File No. 33-60841
File No. 811-07315
As Filed with the Securities and Exchange Commission on November 22, 1995.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
_____
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
_____
Pre-Effective Amendment No. 2__ /_X__/
_____
Post-Effective Amendment No. ___ /_ __/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT _____
OF 1940 /_X__/
_____
Amendment No. 2 _ /_X__/
(Check appropriate box or boxes)
TOMORROW FUNDS RETIREMENT TRUST
(Exact name of Registrant as Specified in Charter)
ONE NEW YORK PLAZA, NEW YORK, NEW YORK 10004
(Address of Principal Executive Office) Zip Code
(212) 223-3332
(Registrant's Telephone Number, including Area Code)
JAY C. NADEL, WEISS, PECK & GREER, L.L.C.
ONE NEW YORK PLAZA, NEW YORK, NEW YORK 10004
(Name and Address of Agent for Service)
Copy to:
Ernest V. Klein, Esq.
Hale and Dorr
60 State Street
Boston, MA 02109
Approximate Date of Proposed Public Offering: As soon as
practicable after the effectiveness of the registration under the
Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to Section 8(a), may determine.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended, Registrant has elected to register an indefinite
number of shares of Registrant and any series thereof. The
Registrant has not yet completed its initial fiscal year and,
therefore, has not filed a Rule 24f-2 Notice.
<PAGE>
ADVISER CLASS SHARES OF
TOMORROW FUNDS RETIREMENT TRUST
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
Tomorrow Post-Retirement Fund
Core Large-Cap Stock Fund
Core Small-Cap Stock Fund
Cross-Reference Sheet Showing Location in Prospectuses
and Statements of Additional Information of
Information Required by Items of the Registration Form
N-1A Item No. and Caption Location:
Part A Prospectus
1. Cover Page............................ Cover Page
2. Synopsis.............................. Expense Information
3. Condensed Financial Information....... Not Applicable
4. General Description of Registrant..... Investment Objectives
and Policies; Risk
Considerations and
Other Practices and
Policies; Management
of the Tomorrow
Funds; How Each
Tomorrow Fund's Share
Price is Determined;
How to Buy Shares;
How to Sell Shares;
How to Exchange
Shares; The Trust
5. Management of the Fund................ Management of the
Tomorrow Funds;
Additional
Information
<PAGE>
6. Capital Stock and Other Securities.... Investment Objectives
and Policies; How
Each Tomorrow Fund's
Share Price is
Determined; How to
Buy Shares; How to
Sell Shares; How to
Exchange Shares; The
Trust
7. Purchase of Securities Being
Offered............................. How Each Tomorrow
Fund's Share Price is
Determined; How to
Sell Shares; How to
Exchange Shares; The
Trust; Distribution
Plans
8. Redemption or Repurchase.............. How Each Tomorrow
Fund's Share Price is
Determined; How to
Buy Shares; How to
Sell Shares; How to
Exchange Shares; The
Trust
9. Pending Legal Proceedings.............. Not Applicable
Statement of
Part B Additional Information
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information
and History......................... Organization
13. Investment Objectives and
Policies............................ The Funds' Investment
Objectives and
Policies; Investment
Techniques;
Investment
Restrictions
- 2 -
<PAGE>
14. Management of the Fund................ Advisory and
Administrative
Services; Trustees
and Officers;
Custodian; Transfer
Agent; Independent
Auditors
15. Control Persons and Principal
Holders of Securities............... Trustees and Officers
16. Investment Advisory and Other
Services............................ Advisory and
Administrative
Services;
Distribution Plans;
Investor Services
17. Brokerage Allocation and
Other Practices..................... Portfolio Brokerage;
Portfolio Turnover
18. Capital Stock and Other
Securities.......................... Organization
19. Purchase, Redemption and
Pricing of Securities
Being Offered....................... How to Purchase
Shares: Investor
Services; Redemption
of Shares; Net Asset
Value; Calculation of
the Funds' Returns
20. Tax Status............................ Dividends,
Distributions and Tax
Status
21. Underwriters.......................... Advisory and
Administrative
Services
22. Calculation of Performance Data....... Calculation of the
Funds' Return
23. Financial Statements.................. Statement of Assets
and Liabilities
- 3 -
<PAGE>
INSTITUTIONAL CLASS SHARES OF
TOMORROW FUNDS RETIREMENT TRUST
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
Tomorrow Post-Retirement Fund
Core Large-Cap Stock Fund
Core Small-Cap Stock Fund
Cross-Reference Sheet Showing Location in Prospectuses
and Statements of Additional Information of
Information Required by Items of the Registration Form
N-1A Item No. and Caption Location:
Part A Prospectus
1. Cover Page............................ Cover Page
2. Synopsis.............................. Expense Information
3. Condensed Financial Information....... Not Applicable
4. General Description of Registrant..... Investment Objectives
and Policies; Risk
Considerations and
Other Practices and
Policies; Management
of the Tomorrow
Funds; How Each
Tomorrow Fund's Share
Price is Determined;
How to Buy Shares;
How to Sell Shares;
How to Exchange
Shares; The Trust
5. Management of the Fund................ Management of the
Tomorrow Funds;
Additional
Information
<PAGE>
6. Capital Stock and Other Securities.... Investment Objectives
and Policies; How
Each Tomorrow Fund's
Share Price is
Determined; How to
Buy Shares; How to
Sell Shares; How to
Exchange Shares; The
Trust
7. Purchase of Securities Being
Offered............................. How Each Tomorrow
Fund's Share Price is
Determined; How to
Sell Shares; How to
Exchange Shares; The
Trust; Service Plans
8. Redemption or Repurchase.............. How Each Tomorrow
Fund's Share Price is
Determined; How to
Buy Shares; How to
Sell Shares; How to
Exchange Shares; The
Trust
9. Pending Legal Proceedings.............. Not Applicable
Statement of
Part B Additional Information
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information
and History......................... Organization
13. Investment Objectives and
Policies............................ The Funds' Investment
Objectives and
Policies; Investment
Techniques;
Investment
Restrictions
- 2 -
<PAGE>
14. Management of the Fund................ Advisory and
Administrative
Services; Trustees
and Officers;
Custodian; Transfer
Agent; Independent
Auditors
15. Control Persons and Principal
Holders of Securities............... Trustees and Officers
16. Investment Advisory and Other
Services............................ Advisory and
Administrative
Services; Service
Plans; Investor
Services
17. Brokerage Allocation and
Other Practices..................... Portfolio Brokerage;
Portfolio Turnover
18. Capital Stock and Other
Securities.......................... Organization
19. Purchase, Redemption and
Pricing of Securities
Being Offered....................... How to Purchase
Shares: Investor
Services; Redemption
of Shares; Net Asset
Value; Calculation of
the Funds' Returns
20. Tax Status............................ Dividends,
Distributions and Tax
Status
21. Underwriters.......................... Advisory and
Administrative
Services
22. Calculation of Performance Data....... Calculation of the
Funds' Return
23. Financial Statements.................. Statement of Assets
and Liabilities
- 3 -
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
One New York Plaza
New York, New York 10004
TOMORROW LONG-TERM RETIREMENT FUND ("Long-Term Fund")
Seeks to satisfy the retirement goals of investors who are currently
between 22 and 35 years of age and with an average remaining life
expectancy of 50 years or more.
TOMORROW MEDIUM-TERM RETIREMENT FUND ("Medium-Term Fund")
Seeks to satisfy the retirement goals of investors who are currently
between 36 and 50 years of age and with an average remaining life
expectancy in the range of 35-50 years.
TOMORROW SHORT-TERM RETIREMENT FUND ("Short-Term Fund")
Seeks to satisfy the retirement goals of investors who are currently
between 51 and 65 years of age and with an average remaining life
expectancy in the range of 20-30 years.
TOMORROW POST-RETIREMENT FUND ("Post-Retirement Fund") *
Seeks to satisfy the goals of investors who seek to maximize total
return, with an emphasis on current income, consistent with capital
preservation.
PROSPECTUS -- Adviser Class Shares
November 22, 1995
This Prospectus describes Adviser Class shares of four mutual funds -
the Long-Term Fund, Medium-Term Fund, Short-Term Fund and Post-Retirement
Fund (together, the "Tomorrow Funds"). Adviser Class shares of the Tomorrow
Funds may be purchased only by "qualified" pension or retirement plans,
including trustees of such plans for individuals funding their individual
retirement accounts or other qualified plans. Each Tomorrow Fund, a series
of the Tomorrow Funds Retirement Trust (the "Trust"), is a diversified
asset allocation mutual fund advised by Weiss, Peck & Greer, L.L.C.
(the "Adviser" or "WPG").
Please read this Prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
Tomorrow Funds invest and the services available to shareholders. To learn
more about the Tomorrow Funds, you can obtain a copy of the Statement of
Additional Information (the "SAI"), also dated November 22, 1995. The SAI
has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated by reference into this Prospectus. A free copy of the SAI
or a copy of the Prospectus describing the Institutional Class shares of
the Tomorrow Funds is available upon request by calling Weiss, Peck &
Greer, L.L.C. at 1-800-223-3332 (toll free). Adviser Class shares of a
Tomorrow Fund may not be available in your state due to various insurance
or other regulations. Please check with your qualified plan fiduciary for
Tomorrow Funds that are available in your state. Inclusion of a Tomorrow
Fund in this Prospectus which is not available in your state is not to be
considered a solicitation. Shareholder inquiries regarding the Tomorrow
Funds may be made in writing to the Trust at the address set forth above.
* As of the date of this Prospectus, the Post-Retirement Fund is not
available for purchase. Contact WPG for the latest information.
ADVISER CLASS SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
ADVISER CLASS SHARES OF THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
The Tomorrow Funds seek to provide investors of all ages who participate in
qualified retirement plans with an asset allocation strategy designed to address
their retirement funding needs. Each Tomorrow Fund invests its assets, in
varying amounts, in equity and fixed-income securities of all types. The
Long-Term, Medium-Term and Short-Term Funds seek to maximize total return while
also increasingly emphasizing current income and capital preservation as the
average age of the target class of investors in that particular Tomorrow Fund
increases. As the average age of the target class of investors in a Tomorrow
Fund increases over time, the particular Tomorrow Fund adjusts the mix of its
assets invested in equity and fixed-income securities to reflect a level of risk
that the Adviser considers appropriate for investors in that target age class,
in general, given their investment time horizon. The Post-Retirement Fund seeks
to provide investors with an asset allocation strategy designed to maximize
total return, with an emphasis on current income, consistent with capital
preservation.
You are encouraged to select a particular Tomorrow Fund based on your
current age and the length of the period during which you expect to maintain
your investment. You may select more than one Tomorrow Fund in order to achieve
a personalized investment program.
Because the investment portfolio of each Tomorrow Fund will change over
time to reflect the investment needs of a target class of investors with an
increasing average age, it will normally not be necessary for you to change your
Tomorrow Fund selection as you grow older. Just as your age increases over time,
the average age of the target class of investors of each of the Long-Term,
Medium-Term and Short-Term Funds will increase over time. However, if your
investment needs change other than by reason of the passage of time, you should
consider whether your particular Tomorrow Fund remains an appropriate selection.
In addition to the Adviser Class shares offered through this Prospectus,
the Tomorrow Funds offer a class of shares known as the Institutional Class
through a separate prospectus. Institutional Class shares of the Tomorrow Funds
are subject to different expenses which may result in different performance
results. Institutional Class shares of the Tomorrow Funds are available only to
certain eligible investors.
TABLE OF CONTENTS
Page
Expense Information. . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . 5
How to Buy Shares. . . . . . . . . . . . . . . . . . . . . . 10
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . 13
How to Exchange Shares . . . . . . . . . . . . . . . . . . . 15
How Each Tomorrow Fund's Share Price is Determined . . . . . 17
Management of the Tomorrow Funds . . . . . . . . . . . . . . 17
Distribution Plans . . . . . . . . . . . . . . . . . . . . . 19
Dividends and Taxes. . . . . . . . . . . . . . . . . . . . . 19
Portfolio Brokerage. . . . . . . . . . . . . . . . . . . . . 20
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Performance . . . . . . . . . . . . . . . . . . . 22
Risk Considerations and Other Practices and Policies . . . . 23
Additional Information . . . . . . . . . . . . . . . . . . . 31
<PAGE>
EXPENSE INFORMATION
Operating a mutual fund, such as each Tomorrow Fund, involves a variety of
expenses for portfolio management, shareholder statements, tax reporting and
other services. These costs are paid from a fund's assets and their effect is
factored into any quoted share price or performance information.
Shareholder Transaction Expenses are charges you pay when you buy or sell
Adviser Class shares of a Tomorrow Fund.
<TABLE>
<S> <C> <C> <C> <C>
Post-
Long-Term Medium-Term Short-Term Retire-
Fund Fund Fund ment Fund#
Maximum Sales Load Imposed on Purchases None None None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Exchange Fees None None None None
</TABLE>
Annual Fund Operating Expenses are paid out of the Tomorrow Funds' assets. Each
Tomorrow Fund's expenses are factored into its share price or dividends and are
not charged directly to shareholder accounts. The following are estimates and
are calculated as a percentage of average net assets.
<TABLE>
<S> <C> <C> <C> <C>
Post-
Long-Term Medium-Term Short-Term Retire-
Fund Fund Fund ment Fund#
Management Fee (after voluntary waiver) 0.00%* 0.00%* 0.00%* 0.00%*
12b-1 Fee 1 0.50% 0.50% 0.50% 0.50%
Other Expenses (after expense limitation) 1.25%* 1.25%* 1.25%* 1.15%*
Total Fund Operating Expenses
(after expense limitation) 1.75%* 1.75%* 1.75%* 1.65%*
Example: Hypothetically assume that each Tomorrow Fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000 you
invested, you would have paid the following expenses if you closed your account
after the number or years indicated:
Post-
Long-Term Medium-Term Short-Term Retire-
Fund Fund Fund ment Fund#
After 1 Year $18 $18 $18 $17
After 3 Years $56 $56 $56 $52
<PAGE>
The purpose of the above table and Example is to assist you in
understanding the various costs and expenses of the Adviser Class shares of the
Tomorrow Funds that an investor will bear directly or indirectly. See page 18.
The Tomorrow Funds are newly organized and have no operating history. The
figures shown in the table under the caption "Other Expenses" and in the
hypothetical example are based on estimates of the Tomorrow Funds' expenses for
the fiscal year ending December 31, 1996. The expenses set forth above do not
reflect charges and expenses that may be applicable to a participant in a
qualified plan. Please refer to your qualified plan documents.
- ---------------
<FN>
# As of the date of this Prospectus, the Post-Retirement Fund is not
available for purchase. Contact WPG for the latest information.
1 Rule 12b-1 Fees consist of a 0.25% distribution fee and a 0.25% service
fee. See "Distribution Plans" on page 19.
* The Adviser has voluntarily agreed to limit temporarily the operating
expenses (excluding Rule 12b-1 fees applicable to Adviser Class shares, service
fees applicable to Institutional Class shares, any other class-specific
expenses, litigation, indemnification and other extraordinary expenses) of the
Long-Term, Medium-Term and Short-Term Funds to 1.25% of their respective average
daily net assets and such operating expenses of the Post-Retirement Fund to
1.15% of its average daily net assets. Each Tomorrow Fund will reimburse the
Adviser for fees foregone or other expenses paid by the Adviser pursuant to this
expense limitation in later years in which operating expenses for that Tomorrow
Fund are less than the expense limitations set forth above for any such year.
See page 18. In the absence of this agreement, Management Fees would be 0.75%,
0.75%, 0.75% and 0.65%, respectively, Other Expenses are estimated to be
approximately 2.87%, 1.77%, 1.59% and 4.35%, respectively, and Total Fund
Operating Expenses are estimated to be approximately 4.12%, 3.02%, 2.84% and
5.50%, respectively, of the average daily net assets attributable to the Adviser
Class shares of the Long-Term Fund, Medium-Term Fund, Short-Term Fund and
Post-Retirement Fund.
</FN>
</TABLE>
The Tomorrow Funds' imposition of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
THE INFORMATION IN THE TABLE AND HYPOTHETICAL EXAMPLE ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
What are the Investment Objectives and Policies of the Tomorrow Funds?
The Tomorrow Funds seek to provide investors of all ages who participate in
qualified retirement plans with an asset allocation strategy designed to address
their retirement funding needs. Each Tomorrow Fund other than the
Post-Retirement Fund seeks to maximize total return while also increasingly
emphasizing current income and capital preservation as the average age of the
target class of investors in that particular Tomorrow Fund increases. The
Post-Retirement Fund seeks to provide investors with an asset allocation
strategy designed to maximize total return, with an emphasis on current income,
consistent with capital preservation.
LONG-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 22 and 35 years of age and with an average
remaining life expectancy of 50 years or more.
MEDIUM-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 36 and 50 years of age and with an average
remaining life expectancy in the range of 35-50 years.
SHORT-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 51 and 65 years of age and with an average
remaining life expectancy in the range of 20-30 years.
POST-RETIREMENT seeks to satisfy the goals of investors who seek to maximize
FUND total return, with an emphasis on current income, consistent
with capital preservation.
Each Tomorrow Fund invests its assets, in varying amounts, in equity and
fixed-income securities of all types (the "Categories"). The amount of assets
allocated to equity securities is currently invested, in varying amounts, among
large capitalization stocks, medium capitalization stocks, small capitalization
stocks and, indirectly through other investment companies, foreign securities
(the "Subcategories"). From time to time, the Adviser may select Subcategories
for the fixed-income Category. Further Subcategories may be selected in addition
to or as a substitute for any of the current Subcategories.
As the average age of the target class of investors in a Tomorrow Fund
increases over time, the particular Tomorrow Fund adjusts the mix of its assets
allocated between equity and fixed-income securities, and allocated, directly or
indirectly, among large, medium and small capitalization stocks and foreign
securities, to reflect a level of risk that the Adviser considers appropriate
for investors in that target age class, in general, given their investment time
horizon. The Post-Retirement Fund maintains a stable mix of its assets invested
(within defined ranges) in equity and fixed-income securities based on the
current outlook for such securities.
Typically, the longer the average life expectancy of the target class of
investors in a Tomorrow Fund, the greater the allocation of assets of that
Tomorrow Fund to securities with higher growth potential and, correspondingly,
more risk, such as small capitalization stocks. Conversely, the shorter the
average life expectancy of the target class of investors in a Tomorrow Fund, the
greater the emphasis on current income and capital preservation of assets and,
therefore, the greater the allocation of assets of that Tomorrow Fund to
fixed-income securities. Each Tomorrow Fund will be managed more conservatively
as the average age of its target class of investors increases. For example,
assuming that current market conditions remain the same, at a point fifteen
years from now, the strategic asset composition of the Long-Term Fund could be
expected to look like the current strategic asset composition of the Medium-Term
Fund. On the date of this Prospectus, the anticipated strategic asset allocation
mix within the Tomorrow Funds' portfolios would be approximately as follows:
[Graphic Material Omitted: Four pie charts demonstrating the asset
allocations of each Tomorrow Fund. The pie chart applicable to the
Long-Term Fund reflects the following asset allocations: large
capitalization stocks - 30%, medium capitalization stocks - 20%, small
capitalization stocks - 25%, foreign equities - 5%, and fixed-income
securities - 20%. The pie chart applicable to the Mid-Term Fund
reflects the following asset allocations: large capitalization stocks -
35%, medium capitalization stocks - 15%, small capitalization stocks -
15%, foreign equities - 5%, and fixed-income securities - 30%. The pie
chart applicable to the Short-Term Fund reflects the following asset
allocations: large capitalization stocks - 40%, medium capitalization
stocks - 10%, small capitalization stocks - 10%, and fixed-income
securities - 40%. The pie chart applicable to the Post-Retirement Fund
reflects the following asset allocations: large capitalization stocks -
30%, and fixed-income securities - 70%.]
- -------------
*The Long-Term Fund and the Medium-Term Fund will currently invest their assets
allocated to foreign securities in shares of other open-end and/or closed-end
investment companies that will invest primarily in equity securities of foreign
issuers. See "Foreign Securities" on page 9.
The strategic asset allocation mix represents the way that the Tomorrow
Funds' investments will generally be allocated in the near-term. A Tomorrow
Fund's actual asset allocation mix between equity and fixed-income securities
and among large, medium and small capitalization stocks and foreign securities,
as applicable, are expected to vary based on the Adviser's evaluation of
anticipated relative returns and risks between and among such securities in the
near-term future. The Adviser will review strategic asset allocations at least
semiannually and will adjust the asset allocations, if necessary, at that time.
Additionally, the strategic asset allocation mix of each Tomorrow Fund (other
than the Post-Retirement Fund) will be adjusted as necessary to reflect a level
of risk that the Adviser considers appropriate for investors in that target
class, in general, given their investment time horizon.
The Trustees of the Trust anticipate that it will be necessary to change,
from time to time, the names of each of the Long-Term, Medium-Term and Short
Term Funds to reflect the decreasing time period to retirement of each such
Fund's target class of investors. As the average age of the target class of
investors in a Tomorrow Fund approaches that of the Post-Retirement Fund, it is
also anticipated that each Tomorrow Fund's assets may begin to decrease as a
result of investor withdrawals. At such time, the Trustees of the Trust will
consider what action would be appropriate to protect the interests of remaining
shareholders, including a combination with the Post-Retirement Fund.
You are encouraged to select a particular Tomorrow Fund for investment
based on your current age and the length of the period during which you expect
to maintain your investment. You may invest in more than one Tomorrow Fund in
order to achieve a personalized investment program. Before investing in the
Tomorrow Funds, you should consider your personal tolerance for risk recognizing
that each Tomorrow Fund is designed and managed to satisfy the retirement goals
of investors in a target age group with a corresponding average life expectancy
who anticipate retiring at approximately age 65. You should also recognize that
the strategic asset allocation of each Tomorrow Fund and the particular
securities in which each Tomorrow Fund invests are determined based upon the
average age of the particular Tomorrow Fund's target class of investors. Because
the Tomorrow Funds are managed to satisfy retirement goals based upon average
life expectancy, the Tomorrow Funds may invest their assets in higher
risk/higher reward securities than mutual funds designed for investors based
solely on retirement dates. In addition, you should recognize that each Tomorrow
Fund is managed with the goal of achieving a different risk/reward ratio, with
the Long-Term Fund seeking the highest risk/reward ratio and the Post-Retirement
Fund seeking the lowest risk/reward ratio among the Tomorrow Funds. Each
Tomorrow Fund (other than the Post-Retirement Fund) will be managed to achieve
an increasingly conservative risk/reward ratio as the average age of the target
class of investors in that particular Tomorrow Fund increases.
Risk/Reward Ratio
Higher Lower
---------------------------------------------------------
Long-Term Medium-Term Short-Term Post-Retirement
Fund Fund Fund Fund
The investment policies, including each Tomorrow Fund's investment
objective, described in this Prospectus are non-fundamental policies which may
be changed by the Trustees without the approval of shareholders. If there is a
change in a Tomorrow Fund's investment objective, shareholders should consider
whether that Tomorrow Fund remains an appropriate investment in light of their
then current financial positions and needs. Each Tomorrow Fund has adopted
certain fundamental policies which may not be changed without the approval of
the applicable Tomorrow Fund's shareholders. See "Investment Restrictions" on
page 31.
In what types of securities do the Tomorrow Funds invest?
Each Tomorrow Fund allocates its assets between equity and fixed-income
securities. The equity Category includes equity securities of all types. The
fixed-income Category includes all varieties of fixed-income instruments
(including adjustable rate preferred stocks). Some types of securities can be
considered as both equity and fixed-income securities. The Tomorrow Funds may
also make other investments that are not considered either an equity or
fixed-income security, such as options and futures. For further information
concerning the equity and fixed-income securities in which the Tomorrow Funds
may invest, see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 23 of this Prospectus.
While each Tomorrow Fund invests in substantially the same equity and
fixed-income securities, the amount of each Tomorrow Fund's assets allocated to
equity and fixed-income securities, and thus in particular securities, differs.
However, it is expected that the relative percentage that a
<PAGE>
particular equity or fixed-income security represents within the equity and
fixed-income Categories and the large, medium and small capitalization stock and
foreign securities Subcategories ordinarily will remain substantially the same.
Each Tomorrow Fund may, but is not required to, utilize various investment
strategies and techniques to hedge various market risks (such as broad or
specific equity or fixed-income market movements and interest rate risk), to
manage the effective maturity or duration of fixed-income securities, or to
enhance potential gain. The investment strategies and techniques used by the
Tomorrow Funds and the instruments in which they invest may change over time as
new techniques, strategies and instruments are developed or regulatory changes
occur. In the course of pursuing their investment objectives, the Tomorrow Funds
may: (i) purchase and write (sell) put and call options on securities and
indices; (ii) purchase and sell financial futures contracts and options thereon;
(iii) lend portfolio securities; (iv) enter into repurchase agreements and
mortgage dollar roll transactions; (v) purchase securities on a forward
commitment, when-issued or delayed delivery basis; (vi) invest in restricted and
illiquid securities; (vii) invest in other investment companies and shares of
real estate investment trusts ("REITs"); and (viii) invest in securities of
unseasoned issuers. For further information concerning the securities in which
the Tomorrow Funds may invest and the investment strategies and techniques they
may employ, see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 23 of this Prospectus.
Equity Securities
A Tomorrow Fund's assets allocated to equity securities is currently
invested, in varying amounts, among large capitalization stocks, medium
capitalization stocks, small capitalization stocks and, indirectly through other
investment companies, foreign securities. Please refer to the charts on page 6
of this Prospectus for the current strategic allocation of a Tomorrow Fund's
assets among these securities.
Large, Medium and Small Capitalization Stocks.
With respect to the assets of each Tomorrow Fund allocated to large, medium
and small capitalization stocks, the Adviser seeks to provide, using a
quantitative methodology, investment results that exceed the performance of an
appropriate "Benchmark Index." To seek to achieve this objective, the assets
that are allocated separately to large, medium and small capitalization stocks
will, under normal market conditions, be invested in a portfolio of securities
that is considered more "efficient" than the applicable Benchmark. An efficient
portfolio is one that has the maximum expected return for any level of risk. The
efficient mix of securities is established mathematically, taking into account
the expected return and volatility of returns for each security in a given
universe, as well as the historical price relationships between different
securities in the universe.
Subcategory Benchmark
Large Capitalization Stocks Standard & Poor's 500 Composite Stock Price
Index
Medium Capitalization Stocks Standard & Poor's 400 MidCap Index
Small Capitalization Stocks Russell 2000 Index
To implement this strategy with respect to a Subcategory, the Adviser
compiles the historical price data of all securities which comprise the
applicable Benchmark. The Adviser may eliminate a security from consideration if
it considers the security to have an inadequate or misleading price history.
Using historical price data, the Adviser constructs and analyzes a complete
matrix of all the possible price relationships between the securities in the
applicable Benchmark.
Using a sophisticated software program that incorporates risk reduction
techniques developed by investment professionals of the Adviser, the Adviser
constructs a number of portfolios separately
<PAGE>
with respect to each Tomorrow Fund's assets that are allocated to large, medium
and small capitalization stocks, which portfolios are believed to have optimized
risk/reward ratios. From these alternative portfolios, the Adviser selects the
combination of securities, together with their appropriate weightings, that the
Adviser believes will comprise the optimal portfolio for each Subcategory. The
optimal portfolio for each Subcategory is designed to have a return greater
than, but highly correlated with, the return of its Benchmark. Please see
"Quantitative Methodology" in the SAI for a further description of how the
Adviser constructs and maintains an optimal portfolio for the large, medium and
small capitalization Subcategories. No quantitative methodology or technical
analysis, including the Adviser's, has ever been objectively proven to provide
enhanced investment return and reduced investment risk in actual long-term
portfolio results.
Foreign Securities
The Adviser intends to invest the Long-Term Fund's and the Medium-Term
Fund's assets allocated to foreign securities in shares of other open-end and/or
closed-end investment companies. Such other investment companies will invest
their assets primarily in equity securities of foreign issuers. It is
anticipated that none of the Tomorrow Funds, including the Long-Term Fund and
the Medium-Term Fund, will currently invest directly in foreign securities. The
Adviser will seek to select for investment other investment companies whose
underlying securities, when aggregated, resemble the composition of the Morgan
Stanley Europe, Australia, Far East Index ("EAFE Index"). There can be no
assurance that the Adviser will be successful in selecting such investment
companies. See "Risk Considerations and Other Investment Practices and Policies
- - Other Investment Companies" on page 27 of this Prospectus and "Foreign
Securities" in the SAI.
Fixed-Income Securities
Each Tomorrow Fund will invest those assets which are allocated to
fixed-income securities in a broad range of fixed-income securities, including
bonds, notes, mortgaged-backed and asset-based securities, preferred stock,
convertible debt securities, zero coupon and capital appreciation bonds issued
by U.S. corporations or other entities or by the U.S. Government or its
agencies, authorities, instrumentalities or sponsored enterprises. The Tomorrow
Funds limit their investments in fixed-income securities to those that are
rated, at the time of purchase, investment grade or, if not rated, determined by
the Adviser to be of equivalent credit quality to securities so rated.
Fixed-income securities may pay interest on a fixed, variable, floating,
contingent, in-kind or deferred basis. There is no limit on the average
dollar-weighted maturity or duration of a Tomorrow Fund's portfolio or on the
maturity or duration of any individual fixed-income security purchased by a
Tomorrow Fund. Because each Tomorrow Fund will invest in substantially the same
fixed-income securities but in different amounts based on the particular
Tomorrow Fund's strategic asset allocation, the average dollar-weighted
effective maturity and duration of the Tomorrow Funds' fixed-income securities
will be substantially the same. Currently, it is expected that under normal
circumstances the average duration of the Tomorrow Funds' assets allocated to
fixed-income securities will be in the intermediate range. For further
information concerning the fixed-income securities in which the Tomorrow Funds
may invest, see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 23 of this Prospectus.
Risk Factors
There is no assurance that any Tomorrow Fund will achieve its investment
objective. Because each Tomorrow Fund owns different types of investments, its
performance is affected by a variety of factors. The value of a Tomorrow Fund's
investments and the income they generate (and, therefore, its net asset value)
will vary from day to day, and generally reflect interest rates, market
conditions, and other company, political and economic news. The Tomorrow Funds'
performance also depends on the Adviser's skill in allocating assets. When you
sell your shares, they may be worth more or less than what you paid for them.
In general, the value of the Tomorrow Funds' investments in fixed-income
securities rises when interest rates fall, and vice versa. Although fixed-income
securities have varying degrees of quality and varying levels of sensitivity to
changes in interest rates, longer-term fixed-income securities are generally
more sensitive to interest changes than shorter-term fixed-income securities.
Investing in REITs involves risks in addition to those associated with
fixed-income securities. REITs may be affected by changes in the value of the
underlying property and by the quality of any credit extended, are dependent
upon management skills, are not diversified, and are subject to heavy cash flow
dependency. The risks associated with the Tomorrow Funds' transactions in
options, futures and other types of derivative securities including
mortgage-backed and asset-backed securities may include some or all of the
following: market risk, leverage and volatility risk, correlation risk, credit
risk and liquidity and valuation risk.
For a further discussion of the risks associated with an investment in the
Tomorrow Funds, please see "Risk Considerations and Other Investment Practices
and Policies" beginning on page 23 of this Prospectus.
HOW TO BUY SHARES
Who is eligible to purchase Adviser Class shares of the Tomorrow Funds?
Adviser Class shares of the Tomorrow Funds may be purchased only for the
account of qualified pension or retirement plans ("Qualified Plans"). Qualified
plans include: qualified plans and trusts under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), annuity plans
under Code Section 403(a), Code Section 403(b) annuities and custodial accounts,
certain governmental plans, simplified employee pension plans, deferred
compensation arrangements under Code Section 457(b) and Individual Retirement
Accounts ("IRAs").
Should you have any questions as to whether you are an eligible investor,
please call WPG at 1-800-223-3332.
Through whom may Adviser Class shares of the Tomorrow Funds be purchased?
Because you may not purchase Adviser Class shares of the Tomorrow Funds
directly, all orders to purchase Adviser Class shares must be made through the
trustee, custodian, plan administrator or other fiduciary (each a "Plan
Fiduciary") of your Qualified Plan. If the monies you wish to invest in the
Tomorrow Funds are maintained in a Qualified Plan sponsored by your employer,
please consult with your employer for information about how to purchase shares
of the Tomorrow Funds. If the monies you wish to invest in the Tomorrow Funds
are maintained by your Plan Fiduciary in an IRA or other self-administered
Qualified Plan, please consult with your Plan Fiduciary for information about
how to purchase shares of the Tomorrow Funds.
You may establish an IRA with the Trust's custodian, Boston Safe Deposit
and Trust Company ("Boston Safe"), through which you may invest in the Tomorrow
Funds. Additionally, you may invest in the Tomorrow Funds by "rolling over" an
existing IRA into an IRA maintained by Boston Safe. Please call WPG at
1-800-223-3332 for information regarding how to establish an IRA with Boston
Safe.
Plan Fiduciaries may purchase shares of the Tomorrow Funds for a Qualified
Plan through any investment dealer or financial service firm ("Authorized
Firm") approved by WPG. Authorized Firms include broker-dealers, banks and
financial planners.
What is the minimum investment in shares of the Tomorrow Funds?
Plan Fiduciaries may invest in the Tomorrow Funds with as little as $250.
There is no minimum amount required for subsequent investments.
How may Plan Fiduciaries invest in the Tomorrow Funds for the account of their
Qualified Plans?
In order to make an initial investment in a Tomorrow Fund for a Qualified
Plan, Plan Fiduciaries must open an account with the Tomorrow Funds by
furnishing to an Authorized Firm the information in the applicable Account
Information Form attached to this Prospectus. Please note that there is an
Account Information Form applicable to IRAs and an Account Information Form
applicable to other Qualified Plans. Shares of the Tomorrow Funds may be
purchased on any day during which the New York Stock Exchange is open for
business (a "Business Day").
At what price are Adviser Class shares of the Tomorrow Funds offered?
Adviser Class shares of the Tomorrow Funds are sold at the net asset value
(NAV) of such shares next determined after The Shareholder Services Group, Inc.,
the Tomorrow Funds' "Transfer Agent," receives and accepts a purchase order.
Purchase orders received by Authorized Firms by the close of regular trading on
the New York Stock Exchange on any Business Day and transmitted to the Transfer
Agent by the close of its business day (normally 5:00 p.m. New York City time)
will be effected as of the close of regular trading on the New York Stock
Exchange on that day. Otherwise, orders will be effected at the NAV determined
on the next Business Day. It is the responsibility of Authorized Firms to
transmit orders so that they will be received by the Transfer Agent before the
close of its business day.
Plan Fiduciaries: To Make an Initial Investment for a Qualified Plan
By Mail: 1. Make a check payable to the Tomorrow Fund in which you wish
to invest.
2. Deliver the completed Account Information Form and check to
an Authorized Firm or mail it to WPG.
By Wire: 1. Call 1-800-223-3332 to open an account and to arrange for a
wire transaction.
2. Instruct your bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
Bank Routing No. 011-00123-4
Specify:
Name of Tomorrow Fund
Adviser Class shares
Account Number
Name(s) in which account is to be registered
3. Deliver the completed Account Information Form to an
Authorized Firm or mail it to WPG.
<PAGE>
Plan Fiduciaries: To Make Further Investments for a Qualified Plan
Automatically: 1. Use the Automatic Investment Plan. Sign up for this
service when opening an account, or call 1-800-223-3332 to
receive a Serviving Form to add this privilege. Plan
Fiduciaries must designate the bank or credit union account
from which funds will be drawn.
2. The amount to be invested will automatically be withdrawn
from the designated bank or credit union account on or
about the first Business Day of the month or quarter
selected.
By Telephone: 1. Sign up for this service when opening an account, or call
1-800-223-3332 to add it. Plan Fiduciaries must designate
the bank or credit union account from which funds will be
drawn. Note that in order to invest by phone, the account
must be in a bank or credit union that is a member of the
Automated Clearing House system (ACH).
2. Once this service has been selected, Plan Fiduciaries may
purchase additional shares for the account of Qualified
Plans by calling the Tomorrow Funds' Transfer Agent, The
Shareholder Services Group, Inc., toll-free at
1-800-223-3332.
3. Give the Transfer Agent representative the name(s) in which
the account is registered, the Tomorrow Fund name, Adviser
Class shares, the account number, and the amount of the
investment.
4. An investment will normally be credited to the Qualified
Plan account upon receipt of payment.
During periods of extreme economic conditions or market changes,
requests by telephone may be difficult to make due to heavy volume.
During such times please consider placing purchase orders by mail.
By Mail: 1. Include a note with the investment specifying:
Name of the Tomorrow Fund
Adviser Class shares
Account Number
Name(s) in which account is registered
2. Make the check payable to the Tomorrow Fund in which you
wish to or are instructed to invest. Indicate the account
number on the check.
3. Deliver the account information and check to an Authorized
Firm or mail to the Transfer Agent at the address indicated
on the back cover of this Prospectus.
<PAGE>
By Wire: Instruct the bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
ABA Routing No. 011-00123-4
For credit to:
Name of Tomorrow Fund
Adviser Class shares
Your Account Number
Name(s) in which account is registered
Other Purchase Information. Each Tomorrow Fund reserves the right to reject
any purchase for any reason and to cancel any purchase due to nonpayment. As a
condition of this offering, if your purchase is cancelled due to nonpayment or
because your check does not clear (and, therefore, your account is required to
be redeemed), you will be responsible for any loss incurred by the Tomorrow
Fund(s) affected. All purchases must be made in U.S. dollars. Checks drawn on
foreign banks will delay purchases until U.S. funds are received and a
collection charge may be imposed. In such cases, Adviser Class shares of the
Tomorrow Funds are priced at the net asset value computed after the Transfer
Agent receives notification of the dollar equivalent from the Tomorrow Funds'
custodian bank. Wire purchases normally take two or more hours to complete and,
to be accepted the same day, must be received by 4:00 p.m. New York City time.
Your bank may charge a fee to wire funds. Telephone transactions are recorded to
verify information.
Acquiring Shares of the Tomorrow Funds in Exchange for Securities. Shares
of the Tomorrow Funds may be purchased in whole or in part for the account of
Qualified Plans by delivering to the Tomorrow Funds' custodian, Boston Safe,
securities acceptable to WPG. Please see "In-Kind Purchases" in the SAI for the
terms and conditions of these transactions.
HOW TO SELL SHARES
How may Adviser Class shares of the Tomorrow Funds be redeemed?
Subject to the restrictions (if any) imposed by your Qualified Plan, you
can arrange to sell or "redeem" some or all of your shares on any Business Day.
All orders to redeem Adviser Class shares must be made through your Plan
Fiduciary. If the Adviser Class shares you wish to redeem are held for the
account of a Qualified Plan sponsored by your employer, please consult with your
employer for information about how to redeem shares of the Tomorrow Funds. If
the Adviser Class shares you wish to redeem are maintained by your Plan
Fiduciary in an IRA or other self-administered Qualified Plan, please consult
with your Plan Fiduciary for information about how to redeem shares of the
Tomorrow Funds. Please note that shares may not be redeemed by telephone or
telegram, except for exchanges which can be requested by Plan Fiduciaries by
telephone or in writing.
At what price are Adviser Class shares of the Tomorrow Funds redeemed?
Adviser Class shares of the Tomorrow Funds will be redeemed at the share
price (NAV) of such shares next calculated after a redemption order is received
in good order by the Transfer Agent. Once shares are redeemed, sale proceeds
generally are available the next Business Day, but may take up to three Business
Days. For your protection, redemption proceeds will not be released until a
shareholder's account has been opened and payment for the shares to be redeemed
have been received by the Tomorrow Fund, which may take up to fifteen days in
the case of payments made by check.
The net asset value per share received upon redemption or repurchase may be
more or less than the original cost of the shares, depending on the market value
of the portfolio at the time of redemption or repurchase.
Plan Fiduciaries: To Redeem Shares for a Qualified Plan
By Mail: 1. In a written request specify:
Name of the Tomorrow Fund
Adviser Class shares
Account Number
Name(s) in which account is registered
The dollar amount or the number of shares to be redeemed
2. Deliver the redemption request to an Authorized Firm or
mail to the Transfer Agent at the address indicated on the
back cover of this Prospectus.
Automatically 1. Use the Automatic Withdrawal Plan if the Qualified Plan
(Post-Retirement account has a total value of at least $10,000. Sign up for
Fund Only): this service when opening an account, or call
1-800-223-3332 to add it.
2. The redemption proceeds of $100 or more will automatically
be transferred from the Qualified Plan account to the
designated address or bank account on or about the first
Business Day of the month or quarter selected.
General Redemption Information. Authorized Firms must receive redemption
requests before the close of business on the New York Stock Exchange and
transmit them to the Transfer Agent prior to the Transfer Agent's close of
business to receive that day's share price (NAV). A written redemption request
must be signed by all registered shareholders for the account using the exact
names in which the account is registered or accompanied by executed power(s) of
attorney. Unless otherwise specified, redemption proceeds will be sent by check
to the record address. Plan Fiduciaries may elect to have redemption proceeds
wired to a checking or bank account if wire redemptions were authorized when the
account was opened or have subsequently been authorized.
Redemptions may be suspended or postponed during any period in which any of
the following conditions exist: the New York Stock Exchange is closed or trading
on the Exchange is restricted; an emergency exists during which it is not
reasonably practicable for a Tomorrow Fund to dispose of its portfolio
securities or to fairly determine its net asset value; or the SEC, by order, so
permits.
Certain requests must include a signature guarantee. A signature guarantee
is a widely accepted way to protect you and the Tomorrow Funds from fraud by
verifying the signature on your request. A signature guarantee is required if
(a) the redemption proceeds are to be sent to an address other than the address
of record or to a person other than the registered shareholder(s) for the
account, (b) the redemption request is made for the account of an IRA or (c) the
net asset value of the shares redeemed is $100,000 or more (this requirement may
be waived by the Adviser in its discretion).
The following institutions may provide a signature guarantee, provided that
the institution meets credit standards established by the Transfer Agent: (i) a
bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency. Signature guarantees may not be provided by a notary public.
Small Accounts. In order to reduce the expense of maintaining numerous
small accounts, the Trust reserves the right to redeem any shareholder account
(other than an IRA) if, as a result of redemptions, the value of the account is
less than $100. Plan Fiduciaries will be allowed at least 60 days, after written
notice by the Trust, to make an additional investment to bring the account value
up to at least $100 before the redemption is processed.
Change in Tax Status. Plan Fiduciaries are required to notify the Trust
through the Transfer Agent if the tax status of their Qualified Plan is revoked
or challenged by the Internal Revenue Service. The Trust reserves the right to
redeem any fund account of any shareholder whose qualification as a qualified
pension or retirement plan satisfying the requirements of Treasury Regulation
section 1.817-5 is revoked or challenged. The Trust will not treat an investor
as a qualified pension or retirement plan for this purpose unless the investor
is among the categories specifically enumerated in Revenue Ruling 94- 62, 1994-2
C.B. 164.
HOW TO EXCHANGE SHARES
May Adviser Class shares be exchanged for shares of other mutual funds?
Subject to the terms of your Qualified Plan Adviser Class shares of a
Tomorrow Fund may be exchanged for Adviser Class shares of any other Tomorrow
Fund or for Adviser Class shares of Core Large-Cap Stock Fund and Core Small-Cap
Stock Fund. To obtain a current prospectus for the Adviser Class shares of Core
Large-Cap Stock Fund and Core Small-Cap Stock Fund, please call 1-800-223- 3332.
Please consider the differences in investment objectives and expenses of a
Tomorrow Fund as described in its prospectus before making an exchange.
Do sales charges apply to exchanges?
As is the case with initial purchases of Adviser Class shares, exchanges of
Adviser Class shares are made without the imposition of a sales charge.
How may I make an exchange?
Because shares of the Tomorrow Funds are held for the account of Qualified
Plans, all orders to exchange shares must be made through your Plan Fiduciary.
If the Adviser Class shares you wish to exchange are held for the account of a
Qualified Plan sponsored by your employer, please consult with your employer for
information about how to exchange shares of the Tomorrow Funds. If the Adviser
Class shares you wish to exchange are maintained by your Plan Fiduciary in an
IRA or other self-administered Qualified Plan, please consult with your Plan
Fiduciary for information about how to exchange shares of the Tomorrow Funds.
<PAGE>
Plan Fiduciaries: To Exchange Shares
By Phone: 1. Use the telephone exchange privilege. The telephone
exchange privilege is not available automatically. It is
necessary to sign up for this privilege on the Account
Application Form when opening an account, or call
1-800-223-3332 to receive the Services Form to add it.
2. Once this privilege has been selected, simply call the
Transfer Agent toll free at 1-800-223-3332 between 9:00 a.m.
and 4:00 p.m. New York City time on any Business Day.
3. Give the following information to the Transfer Agent
representative:
Name of current Tomorrow Fund
Adviser Class shares
Name of the fund into which the current Tomorrow Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
By Mail: 1. Deliver a written request to an Authorized Firm or mail to
the Transfer Agent at the address listed on the back cover
of this Prospectus specifying:
Name of current Tomorrow Fund
Adviser Class shares
Name of the fund into which the current Tomorrow Fund\
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
2. The exchange request must be signed by all registered
holders for the account using the exact names in which the
account is registered or accompanied by executed power(s)
of attorney.
General Exchange Information. Shares exchanged are valued at their
respective net asset values next determined after the exchange request is
received by the Transfer Agent. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be registered for sale in your state; (ii) exchanges may be made only between
funds that are registered in the same name, address and, if applicable, taxpayer
identification number; and (iii) the minimum amount for exchanging from one fund
into another fund is $100 or the total value of your fund account (if less than
$100) and must satisfy the minimum account size of the fund to be exchanged
into.
To confirm that telephone exchange requests are genuine, the Trust employs
reasonable procedures, such as providing written confirmation of telephone
exchange transactions and tape recording of telephone exchange requests. If the
Trust does not employ such reasonable procedures, it may be liable for any loss
incurred by a shareholder due to a fraudulent or unauthorized telephone exchange
request. Otherwise, neither the Trust nor its agents will be liable for any loss
incurred by a shareholder as the result of following instructions communicated
by telephone that they reasonably believed to be genuine. The Trust reserves the
right to refuse any request made by telephone and may limit the dollar amount
involved or the number of telephone requests made by any shareholder. During
periods of extreme economic conditions or market changes, requests by telephone
may be difficult to make due to heavy volume. During such times please consider
placing your order by mail.
To prevent abuse of the exchange privilege to the detriment of other
shareholders, the Trust limits the number of exchanges and purchase/redemption
transactions by any one shareholder account (or group of accounts under common
management) to a total of six transactions per year. This policy applies to
exchanges into or out of any series of the Trust and any pair of transactions
involving a purchase of shares of any series of the Trust followed by a
redemption of an offsetting or substantially equivalent dollar amount of shares
of that same series. If a Plan Fiduciary violates this policy, his/her future
purchases of, or exchanges into, the series of the Trust may be permanently
refused. This policy does not prohibit redemptions of shares of any series. This
policy may be waived by WPG in its discretion. Further, the exchange privilege
may be changed or discontinued and may be subject to additional limitations upon
sixty (60) days' notice to shareholders, including certain restrictions on
purchases by market-timer accounts.
HOW EACH TOMORROW FUND'S SHARE PRICE IS DETERMINED
The net asset value per share of a class of a Tomorrow Fund is determined
by dividing the value of its assets, less liabilities attributable to that
class, by the number of shares of that class outstanding. The net asset value is
normally calculated as of the close of regular trading of the New York Stock
Exchange (currently 4:00 p.m. New York City time) on each Business Day.
Different classes of shares of the Tomorrow Funds may have different net asset
values.
Portfolio securities (other than certain money market instruments) are
valued primarily based on market quotations or, if market quotations are not
available, at fair market value as determined in good faith by a valuation
committee appointed by the Trustees. In accordance with procedures adopted by
the Trustees, each Tomorrow Fund may use pricing services to value fixed-income
investments.
MANAGEMENT OF THE TOMORROW FUNDS
Trustees
Each Tomorrow Fund is a separate investment series of Tomorrow Funds
Retirement Trust, a Delaware business trust (the "Trust"). Under the terms of
the Agreement and Declaration of Trust establishing the Trust, the Trustees of
the Trust are ultimately responsible for the management of its business and
affairs.
Investment Adviser
Weiss, Peck & Greer, L.L.C., One New York Plaza, New York, New York 10004
serves as the investment adviser to each Tomorrow Fund pursuant to an investment
advisory agreement. The Adviser, a privately held limited liability company with
over 20 years' experience as an investment adviser to individual and
institutional clients, has, together with its affiliates, approximately $13
billion under management. Subject to the supervision and direction of the
Trustees, the Adviser manages each Tomorrow Fund's portfolio in accordance with
its stated investment objective and policies, recommends investment decisions
for the Tomorrow Fund and places orders to purchase and sell securities on
behalf of the Tomorrow Fund. For these services, Post-Retirement Fund pays the
Adviser a monthly fee equal on an annual basis to 0.65% of its average daily net
assets and the other Tomorrow Funds each pay the Adviser a monthly fee equal on
an annual basis to 0.75% of the Tomorrow Fund's average daily net assets. The
advisory fee paid by the Long-Term, Medium-Term and Short-Term Funds, which is
greater than that paid by most funds, reflects the added complexity and
additional expenses associated with these Tomorrow Funds' investment strategies.
The Adviser supervises the portfolio management of the Tomorrow Funds
through the Adviser's Asset Allocation Committee, which meets on a regular basis
to evaluate, among other things, the strategic asset allocation mix between
equity and fixed-income securities and among large, medium and small
capitalization and foreign stocks. Joseph N. Pappo has been primarily
responsible since the Tomorrow Funds' inception for the day-to-day management of
the assets of each Tomorrow Fund allocated to large, medium and small
capitalization stocks. Mr. Pappo has been a principal of the Adviser since 1994.
Prior to joining WPG, Mr. Pappo was the founder and president of Eden Financial
Group which was acquired by WPG in 1991. Daniel S. Vandivort has been primarily
responsible since the Tomorrow Funds' inception for the day-to-day management of
the assets of each Tomorrow Fund allocated to fixed-income securities. Mr.
Vandivort has been a principal of the Adviser since November, 1994. Prior
thereto, Mr. Vandivort served in various capacities with CS First Boston
Investment Management, including Managing Director and Head of U.S. Fixed Income
and Senior Portfolio Manager and Director, Global Product Development and
Marketing.
The Adviser has voluntarily agreed to limit temporarily the operating
expenses (excluding Rule 12b-1 fees applicable to the Adviser Class shares,
service fees applicable to the Institutional Class shares, any other
class-specific expenses, litigation, indemnification and other extraordinary
expenses) of the Long-Term, Mid-Term and Short-Term Funds to 1.25% of their
respective average daily net assets and such operating expenses of the
Post-Retirement Fund to 1.15% of its average daily net assets. The Adviser may
discontinue or modify such limitation in the future at its discretion, although
it has no current intention to do so.
Administrator
Pursuant to an administration agreement with each Tomorrow Fund, WPG
provides personnel for supervisory, administrative, accounting, shareholder
services and clerical functions; oversees the performance of administrative and
professional services to the Tomorrow Funds by others; provides office
facilities, furnishings and office equipment; and prepares, but does not pay
for, reports to shareholders, the SEC and other regulatory authorities. As
compensation for the services rendered to the Tomorrow Funds as Administrator,
WPG is entitled to a fee, computed daily and payable monthly, at an annual rate
equal to 0.09% of each Tomorrow Fund's average daily net assets. The
administrative fee for each Tomorrow Fund is reviewed and approved annually by
the Trustees.
Expenses
Each Tomorrow Fund bears all expenses of its operation, subject to the
expense limitation agreement described above. In particular, each Tomorrow Fund
pays: investment advisory fees; administration fees; service fees with respect
to the Institutional Class shares; distribution and service fees with respect to
the Adviser Class shares; custodian and transfer agent expenses; legal and
accounting fees and expenses; expenses of preparing, printing, and distributing
Prospectuses and SAIs to existing shareholders, and shareholder communications
and reports; expenses of computing its net asset value per share; federal and
state registration fees and expenses with respect to its shares; proxy and
shareholder meeting expenses; expenses of issuing and redeeming its shares;
independent trustee fees and expenses; expenses of bond, liability, and other
insurance coverage; brokerage commissions; taxes; trade association fees; and
certain non-recurring and extraordinary expenses. In addition, the expense of
organizing the Tomorrow Funds and initially registering and qualifying their
shares under federal and state securities laws are being charged to the Tomorrow
Funds' operations, as an expense, over a period not to exceed 60 months from the
Tomorrow Funds' inception date.
Each Tomorrow Fund will reimburse the Adviser for fees foregone or other
expenses paid by the Adviser pursuant to this expense limitation in later years
in which operating expenses for that Tomorrow Fund are less than the expense
limitations set forth above for any such year. No interest, carrying or finance
charge will be paid by a Tomorrow Fund with respect to the amounts representing
fees foregone or other expenses paid. In addition, no Tomorrow Fund will pay any
unreimbursed amounts to the Adviser upon termination of its investment advisory
agreement.
DISTRIBUTION PLANS
The Trust, on behalf of each Tomorrow Fund, has adopted a Distribution Plan
(the "Distribution Plans") pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended (the 1940 Act"). Under the Distribution Plans, each
Tomorrow Fund pays distribution and service fees at an aggregate annual rate of
up to 0.50% of a Tomorrow Fund's average daily net assets attributable to
Adviser Class shares. Up to 0.25% is for service fees and the remaining amount
is for distribution expenses. The distribution fee is intended to compensate WPG
for its services and expenses associated with serving as principal underwriter
of the Adviser Class shares of the Tomorrow Funds, including the payment of
commissions by WPG to Authorized Firms. The service fee is intended to be
compensation for personal services and/or account maintenance services with
respect to the Adviser Class shares.
WPG makes monthly payments to Authorized Firms based on the average net
asset value of the Adviser Class shares which are attributable to Qualified
Plans for whom the Authorized Firms are designated as the dealer of record. WPG
makes such payments in amounts up to the distribution fee it receives with
respect to such Adviser Class shares. WPG may suspend or modify such payments to
Authorized Firms.
DIVIDENDS AND TAXES
Each Tomorrow Fund is treated as a separate entity for federal income tax
purposes and intends to elect to be treated as a "regulated investment company"
under the Internal Revenue Code and to qualify for such treatment for each
taxable year. To qualify as such, each Tomorrow Fund must satisfy certain
requirements relating to the sources of its income, diversification of its
assets and distribution of its income to shareholders. Each Tomorrow Fund also
intends to satisfy certain additional diversification requirements applicable
under Section 817(h) of the Internal Revenue Code in order to permit investments
in Institutional Class shares of the Tomorrow Funds by insurance company
segregated asset accounts that fund variable annuity or variable life insurance
products, which are subject to such requirements. It is possible that in order
to satisfy the applicable diversification requirements, investment decisions may
be made which would affect either positively or negatively the investment
performance of a Tomorrow Fund. As a regulated investment company, each Tomorrow
Fund will not be subject to federal income tax on any net investment income and
net realized capital gains that are distributed to its shareholders in
accordance with certain timing requirements of the Internal Revenue Code.
Participants in Qualified Plans may be eligible for tax deferral on
distributions a Qualified Plan receives from a Tomorrow Fund and gains that
arise from a Qualified Plan's dispositions of Fund shares. This Prospectus does
not describe in any respect such tax treatment. Please consult your Plan
Fiduciary or tax adviser. It is suggested that participants in Qualified Plans
keep all statements received from their Qualified Plans to assist in personal
recordkeeping.
Each Tomorrow Fund intends to distribute all of its net investment income
and net capital gains each year. Income dividends, if any, will be declared and
distributed monthly for Post-Retirement Fund. Income dividends, if any, will be
declared and distributed at least annually by each other Tomorrow Fund. Net
short-term and long-term capital gains of each Tomorrow Fund, if any, realized
during the taxable year will be distributed no less frequently then annually.
Dividends derived from each Tomorrow Fund's net investment income (including
dividends, interest and recognized market discount income), and net short- term
capital gains received by a Tomorrow Fund are treated as ordinary income under
the Internal Revenue Code. Distributions from each Tomorrow Fund's net long-term
capital gains are treated as long-term capital gains under the Internal Revenue
Code, regardless of how long shares of the Tomorrow Funds have been held.
Reinvestment of Income Dividends and Capital Gains Distributions
Unless a Plan Fiduciary elects otherwise, as permitted in the Account
Information Form, income dividends and capital gains distributions with respect
to a Tomorrow Fund will be reinvested in additional Adviser Class shares of that
Tomorrow Fund and will be credited to the Qualified Plan's account with that
Tomorrow Fund at the net asset value per share next determined as of the
ex-dividend date. Both income dividends and capital gains distributions are paid
by the Tomorrow Fund on a per share basis. As a result, at the time of such
payment, the net asset value per share of a Tomorrow Fund will be reduced by the
amount of such payment. Although income dividends and capital gains
distributions by the Tomorrow Funds may not give rise to current tax liability
for the categories of shareholders permitted to invest in the Tomorrow Funds,
participants in Qualified Plans may be subject to tax on all or a portion of
their distributions from such Plans or upon the failure of such Plans to
maintain their qualified status under complex Internal Revenue Code provisions
concerning which a tax adviser should be consulted. Participants in Qualified
Plans who wish to change the manner in which income dividends and capital gains
distributions are received by their Qualified Plans should contact their Plan
Fiduciaries. Written notification of such change must be received by the
Transfer Agent at least ten days before the next scheduled distribution.
PORTFOLIO BROKERAGE
In effecting securities transactions, the Tomorrow Funds generally seek to
obtain the best price and execution of orders under the circumstances.
Commission rates are a component of price and are considered along with other
factors, including the ability of the broker to effect the transaction, and the
broker's facilities, reliability and financial responsibility. Subject to the
foregoing, the Tomorrow Funds intend to utilize WPG as their primary broker in
connection with the purchase and sale of exchange-traded portfolio securities.
As the Tomorrow Funds' primary broker, WPG will receive brokerage commissions
from the Tomorrow Funds, limited to the "usual and customary broker's
commission" specified by the 1940 Act. The Tomorrow Funds intend to continue to
use WPG as their primary broker on exchange-traded securities, provided WPG is
able to provide execution at least as favorable as that provided by other
qualified brokers.
The Trustees of the Trust have developed procedures to limit the
commissions received by WPG to the "usual and customary broker's commission"
standard specified by the 1940 Act. On a
<PAGE>
quarterly basis, the Trustees review the securities transactions of each
Tomorrow Fund effected by WPG to assure their compliance with such procedures.
The Tomorrow Funds will also execute their portfolio transactions through
qualified brokers other than WPG. In selecting such other brokers, WPG considers
the quality and reliability of brokerage services, including execution
capability and performance and financial responsibility, and may consider the
research and other investment information provided by such brokers. Accordingly,
the commissions paid to any such broker may be greater than the amount another
firm might charge, provided WPG determines in good faith that the amount of such
commission is reasonable in relation to the value of the brokerage services and
research information provided by such broker. Such information may be used by
WPG (and its affiliates) in managing all of its accounts and not all of such
information may be used by WPG in managing the Tomorrow Funds. In selecting
other brokers for a Tomorrow Fund, WPG may also consider the sale of shares of
the Tomorrow Fund effected through such other brokers as a factor in its
selection, provided that Tomorrow Fund obtains the best price and execution of
orders under the circumstances.
Money market securities and other fixed-income securities, as well as
certain equity securities, in which the Tomorrow Funds invest are traded
primarily in the over-the-counter ("OTC") market. For transactions effected in
the OTC market, financial intermediaries (i.e., dealers) act as principal rather
than as agent and receive a "spread" rather than a commission. The Tomorrow
Funds intend to deal with the primary market-makers with respect to OTC
securities, unless a more favorable result is obtainable elsewhere.
THE TRUST
Tomorrow Funds Retirement Trust is an open-end management investment
company (commonly referred to as a mutual fund) organized as a Delaware business
trust under an Agreement and Declaration of Trust dated June 21, 1995 (the
"Declaration"). The Trust has authorized an unlimited number of shares of
beneficial interest.
As of the date of this Prospectus, the shares of the Trust are divided into
six series: Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement
Fund, Tomorrow Short-Term Retirement Fund, Tomorrow Post-Retirement Fund, Core
Large-Cap Stock Fund and Core Small-Cap Stock Fund. The Trust reserves the right
to create and issue additional series of shares. No series is entitled to share
in the assets of any other series or is liable for the expenses or liabilities
of any other series. Shares of a particular series vote separately on matters
affecting only that series, including the approval of an investment advisory
agreement and changes in fundamental policies or restrictions of a particular
series.
As of the date of this Prospectus, the Trustees have authorized the
issuance of two classes of shares for each series, designated Adviser Class and
Institutional Class. The shares of each Class represent an interest in the same
portfolio of investments of that series. Each Class has equal rights as to
voting, redemption, dividends and liquidation, except that each Class bears
different distribution fees and may bear other expenses properly attributable to
the particular Class. Adviser Class shareholders of a Tomorrow Fund have
exclusive voting rights with respect to the Rule 12b-1 distribution plan adopted
by holders of Adviser Class shares of that Tomorrow Fund. The Trustees have the
authority, without further shareholder approval, to classify and reclassify the
shares of a series of the Trust into additional classes. In addition, subject to
Trustee approval and shareholder approval (if then required), each Tomorrow Fund
may pursue its investment objective by investing all of its investable assets in
a pooled fund. See "Other Investment Companies" on page 27 of this Prospectus.
When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Trust are fully paid and
non-assessable. The Trust is not required, and does not intend, to hold annual
shareholder meetings. Shareholders have certain rights, as set forth in the
Declaration, including the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. Such removal can be
effected upon the action of two-thirds of the outstanding shares of the Trust.
In addition to the requirements under Delaware law, the Declaration
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Trust for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
The Trustees of the Trust do not expect any disadvantages to investors
arising out of the fact that each Tomorrow Fund may offer a class of its shares
to insurance company segregated asset accounts that serve as investment medium
for variable annuity and variable life insurance products or that each Tomorrow
Fund may offer its shares to Qualified Plans. Nevertheless, the Trustees intend
to monitor events in order to identify any material irreconcilable conflicts
which may possibly arise, and to determine what action, if any, should be taken
in response to such conflicts. If such a conflict were to occur, one or more
separate accounts or Qualified Plans might be required to withdraw their
investments in one or more Tomorrow Funds and shares of another series of the
Trust may be substituted. This might force a Tomorrow Fund to sell securities at
disadvantageous prices.
In the interests of economy and convenience, the Trust does not issue
certificates representing the Tomorrow Funds' shares. Instead, the Transfer
Agent maintains a record of each shareholder's ownership. Although each Tomorrow
Fund is offering only its own shares, since the Tomorrow Funds use this combined
Prospectus, it is possible that one Tomorrow Fund might become liable for a
misstatement or omission in this Prospectus regarding another Tomorrow Fund. The
Trustees have considered this factor in approving the use of this combined
Prospectus.
INVESTMENT PERFORMANCE
Each Tomorrow Fund may illustrate in advertisements and sales literature
the average annual total return of its Adviser Class shares, which is the rate
of growth of the Tomorrow Fund that would be necessary to achieve the ending
value of an assumed initial investment of $1,000 kept in Adviser Class shares of
the Tomorrow Fund for the period specified and is based on the following
assumptions: (1) all dividends and distributions by the Tomorrow Fund are
reinvested in Adviser Class shares of the Tomorrow Fund at net asset value; and
(2) all recurring fees are included for applicable periods.
Each Tomorrow Fund may also illustrate in advertisements the cumulative
total return for several time periods throughout the Tomorrow Fund's life based
on an assumed initial investment of $1,000. Any such cumulative total return for
a Tomorrow Fund will assume the reinvestment of all income dividends and capital
gains distributions in Adviser Class for the indicated periods and will include
all recurring fees.
Each Tomorrow Fund may also illustrate in advertisements and sales
literature the yield and effective yield of its Adviser Class shares. Yield is
based on income generated by an investment in Adviser Class shares of the
Tomorrow Fund during a 30-day (or one-month) period. To calculate yield, this
income is annualized, that is, the amount of income generated during the 30-day
(or one-month) period is assumed to be generated each 30-day (or one-month)
period over a one-year period, and expressed as an annual percentage rate.
Effective yield for Adviser Class shares of the Tomorrow Funds is calculated in
a similar manner but, when annualized, the income earned from an investment is
assumed to be reinvested. Effective yield for each Tomorrow Fund will be
slightly higher than its current yield because of the compounding effect of this
assumed reinvestment.
Yields and total returns quoted for the Tomorrow Funds include the effect
of deducting each Tomorrow Fund's expenses but may not include charges and
expenses attributable to any particular Qualified Plan. You should consult with
your Plan Fiduciary for information on relevant charges and expenses. Because
these charges and expenses are excluded from a Tomorrow Fund's quoted
performance, the investment return received by a participant in a Qualified Plan
investing in the Tomorrow Fund may be lower than the quoted performance of the
Tomorrow Fund. You should bear in mind the effect of these charges when
comparing a Tomorrow Fund's performance to that of other mutual funds.
The performance of the Adviser Class shares of the Tomorrow Funds will vary
from time to time and past results are not necessarily representative of future
results. Performance is a function of the type and quality of a Tomorrow Fund's
portfolio securities and is affected by operating expenses. Performance
information may not provide a basis for comparison with other investments or
other mutual funds using a different method of calculating performance. An
investment in any Tomorrow Fund involves the risk of loss.
RISK CONSIDERATIONS AND OTHER INVESTMENT PRACTICES AND POLICIES
Fixed-Income Securities. Each Tomorrow Fund may invest in a broad range of
fixed-income securities, including bonds, notes, mortgage-backed and
asset-backed securities, preferred stock and convertible debt securities issued
by U.S. corporations or other entities or by the U.S. Government or its
agencies, authorities, instrumentalities or sponsored enterprises. The interest
payable on so-called fixed-income securities purchased by a Tomorrow Fund is not
necessarily paid at a fixed rate and may be payable on a variable, floating,
contingent, in-kind or deferred basis.
Fixed-income securities are subject to the risk of the issuers' inability
to meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the credit worthiness of the issuer and
general market liquidity (market risk). Generally, when interest rates decline,
the value of fixed-income securities can be expected to rise. Conversely, when
interest rates rise the value of fixed-income securities can be expected to
decline.
Corporate Debt Obligations. Each Tomorrow Fund may invest in corporate debt
obligations, including obligations of industrial, utility and financial issuers.
In addition to obligations of corporations, corporate debt obligations include
bank obligations and zero coupon securities, issued by financial institutions
and corporations.
The debt securities in which the Tomorrow Funds may invest will be rated
investment grade at the time of purchase. Investment grade securities are
securities rated within the four highest grades as determined by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or by Standard & Poor's
Ratings Group ("Standard & Poor's") (AAA, AA, A or BBB) or their respective
equivalent ratings or, if not rated, determined by the Adviser to be of
equivalent credit quality to securities so rated. A security will be deemed to
have met a rating requirement if it receives the minimum required rating from at
least one such rating organization even though it has been rated below the
minimum rating by one or more other rating organizations, or if unrated by such
rating organizations, determined by the Adviser to be of comparable credit
quality. Securities rated Baa by Moody's or BBB by Standard & Poor's and unrated
securities of equivalent credit quality are considered medium grade obligations
with speculative characteristics. Adverse changes in economic conditions or
other circumstances are more likely to weaken the issuer's capacity to pay
interest and repay principal on these securities than is the case for issuers of
higher rated securities. In the event that the rating on a security held in a
Tomorrow Fund's portfolio is downgraded below investment grade by a rating
service, such action will be considered by the Adviser in its evaluation of the
overall investment merits of that security, but will not necessarily result in
the sale of the security.
Convertible Securities and Preferred Stocks. Each Tomorrow Fund may invest in
debt securities or preferred stocks that are convertible into or exchangeable
for common stock. Preferred stocks are securities that represent an ownership
interest in a company and provide their owner with claims on the company's
earnings and assets prior to the claims of owners of common stock but after
those of bond owners. Preferred stocks in which the Tomorrow Funds may invest
include convertible, perpetual fixed and adjustable rate (including auction
rate) preferred stocks.
U.S. Government Securities. Each Tomorrow Fund may invest in all types of U.S.
Government securities, including obligations issued or guaranteed by the U.S.
Government or its agencies, authorities, instrumentalities or sponsored
enterprises. Some U.S. Government securities, such as Treasury bills, notes and
bonds, which differ only in their interest rates, maturities and times of
issuance, are supported by the full faith and credit of the United States of
America. Others, such as obligations issued or guaranteed by U.S. Government
agencies, authorities, instrumentalities or sponsored enterprises are supported
either by (a) the full faith and credit of the U.S. Government (such as
securities of the Small Business Administration), (b) the right of the issuer to
borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Banks), (c) the discretionary authority of the U.S. Government to purchase the
agency's obligations (such as securities of the Federal National Mortgage
Association), or (d) only the credit of the issuer.
The Tomorrow Funds may invest in U.S. Government securities which are zero
coupon or deferred interest securities. For example, each Tomorrow Fund may
invest in separately traded principal and interest components of securities
guaranteed or issued by the U.S. Government or its agencies, instrumentalities
or sponsored enterprises if such components are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPS") or any similar program sponsored by the U.S. Government.
Zero Coupon and Capital Appreciation Bonds. The Tomorrow Funds may invest in
zero coupon and capital appreciation bonds. Zero coupon and capital appreciation
bonds are debt securities issued or sold at a discount from their face value
that do not entitle the holder to any payment of interest prior to maturity or a
specified redemption date (or cash payment date). The amount of the discount
varies depending on the time remaining until maturity or cash payment date,
prevailing interest rates, the liquidity of the security and the perceived
credit quality of the issuer. These securities also may take the form of debt
securities that have been stripped of their unmatured interest coupons, the
coupons themselves or receipts or certificates representing interests in such
stripped debt obligations or coupons. The market prices of zero coupon and
capital appreciation bonds generally are more volatile than the market prices of
interest- bearing securities and are likely to respond to a greater degree to
changes in interest rates than interest- bearing securities having similar
maturities and credit quality. A Tomorrow Fund's investments in zero coupon
securities or other stripped securities may require the Tomorrow Fund to sell
certain of its portfolio securities to generate sufficient cash in order to
satisfy certain income distribution requirements. See "Dividends, Distributions
and Tax Status" in the SAI.
Mortgage-Backed Securities. Each Tomorrow Fund may invest in mortgage
pass-through certificates and multiple-class pass-through securities, such as
real estate mortgage investment conduits ("REMIC") pass-through certificates and
collateralized mortgage obligations ("CMOs").
Mortgage Pass-Through Securities. Mortgage pass-through securities represent
participation interests in pools of residential mortgage loans and are issued by
U.S. Governmental or private lenders and guaranteed by the U.S. Government
National Mortgage Association ("Ginnie Mae"), the Federal National Mortgage
Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation
("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full faith and
credit of the U.S. Government for timely payment of principal and interest on
the certificates. Fannie Mae certificates are guaranteed by Fannie Mae, a
federally chartered and privately owned corporation, for full and timely payment
of principal and interest on the certificates. Freddie Mac certificates are
guaranteed by Freddie Mac, a corporate instrumentality of the U.S. Government,
for timely payment of interest and the ultimate collection of all principal of
the related mortgage loans.
Multiple-Class Pass-through Securities and Collateralized Mortgage Obligations.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs is
provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages primarily secured by
interests in real property and other permitted investments. Investors may
purchase "regular" and "residual" interest shares of beneficial interest in
REMIC trusts although the Tomorrow Funds do not intend to invest in residual
interests.
Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed-income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Tomorrow Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When a Tomorrow Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment
rate will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.
Risks Associated with Specific Types of Derivative Debt Securities. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities, such as inverse
floating rates and Super Principal Only (PO) Mortgage-Backed Securities. The
Tomorrow Funds will not invest in inverse floating rate or Super Principal Only
(PO) Mortgage-Backed Securities.
Planned amortization class ("PAC") and target amortization class ("TAC")
CMO bonds involve less exposure to prepayment, extension and interest rate risk
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets. To the extent that prepayment
rates do not remain within these prepayment ranges, PAC and TAC CMO bonds
involve prepayment, extension and interest rate risk similar to those of the
residual or support tranches.
Asset-Backed Securities. Each Tomorrow Fund may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, pools of assets such as motor vehicle installment sale contracts,
installment loan contracts, leases of various types of real and personal
property, receivables from revolving credit (credit card) agreements and other
categories of receivables. Asset-backed securities may also be collateralized by
a portfolio of U.S. Government securities, but are not direct obligations of the
U.S. Government, its agencies or instrumentalities. Such asset pools are
securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest on
asset-backed securities may be guaranteed up to certain amounts and for a
certain time period by a letter of credit or a pool insurance policy issued by a
financial institution unaffiliated with the trust or corporation, or other
credit enhancements may be present; however, privately issued obligations
collateralized by a portfolio of privately issued asset-backed securities do not
involve any government-related guarantee or insurance. In addition to risks
similar to those associated with Mortgage-Backed Securities, asset-backed
securities present further risks that are not presented by Mortgage-Backed
Securities because asset-backed securities generally do not have the benefit of
a security interest in collateral that is comparable to mortgage assets.
Real Estate Investment Trusts. Each Tomorrow Fund may invest in shares of real
estate investment trusts ("REITs"). REITs are pooled investment vehicles which
invest primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Tomorrow Funds, REITs
are not taxed on income distributed to shareholders provided they comply with
several requirements of the Internal Revenue Code. Any Tomorrow Fund that
invests in REITs will indirectly bear its proportionate share of any expenses
paid by such REITs in addition to the expenses paid by the Tomorrow Fund.
Investing in REITs involves certain risks: equity REITs may be affected by
changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self-liquidation, and the possibilities of failing to
qualify for the exemption from tax for distributed income under the Internal
Revenue Code and failing to maintain their exemptions from the 1940 Act. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.
Investing in REITs may involve risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P 500
Index.
Eurodollar and Yankee Dollar Investments. Each Tomorrow Fund may invest in
obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of
foreign banks (Yankee dollars) as well as foreign branches of foreign banks.
These investments involve risks that are different from investments in
securities of U.S. banks, including potential unfavorable political and economic
developments, different tax provisions, seizure of foreign deposits, currency
controls, interest limitations or other governmental restrictions which might
affect payment of principal or interest.
Investing in Small Capitalization Companies. Each Tomorrow Fund may invest in
varying degrees in smaller, lesser known companies which the Adviser believes
offer a greater growth potential than larger, more mature, better known firms.
Investing in the securities of such companies, however, involves greater risk
and a possibility of greater portfolio price volatility. Historically, small
capitalization stocks and stocks of recently organized companies have been more
volatile in price than the larger capitalization stocks, such as those included
in the S&P 500. Among the reasons for the greater price volatility of these
small company and unseasoned stocks are the less certain growth prospects of
smaller firms and the lower degree of liquidity in the markets for such stocks.
Other Investment Companies. Each Tomorrow Fund may invest up to 10% of its total
assets in the securities of other investment companies but may not invest more
than 5% of its total assets in the securities of any one investment company or
acquire more than 3% of the voting securities of any other investment company. A
Tomorrow Fund will indirectly bear its proportionate share of any management
fees and other expenses paid by investment companies in which it invests in
addition to the advisory and administration fees paid by the Tomorrow Fund.
However, to the extent that a Tomorrow Fund invests in a registered open-end
investment company, the Adviser will waive its advisory fees on the portion of
the Tomorrow Fund's assets so invested.
Each Tomorrow Fund is authorized to invest all of its assets in the
securities of a single open-end investment company (a "pooled fund") having
substantially identical investment objectives, policies and restrictions as such
Fund, notwithstanding any other investment restriction or policy. Such a
structure is commonly referred to as "master/feeder." If authorized by the
Trustees and subject to shareholder approval (if then required by applicable
law), a Tomorrow Fund would seek to achieve its investment objective by
investing in a pooled fund which would invest in a portfolio of securities that
complies with the Tomorrow Fund's investment objective, policies and
restrictions. The Trustees currently do not intend to authorize investing in a
pooled fund in connection with a master/feeder structure.
Short-Term Debt Securities. Each Tomorrow Fund may establish and maintain cash
balances for temporary purposes in order to maintain liquidity to meet
shareholder redemptions. Each Tomorrow Fund may also establish and maintain cash
balances for defensive purposes without limitation to hedge against potential
stock market declines. A Tomorrow Fund's cash balances, including uncommitted
cash balances, may be invested in investment grade money market instruments and
short-term interest-bearing securities. These securities consist of U.S.
Government securities, instruments of U.S. banks (including negotiable
certificates of deposit, non-negotiable fixed-time deposits and bankers'
acceptances), repurchase agreements, prime commercial paper of U.S. companies
and debt securities that make periodic interest payments at variable or floating
rates.
Mortgage Dollar Rolls. Each Tomorrow Fund may enter into mortgage dollar roll
transactions. In a mortgage dollar roll, a Tomorrow Fund sells securities for
delivery in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity), but not
identical securities on a specified future date. During the roll period, the
Tomorrow Fund will not receive principal and interest paid on the securities
sold. However, the Tomorrow Fund would benefit to the extent of any difference
between the price received for the securities sold and the lower forward price
for the future purchase (often referred to as the "drop") or fee income plus the
interest on the cash proceeds of the securities sold until the settlement date
of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of a Tomorrow Fund
compared with what such performance would have been without the use of mortgage
dollar rolls. The Tomorrow Funds will hold and maintain in a segregated account
until the settlement date cash or liquid, high grade debt securities in an
amount equal to the forward purchase price. Any benefits derived from the use of
mortgage dollar rolls may depend upon mortgage prepayment assumptions, which
will be affected by changes in interest rates. There is no assurance that
mortgage dollar rolls can be successfully employed.
Writing and Purchasing Put and Call Options on Securities and Securities
Indices. To seek additional income or to minimize anticipated declines in the
value of its securities or to hedge various market risks (such as interest rates
and broad or specific equity of fixed-income market movements), each Tomorrow
Fund may purchase and write (i.e., sell) call and put options on securities and
securities indices. Option transactions in which the Tomorrow Funds may engage
may be traded on securities exchanges or in the over-the-counter market. Each
Tomorrow Fund currently intends to limit its option transactions during the
current fiscal year so that no more than 5% of the Tomorrow Fund's net assets
will be at risk as a result of such transactions. Please see the SAI for a
further discussion of option transactions and associated risks.
Futures Contracts and Options on Futures Contracts. Each Tomorrow Fund may
engage in futures transactions and related options. Future contracts may be
based on various securities (such as U.S. Government securities), securities
indices and other financial instruments and indices. A Tomorrow Fund will engage
in futures and related options transactions only for bona fide hedging and
non-hedging purposes to the extent permitted by regulations of the Commodity
Futures Trading Commission. A Tomorrow Fund will not enter into futures
contracts or options thereon for non-hedging purposes if, immediately
thereafter, the aggregate initial margin and premiums required to establish
non-hedging positions in futures contracts and options on futures would exceed
5% of the Tomorrow Fund's net assets, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. Each Tomorrow Fund may also
enter into closing purchase and sale transactions with respect to any of futures
contracts and related options.
The use of futures contracts entails certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of the Tomorrow Fund's income
due to the use of hedging; possible reduction in value of the both the
securities hedged and the hedging instrument; possible lack of liquidity due to
daily limits on price fluctuations; imperfect correlation between the contract
and the securities being hedged; and potential losses in excess of the amount
initially invested in the futures contracts themselves. If the expectations of
the Adviser regarding movements in securities prices or interest rates are
incorrect, the Tomorrow Fund may have experienced better investments results
without hedging. The use of futures contracts and options on futures contracts
requires special skills in addition to those needed to select portfolio
securities. A further discussion of futures contracts and their associated risks
is contained in the SAI.
Forward Commitment, Delayed Delivery and When-Issued Transactions. Each Tomorrow
Fund may purchase securities on a when-issued, delayed delivery or forward
commitment basis (collectively, "when-issued securities"). When such
transactions are negotiated, the price of such securities is fixed at the time
of the commitment, but delivery and payment for the securities may take place up
to 90 days after the date of the commitment to purchase. The securities so
purchased are subject to market fluctuation, and no interest accrues to the
purchaser during this period. When-issued securities involve a risk of loss if
the value of the security to be purchased declines prior to the settlement date.
When a Tomorrow Fund purchases securities on a when-issued basis, the Tomorrow
Fund's custodian will maintain in a segregated account cash or liquid, high
grade debt securities having a value (determined daily) at least equal to the
amount of the Tomorrow Fund's purchase commitment. A Tomorrow Fund may close out
a position in securities purchased on a when-issued basis prior to the
settlement date.
Lending of Portfolio Securities. Each Tomorrow Fund may also seek to increase
its income by lending portfolio securities. Such loans may be made to
institutions, such as certain broker-dealers, and are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. If the Adviser determines to make
securities loans, the value of the securities loaned would not exceed 33 1/ 3%
of the value of the total assets of the Tomorrow Fund. Although the Tomorrow
Funds may loan portfolio securities on a short-term, medium-term and long-term
basis, any such loan may be called at any time for reacquisition by the
respective Tomorrow Fund within the normal settlement period for the security. A
Tomorrow Fund may experience a loss or delay in the recovery of its securities
if the borrowing institution breaches its agreement with the Tomorrow Fund.
Restricted and Illiquid Securities. Each Tomorrow Fund may invest up to 15% of
its total assets in "restricted securities" (i.e., securities that would be
required to be registered under the Securities Act of 1933, as amended ("1933
Act"), prior to distribution to the general public) including restricted
securities eligible for resale to "qualified institutional buyers" under Rule
144A under the 1933 Act. Each Tomorrow Fund may also invest up to 10% of its
total assets in illiquid investments, which includes repurchase agreements
maturing in more than seven days, securities that are not readily marketable,
certain over-the-counter options and restricted securities, unless the Trustees
determine, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. Each
Tomorrow Fund may agree to adhere to more restrictive limits on investments in
restricted and illiquid investments as a condition of the registration of its
shares in various states. The Trustees have adopted guidelines and delegated to
the Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, retain sufficient oversight and
are ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities sold
and offered under Rule 144A will develop, the Trustees carefully monitor each
Tomorrow Fund's investments in these securities, focusing on such important
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in a Tomorrow Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these restricted securities.
Repurchase Agreements. Each Tomorrow Fund may enter into repurchase agreements
through which the Tomorrow Fund purchases a security (the "underlying security")
from a domestic securities dealer or bank that is a member of the Federal
Reserve System. Under the agreement, the seller of the repurchase agreement
(i.e., the securities dealer or bank) agrees to repurchase the underlying
security at a mutually agreed upon time and price. In repurchase transactions,
the underlying security, which must be a high- quality debt security, is held by
the Tomorrow Fund's custodian through the federal book-entry system as
collateral and marked-to-market on a daily basis to ensure full
collateralization of the repurchase agreement. In the event of bankruptcy or
default of certain sellers of repurchase agreements, a Tomorrow Fund could
experience costs and delays in liquidating the underlying security held as
collateral and might incur a loss if such collateral declines in value during
this period.
Market Changes. The market value of the Tomorrow Fund's investments, and thus
each Tomorrow Fund's net asset value, will change in response to market
conditions affecting the value of its portfolio securities. When interest rates
decline, the value of fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate loans are reset periodically,
yields on investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Portfolio Turnover. Although no Tomorrow Fund purchases securities with a view
to rapid turnover, there are no limitations on the length of time that
securities must be held by a Tomorrow Fund and a Tomorrow Fund's annual
portfolio turnover rate may vary significantly from year to year. A high rate of
portfolio turnover (100% or more) involves correspondingly greater transaction
costs which must be borne by the applicable Tomorrow Fund and its shareholders
and may, under certain circumstances, make it more difficult for such Tomorrow
Fund to qualify as a regulated investment company under the Internal Revenue
Code. The estimated portfolio turnover rates of the Tomorrow Funds for the
current fiscal year are as follows: Long-Term Fund 57%; Medium-Term Fund 63%;
Short-Term Fund 95%; and Post-Retirement Fund 145%.
Diversification. Each Tomorrow Fund is diversified, as defined in the 1940 Act.
As such, each Tomorrow Fund has a fundamental policy that limits its investments
so that, with respect to 75% of its assets (i) no more than 5% of the Tomorrow
Fund's total assets will be invested in the securities of a single issuer and
(ii) each Tomorrow Fund will purchase no more than 10% of the outstanding voting
securities of a single issuer. These limitations do not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements collateralized by U.S. Government securities or
investments in other investment companies. In addition to the diversification
requirements under the 1940 Act, the Tomorrow Funds must satisfy the
diversification requirements under the Internal Revenue Code applicable to
regulated investment companies and the additional diversification requirements
applicable under Section 817(h) of the Internal Revenue Code to the underlying
assets of insurance company segregated asset accounts that fund variable annuity
or variable life insurance products. These requirements place certain
limitations on the assets of a Tomorrow Fund that may be invested in securities
of a single issuer or interests in the same commodity. More specific information
on these diversification requirements is contained in the SAI.
Investment Restrictions. Each Tomorrow Fund is subject to further investment
policies and restrictions that are described in the SAI. As previously
described, the foregoing investment policies, including each Tomorrow Fund's
investment objective, are non-fundamental policies which may be changed by the
Trustees without the approval of shareholders. If there is a change in a
Tomorrow Fund's investment objective, shareholders should consider whether that
Tomorrow Fund remains an appropriate investment in light of their then current
financial positions and needs. Each Tomorrow Fund has adopted certain
fundamental policies which may not be changed without the approval of the
applicable Tomorrow Fund's shareholders. Among other fundamental restrictions
listed in the SAI, no Tomorrow Fund may (1) with respect to 75% of its total
assets, purchase securities of any one issuer (other than U.S. Government
securities and securities of other investment companies) if more than 5% of its
total assets would be invested in such issuer, (2) act as an underwriter except
in certain circumstances, (3) purchase or sell real estate except in certain
circumstances, (4) issue senior securities except as permitted by the 1940 Act
or (5) invest more than 25% of its total assets in the securities of issuers
(including any one foreign government, but excluding the U.S. Government) in any
one industry.
If any percentage restriction described above or in the SAI is adhered to
at the time of investment, a subsequent increase or decrease in the percentage
resulting from a change in the value of a Tomorrow Fund's assets will not
constitute a violation of the restriction.
ADDITIONAL INFORMATION
Reports to Shareholders
As shareholders in the Tomorrow Funds, Qualified Plans will receive an
annual report containing audited financial statements and semi-annual reports.
Each Qualified Plan will also be provided with a printed confirmation for each
transaction in their shareholder account. Participants in Qualified Plans may
receive additional reports from their Plan Fiduciary.
Principal Underwriter
WPG serves as the Tomorrow Funds' principal underwriter.
Transfer Agent and Dividend Disbursing Agent
The Shareholder Services Group, Inc., P.O. Box 9037, Boston, MA 02205
serves as transfer agent and dividend disbursing agent for the Tomorrow Funds.
The Tomorrow Funds may also enter into agreements with and compensate other
transfer agents and financial institutions who process shareholder transactions
and maintain shareholder accounts.
<PAGE>
Independent Accounts
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, serves as
the independent accountants for the Trust and will audit each Tomorrow Fund's
financial statements annually.
Legal Counsel
Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust.
----------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus and
the SAI, and, if given or made, such other information or representation must
not be relied upon as having been authorized by the Trust. This Prospectus does
not constitute an offering in any jurisdiction in which such offering may not be
lawfully made.
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
One New York Plaza
New York, New York 10004
TOMORROW LONG-TERM RETIREMENT FUND ("Long-Term Fund")
Seeks to satisfy the retirement goals of investors who are currently
between 22 and 35 years of age and with an average remaining life
expectancy of 50 years or more.
TOMORROW MEDIUM-TERM RETIREMENT FUND ("Medium-Term Fund")
Seeks to satisfy the retirement goals of investors who are currently
between 36 and 50 years of age and with an average remaining life
expectancy in the range of 35-50 years.
TOMORROW SHORT-TERM RETIREMENT FUND ("Short-Term Fund")
Seeks to satisfy the retirement goals of investors who are currently
between 51 and 65 years of age and with an average remaining life
expectancy in the range of 20-30 years.
TOMORROW POST-RETIREMENT FUND ("Post-Retirement Fund") *
Seeks to satisfy the goals of investors who seek to maximize total
return, with an emphasis on current income, consistent with
capital preservation.
PROSPECTUS -- Institutional Class Shares
November 22, 1995
This Prospectus describes Institutional Class shares of four mutual
funds - the Long-Term Fund, Medium-Term Fund, Short-Term Fund and
Post-Retirement Fund (together, the "Tomorrow Funds"). Institutional Class
shares of the Tomorrow Funds of the Funds are designed to provide
investment vehicles for variable annuity and variable life insurance
contracts ("Variable Contracts") of various insurance companies.
Institutional Class shares of the Tomorrow Funds may also be purchased by
"qualified" pension or retirement plans, including trustees of such plans
for certain individuals funding their individual retirement accounts or
other qualified plans. Each Tomorrow Fund, a series of Tomorrow Funds
Retirement Trust (the "Trust"), is a diversified asset allocation mutual
fund advised by Weiss, Peck & Greer, L.L.C. (the "Adviser" or "WPG").
Please read this Prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
Tomorrow Funds invest and the services available to shareholders. If
applicable, this Prospectus should be read in conjunction with the separate
account prospectus of the specific insurance product which accompanies this
Prospectus. To learn more about the Tomorrow Funds, you can obtain a copy
of the Statement of Additional Information (the "SAI"), also dated November
22, 1995. The SAI has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this
Prospectus. A free copy of the SAI or a copy of the Prospectus describing
the Adviser Class shares of the Tomorrow Funds is available upon request by
calling Weiss, Peck & Greer, L.L.C. at 1-800- 223-3332 (toll free).
Institutional Class shares of a Tomorrow Fund may not be available in your
state due to various insurance or other regulations. Please check with your
insurance company or qualified plan fiduciary for Tomorrow Funds that are
available in your state. Inclusion of a Tomorrow Fund in this Prospectus
which is not available in your state is not to be considered a
solicitation. Shareholder inquiries regarding the Tomorrow Funds may be
made in writing to the Trust at the address set forth above.
* As of the date of this Prospectus, the Post-Retirement Fund is not
available for purchase. Contact WPG for the latest information.
INSTITUTIONAL CLASS SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
INSTITUTIONAL CLASS SHARES OF THE FUNDS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
The Tomorrow Funds seek to provide investors of all ages who participate in
qualified retirement plans or who are holders of Variable Contracts with an
asset allocation strategy designed to address their retirement funding needs.
Each Tomorrow Fund invests its assets, in varying amounts, in equity and fixed-
income securities of all types. The Long-Term, Medium-Term and Short-Term Funds
seek to maximize total return while also increasingly emphasizing current income
and capital preservation as the average age of the target class of investors in
that particular Tomorrow Fund increases. As the average age of the target class
of investors in a Tomorrow Fund increases over time, the particular Tomorrow
Fund adjusts the mix of its assets invested in equity and fixed-income
securities to reflect a level of risk that the Adviser considers appropriate for
investors in that target age class, in general, given their investment time
horizon. The Post-Retirement Fund seeks to provide investors with an asset
allocation strategy designed to maximize total return, with an emphasis on
current income, consistent with capital preservation.
You are encouraged to select a particular Tomorrow Fund based on your
current age and the length of the period during which you expect to maintain
your investment. You may select more than one Tomorrow Fund in order to achieve
a personalized investment program.
Because the investment portfolio of each Tomorrow Fund will change over
time to reflect the investment needs of a target class of investors with an
increasing average age, it will normally not be necessary for you to change your
Tomorrow Fund selection as you grow older. Just as your age increases over time,
the average age of the target class of investors of each of the Long-Term,
Medium-Term and Short-Term Funds will increase over time. However, if your
investment needs change other than by reason of the passage of time, you should
consider whether your particular Tomorrow Fund remains an appropriate selection.
In addition to the Institutional Class shares offered through this
Prospectus, the Tomorrow Funds offer a class of shares known as the Adviser
Class through a separate prospectus. Adviser Class shares of the Tomorrow Funds
are subject to different expenses which may result in different performance
results. Adviser Class shares of the Tomorrow Funds are available only to
certain eligible investors.
TABLE OF CONTENTS
Page
Expense Information. . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . 5
Eligible Investors . . . . . . . . . . . . . . . . . . . . . 10
Insurance Company Separate Accounts. . . . . . . . . . . . . 10
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . 11
How to Buy Shares. . . . . . . . . . . . . . . . . . . . . . 11
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . 13
How to Exchange Shares . . . . . . . . . . . . . . . . . . . 15
How Each Tomorrow Fund's Share Price is Determined . . . . . 17
Management of the Tomorrow Funds . . . . . . . . . . . . . . 18
Service Plans. . . . . . . . . . . . . . . . . . . . . . . . 19
Dividends and Taxes. . . . . . . . . . . . . . . . . . . . . 19
Portfolio Brokerage. . . . . . . . . . . . . . . . . . . . . 21
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Performance . . . . . . . . . . . . . . . . . . . 23
Risk Considerations and Other Practices and Policies . . . . 24
Additional Information . . . . . . . . . . . . . . . . . . . 32
<PAGE>
EXPENSE INFORMATION
Operating a mutual fund, such as each Tomorrow Fund, involves a variety of
expenses for portfolio management, shareholder statements, tax reporting and
other services. These costs are paid from a fund's assets and their effect is
factored into any quoted share price or performance information.
Shareholder Transaction Expenses are charges you pay when you buy or sell
Institutional Class shares of a Tomorrow Fund.
<TABLE>
<S> <C> <C> <C> <C>
Post-
Long-Term Medium-Term Short-Term Retire-
Fund Fund Fund ment Fund#
Maximum Sales Load Imposed on Purchases None None None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Exchange Fees None None None None
</TABLE>
Annual Fund Operating Expenses are paid out of the Tomorrow Funds' assets.
Each Tomorrow Fund's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts. The following are estimates
and are calculated as a percentage of average net assets.
<TABLE>
<S> <C> <C> <C> <C>
Post-
Long-Term Medium-Term Short-Term Retire-
Fund Fund Fund ment Fund#
Management Fee (after voluntary waiver) 0.00%* 0.00%* 0.00%* 0.00*%
12b-1 Fee 0.00% 0.00% 0.00% 0.00%
Other Expenses (after expense
limitation)1 1.50%* 1.50%* 1.50%* 1.40%*
Total Fund Operating Expenses
(after expense limitation) 1.50%* 1.50%* 1.50%* 1.40%*
</TABLE>
Example: Hypothetically assume that each Tomorrow Fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000 you
invested, you would have paid the following expenses if you closed your account
after the number or years indicated:
<TABLE>
<S> <C> <C> <C> <C>
Post-
Long-Term Medium-Term Short-Term Retire-
Fund Fund Fund ment Fund#
After 1 Year $15 $15 $15 $14
After 3 Years $48 $48 $48 $45
<PAGE>
The purpose of the above table and Example is to assist you in
understanding the various costs and expenses of the Institutional Class shares
of the Tomorrow Funds that an investor will bear directly or indirectly. See
page 19. The Tomorrow Funds are newly organized and have no operating history.
The figures shown in the table under the caption "Other Expenses" and in the
hypothetical example are based on estimates of the Tomorrow Funds' expenses for
the fiscal year ending December 31, 1996. The expenses set forth above do not
reflect changes and expenses that may be applicable to a holder of a Variable
Contract or participant in a qualified plan. Please refer to your separate
account prospectus or qualified plan documents, as the case may be.
---------------
<FN>
# As of the date of this Prospectus, the Post-Retirement Fund is not
available for purchase. Contact WPG for the latest information.
1 Other expenses include service fees payable under a non-Rule 12b-1
service plan for the benefit of qualified pension or retirement plans. See
"Service Plans" on page 19.
* The Adviser has voluntarily agreed to limit temporarily the operating
expenses (excluding Rule 12b-1 fees applicable to Adviser Class shares, service
fees applicable to Institutional Class shares, any other class-specific
expenses, litigation, indemnification and other extraordinary expenses) of the
Long-Term, Medium-Term and Short-Term Funds to 1.25% of their respective average
daily net assets and such operating expenses of the Post-Retirement Fund to
1.15% of its average daily net assets. Each Tomorrow Fund will reimburse the
Adviser for fees foregone or other expenses paid by the Adviser pursuant to this
expense limitation in later years in which operating expenses for that Tomorrow
Fund are less than the expense limitations set forth above for any such year.
See page 19. In the absence of this agreement, Management Fees would be 0.75%,
0.75%, 0.75% and 0.65%, respectively, Other Expenses are estimated to be
approximately 2.96%, 1.95%, 1.76% and 4.49%, respectively, and Total Fund
Operating Expenses are estimated to be approximately 3.71%, 2.70%, 2.51% and
5.14%, respectively, of the average daily net assets attributable to the
Institutional Class shares of the Long-Term Fund, Medium-Term Fund, Short-Term
Fund and Post-Retirement Fund.
</FN>
</TABLE>
The Tomorrow Funds' imposition of a service fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
THE INFORMATION IN THE TABLE AND HYPOTHETICAL EXAMPLE ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
What are the Investment Objectives and Policies of the Tomorrow Funds?
The Tomorrow Funds seek to provide investors of all ages who participate in
qualified retirement plans with an asset allocation strategy designed to address
their retirement funding needs. Each Tomorrow Fund other than the
Post-Retirement Fund seeks to maximize total return while also increasingly
emphasizing current income and capital preservation as the average age of the
target class of investors in that particular Tomorrow Fund increases. The
Post-Retirement Fund seeks to provide investors with an asset allocation
strategy designed to maximize total return, with an emphasis on current income,
consistent with capital preservation.
LONG-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 22 and 35 years of age and with an average
remaining life expectancy of 50 years or more.
MEDIUM-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 36 and 50 years of age and with an average
remaining life expectancy in the range of 35-50 years.
SHORT-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 51 and 65 years of age and with an average
remaining life expectancy in the range of 20-30 years.
POST-RETIREMENT seeks to satisfy the goals of investors who seek to maximize
FUND total return, with an emphasis on current income, consistent
with capital preservation.
Each Tomorrow Fund invests its assets, in varying amounts, in equity and
fixed-income securities of all types (the "Categories"). The amount of assets
allocated to equity securities is currently invested, in varying amounts, among
large capitalization stocks, medium capitalization stocks, small capitalization
stocks and, indirectly through other investment companies, foreign securities
(the "Subcategories"). From time to time, the Adviser may select Subcategories
for the fixed-income Category. Further Subcategories may be selected in addition
to or as a substitute for any of the current Subcategories.
As the average age of the target class of investors in a Tomorrow Fund
increases over time, the particular Tomorrow Fund adjusts the mix of its assets
allocated between equity and fixed-income securities, and allocated, directly or
indirectly, among large, medium and small capitalization stocks and foreign
securities, to reflect a level of risk that the Adviser considers appropriate
for investors in that target age class, in general, given their investment time
horizon. The Post-Retirement Fund maintains a stable mix of its assets invested
(within defined ranges) in equity and fixed-income securities based on the
current outlook for such securities.
Typically, the longer the average life expectancy of the target class of
investors in a Tomorrow Fund, the greater the allocation of assets of that
Tomorrow Fund to securities with higher growth potential and, correspondingly,
more risk, such as small capitalization stocks. Conversely, the shorter the
average life expectancy of the target class of investors in a Tomorrow Fund, the
greater the emphasis on current income and capital preservation of assets and,
therefore, the greater the allocation of assets of that Tomorrow Fund to
fixed-income securities. Each Tomorrow Fund will be managed more conservatively
as the average age of its target class of investors increases. For example,
assuming that current market conditions remain the same, at a point fifteen
years from now, the strategic asset composition of the Long-Term Fund could be
expected to look like the current strategic asset composition of the Medium-Term
Fund. On the date of this Prospectus, the anticipated strategic asset allocation
mix within the Tomorrow Funds' portfolios would be approximately as follows:
[Graphic Material Omitted: Four pie charts demonstrating the asset
allocations of each Tomorrow Fund. The pie chart applicable to the
Long-Term Fund reflects the following asset allocations: large
capitalization stocks - 30%, medium capitalization stocks - 20%, small
capitalization stocks - 25%, foreign equities - 5%, and fixed-income
securities - 20%. The pie chart applicable to the Mid-Term Fund
reflects the following asset allocations: large capitalization stocks -
35%, medium capitalization stocks - 15%, small capitalization stocks -
15%, foreign equities - 5%, and fixed-income securities - 30%. The pie
chart applicable to the Short-Term Fund reflects the following asset
allocations: large capitalization stocks - 40%, medium capitalization
stocks - 10%, small capitalization stocks - 10%, and fixed-income
securities - 40%. The pie chart applicable to the Post-Retirement Fund
reflects the following asset allocations: large capitalization stocks -
30%, and fixed-income securities - 70%.]
- -------------
* The Long-Term Fund and the Medium-Term Fund will currently invest their assets
allocated to foreign securities in shares of other open-end and/or closed-end
investment companies that will invest primarily in equity securities of foreign
issuers. See "Foreign Securities" on page 9.
The strategic asset allocation mix represents the way that the Tomorrow
Funds' investments will generally be allocated in the near-term. A Tomorrow
Fund's actual asset allocation mix between equity and fixed-income securities
and among large, medium and small capitalization stocks and foreign securities,
as applicable, are expected to vary based on the Adviser's evaluation of
anticipated relative returns and risks between and among such securities in the
near-term future. The Adviser will review strategic asset allocations at least
semiannually and will adjust the asset allocations, if necessary, at that time.
Additionally, the strategic asset allocation mix of each Tomorrow Fund (other
than the Post-Retirement Fund) will be adjusted as necessary to reflect a level
of risk that the Adviser considers appropriate for investors in that target
class, in general, given their investment time horizon.
The Trustees of the Trust anticipate that it will be necessary to change,
from time to time, the names of each of the Long-Term, Medium-Term and
Short-Term Funds to reflect the decreasing time period to retirement of each
such Fund's target class of investors. As the average age of the target class of
investors in a Tomorrow Fund approaches that of the Post-Retirement Fund, it is
also anticipated that each Tomorrow Fund's assets may begin to decrease as a
result of investor withdrawals. At such time, the Trustees of the Trust will
consider what action would be appropriate to protect the interests of remaining
shareholders, including a combination with the Post- Retirement Fund.
You are encouraged to select a particular Tomorrow Fund for investment
based on your current age and the length of the period during which you expect
to maintain your investment. You may invest in more than one Tomorrow Fund in
order to achieve a personalized investment program. Before investing in the
Tomorrow Funds, you should consider your personal tolerance for risk recognizing
that each Tomorrow Fund is designed and managed to satisfy the retirement goals
of investors in a target age group with a corresponding average life expectancy
who anticipate retiring at approximately age 65. You should also recognize that
the strategic asset allocation of each Tomorrow Fund and the particular
securities in which each Tomorrow Fund invests are determined based upon the
average age of the particular Tomorrow Fund's target class of investors. Because
the Tomorrow Funds are managed to satisfy retirement goals based upon average
life expectancy, the Tomorrow Funds may invest their assets in higher
risk/higher reward securities than mutual funds designed for investors based
solely on retirement dates. In addition, you should recognize that each Tomorrow
Fund is managed with the goal of achieving a different risk/reward ratio, with
the Long-Term Fund seeking the highest risk/reward ratio and the Post-Retirement
Fund seeking the lowest risk/reward ratio among the Tomorrow Funds. Each
Tomorrow Fund (other than the Post-Retirement Fund) will be managed to achieve
an increasingly conservative risk/reward ratio as the average age of the target
class of investors in that particular Tomorrow Fund increases.
Risk/Reward Ratio
Higher Lower
--------------------------------------------------------
Long-Term Medium-Term Short-Term Post-Retirement
Fund Fund Fund Fund
The investment policies, including each Tomorrow Fund's investment
objective, described in this Prospectus are non-fundamental policies which may
be changed by the Trustees without the approval of shareholders. If there is a
change in a Tomorrow Fund's investment objective, shareholders should consider
whether that Tomorrow Fund remains an appropriate investment in light of their
then current financial positions and needs. Each Tomorrow Fund has adopted
certain fundamental policies which may not be changed without the approval of
the applicable Tomorrow Fund's shareholders. See "Investment Restrictions" on
page 31.
In what types of securities do the Tomorrow Funds invest?
Each Tomorrow Fund allocates its assets between equity and fixed-income
securities. The equity Category includes equity securities of all types. The
fixed-income Category includes all varieties of fixed-income instruments
(including adjustable rate preferred stocks). Some types of securities can be
considered as both equity and fixed-income securities, such as shares of real
estate investment trusts. The Tomorrow Funds may also make other investments
that are not considered either an equity or fixed-income security, such as
options and futures. For further information concerning the equity and
fixed-income securities in which the Tomorrow Funds may invest, see "Risk
Considerations and Other Investment Practices and Policies" beginning on page 24
of this Prospectus.
While each Tomorrow Fund invests in substantially the same equity and
fixed-income securities, the amount of each Tomorrow Fund's assets allocated to
equity and fixed-income securities, and thus in particular securities, differs.
However, it is expected that the relative percentage that a particular equity or
fixed-income security represents within the equity and fixed-income Categories
and the large, medium and small capitalization stock and foreign securities
Subcategories ordinarily will remain substantially the same.
Each Tomorrow Fund may, but is not required to, utilize various investment
strategies and techniques to hedge various market risks (such as broad or
specific equity or fixed-income market movements and interest rate risk), to
manage the effective maturity or duration of fixed-income securities, or to
enhance potential gain. The investment strategies and techniques used by the
Tomorrow Funds and the instruments in which they invest may change over time as
new techniques, strategies and instruments are developed or regulatory changes
occur. In the course of pursuing their investment objectives, the Tomorrow Funds
may: (i) purchase and write (sell) put and call options on securities and
indices; (ii) purchase and sell financial futures contracts and options thereon;
(iii) lend portfolio securities; (iv) enter into repurchase agreements and
mortgage dollar roll transactions; (v) purchase securities on a forward
commitment, when-issued or delayed delivery basis; (vi) invest in restricted and
illiquid securities; (vii) invest in other investment companies and shares of
real estate investment trusts ("REITs"); and (viii) invest in securities of
unseasoned issuers. For further information concerning the securities in which
the Tomorrow Funds may invest and the investment strategies and techniques they
may employ, see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 24 of this Prospectus.
Equity Securities
A Tomorrow Fund's assets allocated to equity securities is currently
invested, in varying amounts, among large capitalization stocks, medium
capitalization stocks, small capitalization stocks and, indirectly through other
investment companies, foreign securities. Please refer to the charts on page 6
of this Prospectus for the current strategic allocation of a Tomorrow Fund's
assets among these securities.
Large, Medium and Small Capitalization Stocks.
With respect to the assets of each Tomorrow Fund allocated to large, medium
and small capitalization stocks, the Adviser seeks to provide, using a
quantitative methodology, investment results that exceed the performance of an
appropriate "Benchmark Index." To seek to achieve this objective, the assets
that are allocated separately to large, medium and small capitalization stocks
will, under normal market conditions, be invested in a portfolio of securities
that is considered more "efficient" than the applicable Benchmark. An efficient
portfolio is one that has the maximum expected return for any level of risk. The
efficient mix of securities is established mathematically, taking into account
the expected return and volatility of returns for each security in a given
universe, as well as the historical price relationships between different
securities in the universe.
Subcategory Benchmark
Large Capitalization Stocks Standard & Poor's 500 Composite Stock
Price Index
Medium Capitalization Stocks Standard & Poor's 400 MidCap Index
Small Capitalization Stocks Russell 2000 Index
To implement this strategy with respect to a Subcategory, the Adviser
compiles the historical price data of all securities which comprise the
applicable Benchmark. The Adviser may eliminate a security from consideration if
it considers the security to have an inadequate or misleading price history.
Using historical price data, the Adviser constructs and analyzes a complete
matrix of all the possible price relationships between the securities in the
applicable Benchmark.
Using a sophisticated software program that incorporates risk reduction
techniques developed by investment professionals of the Adviser, the Adviser
constructs a number of portfolios separately with respect to each Tomorrow
Fund's assets that are allocated to large, medium and small capitalization
stocks, which portfolios are believed to have optimized risk/reward ratios. From
these alternative portfolios, the Adviser selects the combination of securities,
together with their appropriate weightings, that the Adviser believes will
comprise the optimal portfolio for each Subcategory. The optimal portfolio for
each Subcategory is designed to have a return greater than, but highly
correlated with, the return of its Benchmark. Please see "Quantitative
Methodology" in the SAI for a further description of how the Adviser constructs
and maintains an optimal portfolio for the large, medium and small
capitalization Subcategories. No quantitative methodology or technical analysis,
including the Adviser's, has ever been objectively proven to provide enhanced
investment return and reduced investment risk in actual long-term portfolio
results.
Foreign Securities
The Adviser intends to invest the Long-Term Fund's and the Medium-Term
Fund's assets allocated to foreign securities in shares of other open-end and/or
closed-end investment companies. Such other investment companies will invest
their assets primarily in equity securities of foreign issuers. It is
anticipated that none of the Tomorrow Funds, including the Long-Term Fund and
the Medium-Term Fund, will currently invest directly in foreign securities. The
Adviser will seek to select for investment other investment companies whose
underlying securities, when aggregated, resemble the composition of the Morgan
Stanley Europe, Australia, Far East Index ("EAFE Index"). There can be no
assurance that the Adviser will be successful in selecting such investment
companies. See "Risk Considerations and Other Investment Practices and Policies
- - Other Investment Companies" on page 28 of this Prospectus and "Foreign
Securities" in the SAI.
Fixed-Income Securities
Each Tomorrow Fund will invest those assets which are allocated to
fixed-income securities in a broad range of fixed-income securities, including
bonds, notes, mortgaged-backed and asset-based securities, preferred stock,
convertible debt securities, zero coupon and capital appreciation bonds issued
by U.S. corporations or other entities or by the U.S. Government or its
agencies, authorities, instrumentalities or sponsored enterprises. The Tomorrow
Funds limit their investments in fixed-income securities to those that are
rated, at the time of purchase, investment grade or, if not rated, determined by
the Adviser to be of equivalent credit quality to securities so rated.
Fixed-income securities may pay interest on a fixed, variable, floating,
contingent, in-kind or deferred basis. There is no limit on the average
dollar-weighted maturity or duration of a Tomorrow Fund's portfolio or on the
maturity or duration of any individual fixed-income security purchased by a
Tomorrow Fund. Because each Tomorrow Fund will invest in substantially the same
fixed-income securities but in different amounts based on the particular
Tomorrow Fund's strategic asset allocation, the average dollar-weighted
effective maturity and duration of the Tomorrow Funds' fixed-income securities
will be substantially the same. Currently, it is expected that under normal
circumstances, the average duration of the Tomorrow Funds' assets allocated to
fixed-income securities will be in the intermediate range. For further
information concerning the fixed-income securities in which the Tomorrow Funds
may invest, see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 24 of this Prospectus.
Risk Factors
There is no assurance that any Tomorrow Fund will achieve its investment
objective. Because each Tomorrow Fund owns different types of investments, its
performance is affected by a variety of factors. The value of a Tomorrow Fund's
investments and the income they generate (and, therefore, its net asset value)
will vary from day to day, and generally reflect interest rates, market
conditions, and other company, political and economic news. The Tomorrow Funds'
performance also depends on the Adviser's skill in allocating assets. When you
sell your shares, they may be worth more or less than what you paid for them.
In general, the value of the Tomorrow Funds' investments in fixed-income
securities rises when interest rates fall, and vice versa. Although fixed-income
securities have varying degrees of quality and varying levels of sensitivity to
changes in interest rates, longer-term fixed-income securities are generally
more sensitive to interest changes than shorter-term fixed-income securities.
Investing in REITs involves risks in addition to those associated with
fixed-income securities. REITs may be affected by changes in the value of the
underlying property and by the quality of any credit extended, are dependent
upon management skills, are not diversified, and are subject to heavy cash flow
dependency. The risks associated with the Tomorrow Funds' transactions in
options, futures and other types of derivative securities including
mortgage-backed and asset-backed securities may include some or all of the
following: market risk, leverage and volatility risk, correlation risk, credit
risk and liquidity and valuation risk.
For a further discussion of the risks associated with an investment in the
Tomorrow Funds, please see "Risk Considerations and Other Investment Practices
and Policies" beginning on page 24 of this Prospectus.
ELIGIBLE INVESTORS
Institutional Class shares of the Tomorrow Funds are designed to provide
investment vehicles for variable annuity and variable life insurance contracts
("Variable Contracts") of various insurance companies' separate accounts
("Separate Accounts"). Institutional Class shares of the Tomorrow Funds may also
be purchased for the account of qualified pension or retirement plans
("Qualified Plans"). Qualified Plans include: Qualified plans and trusts under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), annuity plans under Code Section 403(a), Code Section 403(b)
annuities and custodial accounts, certain governmental plans, simplified
employee pension plans, deferred compensation arrangements under Code Section
457(b) and certain Individual Retirement Accounts ("IRAs"). IRAs that may invest
in Institutional Class shares of the Tomorrow Funds are limited to those
established for the benefit of: (a) current and former Trustees and officers of
the Trust; (b) current and former principals and employees of the Adviser; (c)
directors, officers and employees of companies and their affiliates that have an
advisory relationship with the Adviser; (d) directors, officers and employees of
companies and their affiliates serving in an advisory capacity to sponsors of
Qualified Plans and (e) members of the immediate families of any of the
foregoing persons.
Should you have any questions as to whether you are an eligible investor in
Institutional Class shares of the Tomorrow Funds, please call WPG at
1-800-223-3332.
INSURANCE COMPANY SEPARATE ACCOUNTS
Because holders of Variable Contracts may not purchase or redeem
Institutional Class shares of the Tomorrow Funds directly, you should read the
prospectus of your insurance company Separate Account to obtain instructions for
purchasing a Variable Contract. Variable Contracts may or may not make
investments in all the Tomorrow Funds described in this Prospectus.
Separate Accounts purchase and redeem Institutional Class shares of the
Tomorrow Funds at their respective net asset values. Redemptions will be
effected by Separate Accounts to meet obligations under Variable Contracts.
Insurance companies who wish to designate Institutional Class shares of the
Tomorrow Funds as investment vehicles for their Separate Accounts should contact
WPG at 1-800-223-3332.
<PAGE>
QUALIFIED PLANS
The following information describes how participants in Qualified Plans may
arrange to buy, sell (redeem) and exchange Institutional Class shares of the
Tomorrow Funds for the account of their Qualified Plans.
A. HOW TO BUY SHARES
Through whom may Institutional Class shares of the Tomorrow Funds be purchased
for Qualified Plans?
Because you may not purchase Institutional Class shares of the Tomorrow
Funds directly, all orders to purchase Institutional Class shares must be made
through the trustee, custodian, plan administrator or other fiduciary (each a
"Plan Fiduciary") of your Qualified Plan. If the monies you wish to invest in
the Tomorrow Funds are maintained in a Qualified Plan sponsored by your
employer, please consult with your employer for information about how to
purchase shares of the Tomorrow Funds. If the monies you wish to invest in the
Tomorrow Funds are maintained by your Plan Fiduciary in an IRA or other
self-administered Qualified Plan, please consult with your Plan Fiduciary for
information about how to purchase shares of the Tomorrow Funds.
You may establish an IRA with the Trust's custodian, Boston Safe Deposit
and Trust Company ("Boston Safe"), through which you may invest in the Tomorrow
Funds. Additionally, you may invest in the Tomorrow Funds by "rolling over" an
existing IRA into an IRA maintained by Boston Safe. Please call WPG at
1-800-223-3332 for information regarding how to establish an IRA with Boston
Safe.
What is the minimum investment by Qualified Plans in Institutional Class shares
of the Tomorrow Funds?
Plan Fiduciaries may invest in the Tomorrow Funds for the account of
Qualified Plans with as little as $250. There is no minimum amount required for
subsequent investments.
At what price are Institutional Class shares of the Tomorrow Funds offered?
Institutional Class shares of the Tomorrow Funds are sold at the net asset
value (NAV) of such shares next determined after The Shareholder Services Group,
Inc., the Tomorrow Funds' "Transfer Agent," receives and accepts a purchase
order. Purchase orders received and accepted by the Transfer Agent by the close
of regular trading on the New York Stock Exchange on any Business Day (currently
4:00 p.m. New York City time) will be effected as of the close of regular
trading on the New York Stock Exchange on that day. Otherwise, orders will be
effected at the NAV determined on the next Business Day.
How may Plan Fiduciaries invest in the Tomorrow Funds for the account of their
Qualified Plans?
In order to make an initial investment in a Tomorrow Fund for a Qualified
Plan, Plan Fiduciaries must open an account with the Tomorrow Funds by
furnishing to WPG the information in the applicable Account Information Form
attached to this Prospectus. Please note that there is an Account Information
Form applicable to IRAs and an Account Information Form applicable to other
Qualified Plans and to insurance company Separate Accounts. Shares of the
Tomorrow Funds may be purchased by Plan Fiduciaries for the account of Qualified
Plans on any day during which the New York Stock Exchange is open for business
(a "Business Day").
Plan Fiduciaries: To Make an Initial Investment for a Qualified Plan
By Mail: 1. Make a check payable to the Tomorrow Fund in which you wish
to invest.
2. Mail the completed Account Information Form and check to
WPG.
By Wire: 1. Call 1-800-223-3332 to open an account and to arrange for
a wire transaction.
2. Instruct your bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
Bank Routing No. 011-00123-4
Specify:
Name of Tomorrow Fund
Institutional Class shares
Account Number
Name(s) in which account is to be registered
3. Mail the completed Account Information Form to WPG.
Plan Fiduciaries: To Make Further Investments for a Qualified Plan
Automatically: 1. Use the Automatic Investment Plan. Sign up for this
service when opening an account, or call 1-800-223-3332 to
receive a Servicing Form to add this privilege. Designate
the bank or credit union account from which funds will be
drawn.
2. The amount to be invested will automatically be withdrawn
from the designated bank or credit union account on or
about the first Business Day of the month or quarter
selected.
By Telephone: 1. Sign up for this service when opening an account, or call
1-800-223-3332 to add it. Designate the bank or credit
union account from which funds will be drawn. Note that in
order to invest by phone, the account must be in a bank or
credit union that is a member of the Automated Clearing
House system (ACH).
2. Once this service has been selected, Plan Fiduciaries may
purchase additional shares for the account of their
Qualified Plans by calling the Tomorrow Funds' Transfer
Agent, The Shareholder Services Group, Inc., toll-free
at 1-800-223-3332.
3. Give the Transfer Agent representative the name(s) in which
the account is registered, the Tomorrow Fund name,
Institutional Class shares, the account number, and the
amount of the investment.
4. An investment will normally be credited to the Qualified
Plan account upon receipt of payment.
During periods of extreme economic conditions or market changes,
requests by telephone may be difficult to make due to heavy volume.
During such times please consider placing purchase orders by mail.
By Mail: 1. Include a note with the investment specifying:
Name of the Tomorrow Fund
Institutional Class shares
Account Number
Name(s) in which account is registered
2. Make the check payable to the Tomorrow Fund in which you
wish to or are instructed to invest. Indicate the account
number on the check.
3. Mail the account information and check to the Transfer Agent
at the address indicated on the back cover of this
Prospectus.
By Wire: Instruct the bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
ABA Routing No. 011-00123-4
For credit to:
Name of Tomorrow Fund
Institutional Class shares
Your Account Number
Name(s) in which account is registered
Other Purchase Information. Each Tomorrow Fund reserves the right to reject
any purchase for any reason and to cancel any purchase due to nonpayment. As a
condition of this offering, if your purchase is cancelled due to nonpayment or
because your check does not clear (and, therefore, your account is required to
be redeemed), you will be responsible for any loss incurred by the Tomorrow
Fund(s) affected. All purchases must be made in U.S. dollars. Checks drawn on
foreign banks will delay purchases until U.S. funds are received and a
collection charge may be imposed. In such cases, Institutional Class shares of
the Tomorrow Funds are priced at the net asset value computed after the Transfer
Agent receives notification of the dollar equivalent from the Tomorrow Funds'
custodian bank. Wire purchases normally take two or more hours to complete and,
to be accepted the same day, must be received by 4:00 p.m. New York City time.
Your bank may charge a fee to wire funds. Telephone transactions are recorded to
verify information.
Acquiring Shares of the Tomorrow Funds in Exchange for Securities. Shares
of the Tomorrow Funds may be purchased in whole or in part by delivering to the
Tomorrow Funds' custodian, Boston Safe, securities acceptable to WPG. Please see
"In-Kind Purchases" in the SAI for the terms and conditions of these
transactions.
B. HOW TO SELL SHARES
How may Institutional Class shares of the Tomorrow Funds be redeemed for
Qualified Plans?
Subject to the restrictions (if any) imposed by your Qualified Plan, you
can arrange to sell or "redeem" some or all of your shares on any Business Day.
All orders to redeem Institutional Class shares of the Tomorrow Funds held for
the account of Qualified Plans must be made through your Plan Fiduciary. If the
Institutional Class shares you wish to redeem are held for the account of a
Qualified Plan sponsored by your employer, please consult with your employer for
information about how to redeem shares of the Tomorrow Funds. If the
Institutional Class shares you wish to redeem are maintained by your Plan
Fiduciary in an IRA or other self-administered Qualified Plan, please consult
with your Plan Fiduciary for information about how to redeem shares of the
Tomorrow Funds. Please note that shares may not be redeemed by telephone or
telegram, except for exchanges which can be requested by Plan Fiduciaries by
telephone or in writing in the case of payments made by check.
At what price are Institutional Class shares of the Tomorrow Funds redeemed?
Institutional Class shares of the Tomorrow Funds will be redeemed at the
share price (NAV) of such shares next calculated after a redemption order is
received in good order by the Transfer Agent. Once shares are redeemed, sale
proceeds generally are available the next Business Day, but may take up to three
Business Days. For your protection, redemption proceeds will not be released
until a shareholder's account has been opened and payment for the shares to be
redeemed have been received by the Tomorrow Fund, which may take up to fifteen
days in the case of payments made by check.
The net asset value per share received upon redemption or repurchase may be
more or less than the original cost of the shares, depending on the market value
of the portfolio at the time of redemption or repurchase.
Plan Fiduciaries: To Redeem Shares for a Qualified Plan
By Mail: 1. In a written request specify:
Name of the Tomorrow Fund
Institutional Class shares
Account Number
Name(s) in which account is registered
The dollar amount or the number of shares to be redeemed
2. Mail the redemption request to the Transfer Agent at the
address indicated on the back cover of this Prospectus.
Automatically 1. Use the Automatic Withdrawal Plan if the Qualified Plan
(Post-Retirement account has a total value of at least $10,000. Sign up for
Fund Only): this service when opening an account, or call
1-800-223-3332 to add it.
2. The redemption proceeds of $100 or more will automatically
be transferred from the shareholder account to the
designated address or bank account on or about the first
Business Day of the month or quarter selected.
General Redemption Information. Redemption requests must be received by the
Transfer Agent before the close of business on the New York Stock Exchange to
receive that day's share price (NAV). A written redemption request must be
signed by all registered shareholders for the account using the exact names in
which the account is registered or accompanied by executed power(s) of attorney.
Unless otherwise specified, redemption proceeds will be sent by check to the
record address.
<PAGE>
Plan Fiduciaries may elect to have redemption proceeds wired to a checking or
bank account if wire redemptions were authorized when the account was opened or
have subsequently been authorized.
Redemptions may be suspended or postponed during any period in which any of
the following conditions exist: the New York Stock Exchange is closed or trading
on the Exchange is restricted; an emergency exists during which it is not
reasonably practicable for a Tomorrow Fund to dispose of its portfolio
securities or to fairly determine its net asset value; or the SEC, by order, so
permits.
Certain requests must include a signature guarantee. A signature guarantee
is a widely accepted way to protect you and the Tomorrow Funds from fraud by
verifying the signature on your request. A signature guarantee is required if
(a) the redemption proceeds are to be sent to an address other than the address
of record or to a person other than the registered shareholder(s) for the
account, (b) the redemption request is made for the account of an IRA or (c) the
net asset value of the shares redeemed is $100,000 or more (this requirement may
be waived by the Adviser in its discretion).
The following institutions may provide a signature guarantee, provided that
the institution meets credit standards established by the Transfer Agent: (i) a
bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency. Signature guarantees may not be provided by a notary public.
Small Accounts. In order to reduce the expense of maintaining numerous
small accounts, the Trust reserves the right to redeem any shareholder account
(other than an IRA) if, as a result of redemptions, the value of the account is
less than $100. Shareholders will be allowed at least 60 days, after written
notice by the Trust, to make an additional investment to bring the account value
up to at least $100 before the redemption is processed.
Change in Tax Status. Insurance companies and Plan Fiduciaries are required
to notify the Trust through the Transfer Agent if the tax status of their
Separate Account or Qualified Plan is revoked or challenged by the Internal
Revenue Service. The Trust reserves the right to redeem any fund account of any
shareholder whose qualification as a diversified segregated asset account or a
qualified pension or retirement plan satisfying the requirements of Treasury
Regulation section 1.817-5 is revoked or challenged. The Trust will not treat
an investor as a qualified pension or retirement plan for this purpose unless
the investor is among the categories specifically enumerated in Revenue Ruling
94-62, 1994-2 C.B. 164.
C. HOW TO EXCHANGE SHARES
May Institutional Class shares be exchanged for shares of other mutual funds?
Subject to the terms of your Qualified Plan, Institutional Class shares of
a Tomorrow Fund may be exchanged for Institutional Class shares of any other
Tomorrow Fund or for Institutional Class shares of Core Large Cap Stock Fund and
Core Small Cap Stock Fund. To obtain a current prospectus for the Institutional
Class shares of Core Large Cap Stock Fund and Core Small Cap Stock Fund, please
call 1- 800-223-3332. Please consider the differences in investment objectives
and expenses of a fund as described in its prospectus before making an exchange.
<PAGE>
Do sales charges apply to exchanges?
As is the case with initial purchases of Institutional Class shares of the
Tomorrow Funds, exchanges of Institutional Class shares are made without the
imposition of a sales charge.
How may I make an exchange for my Qualified Plan?
Because shares of the Tomorrow Funds are held for the account of Qualified
Plans, all orders to exchange shares must be made through your Plan Fiduciary.
If the Institutional Class shares you wish to exchange are held for the account
of a Qualified Plan sponsored by your employer, please consult with your
employer for information about how to exchange shares of the Tomorrow Funds. If
the Institutional Class shares you wish to exchange are maintained by your Plan
Fiduciary in an IRA or other self- administered Qualified Plan, please consult
with your Plan Fiduciary for information about how to exchange shares of the
Tomorrow Funds.
Plan Fiduciaries: To Exchange Shares
By Phone: 1. Use the telephone exchange privilege. The telephone
exchange privilege is not available automatically. It is
necessary to sign up for this privilege on the Account
Application Form when opening an account, or call
1-800-223-3332 to receive the Services Form to add it.
2. Once this privilege has been selected, simply call the
Transfer Agent toll free at 1-800-223-3332 between
9:00 a.m. and 4:00 p.m. New York City time on any
Business Day.
3. Give the following information to the Transfer Agent
representative:
Name of current Tomorrow Fund
Institutional Class shares
Name of the fund into which the current Tomorrow Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
By Mail: 1. Mail a written request to the Transfer Agent at the address
listed on the back cover of this Prospectus specifying:
Name of current Tomorrow Fund
Institutional Class shares
Name of the fund into which the current Tomorrow Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
2. The exchange request must be signed by all registered
holders for the account using the exact names in which the
account is registered or accompanied by executed power(s)
of attorney.
General Exchange Information. Shares exchanged are valued at their
respective net asset values next determined after the exchange request is
received by the Transfer Agent. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be registered for sale in your state; (ii) exchanges may be made only between
funds that are registered in the same name, address and, if applicable, taxpayer
identification number; and (iii) the minimum amount for exchanging from one fund
into another fund is $100 or the total value of your fund account (if less than
$100) and must satisfy the minimum account size of the fund to be exchanged
into.
To confirm that telephone exchange requests are genuine, the Trust employs
reasonable procedures, such as providing written confirmation of telephone
exchange transactions and tape recording of telephone exchange requests. If the
Trust does not employ such reasonable procedures, it may be liable for any loss
incurred by a shareholder due to a fraudulent or unauthorized telephone exchange
request. Otherwise, neither the Trust nor its agents will be liable for any loss
incurred by a shareholder as the result of following instructions communicated
by telephone that they reasonably believed to be genuine. The Trust reserves the
right to refuse any request made by telephone and may limit the dollar amount
involved or the number of telephone requests made by any shareholder. During
periods of extreme economic conditions or market changes, requests by telephone
may be difficult to make due to heavy volume. During such times please consider
placing your order by mail.
To prevent abuse of the exchange privilege to the detriment of other
shareholders, the Trust limits the number of exchanges and purchase/redemption
transactions by any one shareholder account (or group of accounts under common
management) to a total of six transactions per year. This policy applies to
exchanges into or out of any series of the Trust and any pair of transactions
involving a purchase of shares of any series of the Trust followed by a
redemption of an offsetting or substantially equivalent dollar amount of shares
of that same series. If a Plan Fiduciary violates this policy, his/her future
purchases of, or exchanges into, the series of the Trust may be permanently
refused. This policy does not prohibit redemptions of shares of any series. This
policy may be waived by WPG in its discretion. Further, the exchange privilege
may be changed or discontinued and may be subject to additional limitations upon
sixty (60) days' notice to shareholders, including certain restrictions on
purchases by market-timer accounts.
HOW EACH TOMORROW FUND'S SHARE PRICE IS DETERMINED
The net asset value per share of a class of a Tomorrow Fund is determined
by dividing the value of its assets, less liabilities attributable to that
class, by the number of shares of that class outstanding. The net asset value is
normally calculated as of the close of regular trading of the New York Stock
Exchange (currently 4:00 p.m. New York City time) on each Business Day.
Different classes of shares of the Tomorrow Funds may have different net asset
values.
Portfolio securities (other than certain money market instruments) are
valued primarily based on market quotations or, if market quotations are not
available, at fair market value as determined in good faith by a valuation
committee appointed by the Trustees. In accordance with procedures adopted by
the Trustees, each Tomorrow Fund may use pricing services to value fixed-income
investments.
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MANAGEMENT OF THE TOMORROW FUNDS
Trustees
Each Tomorrow Fund is a separate investment series of Tomorrow Funds
Retirement Trust, a Delaware business trust (the "Trust"). Under the terms of
the Agreement and Declaration of Trust establishing the Trust, the Trustees of
the Trust are ultimately responsible for the management of its business and
affairs.
Investment Adviser
Weiss, Peck & Greer, L.L.C., One New York Plaza, New York, New York 10004
serves as the investment adviser to each Tomorrow Fund pursuant to an investment
advisory agreement. The Adviser, a privately held limited liability company with
over 20 years' experience as an investment adviser to individual and
institutional clients, has, together with its affiliates, approximately $13
billion under management. Subject to the supervision and direction of the
Trustees, the Adviser manages each Tomorrow Fund's portfolio in accordance with
its stated investment objective and policies, recommends investment decisions
for the Tomorrow Fund and places orders to purchase and sell securities on
behalf of the Tomorrow Fund. For these services, Post-Retirement Fund pays the
Adviser a monthly fee equal on an annual basis to 0.65% of its average daily net
assets and the other Tomorrow Funds each pay the Adviser a monthly fee equal on
an annual basis to 0.75% of the Tomorrow Fund's average daily net assets. The
advisory fee paid by the Long-Term, Medium-Term and Short-Term Funds, which is
greater than that paid by most funds, reflects the added complexity and
additional expenses associated with these Tomorrow Funds' investment strategies.
The Adviser supervises the portfolio management of the Tomorrow Funds
through the Adviser's Asset Allocation Committee, which meets on a regular basis
to evaluate, among other things, the strategic asset allocation mix between
equity and fixed-income securities and among large, medium and small
capitalization and foreign stocks. Joseph N. Pappo has been primarily
responsible since the Tomorrow Funds' inception for the day-to-day management of
the assets of each Tomorrow Fund allocated to large, medium and small
capitalization stocks. Mr. Pappo has been a principal of the Adviser since 1994.
Prior to joining WPG, Mr. Pappo was the founder and president of Eden Financial
Group which was acquired by WPG in 1991. Daniel S. Vandivort has been primarily
responsible since the Tomorrow Funds' inception for the day-to-day management of
the assets of each Tomorrow Fund allocated to fixed-income securities. Mr.
Vandivort has been a principal of the Adviser since November, 1994. Prior
thereto, Mr. Vandivort served in various capacities with CS First Boston
Investment Management, including Managing Director and Head of U.S. Fixed Income
and Senior Portfolio Manager and Director, Global Product Development and
Marketing.
The Adviser has voluntarily agreed to limit temporarily the operating
expenses (excluding Rule 12b-1 fees applicable to the Adviser Class shares,
service fees applicable to the Institutional Class shares, any other
class-specific expenses, litigation, indemnification and other extraordinary
expenses) of the Long-Term, Mid-Term and Short-Term Funds to 1.25% of their
respective average daily net assets and such operating expenses of the
Post-Retirement Fund to 1.15% of its average daily net assets. The Adviser may
discontinue or modify such limitation in the future at its discretion, although
it has no current intention to do so.
From time to time, the Adviser may compensate insurance companies or their
affiliates who hold Institutional Class shares of the Tomorrow Funds for the
account of their customers for providing a variety of record-keeping,
administrative, marketing and/or shareholder support services. This
compensation, which may be paid at a rate up to 0.25% of the net asset value of
Institutional Class shares held for the account of those customers depending on
the nature, extent and quality of the services provided, will be paid from the
Adviser's own resources and not from the assets of any Tomorrow Fund.
Administrator
Pursuant to an administration agreement with each Tomorrow Fund, WPG
provides personnel for supervisory, administrative, accounting, shareholder
services and clerical functions; oversees the performance of administrative and
professional services to the Tomorrow Funds by others; provides office
facilities, furnishings and office equipment; and prepares, but does not pay
for, reports to shareholders, the SEC and other regulatory authorities. As
compensation for the services rendered to the Tomorrow Funds as Administrator,
WPG is entitled to a fee, computed daily and payable monthly, at an annual rate
equal to 0.09% of each Tomorrow Fund's average daily net assets. The
administrative fee for each Tomorrow Fund is reviewed and approved annually by
the Trustees.
Expenses
Each Tomorrow Fund bears all expenses of its operation, subject to the
expense limitation agreement described above. In particular, each Tomorrow Fund
pays: investment advisory fees; administration fees; service fees with respect
to the Institutional Class shares; distribution and service fees with respect to
the Adviser Class shares; custodian and transfer agent expenses; legal and
accounting fees and expenses; expenses of preparing, printing, and distributing
Prospectuses and SAIs to existing shareholders, and shareholder communications
and reports; expenses of computing its net asset value per share; federal and
state registration fees and expenses with respect to its shares; proxy and
shareholder meeting expenses; expenses of issuing and redeeming its shares;
independent trustee fees and expenses; expenses of bond, liability, and other
insurance coverage; brokerage commissions; taxes; trade association fees; and
certain non-recurring and extraordinary expenses. In addition, the expense of
organizing the Tomorrow Funds and initially registering and qualifying their
shares under federal and state securities laws are being charged to the Tomorrow
Funds' operations, as an expense, over a period not to exceed 60 months from the
Tomorrow Funds' inception date.
Each Tomorrow Fund will reimburse the Adviser for fees foregone or other
expenses paid by the Adviser pursuant to this expense limitation in later years
in which operating expenses for that Tomorrow Fund are less than the expense
limitations set forth above for any such year. No interest, carrying or finance
charge will be paid by a Tomorrow Fund with respect to the amounts representing
fees foregone or other expenses paid. In addition, no Tomorrow Fund will pay any
unreimbursed amounts to the Adviser upon termination of its investment advisory
agreement.
SERVICE PLANS
The Trust, on behalf of each Tomorrow Fund, has adopted a service plan
pursuant to which each Tomorrow Fund pays service fees at an aggregate annual
rate of up to 0.25% of a Tomorrow Fund's average daily net assets attributable
to Institutional Class shares (the "Service Plans"). The service fee is payable
for the benefit of Qualified Plans and is intended to be compensation to Plan
Fiduciaries for providing personal services and/or account maintenance services
to participants in Qualified Plans who beneficially own Institutional Class
shares of the Tomorrow Funds. The Trust, on behalf of the applicable Tomorrow
Fund, will make quarterly payments to Plan Fiduciaries, for the benefit of their
Qualified Plans, based on the average net asset value of the Institutional Class
shares which are attributable to the Qualified Plans.
DIVIDENDS AND TAXES
Each Tomorrow Fund is treated as a separate entity for federal income tax
purposes and intends to elect to be treated as a "regulated investment company"
under the Internal Revenue Code and to qualify for such treatment for each
taxable year. To qualify as such, each Tomorrow Fund must satisfy certain
requirements relating to the sources of its income, diversification of its
assets and distribution of its income to shareholders. Each Tomorrow Fund also
intends to satisfy certain additional diversification requirements applicable
under Section 817(h) of the Internal Revenue Code in order to permit investments
in Institutional Class shares of the Tomorrow Funds by insurance company
Separate Accounts that fund Variable Contracts, which are subject to such
requirements. It is possible that in order to satisfy the applicable
diversification requirements, investment decisions may be made which would
affect either positively or negatively the investment performance of a Tomorrow
Fund. As a regulated investment company, each Tomorrow Fund will not be subject
to federal income tax on any net investment income and net realized capital
gains that are distributed to its shareholders in accordance with certain timing
requirements of the Internal Revenue Code.
Participants in Qualified Plans may be eligible for tax deferral on
distributions a Qualified Plan receives from a Tomorrow Fund and gains that
arise from a Qualified Plan's dispositions of Fund shares. This Prospectus does
not describe in any respect such tax treatment. Please consult your Plan
Fiduciary or tax adviser.
Under current tax law, dividends or capital gain distributions from a
Tomorrow Fund are not currently taxable if properly allocable to reserves for a
Variable Contract. For a discussion of the tax status of a Variable Contract,
including the tax consequences of withdrawals or other payments, refer to the
prospectus of the insurance company Separate Account.
It is suggested that holders of Variable Contracts and participants in
Qualified Plans keep all statements received from their insurance company or
Qualified Plan to assist in personal recordkeeping.
Each Tomorrow Fund intends to distribute all of its net investment income
and net capital gains each year. Income dividends, if any, will be declared and
distributed monthly for Post-Retirement Fund. Income dividends, if any, will be
declared and distributed at least annually by each other Tomorrow Fund. Net
short-term and long-term capital gains of each Tomorrow Fund, if any, realized
during the taxable year will be distributed no less frequently then annually.
Dividends derived from each Tomorrow Fund's net investment income (including
dividends, interest and recognized market discount income), and net short- term
capital gains received by a Tomorrow Fund are treated as ordinary income under
the Internal Revenue Code. Distributions from each Tomorrow Fund's net long-term
capital gains are treated as long-term capital gains under the Internal Revenue
Code, regardless of how long shares of the Tomorrow Funds have been held.
Reinvestment of Income Dividends and Capital Gains Distributions
Unless a Plan Fiduciary elects otherwise, as permitted in the Account
Information Form, income dividends and capital gains distributions with respect
to a Tomorrow Fund will be reinvested in additional Institutional Class shares
of that Tomorrow Fund and will be credited to the Qualified Plan's account with
that Tomorrow Fund at the net asset value per share next determined as of the
ex-dividend date. Both income dividends and capital gains distributions are paid
by the Tomorrow Fund on a per share basis. As a result, at the time of such
payment, the net asset value per share of a Tomorrow Fund will be reduced by the
amount of such payment. Although income dividends and capital gains
distributions by the Tomorrow Funds may not give rise to current tax liability
for the categories of shareholders permitted to invest in the Tomorrow Funds,
participants in Qualified Plans may be subject to tax on all or a portion of
their distributions from such Plans or upon the failure of such Plans to
maintain their qualified status under complex Internal Revenue Code provisions
concerning which a tax adviser should be consulted. Withdrawals or other
payments to Variable Contract holders from insurance company Separate Accounts
may also be taxable. Participants in Qualified Plans who wish to change the
manner in which income dividends and capital gains distributions are received by
their Qualified Plans should contact their Plan Fiduciaries. Written
notification of such change must be received by the Transfer Agent at least ten
days before the next scheduled distribution.
PORTFOLIO BROKERAGE
In effecting securities transactions, the Tomorrow Funds generally seek to
obtain the best price and execution of orders under the circumstances.
Commission rates are a component of price and are considered along with other
factors, including the ability of the broker to effect the transaction, and the
broker's facilities, reliability and financial responsibility. Subject to the
foregoing, the Tomorrow Funds intend to utilize WPG as their primary broker in
connection with the purchase and sale of exchange-traded portfolio securities.
As the Tomorrow Funds' primary broker, WPG will receive brokerage commissions
from the Tomorrow Funds, limited to the "usual and customary broker's
commission" specified by the 1940 Act. The Tomorrow Funds intend to continue to
use WPG as their primary broker on exchange-traded securities, provided WPG is
able to provide execution at least as favorable as that provided by other
qualified brokers.
The Trustees of the Trust have developed procedures to limit the
commissions received by WPG to the "usual and customary broker's commission"
standard specified by the 1940 Act. On a quarterly basis, the Trustees review
the securities transactions of each Tomorrow Fund effected by WPG to assure
their compliance with such procedures.
The Tomorrow Funds will also execute their portfolio transactions through
qualified brokers other than WPG. In selecting such other brokers, WPG considers
the quality and reliability of brokerage services, including execution
capability and performance and financial responsibility, and may consider the
research and other investment information provided by such brokers. Accordingly,
the commissions paid to any such broker may be greater than the amount another
firm might charge, provided WPG determines in good faith that the amount of such
commission is reasonable in relation to the value of the brokerage services and
research information provided by such broker. Such information may be used by
WPG (and its affiliates) in managing all of its accounts and not all of such
information may be used by WPG in managing the Tomorrow Funds. In selecting
other brokers for a Tomorrow Fund, WPG may also consider the sale of shares of
the Tomorrow Fund effected through such other brokers as a factor in its
selection, provided that Tomorrow Fund obtains the best price and execution of
orders under the circumstances.
Money market securities and other fixed-income securities, as well as
certain equity securities, in which the Tomorrow Funds invest are traded
primarily in the over-the-counter ("OTC") market. For transactions effected in
the OTC market, financial intermediaries (i.e., dealers) act as principal rather
than as agent and receive a "spread" rather than a commission. The Tomorrow
Funds intend to deal with the primary market-makers with respect to OTC
securities, unless a more favorable result is obtainable elsewhere.
THE TRUST
Tomorrow Funds Retirement Trust is an open-end management investment
company (commonly referred to as a mutual fund) organized as a Delaware business
trust under an Agreement and Declaration of Trust dated June 21, 1995 (the
"Declaration"). The Trust has authorized an unlimited number of shares of
beneficial interest.
As of the date of this Prospectus, the shares of the Trust are divided into
six series: Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement
Fund, Tomorrow Short-Term Retirement Fund, Tomorrow Post-Retirement Fund, Core
Large-Cap Stock Fund and Core Small-Cap Stock Fund. The Trust reserves the right
to create and issue additional series of shares. No series is entitled to share
in the assets of any other series or is liable for the expenses or liabilities
of any other series. Shares of a particular series vote separately on matters
affecting only that series, including the approval of an investment advisory
agreement and changes in fundamental policies or restrictions of a particular
series.
As of the date of this Prospectus, the Trustees have authorized the
issuance of two classes of shares for each series, designated Institutional
Class and Adviser Class. The shares of each Class represent an interest in the
same portfolio of investments of that series. Each Class has equal rights as to
voting, redemption, dividends and liquidation, except that each Class bears
different distribution fees and may bear other expenses properly attributable to
the particular Class. Adviser Class shareholders of a Tomorrow Fund have
exclusive voting rights with respect to the Rule 12b-1 distribution plan adopted
by holders of Adviser Class shares of that Tomorrow Fund. The Trustees have the
authority, without further shareholder approval, to classify and reclassify the
shares of a series of the Trust into additional classes. In addition, subject to
Trustee approval and shareholder approval (if then required), each Tomorrow Fund
may pursue its investment objective by investing all of its investable assets in
a pooled fund. See "Other Investment Companies" on page 28 of this Prospectus.
An insurance company issuing a Variable Contract that participates in
Institutional Class shares of a Tomorrow Fund will vote such shares held by the
insurance company Separate Accounts as required by law. In accordance with
current law and interpretations thereof, participating insurance companies are
required to request voting instructions from policy owners and must vote shares
of the Tomorrow Funds in proportion to the voting instructions received. For a
further discussion of voting rights, please refer to your insurance company
Separate Account prospectus.
When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Trust are fully paid and
non-assessable. The Trust is not required, and does not intend, to hold annual
shareholder meetings. Shareholders have certain rights, as set forth in the
Declaration, including the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. Such removal can be
effected upon the action of two-thirds of the outstanding shares of the Trust.
In addition to the requirements under Delaware law, the Declaration
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Trust for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
The Trustees of the Trust do not expect any disadvantages to investors
arising out of the fact that each Tomorrow Fund may offer a class of its shares
to Separate Accounts that serve as investment medium for Variable Contracts or
that each Tomorrow Fund may offer its shares to Qualified Plans. Nevertheless,
the Trustees intend to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise, and to determine what action,
if any, should be taken in response to such conflicts. If such a conflict were
to occur, one or more Separate Accounts or Qualified Plans might be required to
withdraw their investments in one or more Tomorrow Funds and shares of another
series of the Trust may be substituted. This might force a Tomorrow Fund to sell
securities at disadvantageous prices.
In the interests of economy and convenience, the Trust does not issue
certificates representing the Tomorrow Funds' shares. Instead, the Transfer
Agent maintains a record of each shareholder's ownership. Although each Tomorrow
Fund is offering only its own shares, since the Tomorrow Funds use this combined
Prospectus, it is possible that one Tomorrow Fund might become liable for a
misstatement or omission in this Prospectus regarding another Tomorrow Fund. The
Trustees have considered this factor in approving the use of this combined
Prospectus.
INVESTMENT PERFORMANCE
Each Tomorrow Fund may illustrate in advertisements and sales literature
the average annual total return of its Institutional Class shares, which is the
rate of growth of the Tomorrow Fund that would be necessary to achieve the
ending value of an assumed initial investment of $1,000 kept in Institutional
Class shares of the Tomorrow Fund for the period specified and is based on the
following assumptions: (1) all dividends and distributions by the Tomorrow Fund
are reinvested in Institutional Class shares of the Tomorrow Fund at net asset
value; and (2) all recurring fees are included for applicable periods.
Each Tomorrow Fund may also illustrate in advertisements the cumulative
total return for several time periods throughout the Tomorrow Fund's life based
on an assumed initial investment of $1,000. Any such cumulative total return for
a Tomorrow Fund will assume the reinvestment of all income dividends and capital
gains distributions in Institutional Class for the indicated periods and will
include all recurring fees.
Each Tomorrow Fund may also illustrate in advertisements and sales
literature the yield and effective yield of its Institutional Class shares.
Yield is based on income generated by an investment in Institutional Class
shares of the Tomorrow Fund during a 30-day (or one-month) period. To calculate
yield, this income is annualized, that is, the amount of income generated during
the 30-day (or one-month) period is assumed to be generated each 30-day (or
one-month) period over a one-year period, and expressed as an annual percentage
rate. Effective yield for Institutional Class shares of the Tomorrow Funds is
calculated in a similar manner but, when annualized, the income earned from an
investment is assumed to be reinvested. Effective yield for each Tomorrow Fund
will be slightly higher than its current yield because of the compounding effect
of this assumed reinvestment.
Yields and total returns quoted for the Tomorrow Funds include the effect
of deducting each Tomorrow Fund's expenses, but may not include charges and
expenses attributable to any particular Qualified Plan or Variable Contract. You
should carefully review the prospectus of the insurance product you have chosen
or consult with your Plan Fiduciary for information on relevant charges and
expenses. Because these charges and expenses are excluded from a Tomorrow Fund's
quoted performance, the investment return received by a participant in a
Qualified Plan or a holder of a Variable Contract, investing in the Tomorrow
Fund may be lower than the quoted performance of the Tomorrow Fund. You should
bear in mind the effect of these charges when comparing a Tomorrow Fund's
performance to that of other mutual funds.
The performance of the Institutional Class shares of the Tomorrow Funds
will vary from time to time and past results are not necessarily representative
of future results. Performance is a function of the type and quality of a
Tomorrow Fund's portfolio securities and is affected by operating expenses.
Performance information may not provide a basis for comparison with other
investments or other mutual funds using a different method of calculating
performance. An investment in any Tomorrow Fund involves the risk of loss.
RISK CONSIDERATIONS AND OTHER INVESTMENT PRACTICES AND POLICIES
Fixed-Income Securities. Each Tomorrow Fund may invest in a broad range of
fixed-income securities, including bonds, notes, mortgage-backed and
asset-backed securities, preferred stock and convertible debt securities issued
by U.S. corporations or other entities or by the U.S. Government or its
agencies, authorities, instrumentalities or sponsored enterprises. The interest
payable on so-called fixed-income securities purchased by a Tomorrow Fund is not
necessarily paid at a fixed rate and may be payable on a variable, floating,
contingent, in-kind or deferred basis.
Fixed-income securities are subject to the risk of the issuers' inability
to meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the credit worthiness of the issuer and
general market liquidity (market risk). Generally, when interest rates decline,
the value of fixed-income securities can be expected to rise. Conversely, when
interest rates rise the value of fixed-income securities can be expected to
decline.
Corporate Debt Obligations. Each Tomorrow Fund may invest in corporate debt
obligations, including obligations of industrial, utility and financial issuers.
In addition to obligations of corporations, corporate debt obligations include
bank obligations and zero coupon securities, issued by financial institutions
and corporations.
The debt securities in which the Tomorrow Funds may invest will be rated
investment grade at the time of purchase. Investment grade securities are
securities rated within the four highest grades as determined by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or by Standard & Poor's
Ratings Group ("Standard & Poor's") (AAA, AA, A or BBB) or their respective
equivalent ratings or, if not rated, determined by the Adviser to be of
equivalent credit quality to securities so rated. A security will be deemed to
have met a rating requirement if it receives the minimum required rating from at
least one such rating organization even though it has been rated below the
minimum rating by one or more other rating organizations, or if unrated by such
rating organizations, determined by the Adviser to be of comparable credit
quality. Securities rated Baa by Moody's or BBB by Standard & Poor's and unrated
securities of equivalent credit quality are considered medium grade obligations
with speculative characteristics. Adverse changes in economic conditions or
other circumstances are more likely to weaken the issuer's capacity to pay
interest and repay principal on these securities than is the case for issuers of
higher rated securities. In the event that the rating on a security held in a
Tomorrow Fund's portfolio is downgraded below investment grade by a rating
service, such action will be considered by the Adviser in its evaluation of the
overall investment merits of that security, but will not necessarily result in
the sale of the security.
Convertible Securities and Preferred Stocks. Each Tomorrow Fund may invest in
debt securities or preferred stocks that are convertible into or exchangeable
for common stock. Preferred stocks are securities that represent an ownership
interest in a company and provide their owner with claims on the company's
earnings and assets prior to the claims of owners of common stock but after
those of bond owners. Preferred stocks in which the Tomorrow Funds may invest
include convertible, perpetual fixed and adjustable rate (including auction
rate) preferred stocks.
<PAGE>
U.S. Government Securities. Each Tomorrow Fund may invest in all types of U.S.
Government securities, including obligations issued or guaranteed by the U.S.
Government or its agencies, authorities, instrumentalities or sponsored
enterprises. Some U.S. Government securities, such as Treasury bills, notes and
bonds, which differ only in their interest rates, maturities and times of
issuance, are supported by the full faith and credit of the United States of
America. Others, such as obligations issued or guaranteed by U.S. Government
agencies, authorities, instrumentalities or sponsored enterprises are supported
either by (a) the full faith and credit of the U.S. Government (such as
securities of the Small Business Administration), (b) the right of the issuer to
borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Banks), (c) the discretionary authority of the U.S. Government to purchase the
agency's obligations (such as securities of the Federal National Mortgage
Association), or (d) only the credit of the issuer.
The Tomorrow Funds may invest in U.S. Government securities which are zero
coupon or deferred interest securities. For example, each Tomorrow Fund may
invest in separately traded principal and interest components of securities
guaranteed or issued by the U.S. Government or its agencies, instrumentalities
or sponsored enterprises if such components are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPS") or any similar program sponsored by the U.S. Government.
Zero Coupon and Capital Appreciation Bonds. The Tomorrow Funds may invest in
zero coupon and capital appreciation bonds. Zero coupon and capital appreciation
bonds are debt securities issued or sold at a discount from their face value
that do not entitle the holder to any payment of interest prior to maturity or a
specified redemption date (or cash payment date). The amount of the discount
varies depending on the time remaining until maturity or cash payment date,
prevailing interest rates, the liquidity of the security and the perceived
credit quality of the issuer. These securities also may take the form of debt
securities that have been stripped of their unmatured interest coupons, the
coupons themselves or receipts or certificates representing interests in such
stripped debt obligations or coupons. The market prices of zero coupon and
capital appreciation bonds generally are more volatile than the market prices of
interest- bearing securities and are likely to respond to a greater degree to
changes in interest rates than interest- bearing securities having similar
maturities and credit quality. A Tomorrow Fund's investments in zero coupon
securities or other stripped securities may require the Tomorrow Fund to sell
certain of its portfolio securities to generate sufficient cash in order to
satisfy certain income distribution requirements. See "Dividends, Distributions
and Tax Status" in the SAI.
Mortgage-Backed Securities. Each Tomorrow Fund may invest in mortgage
pass-through certificates and multiple-class pass-through securities, such as
real estate mortgage investment conduits ("REMIC") pass-through certificates and
collateralized mortgage obligations ("CMOs").
Mortgage Pass-Through Securities. Mortgage pass-through securities represent
participation interests in pools of residential mortgage loans and are issued by
U.S. Governmental or private lenders and guaranteed by the U.S. Government
National Mortgage Association ("Ginnie Mae"), the Federal National Mortgage
Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation
("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full faith and
credit of the U.S. Government for timely payment of principal and interest on
the certificates. Fannie Mae certificates are guaranteed by Fannie Mae, a
federally chartered and privately owned corporation, for full and timely payment
of principal and interest on the certificates. Freddie Mac certificates are
guaranteed by Freddie Mac, a corporate instrumentality of the U.S. Government,
for timely payment of interest and the ultimate collection of all principal of
the related mortgage loans.
Multiple-Class Pass-through Securities and Collateralized Mortgage Obligations.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs is
provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages primarily secured by
interests in real property and other permitted investments. Investors may
purchase "regular" and "residual" interest shares of beneficial interest in
REMIC trusts although the Tomorrow Funds do not intend to invest in residual
interests.
Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed-income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Tomorrow Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When a Tomorrow Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment
rate will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.
Risks Associated with Specific Types of Derivative Debt Securities. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities, such as inverse
floating rate and Super Principal Only (PO) Mortgage-Backed Securities. The
Tomorrow Funds will not invest in inverse floating rate or Super Principal Only
(PO) Mortgage-Backed Securities.
<PAGE>
Planned amortization class ("PAC") and target amortization class ("TAC")
CMO bonds involve less exposure to prepayment, extension and interest rate risk
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets. To the extent that prepayment
rates do not remain within these prepayment ranges, PAC and TAC CMO bonds
involve prepayment, extension and interest rate risk similar to those of the
residual or support tranches.
Asset-Backed Securities. Each Tomorrow Fund may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, pools of assets such as motor vehicle installment sale contracts,
installment loan contracts, leases of various types of real and personal
property, receivables from revolving credit (credit card) agreements and other
categories of receivables. Asset-backed securities may also be collateralized by
a portfolio of U.S. Government securities, but are not direct obligations of the
U.S. Government, its agencies or instrumentalities. Such asset pools are
securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest on
asset-backed securities may be guaranteed up to certain amounts and for a
certain time period by a letter of credit or a pool insurance policy issued by a
financial institution unaffiliated with the trust or corporation, or other
credit enhancements may be present; however, privately issued obligations
collateralized by a portfolio of privately issued asset-backed securities do not
involve any government-related guarantee or insurance. In addition to risks
similar to those associated with Mortgage-Backed Securities, asset-backed
securities present further risks that are not presented by Mortgage-Backed
Securities because asset-backed securities generally do not have the benefit of
a security interest in collateral that is comparable to mortgage assets.
Real Estate Investment Trusts. Each Tomorrow Fund may invest in shares of real
estate investment trusts ("REITs"). REITs are pooled investment vehicles which
invest primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Tomorrow Funds, REITs
are not taxed on income distributed to shareholders provided they comply with
several requirements of the Internal Revenue Code. Any Tomorrow Fund that
invests in REITs will indirectly bear its proportionate share of any expenses
paid by such REITs in addition to the expenses paid by the Tomorrow Fund.
Investing in REITs involves certain risks: equity REITs may be affected by
changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self-liquidation, and the possibilities of failing to
qualify for the exemption from tax for distributed income under the Internal
Revenue Code and failing to maintain their exemptions from the 1940 Act. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.
Investing in REITs may involve risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P 500
Index.
Eurodollar and Yankee Dollar Investments. Each Tomorrow Fund may invest in
obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of
foreign banks (Yankee dollars) as well as foreign branches of foreign banks.
These investments involve risks that are different from investments in
securities of U.S. banks, including potential unfavorable political and economic
developments, different tax provisions, seizure of foreign deposits, currency
controls, interest limitations or other governmental restrictions which might
affect payment of principal or interest.
Investing in Small Capitalization Companies. Each Tomorrow Fund may invest in
varying degrees in smaller, lesser known companies which the Adviser believes
offer a greater growth potential than larger, more mature, better known firms.
Investing in the securities of such companies, however, involves greater risk
and a possibility of greater portfolio price volatility. Historically, small
capitalization stocks and stocks of recently organized companies have been more
volatile in price than the larger capitalization stocks, such as those included
in the S&P 500. Among the reasons for the greater price volatility of these
small company and unseasoned stocks are the less certain growth prospects of
smaller firms and the lower degree of liquidity in the markets for such stocks.
Other Investment Companies. Each Tomorrow Fund may invest up to 10% of its total
assets in the securities of other investment companies but may not invest more
than 5% of its total assets in the securities of any one investment company or
acquire more than 3% of the voting securities of any other investment company. A
Tomorrow Fund will indirectly bear its proportionate share of any management
fees and other expenses paid by investment companies in which it invests in
addition to the advisory and administration fees paid by the Tomorrow Fund.
However, to the extent that a Tomorrow Fund invests in a registered open-end
investment company, the Adviser will waive its advisory fees on the portion of
the Tomorrow Fund's assets so invested.
Each Tomorrow Fund is authorized to invest all of its assets in the
securities of a single open-end investment company (a "pooled fund") having
substantially identical investment objectives, policies and restrictions as such
Fund, notwithstanding any other investment restriction or policy. Such a
structure is commonly referred to as "master/feeder." If authorized by the
Trustees and subject to shareholder approval (if then required by applicable
law), a Tomorrow Fund would seek to achieve its investment objective by
investing in a pooled fund which would invest in a portfolio of securities that
complies with the Tomorrow Fund's investment objective, policies and
restrictions. The Trustees currently do not intend to authorize investing in a
pooled fund in connection with a master/feeder structure.
Short-Term Debt Securities. Each Tomorrow Fund may establish and maintain cash
balances for temporary purposes in order to maintain liquidity to meet
shareholder redemptions. Each Tomorrow Fund may also establish and maintain cash
balances for defensive purposes without limitation to hedge against potential
stock market declines. A Tomorrow Fund's cash balances, including uncommitted
cash balances, may be invested in investment grade money market instruments and
short-term interest-bearing securities. These securities consist of U.S.
Government securities, instruments of U.S. banks (including negotiable
certificates of deposit, non-negotiable fixed-time deposits and bankers'
acceptances), repurchase agreements, prime commercial paper of U.S. companies
and debt securities that make periodic interest payments at variable or floating
rates.
Mortgage Dollar Rolls. Each Tomorrow Fund may enter into mortgage dollar roll
transactions. In a mortgage dollar roll, a Tomorrow Fund sells securities for
delivery in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity), but not
identical securities on a specified future date. During the roll period, the
Tomorrow Fund will not receive principal and interest paid on the securities
sold. However, the Tomorrow Fund would benefit to the extent of any difference
between the price received for the securities sold and the lower forward price
for the future purchase (often referred to as the "drop") or fee income plus the
interest on the cash proceeds of the securities sold until the settlement date
of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of a Tomorrow Fund
compared with what such performance would have been without the use of mortgage
dollar rolls. The Tomorrow Funds will hold and maintain in a segregated account
until the settlement date cash or liquid, high grade debt securities in an
amount equal to the forward purchase price. Any benefits derived from the use of
mortgage dollar rolls may depend upon mortgage prepayment assumptions, which
will be affected by changes in interest rates. There is no assurance that
mortgage dollar rolls can be successfully employed.
Writing and Purchasing Put and Call Options on Securities and Securities
Indices. To seek additional income or to minimize anticipated declines in the
value of its securities or to hedge various market risks (such as interest rates
and broad or specific equity or fixed-income market movements), each Tomorrow
Fund may purchase and write (i.e., sell) call and put options on securities and
securities indices. Option transactions in which the Tomorrow Funds may engage
may be traded on securities exchanges or in the over-the-counter market. Each
Tomorrow Fund currently intends to limit its option transactions during the
current fiscal year so that no more than 5% of the Tomorrow Fund's net assets
will be at risk as a result of such transactions. Please see the SAI for a
further discussion of option transactions and associated risks.
Futures Contracts and Options on Futures Contracts. Each Tomorrow Fund may
engage in futures transactions and related options. Future contracts may be
based on various securities (such as U.S. Government securities), securities
indices and other financial instruments and indices. A Tomorrow Fund will engage
in futures and related options transactions only for bona fide hedging and
non-hedging purposes to the extent permitted by regulations of the Commodity
Futures Trading Commission. A Tomorrow Fund will not enter into futures
contracts or options thereon for non-hedging purposes if, immediately
thereafter, the aggregate initial margin and premiums required to establish
non-hedging positions in futures contracts and options on futures would exceed
5% of the Tomorrow Fund's net assets, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. Each Tomorrow Fund may also
enter into closing purchase and sale transactions with respect to any of futures
contracts and related options.
The use of futures contracts entails certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of the Tomorrow Fund's income
due to the use of hedging; possible reduction in value of the both the
securities hedged and the hedging instrument; possible lack of liquidity due to
daily limits on price fluctuations; imperfect correlation between the contract
and the securities being hedged; and potential losses in excess of the amount
initially invested in the futures contracts themselves. If the expectations of
the Adviser regarding movements in securities prices or interest rates are
incorrect, the Tomorrow Fund may have experienced better investments results
without hedging. The use of futures contracts and options on futures contracts
requires special skills in addition to those needed to select portfolio
securities. A further discussion of futures contracts and their associated risks
is contained in the SAI.
Forward Commitment, Delayed Delivery and When-Issued Transactions. Each Tomorrow
Fund may purchase securities on a when-issued, delayed delivery or forward
commitment basis (collectively, "when-issued securities"). When such
transactions are negotiated, the price of such securities is fixed at the time
of the commitment, but delivery and payment for the securities may take place up
to 90 days after the date of the commitment to purchase. The securities so
purchased are subject to market fluctuation, and no interest accrues to the
purchaser during this period. When-issued securities involve a risk of loss if
the value of the security to be purchased declines prior to the settlement date.
When a Tomorrow Fund purchases securities on a when-issued basis, the Tomorrow
Fund's custodian will maintain in a segregated account cash or liquid, high
grade debt securities having a value (determined daily) at least equal to the
amount of the Tomorrow Fund's purchase commitment. A Tomorrow Fund may close out
a position in securities purchased on a when-issued basis prior to the
settlement date.
Lending of Portfolio Securities. Each Tomorrow Fund may also seek to increase
its income by lending portfolio securities. Such loans may be made to
institutions, such as certain broker-dealers, and are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. If the Adviser determines to make
securities loans, the value of the securities loaned would not exceed 33 1/3%
of the value of the total assets of the Tomorrow Fund. Although the Tomorrow
Funds may loan portfolio securities on a short-term, medium-term and long-term
basis, any such loan may be called at any time for reacquisition by the
respective Tomorrow Fund within the normal settlement period for the security. A
Tomorrow Fund may experience a loss or delay in the recovery of its securities
if the borrowing institution breaches its agreement with the Tomorrow Fund.
Restricted and Illiquid Securities. Each Tomorrow Fund may invest up to 15% of
its total assets in "restricted securities" (i.e., securities that would be
required to be registered under the Securities Act of 1933, as amended ("1933
Act"), prior to distribution to the general public) including restricted
securities eligible for resale to "qualified institutional buyers" under Rule
144A under the 1933 Act. Each Tomorrow Fund may also invest up to 10% of its
total assets in illiquid investments, which includes repurchase agreements
maturing in more than seven days, securities that are not readily marketable,
certain over-the-counter options and restricted securities, unless the Trustees
determine, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. Each
Tomorrow Fund may agree to adhere to more restrictive limits on investments in
restricted and illiquid investments as a condition of the registration of its
shares in various states. The Trustees have adopted guidelines and delegated to
the Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, retain sufficient oversight and
are ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities sold
and offered under Rule 144A will develop, the Trustees carefully monitor each
Tomorrow Fund's investments in these securities, focusing on such important
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in a Tomorrow Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these restricted securities.
Repurchase Agreements. Each Tomorrow Fund may enter into repurchase agreements
through which the Tomorrow Fund purchases a security (the "underlying security")
from a domestic securities dealer or bank that is a member of the Federal
Reserve System. Under the agreement, the seller of the repurchase agreement
(i.e., the securities dealer or bank) agrees to repurchase the underlying
security at a mutually agreed upon time and price. In repurchase transactions,
the underlying security, which must be a high- quality debt security, is held by
the Tomorrow Fund's custodian through the federal book-entry system as
collateral and marked-to-market on a daily basis to ensure full
collateralization of the repurchase agreement. In the event of bankruptcy or
default of certain sellers of repurchase agreements, a Tomorrow Fund could
experience costs and delays in liquidating the underlying security held as
collateral and might incur a loss if such collateral declines in value during
this period.
Market Changes. The market value of the Tomorrow Fund's investments, and thus
each Tomorrow Fund's net asset value, will change in response to market
conditions affecting the value of its portfolio securities. When interest rates
decline, the value of fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate loans are reset periodically,
yields on investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Portfolio Turnover. Although no Tomorrow Fund purchases securities with a view
to rapid turnover, there are no limitations on the length of time that
securities must be held by a Tomorrow Fund and a Tomorrow Fund's annual
portfolio turnover rate may vary significantly from year to year. A high rate of
portfolio turnover (100% or more) involves correspondingly greater transaction
costs which must be borne by the applicable Tomorrow Fund and its shareholders
and may, under certain circumstances, make it more difficult for such Tomorrow
Fund to qualify as a regulated investment company under the Internal Revenue
Code. The estimated portfolio turnover rates of the Tomorrow Funds for the
current fiscal year are as follows: Long-Term Fund 57%; Medium-Term Fund 63%;
Short-Term Fund 95%; and Post-Retirement Fund 145%.
Diversification. Each Tomorrow Fund is diversified, as defined in the 1940 Act.
As such, each Tomorrow Fund has a fundamental policy that limits its investments
so that, with respect to 75% of its assets (i) no more than 5% of the Tomorrow
Fund's total assets will be invested in the securities of a single issuer and
(ii) each Tomorrow Fund will purchase no more than 10% of the outstanding voting
securities of a single issuer. These limitations do not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements collateralized by U.S. Government securities or
investments in other investment companies. In addition to the diversification
requirements under the 1940 Act, the Tomorrow Funds must satisfy the
diversification requirements under the Internal Revenue Code applicable to
regulated investment companies and the additional diversification requirements
applicable under Section 817(h) of the Internal Revenue Code to Separate
Accounts that fund Variable Contracts. These requirements place certain
limitations on the assets of a Tomorrow Fund that may be invested in securities
of a single issuer or interests in the same commodity. More specific information
on these diversification requirements is contained in the SAI.
Investment Restrictions. Each Tomorrow Fund is subject to further investment
policies and restrictions that are described in the SAI. As previously
described, the foregoing investment policies, including each Tomorrow Fund's
investment objective, are non-fundamental policies which may be changed by the
Trustees without the approval of shareholders. If there is a change in a
Tomorrow Fund's investment objective, shareholders should consider whether that
Tomorrow Fund remains an appropriate investment in light of their then current
financial positions and needs. Each Tomorrow Fund has adopted certain
fundamental policies which may not be changed without the approval of the
applicable Tomorrow Fund's shareholders. Among other fundamental restrictions
listed in the SAI, no Tomorrow Fund may (1) with respect to 75% of its total
assets, purchase securities of any one issuer (other than U.S. Government
securities and securities of other investment companies) if more than 5% of its
total assets would be invested in such issuer, (2) act as an underwriter except
in certain circumstances, (3) purchase or sell real estate except in certain
circumstances, (4) issue senior securities except as permitted by the 1940 Act
or (5) invest more than 25% of its total assets in the securities of issuers
(including any one foreign government, but excluding the U.S. government) in any
one industry.
If any percentage restriction described above or in the SAI is adhered to
at the time of investment, a subsequent increase or decrease in the percentage
resulting from a change in the value of a Tomorrow Fund's assets will not
constitute a violation of the restriction.
<PAGE>
ADDITIONAL INFORMATION
Reports to Shareholders
As shareholders in the Tomorrow Funds, Separate Accounts and Qualified
Plans will receive an annual report containing audited financial statements and
semi-annual reports. Each Separate Account and Qualified Plan will also be
provided with a printed confirmation for each transaction in their shareholder
account. Holders of Variable Contracts and participants in Qualified Plans may
receive additional reports from their insurance company or Plan Fiduciary, as
the case may be.
Principal Underwriter
WPG serves as the Tomorrow Funds' principal underwriter.
Transfer Agent and Dividend Disbursing Agent
The Shareholder Services Group, Inc., P.O. Box 9037, Boston, MA 02205
serves as transfer agent and dividend disbursing agent for the Tomorrow Funds.
The Tomorrow Funds may also enter into agreements with and compensate other
transfer agents and financial institutions who process shareholder transactions
and maintain shareholder accounts.
Independent Accountants
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, serves as
the independent accountants for the Trust and will audit each Tomorrow Fund's
financial statements annually.
Legal Counsel
Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust.
----------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus and
the SAI, and, if given or made, such other information or representation must
not be relied upon as having been authorized by the Trust. This Prospectus does
not constitute an offering in any jurisdiction in which such offering may not be
lawfully made.
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
One New York Plaza
New York, New York 10004
CORE LARGE-CAP STOCK FUND ("Large-Cap Fund")
Seeks to exceed the performance of publicly traded large capitalization
stocks in the aggregate, as represented by the Standard & Poor's Index of
500 Common Stocks (the "S&P 500").
CORE SMALL-CAP STOCK FUND ("Small-Cap Fund")
Seeks to exceed the performance of publicly traded small capitalization
stocks in the aggregate, as represented by the Russell 2000 Index (the
"Russell 2000").
PROSPECTUS -- Adviser Class Shares
November 22, 1995
This Prospectus describes Adviser Class shares of two mutual funds -
the Large-Cap Fund and the Small-Cap Fund (together, the "Funds"). Adviser
Class shares of the Funds may be purchased only by "qualified" pension or
retirement plans, including trustees of such plans for individuals funding
their individual retirement accounts or other qualified plans. Each Fund, a
series of Tomorrow Funds Retirement Trust (the "Trust"), is a diversified
mutual fund advised by Weiss, Peck & Greer, L.L.C. (the "Adviser" or
"WPG").
Please read this Prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
Funds invest and the services available to shareholders. To learn more
about the Funds, you can obtain a copy of the Statement of Additional
Information (the "SAI"), also dated November 22, 1995. The SAI has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus. A free copy of the SAI or a
copy of the Prospectus describing the Institutional Class shares of the
Funds is available upon request by calling Weiss, Peck & Greer, L.L.C. at
1-800-223-3332 (toll free). Adviser Class shares of a Fund may not be
available in your state due to various insurance or other regulations.
Please check with your qualified plan fiduciary for Funds that are
available in your state. Inclusion of a Fund in this Prospectus which is
not available in your state is not to be considered a solicitation.
Shareholder inquiries regarding the Funds may be made in writing to the
Trust at the address set forth above.
ADVISER CLASS SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
ADVISER CLASS SHARES OF THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Each Fund seeks, using quantitative methodology, to provide investors who
participate in qualified retirement plans with investment results that exceed
the performance of a "Benchmark Index." The Benchmark for the Large-Cap Fund is
the S&P 500 and the Benchmark for the Small-Cap Fund is the Russell 2000. Each
Fund primarily invests its assets in equity securities of all types which
comprise the applicable Benchmark.
In addition to the Adviser Class shares offered through this Prospectus,
the Funds offer a class of shares known as the Institutional Class through a
separate prospectus. Institutional Class shares of the Funds are subject to
different expenses which may result in different performance results.
Institutional Class shares of the Funds are available only to certain eligible
investors.
TABLE OF CONTENTS
Page
Expense Information. . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . 5
How to Buy Shares. . . . . . . . . . . . . . . . . . . . . . 7
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . 10
How to Exchange Shares . . . . . . . . . . . . . . . . . . . 12
How Each Fund's Share Price is Determined. . . . . . . . . . 14
Management of the Funds. . . . . . . . . . . . . . . . . . . 14
Distribution Plans . . . . . . . . . . . . . . . . . . . . . 15
Dividends and Taxes. . . . . . . . . . . . . . . . . . . . . 16
Portfolio Brokerage. . . . . . . . . . . . . . . . . . . . . 17
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Performance . . . . . . . . . . . . . . . . . . . 18
Risk Considerations and Other Practices and Policies . . . . 19
Additional Information . . . . . . . . . . . . . . . . . . . 24
<PAGE>
EXPENSE INFORMATION
Operating a mutual fund, such as each Fund, involves a variety of expenses
for portfolio management, shareholder statements, tax reporting and other
services. These costs are paid from a fund's assets and their effect is factored
into any quoted share price or performance information.
Shareholder Transaction Expenses are charges you pay when you buy or sell
Adviser Class shares of a Fund.
Large-Cap Small-Cap
Fund Fund
Maximum Sales Load Imposed on Purchases None None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees None None
Exchange Fees None None
Annual Fund Operating Expenses are paid out of the Funds' assets. Each Fund's
expenses are factored into its share price or dividends and are not charged
directly to shareholder accounts. The following are estimates and are calculated
as a percentage of average net assets.
Large-Cap Small-Cap
Fund Fund
Management Fee (after voluntary waiver) 0.00%* 0.00%*
12b-1 Fee 1 0.50% 0.50%
Other Expenses (after expense limitation) 1.25%* 1.25%*
Total Fund Operating
Expenses
(after expense limitation) 1.75%* 1.75%*
Example: Hypothetically assume that each Fund's annual return is 5% and that its
operating expenses are exactly as just described. For every $1,000 you invested,
you would have paid the following expenses if you closed your account after the
number or years indicated:
Large-Cap Small-Cap
Fund Fund
After 1 Year $18 $18
After 3 Years $56 $56
The purpose of the above table and Example is to assist you in understanding
the various costs and expenses of the Adviser Class shares of the Funds that an
investor will bear directly or indirectly. See page 15. The Funds are newly
organized and have no operating history. The figures shown in the table under
the caption "Other Expenses" and in the hypothetical example are based on
estimates of the Funds' expenses for the fiscal year ending December 31, 1996.
The expenses set forth above do
<PAGE>
not reflect charges and expenses that may be applicable to a participant in a
qualified plan. Please refer to your qualified plan documents.
- ---------------
1 Rule 12b-1 Fees consist of a 0.25% distribution fee and a 0.25% service
fee. See "Distribution Plans" on page 15.
* The Adviser has voluntarily agreed to limit temporarily each Fund's
operating expenses (excluding Rule 12b-1 fees applicable to Adviser Class
shares, service fees applicable to Institutional Class shares, any other
class-specific expenses, litigation, indemnification and other extraordinary
expenses) to 1.25% of its average daily net assets. Each Fund will reimburse the
Adviser for fees foregone or other expenses paid by the Adviser pursuant to this
expense limitation in later years in which operating expenses for that Fund are
less than the expense limitations set forth above for any such year. See page
15. In the absence of this agreement, Management Fees would be 0.75% of each
Fund's average daily net assets and Other Expenses and Total Fund Operating
Expenses are estimated to be approximately 3.75% and 5.00%, respectively, of the
average daily net assets attributable to the Adviser Class shares of the
Large-Cap Fund and 4.35% and 5.60%, respectively, of the average daily net
assets attributable to the Adviser Class shares of the Small-Cap Fund.
The Funds' imposition of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
THE INFORMATION IN THE TABLE AND HYPOTHETICAL EXAMPLE ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
What are the Investment Objectives of the Funds?
Each Fund seeks to provide investors who participate in qualified
retirement plans with investment results that exceed the performance of a
"Benchmark Index." The Benchmark for the Large-Cap Fund is the S&P 500 and the
Benchmark for the Small-Cap Fund is the Russell 2000.
LARGE-CAP FUND seeks to exceed the performance of publicly traded large
capitalization stocks in the aggregate, as represented by the S&P
500. The S&P 500 is an unmanaged index of 500 common stocks. The
S&P 500 represents approximately 70% of the total domestic U.S.
equity market capitalization.
SMALL-CAP FUND seeks to exceed the performance of publicly traded small
capitalization stocks in the aggregate, as represented by the
Russell 2000. The Russell 2000 is an unmanaged index of 2000
common stocks of small market capitalization companies.
How will the Funds invest their assets?
To seek to achieve its objective, each Fund, under normal market
conditions, invests in a portfolio of securities that is considered more
"efficient" than the applicable Benchmark. An efficient portfolio is one that
has the maximum expected return for any level of risk. The efficient mix of
securities is established mathematically, taking into account the expected
return and volatility of returns for each security in a given universe, as well
as the historical price relationships between the different securities in the
universe.
To implement this strategy with respect to the Funds, the Adviser compiles
the historical price data of all securities which comprise the S&P 500 in the
case of the Large-Cap Fund and the Russell 2000 in the case of the Small-Cap
Fund. The Adviser may eliminate a security from consideration if it considers
the security to have an inadequate or misleading price history. Using this
historical price data, the Adviser constructs and analyzes a complete matrix of
all the possible price relationships between the securities in the applicable
Benchmark.
Using a sophisticated software program that incorporates risk reduction
techniques developed by investment professionals of the Adviser, the Adviser
constructs a number of portfolios with respect to each Fund, which portfolios
are believed to have optimized risk/reward ratios. From these alternative
portfolios, the Adviser selects the combination of securities, together with
their appropriate weightings, that the Adviser believes will comprise the
optimal portfolio for each Fund. The optimal portfolio for a Fund is designed to
have a return greater than, but highly correlated with, the return of its
Benchmark. Please see "Quantitative Methodology" in the SAI for a further
description of how the Adviser constructs and maintains an optimal portfolio for
each Fund. No quantitative methodology or technical analysis, including the
Adviser's, has ever been objectively proven to provide enhanced investment
return and reduced investment risk in actual long-term portfolio results.
Under normal circumstances, at least 65% of Large-Cap Fund's and Small-Cap
Fund's total assets are invested in equity securities of large market
capitalization companies and small market capitalization companies,
respectively. For purposes of the Funds' investments, large market
capitalization companies are those ranked, according to market capitalization,
within the top 500 domestic companies that are listed on a U.S. securities
exchange or traded over-the-counter and small market capitalization companies
are those not ranked, according to market capitalization, within the top 1,000
domestic companies that are listed on a U.S. securities exchange or traded
over-the-counter, both determined at the time of the Funds' investments.
Companies whose capitalization falls outside these ranges after purchase
continue to be considered large or small market capitalized, as the case may be,
for purposes of this policy.
While each Fund will generally be substantially fully invested in equity
securities that comprise the applicable Benchmark, each Fund may invest up to
10% of its total assets in fixed-income securities that are rated at least AA by
Standard & Poor's Ratings Group ("S&P") or Aa by Moody's Investors Service, Inc.
("Moody's") or their respective equivalents or, if not rated, determined to be
of equivalent credit quality to securities so rated. For information regarding
the particular types of fixed-income securities in which the Funds may invest,
see "Risk Considerations and Other Investment Practices and Policies" on page 19
of this Prospectus.
Each Fund may, but is not required to, utilize various investment
strategies and techniques to hedge various market risks (such as broad or
specific equity or fixed-income market movements and interest rate risk) or to
enhance potential gain. The investment strategies and techniques used by the
Funds and the instruments in which they invest may change over time as new
techniques, strategies and instruments are developed or regulatory changes
occur. In the course of pursuing their investment objectives, the Funds may: (i)
purchase and write (sell) put and call options on securities and indices; (ii)
purchase and sell financial futures contracts and options thereon; (iii) lend
portfolio securities; (iv) enter into repurchase agreements; (v) purchase
securities on a forward commitment, when-issued or delayed delivery basis; (vi)
invest in restricted and illiquid securities and (vii) invest in shares of real
estate investment trusts ("REITs"). For further information concerning the
securities in which the Funds may invest and the investment strategies and
techniques they may employ, see "Risk Considerations and Other Investment
Practices and Policies" beginning on page 19 of this Prospectus.
The investment policies, including each Fund's investment objective,
described in this Prospectus are non-fundamental policies which may be changed
by the Trustees without the approval of shareholders. If there is a change in
either Fund's investment objective, shareholders should consider whether that
Fund remains an appropriate investment in light of their then current financial
positions and needs. Each Fund has adopted certain fundamental policies which
may not be changed without the approval of the applicable Fund's shareholders.
See "Investment Restrictions" on page 23 of this Prospectus.
Risk Factors
There is no assurance that either Fund will achieve its investment
objective. Because each Fund owns different types of investments, its
performance is affected by a variety of factors. The value of a Fund's
investments and the income they generate (and, therefore, its net asset value)
will vary from day to day, and generally reflect interest rates, market
conditions, and other company, political and economic news. When you sell your
shares, they may be worth more or less than what you paid for them.
The Small-Cap Fund will invest in equity securities of small capitalization
companies included within the Russell 2000 and the Large-Cap Fund may invest in
such securities to the extent that they are included in the S&P 500. Although
investments in securities of small capitalization companies may present greater
opportunities for growth, they also involve greater risks than are customarily
associated with investment in larger, more mature, better known companies. Small
capitalization securities may be subject to more volatile market movements than
securities of larger capitalization securities, such as those included in the
S&P 500. Smaller companies may have limited product lines, markets or financial
resources, and they may depend upon a limited or less experienced management
group. Small capitalization securities may be traded only on the
over-the-counter market or on a regional securities exchange and may not be
traded daily or in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Small-Cap Fund of portfolio
securities to meet redemptions
<PAGE>
or otherwise may require the Fund to sell securities at a discount from market
prices, over a longer period of time or during periods when disposition is not
desirable.
In general, the value of a Fund's investment in fixed-income securities
rises when interest rates fall, and vice versa. Although fixed-income securities
have varying degrees of quality and varying levels of sensitivity to changes in
interest rates, longer-term fixed-income securities are generally more sensitive
to interest changes than shorter-term fixed-income securities. Investing in
REITs involves risks in addition to those associated with fixed-income
securities. REITs may be affected by changes in the value of the underlying
property and by the quality of any credit extended, are dependent upon
management skills, are not diversified, and are subject to heavy cash flow
dependency. The risks associated with the Funds' transactions in options,
futures and other types of derivative securities including mortgage-backed and
asset-backed securities may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk.
For a further discussion of the risks associated with an investment in the
Funds, please see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 19 of this Prospectus.
HOW TO BUY SHARES
Who is eligible to purchase Adviser Class shares of the Funds?
Adviser Class shares of the Funds may be purchased only for the account of
qualified pension or retirement plans ("Qualified Plans"). Qualified Plans
include: qualified plans and trusts under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), annuity plans under Code
Section 403(a), Code Section 403(b) annuities and custodial accounts, certain
governmental plans, simplified employee pension plans, deferred compensation
arrangements under Code Section 457(b) and Individual Retirement Accounts
("IRAs").
Should you have any questions as to whether you are an eligible investor, please
call WPG at 1-800-223-3332.
Through whom may Adviser Class shares of the Funds be purchased?
Because you may not purchase Adviser Class shares of the Funds directly,
all orders to purchase Adviser Class shares must be made through the trustee,
custodian, plan administrator or other fiduciary (each a "Plan Fiduciary") of
your Qualified Plan. If the monies you wish to invest in the Funds are
maintained in a Qualified Plan sponsored by your employer, please consult with
your employer for information about how to purchase shares of the Funds. If the
monies you wish to invest in the Funds are maintained by your Plan Fiduciary in
an IRA or other self-administered Qualified Plan, please consult with your Plan
Fiduciary for information about how to purchase shares of the Funds.
You may establish an IRA with the Trust's custodian, Boston Safe Deposit
and Trust Company ("Boston Safe"), through which you may invest in the Funds.
Additionally, you may invest in the Funds by "rolling over" an existing IRA into
an IRA maintained by Boston Safe. Please call WPG at 1-800-223- 3332 for
information regarding how to establish an IRA with Boston Safe.
Plan Fiduciaries may purchase shares of the Funds for a Qualified Plan
through any investment dealer or financial service firm ("Authorized Firm")
approved by WPG. Authorized Firms include broker-dealers, banks and financial
planners.
<PAGE>
What is the minimum investment in shares of the Funds?
Plan Fiduciaries may invest in the Funds with as little as $250. There is
no minimum amount required for subsequent investments.
How may Plan Fiduciaries invest in the Funds for the account of their Qualified
Plans?
In order to make an initial investment in a Fund for a Qualified Plan, Plan
Fiduciaries must open an account with the Funds by furnishing to an Authorized
Firm the information in the applicable Account Information Form attached to this
Prospectus. Please note that there is an Account Information Form applicable to
IRAs and an Account Information Form applicable to other Qualified Plans. Shares
of the Funds may be purchased on any day during which the New York Stock
Exchange is open for business (a "Business Day").
At what price are Adviser Class shares of the Funds offered?
Adviser Class shares of the Funds are sold at the net asset value (NAV) of
such shares next determined after The Shareholder Services Group, Inc., the
Funds' "Transfer Agent," receives and accepts a purchase order. Purchase orders
received by Authorized Firms by the close of regular trading on the New York
Stock Exchange on any Business Day and transmitted to the Transfer Agent by the
close of its business day (normally 5:00 p.m. New York City time) will be
effected as of the close of regular trading on the New York Stock Exchange on
that day. Otherwise, orders will be effected at the NAV determined on the next
Business Day. It is the responsibility of Authorized Firms to transmit orders so
that they will be received by the Transfer Agent before the close of its
business day.
Plan Fiduciaries: To Make an Initial Investment for a Qualified Plan
By Mail: 1. Make a check payable to the Fund in which you wish to
invest.
2. Deliver the completed Account Information Form and check
to an Authorized Firm or mail it to WPG.
By Wire: 1. Call 1-800-223-3332 to open an account and to arrange for
a wire transaction.
2. Instruct your bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
Bank Routing No. 011-00123-4
Specify:
Name of Fund
Adviser Class shares
Account Number
Name(s) in which account is to be registered
3. Deliver the completed Account Information Form to an
Authorized Firm or mail it to WPG.
<PAGE>
Plan Fiduciaries: To Make Further Investments for a Qualified Plan
Automatically: 1. Use the Automatic Investment Plan. Sign up for this
service when opening an account, or call 1-800-223-3332 to
receive a Servicing Form to add this privilege. Plan
Fiduciaries must designate the bank or credit union account
from which funds will be drawn.
2. The amount to be invested will automatically be withdrawn
from the designated bank or credit union account on or
about the first Business Day of the month or quarter
selected.
By Telephone: 1. Sign up for this service when opening an account, or call
1-800-223-3332 to add it. Plan Fiduciaries must designate
the bank or credit union account from which funds will be
drawn. Note that in order to invest by phone, the account
must be in a bank or credit union that is a member of the
Automated Clearing House system (ACH).
2. Once this service has been selected, Plan Fiduciaries may
purchase additional shares for the account of Qualified
Plans by calling the Funds' Transfer Agent, The Shareholder
Services Group, Inc., toll-free at 1-800-223-3332.
3. Give the Transfer Agent representative the name(s) in which
the account is registered, the Fund name, Adviser Class
shares, the account number, and the amount of the
investment.
4. An investment will normally be credited to the Qualified
Plan account upon receipt of payment.
During periods of extreme economic conditions or market
changes, requests by telephone may be difficult to make due to
heavy volume. During such times please consider placing
purchase orders by mail.
By Mail: 1. Include a note with the investment specifying:
Name of the Fund
Adviser Class shares
Account Number
Name(s) in which account is registered
2. Make the check payable to the Fund in which you wish to or
are instructed to invest. Indicate the account number on
the check.
3. Deliver the account information and check to an Authorized
Firm or mail it to the Transfer Agent at the address
indicated on the back cover of this Prospectus.
<PAGE>
By Wire: Instruct the bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
ABA Routing No. 011-00123-4
For credit to:
Name of Fund
Adviser Class shares
Your Account Number
Name(s) in which account is registered
Other Purchase Information. Each Fund reserves the right to reject any
purchase for any reason and to cancel any purchase due to nonpayment. As a
condition of this offering, if your purchase is cancelled due to nonpayment or
because your check does not clear (and, therefore, your account is required to
be redeemed), you will be responsible for any loss incurred by the Fund(s)
affected. All purchases must be made in U.S. dollars. Checks drawn on foreign
banks will delay purchases until U.S. funds are received and a collection charge
may be imposed. In such cases, Adviser Class shares of the Funds are priced at
the net asset value computed after the Transfer Agent receives notification of
the dollar equivalent from the Funds' custodian bank. Wire purchases normally
take two or more hours to complete and, to be accepted the same day, must be
received by 4:00 p.m. New York City time. Your bank may charge a fee to wire
funds. Telephone transactions are recorded to verify information.
Acquiring Shares of the Funds in Exchange for Securities. Shares of the
Funds may be purchased in whole or in part for the account of Qualified Plans by
delivering to the Funds' custodian, Boston Safe, securities acceptable to WPG.
Please see "In-Kind Purchases" in the SAI for the terms and conditions of these
transactions.
HOW TO SELL SHARES
How may Adviser Class shares of the Funds be redeemed?
Subject to the restrictions (if any) imposed by your Qualified Plan, you
can arrange to sell or "redeem" some or all of your shares on any Business Day.
All orders to redeem Adviser Class shares must be made through your Plan
Fiduciary. If the Adviser Class shares you wish to redeem are held for the
account of a Qualified Plan sponsored by your employer, please consult with your
employer for information about how to redeem shares of the Funds. If the Adviser
Class shares you wish to redeem are maintained by your Plan Fiduciary in an IRA
or other self-administered Qualified Plan, please consult with your Plan
Fiduciary for information about how to redeem shares of the Funds. Please note
that shares may not be redeemed by telephone or telegram, except for exchanges
which can be requested by Plan Fiduciaries by telephone or in writing.
At what price are Adviser Class shares of the Funds redeemed?
Adviser Class shares of the Funds will be redeemed at the share price (NAV)
of such shares next calculated after a redemption order is received in good
order by the Transfer Agent. Once shares are redeemed, sale proceeds generally
are available the next Business Day, but may take up to three Business Days. For
your protection, redemption proceeds will not be released until a shareholder's
account has been opened and payment for the shares to be redeemed have been
received by the Fund, which may take up to fifteen days in the case of payments
made by check.
<PAGE>
The net asset value per share received upon redemption or repurchase may be
more or less than the original cost of the shares, depending on the market value
of the portfolio at the time of redemption or repurchase.
Plan Fiduciaries: To Redeem Shares for a Qualified Plan
By Mail: 1. In a written request specify:
Name of the Fund
Adviser Class shares
Account Number
Name(s) in which account is registered
The dollar amount or the number of shares to be redeemed
2. Deliver the redemption request to an Authorized Firm or mail
to the Transfer Agent at the address indicated on the back
cover of this Prospectus.
General Redemption Information. Authorized Firms must receive redemption
requests before the close of business on the New York Stock Exchange and
transmit them to the Transfer Agent prior to the Transfer Agent's close of
business to receive that day's share price (NAV). A written redemption request
must be signed by all registered shareholders for the account using the exact
names in which the account is registered or accompanied by executed power(s) of
attorney. Unless otherwise specified, redemption proceeds will be sent by check
to the record address. Plan Fiduciaries may elect to have redemption proceeds
wired to a checking or bank account if wire redemptions were authorized when the
account was opened or have subsequently been authorized.
Redemptions may be suspended or postponed during any period in which any of
the following conditions exist: the New York Stock Exchange is closed or trading
on the Exchange is restricted; an emergency exists during which it is not
reasonably practicable for a Fund to dispose of its portfolio securities or to
fairly determine its net asset value; or the SEC, by order, so permits.
Certain requests must include a signature guarantee. A signature guarantee
is a widely accepted way to protect you and the Funds from fraud by verifying
the signature on your request. A signature guarantee is required if (a) the
redemption proceeds are to be sent to an address other than the address of
record or to a person other than the registered shareholder(s) for the account,
(b) the redemption request is made for the account of an IRA or (c) the net
asset value of the shares redeemed is $100,000 or more (this requirement may be
waived by the Adviser in its discretion.)
The following institutions may provide a signature guarantee, provided that
the institution meets credit standards established by the Transfer Agent: (i) a
bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency. Signature guarantees may not be provided by a notary public.
Small Accounts. In order to reduce the expense of maintaining numerous
small accounts, the Trust reserves the right to redeem any shareholder account
(other than an IRA) if, as a result of redemptions, the value of the account is
less than $100. Plan Fiduciaries will be allowed at least 60 days, after written
notice by the Trust, to make an additional investment to bring the account value
up to at least $100 before the redemption is processed.
Change in Tax Status. Plan Fiduciaries are required to notify the Trust
through the Transfer Agent if the tax status of their Qualified Plan is revoked
or challenged by the Internal Revenue Service. The Trust reserves the right to
redeem any fund account of any shareholder whose qualification as a qualified
pension or retirement plan satisfying the requirements of Treasury Regulation
section 1.817-5 is revoked or challenged. The Trust will not treat an investor
as a qualified pension or retirement plan for this purpose unless the investor
is among the categories specifically enumerated in Revenue Ruling 94- 62,
1994-2 C.B. 164.
HOW TO EXCHANGE SHARES
May Adviser Class shares be exchanged for shares of other mutual funds?
Subject to the terms of your Qualified Plan, Adviser Class shares of a Fund
may be exchanged for Adviser Class shares of the other Fund or for Adviser Class
shares of Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement
Fund, Tomorrow Short-Term Retirement Fund and Tomorrow Post- Retirement Fund
(collectively, the Tomorrow Funds"). To obtain a current prospectus for the
Adviser Class shares of the Tomorrow Funds, please call 1-800-223-3332. Please
consider the differences in investment objectives and expenses of a Tomorrow
Fund as described in its prospectus before making an exchange.
Do sales charges apply to exchanges?
As is the case with initial purchases of Adviser Class shares, exchanges of
Adviser Class shares are made without the imposition of a sales charge.
How may I make an exchange?
Because shares of the Funds are held for the account of Qualified Plans,
all orders to exchange shares must be made through your Plan Fiduciary. If the
Adviser Class shares you wish to exchange are held for the account of a
Qualified Plan sponsored by your employer, please consult with your employer for
information about how to exchange shares of the Funds. If the Adviser Class
shares you wish to exchange are maintained by your Plan Fiduciary in an IRA or
other self-administered Qualified Plan, please consult with your Plan Fiduciary
for information about how to exchange shares of the Funds.
Plan Fiduciaries: To Exchange Shares
By Phone: 1. Use the telephone exchange privilege. The telephone
exchange privilege is not available automatically. It is
necessary to sign up for this privilege on the Account
Application Form when opening an account, or call
1-800-223-3332 to receive the Services Form to add it.
2. Once this privilege has been selected, simply call the
Transfer Agent toll free at 1-800-223-3332 between
9:00 a.m. and 4:00 p.m. New York City time on any
Business Day.
<PAGE>
3. Give the following information to the Transfer Agent
representative:
Name of current Fund
Adviser Class shares
Name of the Tomorrow Fund into which the current Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
By Mail: 1. Deliver a written request to an Authorized Firm or mail it
to the Transfer Agent at the address listed on the back
cover of this Prospectus specifying:
Name of current Fund
Adviser Class shares
Name of the Tomorrow Fund into which the current Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
2. The exchange request must be signed by all registered
holders for the account using the exact names in which the
account is registered or accompanied by executed power(s)
of attorney.
General Exchange Information. Shares exchanged are valued at their
respective net asset values next determined after the exchange request is
received by the Transfer Agent. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be registered for sale in your state; (ii) exchanges may be made only between
funds that are registered in the same name, address and, if applicable, taxpayer
identification number; and (iii) the minimum amount for exchanging from one fund
into another fund is $100 or the total value of your fund account (if less than
$100) and must satisfy the minimum account size of the fund to be exchanged
into.
To confirm that telephone exchange requests are genuine, the Trust employs
reasonable procedures, such as providing written confirmation of telephone
exchange transactions and tape recording of telephone exchange requests. If the
Trust does not employ such reasonable procedures, it may be liable for any loss
incurred by a shareholder due to a fraudulent or unauthorized telephone exchange
request. Otherwise, neither the Trust nor its agents will be liable for any loss
incurred by a shareholder as the result of following instructions communicated
by telephone that they reasonably believed to be genuine. The Trust reserves the
right to refuse any request made by telephone and may limit the dollar amount
involved or the number of telephone requests made by any shareholder.
Duringperiods of extreme economic conditions or market changes, requests by
telephone may be difficult to make due to heavy volume. During such times please
consider placing your order by mail.
To prevent abuse of the exchange privilege to the detriment of other
shareholders, the Trust limits the number of exchanges and purchase/redemption
transactions by any one shareholder account (or group of accounts under common
management) to a total of six transactions per year. This policy applies to
exchanges into or out of any Tomorrow Fund and any pair of transactions
involving a purchase of shares of any Tomorrow Fund followed by a redemption of
an offsetting or substantially equivalent dollar amount of shares of that same
Tomorrow Fund. If a Plan Fiduciary violates this policy, his/her future
purchases of, or exchanges into, the Tomorrow Funds may be permanently
<PAGE>
refused. This policy does not prohibit redemptions of shares of any series.
This policy may be waived by WPG in its discretion. Further, the exchange
privilege may be changed or discontinued and may be subject to additional
limitations upon sixty (60) days' notice to shareholders, including certain
restrictions on purchases by market-timer accounts.
HOW EACH FUND'S SHARE PRICE IS DETERMINED
The net asset value per share of a class of a Fund is determined by
dividing the value of its assets, less liabilities attributable to that class,
by the number of shares of that class outstanding. The net asset value is
normally calculated as of the close of regular trading of the New York Stock
Exchange (currently 4:00 p.m. New York City time) on each Business Day.
Different classes of shares of the Funds may have different net asset values.
Portfolio securities (other than certain money market instruments) are
valued primarily based on market quotations or, if market quotations are not
available, at fair market value as determined in good faith by a valuation
committee appointed by the Trustees. In accordance with procedures adopted by
the Trustees, each Fund may use pricing services to value fixed-income
investments. Money market instruments with a remaining maturity of 60 days or
less at the time of purchase are generally valued at amortized cost when the
Trustees believe that amortized cost approximates market value.
MANAGEMENT OF THE FUNDS
Trustees
Each Fund is a separate investment series of Tomorrow Funds Retirement
Trust, a Delaware business trust (the "Trust"). Under the terms of the Agreement
and Declaration of Trust establishing the Trust, the Trustees of the Trust are
ultimately responsible for the management of its business and affairs.
Investment Adviser
Weiss, Peck & Greer, L.L.C., One New York Plaza, New York, New York 10004
serves as the investment adviser to each Fund pursuant to an investment advisory
agreement. The Adviser, a privately held limited liability company with over 20
years' experience as an investment adviser to individual and institutional
clients, has, together with its affiliates, approximately $13 billion under
management. Subject to the supervision and direction of the Trustees, the
Adviser manages each Fund's portfolio in accordance with its stated investment
objective and policies, recommends investment decisions for the Fund and places
orders to purchase and sell securities on behalf of the Fund. For these
services, each Fund pays the Adviser a monthly fee equal on an annual basis to
0.75% of its average daily net assets. The advisory fee paid by the Funds, which
is greater than that paid by most funds, reflects the added complexity and
additional expenses associated with these Funds' investment strategies.
Joseph N. Pappo has been primarily responsible for the day-to-day
management of each Fund's portfolio since the Funds' inception. Mr. Pappo has
been a principal of the Adviser since 1994. Prior to joining WPG, Mr. Pappo was
the founder and president of Eden Financial Group which was acquired by WPG in
1991.
The Adviser has voluntarily agreed to limit temporarily each Fund's
operating expenses (excluding Rule 12b-1 fees applicable to the Adviser Class
shares, service fees applicable to the
<PAGE>
Institutional Class shares, any other class-specific expenses, litigation,
indemnification and other extraordinary expenses) to 1.25% of its average daily
net assets. The Adviser may discontinue or modify such limitation in the future
at its discretion, although it has no current intention to do so.
Administrator
Pursuant to an administration agreement with each Fund, WPG provides
personnel for supervisory, administrative, accounting, shareholder services and
clerical functions; oversees the performance of administrative and professional
services to the Funds by others; provides office facilities, furnishings and
office equipment; and prepares, but does not pay for, reports to shareholders,
the SEC and other regulatory authorities. As compensation for the services
rendered to the Funds as Administrator, WPG is entitled to a fee, computed daily
and payable monthly, at an annual rate equal to 0.09% of each Fund's average
daily net assets. The administrative fee for each Fund is reviewed and approved
annually by the Trustees.
Expenses
Each Fund bears all expenses of its operation, subject to the expense
limitation agreement described above. In particular, each Fund pays: investment
advisory fees; administration fees; service fees with respect to the
Institutional Class shares; distribution and service fees with respect to the
Adviser Class shares; custodian and transfer agent expenses; legal and
accounting fees and expenses; expenses of preparing, printing, and distributing
Prospectuses and SAIs to existing shareholders, and shareholder communications
and reports; expenses of computing its net asset value per share; federal and
state registration fees and expenses with respect to its shares; proxy and
shareholder meeting expenses; expenses of issuing and redeeming its shares;
independent trustee fees and expenses; expenses of bond, liability, and other
insurance coverage; brokerage commissions; taxes; trade association fees; and
certain non-recurring and extraordinary expenses. In addition, the expense of
organizing the Funds and initially registering and qualifying their shares under
federal and state securities laws are being charged to the Funds' operations, as
an expense, over a period not to exceed 60 months from the Funds' inception
date.
Each Fund will reimburse the Adviser for fees foregone or other expenses
paid by the Adviser pursuant to this expense limitation in later years in which
operating expenses for that Fund are less than the expense limitations set forth
above for any such year. No interest, carrying or finance charge will be paid by
a Fund with respect to the amounts representing fees foregone or other expenses
paid. In addition, no Fund will pay any unreimbursed amounts to the Adviser upon
termination of its investment advisory agreement.
DISTRIBUTION PLANS
The Trust, on behalf of each Fund, has adopted a Distribution Plan (the
"Distribution Plans") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"). Under the Distribution Plans, each Fund pays
distribution and service fees at an aggregate annual rate of up to 0.50% of a
Fund's average daily net assets attributable to Adviser Class shares. Up to
0.25% is for service fees and the remaining amount is for distribution expenses.
The distribution fee is intended to compensate WPG for its services and expenses
associated with serving as principal underwriter of the Adviser Class shares of
the Funds, including the payment of commissions by WPG to Authorized Firms. The
service fee is intended to be compensation for personal services and/or account
maintenance services with respect to the Adviser Class shares.
WPG makes monthly payments to Authorized Firms based on the average net
asset value of the Adviser Class shares which are attributable to Qualified
Plans for whom the Authorized Firms are designated as the dealer of record. WPG
makes such payments in amounts up to the distribution fee it receives with
respect to such Adviser Class shares. WPG may suspend or modify such payments to
Authorized Firms.
DIVIDENDS AND TAXES
Each Fund is treated as a separate entity for federal income tax purposes
and intends to elect to be treated as a "regulated investment company" under the
Internal Revenue Code and to qualify for such treatment for each taxable year.
To qualify as such, each Fund must satisfy certain requirements relating to the
sources of its income, diversification of its assets and distribution of its
income to shareholders. Each Fund also intends to satisfy certain additional
diversification requirements applicable under Section 817(h) of the Internal
Revenue Code in order to permit investments in Institutional Class shares of the
Funds by insurance company segregated asset accounts that fund variable annuity
or variable life insurance products, which are subject to such requirements. It
is possible that in order to satisfy the applicable diversification
requirements, investment decisions may be made which would affect either
positively or negatively the investment performance of a Fund. As a regulated
investment company, each Fund will not be subject to federal income tax on any
net investment income and net realized capital gains that are distributed to its
shareholders in accordance with certain timing requirements of the Internal
Revenue Code.
Participants in Qualified Plans may be eligible for tax deferral on
distributions a Qualified Plan receives from a Fund and gains that arise from a
Qualified Plan's dispositions of Fund shares. This Prospectus does not describe
in any respect such tax treatment. Please consult your Plan Fiduciary or tax
adviser. It is suggested that participants in Qualified Plans keep all
statements received from their Qualified Plans to assist in personal
recordkeeping.
Each Fund intends to distribute all of its net investment income and net
capital gains each year. Income dividends, if any, will be declared and
distributed at least annually by each Fund. Net short-term and long-term capital
gains of each Fund, if any, realized during the taxable year will be distributed
no less frequently then annually. Dividends derived from each Fund's net
investment income (including dividends, interest and recognized market discount
income), and net short-term capital gains received by a Fund are treated as
ordinary income under the Internal Revenue Code. Distributions from each Fund's
net long-term capital gains are treated as long-term capital gains under the
Internal Revenue Code, regardless of how long shares of the Funds have been
held.
Reinvestment of Income Dividends and Capital Gains Distributions
Unless a Plan Fiduciary elects otherwise, as permitted in the Account
Information Form, income dividends and capital gains distributions with respect
to a Fund will be reinvested in additional Adviser Class shares of that Fund and
will be credited to the Qualified Plan's account with that Fund at the net asset
value per share next determined as of the ex-dividend date. Both income
dividends and capital gains distributions are paid by the Fund on a per share
basis. As a result, at the time of such payment, the net asset value per share
of a Fund will be reduced by the amount of such payment. Although income
dividends and capital gains distributions by the Funds may not give rise to
current tax liability for the categories of shareholders permitted to invest in
the Funds, participants in Qualified Plans may be subject to tax on all or a
portion of their distributions from such Plans or upon the failure of such Plans
to maintain their qualified status under complex Internal Revenue Code
provisions concerning which a tax adviser should be consulted. Participants in
Qualified Plans who wish to change the manner in which income dividends and
capital gains distributions are received by their Qualified Plans should contact
their Plan Fiduciaries. Written notification of such change must be received by
the Transfer Agent at least ten days before the next scheduled distribution.
PORTFOLIO BROKERAGE
In effecting securities transactions, the Funds generally seek to obtain
the best price and execution of orders under the circumstances. Commission rates
are a component of price and are considered along with other factors, including
the ability of the broker to effect the transaction, and the broker's
facilities, reliability and financial responsibility. Subject to the foregoing,
the Funds intend to utilize WPG as their primary broker in connection with the
purchase and sale of exchange-traded portfolio securities. As the Funds' primary
broker, WPG will receive brokerage commissions from the Funds, limited to the
"usual and customary broker's commission" specified by the 1940 Act. The Funds
intend to continue to use WPG as their primary broker on exchange-traded
securities, provided WPG is able to provide execution at least as favorable as
that provided by other qualified brokers.
The Trustees of the Trust have developed procedures to limit the
commissions received by WPG to the "usual and customary broker's commission"
standard specified by the 1940 Act. On a quarterly basis, the Trustees review
the securities transactions of each Fund effected by WPG to assure their
compliance with such procedures.
The Funds will also execute their portfolio transactions through qualified
brokers other than WPG. In selecting such other brokers, WPG considers the
quality and reliability of brokerage services, including execution capability
and performance and financial responsibility, and may consider the research and
other investment information provided by such brokers. Accordingly, the
commissions paid to any such broker may be greater than the amount another firm
might charge, provided WPG determines in good faith that the amount of such
commission is reasonable in relation to the value of the brokerage services and
research information provided by such broker. Such information may be used by
WPG (and its affiliates) in managing all of its accounts and not all of such
information may be used by WPG in managing the Funds. In selecting other brokers
for a Fund, WPG may also consider the sale of shares of the Fund effected
through such other brokers as a factor in its selection, provided that Fund
obtains the best price and execution of orders under the circumstances.
Money market securities and other fixed-income securities, as well as
certain equity securities, in which the Funds invest are traded primarily in the
over-the-counter ("OTC") market. For transactions effected in the OTC market,
financial intermediaries (i.e., dealers) act as principal rather than as agent
and receive a "spread" rather than a commission. The Funds intend to deal with
the primary market-makers with respect to OTC securities, unless a more
favorable result is obtainable elsewhere.
THE TRUST
Tomorrow Funds Retirement Trust is an open-end management investment
company (commonly referred to as a mutual fund) organized as a Delaware business
trust under an Agreement and Declaration of Trust dated June 21, 1995 (the
"Declaration"). The Trust has authorized an unlimited number of shares of
beneficial interest.
As of the date of this Prospectus, the shares of the Trust are divided into
six series: Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement
Fund, Tomorrow Short-Term Retirement Fund, Tomorrow Post-Retirement Fund, Core
Large-Cap Stock Fund and Core Small-Cap Stock Fund. The Trust reserves the right
to create and issue additional series of shares. No series is entitled to share
in the assets of any other series or is liable for the expenses or liabilities
of any other series. Shares of a particular series vote separately on matters
affecting only that series, including the approval of an investment advisory
agreement and changes in fundamental policies or restrictions of a particular
series.
<PAGE>
As of the date of this Prospectus, the Trustees have authorized the
issuance of two classes of shares for each series, designated Adviser Class and
Institutional Class. The shares of each Class represent an interest in the same
portfolio of investments of that series. Each Class has equal rights as to
voting, redemption, dividends and liquidation, except that each Class bears
different distribution fees and may bear other expenses properly attributable to
the particular Class. Adviser Class shareholders of a Fund have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted by holders of
Adviser Class shares of that Fund. The Trustees have the authority, without
further shareholder approval, to classify and reclassify the shares of a series
of the Trust into additional classes. In addition, subject to Trustee approval
and shareholder approval (if then required), each Fund may pursue its investment
objective by investing all of its investable assets in a pooled fund. See "Other
Investment Companies" on page 21 of this Prospectus.
When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Trust are fully paid and
non-assessable. The Trust is not required, and does not intend, to hold annual
shareholder meetings. Shareholders have certain rights, as set forth in the
Declaration, including the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. Such removal can be
effected upon the action of two-thirds of the outstanding shares of the Trust.
In addition to the requirements under Delaware law, the Declaration
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Trust for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
The Trustees of the Trust do not expect any disadvantages to investors
arising out of the fact that each Fund may offer a class of its shares to
insurance company segregated asset accounts that serve as investment medium for
variable annuity and variable life insurance products or that each Fund may
offer its shares to Qualified Plans. Nevertheless, the Trustees intend to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise, and to determine what action, if any, should be taken in
response to such conflicts. If such a conflict were to occur, one or more
separate accounts or Qualified Plans might be required to withdraw their
investments in either or both Funds and shares of another series of the Trust
may be substituted. This might force a Fund to sell securities at
disadvantageous prices.
In the interests of economy and convenience, the Trust does not issue
certificates representing the Funds' shares. Instead, the Transfer Agent
maintains a record of each shareholder's ownership. Although each Fund is
offering only its own shares, since the Funds use this combined Prospectus, it
is possible that one Fund might become liable for a misstatement or omission in
this Prospectus regarding the other Fund. The Trustees have considered this
factor in approving the use of this combined Prospectus.
INVESTMENT PERFORMANCE
Each Fund may illustrate in advertisements and sales literature the average
annual total return of its Adviser Class shares, which is the rate of growth of
the Fund that would be necessary to achieve the ending value of an assumed
initial investment of $1,000 kept in Adviser Class shares of the Fund for the
period specified and is based on the following assumptions: (1) all dividends
and distributions by the Fund are reinvested in Adviser Class shares of the Fund
at net asset value; and (2) all recurring fees are included for applicable
periods.
Each Fund may also illustrate in advertisements the cumulative total return
for several time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for a Fund will assume
the reinvestment of all income dividends and capital gains distributions in
Adviser Class for the indicated periods and will include all recurring fees.
Total returns quoted for the Funds include the effect of deducting each
Fund's expenses but may not include charges and expenses attributable to any
particular Qualified Plan. You should consult with your Plan Fiduciary for
information on relevant charges and expenses. Because these charges and expenses
are excluded from a Fund's quoted performance, the investment return received by
a participant in a Qualified Plan investing in the Fund may be lower than the
quoted performance of the Fund. You should bear in mind the effect of these
charges when comparing a Fund's performance to that of other mutual funds.
The performance of the Adviser Class shares of the Funds will vary from
time to time and past results are not necessarily representative of future
results. Performance is a function of the type and quality of a Fund's portfolio
securities and is affected by operating expenses. Performance information may
not provide a basis for comparison with other investments or other mutual funds
using a different method of calculating performance. An investment in any Fund
involves the risk of loss.
RISK CONSIDERATIONS AND OTHER INVESTMENT PRACTICES AND POLICIES
Fixed-Income Securities. Each Fund may invest up to 10% of its assets in a broad
range of fixed-income securities, including bonds, notes, mortgage-backed and
asset-backed securities, preferred stock and convertible debt securities issued
by U.S. corporations or other entities or by the U.S. Government or its
agencies, authorities, instrumentalities or sponsored enterprises. The interest
payable on so-called fixed- income securities purchased by a Fund is not
necessarily paid at a fixed rate and may be payable on a variable, floating,
contingent, in-kind or deferred basis.
Fixed-income securities are subject to the risk of the issuers' inability
to meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the credit worthiness of the issuer and
general market liquidity (market risk). Generally, when interest rates decline,
the value of fixed-income securities can be expected to rise. Conversely, when
interest rates rise the value of fixed-income securities can be expected to
decline.
Corporate Debt Obligations. Each Fund may invest in corporate debt obligations,
including obligations of industrial, utility and financial issuers. In addition
to obligations of corporations, corporate debt obligations include bank
obligations and zero coupon securities, issued by financial institutions and
corporations.
The debt securities in which the Funds may invest will be rated, at the
time of purchase, within the top two categories of investment grade securities
or, if not rated, determined by the Adviser to be of equivalent credit quality
to securities so rated. The top two categories of investment grade securities
are Aaa and Aa for Moody's and AAA and AA for S&P. A security will be deemed to
have met a rating requirement if it receives the minimum required rating from at
least one nationally recognized statistical rating organization even though it
has been rated below the minimum rating by one or more other rating
organizations, or if unrated by such rating organizations, determined by the
Adviser to be of comparable credit quality. In the event that the rating on a
security held in a Fund's portfolio is downgraded below the minimum rating
requirement by a rating service, such action will be considered by the Adviser
in its evaluation of the overall investment merits of that security, but will
not necessarily result in the sale of the security.
Convertible Securities and Preferred Stocks. Each Fund may invest in debt
securities or preferred stocks that are convertible into or exchangeable for
common stock. Preferred stocks are securities that represent an ownership
interest in a company and provide their owner with claims on the company's
earnings and assets prior to the claims of owners of common stock but after
those of bond owners. Preferred stocks in which the Funds may invest include
convertible, perpetual fixed and adjustable rate (including auction rate)
preferred stocks.
U.S. Government Securities. Each Fund may invest in all types of U.S. Government
securities, including obligations issued or guaranteed by the U.S. Government or
its agencies, authorities, instrumentalities or sponsored enterprises. Some U.S.
Government securities, such as Treasury bills, notes and bonds, which differ
only in their interest rates, maturities and times of issuance, are supported by
the full faith and credit of the United States of America. Others, such as
obligations issued or guaranteed by U.S. Government agencies, authorities,
instrumentalities or sponsored enterprises are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Small
Business Administration), (b) the right of the issuer to borrow from the U.S.
Treasury (such as securities of the Federal Home Loan Banks), (c) the
discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association),
or (d) only the credit of the issuer.
The Funds may invest in U.S. Government securities which are zero coupon or
deferred interest securities. For example, each Fund may invest in separately
traded principal and interest components of securities guaranteed or issued by
the U.S. Government or its agencies, instrumentalities or sponsored enterprises
if such components are traded independently under the Separate Trading of
Registered Interest and Principal of Securities program ("STRIPS") or any
similar program sponsored by the U.S. Government.
Real Estate Investment Trusts. Each Fund may invest in shares of real estate
investment trusts ("REITs"). REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Funds, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code. Any Fund that invests in REITs will
indirectly bear its proportionate share of any expenses paid by such REITs in
addition to the expenses paid by the Fund.
Investing in REITs involves certain risks: equity REITs may be affected by
changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self- liquidation, and the possibilities of failing to
qualify for the exemption from tax for distributed income under the Internal
Revenue Code and failing to maintain their exemptions from the 1940 Act. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.
Investing in REITs may involve risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P 500
Index.
Other Investment Companies. Each Fund is authorized to invest all of its assets
in the securities of a single open-end investment company (a "pooled fund")
having substantially identical investment objectives, policies and restrictions
as such Fund, notwithstanding any other investment restriction or policy. Such a
structure is commonly referred to as "master/feeder." If authorized by the
Trustees and subject to shareholder approval (if then required by applicable
law), a Fund would seek to achieve its investment objective by investing in a
pooled fund which would invest in a portfolio of securities that complies with
the Fund's investment objective, policies and restrictions. The Trustees
currently do not intend to authorize investing in a pooled fund in connection
with a master/feeder structure.
Short-Term Debt Securities. Each Fund may establish and maintain cash balances
for temporary purposes in order to maintain liquidity to meet shareholder
redemptions. Each Fund may also establish and maintain cash balances for
defensive purposes without limitation to hedge against potential stock market
declines. A Fund's cash balances, including uncommitted cash balances, may be
invested in investment grade money market instruments and short-term
interest-bearing securities. These securities consist of U.S. Government
securities, instruments of U.S. banks (including negotiable certificates of
deposit, non-negotiable fixed-time deposits and bankers' acceptances),
repurchase agreements, prime commercial paper of U.S. companies and debt
securities that make periodic interest payments at variable or floating rates.
Writing and Purchasing Put and Call Options on Securities and Securities
Indices. To seek additional income or to minimize anticipated declines in the
value of its securities or to hedge various market risks (such as interest rates
and broad or specific equity or fixed-income market movements), each Fund may
purchase and write (i.e., sell) call and put options on securities and
securities indices. Option transactions in which the Funds may engage may be
traded on securities exchanges or in the over-the-counter market. Each Fund
currently intends to limit its option transactions during the current fiscal
year so that no more than 5% of the Fund's net assets will be at risk as a
result of such transactions. Please see the SAI for a further discussion of
option transactions and associated risks.
Futures Contracts and Options on Futures Contracts. Each Fund may engage in
futures transactions and related options. Future contracts may be based on
various securities (such as U.S. Government securities), securities indices and
other financial instruments and indices. A Fund will engage in futures and
related options transactions only for bona fide hedging and non-hedging purposes
to the extent permitted by regulations of the Commodity Futures Trading
Commission. A Fund will not enter into futures contracts or options thereon for
non-hedging purposes if, immediately thereafter, the aggregate initial margin
and premiums required to establish non-hedging positions in futures contracts
and options on futures would exceed 5% of the Fund's net assets, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. Each
Fund may also enter into closing purchase and sale transactions with respect to
any of futures contracts and related options.
The use of futures contracts entails certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of the Fund's income due to
the use of hedging; possible reduction in value of the both the securities
hedged and the hedging instrument; possible lack of liquidity due to daily
limits on price fluctuations; imperfect correlation between the contract and the
securities being hedged; and potential losses in excess of the amount initially
invested in the futures contracts themselves. If the expectations of the Adviser
regarding movements in securities prices or interest rates are incorrect, the
Fund may have experienced better investments results without hedging. The use of
futures contracts and options on futures contracts requires special skills in
addition to those needed to select portfolio securities. A further discussion of
futures contracts and their associated risks is contained in the SAI.
Forward Commitment, Delayed Delivery and When-Issued Transactions. Each Fund may
purchase securities on a when-issued, delayed delivery, or forward commitment
basis (collectively, "when-issued securities"). When such transactions are
negotiated, the price of such securities is fixed at the time of the commitment,
but delivery and payment for the securities may take place up to 90 days after
the date of the commitment to purchase. The securities so purchased are subject
to market fluctuation, and no interest accrues to the purchaser during this
period. When-issued securities involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date. When a Fund
purchases securities on a when-issued basis, the Fund's custodian will maintain
in a segregated account cash or liquid, high grade debt securities having a
value (determined daily) at least equal to the amount of the Fund's purchase
commitment. A Fund may close out a position in securities purchased on a
when-issued basis prior to the settlement date.
Lending of Portfolio Securities. Each Fund may also seek to increase its income
by lending portfolio securities. Such loans may be made to institutions, such as
certain broker-dealers, and are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities maintained on
a current basis at an amount at least equal to the market value of the
securities loaned. If the Adviser determines to make securities loans, the value
of the securities loaned would not exceed 33 1/3% of the value of the total
assets of the Fund. Although the Funds may loan portfolio securities on a
short-term, medium-term and long-term basis, any such loan may be called at any
time for reacquisition by the respective Fund within the normal settlement
period for the security. A Fund may experience a loss or delay in the recovery
of its securities if the borrowing institution breaches its agreement with the
Fund.
Restricted and Illiquid Securities. Each Fund may invest up to 15% of its total
assets in "restricted securities" (i.e., securities that would be required to be
registered under the Securities Act of 1933, as amended ("1933 Act"), prior to
distribution to the general public) including restricted securities eligible for
resale to "qualified institutional buyers" under Rule 144A under the 1933 Act.
Each Fund may also invest up to 10% of its total assets in illiquid investments,
which includes repurchase agreements maturing in more than seven days,
securities that are not readily marketable, certain over-the-counter options and
restricted securities, unless the Trustees determine, based upon a continuing
review of the trading markets for the specific restricted security, that such
restricted securities are liquid. Each Fund may agree to adhere to more
restrictive limits on investments in restricted and illiquid investments as a
condition of the registration of its shares in various states. The Trustees have
adopted guidelines and delegated to the Adviser the daily function of
determining and monitoring the liquidity of restricted securities. The Trustees,
however, retain sufficient oversight and are ultimately responsible for the
determinations. Since it is not possible to predict with assurance exactly how
this market for restricted securities sold and offered under Rule 144A will
develop, the Trustees carefully monitor each Fund's investments in these
securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of increasing the level of illiquidity in a Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
Repurchase Agreements. Each Fund may enter into repurchase agreements through
which the Fund purchases a security (the "underlying security") from a domestic
securities dealer or bank that is a member of the Federal Reserve System. Under
the agreement, the seller of the repurchase agreement (i.e., the securities
dealer or bank) agrees to repurchase the underlying security at a mutually
agreed upon time and price. In repurchase transactions, the underlying security,
which must be a high-quality debt security, is held by the Fund's custodian
through the federal book-entry system as collateral and marked-to-market on a
daily basis to ensure full collateralization of the repurchase agreement. In the
event of bankruptcy or default of certain sellers of repurchase agreements, a
Fund could experience costs and delays in liquidating the underlying security
held as collateral and might incur a loss if such collateral declines in value
during this period.
<PAGE>
Market Changes. The market value of the Fund's investments, and thus each Fund's
net asset value, will change in response to market conditions affecting the
value of its portfolio securities. When interest rates decline, the value of
fixed rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Portfolio Turnover. Although neither Fund purchases securities with a view to
rapid turnover, there are no limitations on the length of time that securities
must be held by a Fund and a Fund's annual portfolio turnover rate may vary
significantly from year to year. A high rate of portfolio turnover (100% or
more) involves correspondingly greater transaction costs which must be borne by
the applicable Fund and its shareholders and may, under certain circumstances,
make it more difficult for such Fund to qualify as a regulated investment
company under the Internal Revenue Code. The estimated portfolio turnover rates
of the Funds for the current fiscal year are as follows: Large-Cap Fund 40% and
Small-Cap Fund 45%.
Diversification. Each Fund is diversified, as defined in the 1940 Act. As such,
each Fund has a fundamental policy that limits its investments so that, with
respect to 75% of its assets (i) no more than 5% of the Fund's total assets will
be invested in the securities of a single issuer and (ii) each Fund will
purchase no more than 10% of the outstanding voting securities of a single
issuer. These limitations do not apply to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, repurchase agreements
collateralized by U.S. Government securities or investments in other investment
companies. In addition to the diversification requirements under the 1940 Act,
the Funds must satisfy the diversification requirements under the Internal
Revenue Code applicable to regulated investment companies and the additional
diversification requirements applicable under Section 817(h) of the Internal
Revenue Code to the underlying assets of insurance company segregated asset
accounts that fund variable annuity or variable life insurance products. These
requirements place certain limitations on the assets of a Fund that may be
invested in securities of a single issuer or interests in the same commodity.
More specific information on these diversification requirements is contained in
the SAI.
Investment Restrictions. Each Fund is subject to further investment policies and
restrictions that are described in the SAI. As previously described, the
foregoing investment policies, including each Fund's investment objective, are
non-fundamental policies which may be changed by the Trustees without the
approval of shareholders. If there is a change in a Fund's investment objective,
shareholders should consider whether that Fund remains an appropriate investment
in light of their then current financial positions and needs. Each Fund has
adopted certain fundamental policies which may not be changed without the
approval of the applicable Fund's shareholders. Among other fundamental
restrictions listed in the SAI, neither Fund may (1) with respect to 75% of its
total assets, purchase securities of any one issuer (other than U.S. Government
securities and securities of other investment companies) if more than 5% of its
total assets would be invested in such issuer, (2) act as an underwriter except
in certain circumstances, (3) purchase or sell real estate except in certain
circumstances, (4) issue senior securities except as permitted by the 1940 Act
or (5) invest more than 25% of its total assets in the securities of issuers
(including any one foreign government, but excluding the U.S. Government) in any
one industry provided; however, that the Large-Cap Fund and the Small-Cap Fund
may concentrate their assets in securities of issuers in any industry to the
extent that the S&P 500 Index or the Russell 2,000 Index, respectively, are so
concentrated.
If any percentage restriction described above or in the SAI is adhered to
at the time of investment, a subsequent increase or decrease in the percentage
resulting from a change in the value of a Fund's assets will not constitute a
violation of the restriction.
<PAGE>
ADDITIONAL INFORMATION
Reports to Shareholders
As shareholders in the Funds, Qualified Plans will receive an annual report
containing audited financial statements and semi-annual reports. Each Qualified
Plan will also be provided with a printed confirmation for each transaction in
their shareholder account. Participants in Qualified Plans may receive
additional reports from their Plan Fiduciary.
Principal Underwriter
WPG serves as the Funds' principal underwriter.
Transfer Agent and Dividend Disbursing Agent
The Shareholder Services Group, Inc., P.O. Box 9037, Boston, MA 02205
serves as transfer agent and dividend disbursing agent for the Funds. The Funds
may also enter into agreements with and compensate other transfer agents and
financial institutions who process shareholder transactions and maintain
shareholder accounts.
Independent Accountants
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, serves as
the independent accountants for the Trust and will audit each Fund's financial
statements annually.
Legal Counsel
Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust.
--------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus and
the SAI, and, if given or made, such other information or representation must
not be relied upon as having been authorized by the Trust. This Prospectus does
not constitute an offering in any jurisdiction in which such offering may not be
lawfully made.
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
One New York Plaza
New York, New York 10004
CORE LARGE-CAP STOCK FUND ("Large-Cap Fund")
Seeks to exceed the performance of publicly traded large
capitalization stocks in the aggregate, as represented by the Standard
& Poor's Index of 500 Common Stocks (the "S&P 500").
CORE SMALL-CAP STOCK FUND ("Small-Cap Fund")
Seeks to exceed the performance of publicly traded small
capitalization stocks in the aggregate, as represented by the Russell
2000 Index (the "Russell 2000").
PROSPECTUS -- Institutional Class Shares
November 22, 1995
This Prospectus describes Institutional Class shares of two mutual
funds - the Large-Cap Fund and the Small-Cap Fund (together, the "Funds").
Institutional Class shares of the Funds are designed to provide investment
vehicles for variable annuity and variable life insurance contracts
("Variable Contracts") of various insurance companies. Institutional Class
shares of the Funds may also be purchased by "qualified" pension or
retirement plans, including trustees of such plans for certain individuals
funding their individual retirement accounts or other qualified plans. Each
Fund, a series of Tomorrow Funds Retirement Trust (the "Trust"), is a
diversified mutual fund advised by Weiss, Peck & Greer, L.L.C. (the
"Adviser" or "WPG").
Please read this Prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
Funds invest and the services available to shareholders. If applicable,
this Prospectus should be read in conjunction with the separate account
prospectus of the specific insurance product which accompanies this
Prospectus. To learn more about the Funds, you can obtain a copy of the
Statement of Additional Information (the "SAI"), also dated November 22,
1995. The SAI has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated by reference into this Prospectus. A free
copy of the SAI or a copy of the Prospectus describing the Adviser Class
shares of the Funds is available upon request by calling Weiss, Peck &
Greer, L.L.C. at 1-800-223- 3332 (toll free). Institutional Class shares of
a Fund may not be available in your state due to various insurance or other
regulations. Please check with your insurance company or qualified plan
fiduciary for Funds that are available in your state. Inclusion of a Fund
in this Prospectus which is not available in your state is not to be
considered a solicitation. Shareholder inquiries regarding the Funds may be
made in writing to the Trust at the address set forth above.
INSTITUTIONAL CLASS SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
INSTITUTIONAL CLASS SHARES OF THE FUNDS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Each Fund seeks, using quantitative methodology, to provide investors who
participate in qualified retirement plans or who are holders of Variable
Contracts with investment results that exceed the performance of a "Benchmark
Index." The Benchmark for the Large-Cap Fund is the S&P 500 and the Benchmark
for the Small-Cap Fund is the Russell 2000. Each Fund primarily invests its
assets in equity securities of all types which comprise the applicable
Benchmark.
In addition to the Institutional Class shares offered through this
Prospectus, the Funds offer a class of shares known as the Adviser Class through
a separate prospectus. Adviser Class shares of the Funds are subject to
different expenses which result in different performance results. Adviser Class
shares of the Funds are available only to certain eligible investors.
TABLE OF CONTENTS
Page
Expense Information. . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . 5
Eligible Investors . . . . . . . . . . . . . . . . . . . . . 7
Insurance Company Separate Accounts. . . . . . . . . . . . . 7
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . 8
How to Buy Shares. . . . . . . . . . . . . . . . . . . . . . 8
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . 11
How to Exchange Shares . . . . . . . . . . . . . . . . . . . 13
How Each Fund's Share Price is Determined. . . . . . . . . . 14
Management of the Funds. . . . . . . . . . . . . . . . . . . 14
Service Plans. . . . . . . . . . . . . . . . . . . . . . . . 15
Dividends and Taxes. . . . . . . . . . . . . . . . . . . . . 16
Portfolio Brokerage. . . . . . . . . . . . . . . . . . . . . 17
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Performance . . . . . . . . . . . . . . . . . . . 19
Risk Considerations and Other Practices and Policies . . . . 19
Additional Information . . . . . . . . . . . . . . . . . . . 23
<PAGE>
EXPENSE INFORMATION
Operating a mutual fund, such as each Fund, involves a variety of expenses
for portfolio management, shareholder statements, tax reporting and other
services. These costs are paid from a fund's assets and their effect is factored
into any quoted share price or performance information.
Shareholder Transaction Expenses are charges you pay when you buy or sell
Institutional Class shares of a Fund.
Large-Cap Small-Cap
Fund Fund
Maximum Sales Load Imposed on Purchases None None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees None None
Exchange Fees None None
Annual Fund Operating Expenses are paid out of the Funds' assets. Each Fund's
expenses are factored into its share price or dividends and are not charged
directly to shareholder accounts. The following are estimates and are calculated
as a percentage of average net assets.
Large-Cap Small-Cap
Fund Fund
Management Fee (after voluntary waiver) 0.00%* 0.00%*
12b-1 Fee 0.00% 0.00%
Other Expenses (after expense limitation)1 1.50%* 1.50%*
Total Fund Operating Expenses
(after expense limitation) 1.50%* 1.50%*
Example: Hypothetically assume that each Fund's annual return is 5% and that its
operating expenses are exactly as just described. For every $1,000 you invested,
you would have paid the following expenses if you closed your account after the
number or years indicated:
Large-Cap Small-Cap
Fund Fund
After 1 Year $15 $15
After 3 Years $48 $48
The purpose of the above table and Example is to assist you in
understanding the various costs and expenses of the Institutional Class shares
of the Funds that an investor will bear directly or indirectly. See page 15. The
Funds are newly organized and have no operating history. The figures shown in
the table under the caption "Other Expenses" and in the hypothetical example are
based on estimates of the Funds' expenses for the fiscal year ending December
31, 1996. The expenses set forth above do not reflect charges and expenses that
may be applicable to a holder of a Variable Contract or participant in a
qualified plan. Please refer to your separate account prospectus or qualified
plan documents, as the case may be.
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1 Other expenses include service fees payable under a non-Rule 12b-1
service plan for the benefit of qualified pension or retirement plans. See
"Service Plans" on page 15.
* The Adviser has voluntarily agreed to limit temporarily each Fund's
operating expenses (excluding Rule 12b-1 fees applicable to Adviser Class
shares, service fees applicable to Institutional Class shares, any other
class-specific expenses, litigation, indemnification and other extraordinary
expenses) to 1.25% of its average daily net assets. Each Fund will reimburse the
Adviser for fees foregone or other expenses paid by the Adviser pursuant to this
expense limitation in later years in which operating expenses for that Fund are
less than the expense limitations set forth above for any such year. See page
15. In the absence of this agreement, Management Fees would be 0.75% of each
Fund's average daily net assets and Other Expenses and Total Fund Operating
Expenses are estimated to be approximately 3.90% and 4.65%, respectively, of the
average daily net assets attributable to the Institutional Class shares of the
Large-Cap Fund and 4.49% and 5.24%, respectively, of the average daily net
assets attributable to the Institutional Class shares of the Small-Cap Fund.
The Funds' imposition of a service fee may result in a long-term shareholder
indirectly paying more than the economic equivalent of the maximum front-end
sales charge permitted under the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
THE INFORMATION IN THE TABLE AND HYPOTHETICAL EXAMPLE ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
What are the Investment Objectives of the Funds?
Each Fund seeks to provide investors who participate in qualified
retirement plans with investment results that exceed the performance of a
"Benchmark Index." The Benchmark for the Large-Cap Fund is the S&P 500 and the
Benchmark for the Small-Cap Fund is the Russell 2000.
LARGE-CAP FUND seeks to exceed the performance of publicly traded large
capitalization stocks in the aggregate, as represented by the S&P
500. The S&P 500 is an unmanaged index of 500 common stocks. The
S&P 500 represents approximately 70% of the total domestic U.S.
equity market capitalization.
SMALL-CAP FUND seeks to exceed the performance of publicly traded small
capitalization stocks in the aggregate, as represented by the
Russell 2000. The Russell 2000 is an unmanaged index of 2000
common stocks of small market capitalization companies.
How will the Funds invest their assets?
To seek to achieve its objective, each Fund, under normal market
conditions, invests in a portfolio of securities that is considered more
"efficient" than the applicable Benchmark. An efficient portfolio is one that
has the maximum expected return for any level of risk. The efficient mix of
securities is established mathematically, taking into account the expected
return and volatility of returns for each security in a given universe, as well
as the historical price relationships between the different securities in the
universe.
To implement this strategy with respect to the Funds, the Adviser compiles
the historical price data of all securities which comprise the S&P 500 in the
case of the Large-Cap Fund and the Russell 2000 in the case of the Small-Cap
Fund. The Adviser may eliminate a security from consideration if it considers
the security to have an inadequate or misleading price history. Using this
historical price data, the Adviser constructs and analyzes a complete matrix of
all the possible price relationships between the securities in the applicable
Benchmark.
Using a sophisticated software program that incorporates risk reduction
techniques developed by investment professionals of the Adviser, the Adviser
constructs a number of portfolios with respect to each Fund, which portfolios
are believed to have optimized risk/reward ratios. From these alternative
portfolios, the Adviser selects the combination of securities, together with
their appropriate weightings, that the Adviser believes will comprise the
optimal portfolio for each Fund. The optimal portfolio for a Fund is designed to
have a return greater than, but highly correlated with, the return of its
Benchmark. Please see "Quantitative Methodology" in the SAI for a further
description of how the Adviser constructs and maintains an optimal portfolio for
each Fund. No quantitative methodology or technical analysis, including the
Adviser's, has ever been objectively proven to provide enhanced investment
return and reduced investment risk in actual long-term portfolio results.
Under normal circumstances, at least 65% of Large-Cap Fund's and Small-Cap
Fund's total assets are invested in equity securities of large market
capitalization companies and small market capitalization companies,
respectively. For purposes of the Funds' investments, large market
capitalization companies are those ranked, according to market capitalization,
within the top 500 domestic companies that are listed on a U.S. securities
exchange or traded over-the-counter and small market capitalization companies
are those not ranked, according to market capitalization, within the top 1,000
domestic companies that are listed on a U.S. securities exchange or traded
over-the-counter, both determined at the time of the Funds' investments.
Companies whose capitalization falls outside these ranges after purchase
continue to be considered large or small market capitalized, as the case may be,
for purposes of this policy.
While each Fund will generally be substantially fully invested in equity
securities that comprise the applicable Benchmark, each Fund may invest up to
10% of its total assets in fixed-income securities that are rated at least AA by
Standard & Poor's Ratings Group ("S&P") or Aa by Moody's Investors Service, Inc.
("Moody's") or their respective equivalents or, if not rated, determined to be
of equivalent credit quality to securities so rated. For more information
regarding the particular types of fixed-income securities in which the Funds may
invest, see "Risk Considerations and Other Investment Practices and Policies" on
page 19 of this Prospectus.
Each Fund may, but is not required to, utilize various investment
strategies and techniques to hedge various market risks (such as broad or
specific equity or fixed-income market movements and interest rate risk) or to
enhance potential gain. The investment strategies and techniques used by the
Funds and the instruments in which they invest may change over time as new
techniques, strategies and instruments are developed or regulatory changes
occur. In the course of pursuing their investment objectives, the Funds may: (i)
purchase and write (sell) put and call options on securities and indices; (ii)
purchase and sell financial futures contracts and options thereon; (iii) lend
portfolio securities; (iv) enter into repurchase agreements; (v) purchase
securities on a forward commitment, when-issued or delayed delivery basis; (vi)
invest in restricted and illiquid securities and (vii) invest in shares of real
estate investment trusts ("REITs"). For further information concerning the
securities in which the Funds may invest and the investment strategies and
techniques they may employ, see "Risk Considerations and Other Investment
Practices and Policies" beginning on page 19 of this Prospectus.
The investment policies, including each Fund's investment objective,
described in this Prospectus are non-fundamental policies which may be changed
by the Trustees without the approval of shareholders. If there is a change in
either Fund's investment objective, shareholders should consider whether that
Fund remains an appropriate investment in light of their then current financial
positions and needs. Each Fund has adopted certain fundamental policies which
may not be changed without the approval of the applicable Fund's shareholders.
See "Investment Restrictions" on page 23 of this Prospectus.
Risk Factors
There is no assurance that either Fund will achieve its investment
objective. Because each Fund owns different types of investments, its
performance is affected by a variety of factors. The value of a Fund's
investments and the income they generate (and, therefore, its net asset value)
will vary from day to day, and generally reflect interest rates, market
conditions, and other company, political and economic news. When you sell your
shares, they may be worth more or less than what you paid for them.
The Small-Cap Fund will invest in equity securities of small capitalization
companies included within the Russell 2000 and the Large-Cap Fund may invest in
such securities to the extent that they are included in the S&P 500. Although
investments in securities of small capitalization companies may present greater
opportunities for growth, they also involve greater risks than are customarily
associated with investments in larger, more mature, better known companies.
Small capitalization securities may be subject to more volatile market movements
than securities of larger capitalization securities, such as those included in
the S&P 500. Smaller companies may have limited product lines, markets or
financial resources, and they may depend upon a limited or less experienced
management group. Small capitalization securities may be traded only on the
over-the-counter market or on a regional securities exchange and may not be
traded daily or in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Small-Cap Fund of portfolio
securities to meet redemptions or otherwise may require the Fund to sell
securities at a discount from market prices, over a longer period of time or
during periods when disposition is not desirable.
In general, the value of a Fund's investment in fixed-income securities
rises when interest rates fall, and vice versa. Although fixed-income securities
have varying degrees of quality and varying levels of sensitivity to changes in
interest rates, longer-term fixed-income securities are generally more sensitive
to interest changes than shorter-term fixed-income securities. Investing in
REITs involves risks in addition to those associated with fixed-income
securities. REITs may be affected by changes in the value of the underlying
property and by the quality of any credit extended, are dependent upon
management skills, are not diversified, and are subject to heavy cash flow
dependency. The risks associated with the Funds' transactions in options,
futures and other types of derivative securities including mortgage-backed and
asset-backed securities may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk.
For a further discussion of the risks associated with an investment in the
Funds, please see "Risk Considerations and Other Investment Practices and
Policies" beginning on page 19 of this Prospectus.
ELIGIBLE INVESTORS
Institutional Class shares of the Funds are designed to provide investment
vehicles for variable annuity and variable life insurance contracts ("Variable
Contracts") of various insurance companies' separate accounts ("Separate
Accounts"). Institutional Class shares of the Funds may also be purchased for
the account of qualified pension or retirement plans ("Qualified Plans").
Qualified plans include: qualified plans and trusts under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), annuity
plans under Code Section 403(a), Code Section 403(b) annuities are custodial
accounts, certain governmental plans, simplified employee pension plans,
deferred compensation arrangements under Code Section 457(b) and certain
Individual Retirement Accounts ("IRAs"). IRAs that may invest in Institutional
Class shares of the Funds are limited to those established for the benefit of:
(a) current and former Trustees and officers of the Trust; (b) current and
former principals and employees of the Adviser; (c) directors, officers and
employees of companies and their affiliates that have an advisory relationship
with the Adviser; (d) directors, officers and employees of companies and their
affiliates serving in an advisory capacity to sponsors of Qualified Plans and
(e) members of the immediate families of any of the foregoing persons.
Should you have any questions as to whether you are an eligible investor in
Institutional Class shares of the Funds, please call WPG at 1-800-223-3332.
INSURANCE COMPANY SEPARATE ACCOUNTS
Because holders of Variable Contracts may not purchase or redeem
Institutional Class shares of the Funds directly, you should read the prospectus
of your insurance company Separate Account to obtain instructions for purchasing
a Variable Contract. Variable Contracts may or may not make investments in both
the Funds described in this Prospectus.
<PAGE>
Separate Accounts purchase and redeem Institutional Class shares of the
Funds at their respective net asset values. Redemptions will be effected by
Separate Accounts to meet obligations under Variable Contracts. Insurance
companies who wish to designate Institutional Class shares of the Funds as
investment vehicles for their Separate Accounts should contact WPG at
1-800-223-3332.
QUALIFIED PLANS
The following information describes how participants in Qualified Plans may
arrange to buy, sell (redeem) and exchange Institutional Class shares of the
Funds for the account of their Qualified Plans.
A. HOW TO BUY SHARES
Through whom may Institutional Class shares of the Funds be purchased for
Qualified Plans?
Because you may not purchase Institutional Class shares of the Funds
directly, all orders to purchase Institutional Class shares must be made through
the trustee, custodian, plan administrator or other fiduciary (each a "Plan
Fiduciary") of your Qualified Plan. If the monies you wish to invest in the
Funds are maintained in a Qualified Plan sponsored by your employer, please
consult with your employer for information about how to purchase shares of the
Funds. If the monies you wish to invest in the Funds are maintained by your Plan
Fiduciary in an IRA or other self-administered Qualified Plan, please consult
with your Plan Fiduciary for information about how to purchase shares of the
Funds.
You may establish an IRA with the Trust's custodian, Boston Safe Deposit
and Trust Company ("Boston Safe"), through which you may invest in the Funds.
Additionally, you may invest in the Funds by "rolling over" an existing IRA into
an IRA maintained by Boston Safe. Please call WPG at 1-800-223- 3332 for
information regarding how to establish an IRA with Boston Safe.
What is the minimum investment by Qualified Plans in Institutional Class shares
of the Funds?
Plan Fiduciaries may invest in the Funds for the account of Qualified Plans
with as little as $250. There is no minimum amount required for subsequent
investments.
At what price are Institutional Class shares of the Funds offered?
Institutional Class shares of the Funds are sold at the net asset value
(NAV) of such shares next determined after The Shareholder Services Group, Inc.,
the Funds' "Transfer Agent," receives and accepts a purchase order. Purchase
orders received and accepted by the Transfer Agent by the close of regular
trading on the New York Stock Exchange on any Business Day (currently 4:00 p.m.
New York City time) will be effected as of the close of regular trading on the
New York Stock Exchange on that day. Otherwise, orders will be effected at the
NAV determined on the next Business Day.
How may Plan Fiduciaries invest in the Funds for the account of their Qualified
Plans?
In order to make an initial investment in a Fund for a Qualified Plan, Plan
Fiduciaries must open an account with the Funds by furnishing to WPG the
information in the applicable Account Information Form attached to this
Prospectus. Please note that there is an Account Information Form applicable to
IRAs and an Account Information Form applicable to other Qualified Plans and to
insurance company separate accounts. Shares of the Funds may be purchased by
Plan Fiduciaries for the account of Qualified Plans on any day during which the
New York Stock Exchange is open for business (a "Business Day").
Plan Fiduciaries: To Make an Initial Investment for a Qualified Plan
By Mail: 1. Make a check payable to the Fund in which you wish to
invest.
2. Mail the completed Account Information Form and check to
WPG.
By Wire: 1. Call 1-800-223-3332 to open an account and to arrange for a
wire transaction.
2. Instruct your bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
Bank Routing No. 011-00123-4
Specify:
Name of Fund
Institutional Class shares
Account Number
Name(s) in which account is to be registered
3. Mail the completed Account Information Form to WPG.
Plan Fiduciaries: To Make Further Investments for a Qualified Plan
Automatically: 1. Use the Automatic Investment Plan. Sign up for this service
when opening an account, or call 1-800-223-3332 to receive
a Servicing Form to add this privilege. Designate the bank
or credit union account from which funds will be drawn.
2. The amount to be invested will automatically be withdrawn
from the designated bank or credit union account on or about
the first Business Day of the month or quarter selected.
By Telephone: 1. Sign up for this service when opening an account,
or call 1-800-223-3332 to add it. Designate the bank or
credit union account from which funds will be drawn. Note
that in order to invest by phone, the account must be in a
bank or credit union that is a member of the Automated
Clearing House system (ACH).
2. Once this service has been selected, Plan Fiduciaries may
purchase additional shares for the account of their
Qualified Plans by calling the Funds' Transfer Agent, The
Shareholder Services Group, Inc., toll-free at
1-800-223-3332.
3. Give the Transfer Agent representative the name(s) in which
the account is registered, the Fund name, Institutional
Class shares, the account number, and the amount of the
investment.
4. An investment will normally be credited to the Qualified
Plan account upon receipt of payment.
During periods of extreme economic conditions or market
changes, requests by telephone may be difficult to make due to
heavy volume. During such times please consider placing purchase
orders by mail.
By Mail: 1. Include a note with the investment specifying:
Name of the Fund
Institutional Class shares
Account Number
Name(s) in which account is registered
2. Make the check payable to the Fund in which you wish to or
are instructed to invest. Indicate the account number on
the check.
3. Mail the account information and check to the Transfer
Agent at the address indicated on the back cover of this
Prospectus.
By Wire: Instruct the bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
ABA Routing No. 011-00123-4
For credit to:
Name of Fund
Institutional Class shares
Your Account Number
Name(s) in which account is registered
Other Purchase Information. Each Fund reserves the right to reject any
purchase for any reason and to cancel any purchase due to nonpayment. As a
condition of this offering, if your purchase is cancelled due to nonpayment or
because your check does not clear (and, therefore, your account is required to
be redeemed), you will be responsible for any loss incurred by the Fund(s)
affected. All purchases must be made in U.S. dollars. Checks drawn on foreign
banks will delay purchases until U.S. funds are received and a collection charge
may be imposed. In such cases, Institutional Class shares of the Funds are
priced at the net asset value computed after the Transfer Agent receives
notification of the dollar equivalent from the Funds' custodian bank. Wire
purchases normally take two or more hours to complete and, to be accepted the
same day, must be received by 4:00 p.m. New York City time. Your bank may charge
a fee to wire funds. Telephone transactions are recorded to verify information.
Acquiring Shares of the Funds in Exchange for Securities. Shares of the
Funds may be purchased in whole or in part by delivering to the Funds'
custodian, Boston Safe, securities acceptable to WPG. Please see "In-Kind
Purchases" in the SAI for the terms and conditions of these transactions.
<PAGE>
B. HOW TO SELL SHARES
How may Institutional Class shares of the Funds be redeemed for Qualified Plans?
Subject to the restrictions (if any) imposed by your Qualified Plan, you
can arrange to sell or "redeem" some or all of your shares on any Business Day.
All orders to redeem Institutional Class shares of the Funds held for the
account of Qualified Plans must be made through your Plan Fiduciary.
If the Institutional Class shares you wish to redeem are held for the account
of a Qualified Plan sponsored by your employer, please consult with your
employer for information about how to redeem shares of the Funds. If the
Institutional Class shares you wish to redeem are maintained by your Plan
Fiduciary in an IRA or other self-administered Qualified Plan, please consult
with your Plan Fiduciary for information about how to redeem shares of the
Funds. Please note that shares may not be redeemed by telephone or telegram,
except for exchanges which can be requested by Plan Fiduciaries by telephone or
in writing.
At what price are Institutional Class shares of the Funds redeemed?
Institutional Class shares of the Funds will be redeemed at the share price
(NAV) of such shares next calculated after a redemption order is received in
good order by the Transfer Agent. Once shares are redeemed, sale proceeds
generally are available the next Business Day, but may take up to three Business
Days. For your protection, redemption proceeds will not be released until a
shareholder's account has been opened and payment for the shares to be redeemed
have been received by the Fund, which may take up to fifteen days in the case of
payments made by check.
The net asset value per share received upon redemption or repurchase may be
more or less than the original cost of the shares, depending on the market value
of the portfolio at the time of redemption or repurchase.
Plan Fiduciaries: To Redeem Shares for a Qualified Plan
By Mail: 1. In a written request specify:
Name of the Fund
Institutional Class shares
Account Number
Name(s) in which account is registered
The dollar amount or the number of shares to be redeemed
2. Mail the redemption request to the Transfer Agent at the
address indicated on the back cover of this Prospectus.
General Redemption Information. Redemption requests must be received by the
Transfer Agent before the close of business on the New York Stock Exchange to
receive that day's share price (NAV). A written redemption request must be
signed by all registered shareholders for the account using the exact names in
which the account is registered or accompanied by executed power(s) of attorney.
Unless otherwise specified, redemption proceeds will be sent by check to the
record address. Plan Fiduciaries may elect to have redemption proceeds wired to
a checking or bank account if wire redemptions were authorized when the account
was opened or have subsequently been authorized.
Redemptions may be suspended or postponed during any period in which any of
the following conditions exist: the New York Stock Exchange is closed or trading
on the Exchange is restricted; an emergency exists during which it is not
reasonably practicable for a Fund to dispose of its portfolio securities or to
fairly determine its net asset value; or the SEC, by order, so permits.
Certain requests must include a signature guarantee. A signature guarantee
is a widely accepted way to protect you and the Funds from fraud by verifying
the signature on your request. A signature guarantee is required if (a) the
redemption proceeds are to be sent to an address other than the address of
record or to a person other than the registered shareholder(s) for the account,
(b) the redemption request is made for the account of an IRA or (c) the net
asset value of the shares redeemed is $100,000 or more (this requirement may be
waived by the Adviser in its discretion).
The following institutions may provide a signature guarantee, provided that
the institution meets credit standards established by the Transfer Agent: (i) a
bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency. Signature guarantees may not be provided by a notary public.
Small Accounts. In order to reduce the expense of maintaining numerous
small accounts, the Trust reserves the right to redeem any shareholder account
(other than an IRA) if, as a result of redemptions, the value of the account is
less than $100. Shareholders will be allowed at least 60 days, after written
notice by the Trust, to make an additional investment to bring the account value
up to at least $100 before the redemption is processed.
Change in Tax Status. Insurance companies and Plan Fiduciaries are required
to notify the Trust through the Transfer Agent if the tax status of their
Separate Account or Qualified Plan is revoked or challenged by the Internal
Revenue Service. The Trust reserves the right to redeem any fund account of any
shareholder whose qualification as a diversified segregated asset account or a
qualified pension or retirement plan satisfying the requirements of Treasury
Regulation section 1.817-5 is revoked or challenged. The Trust will not treat
an investor as a qualified pension or retirement plan for this purpose unless
the investor is among the categories specifically enumerated in Revenue Ruling
94-62, 1994-2 C.B. 164.
C. HOW TO EXCHANGE SHARES
May Institutional Class shares be exchanged for shares of other mutual funds?
Subject to the terms of your Qualified Plan, Institutional Class shares of
a Fund may be exchanged for Institutional Class shares of the other Fund or for
Institutional Class shares of Tomorrow Long-Term Retirement Fund, Tomorrow
Medium-Term Retirement Fund, Tomorrow Short-Term Retirement Fund and Tomorrow
Post-Retirement Fund (collectively, the Tomorrow Funds"). To obtain a current
prospectus for the Institutional Class shares of the Tomorrow Funds, please call
1-800-223- 3332. Please consider the differences in investment objectives and
expenses of a Tomorrow Fund as described in its prospectus before making an
exchange.
Do sales charges apply to exchanges?
As is the case with initial purchases of Institutional Class shares of the
Funds, exchanges of Institutional Class shares are made without the imposition
of a sales charge.
How may I make an exchange for my Qualified Plan?
Because shares of the Funds are held for the account of Qualified Plans,
all orders to exchange shares must be made through your Plan Fiduciary. If the
Institutional Class shares you wish to exchange are held for the account of a
Qualified Plan sponsored by your employer, please consult with your employer for
information about how to exchange shares of the Funds. If the Institutional
Class shares you wish to exchange are maintained by your Plan Fiduciary in an
IRA or other self-administered Qualified Plan, please consult with your Plan
Fiduciary for information about how to exchange shares of the Funds.
Plan Fiduciaries: To Exchange Shares
By Phone: 1. Use the telephone exchange privilege. The telephone
exchange privilege is not available automatically. It is
necessary to sign up for this privilege on the Account
Application Form when opening an account, or call 1-800-223-
3332 to receive the Services Form to add it.
2. Once this privilege has been selected, simply call the
Transfer Agent toll free at 1-800-223-3332 between 9:00 a.m.
and 4:00 p.m. New York City time on any Business Day.
3. Give the following information to the Transfer Agent
representative:
Name of current Fund
Institutional Class shares
Name of the Tomorrow Fund into which the current Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
By Mail: 1. Mail a written request to the Transfer Agent at the
address listed on the back cover of this Prospectus
specifying:
Name of current Fund
Institutional Class shares
Name of the Tomorrow Fund into which the current Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be exchanged
2. The exchange request must be signed by all registered
holders for the account using the exact names in which the
account is registered or accompanied by executed power(s)
of attorney.
General Exchange Information. Shares exchanged are valued at their
respective net asset values next determined after the exchange request is
received by the Transfer Agent. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be registered for sale in your state; (ii) exchanges may be made only between
funds that are registered in the same name, address and, if applicable, taxpayer
identification number; and (iii) the minimum amount for exchanging from one fund
into another fund is $100 or the total value of your fund account (if less than
$100) and must satisfy the minimum account size of the fund to be exchanged
into.
To confirm that telephone exchange requests are genuine, the Trust employs
reasonable procedures, such as providing written confirmation of telephone
exchange transactions and tape recording of telephone exchange requests. If the
Trust does not employ such reasonable procedures, it may be liable for any loss
incurred by a shareholder due to a fraudulent or unauthorized telephone exchange
request. Otherwise, neither the Trust nor its agents will be liable for any loss
incurred by a shareholder as the result of following instructions communicated
by telephone that they reasonably believed to be genuine. The Trust reserves the
right to refuse any request made by telephone and may limit the dollar amount
involved or the number of telephone requests made by any shareholder. During
periods of extreme economic conditions or market changes, requests by telephone
may be difficult to make due to heavy volume. During such times please consider
placing your order by mail.
To prevent abuse of the exchange privilege to the detriment of other
shareholders, the Trust limits the number of exchanges and purchase/redemption
transactions by any one shareholder account (or group of accounts under common
management) to a total of six transactions per year. This policy applies to
exchanges into or out of any Tomorrow Fund and any pair of transactions
involving a purchase of shares of any Tomorrow Fund followed by a redemption of
an offsetting or substantially equivalent dollar amount of shares of that same
Tomorrow Fund. If a Plan Fiduciary violates this policy, his/her future
purchases of, or exchanges into, the Tomorrow Funds may be permanently refused.
This policy does not prohibit redemptions of shares of any series. This policy
may be waived by WPG in its discretion. Further, the exchange privilege may be
changed or discontinued and may be subject to additional limitations upon sixty
(60) days' notice to shareholders, including certain restrictions on purchases
by market-timer accounts.
HOW EACH FUND'S SHARE PRICE IS DETERMINED
The net asset value per share of a class of a Fund is determined by
dividing the value of its assets, less liabilities attributable to that class,
by the number of shares of that class outstanding. The net asset value is
normally calculated as of the close of regular trading of the New York Stock
Exchange (currently 4:00 p.m. New York City time) on each Business Day.
Different classes of shares of the Funds may have different net asset values.
Portfolio securities (other than certain money market instruments) are
valued primarily based on market quotations or, if market quotations are not
available, at fair market value as determined in good faith by a valuation
committee appointed by the Trustees. In accordance with procedures adopted by
the Trustees, each Fund may use pricing services to value fixed-income
investments. Money market instruments with a remaining maturity of 60 days or
less at the time of purchase are generally valued at amortized cost when the
Trustees believe that amortized cost approximates market value.
MANAGEMENT OF THE FUNDS
Trustees
Each Fund is a separate investment series of Tomorrow Funds Retirement
Trust, a Delaware business trust (the "Trust"). Under the terms of the Agreement
and Declaration of Trust establishing the Trust, the Trustees of the Trust are
ultimately responsible for the management of its business and affairs.
Investment Adviser
Weiss, Peck & Greer, L.L.C., One New York Plaza, New York, New York 10004
serves as the investment adviser to each Fund pursuant to an investment advisory
agreement. The Adviser, a privately held limited liability company with over 20
years' experience as an investment adviser to individual and institutional
clients, has, together with its affiliates, approximately $13 billion under
management. Subject to the supervision and direction of the Trustees, the
Adviser manages each Fund's portfolio in accordance with its stated investment
objective and policies, recommends investment decisions for the Fund and places
orders to purchase and sell securities on behalf of the Fund. For these
services, each Fund pays the Adviser a monthly fee equal on an annual basis to
0.75% of its average daily net assets. The advisory fee paid by the Funds, which
is greater than that paid by most funds, reflects the added complexity and
additional expenses associated with these Funds' investment strategies.
Joseph N. Pappo has been primarily responsible for the day-to-day
management of each Fund's portfolio since the Funds' inception. Mr. Pappo has
been a principal of the Adviser since 1994. Prior to joining WPG, Mr. Pappo was
the founder and president of Eden Financial Group which was acquired by WPG in
1991.
The Adviser has voluntarily agreed to limit temporarily each Fund's
operating expenses (excluding Rule 12b-1 fees applicable to the Adviser Class
shares, service fees applicable to the Institutional Class shares, any other
class-specific expenses, litigation, indemnification and other extraordinary
expenses) to 1.25% of its average daily net assets. The Adviser may discontinue
or modify such limitation in the future at its discretion, although it has no
current intention to do so.
From time to time, the Adviser may compensate insurance companies or their
affiliates who hold Institutional Class shares of the Tomorrow Funds for the
account of their customers for providing a variety of record-keeping,
administrative, marketing and/or shareholder support services. This
compensation, which may be paid at a rate up to 0.25% of the net asset value of
Institutional Class shares held for the account of those customers depending on
the nature, extent and quality of the services provided, will be paid from the
Adviser's own resources and not from the assets of any Tomorrow Fund.
Administrator
Pursuant to an administration agreement with each Fund, WPG provides
personnel for supervisory, administrative, accounting, shareholder services and
clerical functions; oversees the performance of administrative and professional
services to the Funds by others; provides office facilities, furnishings and
office equipment; and prepares, but does not pay for, reports to shareholders,
the SEC and other regulatory authorities. As compensation for the services
rendered to the Funds as Administrator, WPG is entitled to a fee, computed daily
and payable monthly, at an annual rate equal to 0.09% of each Fund's average
daily net assets. The administrative fee for each Fund is reviewed and approved
annually by the Trustees.
Expenses
Each Fund bears all expenses of its operation, subject to the expense
limitation agreement described above. In particular, each Fund pays: investment
advisory fees; administration fees; service fees with respect to the
Institutional Class shares; distribution and service fees with respect to the
Adviser Class shares; custodian and transfer agent expenses; legal and
accounting fees and expenses; expenses of preparing, printing, and distributing
Prospectuses and SAIs to existing shareholders, and shareholder communications
and reports; expenses of computing its net asset value per share; federal and
state registration fees and expenses with respect to its shares; proxy and
shareholder meeting expenses; expenses of issuing and redeeming its shares;
independent trustee fees and expenses; expenses of bond, liability, and other
insurance coverage; brokerage commissions; taxes; trade association fees; and
certain non-recurring and extraordinary expenses. In addition, the expense of
organizing the Funds and initially registering and qualifying their shares under
federal and state securities laws are being charged to the Funds' operations, as
an expense, over a period not to exceed 60 months from the Funds' inception
date.
Each Fund will reimburse the Adviser for fees foregone or other expenses
paid by the Adviser pursuant to this expense limitation in later years in which
operating expenses for that Fund are less than the expense limitations set forth
above for any such year. No interest, carrying or finance charge will be paid by
a Fund with respect to the amounts representing fees foregone or other expenses
paid. In addition, no Fund will pay any unreimbursed amounts to the Adviser upon
termination of its investment advisory agreement.
SERVICE PLANS
The Trust, on behalf of each Fund, has adopted a service plan pursuant to
which each Fund pays service fees at an aggregate annual rate of up to 0.25% of
a Fund's average daily net assets attributable to Institutional Class shares
(the "Service Plans"). The service fee is payable for the benefit of the
Qualified Plan and is intended to be compensation to Plan Fiduciaries for
providing personal services and/or account maintenance services to participants
in Qualified Plans who beneficially own Institutional Class shares of the Funds.
The Trust, on behalf of the applicable Fund, will make monthly payments to Plan
Fiduciaries, for the benefit of their Qualified Plans, based on the average net
asset value of the Institutional Class shares which are attributable to the
Qualified Plan
DIVIDENDS AND TAXES
Each Fund is treated as a separate entity for federal income tax purposes
and intends to elect to be treated as a "regulated investment company" under the
Internal Revenue Code and to qualify for such treatment for each taxable year.
To qualify as such, each Fund must satisfy certain requirements relating to the
sources of its income, diversification of its assets and distribution of its
income to shareholders. Each Fund also intends to satisfy certain additional
diversification requirements applicable under Section 817(h) of the Internal
Revenue Code in order to permit investments in Institutional Class shares of the
Funds by insurance company Separate Accounts that fund Variable Contracts, which
are subject to such requirements. It is possible that in order to satisfy the
applicable diversification requirements, investment decisions may be made which
would affect either positively or negatively the investment performance of a
Fund. As a regulated investment company, each Fund will not be subject to
federal income tax on any net investment income and net realized capital gains
that are distributed to its shareholders in accordance with certain timing
requirements of the Internal Revenue Code.
Participants in Qualified Plans may be eligible for tax deferral on
distributions a Qualified Plan receives from a Fund and gains that arise from a
Qualified Plan's dispositions of Fund shares. This Prospectus does not describe
in any respect such tax treatment. Please consult your Plan Fiduciary or tax
adviser.
Under current tax law, dividends or capital gain distributions from a Fund
are not currently taxable if properly allocable to reserves for a Variable
Contract. For a discussion of the tax status of a Variable Contract, including
the tax consequences of withdrawals or other payments, refer to the prospectus
of the insurance company Separate Account.
It is suggested that holders of Variable Contracts and participants in
Qualified Plans keep all statements received from their insurance company or
Qualified Plan to assist in personal recordkeeping.
Each Fund intends to distribute all of its net investment income and net
capital gains each year. Income dividends, if any, will be declared and
distributed at least annually by each Fund. Net short-term and long-term capital
gains of each Fund, if any, realized during the taxable year will be distributed
no less frequently then annually. Dividends derived from each Fund's net
investment income (including dividends, interest and recognized market discount
income), and net short-term capital gains received by a Fund are treated as
ordinary income under the Internal Revenue Code. Distributions from each Fund's
net long-term capital gains are treated as long-term capital gains under the
Internal Revenue Code, regardless of how long shares of the Funds have been
held.
Reinvestment of Income Dividends and Capital Gains Distributions
Unless a Plan Fiduciary elects otherwise, as permitted in the Account
Information Form, income dividends and capital gains distributions with respect
to a Fund will be reinvested in additional Institutional Class shares of that
Fund and will be credited to the Qualified Plan's account with that Fund at the
net asset value per share next determined as of the ex-dividend date. Both
income dividends and capital gains distributions are paid by the Fund on a per
share basis. As a result, at the time of such payment, the net asset value per
share of a Fund will be reduced by the amount of such payment. Although income
dividends and capital gains distributions by the Funds may not give rise to
current tax liability for the categories of shareholders permitted to invest in
the Funds, participants in Qualified Plans may be subject to tax on all or a
portion of their distributions from such Plans or upon the failure of such Plans
to maintain their qualified status under complex Internal Revenue Code
provisions concerning which a tax adviser should be consulted. Withdrawals or
other payments to Variable Contract holders from insurance company Separate
Accounts may also be taxable. Participants in Qualified Plans who wish to change
the manner in which income dividends and capital gains distributions are
received by their Qualified Plans should contact their Plan Fiduciaries. Written
notification of such change must be received by the Transfer Agent at least ten
days before the next scheduled distribution.
PORTFOLIO BROKERAGE
In effecting securities transactions, the Funds generally seek to obtain
the best price and execution of orders under the circumstances. Commission rates
are a component of price and are considered along with other factors, including
the ability of the broker to effect the transaction, and the broker's
facilities, reliability and financial responsibility. Subject to the foregoing,
the Funds intend to utilize WPG as their primary broker in connection with the
purchase and sale of exchange-traded portfolio securities. As the Funds' primary
broker, WPG will receive brokerage commissions from the Funds, limited to the
"usual and customary broker's commission" specified by the 1940 Act. The Funds
intend to continue to use WPG as their primary broker on exchange-traded
securities, provided WPG is able to provide execution at least as favorable as
that provided by other qualified brokers.
The Trustees of the Trust have developed procedures to limit the
commissions received by WPG to the "usual and customary broker's commission"
standard specified by the 1940 Act. On a quarterly basis, the Trustees review
the securities transactions of each Fund effected by WPG to assure their
compliance with such procedures.
The Funds will also execute their portfolio transactions through qualified
brokers other than WPG. In selecting such other brokers, WPG considers the
quality and reliability of brokerage services, including execution capability
and performance and financial responsibility, and may consider the research and
other investment information provided by such brokers. Accordingly, the
commissions paid to any such broker may be greater than the amount another firm
might charge, provided WPG determines in good faith that the amount of such
commission is reasonable in relation to the value of the brokerage services and
research information provided by such broker. Such information may be used by
WPG (and its affiliates) in managing all of its accounts and not all of such
information may be used by WPG in managing the Funds. In selecting other brokers
for a Fund, WPG may also consider the sale of shares of the Fund effected
through such other brokers as a factor in its selection, provided that Fund
obtains the best price and execution of orders under the circumstances.
Money market securities and other fixed-income securities, as well as
certain equity securities, in which the Funds invest are traded primarily in the
over-the-counter ("OTC") market. For transactions effected in the OTC market,
financial intermediaries (i.e., dealers) act as principal rather than as agent
and receive a "spread" rather than a commission. The Funds intend to deal with
the primary market-makers with respect to OTC securities, unless a more
favorable result is obtainable elsewhere.
THE TRUST
Tomorrow Funds Retirement Trust is an open-end management investment
company (commonly referred to as a mutual fund) organized as a Delaware business
trust under an Agreement and Declaration of Trust dated June 21, 1995 (the
"Declaration"). The Trust has authorized an unlimited number of shares of
beneficial interest.
As of the date of this Prospectus, the shares of the Trust are divided into
six series: Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement
Fund, Tomorrow Short-Term Retirement Fund, Tomorrow Post-Retirement Fund, Core
Large-Cap Stock Fund and Core Small-Cap Stock Fund. The Trust reserves the right
to create and issue additional series of shares. No series is entitled to share
in the assets of any other series or is liable for the expenses or liabilities
of any other series. Shares of a particular series vote separately on matters
affecting only that series, including the approval of an investment advisory
agreement and changes in fundamental policies or restrictions of a particular
series.
As of the date of this Prospectus, the Trustees have authorized the
issuance of two classes of shares for each series, designated Adviser Class and
Institutional Class. The shares of each Class represent an interest in the same
portfolio of investments of that series. Each Class has equal rights as to
voting, redemption, dividends and liquidation, except that each Class bears
different distribution fees and may bear other expenses properly attributable to
the particular Class. Adviser Class shareholders of a Fund have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted by holders of
Adviser Class shares of that Fund. The Trustees have the authority, without
further shareholder approval, to classify and reclassify the shares of a series
of the Trust into additional classes. In addition, subject to Trustee approval
and shareholder approval (if then required), each Fund may pursue its investment
objective by investing all of its investable assets in a pooled fund. See "Other
Investment Companies" on page 21 of this Prospectus.
An insurance company issuing a Variable Contract that participates in
Institutional Class shares of a Fund will vote such shares held by the insurance
company Separate Accounts as required by law. In accordance with current law and
interpretations thereof, participating insurance companies are required to
request voting instructions from policy owners and must vote shares of the Funds
in proportion to the voting instructions received. For a further discussion of
voting rights, please refer to your insurance company Separate Account
prospectus.
When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Trust are fully paid and
non-assessable. The Trust is not required, and does not intend, to hold annual
shareholder meetings. Shareholders have certain rights, as set forth in the
Declaration, including the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. Such removal can be
effected upon the action of two-thirds of the outstanding shares of the Trust.
In addition to the requirements under Delaware law, the Declaration
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Trust for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
The Trustees of the Trust do not expect any disadvantages to investors
arising out of the fact that each Fund may offer a class of its shares to
Separate Accounts that serve as investment medium for Variable Contracts or that
each Fund may offer its shares to Qualified Plans. Nevertheless, the Trustees
intend to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise, and to determine what action, if any, should
be taken in response to such conflicts. If such a conflict were to occur, one or
more Separate Accounts or Qualified Plans might be required to withdraw their
investments in either or both Funds and shares of another series of the Trust
may be substituted. This might force a Fund to sell securities at
disadvantageous prices.
In the interests of economy and convenience, the Trust does not issue
certificates representing the Funds' shares. Instead, the Transfer Agent
maintains a record of each shareholder's ownership. Although each Fund is
offering only its own shares, since the Funds use this combined Prospectus, it
is possible that one Fund might become liable for a misstatement or omission in
this Prospectus regarding the other Fund. The Trustees have considered this
factor in approving the use of this combined Prospectus.
INVESTMENT PERFORMANCE
Each Fund may illustrate in advertisements and sales literature the average
annual total return of its Institutional Class shares, which is the rate of
growth of the Fund that would be necessary to achieve the ending value of an
assumed initial investment of $1,000 kept in Institutional Class shares of the
Fund for the period specified and is based on the following assumptions: (1) all
dividends and distributions by the Fund are reinvested in Institutional Class
shares of the Fund at net asset value; and (2) all recurring fees are included
for applicable periods.
Each Fund may also illustrate in advertisements the cumulative total return
for several time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for a Fund will assume
the reinvestment of all income dividends and capital gains distributions in
Institutional Class for the indicated periods and will include all recurring
fees.
Total returns quoted for the Funds include the effect of deducting each
Fund's expenses, but may not include charges and expenses attributable to any
particular Qualified Plan or Variable Contract. You should carefully review the
prospectus of the insurance product you have chosen or consult with your Plan
Fiduciary for information on relevant charges and expenses. Because these
charges and expenses are excluded from a Fund's quoted performance, the
investment return received by a participant in a Qualified Plan or a holder of a
Variable Contract investing in the Fund may be lower than the quoted performance
of the Fund. You should bear in mind the effect of these charges when comparing
a Fund's performance to that of other mutual funds.
The performance of the Institutional Class shares of the Funds will vary
from time to time and past results are not necessarily representative of future
results. Performance is a function of the type and quality of a Fund's portfolio
securities and is affected by operating expenses. Performance information may
not provide a basis for comparison with other investments or other mutual funds
using a different method of calculating performance. An investment in any Fund
involves the risk of loss.
RISK CONSIDERATIONS AND OTHER INVESTMENT PRACTICES AND POLICIES
Fixed-Income Securities. Each Fund may invest up to 10% of its assets in a broad
range of fixed-income securities, including bonds, notes, mortgage-backed and
asset-backed securities, preferred stock and convertible debt securities issued
by U.S. corporations or other entities or by the U.S. Government or its
agencies, authorities, instrumentalities or sponsored enterprises. The interest
payable on so-called fixed- income securities purchased by a Fund is not
necessarily paid at a fixed rate and may be payable on a variable, floating,
contingent, in-kind or deferred basis.
Fixed-income securities are subject to the risk of the issuers' inability
to meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the credit worthiness of the issuer and
general market liquidity (market risk). Generally, when interest rates decline,
the value of fixed-income securities can be expected to rise. Conversely, when
interest rates rise the value of fixed-income securities can be expected to
decline.
Corporate Debt Obligations. Each Fund may invest in corporate debt obligations,
including obligations of industrial, utility and financial issuers. In addition
to obligations of corporations, corporate debt obligations include bank
obligations and zero coupon securities, issued by financial institutions and
corporations.
The debt securities in which the Funds may invest will be rated, at the
time of purchase, within the top two categories of investment grade securities
or, if not rated, determined by the Adviser to be of equivalent credit quality
to securities so rated. The top two categories of investment grade securities
are Aaa and Aa for Moody's and AAA and AA for S&P. A security will be deemed to
have met a rating requirement if it receives the minimum required rating from at
least one nationally recognized statistical rating organization even though it
has been rated below the minimum rating by one or more other rating
organizations, or if unrated by such rating organizations, determined by the
Adviser to be of comparable credit quality. In the event that the rating on a
security held in a Fund's portfolio is downgraded below the minimum rating
requirement by a rating service, such action will be considered by the Adviser
in its evaluation of the overall investment merits of that security, but will
not necessarily result in the sale of the security.
Convertible Securities and Preferred Stocks. Each Fund may invest in debt
securities or preferred stocks that are convertible into or exchangeable for
common stock. Preferred stocks are securities that represent an ownership
interest in a company and provide their owner with claims on the company's
earnings and assets prior to the claims of owners of common stock but after
those of bond owners. Preferred stocks in which the Funds may invest include
convertible, perpetual fixed and adjustable rate (including auction rate)
preferred stocks.
U.S. Government Securities. Each Fund may invest in all types of U.S. Government
securities, including obligations issued or guaranteed by the U.S. Government or
its agencies, authorities, instrumentalities or sponsored enterprises. Some U.S.
Government securities, such as Treasury bills, notes and bonds, which differ
only in their interest rates, maturities and times of issuance, are supported by
the full faith and credit of the United States of America. Others, such as
obligations issued or guaranteed by U.S. Government agencies, authorities,
instrumentalities or sponsored enterprises are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Small
Business Administration), (b) the right of the issuer to borrow from the U.S.
Treasury (such as securities of the Federal Home Loan Banks), (c) the
discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association),
or (d) only the credit of the issuer.
The Funds may invest in U.S. Government securities which are zero coupon or
deferred interest securities. For example, each Fund may invest in separately
traded principal and interest components of securities guaranteed or issued by
the U.S. Government or its agencies, instrumentalities or sponsored enterprises
if such components are traded independently under the Separate Trading of
Registered Interest and Principal of Securities program ("STRIPS") or any
similar program sponsored by the U.S. Government.
Real Estate Investment Trusts. Each Fund may invest in shares of real estate
investment trusts ("REITs"). REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Funds, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code. Any Fund that invests in REITs will
indirectly bear its proportionate share of any expenses paid by such REITs in
addition to the expenses paid by the Fund.
Investing in REITs involves certain risks: equity REITs may be affected by
changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self- liquidation, and the possibilities of failing to
qualify for the exemption from tax for distributed income under the Internal
Revenue Code and failing to maintain their exemptions from the 1940 Act. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.
<PAGE>
Investing in REITs may involve risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P 500
Index.
Other Investment Companies. Each Fund is authorized to invest all of its assets
in the securities of a single open-end investment company (a "pooled fund")
having substantially identical investment objectives, policies and restrictions
as such Fund, notwithstanding any other investment restriction or policy. Such a
structure is commonly referred to as "master/feeder." If authorized by the
Trustees and subject to shareholder approval (if then required by applicable
law), a Fund would seek to achieve its investment objective by investing in a
pooled fund which would invest in a portfolio of securities that complies with
the Fund's investment objective, policies and restrictions. The Trustees
currently do not intend to authorize investing in a pooled fund in connection
with a master/feeder structure.
Short-Term Debt Securities. Each Fund may establish and maintain cash balances
for temporary purposes in order to maintain liquidity to meet shareholder
redemptions. Each Fund may also establish and maintain cash balances for
defensive purposes without limitation to hedge against potential stock market
declines. A Fund's cash balances, including uncommitted cash balances, may be
invested in investment grade money market instruments and short-term
interest-bearing securities. These securities consist of U.S. Government
securities, instruments of U.S. banks (including negotiable certificates of
deposit, non-negotiable fixed-time deposits and bankers' acceptances),
repurchase agreements, prime commercial paper of U.S. companies and debt
securities that make periodic interest payments at variable or floating rates.
Writing and Purchasing Put and Call Options on Securities and Securities
Indices. To seek additional income or to minimize anticipated declines in the
value of its securities or to hedge various market risks (such as interest rates
and broad or specific equity or fixed-income market movements), each Fund may
purchase and write (i.e., sell) call and put options on securities and
securities indices. Option transactions in which the Funds may engage may be
traded on securities exchanges or in the over-the-counter market. Each Fund
currently intends to limit its option transactions during the current fiscal
year so that no more than 5% of the Fund's net assets will be at risk as a
result of such transactions. Please see the SAI for a further discussion of
option transactions and associated risks.
Futures Contracts and Options on Futures Contracts. Each Fund may engage in
futures transactions and related options. Future contracts may be based on
various securities (such as U.S. Government securities), securities indices and
other financial instruments and indices. A Fund will engage in futures and
related options transactions only for bona fide hedging and non-hedging purposes
to the extent permitted by regulations of the Commodity Futures Trading
Commission. A Fund will not enter into futures contracts or options thereon for
non-hedging purposes if, immediately thereafter, the aggregate initial margin
and premiums required to establish non-hedging positions in futures contracts
and options on futures would exceed 5% of the Fund's net assets, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. Each
Fund may also enter into closing purchase and sale transactions with respect to
any of futures contracts and related options.
The use of futures contracts entails certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of the Fund's income due to
the use of hedging; possible reduction in value of the both the securities
hedged and the hedging instrument; possible lack of liquidity due to daily
limits on price fluctuations; imperfect correlation between the contract and the
securities being hedged; and potential losses in excess of the amount initially
invested in the futures contracts themselves. If the expectations of the Adviser
regarding movements in securities prices or interest rates are incorrect, the
Fund may have experienced better investments results without hedging. The use of
futures contracts and options on futures contracts requires special skills in
addition to those needed to select portfolio securities. A further discussion of
futures contracts and their associated risks is contained in the SAI.
Forward Commitment, Delayed Delivery and When-Issued Transactions. Each Fund may
purchase securities on a when-issued, delayed delivery, or forward commitment
basis (collectively, "when-issued securities"). When such transactions are
negotiated, the price of such securities is fixed at the time of the commitment,
but delivery and payment for the securities may take place up to 90 days after
the date of the commitment to purchase. The securities so purchased are subject
to market fluctuation, and no interest accrues to the purchaser during this
period. When-issued securities involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date. When a Fund
purchases securities on a when-issued basis, the Fund's custodian will maintain
in a segregated account cash or liquid, high grade debt securities having a
value (determined daily) at least equal to the amount of the Fund's purchase
commitment. A Fund may close out a position in securities purchased on a
when-issued basis prior to the settlement date.
Lending of Portfolio Securities. Each Fund may also seek to increase its income
by lending portfolio securities. Such loans may be made to institutions, such as
certain broker-dealers, and are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities maintained on
a current basis at an amount at least equal to the market value of the
securities loaned. If the Adviser determines to make securities loans, the value
of the securities loaned would not exceed 33 1/3% of the value of the total
assets of the Fund. Although the Funds may loan portfolio securities on a
short-term, medium-term and long-term basis, any such loan may be called at any
time for reacquisition by the respective Fund within the normal settlement
period for the security. A Fund may experience a loss or delay in the recovery
of its securities if the borrowing institution breaches its agreement with the
Fund.
Restricted and Illiquid Securities. Each Fund may invest up to 15% of its total
assets in "restricted securities" (i.e., securities that would be required to be
registered under the Securities Act of 1933, as amended ("1933 Act"), prior to
distribution to the general public) including restricted securities eligible for
resale to "qualified institutional buyers" under Rule 144A under the 1933 Act.
Each Fund may also invest up to 10% of its total assets in illiquid investments,
which includes repurchase agreements maturing in more than seven days,
securities that are not readily marketable, certain over-the-counter options and
restricted securities, unless the Trustees determine, based upon a continuing
review of the trading markets for the specific restricted security, that such
restricted securities are liquid. Each Fund may agree to adhere to more
restrictive limits on investments in restricted and illiquid investments as a
condition of the registration of its shares in various states. The Trustees have
adopted guidelines and delegated to the Adviser the daily function of
determining and monitoring the liquidity of restricted securities. The Trustees,
however, retain sufficient oversight and are ultimately responsible for the
determinations. Since it is not possible to predict with assurance exactly how
this market for restricted securities sold and offered under Rule 144A will
develop, the Trustees carefully monitor each Fund's investments in these
securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of increasing the level of illiquidity in a Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
Repurchase Agreements. Each Fund may enter into repurchase agreements through
which the Fund purchases a security (the "underlying security") from a domestic
securities dealer or bank that is a member of the Federal Reserve System. Under
the agreement, the seller of the repurchase agreement (i.e., the securities
dealer or bank) agrees to repurchase the underlying security at a mutually
agreed upon time and price. In repurchase transactions, the underlying security,
which must be a high-quality debt security, is held by the Fund's custodian
through the federal book-entry system as collateral and marked-to-market on a
daily basis to ensure full collateralization of the repurchase agreement. In the
event of bankruptcy or default of certain sellers of repurchase agreements, a
Fund could experience costs and delays in liquidating the underlying security
held as collateral and might incur a loss if such collateral declines in value
during this period.
Market Changes. The market value of the Fund's investments, and thus each Fund's
net asset value, will change in response to market conditions affecting the
value of its portfolio securities. When interest rates decline, the value of
fixed rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Portfolio Turnover. Although neither Fund purchases securities with a view to
rapid turnover, there are no limitations on the length of time that securities
must be held by a Fund and a Fund's annual portfolio turnover rate may vary
significantly from year to year. A high rate of portfolio turnover (100% or
more) involves correspondingly greater transaction costs which must be borne by
the applicable Fund and its shareholders and may, under certain circumstances,
make it more difficult for such Fund to qualify as a regulated investment
company under the Internal Revenue Code. The estimated portfolio turnover rates
of the Funds for the current fiscal year are as follows: Large-Cap Fund 40% and
Small-Cap Fund 45%.
Diversification. Each Fund is diversified, as defined in the 1940 Act. As such,
each Fund has a fundamental policy that limits its investments so that, with
respect to 75% of its assets (i) no more than 5% of the Fund's total assets will
be invested in the securities of a single issuer and (ii) each Fund will
purchase no more than 10% of the outstanding voting securities of a single
issuer. These limitations do not apply to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, repurchase agreements
collateralized by U.S. Government securities or investments in other investment
companies. In addition to the diversification requirements under the 1940 Act,
the Funds must satisfy the diversification requirements under the Internal
Revenue Code applicable to regulated investment companies and the additional
diversification requirements applicable under Section 817(h) of the Internal
Revenue Code to Separate Accounts that fund Variable Contracts. These
requirements place certain limitations on the assets of a Fund that may be
invested in securities of a single issuer or interests in the same commodity.
More specific information on these diversification requirements is contained in
the SAI.
Investment Restrictions. Each Fund is subject to further investment policies and
restrictions that are described in the SAI. As previously described, the
foregoing investment policies, including each Fund's investment objective, are
non-fundamental policies which may be changed by the Trustees without the
approval of shareholders. If there is a change in a Fund's investment objective,
shareholders should consider whether that Fund remains an appropriate investment
in light of their then current financial positions and needs. Each Fund has
adopted certain fundamental policies which may not be changed without the
approval of the applicable Fund's shareholders. Among other fundamental
restrictions listed in the SAI, neither Fund may (1) with respect to 75% of its
total assets, purchase securities of any one issuer (other than U.S. Government
securities and securities of other investment companies) if more than 5% of its
total assets would be invested in such issuer, (2) act as an underwriter except
in certain circumstances, (3) purchase or sell real estate except in certain
circumstances, (4) issue senior securities except as permitted by the 1940 Act
or (5) invest more than 25% of its total assets in the securities of issuers
(including any one foreign government, but excluding the U.S. Government) in any
one industry provided; however, that the Large-Cap Fund and the Small-Cap Fund
may concentrate their assets in securities of issuers in any industry to the
extent that the S&R 500 or the Russell 2000, respectively, are so concentrated.
If any percentage restriction described above or in the SAI is adhered to
at the time of investment, a subsequent increase or decrease in the percentage
resulting from a change in the value of a Fund's assets will not constitute a
violation of the restriction.
ADDITIONAL INFORMATION
Reports to Shareholders
As shareholders in the Funds, Separate Accounts and Qualified Plans will
receive an annual report containing audited financial statements and semi-annual
reports. Each Separate Account and Qualified Plan will also be provided with a
printed confirmation for each transaction in their shareholder account. Holders
of Variable Contracts and participants in Qualified Plans may receive additional
reports from their insurance company or Plan Fiduciary, as the case may be.
Principal Underwriter
WPG serves as the Funds' principal underwriter.
Transfer Agent and Dividend Disbursing Agent
The Shareholder Services Group, Inc., P.O. Box 9037, Boston, MA 02205
serves as transfer agent and dividend disbursing agent for the Funds. The Funds
may also enter into agreements with and compensate other transfer agents and
financial institutions who process shareholder transactions and maintain
shareholder accounts.
Independent Accounts
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, serves as
the independent accountants for the Trust and will audit each Fund's financial
statements annually.
Legal Counsel
Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust.
----------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus and
the SAI, and, if given or made, such other information or representation must
not be relied upon as having been authorized by the Trust. This Prospectus does
not constitute an offering in any jurisdiction in which such offering may not be
lawfully made.
<PAGE>
PART B
WEISS, PECK & GREER INVESTMENTS
TOMORROW FUNDS RETIREMENT TRUST
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
Tomorrow Post-Retirement Fund
Core Large-Cap Stock Fund
Core Small-Cap Stock Fund
(each a "Fund" and collectively, the "Funds")
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
ADVISER CLASS SHARES
November 22, 1995
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Adviser Class prospectuses of
the Funds, each dated November 22, 1995, as amended and/or supplemented
from time to time (collectively, the "Prospectuses"), copies of which
may be obtained without charge by writing to Tomorrow Funds Retirement
Trust (the "Trust"), One New York Plaza, New York 10004 or by calling
1-800-223-3332.
THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED
OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
Page
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.......... 1
Quantitative Methodology.......................... 1
INVESTMENT TECHNIQUES.................................. 3
Repurchase Agreements............................. 3
Forward Commitment, Delayed Delivery and
When-Issued Transactions........................ 4
Loans of Portfolio Securities..................... 5
Options........................................... 6
Futures Transactions.............................. 9
Limitations on the Use of Futures Contracts
and Options on Futures.......................... 11
Special Considerations and Risks
Related to Options and Futures Transactions..... 12
Privately Issued Mortgage-Backed Securities....... 14
Risks Associated with Specific Types
of Derivative Securities........................ 15
Participation Interests........................... 16
Securities of Foreign Issuers..................... 16
Restricted and Illiquid Securities................ 17
Other Investment Companies........................ 18
CALCULATION OF THE FUNDS' RETURNS...................... 18
Total Return...................................... 18
Yield............................................. 19
Other Quotations, Comparisons and
General Information............................. 20
INVESTMENT RESTRICTIONS................................ 22
ADVISORY AND ADMINISTRATIVE SERVICES................... 28
Investment Adviser................................ 28
Administrator..................................... 31
Principal Underwriter............................. 33
DISTRIBUTION PLANS..................................... 33
TRUSTEES AND OFFICERS.................................. 35
HOW TO PURCHASE SHARES................................. 40
Acquiring Shares of the Funds in Exchange
for Shares...................................... 40
REDEMPTION OF SHARES................................... 41
Systematic Withdrawal Plan........................ 41
-i-
<PAGE>
NET ASSET VALUE........................................ 42
INVESTOR SERVICES...................................... 43
Automatic Investment Plan......................... 44
Prototype Retirement Plan for Employers
and Self-Employed Individuals................... 44
Individual Retirement Account..................... 46
Simplified Employee Pension Plans (SEP-IRA)....... 47
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS................ 49
PORTFOLIO BROKERAGE.................................... 55
PORTFOLIO TURNOVER..................................... 59
ORGANIZATION........................................... 59
CUSTODIAN.............................................. 62
TRANSFER AGENT......................................... 62
INDEPENDENT AUDITORS................................... 62
APPENDIX............................................... 63
GLOSSARY............................................... 66
-ii-
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
(See "Investment Objectives and Policies," and "Risk
Considerations and Other Investment Practices and Policies" in the
Prospectuses.)
All capitalized terms not defined herein shall have the meanings
set forth in the Prospectuses.
The securities in which each Fund may invest and certain other
investment policies are described in the Funds' Prospectuses. This
Statement of Additional Information should be read in conjunction with
the Prospectuses.
The Appendix to this Statement of Additional Information contains
a description of the quality categories of corporate bonds in which the
Funds may invest, and a Glossary describing some of the Funds'
investments.
Quantitative Methodology
To seek to achieve their respective investment objectives, each of
the Core Large-Cap Stock Fund ("Large-Cap Fund") and the Core Small-Cap
Stock Fund ("Small-Cap Fund") under normal market conditions invests in
a portfolio of securities that are considered more "efficient" than the
Standard & Poor's 500 Stock Index (the "S&P 500") in the case of the
Large-Cap Fund and the Russell 2000 Index (the "Russell 2000") in the
case of the Small-Cap Fund. The other Funds seek to achieve similar
results with respect to the amount of their assets allocated to
Large-Cap, Medium-Cap and Small-Cap securities (as described in the
Prospectus applicable to such Funds). The Benchmarks for the Large-Cap,
Medium-Cap and Small-Cap Subcategories are the S&P 500, the Standard &
Poor's 400 MidCap Index (the "S&P 400") and the Russell 2000,
respectively.
An efficient portfolio is one that has the maximum expected return
for any level of risk. The efficient mix of securities is established
mathematically, taking into account the expected return and volatility
of returns for each security in a given universe, as well as the
historical price relationships between the different securities in the
universe.
To implement this strategy with respect to the Large-Cap and
Small-Cap Funds and the Subcategories of the other Funds, Weiss, Peck &
Greer, L.L.C. (the "Adviser" or "WPG") compiles the historical price
data of all securities which comprise the applicable Benchmark. The
Adviser may eliminate a security from consideration if it considers the
security to have an inadequate or misleading price history. Using this
historical price data, the Adviser constructs and analyzes a complete
matrix of all the possible price relationships between the securities
in the applicable Benchmark.
Using a sophisticated software program that incorporates risk
reduction techniques developed by investment professionals of the
Adviser, the Adviser constructs a number of portfolios with respect to
the Large-Cap and Small-Cap Funds and the Subcategories, which
portfolios are believed to have optimized risk/reward ratios. From
these alternative portfolios, the Adviser selects the combination of
securities, together with their appropriate weightings, that the
Adviser believes will comprise the optimal portfolio for the Large-Cap
and Small-Cap Funds and the Subcategories. The respective optimal
portfolios for the Large-Cap and Small-Cap Funds and the Subcategories
are designed to have returns greater than, but highly correlated with,
the return of the applicable Benchmarks.
After each optimal portfolio is constructed, it may be rebalanced
to maintain the original optimal weights. The Adviser will sell a
security when the security's weight within an actual portfolio becomes
significantly greater than its optimal weight. The Adviser will buy a
security when the security's weight within an actual portfolio becomes
significantly less than its optimal weight. The Adviser repeats the
entire optimization process at least semi-annually, at which point a
new portfolio is constructed with respect to the Large-Cap and
Small-Cap Funds and the Subcategories adding the most recent historical
data, and deleting the oldest data. When a security is removed from a
Benchmark, it will not necessarily be removed from the Funds'
portfolios within a predetermined length of time.
The Adviser's research personnel will monitor and occasionally
make changes in the way the optimal portfolios are constructed or
traded. Such changes may include determining better ways to eliminate
issues from consideration in the matrix, improving the manner in which
the matrix is calculated, altering constraints in the optimization
process and effecting changes in trading procedure (to reduce
transaction costs or to enhance the effects of rebalancing). Any such
changes are intended to be consistent with the basic philosophy of
seeking higher returns with respect to each of the Large-Cap and
Small-Cap Funds and each Subcategory than those that could be obtained
by investing directly in all the stocks of each Benchmark. Investors
should be aware that no quantitative methodology or technical analysis,
including the Adviser's, has ever been proven to provide enhanced
investment return and reduced investment risk in actual long-term
portfolio results.
<PAGE>
INVESTMENT TECHNIQUES
The following description of the Funds' investment techniques
supplements the discussion contained in the Prospectuses. (See
"Risk Considerations and Other Investment Practices and Policies"
in the Prospectuses).
Repurchase Agreements
Each Fund may enter into repurchase agreements with banks,
broker-dealers or other financial institutions in order to generate
additional current income. A repurchase agreement is an agreement under
which a Fund acquires a security from a seller subject to resale to the
seller at an agreed upon price and date. The resale price reflects an
agreed upon interest rate effective for the time period the security is
held by a Fund. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and
repurchase price may be the same, with interest at a stated rate due to
the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the
security. Typically, repurchase agreements are in effect for one week
or less, but may be in effect for longer periods of time. Repurchase
agreements of more than one week's duration are subject to each Fund's
limitation on investments in illiquid securities.
Repurchase agreements are considered by the Securities and
Exchange Commission (the "SEC") to be loans by the purchaser
collateralized by the underlying securities. In an attempt to reduce
the risk of incurring a loss on a repurchase agreement, the Funds will
generally enter into repurchase agreements only with domestic banks
with total assets in excess of one billion dollars, primary dealers in
U.S. Government securities reporting to the Federal Reserve Bank of New
York or broker-dealers approved by the Trust's Board of Trustees, with
respect to securities of the type in which the Funds may invest. The
Adviser will monitor the value of the underlying securities throughout
the term of the agreement to ensure that their market value always
equals or exceeds the agreed-upon repurchase price to be paid to a
Fund. Each Fund will maintain a segregated account with its custodian,
Boston Safe Deposit and Trust Company (the "Custodian"), or a
subcustodian for the securities and other collateral, if any, acquired
under a repurchase agreement for the term of the agreement.
In addition to the risk of the seller's default or a decline in
value of the underlying security (see "Risk Considerations and Other
Investment Practices and Policies -- Repurchase Agreements" in the
Prospectuses), a Fund also might incur disposition costs in connection
with liquidating the underlying securities. If the seller becomes
insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by a Fund not within the
control of that Fund and therefore subject to sale by the seller's
trustee in bankruptcy. Finally, it is possible that a Fund may not be
able to perfect its interest in the underlying security and may be
deemed an unsecured creditor of the seller. While the Trust
acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
Forward Commitment, Delayed Delivery and When-Issued Transactions
Each Fund may purchase securities on a when-issued, delayed
delivery or forward commitment basis. Securities transactions settled
on when-issued or forward commitment basis are also know as delayed
delivery transactions. The phrase "delayed delivery" is not intended to
address transactions involving the purchase of securities where the
delay in delivery involves only the brief period usually required by
the selling party and its agent solely to locate appropriate
certificates and prepare them for submission for clearance and
settlement in the customary way. Forward commitment and when-issued
transactions involve a commitment by the Fund to purchase or sell
securities at a future date (ordinarily up to 90 days later). The price
of the underlying securities (usually expressed in terms of yield) and
the date when the securities will be delivered and paid for (the
settlement date) are fixed at the time the transaction is negotiated.
When-issued purchases and forward commitments are negotiated directly
with the other party, and such commitments are not traded on exchanges.
A Fund will not enter into such transactions for the purpose of
leverage.
When-issued purchases and forward commitments enable a Fund to
lock in what is believed to be an attractive price or yield on a
particular security for a period of time, regardless of future changes
in interest rates. For instance, in periods of rising interest rates
and falling prices, a Fund might sell securities it owns on a forward
commitment basis to limit its exposure to falling prices. In periods of
falling interest rates and rising prices, a Fund might sell securities
it owns and purchase the same or a similar security on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently
higher yields.
The value of securities purchased on a when-issued or forward
commitment basis and any subsequent fluctuations in their value are
reflected in the computation of the Fund's net asset value starting on
the date of the agreement to purchase the securities, and the Fund is
subject to the rights and risks of ownership of the securities on that
date. The Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the
settlement date. When the Fund makes a forward commitment to sell
securities it owns, the proceeds to be received upon settlement are
included in the Fund's assets. Fluctuations in the market value of the
underlying securities are not reflected in the Fund's net asset value
as long as the commitment to sell remains in effect. Settlement of
when-issued purchases and forward commitment transactions generally
takes place up to 90 days after the date of the transaction, but a Fund
may agree to a longer settlement period.
A Fund will make commitments to purchase securities on a
when-issued basis or to purchase or sell securities on a forward
commitment basis only with the intention of completing the transaction
and actually purchasing or selling the securities. If deemed advisable
as a matter of investment strategy, however, a Fund may dispose of or
renegotiate a commitment after it is entered into. A Fund also may sell
securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. The Funds may realize a
capital gain or loss in connection with these transactions.
When a Fund purchases securities on a when-issued or forward
commitment basis, the Custodian will maintain in a segregated account
securities having a value (determined daily) at least equal to the
amount of the Fund's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the Custodian will hold the
portfolio securities themselves in a segregated account while the
commitment is outstanding. These procedures are designed to ensure that
the Fund will maintain sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitments.
Loans of Portfolio Securities
Each Fund may seek to increase its income by lending portfolio
securities. Under present regulatory policies, such loans may be made
to financial institutions, such as broker-dealers, and would be
required to be secured continuously by collateral in cash, cash
equivalents or U.S. Government securities maintained on a current basis
at an amount at least equal to the market value of the securities
loaned. See "Risk Considerations and Other Investment Practices and
Policies --Lending of Portfolio Securities" in the Prospectuses. The
rules of the New York Stock Exchange ("NYSE") give the Fund the right
to call a loan and obtain the securities loaned at any time on five
days' notice. For the duration of a loan, the Fund would receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation from the
investment of the collateral. The Fund would not, however, have the
right to vote any securities having voting rights during the existence
of the loan, but the Fund would call the loan in anticipation of an
important vote to be taken among holders of the securities or of the
giving or withholding of their consent on a material matter affecting
the investment. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would
be made only to firms deemed by the Adviser to be of good standing, and
when, in the judgment of the Adviser, the consideration which can be
earned currently from securities loans of this type justifies the
attendant risk. If the Adviser determines to make securities loans, it
is intended that the value of the securities loaned would not exceed 33
1/3% of the value of the total assets of the Fund.
At the present time the staff of the SEC does not object if an
investment company pays reasonable negotiated fees to its custodian in
connection with loaned securities as long as such fees are pursuant to
a contract approved by the investment company's trustees.
Options
Each Fund currently intends to limit its options transactions
during the current fiscal year so that no more than 5% of the Fund's
net assets will be at risk as a result of such transactions.
Writing Covered Call Options on Securities. Each Fund may write
(sell) covered call options on securities ("calls") at such time or
times as the Adviser shall determine to be appropriate. When a Fund
writes a call, it receives a premium and sells to the purchaser the
right to buy the underlying security at any time during the call period
(usually between three and nine months) at a fixed exercise price
regardless of market price changes during the call period. If the call
is exercised, the Fund forgoes any gain but is not subject to any loss
on any change in the market price of the underlying security relative
to the exercise price. A Fund will write such options subject to any
applicable limitations or restrictions imposed by law.
Purchasing Call Options. Each Fund may purchase a call option when
the Adviser believes the value of the underlying security will rise or
to effect a "closing purchase transaction." A Fund will realize a
profit (or loss) from a closing purchase transaction if the amount paid
to purchase a call is less (or more) than the amount received from the
sale thereof.
Put Options. Each Fund may also write and purchase put options on
securities ("puts"). A put written by a Fund obligates it to purchase
the specified security at a specified price if the option is exercised
at any time before the expiration date. All put options written by a
Fund would be covered. A Fund may purchase a put option when the
Adviser believes the value of the underlying security will decline. A
Fund may purchase put options on securities in its portfolio in order
to hedge against a decline in the value of such securities ("protective
puts").
<PAGE>
The purpose of writing covered put and call options is to hedge
against fluctuations in the market value of a Fund's portfolio
securities. Each Fund may purchase or sell call and put options on
securities indices for a similar purpose. Such a hedge is limited to
the degree that the price change of the underlying security is in an
amount which is less than the difference between the option premium
received by the Fund and the option strike price. To the extent that
the underlying security's price change exceeds this amount, written put
and call options will not provide an effective hedge.
A written call option would be covered if the Fund owns the
security underlying the option. A written put option may be covered by
maintaining in a segregated account cash or liquid securities rated
within one of the top three ratings categories by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("Standard
& Poor's"), or, if unrated, deemed by the Adviser to be of comparable
credit quality ("High-Grade Debt Securities"). While this will ensure
that the Fund will have sufficient assets to meet its obligations under
the option contract should it be exercised, it does not reduce the
potential loss to the Fund should the value of the underlying security
decrease and the option be exercised. A written call option or put
option may also be covered by purchasing an offsetting option or any
other option which, by virtue of its exercise price or otherwise,
reduces the Fund's net exposure on its written option position.
Further, instead of "covering" a written call option, the Fund may
simply maintain cash or High-Grade Debt Securities in a segregated
account in amounts sufficient to ensure that it is able to meet its
obligations under the written call should it be exercised. This method
does not reduce the potential loss to the Fund should the value of the
underlying security increase and the option be exercised.
Options on Securities Indices. Each Fund may purchase call and put
options on securities indices for the purpose of hedging against the
risk of unfavorable price movements adversely affecting the value of
the Fund's securities or securities the Fund intends to buy or to seek
to increase total return. Such Fund's net assets will be at risk as a
result of such transactions. Unlike a stock option, which gives the
holder the right to purchase or sell a specified stock at a specified
price, an option on a securities index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the
underlying securities index on the exercise date multiplied by (ii) a
fixed "index multiplier."
A securities index fluctuates with changes in the market values of
the stocks included in the index. For example, some securities index
options are based on a broad market index such as the S&P 500 or the
Value Line Composite Index, or a narrower market index such as the
Standard & Poor's 100 Stock Index ("S&P 100"). Indices may also be
based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on
securities indices are currently traded on the Chicago Board Options
Exchange, the NYSE and the American Stock Exchange.
The Funds may purchase put options in order to hedge against an
anticipated decline in stock market prices that might adversely affect
the value of a Fund's portfolio securities. If a Fund purchases a put
option on a securities index, the amount of the payment it would
receive upon exercising the option would depend on the extent of any
decline in the level of the securities index below the exercise price.
Such payments would tend to offset a decline in the value of the Fund's
portfolio securities. However, if the level of the securities index
increases and remains above the exercise price while the put option is
outstanding, a Fund will not be able to profitably exercise the option
and will lose the amount of the premium and any transaction costs. Such
loss may be partially or wholly offset by an increase in the value of a
Fund's portfolio securities.
The Funds may purchase call options on securities indices in order
to participate in an anticipated increase in stock market prices or to
offset anticipated price increases on securities that it intends to buy
in the future. If a Fund purchases a call option on a securities index,
the amount of the payment it receives upon exercising the option
depends on the extent of any increase in the level of the securities
index above the exercise price. Such payments would in effect allow the
Fund to benefit from stock market appreciation even though it may not
have had sufficient cash to purchase the underlying stocks. Such
payments may also offset increases in the price of stocks that the Fund
intends to purchase. If, however, the level of the securities index
declines and remains below the exercise price while the call option is
outstanding, a Fund will not be able to exercise the option profitably
and will lose the amount of the premium and transaction costs. Such
loss may be partially or wholly offset by a reduction in the price a
Fund pays to buy additional securities for its portfolio.
The Funds may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of
the underlying index or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for
additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities in their
respective portfolio. The Funds may also cover call and put options on
a securities index by maintaining cash or High-Grade Debt Securities
with a value equal to the exercise price in a segregated account with
its custodian or by using the other methods described above. When
purchased, options on securities indices may not enable the Fund to
hedge effectively against interest rate or stock market risk if the
stocks comprising the index subject to the option are not highly
correlated with the composition of the Fund's portfolio. Moreover, the
ability to hedge effectively depends upon the ability to predict
movements in interest rates or the stock market. Some options on
securities indices may not have a broad and liquid secondary market, in
which case options purchased by the Fund may not be closed out and the
Fund could lose more than its option premium when the option expires.
The purchase and sale of option contracts is a highly specialized
activity which involves investment techniques and risks different from
those ordinarily associated with investment companies. It should be
noted that transaction costs relating to options transactions may tend
to be higher than the transaction costs with respect to transactions in
securities. In addition, if a Fund were to write a substantial number
of option contracts which are exercised, the portfolio turnover rate of
that Fund could increase.
Securities for each Fund's portfolio will continue to be bought
and sold solely on the basis of appropriateness to fulfill the
applicable Fund's investment objective. Option transactions can be
used, among other things, to increase the return on portfolio
positions.
Futures Transactions
Each Fund may purchase and sell futures contracts for hedging
purposes and to seek to increase total return. A futures contract is an
agreement between two parties to buy and sell a security for a set
price at a future time. Each Fund may also enter into index-based
futures contracts and interest rate futures contracts. Futures
contracts on indices provide for a final cash settlement on the
expiration date based on changes in the relevant index. All futures
contracts are traded on designated "contract markets" licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC")
which, through their clearing corporations, guarantee performance of
the contracts.
Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa). If a Fund holds
long-term U.S. Government securities and the Adviser anticipates a rise
in long-term interest rates, it could, in lieu of disposing of its
portfolio securities, enter into futures contracts for the sale of
similar long-term securities. If rates increased and the value of a
Fund's portfolio securities declined, the value of that Fund's futures
contract would increase, thereby protecting that Fund by preventing net
asset value from declining as much as it otherwise would have. If the
Adviser expects long-term interest rates to decline, a Fund might enter
into futures contracts for the purchase of long-term securities, so
that it could offset anticipated increases in the cost of such
securities it intends to purchase while continuing to hold
higher-yielding short-term securities or waiting for the long-term
market to stabilize. Similar techniques may be used by the Funds to
hedge stock market risk.
Each Fund also may purchase and sell listed put and call options
on futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call
and a short position if the option is a put), at a specified exercise
price at any time during the option period. When an option on a futures
contract is exercised, settlement is effected by the payment of cash
representing the difference between the current market price of the
futures contract and the exercise price of the option. The risk of loss
to a Fund purchasing an option on a futures contract is limited to the
premium paid for the option. A Fund may purchase put options on
interest rate futures contracts in lieu of, and for the same purpose
as, its sale of a futures contract: to hedge a long position in the
underlying futures contract.
The purchase of call options on interest rate futures contracts is
intended to serve the same purpose as the actual purchase of the
futures contract.
A Fund would write a call option on a futures contract in order to
hedge against a decline in the prices of the securities underlying the
futures contracts. If the price of the futures contract at expiration
is below the exercise price, the applicable Fund would retain the
option premium, which would offset, in part, any decline in the value
of its portfolio securities.
The writing of a put option on a futures contract is similar to
the purchase of the futures contract, except that, if market price
declines, a Fund would pay more than the market price for the
underlying securities. The net cost to a Fund will be reduced, however,
by the premium received on the sale of the put, less any transaction
costs. See "Dividends, Distributions and Tax Status" below.
Each Fund may engage in "straddle" transactions, which involve the
purchase or sale of combinations of call and put options on the same
underlying securities or futures contracts. A Fund will not purchase
calls or puts, in connection with such straddle transactions, if the
aggregate premiums paid for such options will exceed 10% of its total
assets.
In purchasing and selling futures contracts and related options,
each Fund intends to comply with rules and interpretations of the CFTC
and of the SEC.
Limitations on the Use of Futures Contracts and Options on Futures.
Each Fund will engage in futures and related options transactions
only for hedging purposes in accordance with CFTC regulations or to
seek to increase total return to the extent permitted by such
regulations. The Fund will determine that the price fluctuations in the
futures contracts and options on futures contracts used for hedging
purposes are substantially related to price fluctuations in securities
held by the Fund or which it expects to purchase. Except as stated
below, a Fund's futures transactions will be entered into for
traditional hedging purposes - that is, futures contracts will be sold
to protect against a decline in the price of securities that the Fund
owns, or futures contracts will be purchased to protect the Fund
against an increase in the price of securities it intends to purchase.
As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures (or option)
position (involving the purchase of futures contracts), a Fund will
have purchased, or will be in the process of purchasing, equivalent
amounts of related securities in the cash market at the time when the
futures (or option) position is closed out. However, in particular
cases, when it is economically advantageous for a Fund to do so, a long
futures position may be terminated (or an option may expire) without
the corresponding purchase of securities. As an alternative to
compliance with the bona fide hedging definition, a CFTC regulation
permits a Fund to elect to comply with a different test, under which
the sum of the amounts of initial margin deposits on its existing
futures positions and premiums paid for options on futures entered into
for the purpose of seeking to increase total return (net of the amount
the positions were "in the money" at the time of purchase) would not
exceed 5% of that Fund's net assets, after taking into account
unrealized gains and losses on such positions. A Fund will engage in
transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for maintaining
its qualification as a regulated investment company for Federal income
tax purposes (see "Dividends, Distributions, and Tax Status").
A Fund will be required, in connection with transactions in
futures contracts and the writing of options on futures contracts, to
make margin deposits, which will be held by a Fund's custodian for the
benefit of the merchant through whom a Fund engages in such futures and
options transactions. In the case of futures contracts or options
thereon requiring the Fund to purchase securities, the Fund must
segregate cash or High-Grade Debt Securities in an account maintained
by the Custodian to cover such contracts and options. Cash or
High-Grade Debt Securities required to be in a segregated account will
be marked to market daily.
<PAGE>
Special Considerations and Risks Related to Options and Futures
Transactions
Exchange markets in options on certain securities are a relatively
new and untested concept. It is impossible to predict the amount of
trading interest that may exist in such options, and there can be no
assurance that viable exchange markets will develop or continue.
The exchanges will not continue indefinitely to introduce new
expirations to replace expiring options on particular issues because
trading interest in many issues of longer duration tends to center on
the most recently auctioned issues. The expirations introduced at the
commencement of options trading on a particular issue will be allowed
to run out, with the possible addition of a limited number of new
expirations as the original expirations expire. Options trading on each
issue of securities with longer durations will thus be phased out as
new options are listed on more recent issues, and a full range of
expirations will not ordinarily be available for every issue on which
options are traded.
In the event of a shortage of the underlying securities
deliverable on exercise of an option, the Options Clearing Corporation
has the authority to permit other, generally comparable, securities to
be delivered in fulfillment of option exercise obligations. If the
Options Clearing Corporation exercises its discretionary authority to
allow such other securities to be delivered, it may also adjust the
exercise prices of the affected options by setting different prices at
which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options
Clearing Corporation may impose special exercise settlement procedures.
The hours of trading for options on securities may not conform to
the hours during which the underlying securities are traded. To the
extent that the markets for underlying securities close before the
options markets, significant price and rate movements can take place in
the options markets that cannot be reflected in the underlying markets.
In addition, to the extent that the options markets close before the
markets for the underlying securities, price and rate movements can
take place in the underlying markets that cannot be reflected in the
options markets.
Prior to exercise or expiration, an option position can be
terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange for call
or put options of the same series. Similarly, positions in futures may
be closed out only on an exchange which provides a secondary market for
such futures. A Fund will enter into an option or futures position only
if there appears to be a liquid secondary market for such options or
futures. However, there can be no assurance that a liquid secondary
market will exist for any particular call or put option or futures
contract at any specific time. Thus, it may not be possible to close an
option or futures position. In the event of adverse price movements, a
Fund would continue to be required to make daily cash payments of
maintenance margin for futures contracts or options on futures
contracts position written by that Fund. A Fund may have to sell
portfolio securities at a time when it may be disadvantageous to do so
if it had insufficient cash to meet the daily maintenance margin
requirements. In addition, a Fund may be required to take or make
delivery of the instruments underlying interest rate futures contracts
it holds. The inability to close options and futures positions also
could have an adverse impact on a Fund's ability to effectively hedge
its portfolios.
Each of the exchanges has established limitations governing the
maximum number of call or put options on the same underlying security
(whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether
such options are written on the same or different exchanges or are held
or written on one or more accounts or through one or more brokers). An
exchange may order the liquidation of positions found to be in
violation of applicable trading limits and it may impose other
sanctions or restrictions. The Trust and other clients advised by the
Adviser and its affiliates may be deemed to constitute a group for
these purposes. In light of these limits, the Trustees of the Trust
(the "Trustees") may determine at any time to restrict or terminate the
Funds' transactions in options. The Adviser does not believe that these
trading and position limits will have any adverse impact on the
investment techniques for hedging the Trust's portfolios.
Over-the-counter ("OTC") options are purchased from or sold to
securities dealers, financial institutions or other parties
("Counterparties") through direct agreement with the Counterparty. In
contrast to exchange listed options, which generally have standardized
terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the
parties.
Unless the parties provide for it, there is no central clearing or
guaranty function in the OTC option market. As a result, if the
Counterparty fails to make delivery of the security or other instrument
underlying an OTC option it has entered into with the Fund or fails to
make a cash settlement payment due in accordance with the terms of that
option, the Fund will lose any premium it paid for the option as well
as any anticipated benefit of the transaction. Accordingly, the Adviser
must assess the creditworthiness of each such Counterparty or any
guarantor or credit enhancement of the Counterparty's credit to
determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with
U.S. Government securities dealers recognized by the Federal Reserve
Bank of New York as "primary dealers", or broker dealers, domestic or
foreign banks or other financial institutions which have received,
combined with any credit enhancements, a long-term debt rating of A
from Standard & Poor's or Moody's or an equivalent rating from any
other nationally recognized statistical rating organization ("NRSRO")
or that issue long-term debt determined to be of equivalent credit
quality by the Adviser. The staff of the SEC currently takes the
position that OTC options purchased by a Fund, and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option
sold by it (the cost of the sell-back plus the in-the-money amount, if
any) are illiquid, and are subject to each Fund's limitation on
investing no more than 15% of its assets in illiquid securities.
However, for options written with "primary dealers" in U.S. Government
securities pursuant to an agreement requiring a closing transaction at
a formula price, the amount which is considered to be illiquid may be
calculated by reference to a formula price.
Utilization of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and
movements in the price of the securities which are the subject of the
hedge. If the price of the futures contract moves more or less than the
price of the security, a Fund will experience a gain or loss which will
not be completely offset by movements in the price of the securities
which are the subject of the hedge. There is also a risk of imperfect
correlation where the securities underlying futures contracts have
different maturities than the portfolio securities being hedged.
Transactions in options on futures contracts involve similar risks.
Privately Issued Mortgage-Backed Securities
Each of the Tomorrow Post-Retirement Fund (the "Post-Retirement
Fund"), Tomorrow Long-Term Retirement Fund (the "Long-Term Fund"),
Tomorrow Medium-Term Retirement Fund (the "Medium-Term Fund") and
Tomorrow Short-Term Retirement Fund (the "Short-Term Fund") (sometimes
collectively referred to herein as the "Tomorrow Funds") may invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in
mortgage loans and other non-governmental entities (or representing
custodial arrangements administered by such institutions). These
private originators and institutions include savings and loan
associations, mortgage bankers, commercial banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing.
Privately issued mortgage-backed securities are generally backed
by pools of conventional (i.e., non-government guaranteed or insured)
mortgage loans. Since such mortgage-backed securities normally are not
guaranteed by an entity having the credit standing of Ginnie Mae,
Fannie Mae or Freddie Mac, in order to receive a high quality rating
from the rating organizations (e.g., Standard & Poor's or Moody's),
they often are structured with one or more types of "credit
enhancement." Such credit enhancement falls into two categories: (1)
liquidity protection and (2) protection against losses resulting after
default by a borrower and liquidation of the collateral (e.g., sale of
a house after foreclosure). Liquidity protection refers to the payment
of cash advances to holders of mortgage-backed securities when a
borrower or an underlying mortgage fails to make its monthly payment on
time. Protection against losses resulting after default and liquidation
is designed to cover losses resulting when, for example, the proceeds
of a foreclosure sale are insufficient to cover the outstanding amount
on the mortgage. Such protection may be provided through guarantees,
insurance policies or letters of credit, through various means of
structuring the securities or through a combination of such approaches.
Examples of credit enhancement arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class
securities with one or more classes entitled to receive payment before
other classes, with the result that defaults on the underlying
mortgages are borne first by the holders of the subordinated class),
creation of "spread accounts" or "reserve funds" (where cash or
investments are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on the
underlying mortgages in a pool exceeds the amount required to be paid
on the mortgage-backed securities). The degree of credit enhancement
for a particular issue of mortgage-backed securities is based on the
level of credit risk associated with the particular mortgages in the
related pool. Losses on a pool in excess of anticipated levels could
nevertheless result in losses to security holders since credit
enhancement rarely covers every dollar owed on a pool. See the Funds'
Prospectuses for a further description of mortgage-backed securities.
Risks Associated with Specific Types of Derivative Securities
Each of the Post-Retirement Fund, Long-Term Fund, Mid-Term Fund
and Short-Term Fund may invest in floating rate securities based on the
Cost of Funds Index ("COFI floaters"), other "lagging rate" floating
rate securities, floating rate securities that are subject to a maximum
interest rate ("capped floaters"), and Mortgage-Backed Securities
purchased at a discount. The primary risks associated with these
derivative debt securities are the potential extension of average life
and/or depreciation due to rising interest rates.
The principal of and interest on the assets underlying a CMO or
REMIC Trust may be allocated among the several classes of CMOs or REMIC
Certificates in various ways. In certain structures (known as
"sequential pay" CMOs or REMIC Certificates), payments of principal,
including any principal prepayments, on the underlying mortgage assets
generally are applied to the classes of CMOs or REMIC Certificates in
the order of their respective final distribution dates. Thus, no
payment of principal will be made on any class of sequential pay CMOs
or REMIC Certificates until all other classes having an earlier final
distribution date have been paid in full. Each Tomorrow Fund will
limits its investments in sequential pay CMOs and REMIC Certificates to
5% of its net assets. Please see "Mortgage-Backed Securities" in the
Tomorrow Funds' prospectuses.
Participation Interests
Each Fund may purchase from banks participation interests in all
or part of specific holdings of debt obligations. Each participation
interest is backed by an irrevocable letter of credit or guarantee of
the selling bank that the Adviser has determined meets the prescribed
quality standards of each Fund. Thus, even if the credit of the issuer
of the debt obligation does not meet the quality standards of a Fund,
the credit of the selling bank will. Each Fund will have the right to
sell the participation interest back to the bank after seven days'
notice for the full principal amount of a Fund's interest in the debt
obligation plus accrued interest, but only (1) as required to provide
liquidity to that Fund, (2) to maintain the quality standards of each
Fund's investment portfolio or (3) upon a default under the terms of
the debt obligation. The selling bank may receive a fee from a Fund in
connection with the arrangement.
Securities of Foreign Issuers
To the extent included in the benchmark indices applicable to each
Fund, each Fund may invest in certain types of U.S. dollar-denominated
securities of foreign issuers, including American Depository Receipts
("ADRs"). ADRs are U.S. dollar-denominated certificates issued by a
U.S. bank or trust company and represent the right to receive
securities of a foreign issuer deposited in a domestic bank or foreign
branch of a U.S. bank. ADRs are traded on domestic exchanges or in the
U.S. over-the-counter market and, generally, are in registered form.
Investments in ADRs have certain advantages over direct investment in
the underlying non- U.S. securities because (i) ADRs are U.S.
dollar-denominated investments which are registered domestically,
easily transferable, and for which market quotations are readily
available, and (ii) issuers whose securities are represented by ADRs
are subject to the same auditing, accounting and financial reporting
standards as domestic issuers. To the extent a Fund acquires ADRs
through banks which do not have a contractual relationship with the
foreign issuer of the security underlying the ADR to issue and service
such ADRs, there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions such as
stock splits or rights offerings involving the foreign issuer in a
timely manner.
Although the Funds do not currently invest directly in foreign
denominated securities, the Long-Term Fund and the Medium- Term Fund
will each invest in other investment companies that will invest their
assets in securities of foreign issuers. The Long- Term and Medium-Term
Funds may, therefore, be subject to the risks associated with investing
in foreign securities.
Investing in foreign securities may involve advantages and
disadvantages not present in domestic investments. There may be less
publicly available information about securities not registered
domestically, or their issuers, than is available about domestic
issuers or their domestically registered securities. Stock markets
outside the U.S. may not be as developed as domestic markets, and there
may also be less government supervision of foreign exchanges and
brokers. Foreign denominated securities may be less liquid or more
volatile than U.S. securities. Trade settlements may be slower and
could possibly be subject to failure. In addition, brokerage
commissions and custodial costs with respect to foreign denominated
securities may be higher than those for domestic investments.
Accounting, auditing, financial reporting, and disclosure standards for
foreign issuers may be different than those applicable to domestic
issuers. Foreign denominated securities may be affected favorably or
unfavorably by changes in currency exchange rates and exchange control
regulations (including currency blockage) and a Fund investing in such
securities may incur costs in connection with conversions between
various currencies. Foreign securities may also involve risks due to
changes in the political or economic conditions of such foreign
countries, the possibility of expropriation of assets or
nationalization, and possible difficulty in obtaining and enforcing
judgments against foreign entities.
Restricted and Illiquid Securities
Each Fund may invest up to 15% of its total assets in "restricted
securities" (i.e., securities that would be required to be registered
prior to distribution to the public), including restricted securities
eligible for resale to certain institutional investors pursuant to Rule
144A of the 1933 Act. In addition, each Fund may invest up to 10% of
its total assets in illiquid investments, which includes securities
that are not readily marketable, repurchase agreements maturing in more
than seven days and privately issued stripped mortgage-backed
securities. The Trustees have adopted guidelines and delegated to the
Adviser the daily function of determining and monitoring the liquidity
of restricted securities. The Trustees, however, retain sufficient
oversight and are ultimately responsible for the determinations. Please
see the non-fundamental investment restrictions for further limitations
regarding the Funds' investments in restricted and illiquid securities.
Since it is not possible to predict with assurance exactly how the
market for restricted securities sold and offered under Rule 144A will
develop, the Trustees will carefully monitor each Fund's investments in
these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity
in the Funds to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities.
Notwithstanding the foregoing investment restrictions and as further
described below, each Fund may invest all or part of its assets in an
open-end investment company with substantially the same investment
objective, policies and restrictions as each Fund.
Other Investment Companies
Each Fund, subject to authorization by the Trustees, may invest
all of its investable assets in the securities of a single open-end
investment company (a "Portfolio"). If authorized by the Trustees, a
Fund would seek to achieve its investment objective by investing in a
Portfolio, which Portfolio would invest in a portfolio of securities
that complies with the Fund's investment objectives, policies and
restrictions. The Trustees do not intend to authorize investing in this
manner at this time.
Each Fund may invest up to 10% of its total assets, calculated at
the time of purchase, in the securities of other investment companies
(other than those affiliated with WPG) but may not invest more than 5%
of its total assets in the securities of any one investment company or
acquire more than 3% of the voting securities of any investment
company. Investments in investment companies will result in duplication
of certain expenses, since the Fund will indirectly bear its
proportionate share of any expenses paid by investment companies in
which it invests in addition to the expenses paid by the Fund. However,
to the extent that a Fund invests in an open-end registered investment
company, the Adviser will not impose its advisory fees on the portion
of the Fund's assets so invested.
CALCULATION OF THE FUNDS' RETURNS
Total Return
The average annual total return with respect to Adviser Class
shares of each Fund is determined for a particular period by
calculating the actual dollar amount of the investment return on a
$1,000 investment in Adviser Class shares of the Fund made at the net
asset value of such shares at the beginning of the period, and then
calculating the annual compounded rate of return which would produce
that amount. Total return for a period of one year is equal to the
actual return of the Fund during that period. The following formula
describes the calculation:
n
ERV = P(1+T)
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return with respect to Adviser
Shares.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the indicated
period.
This calculation assumes that (i) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the
period and (ii) all recurring fees are included for applicable periods.
Each Fund may illustrate in advertisements and sales literature
the average annual total return and cumulative total return for several
time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for a Fund will
assume the reinvestment of all income dividends and capital gains
distributions in Adviser Class shares for the indicated periods and
will include all recurring fees.
Yield
The 30 day yield quotation with respect to Adviser Class shares of
each of the Long-Term Fund, Mid-Term Fund, Short-Term Fund and
Post-Retirement Fund is computed by dividing the net investment income
for the period with respect to Adviser Class shares of that Fund by the
net asset value of each Adviser Class share on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)6-1]
---
cd
<PAGE>
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Adviser Class shares
outstanding during the period that were entitled to
receive dividends.
d = the offering price per Adviser Class share (net asset
value per share) on the last day of the period.
Return for a Fund is not fixed or guaranteed and will fluctuate
from time to time, unlike bank deposits or other investments which pay
a fixed yield or return for a stated period of time, and do not provide
a basis for determining future returns. Return is a function of
portfolio quality, composition, maturity and market conditions as well
as the expenses allocated each Fund. The return of a Fund may not be
comparable to other investment alternatives because of differences in
the foregoing variables and differences in the methods used to value
portfolio securities, compute expenses and calculate return.
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in
reports to shareholders, the past performance of a Fund may be
illustrated and/or compared with that of other mutual funds with
similar investment objectives, and to stock or other relevant indices.
For example, total return of a Fund's classes may be compared to
averages or rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors mutual fund
performance; the Morgan Stanley Europe, Australia, Far East Index
("EAFE"), an unmanaged index of international stock markets, the S&P
400, an unmanaged index of common stocks; the S&P 500, an unmanaged
index of common stocks; the Russell 2000, an unmanaged index of common
stocks; the Russell 3000 Index (the "Russell 3000"), an unmanaged index
of common stocks; or the Dow Jones Industrial Average, an unmanaged
index of common stocks of 30 industrial companies listed on the New
York Stock Exchange.
The S&P 500 is an unmanaged index of 500 common stocks which are
traded on the New York Stock Exchange, American Stock Exchange and the
Nasdaq National Market. The S&P 500 represents approximately 70% of the
total domestic U.S. equity market capitalization. The S&P 400 is an
unmanaged index of common stocks of 400 companies with mid-size market
capitalizations - $300 million to $5 billion. The S&P 500 and the S&P
400 are market value-weighted indices (shares outstanding times stock
price) in which each company's influence on the respective index is
directly proportional to its market value. The companies in the S&P 500
and the S&P 400 are selected from four major industry sectors:
industrials, utilities, financials and transportation. The 500
companies chosen for the S&P 500 are not the 500 largest companies in
terms of market value. Rather, the companies chosen by S&P for
inclusion in the S&P 500 tend to be leaders in important industries
within the U.S. economy. The Russell 2000 is an unmanaged index of 2000
common stocks of small capitalization companies. The Russell 2000 is
composed of the 2000 smallest companies with respect to capitalization
in the Russell 3000 and represents approximately 7% of the Russell 3000
total market capitalization. The Russell 3000 is an unmanaged index of
3000 common stocks of large United States companies with market
capitalizations ranging from approximately $60 million to $80 billion.
The Russell 3000 represents approximately 98% of the United States
equity market.
In addition, the performance of the classes of a Fund may be
compared to alternative investment or savings vehicles and/or to
indexes or indicators of economic activity, e.g., inflation or interest
rates. Performance rankings and listings reported in newspapers or
national business and financial publications, such as Barron's,
Business Week, Consumer's Digest, Consumer Reports, Financial World,
Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, the New York Times, Smart Money, USA Today,
U.S. News and World Report, The Wall Street Journal and Worth may also
be cited (if a Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings from various
other sources including Bloomberg Financial Systems, CDA/Wiesenberger
Investment Companies Service, Donoghue's Mutual Fund Almanac,
Investment Company Data, Inc., Johnson's Charts, Kanon Bloch Carre &
Co., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems.
In addition, from time to time, quotations from articles from
financial publications, such as those listed above, may be used in
advertisements, in sales literature or in reports to shareholders of
the Funds.
The Funds may also present, from time to time, historical
information depicting the value of a hypothetical account in one or
more classes of a Fund since the Fund's inception.
In presenting investment results, the Funds may also include
references to certain financial planning concepts, including (a) an
investor's need to evaluate his financial assets and obligations to
determine how much to invest; (b) his need to analyze the objectives of
various investments to determine where and when to invest; and (c) his
need to analyze his time frame for future capital needs to determine
how long to invest. The investor controls these three factors, all of
which affect the use of investments in building assets. The Adviser's
agreement to limit each Fund's operating expenses will increase
investment performance.
In advertisements, sales literature or reports to shareholders,
the Funds may include references to asset allocation strategies.
According to information supplied by B.G.B. Brinceson, B.D. Singer and
G.L. Beebower, as of May/June 1991, 91% of investment performance is
derived from asset allocation, the proper mix of cash, bonds and
stocks. In general, the remaining performance is derived as follows:
stock selection--5%, market timing--2%, and other--2%.
According to Standard & Poor's Ratings Group and Crandell, Pierce
& Company, the best and worst stock market returns (as represented by
the Standard & Poor's Index of 500 Common Stocks) annualized over the
time periods from 1950 through June 1995 using monthly observations
were as follows:
<TABLE>
<S> <C> <C>
Time Best Worst
Periods Performance Performance
One Year 61.3 -36.9
Three Years 33.3 -10.6
Five Years 29.6 - 4.2
Seven Years 23.0 - 2.7
Ten Years 19.2 0.5
Fifteen Years 17.2 4.1
Twenty Years 15.1 6.4
Thirty Years 11.2 9.1
</TABLE>
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment
restrictions which may not be changed without approval of a majority of
the applicable Fund's outstanding voting securities. Under the 1940
Act, and as used in the Prospectuses and this SAI, a "majority of the
outstanding voting securities" requires the approval of the lesser of
(1) the holders of 67% or more of the shares of a Fund represented at a
meeting of the holders if more than 50% of the outstanding shares of
the Fund are present in person or by proxy or (2) the holders of more
than 50% of the outstanding shares of the Fund.
A Fund may not:
1. Issue senior securities, except as permitted by paragraphs 2, 5,
and 6 below. For purposes of this restriction, the issuance of
shares of beneficial interest in multiple classes or series, the
purchase or sale of options, futures contracts, forward
commitments and repurchase agreements entered into in accordance
with the Fund's investment policies or within the meaning
of paragraph 5 below, are not deemed to be senior securities.
2. Borrow money, except (i) from banks for temporary or short-
term purposes or for the clearance of transactions in amounts
not to exceed 33 1/3% of the value of the Fund's total assets
(including the amount borrowed) taken at market value, (ii)
in connection with the redemption of Fund shares or to
finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets;
(iii) in order to fulfill commitments or plans to purchase
additional securities pending the anticipated sale of other
portfolio securities or assets and (iv) the Fund may enter
into reverse repurchase agreements and forward roll
transactions, but only if after each such borrowing there is
asset coverage of at least 300% as defined in the 1940 Act.
For purposes of this investment restriction, investments in short
sales, futures contracts, options on futures contracts, securities
or indices and forward commitments shall not constitute borrowing.
3. Act as an underwriter with respect to the securities of other
issuers, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed
to be an underwriter for purposes of the 1933 Act; provided,
however, that the Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as the Fund.
4. Purchase or sell real estate except that the Fund may (i) acquire
or lease office space for its own use, (ii) invest in securities
of issuers that invest in real estate or interests therein, (iii)
invest in securities that are secured by real estate or interests
therein, (iv) purchase and sell mortgage-related securities and
(v) hold and sell real estate acquired by the Fund as a result of
the ownership of securities.
5. Invest in commodities, except the Fund may purchase and sell
options on securities, securities indices and currency, futures
contracts on securities, securities indices and currency and
options on such futures, forward foreign currency exchange
contracts, forward commitments, securities index put or call
warrants and repurchase agreements entered into in accordance with
the Fund's investment policies.
6. Make loans, except that the Fund may (1) lend portfolio securities
in accordance with the Fund's investment policies up to 33 1/3% of
<PAGE>
the Fund's total assets taken at market value, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an
issue of debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original
issuance of the securities.
7. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such
purchase, the value of its investments in such industry would
exceed 25% of its total assets taken at market value at the
time of such investment (except investments in obligations of
the U.S. Government or any of its agencies, instrumentalities
or authorities and except that the Large-Cap Fund and the
Small-Cap Fund may concentrate their assets in securities of
issuers in any industry to the extent that the S&P 500 Index
or the Russell 2000 Index, respectively, are so
concentrated); provided, however, that the Fund may invest
all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
8. For each Fund, with respect to 75% of its total assets, purchase
securities of an issuer (other than the U.S. Government, its
agencies, instrumentalities or authorities or repurchase
agreements collateralized by U.S. Government securities and other
investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer; or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held
by the Fund;
provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with substantially
the same investment objective, policies and restrictions as the Fund.
For purposes of the above fundamental investment restrictions
regarding senior securities, the Adviser generally classifies issuers
by industry in accordance with classifications set forth in the
Standard & Poor's Stock Guide. In the absence of such classification or
if the Adviser determines in good faith based on its own information
that the economic characteristics affecting a particular issuer make it
more appropriately considered to be engaged in a different industry,
the Adviser may classify an issuer according to its own sources.
The following restrictions are designated as non-fundamental and
may be changed by the Trustees without the approval of shareholders.
A Fund may not:
a. Pledge, mortgage or hypothecate its assets, except to secure
permitted borrowings and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the
Fund's total assets taken at market value. Collateral
arrangements with respect to margin, option and other risk
management and when-issued and forward commitment
transactions are not deemed to be pledges or other
encumbrances for purposes of this restriction.
b. Participate on a joint or joint-and-several basis in any
securities trading account. The "bunching" of orders for the sale
or purchase of marketable portfolio securities with other accounts
under the management of the Adviser or any subadviser to save
commissions or to average prices among them is not deemed to
result in a joint securities trading account.
c. Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or principals or officers of the
Adviser, any subadviser or any investment management subsidiary of
the Adviser individually owns beneficially more than 0.5% and
together own beneficially more than 5% of the securities of such
issuer.
d. Purchase a security of other investment companies, except
when the purchase is part of a plan of merger, consolidation,
reorganization or acquisition or except by purchase in the
open market where no commission or profit to a sponsor or
dealer results from the purchase other than customary
brokers' commissions and then only if, as a result, (i) more
than 10% of the Fund's assets would be invested in securities
of other investment companies, (ii) more than 3% of the total
outstanding voting securities of any one such investment
company would be held by the Fund or (iii) more than 5% of
the Fund's assets would be invested in any one such
investment company; provided, however, that the Fund may
invest all of its investable assets in an open-end investment
company with substantially the same investment objective,
policies and restrictions as the Fund.
e. Invest more than 15% of its total assets in the aggregate of
(i) securities of any issuer which, together with its
predecessors, has been in operation for less than three years
(including the operation of any predecessor) and
(ii) restricted securities including those eligible for
resale under Rule 144A; provided, however, the Fund may not
invest more than (a) 5% of its total assets in securities of
unseasoned issuers and (b) 10% of its total assets in
restricted securities excluding those eligible for resale
under Rule 144A; and provided further, the Fund may invest
all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund; and
provided further that obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities and
securities fully collateralized by such securities are not
considered to be obligations of unseasoned issuers.
f. Invest in securities which are illiquid if, as a result, more
than 10% of its total assets would consist of such securities,
including repurchase agreements maturing in more than seven
days, securities that are not readily marketable, restricted
securities not eligible for resale pursuant to Rule 144A
under the 1933 Act, purchased OTC options, certain assets
used to cover written OTC options, and privately issued
stripped mortgage-backed securities, unless the Trustees
determine that such restricted securities are liquid;
provided, however, that the Fund may invest all or part of
its investable assets in an open-end investment company with
substantially the same investment objectives, policies and
restrictions as the Fund.
g. Purchase securities while outstanding borrowings exceed 5% of
the Fund's total assets.
h. Invest in real estate limited partnership interests.
i. Purchase warrants of any issuer, if, as a result of such
purchase, more than 2% of the value of the Fund's total
assets would be invested in warrants which are not listed on
an exchange or more than 5% of the value of the total assets
of the Fund would be invested in warrants generally, whether
or not so listed. For these purposes, warrants are to be
valued at the lesser of cost or market, but warrants acquired
by the Fund in units with or attached to debt securities
shall be deemed to be without value.
j. Purchase interests in oil, gas, or other mineral exploration
programs or mineral leases; however, this policy will not prohibit
the acquisition of securities of companies engaged in the
production or transmission of oil, gas or other minerals.
k. Invest for the purposes of exercising control over or management
of any company, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment, provided,
however, that the Fund may invest all or part of its investable
assets in an open-end investment company with substantially the
same investment objective, policies and restrictions as the Fund.
l. Purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, the Fund has the
right to obtain securities equivalent in kind and amount to
the securities sold and, if the right is conditional, the
sale is made upon the same conditions, except (i) in
connection with arbitrage transactions, (ii) for hedging the
Fund's exposure to an actual or anticipated market decline in
the value of its securities, (iii) to profit from an
anticipated decline in the value of a security, and (iv) to
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities.
m. Write puts on securities if the aggregate value of the
obligations underlying the puts exceeds 50% of the Fund's net
assets.
n. Buy and sell puts and calls on securities, stock index
futures or options on stock index futures or financial
futures or options on financial futures if (i) the aggregate
premiums paid on all such options which are held at any time
exceed 20% of the Fund's aggregate net assets and (ii) the
aggregate margin deposits required on all such futures or
options thereon held at any time exceed 5% of the Fund's
total assets.
o. Purchase puts, calls, straddles or spreads, or any combination
thereof if by reason thereof, the value of its aggregate
investment in such classes of securities (other than protective
puts) will exceed 5% of its net assets.
Each Fund may, notwithstanding any other fundamental or
non-fundamental investment restriction or policy, invest all of its
assets in the securities of a single open-end investment company with
substantially the same fundamental investment objectives, restrictions
and policies as the Fund.
The Funds do not have any current intention to enter into reverse
repurchase agreements, sell securities short or engage in arbitrage
transactions.
Except with respect to the 300% asset coverage required by
fundamental restriction number 2, if a percentage restriction on
investment or utilization of assets as set forth above is adhered to at
the time an investment is made, a later change in percentage resulting
from changes in the values of a Fund's assets will not be considered a
violation of the restriction.
In order to permit the sale of shares of the Funds in certain
states, the Trustees may, in their sole discretion, adopt restrictions
on investment policy more restrictive than those described above.
Should the Trustees determine that any such more restrictive policy is
no longer in the best interest of a Fund and its shareholders, the Fund
may cease offering shares in the state involved and the Trustees may
revoke such restrictive policy. Moreover, if the states involved shall
no longer require any such restrictive policy, the Trustees may, in
their sole discretion, revoke such policy.
ADVISORY AND ADMINISTRATIVE SERVICES
Investment Adviser
As stated in the Prospectuses, WPG, One New York Plaza, New York,
New York 10004, serves as investment adviser and administrator to each
Fund. See "Management of the Tomorrow Funds -- Investment Adviser",
"Management of the Tomorrow Funds ---Administrator" and "Portfolio
Brokerage" in the Prospectuses for a description of the duties of WPG
as investment adviser and administrator to the Funds.
The Funds' investment advisory agreements with the Adviser (the
"Advisory Agreements") were initially approved by the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
parties to such agreements or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "Independent
Trustees"), on July 19, 1995 and became effective upon each Fund's
commencement of operations. The Advisory Agreements were approved by
the sole initial shareholder of each Fund immediately prior to that
Fund's commencement of operations.
Pursuant to the Advisory Agreements, the Adviser supervises and
assists in the management of the assets of each Fund and furnishes each
Fund with research, statistical and advisory services. In managing the
assets of the Funds, the Adviser furnishes continuously an investment
program for each Fund consistent with the investment objectives and
policies of that Fund. More specifically, the Adviser determines from
time to time what securities shall be purchased for the Fund, what
securities shall be held or sold by the Fund and what portion of the
Fund's assets shall be held uninvested as cash, subject always to the
provisions of the Trust's Agreement and Declaration of Trust, By-Laws
and its registration statement under the 1940 Act and under the 1933
Act covering the Trust's shares, as filed with the SEC, and to the
investment objectives, policies and restrictions of the Fund, as each
of the same shall be from time to time in effect, and subject, further,
to such policies and instructions as the Board of Trustees of the Trust
may from time to time establish. To carry out such determinations, the
Adviser places orders for the investment and reinvestment of each
Fund's assets (see "Portfolio Brokerage").
For its investment advisory services under the Advisory
Agreements, the Adviser receives an annual fee from each Fund, payable
monthly, equal to 0.75% (on an annual basis) of the Fund's average
daily net assets, except for the Post-Retirement Fund, which pays the
Adviser on a monthly basis a fee equal on an annual basis to 0.65% of
such Fund's average daily net assets.
The Adviser has voluntarily agreed to limit temporarily each
Fund's operating expenses (excluding Rule 12b-1 fees with respect to
the Adviser Class shares, service fees with respect to the
Institutional Class shares, any other class-specfic expenses,
litigation, indemnification and other extraordinary expenses) to 1.25%
of its average daily net assets, except for the Post-Retirement Fund,
for which the Adviser has voluntarily agreed to temporarily limit
operating expenses (with the same exclusions as listed above) to 1.15%
of its average daily net assets. The Adviser may discontinue or modify
such limitation in the future at its discretion, although it has no
current intention to do so. Each Fund will reimburse the Adviser for
fees foregone or other expenses paid by the Adviser pursuant to this
expense limitation in later years in which operating expenses for the
Fund are less than the expense limitations set forth above for any such
year. No interest, carrying or finance charge will be paid by a Fund
with respect to the amounts representing fees foregone or other
expenses paid. In addition, no Fund will pay any unreimbursed amounts
to the Adviser upon termination of its Advisory Agreement.
The advisory fees are accrued daily and will be prorated with
respect to any Fund if the Adviser shall not have acted as that Fund's
investment adviser during any entire monthly period. The Advisory and
the Administration Agreements (as defined below) provide that if the
operating expenses of a Fund in any year, including the investment
advisory fee and the administration fee, but excluding taxes, brokerage
commissions, interest, dividends paid on securities sold short and
extraordinary legal fees and expenses exceed the expense limits set by
state securities law administrators in states in which that Fund's
shares are sold, the amount payable to WPG, in its capacity as Adviser
and Administrator, will be reduced (but not below zero) by the amount
of such excess. The most restrictive state securities law expense limit
presently in effect requires such reduction if expenses exceed 2.5% of
the first $30 million, 2.0% of the next $70 million and 1.5% of the
remainder of the average daily net assets of a Fund during such year.
Each Advisory Agreement provides that the Adviser will not be
liable for any loss sustained by the Trust or any Fund by reason of the
adoption or implementation of any investment policy or the purchase,
sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research
of the Adviser, or upon investigation and research made by any other
individual, firm or corporation if such recommendation shall have been
made and such other individual, firm or corporation shall have been
selected with due care and in good faith, except for a loss resulting
from willful misfeasance, bad faith, or gross negligence in the
performance by the Adviser of its duties or by reason of the Adviser's
reckless disregard of its obligations and duties thereunder.
Each Advisory Agreement may be modified or amended only with the
approval of the holders of a majority of the applicable Fund's
outstanding shares and by a vote of the majority of the Independent
Trustees of the Trust. Unless terminated as provided below, each
Advisory Agreement continues in full force and effect for two years
after its date of execution and for successive periods of one year
thereafter, but only as long as each such continuance after the end of
the initial two year period is approved annually by a majority vote of
the Board or by a vote of the holders of a majority of the outstanding
shares of the applicable Fund, but in either event it also must be
approved by a vote of a majority of the Independent Trustees of the
Trust, cast in person at a meeting called for the purpose of voting on
such approval. Each Advisory Agreement may be terminated without
penalty, by either party upon 60 days' written notice and automatically
will terminate in the event of its assignment.
Officers and Trustees of the Trust who are also principals in and
employees of WPG may receive indirect compensation by reason of
investment advisory and administration fees paid by the Trust to WPG,
in its capacity as the Adviser and Administrator.
As of June 30, 1994, WPG had capital in excess of $48 million. WPG
consists of 44 general principals, one of whom is a member of the NYSE,
and certain associate principals. WPG has approximately 240 full-time
employees in addition to its principals. WPG together with its
wholly-owned subsidiary, Weiss, Peck & Greer, Inc., act as investment
adviser or manager for approximately $13 billion of institutional and
private investment accounts.
Roger J. Weiss is a Senior Managing Principal of WPG and
Chairman of the Board, President and Trustee of the Trust.
Stephen H. Weiss, brother of Roger J. Weiss, is also a Senior
Managing Principal of WPG. Francis H. Powers is a principal of
WPG, and Executive Vice President and Treasurer of the Trust.
Jay C. Nadel is a principal of WPG and an Executive Vice President
and Secretary of the Trust. The principals of WPG who serve on
WPG's executive committee are Stephen H. Weiss (Chairman),
Roger J. Weiss, Phillip Greer, Melville Straus, Ronald M. Hoffner
and Wesley W. Lang, Jr.
In addition to the members of the Adviser's Asset Allocation
Committee and Messrs. Pappo and Vandivort, Messrs. Stephen H. Weiss and
Roger J. Weiss may participate in each Fund's investment decisions and
all of the principals in WPG consult on a regular basis among
themselves about general market conditions, as well as specific
securities and industries.
In the management of the Trust and their other accounts, WPG and
its subsidiaries allocate investment opportunities to all accounts for
which they are appropriate subject to the availability of cash in any
particular account and the final decision of the individual or
individuals in charge of such accounts. Where market supply is
inadequate for a distribution to all such accounts, securities are
allocated on a pro rata basis. In some cases this procedure may have an
adverse effect on the price or volume of the security as far as the
Funds are concerned. However, it is the judgment of the Trustees that
the desirability of continuing the Trust's advisory arrangements with
the Adviser outweighs any disadvantages that may result from
contemporaneous transactions. See "Portfolio Brokerage."
In an attempt to avoid any potential conflict with portfolio
transactions for the Funds, the Adviser and the Trust, on behalf of
each Fund, have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. These
restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings
of securities. These restrictions are a continuation of the basic
principle that the interests of the Funds and their shareholders come
before those of the Adviser and its principals and employees.
In the event that neither the Adviser nor any of its affiliates
acts as investment adviser to the Trust, the name of the Trust will be
changed to one that does not contain the name "Weiss, Peck & Greer" or
the initials "WPG" or otherwise suggest an affiliation with the Adviser
or contain the name "Tomorrow" or any connotation or derivative of such
name.
Administrator
WPG, in its capacity as Administrator of each Fund, performs
administrative, certain transfer agency related and shareholder
relations services and certain clerical and accounting services for
each Fund under separate administration agreements (the "Administration
Agreements"). More specifically, these obligations pursuant to the
Administration Agreements include, subject to the general supervision
of the Trustees of the Trust, (a) providing supervision of all aspects
of the Funds' non-investment operations (the parties giving due
recognition to the fact that certain of such operations are performed
by others pursuant to agreements with the Funds), (b) providing the
Funds, to the extent not provided pursuant to their custodian and
transfer agency agreements or agreements with other institutions, with
personnel to perform such executive, administrative, accounting and
clerical services as are reasonably necessary to provide effective
administration of the Funds, (c) arranging, to the extent not provided
pursuant to such agreements, for the preparation, at the Funds'
expense, of its tax returns, reports to shareholders, periodic updating
of the prospectuses and reports filed with the SEC and other regulatory
authorities, (d) providing the Funds, to the extent not provided
pursuant to such agreements, with adequate office space and certain
related office equipment and services, (e) maintaining all of the
Funds' records other than those maintained pursuant to such agreements
or the Advisory Agreements, and (f) providing to the Funds transfer
agency-related and shareholder relations services and facilities and
the services of one or more of its employees or officers, or employees
or officers of its affiliates, relating to such functions (including
salaries and benefits, office space and supplies, equipment and
teaching).
For its services under the Administration Agreements, the
Administrator is entitled to receive a fee, computed daily and payable
monthly at an annual rate equal to 0.09% of each Fund's average daily
net assets. These fees may be changed by the Board of Trustees without
shareholder approval.
Each Fund bears all expenses of its own operation (subject to the
expense limitations described above), which expenses include: (i) fees
and expenses of any investment adviser or administrator of the Fund;
(ii) organization expenses of the Trust; (iii) fees and expenses
incurred by the Fund in connection with membership in investment
company organizations; (iv) brokers' commissions; (v) payment for
portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses (including an allocable portion of the
cost of its employees rendering legal services to the Funds); (vii)
interest, insurance premiums, taxes or governmental fees; (viii) the
fees and expenses of the transfer agent of the Funds; (ix) the cost of
preparing stock certificates or any other expenses, including, without
limitation, clerical expenses of issue, redemption or repurchase of
shares of the Funds; (x) the expenses of and fees for registering or
qualifying shares of the Funds for sale and of maintaining the
registration of the Funds; (xi) a portion of the fees and expenses of
Trustees of the Trust who are not affiliated with the Adviser; (xii)
the cost of preparing and distributing reports and notices to existing
shareholders, the SEC and other regulatory authorities; (xiii) the fees
or disbursements of custodians of the Funds' assets, including expenses
incurred in the performance of any obligations enumerated by the
Declaration of Trust or By-Laws of the Trust insofar as they govern
agreements with any such custodian; (xiv) costs in connection with
annual or special meetings of shareholders, including proxy material
preparation, printing and mailing; (xv) litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary
course of the Funds' business; and (xvi) distribution fees and service
fees applicable to Adviser Class shares and service fees applicable to
Institutional Class shares.
The Funds' Advisory and Administration Agreements each provide
that WPG, in its capacities as investment adviser and administrator,
may render similar services to others so long as the services provided
thereunder are not impaired thereby.
Principal Underwriter
WPG serves as the principal underwriter in connection with the
continuous offering of the shares of the Trust pursuant to an
Underwriting Agreement, dated as of the effective date of the Trust's
registration statement. The Trustees, including the non-interested
Trustees, approved the Underwriting Agreement on July 19, 1995, which
will continue in effect from year to year, if annually approved by the
Trustees, including the non-interested Trustees, in conjunction with
the continuance of the Plans of Distribution. See "Distribution Plans"
below. The Underwriting Agreement provides that WPG will bear certain
distribution expenses not borne by the Funds.
WPG bears all expenses it incurs in providing services under the
Underwriting Agreement. Such expenses include compensation to its
employees and representatives and to any investment dealers and
financial firms ("Authorized Firms") for distribution related services.
WPG also pays certain expenses in connection with the distribution of
the Funds' shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of
printing and distributing prospectuses and supplements to prospective
shareholders. WPG receives compensation under a Rule 12b-1 Plan for
providing such services with respect to Adviser Class shares. Each Fund
bears the cost of registering its shares under federal, state and
foreign securities law. See "Distribution Plans" below.
DISTRIBUTION PLANS
Each Fund, with respect to its Adviser class shares, has adopted a
plan of distribution pursuant to Rule 12b-1 promulgated by the
Commission under the 1940 Act (the "Plans").
Each Plan provides that a Fund shall pay WPG, as the Fund's
distributor for its Adviser Class shares, a daily distribution fee
equal on an annual basis to 0.25% of the Fund's average daily net
assets attributable to Adviser Class shares and will pay WPG a service
fee equal on an annual basis to 0.25% of the Fund's average daily net
assets attributable to Adviser Class shares (which WPG will in turn pay
to Authorized Firms which enter into a sales or services agreement with
WPG at a rate of up to 0.25% of the Fund's average daily net assets
attributable to Adviser Class shares owned by investors for whom that
Authorized Firm is the holder or dealer of record). This service fee is
intended to be consideration for personal services and/or account
maintenance services rendered by the Authorized Firm with respect to
Adviser Class shares. Personal and account maintenance services for
which WPG or any of its affiliates, banks or dealers may be compensated
pursuant to the Plans include, without limitation: payments made to or
on account of WPG or any of its affiliates, banks, other brokers and
dealers who are members of the NASD, or their officers, sales
representatives and employees, who respond to inquiries of, and furnish
assistance to, shareholders regarding their ownership of Adviser Class
shares or their accounts or who provide similar services not otherwise
provided by or on behalf of the Funds. Authorized Firms may from time
to time be required to meet certain other criteria in order to receive
service fees. WPG or its affiliates are entitled to retain all service
fees payable under the Plans for which there is no Authorized Firm of
record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance
services performed by WPG or its affiliates for shareholder accounts.
The purpose of distribution payments to WPG under the Plans is to
compensate WPG for its distribution services related to the Adviser
Class shares of the Funds. WPG pays commissions to Authorized Firms as
well as expenses of printing prospectuses and reports used for sales
purposes, expenses with respect to the preparation and printing of
sales literature and other distribution related expenses, including,
without limitation, the cost necessary to provide distribution-related
services or personnel, travel, office expenses and equipment. (See
"Distribution Plans" in the Prospectus.)
In accordance with the terms of the Plans, WPG provides to the
Trust for review by the Trustees a quarterly written report of the
amounts expended under the Plans and the purpose for which such
expenditures were made. In the Trustees' quarterly review of the Plans,
they will consider the continued appropriateness and the level of
compensation that the Plans provide.
No interested person of the Trust, nor any Trustee of the Trust
who is not an independent Trustee, has any direct or indirect financial
interest in the operation of the Plans except to the extent that WPG
and certain of its employees may be deemed to have such an interest as
a result of receiving a portion of the amounts expended under the Plans
by the Funds and except to the extent the principals of WPG may be
deemed to receive a benefit under the Advisory and Administration
Agreements under the Plans.
The Plans were adopted with respect to the Adviser Class shares of
each Fund by a majority vote of the Board of Trustees, including all of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. In approving the Plans, the Trustees
identified and considered a number of potential benefits which the
Plans may provide. The number of potential benefits which the Plans may
provide. The Trustees believe that there is a reasonable likelihood
that the Plans will benefit the Funds and their respective Adviser
Class shareholders. Under their terms, the Plans remain in effect from
year to year provided such continuance is approved annually by vote of
the Trustees in the manner described above. The Plans may not be
amended to increase materially the annual percentage limitation of
average net assets which may be spent for the services described
therein without approval of the shareholders of the Adviser Class
shares, and material amendments of the Plans must also be approved by
the Trustees in the manner described above. A Plan may be terminated at
any time, without payment of any penalty, by vote of the majority of
the Independent Trustees or by a vote of a majority of the outstanding
voting securities of the Adviser Class of the applicable Fund. A Plan
will automatically terminate in the event of its assignment (as defined
in the 1940 Act).
TRUSTEES AND OFFICERS
The Trustees have responsibility for management of the business of
the Trust. The executive officers of the Trust are responsible for its
day to day operation. Set forth below is certain information concerning
the Trustees and officers.
Name, Address,
Age and Title Principal Occupations During Past Five Years
Roger J. Weiss* Senior Managing Principal, Weiss, Peck &
One New York Plaza Greer, L.L.C.
New York, NY 10004 Chairman of the Board of all WPG Funds
Age: 56 President, Weiss, Peck & Greer International
Fund
Chairman of the Executive Vice President and Director,
Board, President WPG Advisers, Inc.
and Trustee Former Executive Vice President and Director,
Tudor Management Company
<PAGE>
Raymond R.
Herrmann, Jr.** Chairman of the Board, Sunbelt Beverage
654 Madison Avenue Corporation (distributor of wines and
Suite 1400 liquors)
New York, NY 10017 Former Vice Chairman and Director, McKesson
Age: 75 Corporation (U.S. distributor of
drugs and health care products, wine and
Trustee spirits)
Life Member, Board of Overseers of Cornell
Medical College
Member of Board and Executive Committee, Sky
Ranch for Boys
Member, Evaluation Advisory Board,
Biotechnology Investments, Ltd.
Harvey E. Sampson** Chief Executive Officer and Chairman of Harvey
600 Secaucus Road Group, Inc. (retail sales of consumer
Secaucus, NJ 07094 electronics)
Age: 56 Trustee, Cornell University
Joint Board of The New York Hospital -
Trustee Cornell Medical Center
Trustee, North Shore University Hospital
Lawrence J. Israel** Private Investor
200 Broadway Director and Trustee of the Touro Infirmary
Suite 249 Member of the Intercollegiate Athletics
New Orleans, LA 70118 Committee of the Administrators of the
Age: 60 Tulane Educational Fund
Trustee
Francis H. Powers* Principal, Weiss, Peck & Greer, L.L.C.
One New York Plaza Vice President and Secretary, Weiss, Peck &
New York, NY 10004 Greer Advisers, Inc.
Age: 55 Executive Vice President and Treasurer of all
WPG Funds
Executive Former Vice President and Secretary, Tudor
Vice President Management Company
and Treasurer
<PAGE>
Jay C. Nadel* Principal, Weiss, Peck & Greer, L.L.C.
One New York Plaza Director of Operating Departments
New York, NY 10004 Executive Vice President and Secretary of all
Age: 37 WPG Funds
Executive
Vice President
and Secretary
Joseph N. Pappo* Principal, Weiss, Peck & Greer,
311 So. Wacker Drive L.L.C. since 1994
52nd Floor President of Eden Financial
Chicago, IL 60606 Corporation from 1988-1991
Age 44
Vice President
Daniel S. Vandivort* Principal, Weiss, Peck & Greer,
One New York Plaza L.L.C. since 1994
30th Floor Previously Managing Director and
New York, NY 10004 Head of U.S. Fixed Income,
Age: 41 Senior Portfolio Manager and
Director, Global Product
Vice President Development and Marketing with
CS First Boston Investment
Management, 1989-1994
Stephen Gresham* Associate Principal, Weiss, Peck &
One New York Plaza Greer, L.L.C., 1994
30th Floor Senior Vice President and
New York, NY 10004 Principal, Systematic Financial
Age: 35 Management from 1991-1994.
Managing Director of Advest, Inc.
Vice President from 1987 to 1991
Arlen S. Oransky* Vice President, Mutual Fund
One New York Plaza Operations, Weiss, Peck & Greer, L.L.C.
New York, NY 10004 since December, 1991
Age: 39 Assistant Vice President of all
WPG Funds since April, 1991
Vice President Manager of Investment Services
Weiss, Peck & Greer, L.L.C. from July,
1990 to December, 1991
<PAGE>
Joseph J. Reardon* Vice President, Mutual Fund
One New York Plaza Operations, Weiss, Peck & Greer, L.L.C.
New York, NY 10004 since December, 1993
Age: 35 Assistant Manager, Mutual Fund
Operations, Weiss, Peck & Greer, L.L.C.
Vice President from February, 1990 to December, 1993
Assistant Vice President of all
WPG Funds since April, 1991
Teresa Hogan Manager State Regulation,
First Data Investor First Data Investor
Services Group Services Group, Inc.
53 State Street Since June, 1994
Boston, MA 02109 Senior Legal Assistant,
Age: 33 Palmer & Dodge
from 1992-1994
Assistant Secretary Blue Sky Paralegal,
Robinson & Cole from
1984-1992
-----------------------
* "Interested Person" within the meaning of the 1940 Act.
** Each of the non-interested Trustees is a trustee of each of the
other WPG Funds and a Member of the Trust's Audit Committee and
Special Nominating Committee.
Compensation of Trustees and Officers
The Funds pay no compensation to the Trust's Trustees affiliated
with the Adviser or its officers. None of the Trust's Trustees or
officers have engaged in any financial transactions with any Fund or
the Adviser.
<PAGE>
The following table estimates the amount of compensation to be paid to the
Trust's Trustees for the current fiscal year ending December, 31, 1995. In
addition, each Trustee is reimbursed for out-of-pocket expenses associated with
attending Trustee meetings.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pension or
Aggregate Aggregate Aggregate Aggregate Aggregate Aggregate Retirement Total
Compensa- Compensa- Compensa- Compensa- Compensa- Compensa- Benefits Compensation
tion from tion from tion from tion from tion from tion from Accrued as from Trust
Long-Term Medium-Term Short-Term Post- Core Large- Core Small- Part of and other
Retirement Retirement Retirement Retirement Cap Stock Cap Stock Trust's Funds in
Fund* Fund* Fund* Fund* Fund* Fund* Expenses Complex**
Roger J. Weiss $0 $0 $0 $0 $0 $0 $0 $0
Raymond H. Herrmann, Jr. $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $0 $37,250
Harvey E. Sampson $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $0 $37,250
Lawrence J. Israel $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $0 $37,250
Total $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $0 $111,750
<FN>
* Estimated. The Trust is newly organized and has not paid any Trustee's fees.
** As of the date of this SAI, there were 15 mutual funds in the WPG fund complex, six of which were series of the
Trust. The Trustee's fees paid with respect to the other funds in the WPG fund complex are based on actual fees paid by
such funds for the fiscal year ended December 31, 1994.
</FN>
</TABLE>
<PAGE>
Certain Shareholders
Immediately prior to the commencement of a Fund's operations, it
is expected that WPG will own 100% of the outstanding shares of that
Fund. As of the date of this Statement of Additional Information, the
Trustees and officers of the Trust as a group beneficially owned (i.e.,
had voting or investing power) less than 1% of the outstanding shares
of each Fund.
HOW TO PURCHASE SHARES
(See "How to Buy Shares" in the Prospectuses.)
The Trust continuously offers shares of each Fund. The Trust may
terminate the continuous offering of its shares with respect to any
Fund at any time at the discretion of the Trustees.
In the case of telephone subscriptions, if full payment for
telephone subscriptions is not received by the Trust within the
customary time period for settlement then in effect after the
acceptance of the order by the Trust, the order is subject to
cancellation and the purchaser will be liable to the affected Fund for
any loss suffered as a result of such cancellation. To recoup such loss
each Fund reserves the right to redeem shares owned by any shareholder
whose purchase order is cancelled for non-payment, and such purchaser
may be prohibited from placing further telephone orders.
If a subscription or redemption of Fund shares is arranged and
settlement made through a member of the NASD, then that member may, in
its discretion, charge a fee for this service.
Acquiring Shares of the Funds in Exchange for Securities
Shares of the Funds may be purchased in whole or in part by
delivering to the Funds' Custodian securities acceptable to WPG. If the
securities are not suitable for a Fund's portfolio, the securities will
be sold by the Custodian as agent for the account of their owner on the
day of their receipt by the Custodian or as soon thereafter as
possible. The number of shares of a class of a Fund to be issued in
exchange for securities will be the aggregate proceeds from the sale of
such securities, divided by the net asset value per share of the
applicable class of the applicable Fund on the day such proceeds are
received. WPG will use reasonable efforts to obtain the current market
price for such securities but does not guarantee the best available
price. WPG will absorb any transaction costs, such as commissions, on
the sale of securities.
<PAGE>
Securities determined by WPG to be acceptable should be
transferred by book entry or physically delivered, in proper form for
transfer. Please contact WPG for transfer instructions.
Investors who are contemplating an exchange of securities for
shares of a Fund must contact WPG to determine whether the securities
are acceptable before forwarding such securities to the Custodian. WPG
reserves the right to reject any securities. Exchanging securities for
shares of the Funds may create a taxable gain or loss. Please consult
your tax adviser with respect to the particular Federal, state and
local tax consequences of exchanging securities for Fund shares.
The Trust will not generally issue shares for consideration other
than cash. The Trust may, however, issue shares for consideration other
than cash pursuant to a bona fide purchase of assets, merger or other
reorganization provided (i) the securities meet the investment
objectives and policies of the applicable Fund; (ii) the securities are
acquired by the applicable Fund for investment and not for resale;
(iii) the securities are not restricted as to transfer either by law or
liquidity of market; and (iv) the securities have a value which is
readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange or
the New York Stock Exchange or by quotation on the Nasdaq National
Market.
REDEMPTION OF SHARES
(See "How to Sell Shares" and "How to Exchange Shares" in the
Prospectuses.)
Systematic Withdrawal Plan
A Systematic Withdrawal Plan is available only for the
Post-Retirement Fund, without expense to any shareholder with a minimum
investment of $10,000 in value in such Funds' shares (at the then
current offering price). The Transfer Agent may be directed, as agent
of the purchaser, to redeem without a redemption charge shares of such
Funds held in his account as may be required so that the shareholder or
any person designated by him will receive a monthly or quarterly check
in a stated amount not to be less than $100 although such amount is not
necessarily a recommended amount. Dividends and capital gains
distributions will be reinvested in additional shares of the same class
of such Fund at net asset value as of the reinvestment date.
Redemption of shares of the Post-Retirement Fund under the
Systematic Withdrawal Plan may reduce or even liquidate the account,
particularly in a declining market. Such payments paid to a shareholder
cannot be considered a yield or income on the investment. Payments to a
shareholder in excess of distributions of investment income will
constitute a return of his invested principal, and the liquidation of
Fund shares pursuant to this Plan is a taxable transaction which may
result in gain or loss to the shareholder depending upon the cost of
the shares when acquired.
Withdrawals at the same time as regular purchases of Adviser Class
shares of the Post-Retirement Fund ordinarily will not be permitted
since purchases are intended to accumulate capital and the Systematic
Withdrawal Plan is designed for the regular withdrawal of monies,
except that a shareholder may make lump sum investments, of $5,000 or
more. The Systematic Withdrawal Plan may be terminated by the
shareholder, without penalty, at any time and the Trust may terminate
the Plan at will. There are no contractual rights on the part of either
party with respect to the Plan.
NET ASSET VALUE
(See "How Each Tomorrow Fund's Share Price is Determined" in the
Prospectuses)
Under the 1940 Act, the Trustees are responsible for determining
in good faith the fair value of securities of the Funds. The net asset
value per share of each class of each Fund is determined once daily,
Monday through Friday as of the close of regular trading on the NYSE
(normally 4:00 P.M. New York City time) on each Business Day (as
defined in the Prospectuses) in which there is a sufficient degree of
trading in that Fund's portfolio securities that the current net asset
value of that Fund's shares might be materially affected. A Fund may
not determine its net asset value on any day during which its shares
were not tendered for redemption and the Trust did not receive any
order to purchase or sell shares of that Fund. In accordance with
procedures approved by the Trustees, the net asset value per share of
each class of each Fund is calculated by determining the value of the
net assets attributable to each class of that Fund and dividing by the
number of outstanding shares of that class. The NYSE is not open for
trading on weekends or on New Year's Day (January 1), Presidents' Day
(the third Monday in February), Good Friday, Memorial Day (the last
Monday in May), Independence Day (July 4), Labor Day (the first Monday
in September), Thanksgiving Day (the fourth Thursday in November) and
Christmas Day (December 25).
The public offering price per Adviser Class share of a class of a
Fund is the net asset value per share of that class of that Fund next
determined after receipt of an order. Orders for Adviser Class shares
which have been received by the Trust or the Transfer Agent prior to
the close of regular trading of the NYSE are confirmed at the offering
price effective at the close of regular trading of the NYSE on that
day, while orders received subsequent to the close of regular trading
of the NYSE will be confirmed at the offering price effective at the
close of regular trading of the NYSE on the next day on which the net
asset value is calculated.
Bonds and other fixed-income securities (other than short-term
obligations but including listed issues) in a Fund's portfolio are
valued on the basis of valuations furnished by a pricing service which
utilizes both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, when such valuations are believed
to reflect the fair value of such securities.
In determining the net asset value, unlisted securities for which
market quotations are available are valued at the mean between the most
recent bid and asked prices. Securities, options on securities, futures
contracts and options thereon which are listed or admitted to trading
on a national exchange, are valued at their last sale on such exchange
prior to the time of determining net asset value; or if no sales are
reported on such exchange on that day, at the mean between the most
recent bid and asked price. Securities listed on more than one exchange
shall be valued on the exchange the security is most extensively
traded. Other securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good
faith by the Valuation Committee as authorized by the Trustees.
For purposes of determining the net asset value of the Funds'
shares, options transactions will be treated as follows: When a Fund
sells an option, an amount equal to the premium received by that Fund
will be included in that Fund's accounts as an asset and a deferred
liability will be created in the amount of the option. The amount of
the liability will be marked to the market to reflect the current
market value of the option. If the option expires or if that Fund
enters into a closing purchase transaction, that Fund will realize a
gain (or a loss if the cost of the closing purchase exceeds the premium
received), and the related liability will be extinguished. If a call
option contract sold by a Fund is exercised, that Fund will realize the
gain or loss from the sale of the underlying security and the sale
proceeds will be increased by the premium originally received.
INVESTOR SERVICES
(See "How to Buy Shares," "How to Sell Shares" and "How to
Exchange Shares" in the Prospectuses.)
<PAGE>
The Trust offers a variety of services, described in the sections
that follow, designed to meet the needs of its shareholders. The costs
of providing such services are borne by the Funds.
Automatic Investment Plan
The Automatic Investment Plan enables shareholders to make regular
(monthly or quarterly) investments in shares of any of the Funds
through an automatic withdrawal from a designated bank account by
simply completing the Automatic Investment Plan application. Please
call 1-800-223-3332 or write to WPG to receive this form. By completing
the form, the shareholder authorizes the Trust's Custodian to
periodically draw money from a designated bank or federal credit union
account, and to invest such amounts in account(s) of the Fund(s)
specified. The transaction will be automatically processed to the
mutual fund account on or about the first business day of the month or
quarter designated.
Please be aware that: (1) the Automatic Investment Plan privilege
may be revoked without prior notice if any check is not paid upon
presentation; (2) the Custodian is under no obligation to notify the
shareholder as to the non-payment of any check, and (3) this service
may be modified or discontinued by the Custodian upon thirty (30) days'
written notice prior to any payment date, or may be discontinued by you
by written notice to TSSG, at least ten (10) days before the next
payment date.
Prototype Retirement Plan for Employers and Self-Employed
Individuals
Prototype retirement plans (the "Retirement Plan") are available
for those entities or self-employed individuals who wish to purchase
shares of a Fund in connection with a money purchase plan or a profit
sharing plan maintained by their employer. The Retirement Plans were
designed to conform to the requirements of the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The
Retirement Plans received opinion letters from the Internal Revenue
Service (the "IRS") on March 29, 1990 that the form of the Retirement
Plans is acceptable under Section 401 of the Code.
Annual tax-deductible contributions to the Retirement Plan may be
made up to the lesser of $30,000 or 25% of the participant's earned
income (disregarding any compensation in excess of $150,000 (as
adjusted by the IRS for inflation). Under the terms of the Retirement
Plan, contributions by or on behalf of participants may be invested in
a Fund with the designated custodian under the Retirement Plan (the
"Retirement Plan's Custodian"). Investment in other mutual funds
advised by the Adviser or one of its affiliates may also be available.
Employers adopting the Retirement Plan may elect either that a
participant shall specify the investments to be made with contributions
by or on behalf of such participant or that the employer shall specify
the investments to be made with all such contributions. Since no Fund
is intended as a complete investment program it is important, in
connection with such election, that employers give careful
consideration to the fiduciary obligation requirements of ERISA.
All dividends and distributions received by the Retirement Plan's
Custodian on the Funds' shares held by the Plan's Custodian will be
reinvested in the applicable Fund's shares of the same class at net
asset value. Distributions of benefits to participants, when made, will
be paid first in cash, to the extent that any amount credited to a
participant's account is not invested in the applicable Fund's shares
and then in full Fund shares of the applicable class (and cash in lieu
of fractional shares).
Boston Safe Deposit and Trust Company serves as the Retirement
Plan's Custodian under a Custodial Agreement. Custodian fees which are
payable by the employer to the Retirement Plan's Custodian under such
Custodial Agreement are a $10 application fee for processing the
Retirement Plan application, an annual maintenance fee of $15 per
participant, and a distribution fee of $10 for each distribution from a
participant's account. Such fees may be altered from time to time by
agreement of the employer and the Retirement Plan's Custodian. For
further details see the terms of the Retirement Plan which are
available from the Trust.
Distributions must be made pursuant to the terms of the Retirement
Plan and generally may not commence before retirement, disability,
death, termination of employment, or termination of the Retirement Plan
and must commence no later than April 1 of the year following the year
in which the participant attains age 70 (the "required beginning
date"). Distributions are taxed as ordinary income when received,
except the portion, if any, considered a return of a participant's
nondeductible contributions. Certain distributions before age 59 may be
subject to a 10% nondeductible penalty on the taxable portion of the
distribution. Failure to make minimum required distributions by the
required beginning date may be subject to a 50% excise tax.
It should be noted that the Retirement Plan is a retirement
investment program involving commitments covering future years. In
deciding whether to utilize the Retirement Plan, it is important that
the employer consider his or her needs and those of the Retirement Plan
participants and whether the investment objectives of the Funds are
likely to fulfill such needs. Termination or curtailment of the
Retirement Plan for other than business reasons within a few years
after its adoption may result in adverse tax consequences.
<PAGE>
Employers who contemplate adoption of the Retirement Plan should
consult an attorney or financial adviser regarding all aspects of the
Retirement Plan as a retirement plan vehicle (including fiduciary
obligations under ERISA).
Individual Retirement Account
Persons with earned income, whether or not they are active
participants in a pension, profit-sharing or stock bonus plan described
in Code 401(a), Federal, state or local pension plan, an annuity plan
described in Code 403(a), an annuity contract or custodial account
described in Code 403(b), a simplified employee pension plan described
in Code 408(k), or a trust described in Code 501(c)(18) ("active
participant"), generally are eligible to establish an Individual
Retirement Account ("IRA"). An individual may make a deductible
contribution to an IRA only if (i) neither the individual nor his or
her spouse (unless living apart for the entire year and filing separate
returns) is an active participant, or (ii) the individual (and his or
her spouse, if applicable) has an adjusted gross income below a certain
level ($40,000 for married individuals filing a joint return, with a
phase-out for adjusted gross income between $40,000 and $50,000;
$25,000 for a single individual, with a phase-out for adjusted gross
income between $25,000 and $35,0000). However, an individual who is not
permitted to make a deductible contribution to an IRA for a taxable
year may nonetheless make annual nondeductible contributions to an IRA
up to the lesser of 100% of the individual's earned income or $2,000 to
an IRA (up to $2,250 to IRAs for an individual and his or her
non-earning spouse) for that year. There are special rules for
determining how withdrawals are to be taxed if an IRA contains both
deductible and nondeductible amounts. In general, a proportionate
amount of each withdrawal will be deemed to be made from nondeductible
contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be
made to a spousal IRA even if the spouse has earnings in a given year
if the spouse elects to be treated as having no earnings (for IRA
contribution purposes) for the year.
Withdrawals from the IRA (other than the portion treated as a
return of nondeductible contributions) are taxed as ordinary income
when received, may be made without penalty after the participant
reaches age 59 and must commence no later than the required beginning
date (see discussion of "Prototype Retirement Plans" above).
Withdrawals before age 59 may involve the payment of a 10%
nondeductible penalty on the taxable portion of the amount withdrawn.
The time and rate of withdrawal must conform with Code requirements in
order to avoid adverse tax consequences. All dividends and
distributions on shares of a Fund held in IRA accounts are reinvested
in full and fractional shares of the same class of the same Fund and
are not subject to federal income tax until withdrawn from the IRA.
Investors should consult their tax advisers for further tax
information, including information with respect to the imposition of
state and local income taxes and the effects of tax law changes.
The Trust has arranged for Boston Safe Deposit and Trust Company
to furnish the required custodial services for IRAs using any of the
Fund's shares as the underlying investment. The Bank will charge an
acceptance fee of $10 for each new IRA and an annual maintenance fee of
$15 for each year that an IRA is in existence. There is a $10 fee for
processing a premature distribution. These fees will be deducted from
the IRA account and may be changed by the Plan's Custodian upon 30
days' prior notice.
To establish an IRA for investment in a Fund, an investor must
complete an application and a custodial agreement on IRS Form 5305-A
(which has been supplemented to provide certain additional custodial
provisions) and must make an initial cash contribution to the IRA,
subject to the limitation on contributions described above. Pursuant to
IRS regulations, an investor may for seven days following establishment
of an IRA revoke the IRA. Detailed information on IRAs, together with
the necessary form of application and custodial agreement, is available
from the Trust and should be studied carefully by persons interested in
utilizing a Fund for IRA investments. Such persons should also consult
their own advisers regarding all aspects of the Funds as an appropriate
IRA investment vehicle.
Simplified Employee Pension Plans (SEP-IRA)
A simplified employee pension (SEP) allows an employer to make
contributions toward his or her own (if a self-employed individual) and
his or her employees' retirement and/or permits the employees to make
elective deferrals by salary reduction. A SEP requires an Individual
Retirement Account (a SEP-IRA) to be established for each "qualifying
employee," although the employer may include additional employees if it
wishes. A qualifying employee is one who: (a) is at least age 21, (b)
has worked for the employer during at least 3 of 5 years immediately
preceding the tax year, and (c) has received at least $400 (as indexed
for inflation) in compensation in the tax year.
An employer is not required to make any contribution to the
SEP-IRA. However, if the employer does make a contribution, the
contribution must be based on a written allocation formula and must not
discriminate in favor of highly compensated employees, as defined in
Code Section 414(q). The employer may make annual contributions on
behalf of each qualifying employee, provided that the contributions,
when combined with the employee's elective deferrals, do not exceed 15%
of the employee's compensation or $30,000, whichever is less.
<PAGE>
A SEP-IRA may include a salary reduction arrangement under which
the employee can choose to have the employer make contributions
("elective deferrals") to his or her SEP-IRA out of his or her salary.
However, employees may make elective deferrals only if (i) at least 50%
of the employer's eligible employees choose elective deferrals; (ii)
the employer did not have more than 25 eligible employees at any time
during the preceding year; and (iii) the amount deferred each year by
each eligible highly compensated employee as a percentage of pay is no
more than 125% of the average deferral percentage of all other eligible
employees. An elective deferral arrangement is not available for a SEP
maintained by a state or local government, or any of their political
subdivisions, agencies, or instrumentalities, or to exempt
organizations.
In general, the total income which an employee can defer under a
salary reduction arrangement included in a SEP and certain other
elective deferral arrangements is limited to $9,240 (indexed annually
for inflation). This dollar limit applies only to the elective
deferrals, not to any contributions from employer funds. The Code may
require that contributions be further limited to prevent discrimination
in favor of highly compensated employees. An employee may also make
regular IRA contributions to his or her SEP-IRA (see discussion of
IRAs, above).
Under the terms of the SEP-IRA, contributions by or on behalf of
participants may be invested in shares of the Funds (or shares of other
funds designated by the Adviser as eligible investments), as specified
by the participant. All dividends and distributions on shares held in
SEP-IRAs are reinvested in full and fractional shares of the same class
of the same Fund. Since no Fund is intended as a complete investment
program it is important, in connection with the adoption of a SEP-IRA,
that employers give careful consideration to the fiduciary obligation
requirements of ERISA, particularly those pertaining to diversification
of investments.
Withdrawals before age 59 may involve the payment of a 10%
nondeductible penalty on the amount withdrawn. Withdrawals must
commence no later than the required beginning date (see discussions of
"Prototype Retirement Plans" above). The time and rate of withdrawal
must conform with Code requirements in order to avoid adverse tax
consequences. Contributions to a SEP-IRA by an employer are excluded
from the employee's income rather than deducted from it. Elective
deferrals made to an employee's SEP-IRA generally are excluded from his
income in the year of deferral, but are included in wages for social
security (FICA) and unemployment (FUTA) tax purposes. However, if the
employee makes regular IRA contributions to his SEP-IRA (other than
elective deferrals), he can deduct them the same way as contributions
to a regular IRA, up to the amount of his deduction limit. Investors
should consult their tax advisers for further tax information including
information with respect to the imposition of state and local income
taxes and the effects of tax law changes.
The Fund has arranged for Boston Safe Deposit and Trust Company to
furnish the required custodial services for SEP-IRAs using the Funds as
the underlying investment. Boston Safe Deposit and Trust Company will
charge an acceptance fee of $10 for each new SEP-IRA and an annual
maintenance fee of $15 for each year that a SEP-IRA is in existence.
There is a $10 fee for each premature distribution. These fees will be
deducted from the SEP-IRA account and may be changed by the Custodian
upon 30 days' prior written notice.
To establish a SEP-IRA, an employer and employee should complete
the WPG IRA application materials, as well as either IRS Form 5305A-SEP
(if employees will make elective deferrals) and/or IRS Form 5305-SEP
(only if employer contributions will be made). Pursuant to IRS
regulations, an investor may for seven days following establishment of
a SEP-IRA revoke the SEP-IRA. Detailed information on SEP-IRAs,
together with the necessary form of application and custodial
agreement, is available from the Fund and should be studied carefully
by persons interested in utilizing the Fund for SEP-IRA investments.
Such persons should also consult their own advisers regarding all
aspects of the Fund as an appropriate SEP-IRA investment vehicle.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund within the Trust is separate for investment and
accounting purposes and is treated as a separate entity for federal
income tax purposes.
A regulated investment company qualifying under Subchapter M of
the Code is not subject to federal income tax on distributed amounts to
the extent that it distributes annually its taxable and, if any,
tax-exempt net investment income and net realized capital gains in
accordance with the timing requirements of the Code. Each Fund intends
to elect and to qualify to be treated as a regulated investment company
and intends to continue to so qualify for each taxable year.
Qualification of a Fund for treatment as a regulated investment
company under the Code requires, among other things, that (a) at least
90% of a Fund's annual gross income, without offset for losses from the
sale or other disposition of stock or securities or other transactions,
be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including but not
limited to gains from options, futures, or forward contracts) derived
with respect to its business of investing in such stock, securities or
currencies; (b) the Fund derive less than 30% of its annual gross
income from gains (without deduction for losses) from the sale or other
disposition of any of the following held (for tax purposes) for less
than three months: (i) stock or securities; (ii) options, futures or
forward contracts (not on foreign currencies) or (iii) foreign
currencies (or options, futures or forward contracts on foreign
currencies) not directly related to the Fund's principal business of
investing in stock or securities and related options or futures; (c)
the Fund distribute at least annually to its shareholders as dividends
at least 90% of its taxable and tax-exempt net investment income, the
excess of net short-term capital gain over net long-term capital loss
earned in each year and any other net income (except for the excess, if
any, of net long-term capital gain over net short-term capital loss,
which need not be distributed in order for the Fund to qualify as a
regulated investment company but is taxed to the Fund if it is not
distributed); and (d) the Fund diversify its assets so that, at the
close of each quarter of its taxable year, (i) at least 50% of the fair
market value of its total (gross) assets is comprised of cash, cash
items, U.S. Government securities, securities of other regulated
investment companies and other securities limited in respect of any one
issuer to no more than 5% of the fair market value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer and
(ii) no more than 25% of the fair market value of its total assets is
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged
in the same, similar, or related trades or businesses.
It is expected that separate accounts of insurance companies will
be purchasing Institutional Class shares of the Funds. As such, each
Fund must, and intends to, comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder.
These requirements, which are in addition to the diversification
requirements imposed on a Fund by the 1940 Act and Subchapter M of the
Code, place certain limitations on the assets of each separate account
and, because Section 817(h) and those regulations treat the assets of
the Fund as assets of the related separate account, the assets of a
Fund, that may be invested in securities of a single issuer.
Specifically, the regulations provide that, except as permitted by the
"safe harbor" described below, as of the end of each calendar quarter
or within 30 days thereafter no more than 55% of the total assets of a
Fund may be represented by any one investment, no more than 70% by any
two investments, no more than 80% by any three investments and no more
than 90% by any four investments. For this purpose, all securities of
the same issuer are considered a single investment, and each U.S.
Government agency and instrumentality is considered a separate issuer.
Section 817(h) provides, as a safe harbor, that a separate account will
be treated as being adequately diversified if the diversification
requirements under Subchapter M of the Code are satisfied and no more
than 55% of the value of the account's total assets are cash and cash
items (including receivables), U.S. Government securities and
securities of other regulated investment companies. Failure by a Fund
to both qualify as a regulated investment company and satisfy the
Section 817(h) requirements would generally result in treatment of the
variable contract holders other than as described in the Institutional
Class shares Prospectus, including inclusion in ordinary income of
income accrued under the contracts for the current and all prior
taxable years. Any such failure may also result in adverse tax
consequences for the insurance company issuing the contracts.
Unless its only shareholders are life insurance company segregated
asset accounts held in connection with variable contracts, trusts that
are described in section 401(a) of the Code and exempt from tax under
section 501(a) of the Code, and investors of "seed money" not in excess
of $250,000, each Fund is subject to a 4% nondeductible federal excise
tax on amounts required to be but not distributed under a prescribed
formula. The formula requires that a Fund distribute (or be deemed to
have distributed) to shareholders during a calendar year at least 98%
of the Fund's ordinary income (not including tax-exempt interest) for
the calendar year, at least 98% of the excess of its capital gains over
the capital losses realized during the one-year period ending October
31 during such year, as well as any income or gain (as so computed)
from the prior calendar year that was not distributed for such year and
on which the Fund paid no federal income tax. Each Fund has
distribution policies that should generally enable it to avoid
liability for this tax.
Net investment income for each Fund is the Fund's investment
income less its expenses. Dividends from taxable net investment income
and the excess, if any, of net short-term capital gain over net
long-term capital loss of a Fund will be treated under the Code as
ordinary income, and dividends from net long-term capital gain in
excess of net short-term capital loss ("capital gain dividends") will
be treated under the Code as long-term capital gain, for federal income
tax purposes. These dividends are paid after taking into account, and
reducing the distribution to the extent of, any available capital loss
carryforwards. Distributions from a Fund's current or accumulated
earnings and profits, as computed for Federal income tax purposes, will
be treated as described above whether taken in shares or in cash.
Certain distributions received in January may be treated as if paid by
a Fund and received by a shareholder on December 31 of the prior year.
Dividends, including capital gain dividends, paid by a Fund
shortly after a shareholder's purchase of shares have the effect of
reducing the net asset value per share of his shares by the amount per
share of the dividend distribution. Although such dividends are, in
effect, a partial return of the shareholder's purchase price to the
<PAGE>
shareholder, they may be characterized as ordinary income or capital
gain as described above.
Equity options (including options on stock and options on
narrow-based stock indices) and over-the-counter options on debt
securities written or purchased by a Fund will be subject to tax under
Section 1234 of the Code. In general, no loss is recognized by a Fund
upon payment of a premium in connection with the purchase of a put or
call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse
or sale of the option, on the Fund's holding period for the option, and
in the case of an exercise of the option, on the Fund's holding period
for the underlying security. The purchase of a put option may
constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying stock or security or
a substantially identical stock or security in the Fund's portfolio. If
a Fund writes a put or call option, no gain is recognized upon its
receipt of a premium. If the option lapses or is closed out, any gain
or loss is treated as a short-term capital gain or loss. If a call
option is exercised, whether the gain or loss is long-term or
short-term depends on the holding period of the underlying stock or
security. The exercise of a put option written by a Fund is not a
taxable transaction for the Fund.
All futures contracts entered into by a Fund and all listed
nonequity options written or purchased by a Fund (including options on
debt securities, options on futures contracts, options on securities
indices and options on broad-based stock indices) will be governed by
Section 1256 of the Code. Absent a tax election to the contrary, gain
or loss attributable to the lapse, exercise or closing out of any such
position will be treated as 60% long-term and 40% short-term capital
gain or loss, and on the last trading day of a Fund's taxable year, all
outstanding Section 1256 positions will be marked to market (i.e.,
treated as if such positions were closed out at their closing price on
such day), and any resulting gain or loss will be recognized as 60%
long-term and 40% short-term capital gain or loss. Under certain
circumstances, entry into a futures contract to sell a security may
constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying security or a
substantially identical security in a Fund's portfolio.
Because options and futures activities of a Fund may increase the
amount of gains from the sale of securities or investments held or
treated as held for less than three months, the Funds may have to limit
their options and futures transactions in order to comply with the 30%
limitation described above.
<PAGE>
Positions of a Fund which consist of at least one stock and at
least one stock option or other position with respect to a related
security which substantially diminishes the Fund's risk of loss with
respect to such stock could be treated as a "straddle" which is
governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of stock or
securities and conversion of short-term capital losses into long-term
capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security
not governed by Section 1256 and at least one futures contract or
listed nonequity option governed by Section 1256 which substantially
diminishes the Fund's risk of loss with respect to such debt security
will be treated as a "mixed straddle." Although mixed straddles are
subject to the straddle rules of Section 1092 of the Code, certain tax
elections exist for them which reduce or eliminate the operation of
these rules. Each Fund will monitor its transactions in options and
futures and may make certain tax elections in order to mitigate the
operation of these rules and prevent disqualification of the Fund as a
regulated investment company for federal income tax purposes.
These special tax rules applicable to options and futures
transactions could affect the amount, timing and character of a Fund's
income or loss and hence of its distributions to shareholders by
causing holding period adjustments, converting short-term capital
losses into long-term capital losses, and accelerating a Fund's income
or deferring its losses.
A Fund's investment in zero coupon securities or other securities
having original issue discount (or market discount, if the Fund elects
to include market discount in income currently) will generally cause it
to realize income prior to the receipt of cash payments with respect to
these securities. The mark to market rules described above may also
require a Fund to recognize gains without a concurrent receipt of cash.
In such case, a Fund will not be able to purchase additional income
producing securities with the cash generated by the sale of such
securities but will be required to use such cash to make such required
distributions, and its current portfolio income may ultimately be
reduced accordingly. In order to distribute this income or gains,
maintain its qualification as a regulated investment company, and avoid
federal income or excise taxes, the Fund may be required to liquidate
portfolio securities that it might otherwise have continued to hold.
The Funds may be subject to foreign withholding or other foreign
taxes with respect to income (possibly including, in some cases,
capital gains) derived from foreign securities. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax
treaty. However, the Funds will not be eligible to pass through to
shareholders any foreign tax credits or deductions for foreign taxes
paid by the Funds that are not thus reduced or eliminated. Certain
foreign exchange gains and losses realized by the Funds with respect to
such securities or related currency transactions will generally be
treated as ordinary income and losses. Certain uses of foreign currency
and investments by the Funds in certain "passive foreign investment
companies" may be limited in order to avoid adverse tax consequences
for the Funds (or an election, if available, may be made with respect
to such investments).
Different tax treatment, including a penalty on certain
distributions, excess contributions or other transactions is accorded
to accounts maintained as IRAs or other retirement plans. Investors
should consult their tax advisers for more information. See "Prototype
Retirement Plan For Employers and Self-Employed Individuals,"
"Simplified Employee Pension Plans (SEP-IRA)," and "Individual
Retirement Accounts."
Redemptions, including exchanges, of shares may give rise to
realized gains or losses, recognizable for tax purposes except for
investors subject to tax provisions that do not require them to
recognize such gains or losses. All or a portion of a loss realized
upon the redemption of shares may be disallowed under "wash sale" rules
to the extent shares are purchased (including shares acquired by means
of reinvested dividends) within a 61-day period beginning 30 days
before and ending 30 days after such redemption. Any loss realized upon
a shareholder's sale, redemption or other disposition of shares with a
tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any distribution of long-term capital
gains with respect to such shares. Exchanges and withdrawals under the
Systematic Withdrawal Plan are treated as redemptions for federal
income tax purposes.
The Trust is organized as a Delaware business trust, and neither
the Trust nor the Funds will be subject to any corporate excise or
franchise tax in the State of Delaware, nor will they be liable for
Delaware income taxes provided that each Fund qualifies as a regulated
investment company for federal income tax purposes and satisfies
certain income source requirements of Delaware law. If each Fund so
qualifies and distributes all of its income and capital gains, it will
also be exempt from the New York State franchise tax and the New York
City general corporation tax, except for small minimum taxes.
The foregoing discussion of U.S. federal income tax law does not
address the special tax rules applicable to certain classes of
investors, such as insurance companies. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Funds, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30%
<PAGE>
(or at a lower rate under an applicable income tax treaty) on Fund
distributions treated as ordinary dividends.
This discussion of the federal income tax treatment of the Funds
and their distributions is based on the federal income tax law in
effect as of the date of this Statement of Additional Information.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional
information and about the possible application of state, local and
foreign taxes in light of their particular tax situations.
PORTFOLIO BROKERAGE
(See "Portfolio Brokerage" in the Prospectuses.)
It is the general policy of the Trust not to employ any broker in
the purchase or sale of securities for a Fund's portfolio unless the
Trust believes that the broker will obtain the best results for the
Fund, taking into consideration such relevant factors as price, the
ability of the broker to effect the transaction and the broker's
facilities, reliability and financial responsibility. Commission rates,
being a component of price, are considered together with such factors.
Subject to the foregoing, where transactions are effected on securities
exchanges, the Trust intends to employ primarily WPG as its broker. The
Trust is not obligated to deal with any broker or group of brokers in
the execution of transactions in portfolio securities.
WPG acts as broker for the Funds on exchange transactions,
subject, however, to the general policy of the Trust set forth above
and the procedures adopted by the Trustees. Commissions paid to WPG
must be at least as favorable as those believed to be contemporaneously
charged by other brokers in connection with comparable transactions
involving similar securities being purchased or sold on a securities
exchange. A transaction is not placed with WPG if a Fund would have to
pay a commission rate less favorable than WPG's contemporaneous charges
for comparable transactions for its other most favored, but
unaffiliated, customers except for accounts for which WPG acts as a
clearing broker for another brokerage firm, and any customers of WPG
determined by a majority of the Independent Trustees not to be
comparable to the Funds. With regard to comparable customers, in
isolated situations, subject to the approval of a majority of the
Independent Trustees, exceptions may be made. Since WPG has, as
investment adviser to the Funds, the obligation to provide management,
which includes elements of research and related skills, such research
and related skills will not be used by WPG as a basis for negotiating
commissions at a rate higher than that determined in accordance with
the above criteria.
The commission rate on all exchange orders is subject to
negotiation. Section 17(e) of the 1940 Act limits to "the usual and
customary broker's commission" the amount which can be paid by the
Trust to an affiliated person, such as WPG, acting as broker in
connection with transactions effected on a securities exchange. The
Trustees, including a majority of the Independent Trustees, have
adopted procedures designed to comply with the requirements of Section
17(e) of the 1940 Act and Rule 17e-1 thereunder to ensure a broker's
commission that is "reasonable and fair compared to the commission, fee
or other remuneration received by other brokers in connection with
comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time ...."
Rule 17e-1 also requires the Trustees, including a majority of the
Independent Trustees, to adopt procedures reasonably designed to
provide that the commission paid is consistent with the above standard,
review those procedures at least annually to determine that they
continue to be appropriate and determine at least quarterly that
transactions have been effected in compliance with those procedures.
The Trustees of the Trust, including a majority of the Independent
Trustees, have adopted procedures designed to comply with the
requirements of Rule 17e-1.
In selecting brokers other than WPG to effect transactions on
securities exchanges, the Trust considers the factors set forth in the
first paragraph under this heading and any investment products or
services provided by such brokers, subject to the criteria of Section
28(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Section 28(e) specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest rate available. To obtain the
benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions
paid are "reasonable in relation to the value of the brokerage and
research services provided viewed in terms of either that particular
transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion." Accordingly,
if the Trust determines in good faith that the amount of commissions
charged by a broker is reasonable in relation to the value of the
brokerage and research products and services provided by such broker,
the Trust may pay commissions to such broker in an amount greater than
the amount another firm might charge. Research products and services
provided to the Trust include research reports on particular industries
and companies, economic surveys and analyses, recommendations as to
specific securities and other products or services (e.g., quotation
equipment and computer related costs and expenses) providing lawful and
appropriate assistance to WPG (and its subsidiaries) in the performance
of their decision-making responsibilities.
<PAGE>
Each year, the Adviser considers the amount and nature of the
research products and services provided by other brokers as well as the
extent to which such products and services are relied upon, and
attempts to allocate a portion of the brokerage business of their
clients, such as the Trust, on the basis of that consideration. In
addition, brokers sometimes suggest a level of business they would like
to receive in return for the various services they provide. Actual
brokerage business received by any broker may be less than the
suggested allocations, but can (and often does) exceed the suggestions,
because total brokerage is allocated on the basis of all the
considerations described above. In no instance is a broker excluded
from receiving business because it has not been identified as providing
research services. As permitted by Section 28(e), the investment
information received from other brokers may be used by WPG (and its
subsidiaries) in servicing all its accounts and not all such
information may be used by WPG, in its capacity as the Adviser, in
connection with the Trust. Nonetheless, the Trust believes that such
investment information provides the Trust with benefits by
supplementing the research otherwise available to the Trust.
As set forth above, the Trust employs WPG, a member firm of the
NYSE, as its principal broker on U.S. exchange transactions. Section
11(a) of the Exchange Act provides that a member firm of a national
securities exchange (such as WPG) may not effect transactions on such
exchange for the account of an investment company (such as the Trust)
of which the member firm or its affiliate (such as the Adviser) is the
investment adviser unless certain conditions are met. These conditions
require that the investment company authorize the practice and that the
investment company receive from the member firm at least annually a
statement of all commissions paid in connection with such transactions.
WPG's transactions on behalf of the Funds are effected in compliance
with these conditions.
WPG furnishes to the Trust at least quarterly a statement setting
forth the total amount of all compensation retained by WPG or any
associated person of WPG in connection with effecting transactions for
the account of the Trust, and the Trustees of the Trust review and
approve all the Trust's portfolio transactions and the compensation
received by WPG in connection therewith.
WPG does not knowingly participate in commissions paid by the
Trust to other brokers or dealers and does not seek or knowingly
receive any reciprocal business as the result of the payment of such
commissions. In the event WPG at any time learns that it has knowingly
received reciprocal business, it will so inform the Trustees.
To the extent that WPG receives brokerage commissions on Trust
portfolio transactions, officers and Trustees of the Trust who are also
<PAGE>
principals in WPG may receive indirect compensation from the Trust
through their participation in such brokerage commissions.
In certain instances there may be securities which are suitable
for a Fund's portfolio as well as for that of another Fund or one or
more of the other clients of the Adviser. Investment decisions for a
Fund and for the Adviser's other clients are made with a view to
achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though
it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or
more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated
among clients in a manner believed to be equitable to each. It is
recognized that in some cases this system could have a detrimental
effect on the price or volume of the security in a particular
transaction as far as a Fund is concerned. The Trust believes that over
time its ability to participate in volume transactions will produce
better executions for the Funds. When appropriate, orders for the
account of the Funds are combined with orders for other investment
companies or other clients advised by WPG in order to obtain a more
favorable commission rate. When the same security is purchased for a
Fund and one or more other funds or other clients on the same day, each
party pays the average price and commissions paid are allocated in
direct proportion to the number of shares purchased.
The U.S. Government and debt securities in which the Funds invest
are traded primarily in the over-the-counter market. Transactions in
the over-the-counter market are generally principal transactions with
dealers and the costs of such transactions involve dealer spreads
rather than brokerage commissions. With respect to over-the-counter
transactions, the Trust, where possible, deals directly with the
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available
elsewhere. Under the 1940 Act, persons affiliated with the Trust are
prohibited from dealing with the Trust as a principal in the purchase
and sale of securities. Since transactions in the over-the-counter
market usually involve transactions with dealers acting as principal
for their own account, affiliated persons of the Trust, including WPG,
may not serve as the Trust's dealer in connection with such
transactions. However, affiliated persons of the Trust may serve as its
broker in transactions conducted on an exchange or over-the-counter
transactions conducted on an agency basis. On occasion, certain money
market instruments may be purchased directly from an issuer, in which
case no commissions or discounts are paid.
Subject to the supervision of the Trustees, all investment
decisions of the Trust are executed through WPG's trading department.
PORTFOLIO TURNOVER
See "Risk Considerations and Other Investment Practices and
Policies -- Portfolio Turnover" in the Prospectus.
The annual portfolio turnover rate of a Fund is calculated by
dividing the lesser of the purchase or sales of a Fund's portfolio
securities for the year by the monthly average of the value of the
portfolio securities owned by that Fund during the year. The monthly
average is calculated by totalling the values of the portfolio
securities as of the beginning and end of the first month of the year
and as of the end of the succeeding 11 months and dividing the sum by
13. In determining portfolio turnover, securities (including options)
which have maturities at the time of acquisition of one year or less
("short-term securities"), are excluded. A turnover rate of 100% would
occur if all of a Fund's portfolio securities (other than short-term
securities) were replaced once in a period of one year. It should be
noted that if a Fund were to write a substantial number of options
which are exercised, the portfolio turnover rate of that Fund would
increase. Increased portfolio turnover results in increased brokerage
costs which the Trust must pay and the possibility of more short-term
gains which may increase the difficulty of qualifying as a regulated
investment company.
To the extent that their portfolios are traded for short-term
market considerations and exceeds 100%, the annual portfolio turnover
rate of the Funds could be higher than most mutual funds. None of the
Funds will engage in short-term trading to an extent which would
disqualify them as regulated investment companies under Subchapter M of
the Code.
ORGANIZATION
(See "Management of the Tomorrow Funds" and "The Trust" in the
Prospectuses.)
As a Delaware business trust, the Trust's operations are governed
by its Agreement and Declaration of Trust dated June 21, 1995 (the
"Declaration of Trust"). A copy of the Trust's Certificate of Trust,
also dated June 21, 1995, is on file with the Office of the Secretary
of State of the State of Delaware. Upon the initial purchase of shares,
the shareholder agrees to be bound by the Trust's Declaration of Trust,
as amended from time to time. Generally, Delaware business trust
shareholders are not personally liable for obligations of the Delaware
business trust under Delaware law. The Delaware Business Trust Act (the
"Delaware Act") provides that a shareholder of a Delaware business
trust shall be entitled to the same limitation of liability extended to
shareholders of private for-profit corporations. The Trust's
Declaration of Trust expressly provides that the Trust has been
organized under the Delaware Act and that the Declaration of Trust is
to be governed by Delaware law. It is nevertheless possible that a
Delaware business trust, such as the Trust, might become a party to an
action in another state whose courts refused to apply Delaware law, in
which case the Trust's shareholders could be subject to personal
liability.
To guard against this risk, the Declaration of Trust (i) contains
an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides that notice of such disclaimer may be given
in each agreement, obligation and instrument entered into or executed
by the Trust or its Trustees, (ii) provides for the indemnification out
of Trust property of any shareholders held personally liable for any
obligations of the Trust or any series of the Trust and (iii) provides
that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, the risk of a Trust shareholder
incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the
following factors are present: (1) a court refused to apply Delaware
law; (2) the liability arose under tort law or, if not, no contractual
limitation of lability was in effect; and (3) the Trust itself would be
unable to meet its obligations. In the light of Delaware law, the
nature of the Trust's business and the nature of its assets, the risk
of personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Trust shall
indemnify each of its Trustees and officers against liabilities and
expenses reasonably incurred by them, in connection with, or arising
out of, any action, suit or proceeding, threatened against or otherwise
involving such Trustee or officer, directly or indirectly, by reason of
being or having been a Trustee or officer of the Trust. The Declaration
of Trust does not authorize the Trust to indemnify any Trustee or
officer against any liability to which he or she would otherwise be
subject by reason of or for willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties.
Under the Declaration of Trust, the Trust is not required to hold
annual meetings to elect Trustees or for other purposes. It is not
anticipated that the Trust will hold shareholders' meetings unless
required by law or the Declaration of Trust. The Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on
the Board if, at any time, fewer than a majority of the Trustees have
been elected by the shareholders of the Trust. The Board is required to
call a meeting for the purpose of considering the removal of persons
<PAGE>
serving as Trustee if requested in writing to do so by the holders of
not less than 10% of the outstanding shares of the Trust.
Shares of the Trust do not entitle their holders to cumulative
voting rights, so that the holders of more than 50% of the outstanding
shares of the Trust may elect all of the Trustees, in which case the
holders of the remaining shares would not be able to elect any
Trustees. As determined by the Trustees, shareholders are entitled to
one vote for each full share held and fractional votes for fractional
shares held or one vote for each dollar of net asset value (number of
shares held times the net asset value of the applicable class of the
applicable Fund).
As it is expected that separate accounts of insurance companies
will be purchasing Institutional Class shares of each of the Funds, it
should be noted that the rights, if any, of variable contract holders
to vote the shares of a Fund beneficially owned by such variable
contract holders are governed by the relevant variable contract.
Pursuant to the Declaration of Trust, the Trustees may create
additional funds by establishing additional series of shares in the
Trust. The establishment of additional series would not affect the
interests of current shareholders in the existing six Funds. As of the
date of this Statement of Additional Information, the Board does not
have any plan to establish another series of shares in the Trust.
Pursuant to the Declaration of Trust, the Board may establish and
issue multiple classes of shares for each Fund. As of the date of this
Statement of Additional Information, the Trustees have authorized the
issuance of two classes of shares for each series, designated Adviser
Class and Institutional Class. See "The Trust" in the Prospectuses for
a detailed description of the respective rights of the two classes of
shares. The Trustees do not have any plan to establish additional
classes of shares for any Fund.
Each share of each class of a Fund is entitled to such dividends
and distributions out of the income earned on the assets belonging to
that Fund which are attributable to such class as are declared in the
discretion of the Board. In the event of the liquidation or dissolution
of the Trust, shares of each class of each Fund are entitled to receive
their proportionate share of the assets which are attributable to such
class of such Fund and which are available for distribution as the
Trustees in their sole discretion may determine. Shareholders are not
entitled to any preemptive, conversion or subscription rights. All
shares, when issued, will be fully paid and non-assessable by the
Trust.
Pursuant to the Declaration of Trust and subject to shareholder
approval (if then required), the Trustees may authorize each Fund to
invest all or part of its investable assets in a single open-end
investment company that has substantially the same investment
objectives, policies and restrictions as the Fund. As of the date of
this Statement of Additional Information, the Board does not have any
plan to authorize any Fund to so invest its assets.
"Tomorrow Funds Retirement Trust" is the designation of the Trust
for the time being under the Declaration of Trust, and all persons
dealing with a Fund must look solely to the property of that Fund for
the enforcement of any claims against that Fund as neither the
Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of a Fund or the
Trust. No Fund is liable for the obligations of any other Fund. Since
the Funds use combined prospectuses, however, it is possible that one
Fund might become liable for a misstatement or omission in its
prospectus regarding the other Fund with which its disclosure is
combined. The Trustees have considered this factor in approving the use
of the combined prospectuses.
CUSTODIAN
The Custodian for the Trust is Boston Safe Deposit and Trust
Company at One Exchange Place, Boston, Massachusetts 02109. In its
capacity as Custodian, Boston Safe Deposit and Trust Company performs
all accounting services, holds the assets of the Trust and is
responsible for calculating the net asset value per share.
TRANSFER AGENT
The Shareholder Services Group, Inc. acts as transfer agent for
the Trust and, in such capacity, processes purchases, transfers and
redemptions of shares, acts as dividend disbursing agent, and maintains
records and handles correspondence with respect to shareholder
accounts.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("KPMG"), 345 Park Avenue, New York, New
York 10154, are the independent auditors for the Trust. Professional
services performed by KPMG include audits of the financial statements
of the Trust, consultation on financial, accounting and reporting
matters, review and consultation regarding various filings with the SEC
and attendance at the meetings of the Audit Committee and Board of
Trustees. KPMG also performs other professional services for the Trust
including preparation of income tax returns of the Funds.
<PAGE>
APPENDIX
Description of Bond Ratings Moody's Investors Service, Inc.
Aaa: Bonds which 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 edge." 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 which 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 fluctuations of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A: Bonds which 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
sometime in the future.
Baa: Bonds which 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.
Moody's also provides credit ratings for preferred stocks. It
should be borne in mind that preferred stock occupies a junior position
to bonds within a particular capital structure and that these
securities are rated within the universe of preferred stocks.
aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
aa: An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
a: An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classifications, earnings and asset
protections are, nevertheless, expected to be maintained at adequate
levels.
baa: An issue which is rated "baa" is considered to be a medium grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in
recognition of the differences between short-term and long-term credit
risk. Loans bearing the designation MIG 1 are of the best quality,
enjoying strong protection by establishing cash flows of funds for
their servicing or by established and broad-based access to the market
for refinancing, or both. Loans bearing the designation MIG 2 are of
high quality, with margins of protection ample although not so large as
in the preceding group. A short term issue having a demand feature
(i.e. payment relying on external liquidity and usually payable on
demand rather than fixed maturity dates) is differentiated by Moody's
with the use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax-exempt commercial
paper. These are promissory obligations (1) not having an original
maturity in excess of nine months, and (2) backed by commercial banks.
Notes bearing the designation P-1 have a superior capacity for
repayment. Notes bearing the designation P-2 have a strong capacity for
repayment.
Standard & Poor's Ratings Group
AAA: Bonds rated AAA have the higher rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small
degree.
A: Bonds rated A have a very 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 bonds in this category than in higher
rated categories.
S&P's top ratings for municipal notes issued after July 29, 1984
are SP-1 and SP-2. The designation SP-1 indicates a very strong
capacity to pay principal and interest. A "+" is added for those issues
determined to possess overwhelming safety characteristics. An "SP-2"
designation indicates a satisfactory capacity to pay principal and
interest.
Commercial paper rated A-2 or better by S&P is described as having
a very strong degree of safety regarding timeliness and capacity to
repay. Additionally, as a precondition for receiving an S&P commercial
paper rating, a bank credit line and/or liquid assets must be present
to cover the amount of commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity
for repayment of short-term promissory obligations.
<PAGE>
GLOSSARY
Commercial Paper: Short-term promissory notes of large
corporations with excellent credit ratings issued to finance their
current operations.
Certificates of Deposit: Negotiable certificates representing a
commercial bank's obligations to repay funds deposited with it, earning
specified rates of interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a
draft which has been drawn on it by a customer. These obligations
are backed by large banks and usually are backed by goods in
international trade.
Time Deposits: Non-negotiable deposits in a banking institution
earning a specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and
other business organizations in order to finance their long-term
credit needs.
<PAGE>
Tomorrow Funds Retirement Trust
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
September 21, 1995
<S> <C>
Core
Large-Cap
Stock
Fund
Assets:
Cash....................................... $100,000
100,000
Liabilities: 0
Total Net Assets........................... 100,000
Net Assets Represented By:
Shares of Beneficial Interest.............. 10
Paid in Surplus............................ 99,990
Net assets, at value, applicable to
10,000 outstanding shares of
beneficial interest with
$0.001 par value........................ $100,000
Net asset value, offering and redemption
price per share......................... $10.00
<FN>
NOTES:
(1) The Tomorrow Funds Retirement Trust (the "Trust") was organized as a
Delaware Business Trust and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust has
had no operations through September 21, 1995 other than those relating
to organizational matters. The Trust is comprised of the Core Large-Cap Stock
Fund, the Core Small-Cap Stock Fund, the Tomorrow Long-Term Retirement Fund,
the Tomorrow Medium-Term Retirement Fund, the Tomorrow Short-Term Retirement
Fund and the Tomorrow Post-Retirement Fund.
(2) Each Fund in the Trust has entered into an investment advisory agreement
with Weiss, Peck & Greer, L.L.C., ("WPG") to act as investment adviser, as well
as a separate administration agreement with WPG to provide shareholder and
accounting services.
(3) WPG has advanced all organizational and start-up expenses of the Trust,
estimated to total $275,000, which will be reimbursed by the Trust. Such
expenses have been deferred and will be amortized on a straight line basis
over a sixty month period that commences the effective date of the Fund's
initial prospectus. WPG has agreed in the event that any of the initial
10,000 shares are redeemed by any holder thereof during the period of
amortization of the Fund's organizational and start-up expenses, the
redemption proceeds will be reduced by any such organizational expenses in the
same proportion as the number of initial shares being redeemed bears to the
number of the initial shares outstanding at the time of the redemption.
(4) Each Fund intends to comply in its initial year and thereafter with the
requirements of the Internal Revenue Code necessary to qualify as a regulated
investment company and as such will not be subject to Federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders.
(5) There are two classes in each Fund of the Trust. The Institutional Class
has a service fee of 0.25% and the Advisor Class which has a 12b-1 Fee of
0.50%. The deposit of $100,000 seed capital has been made exclusively to
the Institutional Class of shares in the Core Large-Cap Stock Fund.
</FN>
</TABLE>
PART B
WEISS, PECK & GREER INVESTMENTS
TOMORROW FUNDS RETIREMENT TRUST
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
Tomorrow Post-Retirement Fund
Core Large-Cap Stock Fund
Core Small-Cap Stock Fund
(each a "Fund" and collectively, the "Funds")
- ------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL CLASS SHARES
November 22, 1995
- ------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Institutional Class prospectuses
of the Funds, each dated November 22, 1995, as amended and/or
supplemented from time to time (collectively, the "Prospectuses"),
copies of which may be obtained without charge by writing to Tomorrow
Funds Retirement Trust (the "Trust"), One New York Plaza, New York
10004 or by calling 1-800-223-3332.
THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED
OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
Page
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.......... 1
Quantitative Methodology.......................... 2
INVESTMENT TECHNIQUES.................................. 3
Repurchase Agreements............................. 3
Forward Commitment, Delayed Delivery and
When-Issued Transactions........................ 4
Loans of Portfolio Securities..................... 6
Options........................................... 7
Futures Transactions.............................. 10
Limitations on the Use of Futures Contracts
and Options on Futures.......................... 11
Special Considerations and Risks
Related to Options and Futures Transactions..... 12
Privately Issued Mortgage-Backed Securities....... 15
Risks Associated with Specific Types
of Derivative Securities........................ 16
Participation Interests........................... 16
Securities of Foreign Issuers..................... 17
Restricted and Illiquid Securities................ 18
Other Investment Companies........................ 18
CALCULATION OF THE FUNDS' RETURNS...................... 19
Total Return...................................... 19
Yield............................................. 20
Other Quotations, Comparisons and
General Information............................. 20
INVESTMENT RESTRICTIONS................................ 22
ADVISORY AND ADMINISTRATIVE SERVICES................... 28
Investment Adviser................................ 28
Administrator..................................... 31
Principal Underwriter............................. 33
SERVICE PLANS.......................................... 33
TRUSTEES AND OFFICERS.................................. 35
HOW TO PURCHASE SHARES................................. 39
Acquiring Share of the Funds in
Exchange for Securities......................... 39
REDEMPTION OF SHARES................................... 40
Systematic Withdrawal Plan........................ 40
-i-
<PAGE>
NET ASSET VALUE........................................ 41
INVESTOR SERVICES...................................... 42
Automatic Investment Plan......................... 43
Prototype Retirement Plan for Employers
and Self-Employed Individuals................... 43
Individual Retirement Account..................... 45
Simplified Employee Pension Plans (SEP-IRA)....... 46
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS................ 48
PORTFOLIO BROKERAGE.................................... 54
PORTFOLIO TURNOVER..................................... 57
ORGANIZATION........................................... 58
CUSTODIAN.............................................. 61
TRANSFER AGENT......................................... 61
INDEPENDENT AUDITORS................................... 61
APPENDIX............................................... 62
GLOSSARY............................................... 65
-ii-
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
(See "Investment Objectives and Policies," and "Risk
Considerations and Other Investment Practices and Policies" in the
Prospectuses.)
All capitalized terms not defined herein shall have the meanings
set forth in the Prospectuses.
The Trust consists of separate Funds, the Institutional Class
shares of which are offered to separate accounts (the "Separate
Accounts" or Accounts") of various insurance companies ("Participating
Insurance Companies") to fund variable annuity and variable life
insurance contracts (the "Variable Contracts"). As described in the
Prospectuses, Institutional Class shares of the Funds also may be
offered to certain qualified pension and retirement plans (the
"Qualified Plans"). The terms and conditions of the Variable Contracts
and any limitations upon the Funds in which the Accounts may be
invested are set forth in a separate prospectus and statement of
additional information relating to the Variable Contracts. The terms
and conditions of a Qualified Plan and any limitations upon the Funds
in which such Qualified Plan may be invested are set forth in such
Qualified Plan's governing documents. The Trust reserves the right to
limit the types of Accounts and the types of Qualified Plans that may
invest in any Fund.
Qualified Plans and Participating Insurance Companies are the
record holders of shares of beneficial interest in each Fund. Subject
to the limitations set forth in their Variable Contracts and the
separate prospectus and statement of additional information relating to
the Variable Contracts, contract holders may direct through their
Participating Insurance Companies the allocation of amounts available
for investment among the Funds. Similarly, in accordance with any
limitations set forth in their Qualified Plans, Qualified Plan
participants may direct through their Qualified Plan fiduciaries the
allocation of amounts available for investment among the Funds.
Instructions for any such allocation, or for the purchase or redemption
of shares of a Fund, must be made by the investor's Participating
Insurance Company or Qualified Plan fiduciary, as the case may be, as
the record holder of the Fund's shares. The rights of Participating
Insurance Companies and Qualified Plans as record holders of shares of
a Fund are different from the rights of Variable Contract holders and
Qualified Plan participants. The term "shareholder" in this Statement
of Additional Information when used in the context of Institutional
Class shares refers only to Participating Insurance Companies and
Qualified Plans, and not to Variable Contract holders or Qualified Plan
participants.
<PAGE>
The securities in which each Fund may invest and certain other
investment policies are described in the Funds' Prospectuses. This
Statement of Additional Information should be read in conjunction with
the Prospectuses and, when applicable, with the separate prospectus and
statement of additional information related to the applicable Account.
The Appendix to this Statement of Additional Information contains
a description of the quality categories of corporate bonds in which the
Funds may invest, and a Glossary describing some of the Funds'
investments.
Quantitative Methodology
To seek to achieve their respective investment objectives, each of
the Core Large-Cap Stock Fund ("Large-Cap Fund") and the Core Small-Cap
Stock Fund ("Small-Cap Fund") under normal market conditions invests in
a portfolio of securities that are considered more "efficient" than the
Standard & Poor's 500 Stock Index (the "S&P 500") in the case of the
Large-Cap Fund and the Russell 2000 Index (the "Russell 2000") in the
case of the Small-Cap Fund. The other Funds seek to achieve similar
results with respect to the amount of their assets allocated to
Large-Cap, Medium-Cap and Small-Cap securities (as described in the
Prospectus applicable to such Funds). The Benchmarks for the Large-Cap,
Medium-Cap and Small-Cap Subcategories are the S&P 500, the Standard &
Poor's 400 MidCap Index (the "S&P 400") and the Russell 2000,
respectively.
An efficient portfolio is one that has the maximum expected return
for any level of risk. The efficient mix of securities is established
mathematically, taking into account the expected return and volatility
of returns for each security in a given universe, as well as the
historical price relationships between the different securities in the
universe.
To implement this strategy with respect to the Large-Cap and
Small-Cap Funds and the Subcategories of the other Funds, Weiss, Peck &
Greer, L.L.C. (the "Adviser" or "WPG") compiles the historical price
data of all securities which comprise the applicable Benchmark. The
Adviser may eliminate a security from consideration if it considers the
security to have an inadequate or misleading price history. Using this
historical price data, the Adviser constructs and analyzes a complete
matrix of all the possible price relationships between the securities
in the applicable Benchmark.
Using a sophisticated software program that incorporates risk
reduction techniques developed by investment professionals of the
Adviser, the Adviser constructs a number of portfolios with respect to
the Large-Cap and Small-Cap Funds and the Subcategories, which
portfolios are believed to have optimized risk/reward ratios. From
these alternative portfolios, the Adviser selects the combination of
securities, together with their appropriate weightings, that the
Adviser believes will comprise the optimal portfolio for the Large-Cap
and Small-Cap Funds and the Subcategories. The respective optimal
portfolios for the Large-Cap and Small-Cap Funds and the Subcategories
are designed to have returns greater than, but highly correlated with,
the return of the applicable Benchmarks.
After each optimal portfolio is constructed, it may be rebalanced
to maintain the original optimal weights. The Adviser will sell a
security when the security's weight within an actual portfolio becomes
significantly greater than its optimal weight. The Adviser will buy a
security when the security's weight within an actual portfolio becomes
significantly less than its optimal weight. The Adviser repeats the
entire optimization process at least semi-annually, at which point a
new portfolio is constructed with respect to the Large-Cap and
Small-Cap Funds and the Subcategories adding the most recent historical
data, and deleting the oldest data. When a security is removed from a
Benchmark, it will not necessarily be removed from the Funds'
portfolios within a predetermined length of time.
The Adviser's research personnel will monitor and occasionally
make changes in the way the optimal portfolios are constructed or
traded. Such changes may include determining better ways to eliminate
issues from consideration in the matrix, improving the manner in which
the matrix is calculated, altering constraints in the optimization
process and effecting changes in trading procedure (to reduce
transaction costs or to enhance the effects of rebalancing). Any such
changes are intended to be consistent with the basic philosophy of
seeking higher returns with respect to each of the Large-Cap and
Small-Cap Funds and each Subcategory than those that could be obtained
by investing directly in all the stocks of each Benchmark. Investors
should be aware that no quantitative methodology or technical analysis,
including the Adviser's, has ever been proven to provide enhanced
investment return and reduced investment risk in actual long-term
portfolio results.
INVESTMENT TECHNIQUES
The following description of the Funds' investment techniques
supplements the discussion contained in the Prospectuses. (See
"Risk Considerations and Other Investment Practices and Policies"
in the Prospectuses).
Repurchase Agreements
Each Fund may enter into repurchase agreements with banks,
broker-dealers or other financial institutions in order to generate
additional current income. A repurchase agreement is an agreement under
which a Fund acquires a security from a seller subject to resale to the
seller at an agreed upon price and date. The resale price reflects an
agreed upon interest rate effective for the time period the security is
held by a Fund. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and
repurchase price may be the same, with interest at a stated rate due to
the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the
security. Typically, repurchase agreements are in effect for one week
or less, but may be in effect for longer periods of time. Repurchase
agreements of more than one week's duration are subject to each Fund's
limitation on investments in illiquid securities.
Repurchase agreements are considered by the Securities and
Exchange Commission (the "SEC") to be loans by the purchaser
collateralized by the underlying securities. In an attempt to reduce
the risk of incurring a loss on a repurchase agreement, the Funds will
generally enter into repurchase agreements only with domestic banks
with total assets in excess of one billion dollars, primary dealers in
U.S. Government securities reporting to the Federal Reserve Bank of New
York or broker-dealers approved by the Trust's Board of Trustees, with
respect to securities of the type in which the Funds may invest. The
Adviser will monitor the value of the underlying securities throughout
the term of the agreement to ensure that their market value always
equals or exceeds the agreed-upon repurchase price to be paid to a
Fund. Each Fund will maintain a segregated account with its custodian,
Boston Safe Deposit and Trust Company (the "Custodian"), or a
subcustodian for the securities and other collateral, if any, acquired
under a repurchase agreement for the term of the agreement.
In addition to the risk of the seller's default or a decline in
value of the underlying security (see "Risk Considerations and Other
Investment Practices and Policies -- Repurchase Agreements" in the
Prospectuses), a Fund also might incur disposition costs in connection
with liquidating the underlying securities. If the seller becomes
insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by a Fund not within the
control of that Fund and therefore subject to sale by the seller's
trustee in bankruptcy. Finally, it is possible that a Fund may not be
able to perfect its interest in the underlying security and may be
deemed an unsecured creditor of the seller. While the Trust
acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
Forward Commitment, Delayed Delivery and When-Issued Transactions
Each Fund may purchase securities on a when-issued, delayed
delivery or forward commitment basis. Securities transactions settled
on when-issued or forward commitment basis are also know as delayed
delivery transactions. The phrase "delayed delivery" is not intended to
address transactions involving the purchase of securities where the
delay in delivery involves only the brief period usually required by
the selling party and its agent solely to locate appropriate
certificates and prepare them for submission for clearance and
settlement in the customary way. Forward commitment and when-issued
transactions involve a commitment by the Fund to purchase or sell
securities at a future date (ordinarily up to 90 days later). The price
of the underlying securities (usually expressed in terms of yield) and
the date when the securities will be delivered and paid for (the
settlement date) are fixed at the time the transaction is negotiated.
When-issued purchases and forward commitments are negotiated directly
with the other party, and such commitments are not traded on exchanges.
A Fund will not enter into such transactions for the purpose of
leverage.
When-issued purchases and forward commitments enable a Fund to
lock in what is believed to be an attractive price or yield on a
particular security for a period of time, regardless of future changes
in interest rates. For instance, in periods of rising interest rates
and falling prices, a Fund might sell securities it owns on a forward
commitment basis to limit its exposure to falling prices. In periods of
falling interest rates and rising prices, a Fund might sell securities
it owns and purchase the same or a similar security on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently
higher yields.
The value of securities purchased on a when-issued or forward
commitment basis and any subsequent fluctuations in their value are
reflected in the computation of the Fund's net asset value starting on
the date of the agreement to purchase the securities, and the Fund is
subject to the rights and risks of ownership of the securities on that
date. The Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the
settlement date. When the Fund makes a forward commitment to sell
securities it owns, the proceeds to be received upon settlement are
included in the Fund's assets. Fluctuations in the market value of the
underlying securities are not reflected in the Fund's net asset value
as long as the commitment to sell remains in effect. Settlement of
when-issued purchases and forward commitment transactions generally
takes place up to 90 days after the date of the transaction, but a Fund
may agree to a longer settlement period.
A Fund will make commitments to purchase securities on a
when-issued basis or to purchase or sell securities on a forward
commitment basis only with the intention of completing the transaction
and actually purchasing or selling the securities. If deemed advisable
as a matter of investment strategy, however, a Fund may dispose of or
renegotiate a commitment after it is entered into. A Fund also may sell
securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. The Funds
<PAGE>
may realize a capital gain or loss in connection with these
transactions.
When a Fund purchases securities on a when-issued or forward
commitment basis, the Custodian will maintain in a segregated account
securities having a value (determined daily) at least equal to the
amount of the Fund's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the Custodian will hold the
portfolio securities themselves in a segregated account while the
commitment is outstanding. These procedures are designed to ensure that
the Fund will maintain sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitments.
Loans of Portfolio Securities
Each Fund may seek to increase its income by lending portfolio
securities. Under present regulatory policies, such loans may be made
to financial institutions, such as broker-dealers, and would be
required to be secured continuously by collateral in cash, cash
equivalents or U.S. Government securities maintained on a current basis
at an amount at least equal to the market value of the securities
loaned. See "Risk Considerations and Other Investment Practices and
Policies --Lending of Portfolio Securities" in the Prospectuses. The
rules of the New York Stock Exchange ("NYSE") give the Fund the right
to call a loan and obtain the securities loaned at any time on five
days' notice. For the duration of a loan, the Fund would receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation from the
investment of the collateral. The Fund would not, however, have the
right to vote any securities having voting rights during the existence
of the loan, but the Fund would call the loan in anticipation of an
important vote to be taken among holders of the securities or of the
giving or withholding of their consent on a material matter affecting
the investment. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would
be made only to firms deemed by the Adviser to be of good standing, and
when, in the judgment of the Adviser, the consideration which can be
earned currently from securities loans of this type justifies the
attendant risk. If the Adviser determines to make securities loans, it
is intended that the value of the securities loan would not exceed 33
1/3% of the value of the total assets of the Fund.
At the present time the staff of the SEC does not object if an
investment company pays reasonable negotiated fees to its custodian in
connection with loaned securities as long as such fees are pursuant to
a contract approved by the investment company's trustees.
<PAGE>
Options
Each Fund currently intends to limit its options transactions
during the current fiscal year so that no more than 5% of the Fund's
net assets will be at risk as a result of such transactions.
Writing Covered Call Options on Securities. Each Fund may write
(sell) covered call options on securities ("calls") at such time or
times as the Adviser shall determine to be appropriate. When a Fund
writes a call, it receives a premium and sells to the purchaser the
right to buy the underlying security at any time during the call period
(usually between three and nine months) at a fixed exercise price
regardless of market price changes during the call period. If the call
is exercised, the Fund forgoes any gain but is not subject to any loss
on any change in the market price of the underlying security relative
to the exercise price. A Fund will write such options subject to any
applicable limitations or restrictions imposed by law.
Purchasing Call Options. Each Fund may purchase a call option when
the Adviser believes the value of the underlying security will rise or
to effect a "closing purchase transaction." A Fund will realize a
profit (or loss) from a closing purchase transaction if the amount paid
to purchase a call is less (or more) than the amount received from the
sale thereof.
Put Options. Each Fund may also write and purchase put options on
securities ("puts"). A put written by a Fund obligates it to purchase
the specified security at a specified price if the option is exercised
at any time before the expiration date. All put options written by a
Fund would be covered. A Fund may purchase a put option when the
Adviser believes the value of the underlying security will decline. A
Fund may purchase put options on securities in its portfolio in order
to hedge against a decline in the value of such securities ("protective
puts").
The purpose of writing covered put and call options is to hedge
against fluctuations in the market value of a Fund's portfolio
securities. Each Fund may purchase or sell call and put options on
securities indices for a similar purpose. Such a hedge is limited to
the degree that the price change of the underlying security is in an
amount which is less than the difference between the option premium
received by the Fund and the option strike price. To the extent that
the underlying security's price change exceeds this amount, written put
and call options will not provide an effective hedge.
A written call option would be covered if the Fund owns the
security underlying the option. A written put option may be covered by
maintaining in a segregated account cash or liquid securities rated
within one of the top three ratings categories by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("Standard
& Poor's"), or, if unrated, deemed by the Adviser to be of comparable
credit quality ("High-Grade Debt Securities"). While this will ensure
that the Fund will have sufficient assets to meet its obligations under
the option contract should it be exercised, it does not reduce the
potential loss to the Fund should the value of the underlying security
decrease and the option be exercised. A written call option or put
option may also be covered by purchasing an offsetting option or any
other option which, by virtue of its exercise price or otherwise,
reduces the Fund's net exposure on its written option position.
Further, instead of "covering" a written call option, the Fund may
simply maintain cash or High-Grade Debt Securities in a segregated
account in amounts sufficient to ensure that it is able to meet its
obligations under the written call should it be exercised. This method
does not reduce the potential loss to the Fund should the value of the
underlying security increase and the option be exercised.
Options on Securities Indices. Each Fund may purchase call and put
options on securities indices for the purpose of hedging against the
risk of unfavorable price movements adversely affecting the value of
the Fund's securities or securities the Fund intends to buy or to seek
to increase total return. Such Fund's net assets will be at risk as a
result of such transactions. Unlike a stock option, which gives the
holder the right to purchase or sell a specified stock at a specified
price, an option on a securities index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the
underlying securities index on the exercise date multiplied by (ii) a
fixed "index multiplier."
A securities index fluctuates with changes in the market values of
the stocks included in the index. For example, some securities index
options are based on a broad market index such as the S&P 500 or the
Value Line Composite Index, or a narrower market index such as the
Standard & Poor's 100 Stock Index ("S&P 100"). Indices may also be
based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on
securities indices are currently traded on the Chicago Board Options
Exchange, the NYSE and the American Stock Exchange.
The Funds may purchase put options in order to hedge against an
anticipated decline in stock market prices that might adversely affect
the value of a Fund's portfolio securities. If a Fund purchases a put
option on a securities index, the amount of the payment it would
receive upon exercising the option would depend on the extent of any
decline in the level of the securities index below the exercise price.
Such payments would tend to offset a decline in the value of the Fund's
portfolio securities. However, if the level of the securities index
increases and remains above the exercise price while the put option is
outstanding, a Fund will not be able to profitably exercise the option
and will lose the amount of the premium and any transaction costs. Such
loss may be partially or wholly offset by an increase in the value of a
Fund's portfolio securities.
The Funds may purchase call options on securities indices in order
to participate in an anticipated increase in stock market prices or to
offset anticipated price increases on securities that it intends to buy
in the future. If a Fund purchases a call option on a securities index,
the amount of the payment it receives upon exercising the option
depends on the extent of any increase in the level of the securities
index above the exercise price. Such payments would in effect allow the
Fund to benefit from stock market appreciation even though it may not
have had sufficient cash to purchase the underlying stocks. Such
payments may also offset increases in the price of stocks that the Fund
intends to purchase. If, however, the level of the securities index
declines and remains below the exercise price while the call option is
outstanding, a Fund will not be able to exercise the option profitably
and will lose the amount of the premium and transaction costs. Such
loss may be partially or wholly offset by a reduction in the price a
Fund pays to buy additional securities for its portfolio.
The Funds may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of
the underlying index or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for
additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities in their
respective portfolio. The Funds may also cover call and put options on
a securities index by maintaining cash or High-Grade Debt Securities
with a value equal to the exercise price in a segregated account with
its custodian or by using the other methods described above. When
purchased, options on securities indices may not enable the Fund to
hedge effectively against interest rate or stock market risk if the
stocks comprising the index subject to the option are not highly
correlated with the composition of the Fund's portfolio. Moreover, the
ability to hedge effectively depends upon the ability to predict
movements in interest rates or the stock market. Some options on
securities indices may not have a broad and liquid secondary market, in
which case options purchased by the Fund may not be closed out and the
Fund could lose more than its option premium when the option expires.
The purchase and sale of option contracts is a highly specialized
activity which involves investment techniques and risks different from
those ordinarily associated with investment companies. It should be
noted that transaction costs relating to options transactions may tend
to be higher than the transaction costs with respect to transactions in
securities. In addition, if a Fund were to write a substantial number
of option contracts which are exercised, the portfolio turnover rate of
that Fund could increase.
<PAGE>
Securities for each Fund's portfolio will continue to be bought
and sold solely on the basis of appropriateness to fulfill the
applicable Fund's investment objective. Option transactions can be
used, among other things, to increase the return on portfolio
positions.
Futures Transactions
Each Fund may purchase and sell futures contracts for hedging
purposes and to seek to increase total return. A futures contract is an
agreement between two parties to buy and sell a security for a set
price at a future time. Each Fund may also enter into index-based
futures contracts and interest rate futures contracts. Futures
contracts on indices provide for a final cash settlement on the
expiration date based on changes in the relevant index. All futures
contracts are traded on designated "contract markets" licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC")
which, through their clearing corporations, guarantee performance of
the contracts.
Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa). If a Fund holds
long-term U.S. Government securities and the Adviser anticipates a rise
in long-term interest rates, it could, in lieu of disposing of its
portfolio securities, enter into futures contracts for the sale of
similar long-term securities. If rates increased and the value of a
Fund's portfolio securities declined, the value of that Fund's futures
contract would increase, thereby protecting that Fund by preventing net
asset value from declining as much as it otherwise would have. If the
Adviser expects long-term interest rates to decline, a Fund might enter
into futures contracts for the purchase of long-term securities, so
that it could offset anticipated increases in the cost of such
securities it intends to purchase while continuing to hold
higher-yielding short-term securities or waiting for the long-term
market to stabilize. Similar techniques may be used by the Funds to
hedge stock market risk.
Each Fund also may purchase and sell listed put and call options
on futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call
and a short position if the option is a put), at a specified exercise
price at any time during the option period. When an option on a futures
contract is exercised, settlement is effected by the payment of cash
representing the difference between the current market price of the
futures contract and the exercise price of the option. The risk of loss
to a Fund purchasing an option on a futures contract is limited to the
premium paid for the option. A Fund may purchase put options on
interest rate futures contracts in lieu of, and for the same purpose
as, its sale of a futures contract: to hedge a long position in the
underlying futures contract.
The purchase of call options on interest rate futures contracts is
intended to serve the same purpose as the actual purchase of the
futures contract.
A Fund would write a call option on a futures contract in order to
hedge against a decline in the prices of the securities underlying the
futures contracts. If the price of the futures contract at expiration
is below the exercise price, the applicable Fund would retain the
option premium, which would offset, in part, any decline in the value
of its portfolio securities.
The writing of a put option on a futures contract is similar to
the purchase of the futures contract, except that, if market price
declines, a Fund would pay more than the market price for the
underlying securities. The net cost to a Fund will be reduced, however,
by the premium received on the sale of the put, less any transaction
costs. See "Dividends, Distributions and Tax Status" below.
Each Fund may engage in "straddle" transactions, which involve the
purchase or sale of combinations of call and put options on the same
underlying securities or futures contracts.
In purchasing and selling futures contracts and related options,
each Fund intends to comply with rules and interpretations of the CFTC
and of the SEC.
Limitations on the Use of Futures Contracts and Options on Futures.
Each Fund will engage in futures and related options transactions
only for hedging purposes in accordance with CFTC regulations or to
seek to increase total return to the extent permitted by such
regulations. The Fund will determine that the price fluctuations in the
futures contracts and options on futures contracts used for hedging
purposes are substantially related to price fluctuations in securities
held by the Fund or which it expects to purchase. Except as stated
below, a Fund's futures transactions will be entered into for
traditional hedging purposes - that is, futures contracts will be sold
to protect against a decline in the price of securities that the Fund
owns, or futures contracts will be purchased to protect the Fund
against an increase in the price of securities it intends to purchase.
As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures (or option)
position (involving the purchase of futures contracts), a Fund will
have purchased, or will be in the process of purchasing, equivalent
amounts of related securities in the cash market at the time when the
futures (or option) position is closed out. However, in particular
cases, when it is economically advantageous for a Fund to do so, a long
futures position may be terminated (or an option may expire) without
the corresponding purchase of securities. As an alternative to
compliance with the bona fide hedging definition, a CFTC regulation
permits a Fund to elect to comply with a different test, under which
the sum of the amounts of initial margin deposits on its existing
futures positions and premiums paid for options on futures entered into
for the purpose of seeking to increase total return (net of the amount
the positions were "in the money" at the time of purchase) would not
exceed 5% of that Fund's net assets, after taking into account
unrealized gains and losses on such positions. A Fund will engage in
transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for maintaining
its qualification as a regulated investment company for Federal income
tax purposes (see "Dividends, Distributions, and Tax Status").
A Fund will be required, in connection with transactions in
futures contracts and the writing of options on futures contracts, to
make margin deposits, which will be held by a Fund's custodian for the
benefit of the merchant through whom a Fund engages in such futures and
options transactions. In the case of futures contracts or options
thereon requiring the Fund to purchase securities, the Fund must
segregate cash or High-Grade Debt Securities in an account maintained
by the Custodian to cover such contracts and options. Cash or
High-Grade Debt Securities required to be in a segregated account will
be marked to market daily.
Special Considerations and Risks Related to Options and Futures
Transactions
Exchange markets in options on certain securities are a relatively
new and untested concept. It is impossible to predict the amount of
trading interest that may exist in such options, and there can be no
assurance that viable exchange markets will develop or continue.
The exchanges will not continue indefinitely to introduce new
expirations to replace expiring options on particular issues because
trading interest in many issues of longer duration tends to center on
the most recently auctioned issues. The expirations introduced at the
commencement of options trading on a particular issue will be allowed
to run out, with the possible addition of a limited number of new
expirations as the original expirations expire. Options trading on each
issue of securities with longer durations will thus be phased out as
new options are listed on more recent issues, and a full range of
expirations will not ordinarily be available for every issue on which
options are traded.
In the event of a shortage of the underlying securities
deliverable on exercise of an option, the Options Clearing Corporation
has the authority to permit other, generally comparable, securities to
be delivered in fulfillment of option exercise obligations. If the
Options Clearing Corporation exercises its discretionary authority to
allow such other securities to be delivered, it may also adjust the
exercise prices of the affected options by setting different prices at
which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options
Clearing Corporation may impose special exercise settlement procedures.
The hours of trading for options on securities may not conform to
the hours during which the underlying securities are traded. To the
extent that the markets for underlying securities close before the
options markets, significant price and rate movements can take place in
the options markets that cannot be reflected in the underlying markets.
In addition, to the extent that the options markets close before the
markets for the underlying securities, price and rate movements can
take place in the underlying markets that cannot be reflected in the
options markets.
Prior to exercise or expiration, an option position can be
terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange for call
or put options of the same series. Similarly, positions in futures may
be closed out only on an exchange which provides a secondary market for
such futures. A Fund will enter into an option or futures position only
if there appears to be a liquid secondary market for such options or
futures. However, there can be no assurance that a liquid secondary
market will exist for any particular call or put option or futures
contract at any specific time. Thus, it may not be possible to close an
option or futures position. In the event of adverse price movements, a
Fund would continue to be required to make daily cash payments of
maintenance margin for futures contracts or options on futures
contracts position written by that Fund. A Fund may have to sell
portfolio securities at a time when it may be disadvantageous to do so
if it had insufficient cash to meet the daily maintenance margin
requirements. In addition, a Fund may be required to take or make
delivery of the instruments underlying interest rate futures contracts
it holds. The inability to close options and futures positions also
could have an adverse impact on a Fund's ability to effectively hedge
its portfolios.
Each of the exchanges has established limitations governing the
maximum number of call or put options on the same underlying security
(whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether
such options are written on the same or different exchanges or are held
or written on one or more accounts or through one or more brokers). An
exchange may order the liquidation of positions found to be in
violation of applicable trading limits and it may impose other
sanctions or restrictions. The Trust and other clients advised by the
Adviser and its affiliates may be deemed to constitute a group for
these purposes. In light of these limits, the Trustees of the Trust
(the "Trustees") may determine at any time to restrict or terminate the
Funds' transactions in options. The Adviser does not believe that these
trading and position limits will have any adverse impact on the
investment techniques for hedging the Trust's portfolios.
Over-the-counter ("OTC") options are purchased from or sold to
securities dealers, financial institutions or other parties
("Counterparties") through direct agreement with the Counterparty. In
contrast to exchange listed options, which generally have standardized
terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the
parties.
Unless the parties provide for it, there is no central clearing or
guaranty function in the OTC option market. As a result, if the
Counterparty fails to make delivery of the security or other instrument
underlying an OTC option it has entered into with the Fund or fails to
make a cash settlement payment due in accordance with the terms of that
option, the Fund will lose any premium it paid for the option as well
as any anticipated benefit of the transaction. Accordingly, the Adviser
must assess the creditworthiness of each such Counterparty or any
guarantor or credit enhancement of the Counterparty's credit to
determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with
U.S. Government securities dealers recognized by the Federal Reserve
Bank of New York as "primary dealers", or broker dealers, domestic or
foreign banks or other financial institutions which have received,
combined with any credit enhancements, a long-term debt rating of A
from Standard & Poor's or Moody's or an equivalent rating from any
other nationally recognized statistical rating organization ("NRSRO")
or that issue long-term debt determined to be of equivalent credit
quality by the Adviser. The staff of the SEC currently takes the
position that OTC options purchased by a Fund, and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option
sold by it (the cost of the sell-back plus the in-the-money amount, if
any) are illiquid, and are subject to each Fund's limitation on
investing no more than 15% of its assets in illiquid securities.
However, for options written with "primary dealers" in U.S. Government
securities pursuant to an agreement requiring a closing transaction at
a formula price, the amount which is considered to be illiquid may be
calculated by reference to a formula price.
Utilization of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and
movements in the price of the securities which are the subject of the
hedge. If the price of the futures contract moves more or less than the
price of the security, a Fund will experience a gain or loss which will
not be completely offset by movements in the price of the securities
which are the subject of the hedge. There is also a risk of imperfect
correlation where the securities underlying futures contracts have
different maturities than the portfolio securities being hedged.
Transactions in options on futures contracts involve similar risks.
Privately Issued Mortgage-Backed Securities
Each of the Tomorrow Post-Retirement Fund ("Post-Retirement
Fund"), Tomorrow Long-Term Retirement Fund ("Long-Term Fund"), Tomorrow
Medium-Term Retirement Fund ("Medium-Term Fund") and Tomorrow
Short-Term Retirement Fund ("Short-Term Fund") (sometimes collectively
referred to herein as the "Tomorrow Funds") may invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in
mortgage loans and other non-governmental entities (or representing
custodial arrangements administered by such institutions). These
private originators and institutions include savings and loan
associations, mortgage bankers, commercial banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing.
Privately issued mortgage-backed securities are generally backed
by pools of conventional (i.e., non-government guaranteed or insured)
mortgage loans. Since such mortgage-backed securities normally are not
guaranteed by an entity having the credit standing of Ginnie Mae,
Fannie Mae or Freddie Mac, in order to receive a high quality rating
from the rating organizations (e.g., Standard & Poor's or Moody's),
they often are structured with one or more types of "credit
enhancement." Such credit enhancement falls into two categories: (1)
liquidity protection and (2) protection against losses resulting after
default by a borrower and liquidation of the collateral (e.g., sale of
a house after foreclosure). Liquidity protection refers to the payment
of cash advances to holders of mortgage-backed securities when a
borrower or an underlying mortgage fails to make its monthly payment on
time. Protection against losses resulting after default and liquidation
is designed to cover losses resulting when, for example, the proceeds
of a foreclosure sale are insufficient to cover the outstanding amount
on the mortgage. Such protection may be provided through guarantees,
insurance policies or letters of credit, through various means of
structuring the securities or through a combination of such approaches.
Examples of credit enhancement arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class
securities with one or more classes entitled to receive payment before
other classes, with the result that defaults on the underlying
mortgages are borne first by the holders of the subordinated class),
creation of "spread accounts" or "reserve funds" (where cash or
investments are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on the
underlying mortgages in a pool exceeds the amount required to be paid
on the mortgage-backed securities). The degree of credit enhancement
for a particular issue of mortgage-backed securities is based on the
level of credit risk associated with the particular mortgages in the
related pool. Losses on a pool in excess of anticipated levels could
nevertheless result in losses to security holders since credit
enhancement rarely covers every dollar owed on a pool. See the Funds'
Prospectuses for a further description of mortgage-backed securities.
Risks Associated with Specific Types of Derivative Securities
Each of the Post-Retirement Fund, Long-Term Fund, Medium-Term Fund
and Short-Term Fund may invest in floating rate securities based on the
Cost of Funds Index ("COFI floaters"), other "lagging rate" floating
rate securities, floating rate securities that are subject to a maximum
interest rate ("capped floaters"), and Mortgage-Backed Securities
purchased at a discount. The primary risks associated with these
derivative debt securities are the potential extension of average life
and/or depreciation due to rising interest rates.
The principal of and interest on the assets underlying a CMO or
REMIC Trust may be allocated among the several classes of CMOs or REMIC
Certificates in various ways. In certain structures known as
"sequential pay" CMOs or REMIC Certificates), payments of principal,
including any principal prepayments, on the underlying mortgage assets
generally are applied to the classes of CMOs or REMIC Certificates in
the order of their respective final distribution dates. Thus, no
payment of principal will be made on any class of sequential pay CMOs
or REMIC Certificates until all other classes having an earlier final
distribution date have been paid in full. Each Tomorrow Fund will
limits its investments in sequential pay CMOs and REMIC Certificates to
5% of its net assets. Please see "Mortgage-Backed Securities" in the
Tomorrow Funds' prospectuses.
Participation Interests
Each Fund may purchase from banks participation interests in all
or part of specific holdings of debt obligations. Each participation
interest is backed by an irrevocable letter of credit or guarantee of
the selling bank that the Adviser has determined meets the prescribed
quality standards of each Fund. Thus, even if the credit of the issuer
of the debt obligation does not meet the quality standards of a Fund,
the credit of the selling bank will. Each Fund will have the right to
sell the participation interest back to the bank after seven days'
notice for the full principal amount of a Fund's interest in the debt
obligation plus accrued interest, but only (1) as required to provide
liquidity to that Fund, (2) to maintain the quality standards of each
Fund's investment portfolio or (3) upon a default under the terms of
the debt obligation. The selling bank may receive a fee from a Fund in
connection with the arrangement.
<PAGE>
Securities of Foreign Issuers
To the extent included in the benchmark indices applicable to each
Fund, each Fund may invest in certain types of U.S. dollar-denominated
securities of foreign issuers, including American Depository Receipts
("ADRs"). ADRs are U.S. dollar-denominated certificates issued by a
U.S. bank or trust company and represent the right to receive
securities of a foreign issuer deposited in a domestic bank or foreign
branch of a U.S. bank. ADRs are traded on domestic exchanges or in the
U.S. over-the-counter market and, generally, are in registered form.
Investments in ADRs have certain advantages over direct investment in
the underlying non-U.S. securities because (i) ADRs are U.S.
dollar-denominated investments which are registered domestically,
easily transferable, and for which market quotations are readily
available, and (ii) issuers whose securities are represented by ADRs
are subject to the same auditing, accounting and financial reporting
standards as domestic issuers. To the extent a Fund acquires ADRs
through banks which do not have a contractual relationship with the
foreign issuer of the security underlying the ADR to issue and service
such ADRs, there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions such as
stock splits or rights offerings involving the foreign issuer in a
timely manner.
Although the Funds do not currently invest directly in foreign
denominated securities, the Long-Term Fund and the Medium-Term Fund
will each invest in other investment companies that will invest their
assets in securities of foreign issuers. The Long- Term and Medium-Term
Funds may, therefore, be subject to the risks associated with investing
in foreign securities.
Investing in foreign securities may involve advantages and
disadvantages not present in domestic investments. There may be less
publicly available information about securities not registered
domestically, or their issuers, than is available about domestic
issuers or their domestically registered securities. Stock markets
outside the U.S. may not be as developed as domestic markets, and there
may also be less government supervision of foreign exchanges and
brokers. Foreign denominated securities may be less liquid or more
volatile than U.S. securities. Trade settlements may be slower and
could possibly be subject to failure. In addition, brokerage
commissions and custodial costs with respect to foreign denominated
securities may be higher than those for domestic investments.
Accounting, auditing, financial reporting, and disclosure standards for
foreign issuers may be different than those applicable to domestic
issuers. Foreign denominated securities may be affected favorably or
unfavorably by changes in currency exchange rates and exchange control
regulations (including currency blockage) and a Fund investing in such
securities may incur costs in connection with conversions between
various currencies. Foreign securities may also involve risks due to
changes in the political or economic conditions of such foreign
countries, the possibility of expropriation of assets or
nationalization, and possible difficulty in obtaining and enforcing
judgments against foreign entities.
Restricted and Illiquid Securities
Each Fund may invest up to 15% of its total assets in "restricted
securities" (i.e., securities that would be required to be registered
prior to distribution to the public), including restricted securities
eligible for resale to certain institutional investors pursuant to Rule
144A of the 1933 Act. In addition, each Fund may invest up to 10% of
its total assets in illiquid investments, which includes securities
that are not readily marketable, repurchase agreements maturing in more
than seven days and privately issued stripped mortgage-backed
securities. The Trustees have adopted guidelines and delegated to the
Adviser the daily function of determining and monitoring the liquidity
of restricted securities. The Trustees, however, retain sufficient
oversight and are ultimately responsible for the determinations. Please
see the non-fundamental investment restrictions for further limitations
regarding the Funds' investments in restricted and illiquid securities.
Since it is not possible to predict with assurance exactly how the
market for restricted securities sold and offered under Rule 144A will
develop, the Trustees will carefully monitor each Fund's investments in
these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity
in the Funds to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities.
Notwithstanding the foregoing investment restrictions and as further
described below, each Fund may invest all or part of its assets in an
open-end investment company with substantially the same investment
objective, policies and restrictions as each Fund.
Other Investment Companies
Each Fund, subject to authorization by the Trustees, may invest
all of its investable assets in the securities of a single open-end
investment company (a "Portfolio"). If authorized by the Trustees, a
Fund would seek to achieve its investment objective by investing in a
Portfolio, which Portfolio would invest in a portfolio of securities
that complies with the Fund's investment objectives, policies and
restrictions. The Trustees do not intend to authorize investing in this
manner at this time.
Each Fund may invest up to 10% of its total assets, calculated at
the time of purchase, in the securities of other investment companies
(other than those affiliated with WPG) but may not invest more than 5%
of its total assets in the securities of any one investment company or
acquire more than 3% of the voting securities of any investment
company. Investments in investment companies will result in duplication
of certain expenses, since the Fund will indirectly bear its
proportionate share of any expenses paid by investment companies in
which it invests in addition to the expenses paid by the Fund. However,
to the extent that a Fund invests in an open-end registered investment
company, the Adviser will not impose its advisory fees on the portion
of the Fund's assets so invested.
CALCULATION OF THE FUNDS' RETURNS
Total Return
The average annual total return with respect to Institutional
Class shares of each Fund is determined for a particular period by
calculating the actual dollar amount of the investment return on a
$1,000 investment in Institutional Class shares of the Fund made at the
net asset value of such shares at the beginning of the period, and then
calculating the annual compounded rate of return which would produce
that amount. Total return for a period of one year is equal to the
actual return of the Fund during that period. The following formula
describes the calculation:
n
ERV = P(1+T)
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return with respect to
Institutional Class shares.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the indicated
period.
This calculation assumes that (i) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the
period and (ii) all recurring fees are included for applicable periods.
Each Fund may illustrate in advertisements and sales literature
the average annual total return and cumulative total return for several
time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for a Fund will
assume the reinvestment of all income dividends and capital gains
distributions in Institutional Class shares for the indicated periods
and will include all recurring fees.
Yield
The 30 day yield quotation with respect to Institutional Class
shares of each of the Long-Term Fund, Medium-Term Fund, Short-Term Fund
and Post-Retirement Fund is computed by dividing the net investment
income for the period with respect to Institutional Class shares of
that Fund by the net asset value of each Institutional Class share on
the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6-1]
---
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued for the period.
c = the average daily number of Institutional Class
shares outstanding during the period that were
entitled to receive dividends.
d = the offering price per Institutional Class share (net
asset value per share) on the last day of the period.
Return for a Fund is not fixed or guaranteed and will fluctuate
from time to time, unlike bank deposits or other investments which pay
a fixed yield or return for a stated period of time, and do not provide
a basis for determining future returns. Return is a function of
portfolio quality, composition, maturity and market conditions as well
as the expenses allocated each Fund. The return of a Fund may not be
comparable to other investment alternatives because of differences in
the foregoing variables and differences in the methods used to value
portfolio securities, compute expenses and calculate return.
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in
reports to shareholders, the past performance of a Fund may be
illustrated and/or compared with that of other mutual funds with
similar investment objectives, and to stock or other relevant indices.
For example, total return of a Fund's classes may be compared to
averages or rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors mutual fund
performance; the Morgan Stanley Europe, Australia, Far East Index
("EAFE"), an unmanaged index of international stock markets, the S&P
400, an unmanaged index of common stocks; the S&P 500, an unmanaged
index of common stocks; the Russell 2000, an unmanaged index of common
stocks; the Russell 3000 Index (the "Russell 3000"), an unmanaged index
of common stocks; or the Dow Jones Industrial Average, an unmanaged
index of common stocks of 30 industrial companies listed on the New
York Stock Exchange.
<PAGE>
The S&P 500 is an unmanaged index of 500 common stocks which are
traded on the New York Stock Exchange, American Stock Exchange and the
Nasdaq National Market. The S&P 500 represents approximately 70% of the
total domestic U.S. equity market capitalization. The S&P 400 is an
unmanaged index of common stocks of 400 companies with mid-size market
capitalizations - $300 million to $5 billion. The S&P 500 and the S&P
400 are market value-weighted indices (shares outstanding times stock
price) in which each company's influence on the respective index is
directly proportional to its market value. The companies in the S&P 500
and the S&P 400 are selected from four major industry sectors:
industrials, utilities, financials and transportation. The 500
companies chosen for the S&P 500 are not the 500 largest companies in
terms of market value. Rather, the companies chosen by S&P for
inclusion in the S&P 500 tend to be leaders in important industries
within the U.S. economy. The Russell 2000 is an unmanaged index of 2000
common stocks of small capitalization companies. The Russell 2000 is
composed of the 2000 smallest companies with respect to capitalization
in the Russell 3000 and represents approximately 7% of the Russell 3000
total market capitalization. The Russell 3000 is an unmanaged index of
3000 common stocks of large United States companies with market
capitalizations ranging from approximately $60 million to $80 billion.
The Russell 3000 represents approximately 98% of the United States
equity market.
In addition, the performance of the classes of a Fund may be
compared to alternative investment or savings vehicles and/or to
indexes or indicators of economic activity, e.g., inflation or interest
rates. Performance rankings and listings reported in newspapers or
national business and financial publications, such as Barron's,
Business Week, Consumer's Digest, Consumer Reports, Financial World,
Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, the New York Times, Smart Money, USA Today,
U.S. News and World Report, The Wall Street Journal and Worth may also
be cited (if a Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings from various
other sources including Bloomberg Financial Systems, CDA/Wiesenberger
Investment Companies Service, Donoghue's Mutual Fund Almanac,
Investment Company Data, Inc., Johnson's Charts, Kanon Bloch Carre &
Co., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems.
In addition, from time to time, quotations from articles from
financial publications, such as those listed above, may be used in
advertisements, in sales literature or in reports to shareholders of
the Funds.
The Funds may also present, from time to time, historical
information depicting the value of a hypothetical account in one or
more classes of a Fund since the Fund's inception.
In presenting investment results, the Funds may also include
references to certain financial planning concepts, including (a) an
investor's need to evaluate his financial assets and obligations to
determine how much to invest; (b) his need to analyze the objectives of
various investments to determine where and when to invest; and (c) his
need to analyze his time frame for future capital needs to determine
how long to invest. The investor controls these three factors, all of
which affect the use of investments in building assets. The Adviser's
agreement to limit each Fund's operating expenses will increase
investment performance.
In advertisements, sales literature or reports to shareholders,
the Funds may include references to asset allocation strategies.
According to information supplied by B.G.B. Brinceson, B.D. Singer and
G.L. Beebower, as of May/June 1991, 91% of investment performance is
derived from asset allocation, the proper mix of cash, bonds and
stocks. In general, the remaining performance is derived as follows:
stock selection--5%, market timing--2%, and other--2%.
According to Standard & Poor's Ratings Group and Crandell, Pierce
& Company, the best and worst stock market returns (as represented by
the Standard & Poor's Index of 500 Common Stocks) annualized over the
time periods from 1950 through June 1995 using monthly observations
were as follows:
<TABLE>
<S> <C> <C>
Time Best Worst
Periods Performance Performance
One Year 61.3 -36.9
Three Years 33.3 -10.6
Five Years 29.6 - 4.2
Seven Years 23.0 - 2.7
Ten Years 19.2 0.5
Fifteen Years 17.2 4.1
Twenty Years 15.1 6.4
Thirty Years 11.2 9.1
</TABLE>
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment
restrictions which may not be changed without approval of a majority of
the applicable Fund's outstanding voting securities. Under the 1940
Act, and as used in the Prospectuses and this SAI, a "majority of the
outstanding voting securities" requires the approval of the lesser of
(1) the holders of 67% or more of the shares of a Fund represented at a
meeting of the holders if more than 50% of the outstanding shares of
the Fund are present in person or by proxy or (2) the holders of more
than 50% of the outstanding shares of the Fund.
A Fund may not:
1. Issue senior securities, except as permitted by paragraphs 2, 5,
and 6 below. For purposes of this restriction, the issuance of
shares of beneficial interest in multiple classes or series, the
purchase or sale of options, futures contracts, forward
commitments and repurchase agreements entered into in accordance
with the Fund's investment policies or within the meaning of
paragraph 5 below, are not deemed to be senior securities.
2. Borrow money, except (i) from banks for temporary or short-
term purposes or for the clearance of transactions in amounts
not to exceed 33 1/3% of the value of the Fund's total assets
(including the amount borrowed) taken at market value, (ii) in
connection with the redemption of Fund shares or to finance failed
settlements of portfolio trades without immediately liquidating
portfolio securities or other assets; (iii) in order to fulfill
commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets and (iv)
the Fund may enter into reverse repurchase agreements and forward
roll transactions, but only if after each such borrowing there is
asset coverage of at least 300% as defined in the 1940 Act. For
purposes of this investment restriction, investments in short
sales, futures contracts, options on futures contracts, securities
or indices and forward commitments shall not constitute borrowing.
3. Act as an underwriter with respect to the securities of other
issuers, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed
to be an underwriter for purposes of the 1933 Act; provided,
however, that the Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as the Fund.
4. Purchase or sell real estate except that the Fund may (i) acquire
or lease office space for its own use, (ii) invest in securities
of issuers that invest in real estate or interests therein, (iii)
invest in securities that are secured by real estate or interests
therein, (iv) purchase and sell mortgage-related securities and
(v) hold and sell real estate acquired by the Fund as a result of
the ownership of securities.
5. Invest in commodities, except the Fund may purchase and sell
options on securities, securities indices and currency, futures
contracts on securities, securities indices and currency and
options on such futures, forward foreign currency exchange
contracts, forward commitments, securities index put or call
<PAGE>
warrants and repurchase agreements entered into in accordance with
the Fund's investment policies.
6. Make loans, except that the Fund may (1) lend portfolio securities
in accordance with the Fund's investment policies up to 33 1/3% of
the Fund's total assets taken at market value, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an
issue of debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original
issuance of the securities.
7. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such
purchase, the value of its investments in such industry would
exceed 25% of its total assets taken at market value at the
time of such investment (except investments in obligations of
the U.S. Government or any of its agencies, instrumentalities
or authorities and except that the Large-Cap Fund and the
Small-Cap Fund may concentrate their assets in securities of
issuers in any industry to the extent that the S&P 500 Index
or the Russell 2,000 Index, respectively, are so
concentrated); provided, however, that the Fund may invest
all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
8. For each Fund, with respect to 75% of its total assets, purchase
securities of an issuer (other than the U.S. Government, its
agencies, instrumentalities or authorities or repurchase
agreements collateralized by U.S. Government securities and other
investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer; or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held
by the Fund;
provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with substantially
the same investment objective, policies and restrictions as the Fund.
For purposes of the above fundamental investment restrictions
regarding senior securities, the Adviser generally classifies issuers
by industry in accordance with classifications set forth in the
Standard & Poor's Stock Guide. In the absence of such classification or
if the Adviser determines in good faith based on its own information
that the economic characteristics affecting a particular issuer make it
more appropriately considered to be engaged in a different industry,
the Adviser may classify an issuer according to its own sources.
The following restrictions are designated as non-fundamental and
may be changed by the Trustees without the approval of shareholders.
A Fund may not:
a. Pledge, mortgage or hypothecate its assets, except to secure
permitted borrowings and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the
Fund's total assets taken at market value. Collateral
arrangements with respect to margin, option and other risk
management and when-issued and forward commitment
transactions are not deemed to be pledges or other
encumbrances for purposes of this restriction.
b. Participate on a joint or joint-and-several basis in any
securities trading account. The "bunching" of orders for the sale
or purchase of marketable portfolio securities with other accounts
under the management of the Adviser or any subadviser to save
commissions or to average prices among them is not deemed to
result in a joint securities trading account.
c. Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or principals or officers of the
Adviser, any subadviser or any investment management subsidiary of
the Adviser individually owns beneficially more than 0.5% and
together own beneficially more than 5% of the securities of such
issuer.
d. Purchase a security of other investment companies, except
when the purchase is part of a plan of merger, consolidation,
reorganization or acquisition or except by purchase in the
open market where no commission or profit to a sponsor or
dealer results from the purchase other than customary
brokers' commissions and then only if, as a result, (i) more
than 10% of the Fund's assets would be invested in securities
of other investment companies, (ii) more than 3% of the total
outstanding voting securities of any one such investment
company would be held by the Fund or (iii) more than 5% of
the Fund's assets would be invested in any one such
investment company; provided, however, that the Fund may
invest all of its investable assets in an open-end investment
company with substantially the same investment objective,
policies and restrictions as the Fund.
<PAGE>
e. Invest more than 15% of its total assets in the aggregate of
(i) securities of any issuer which, together with its
predecessors, has been in operation for less than three years
(including the operation of any predecessor) and
(ii) restricted securities including those eligible for
resale under Rule 144A; provided, however, the Fund may not
invest more than (a) 5% of its total assets in securities of
unseasoned issuers and (b) 10% of its total assets in
restricted securities excluding those eligible for resale
under Rule 144A; and provided further, the Fund may invest
all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund; and
provided further that obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities and
securities fully collateralized by such securities are not
considered to be obligations of unseasoned issuers.
f. Invest in securities which are illiquid if, as a result, more
than 10% of its total assets would consist of such securities,
including repurchase agreements maturing in more than seven
days, securities that are not readily marketable, restricted
securities not eligible for resale pursuant to Rule 144A
under the 1933 Act, purchased OTC options, certain assets
used to cover written OTC options, and privately issued
stripped mortgage-backed securities, unless the Trustees
determine that such restricted securities are liquid;
provided, however, that the Fund may invest all or part of
its investable assets in an open-end investment company with
substantially the same investment objectives, policies and
restrictions as the Fund.
g. Purchase securities while outstanding borrowings exceed 5% of
the Fund's total assets.
h. Invest in real estate limited partnership interests.
i. Purchase warrants of any issuer, if, as a result of such
purchase, more than 2% of the value of the Fund's total
assets would be invested in warrants which are not listed on
an exchange or more than 5% of the value of the total assets
of the Fund would be invested in warrants generally, whether
or not so listed. For these purposes, warrants are to be
valued at the lesser of cost or market, but warrants acquired
by the Fund in units with or attached to debt securities
shall be deemed to be without value.
j. Purchase interests in oil, gas, or other mineral exploration
programs or mineral leases; however, this policy will not prohibit
<PAGE>
the acquisition of securities of companies engaged in the
production or transmission of oil, gas or other minerals.
k. Invest for the purposes of exercising control over or management
of any company, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment, provided,
however, that the Fund may invest all or part of its investable
assets in an open-end investment company with substantially the
same investment objective, policies and restrictions as the Fund.
l. Purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, the Fund has the
right to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is made
upon the same conditions, except (i) in connection with arbitrage
transactions, (ii) for hedging the Fund's exposure to an actual or
anticipated market decline in the value of its securities, (iii)
to profit from an anticipated decline in the value of a security,
and (iv) to obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities.
m. Write puts on securities if the aggregate value of the
obligations underlying the puts exceeds 50% of the Fund's net
assets.
n. Buy and sell puts and calls on securities, stock index
futures or options on stock index futures or financial
futures or options on financial futures if (i) the aggregate
premiums paid on all such options which are held at any time
exceed 20% of the Fund's aggregate net assets and (ii) the
aggregate margin deposits required on all such futures or
options thereon held at any time exceed 5% of the Fund's
total assets.
o. Purchase puts, calls, straddles or spreads, or any combination
thereof if by reason thereof, the value of its aggregate
investment in such classes of securities (other than protective
puts) will exceed 5% of its net assets.
Each Fund may, notwithstanding any other fundamental or
non-fundamental investment restriction or policy, invest all of its
assets in the securities of a single open-end investment company with
substantially the same fundamental investment objectives, restrictions
and policies as the Fund.
The Funds do not have any current intention to enter into reverse
repurchase agreements, sell securities short or engage in arbitrage
transactions.
<PAGE>
Except with respect to the 300% asset coverage required by
fundamental restriction number 2, if a percentage restriction on
investment or utilization of assets as set forth above is adhered to at
the time an investment is made, a later change in percentage resulting
from changes in the values of a Fund's assets will not be considered a
violation of the restriction.
In order to permit the sale of shares of the Funds in certain
states, the Trustees may, in their sole discretion, adopt restrictions
on investment policy more restrictive than those described above.
Should the Trustees determine that any such more restrictive policy is
no longer in the best interest of a Fund and its shareholders, the Fund
may cease offering shares in the state involved and the Trustees may
revoke such restrictive policy. Moreover, if the states involved shall
no longer require any such restrictive policy, the Trustees may, in
their sole discretion, revoke such policy.
ADVISORY AND ADMINISTRATIVE SERVICES
Investment Adviser
As stated in the Prospectuses, WPG, One New York Plaza, New York,
New York 10004, serves as investment adviser and administrator to each
Fund. See "Management of the Funds --Investment Adviser", "Management
of the Funds --- Administrator" and "Portfolio Brokerage" in the
Prospectuses for a description of the duties of WPG as investment
adviser and administrator to the Funds.
The Funds' investment advisory agreements with the Adviser (the
"Advisory Agreements") were initially approved by the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
parties to such agreements or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "Independent
Trustees"), on July 19, 1995 and became effective upon each Fund's
commencement of operations. The Advisory Agreements were approved by
the sole initial shareholder of each Fund immediately prior to that
Fund's commencement of operations.
Pursuant to the Advisory Agreements, the Adviser supervises and
assists in the management of the assets of each Fund and furnishes each
Fund with research, statistical and advisory services. In managing the
assets of the Funds, the Adviser furnishes continuously an investment
program for each Fund consistent with the investment objectives and
policies of that Fund. More specifically, the Adviser determines from
time to time what securities shall be purchased for the Fund, what
securities shall be held or sold by the Fund and what portion of the
Fund's assets shall be held uninvested as cash, subject always to the
provisions of the Trust's Agreement and Declaration of Trust, By-Laws
and its registration statement under the 1940 Act and under the 1933
Act covering the Trust's shares, as filed with the SEC, and to the
investment objectives, policies and restrictions of the Fund, as each
of the same shall be from time to time in effect, and subject, further,
to such policies and instructions as the Board of Trustees of the Trust
may from time to time establish. To carry out such determinations, the
Adviser places orders for the investment and reinvestment of each
Fund's assets (see "Portfolio Brokerage").
For its investment advisory services under the Advisory
Agreements, the Adviser receives an annual fee from each Fund, payable
monthly, equal to 0.75% (on an annual basis) of the Fund's average
daily net assets, except for the Post-Retirement Fund, which pays the
Adviser on a monthly basis a fee equal on an annual basis to 0.65% of
such Fund's average daily net assets.
The Adviser has voluntarily agreed to limit temporarily each
Fund's operating expenses (excluding Rule 12b-1 fees with respect to
the Adviser Class shares, service fees with respect to the
Institutional Class shares, any other class-specific expenses,
litigation, indemnification and other extraordinary expenses) to 1.25%
of its average daily net assets, except for the Post-Retirement Fund,
for which the Adviser has voluntarily agreed to temporarily limit
operating expenses (with the same exclusions as listed above) to 0.90%
of its average daily net assets. The Adviser may discontinue or modify
such limitation in the future at its discretion, although it has no
current intention to do so. Each Fund will reimburse the Adviser for
fees foregone or other expenses paid by the Adviser pursuant to this
expense limitation in later years in which operating expenses for the
Fund are less than the expense limitations set forth above for any such
year. No interest, carrying or finance charge will be paid by a Fund
with respect to the amounts representing fees foregone or other
expenses paid. In addition, no Fund will pay any unreimbursed amounts
to the Adviser upon termination of its Advisory Agreement.
The advisory fees are accrued daily and will be prorated with
respect to any Fund if the Adviser shall not have acted as that Fund's
investment adviser during any entire monthly period. The Advisory and
the Administration Agreements (as defined below) provide that if the
operating expenses of a Fund in any year, including the investment
advisory fee and the administration fee, but excluding taxes, brokerage
commissions, interest, dividends paid on securities sold short and
extraordinary legal fees and expenses exceed the expense limits set by
state securities law administrators in states in which that Fund's
shares are sold, the amount payable to WPG, in its capacity as Adviser
and Administrator, will be reduced (but not below zero) by the amount
of such excess. The most restrictive state securities law expense limit
presently in effect requires such reduction if expenses exceed 2.5% of
the first $30 million, 2.0% of the next $70 million and 1.5% of the
remainder of the average daily net assets of a Fund during such year.
<PAGE>
Each Advisory Agreement provides that the Adviser will not be
liable for any loss sustained by the Trust or any Fund by reason of the
adoption or implementation of any investment policy or the purchase,
sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research
of the Adviser, or upon investigation and research made by any other
individual, firm or corporation if such recommendation shall have been
made and such other individual, firm or corporation shall have been
selected with due care and in good faith, except for a loss resulting
from willful misfeasance, bad faith, or gross negligence in the
performance by the Adviser of its duties or by reason of the Adviser's
reckless disregard of its obligations and duties thereunder.
Each Advisory Agreement may be modified or amended only with the
approval of the holders of a majority of the applicable Fund's
outstanding shares and by a vote of the majority of the Independent
Trustees of the Trust. Unless terminated as provided below, each
Advisory Agreement continues in full force and effect for two years
after its date of execution, and for successive periods of one year
thereafter, but only as long as each such continuance after the end of
the initial two year period is approved annually by a majority vote of
the Board or by a vote of the holders of a majority of the outstanding
shares of the applicable Fund, but in either event it also must be
approved by a vote of a majority of the Independent Trustees of the
Trust, cast in person at a meeting called for the purpose of voting on
such approval. Each Advisory Agreement may be terminated without
penalty, by either party upon 60 days' written notice and automatically
will terminate in the event of its assignment.
Officers and Trustees of the Trust who are also principals in and
employees of WPG may receive indirect compensation by reason of
investment advisory and administration fees paid by the Trust to WPG,
in its capacity as the Adviser and Administrator.
As of June 30, 1994, WPG had capital in excess of $48 million. WPG
consists of 44 general principals, one of whom is a member of the NYSE,
and certain associate principals. WPG has approximately 240 full-time
employees in addition to its principals. WPG together with its
wholly-owned subsidiary, Weiss, Peck & Greer, Inc., act as investment
adviser or manager for approximately $13 billion of institutional and
private investment accounts.
Roger J. Weiss is a Senior Managing Principal of WPG and
Chairman of the Board, President and Trustee of the Trust.
Stephen H. Weiss, brother of Roger J. Weiss, is also a Senior
Managing Principal of WPG. Francis H. Powers is a principal of
WPG, and Executive Vice President and Treasurer of the Trust.
Jay C. Nadel is a principal of WPG and an Executive Vice President
and Secretary of the Trust. The principals of WPG who serve on
WPG's executive committee are Stephen H. Weiss (Chairman),
Roger J. Weiss, Phillip Greer, Melville Straus, Ronald M. Hoffner
and Wesley W. Lang, Jr.
In addition to the members of the Adviser's Asset Allocation
Committee and Messrs. Pappo and Vandivort, Messrs. Stephen H. Weiss and
Roger J. Weiss may participate in each Fund's investment decisions and
all of the principals in WPG consult on a regular basis among
themselves about general market conditions, as well as specific
securities and industries.
In the management of the Trust and their other accounts, WPG and
its subsidiaries allocate investment opportunities to all accounts for
which they are appropriate subject to the availability of cash in any
particular account and the final decision of the individual or
individuals in charge of such accounts. Where market supply is
inadequate for a distribution to all such accounts, securities are
allocated on a pro rata basis. In some cases this procedure may have an
adverse effect on the price or volume of the security as far as the
Funds are concerned. However, it is the judgment of the Trustees that
the desirability of continuing the Trust's advisory arrangements with
the Adviser outweighs any disadvantages that may result from
contemporaneous transactions. See "Portfolio Brokerage."
In an attempt to avoid any potential conflict with portfolio
transactions for the Funds, the Adviser and the Trust, on behalf of
each Fund, have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. These
restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings
of securities. These restrictions are a continuation of the basic
principle that the interests of the Funds and their shareholders come
before those of the Adviser and its principals and employees.
In the event that neither the Adviser nor any of its affiliates
acts as investment adviser to the Trust, the name of the Trust will be
changed to one that does not contain the name "Weiss, Peck & Greer" or
the initials "WPG" or otherwise suggest an affiliation with the Adviser
or contain the name "Tomorrow" or any connotation or derivative of such
name.
Administrator
WPG, in its capacity as Administrator of each Fund, performs
administrative, certain transfer agency related and shareholder
relations services and certain clerical and accounting services for
each Fund under separate administration agreements (the "Administration
Agreements"). More specifically, these obligations pursuant to the
Administration Agreements include, subject to the general supervision
of the Trustees of the Trust, (a) providing supervision of all aspects
of the Funds' non-investment operations (the parties giving due
recognition to the fact that certain of such operations are performed
by others pursuant to agreements with the Funds), (b) providing the
Funds, to the extent not provided pursuant to their custodian and
transfer agency agreements or agreements with other institutions, with
personnel to perform such executive, administrative, accounting and
clerical services as are reasonably necessary to provide effective
administration of the Funds, (c) arranging, to the extent not provided
pursuant to such agreements, for the preparation, at the Funds'
expense, of its tax returns, reports to shareholders, periodic updating
of the prospectuses and reports filed with the SEC and other regulatory
authorities, (d) providing the Funds, to the extent not provided
pursuant to such agreements, with adequate office space and certain
related office equipment and services, (e) maintaining all of the
Funds' records other than those maintained pursuant to such agreements
or the Advisory Agreements, and (f) providing to the Funds transfer
agency-related and shareholder relations services and facilities and
the services of one or more of its employees or officers, or employees
or officers of its affiliates, relating to such functions (including
salaries and benefits, office space and supplies, equipment and
teaching).
For its services under the Administration Agreements, the
Administrator is entitled to receive a fee, computed daily and payable
monthly at an annual rate equal to 0.09% of each Fund's average daily
net assets. These fees may be changed by the Board of Trustees without
shareholder approval.
Each Fund bears all expenses of its own operation (subject to the
expense limitations described above), which expenses include: (i) fees
and expenses of any investment adviser or administrator of the Fund;
(ii) organization expenses of the Trust; (iii) fees and expenses
incurred by the Fund in connection with membership in investment
company organizations; (iv) brokers' commissions; (v) payment for
portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses (including an allocable portion of the
cost of its employees rendering legal services to the Funds); (vii)
interest, insurance premiums, taxes or governmental fees; (viii) the
fees and expenses of the transfer agent of the Funds; (ix) the cost of
preparing stock certificates or any other expenses, including, without
limitation, clerical expenses of issue, redemption or repurchase of
shares of the Fund; (x) the expenses of and fees for registering or
qualifying shares of the Funds for sale and of maintaining the
registration of the Funds; (xi) a portion of the fees and expenses of
Trustees of the Trust who are not affiliated with the Adviser; (xii)
the cost of preparing and distributing reports and notices to existing
shareholders, the SEC and other regulatory authorities; (xiii) the fees
or disbursements of custodians of the Funds' assets, including expenses
incurred in the performance of any obligations enumerated by the
Declaration of Trust or By-Laws of the Trust insofar as they govern
agreements with any such custodian; (xiv) costs in connection with
annual or special meetings of shareholders, including proxy material
preparation, printing and mailing; (xv) litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary
course of the Funds' business; and (xvi) distribution fees and service
fees applicable to Adviser Class shares and service fees applicable to
Institutional Class shares.
The Funds' Advisory and Administration Agreements each provide
that WPG, in its capacities as investment adviser and administrator,
may render similar services to others so long as the services provided
thereunder are not impaired thereby.
Principal Underwriter
WPG serves as the principal underwriter in connection with the
continuous offering of the shares of the Trust pursuant to an
Underwriting Agreement, dated as of the effective date of the Trust's
registration statement. The Trustees, including the non-interested
Trustees, approved the Underwriting Agreement on July 19, 1995, which
will continue in effect from year to year, if annually approved by the
Trustees, including the non-interested Trustees. The Underwriting
Agreement provides that WPG will bear certain distribution expenses not
borne by the Funds.
WPG bears all expenses it incurs in providing services under the
Underwriting Agreement. Such expenses include compensation to its
employees and representatives and to any investment dealers and
financial firms ("Authorized Firms") for distribution related services.
WPG also pays certain expenses in connection with the distribution of
the Funds' shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of
printing and distributing prospectuses and supplements to prospective
shareholders. WPG receives compensation under a Rule 12b-1 Plan for
providing such services with respect to Adviser Class shares. Each Fund
bears the cost of registering its shares under federal, state and
foreign securities law.
SERVICE PLANS
Each Fund, with respect to its Institutional Class shares, has
adopted a service plan (collectively, the "Plans").
Each Plan provides that a Fund shall compensate Plan Fiduciaries
or other service providers to Qualified Plans for the benefit of the
Qualified Plans (for purposes of this section, collectively, "Plan
Fiduciaries") for providing certain personal, account administration
and/or shareholder liaison services to plan participants who are
beneficial owners of Institutional Class shares. Pursuant to the Plans,
the Funds may enter into agreements with Plan Fiduciaries which
purchase Institutional Class shares of the Fund ("Service Agreements").
Under such Service Agreements or otherwise, the Plan Fiduciaries may
perform some or all of the following services: (a) act as the sole
shareholder of record and nominee for all plan participants, (b)
maintain account records for each plan participants who beneficially
owns Institutional Class shares of the Funds, (c) answer questions and
handle correspondence from plan participant regarding their accounts,
(d) process plan participants orders to purchase, redeem and exchange
Institutional Class shares of the Funds, and handle the transmission of
funds representing the participants' purchase price or redemption
proceeds, (e) issue confirmations for transactions in shares by
participants, (f) provide facilities to answer questions from
participants and existing investors about Institutional Class shares of
the Funds, (g) receive and answer shareholder correspondence, including
requests for prospectuses and statements of additional information, (h)
assist participants in selecting dividend and other account options and
opening custody accounts with the Plan Fiduciaries and (i) act as
liaison between participants and the Funds, including obtaining
information from the Funds, working with the Funds to correct errors
and resolve problems and providing statistical and other information to
the Funds. As compensation for such services, the Funds may pay each
Plan Fiduciary a service fee in an amount up to 0.25% (on an annualized
basis) of the Fund's average daily net assets attributable to
Institutional Class shares of the Funds that are attributable to or
held in the name of such Plan Fiduciary. Plan Fiduciaries may from time
to time be required to meet certain other criteria in order to receive
service fees.
Conflict of interest restrictions (including the Employee
Retirement Income Security Act of 1974) may apply to a Plan Fiduciary's
receipt of compensation paid by the Funds in connection with the
investment of fiduciary assets in Institutional Class shares of the
Funds. Plan Fiduciaries and investment advisers and other money mangers
subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal advisers
before investing fiduciary assets in Institutional Class shares of the
Funds.
In accordance with the terms of the Plans, WPG provides to the
Trust for review by the Trustees a quarterly written report of the
amounts expended under the Plans and the purpose for which such
expenditures were made. In the Trustees' quarterly review of the Plans,
they will consider the continued appropriateness and the level of
compensation that the Plans provide.
<PAGE>
TRUSTEES AND OFFICERS
The Trustees have responsibility for management of the business of
the Trust. The executive officers of the Trust are responsible for its
day to day operation. Set forth below is certain information concerning
the Trustees and officers.
Name, Address,
Age and Title Principal Occupations During Past Five Years
Roger J. Weiss* Senior Managing Principal, Weiss, Peck &
One New York Plaza Greer, L.L.C.
New York, NY 10004 Chairman of the Board of all WPG Funds
Age: 56 President, Weiss, Peck & Greer International
Fund
Chairman of the Executive Vice President and Director,
Board, President WPG Advisers, Inc.
and Trustee Former Executive Vice President and Director,
Tudor Management Company
Raymond R.
Herrmann, Jr.** Chairman of the Board, Sunbelt Beverage
654 Madison Avenue Corporation (distributor of wines and
Suite 1400 liquors)
New York, NY 10017 Former Vice Chairman and Director, McKesson
Age: 75 Corporation (U.S. distributor of
drugs and health care products, wine and
Trustee spirits)
Life Member, Board of Overseers of Cornell
Medical College
Member of Board and Executive Committee, Sky
Ranch for Boys
Member, Evaluation Advisory Board,
Biotechnology Investments, Ltd.
Harvey E. Sampson** Chief Executive Officer and Chairman of Harvey
600 Secaucus Road Group, Inc. (retail sales of consumer
Secaucus, NJ 07094 electronics)
Age: 56 Trustee, Cornell University
Joint Board of The New York Hospital -
Trustee Cornell Medical Center
Trustee, North Shore University Hospital
Lawrence J. Israel** Private Investor
200 Broadway Director and Trustee of the Touro Infirmary
Suite 249 Member of the Intercollegiate Athletics
New Orleans, LA 70118 Committee of the Administrators of the
Age: 60 Tulane Educational Fund
Trustee
Francis H. Powers* Principal, Weiss, Peck & Greer, L.L.C.
One New York Plaza Vice President and Secretary, Weiss, Peck &
New York, NY 10004 Greer Advisers, Inc.
Age: 55 Executive Vice President and Treasurer of all
WPG Funds
Executive Former Vice President and Secretary, Tudor
Vice President Management Company
and Treasurer
Jay C. Nadel* Principal, Weiss, Peck & Greer, L.L.C.
One New York Plaza Director of Operating Departments
New York, NY 10004 Executive Vice President and Secretary of all
Age: 37 WPG Funds
Executive
Vice President
and Secretary
Joseph N. Pappo* Principal, Weiss, Peck & Greer,
311 So. Wacker Drive L.L.C. since 1994
52nd Floor President of Eden Financial
Chicago, IL 60606 Corporation from 1988-1991
Age 44
Vice President
Daniel S. Vandivort* Principal, Weiss, Peck & Greer,
One New York Plaza L.L.C. since 1994
30th Floor Previously Managing Director and
New York, NY 10004 Head of U.S. Fixed Income,
Age: 41 Senior Portfolio Manager and
Director, Global Product
Vice President Development and Marketing with
CS First Boston Investment
Management, 1989-1994
Stephen Gresham* Associate Principal, Weiss, Peck &
One New York Plaza Greer, L.L.C., 1994
30th Floor Senior Vice President and
New York, NY 10004 Principal, Systematic Financial
Age: 35 Management from 1991-1994.
Managing Director of Advest, Inc.
Vice President from 1987 to 1991
<PAGE>
Arlen S. Oransky* Vice President, Mutual Fund
One New York Plaza Operations, Weiss, Peck & Greer, L.L.C.
New York, NY 10004 since December, 1991
Age: 39 Assistant Vice President of all
WPG Funds since April, 1991
Assistant Manager of Investment Services
Vice President Weiss, Peck & Greer, L.L.C. from July,
1990 to December, 1991
Joseph J. Reardon* Vice President, Mutual Fund
One New York Plaza Operations, Weiss, Peck & Greer, L.L.C.
New York, NY 10004 since December, 1993
Age: 35 Assistant Manager, Mutual Fund
Operations, Weiss, Peck & Greer, L.L.C.
Assistant from February, 1990 to December, 1993
Vice President Assistant Vice President of all
WPG Funds since April, 1991
Teresa Hogan Manager State Regulation,
First Data Investor First Data Investor
Services Group Services Group, Inc.
53 State Street Since June, 1994
Boston, MA 02109 Senior Legal Assistant,
Age: 33 Palmer & Dodge
from 1992-1994
Assistant Secretary Blue Sky Paralegal,
Robinson & Cole from
1984-1992
-----------------------
* "Interested Person" within the meaning of the 1940 Act.
** Each of the non-interested Trustees is a trustee of each of the
other WPG Funds and a Member of the Trust's Audit Committee and
Special Nominating Committee.
Compensation of Trustees and Officers
The Funds pay no compensation to the Trust's Trustees affiliated
with the Adviser or its officers. None of the Trust's Trustees or
officers have engaged in any financial transactions with any Fund or
the Adviser.
<PAGE>
The following table estimates the amount of compensation to be paid to the
Trust's Trustees for the current fiscal year ending December, 31, 1995. In
addition, each Trustee is reimbursed for out-of-pocket expenses associated with
attending Trustee meetings.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pension or
Aggregate Aggregate Aggregate Aggregate Aggregate Aggregate Retirement Total
Compensa- Compensa- Compensa- Compensa- Compensa- Compensa- Benefits Compensation
tion from tion from tion from tion from tion from tion from Accrued as from Trust
Long-Term Medium-Term Short-Term Post- Core Large- Core Small- Part of and other
Retirement Retirement Retirement Retirement Cap Stock Cap Stock Trust's Funds in
Fund* Fund* Fund* Fund* Fund* Fund* Expenses Complex**
Roger J. Weiss $0 $0 $0 $0 $0 $0 $0 $0
Raymond H. Herrmann, Jr. $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $0 $37,250
Harvey E. Sampson $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $0 $37,250
Lawrence J. Israel $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $0 $37,250
Total $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $0 $111,750
<FN>
* Estimated. The Trust is newly organized and has not paid any Trustee's fees.
** As of the date of this SAI, there were 15 mutual funds in the WPG fund complex, six of which were series of the
Trust. The Trustee's fees paid with respect to the other funds in the WPG fund complex are based on actual fees paid by
such funds for the fiscal year ended December 31, 1994.
</FN>
</TABLE>
<PAGE>
Certain Shareholders
Immediately prior to the commencement of a Fund's operations, it
is expected that WPG will own 100% of the outstanding shares of that
Fund. As of the date of this Statement of Additional Information, the
Trustees and officers of the Trust as a group beneficially owned (i.e.,
had voting or investing power) less than 1% of the outstanding shares
of each Fund.
HOW TO PURCHASE SHARES
(See "How to Buy Shares" in the Prospectuses.)
The Trust continuously offers shares of each Fund. The Trust may
terminate the continuous offering of its shares with respect to any
Fund at any time at the discretion of the Trustees.
In the case of telephone subscriptions, if full payment for
telephone subscriptions is not received by the Trust within the
customary time period for settlement then in effect after the
acceptance of the order by the Trust, the order is subject to
cancellation and the purchaser will be liable to the affected Fund for
any loss suffered as a result of such cancellation. To recoup such loss
each Fund reserves the right to redeem shares owned by any shareholder
whose purchase order is cancelled for non-payment, and such purchaser
may be prohibited from placing further telephone orders.
If a subscription or redemption of Fund shares is arranged and
settlement made through a member of the NASD, then that member may, in
its discretion, charge a fee for this service.
Acquiring Shares of the Funds in Exchange for Securities
Shares of the Funds may be purchased in whole or in part by
delivering to the Funds' Custodian securities acceptable to WPG. If the
securities are not suitable for a Fund's portfolio, the securities will
be sold by the Custodian as agent for the account of their owner on the
day of their receipt by the Custodian or as soon thereafter as
possible. The number of shares of a class of a Fund to be issued in
exchange for securities will be the aggregate proceeds from the sale of
such securities, divided by the net asset value per share of the
applicable class of the applicable Fund on the day such proceeds are
received. WPG will use reasonable efforts to obtain the current market
price for such securities but does not guarantee the best available
price. WPG will absorb any transaction costs, such as commissions, on
the sale of securities.
<PAGE>
Securities determined by WPG to be acceptable should be
transferred by book entry or physically delivered, in proper form for
transfer. Please contact WPG for transfer instructions.
Investors who are contemplating an exchange of securities for
shares of a Fund must contact WPG to determine whether the securities
are acceptable before forwarding such securities to the Custodian. WPG
reserves the right to reject any securities. Exchanging securities for
shares of the Funds may create a taxable gain or loss. Please consult
your tax adviser with respect to the particular Federal, state and
local tax consequences of exchanging securities for Fund shares.
The Trust will not generally issue shares for consideration other
than cash. The Trust may, however, issue shares for consideration other
than cash pursuant to a bona fide purchase of assets, merger or other
reorganization provided (i) the securities meet the investment
objectives and policies of the applicable Fund; (ii) the securities are
acquired by the applicable Fund for investment and not for resale;
(iii) the securities are not restricted as to transfer either by law or
liquidity of market; and (iv) the securities have a value which is
readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange or
the New York Stock Exchange or by quotation on the Nasdaq National
Market.
REDEMPTION OF SHARES
(See "How to Sell Shares" and "How to Exchange Shares" in the
Prospectuses.)
Systematic Withdrawal Plan
A Systematic Withdrawal Plan is available only for the
Post-Retirement Fund without expense to any shareholder with a minimum
investment of $10,000 in value in such Funds' shares (at the then
current offering price). The Transfer Agent may be directed, as agent
of the purchaser, to redeem without a redemption charge shares of such
Fund held in his account as may be required so that the shareholder or
any person designated by him will receive a monthly or quarterly check
in a stated amount not to be less than $100 although such amount is not
necessarily a recommended amount. Dividends and capital gains
distributions will be reinvested in additional shares of the same class
of such Fund at net asset value as of the reinvestment date.
Redemption of shares of the Post-Retirement Fund under the
Systematic Withdrawal Plan may reduce or even liquidate the account,
particularly in a declining market. Such payments paid to a shareholder
cannot be considered a yield or income on the investment. Payments to a
shareholder in excess of distributions of investment income will
constitute a return of his invested principal, and the liquidation of
Fund shares pursuant to this Plan is a taxable transaction which may
result in gain or loss to the shareholder depending upon the cost of
the shares when acquired.
Withdrawals at the same time as regular purchases of Institutional
Class shares of the Post-Retirement Fund ordinarily will not be
permitted since purchases are intended to accumulate capital and the
Systematic Withdrawal Plan is designed for the regular withdrawal of
monies, except that a shareholder may make lump sum investments, of
$5,000 or more. The Systematic Withdrawal Plan may be terminated by the
shareholder, without penalty, at any time and the Trust may terminate
the Plan at will. There are no contractual rights on the part of either
party with respect to the Plan.
NET ASSET VALUE
(See "How Each Fund's Share Price is Determined" in the
Prospectuses)
Under the 1940 Act, the Trustees are responsible for determining
in good faith the fair value of securities of the Funds. The net asset
value per share of each class of each Fund is determined once daily,
Monday through Friday as of the close of regular trading on the NYSE
(normally 4:00 P.M. New York City time) on each Business Day (as
defined in the Prospectuses) in which there is a sufficient degree of
trading in that Fund's portfolio securities that the current net asset
value of that Fund's shares might be materially affected. A Fund may
not determine its net asset value on any day during which its shares
were not tendered for redemption and the Trust did not receive any
order to purchase or sell shares of that Fund. In accordance with
procedures approved by the Trustees, the net asset value per share of
each class of each Fund is calculated by determining the value of the
net assets attributable to each class of that Fund and dividing by the
number of outstanding shares of that class. The NYSE is not open for
trading on weekends or on New Year's Day (January 1), Presidents' Day
(the third Monday in February), Good Friday, Memorial Day (the last
Monday in May), Independence Day (July 4), Labor Day (the first Monday
in September), Thanksgiving Day (the fourth Thursday in November) and
Christmas Day (December 25).
The public offering price per Institutional Class share of a class
of a Fund is the net asset value per share of that class of that Fund
next determined after receipt of an order. Orders for Institutional
Class shares which have been received by the Trust or the Transfer
Agent prior to the close of regular trading of the NYSE are confirmed
at the offering price effective at the close of regular trading of the
NYSE on that day, while orders received subsequent to the close of
regular trading of the NYSE will be confirmed at the offering price
effective at the close of regular trading of the NYSE on the next day
on which the net asset value is calculated.
Bonds and other fixed-income securities (other than short-term
obligations but including listed issues) in a Fund's portfolio are
valued on the basis of valuations furnished by a pricing service which
utilizes both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, when such valuations are believed
to reflect the fair value of such securities.
In determining the net asset value, unlisted securities for which
market quotations are available are valued at the mean between the most
recent bid and asked prices. Securities, options on securities, futures
contracts and options thereon which are listed or admitted to trading
on a national exchange, are valued at their last sale on such exchange
prior to the time of determining net asset value; or if no sales are
reported on such exchange on that day, at the mean between the most
recent bid and asked price. Securities listed on more than one exchange
shall be valued on the exchange the security is most extensively
traded. Other securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good
faith by the Valuation Committee as authorized by the Trustees.
For purposes of determining the net asset value of the Funds'
shares, options transactions will be treated as follows: When a Fund
sells an option, an amount equal to the premium received by that Fund
will be included in that Fund's accounts as an asset and a deferred
liability will be created in the amount of the option. The amount of
the liability will be marked to the market to reflect the current
market value of the option. If the option expires or if that Fund
enters into a closing purchase transaction, that Fund will realize a
gain (or a loss if the cost of the closing purchase exceeds the premium
received), and the related liability will be extinguished. If a call
option contract sold by a Fund is exercised, that Fund will realize the
gain or loss from the sale of the underlying security and the sale
proceeds will be increased by the premium originally received.
INVESTOR SERVICES
(See "How to Buy Shares," "How to Sell Shares" and "How to
Exchange Shares" in the Prospectuses.)
<PAGE>
The Trust offers a variety of services, described in the sections
that follow, designed to meet the needs of its shareholders. The costs
of providing such services are borne by the Funds.
Automatic Investment Plan
The Automatic Investment Plan enables shareholders to make regular
(monthly or quarterly) investments of or more in shares of any of the
Funds through an automatic withdrawal from a designated bank account by
simply completing the Automatic Investment Plan application. Please
call 1-800-223-3332 or write to WPG to receive this form. By completing
the form, the shareholder authorizes the Trust's Custodian to
periodically draw money from a designated bank or federal credit union
account, and to invest such amounts in account(s) of the Fund(s)
specified. The transaction will be automatically processed to the
mutual fund account on or about the first business day of the month or
quarter designated.
Please be aware that: (1) the Automatic Investment Plan privilege
may be revoked without prior notice if any check is not paid upon
presentation; (2) the Custodian is under no obligation to notify the
shareholder as to the non-payment of any check, and (3) this service
may be modified or discontinued by the Custodian upon thirty (30) days'
written notice prior to any payment date, or may be discontinued by you
by written notice to TSSG, at least ten (10) days before the next
payment date.
Prototype Retirement Plan for Employers and Self-Employed
Individuals
Prototype retirement plans (the "Retirement Plan") are available
for those entities or self-employed individuals who wish to purchase
shares of a Fund in connection with a money purchase plan or a profit
sharing plan maintained by their employer. The Retirement Plans were
designed to conform to the requirements of the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The
Retirement Plans received opinion letters from the Internal Revenue
Service (the "IRS") on March 29, 1990 that the form of the Retirement
Plans is acceptable under Section 401 of the Code.
Annual tax-deductible contributions to the Retirement Plan may be
made up to the lesser of $30,000 or 25% of the participant's earned
income (disregarding any compensation in excess of $150,000 (as
adjusted by the IRS for inflation). Under the terms of the Retirement
Plan, contributions by or on behalf of participants may be invested in
a Fund with the designated custodian under the Retirement Plan (the
"Retirement Plan's Custodian"). Investment in other mutual funds
advised by the Adviser or one of its affiliates may also be available.
Employers adopting the Retirement Plan may elect either that a
participant shall specify the investments to be made with contributions
by or on behalf of such participant or that the employer shall specify
the investments to be made with all such contributions. Since no Fund
is intended as a complete investment program it is important, in
connection with such election, that employers give careful
consideration to the fiduciary obligation requirements of ERISA.
All dividends and distributions received by the Retirement Plan's
Custodian on the Funds' shares held by the Plan's Custodian will be
reinvested in the applicable Fund's shares of the same class at net
asset value. Distributions of benefits to participants, when made, will
be paid first in cash, to the extent that any amount credited to a
participant's account is not invested in the applicable Fund's shares
and then in full Fund shares of the applicable class (and cash in lieu
of fractional shares).
Boston Safe Deposit and Trust Company serves as the Retirement
Plan's Custodian under a Custodial Agreement. Custodian fees which are
payable by the employer to the Retirement Plan's Custodian under such
Custodial Agreement are a $10 application fee for processing the
Retirement Plan application, an annual maintenance fee of $15 per
participant, and a distribution fee of $10 for each distribution from a
participant's account. Such fees may be altered from time to time by
agreement of the employer and the Retirement Plan's Custodian. For
further details see the terms of the Retirement Plan which are
available from the Trust.
Distributions must be made pursuant to the terms of the Retirement
Plan and generally may not commence before retirement, disability,
death, termination of employment, or termination of the Retirement Plan
and must commence no later than April 1 of the year following the year
in which the participant attains age 70 (the "required beginning
date"). Distributions are taxed as ordinary income when received,
except the portion, if any, considered a return of a participant's
nondeductible contributions. Certain distributions before age 59 may be
subject to a 10% nondeductible penalty on the taxable portion of the
distribution. Failure to make minimum required distributions by the
required beginning date may be subject to a 50% excise tax.
It should be noted that the Retirement Plan is a retirement
investment program involving commitments covering future years. In
deciding whether to utilize the Retirement Plan, it is important that
the employer consider his or her needs and those of the Retirement Plan
participants and whether the investment objectives of the Funds are
likely to fulfill such needs. Termination or curtailment of the
Retirement Plan for other than business reasons within a few years
after its adoption may result in adverse tax consequences.
Employers who contemplate adoption of the Retirement Plan should
consult an attorney or financial adviser regarding all aspects of the
<PAGE>
Retirement Plan as a retirement plan vehicle (including fiduciary
obligations under ERISA).
Individual Retirement Account
Persons with earned income, whether or not they are active
participants in a pension, profit-sharing or stock bonus plan described
in Code 401(a), Federal, state or local pension plan, an annuity plan
described in Code 403(a), an annuity contract or custodial account
described in Code 403(b), a simplified employee pension plan described
in Code 408(k), or a trust described in Code 501(c)(18) ("active
participant"), generally are eligible to establish an Individual
Retirement Account ("IRA"). An individual may make a deductible
contribution to an IRA only if (i) neither the individual nor his or
her spouse (unless living apart for the entire year and filing separate
returns) is an active participant, or (ii) the individual (and his or
her spouse, if applicable) has an adjusted gross income below a certain
level ($40,000 for married individuals filing a joint return, with a
phase-out for adjusted gross income between $40,000 and $50,000;
$25,000 for a single individual, with a phase-out for adjusted gross
income between $25,000 and $35,0000). However, an individual who is not
permitted to make a deductible contribution to an IRA for a taxable
year may nonetheless make annual nondeductible contributions to an IRA
up to the lesser of 100% of the individual's earned income or $2,000 to
an IRA (up to $2,250 to IRAs for an individual and his or her
non-earning spouse) for that year. There are special rules for
determining how withdrawals are to be taxed if an IRA contains both
deductible and nondeductible amounts. In general, a proportionate
amount of each withdrawal will be deemed to be made from nondeductible
contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be
made to a spousal IRA even if the spouse has earnings in a given year
if the spouse elects to be treated as having no earnings (for IRA
contribution purposes) for the year.
Withdrawals from the IRA (other than the portion treated as a
return of nondeductible contributions) are taxed as ordinary income
when received, may be made without penalty after the participant
reaches age 59 and must commence no later than the required beginning
date (see discussion of "Prototype Retirement Plans" above).
Withdrawals before age 59 may involve the payment of a 10%
nondeductible penalty on the taxable portion of the amount withdrawn.
The time and rate of withdrawal must conform with Code requirements in
order to avoid adverse tax consequences. All dividends and
distributions on shares of a Fund held in IRA accounts are reinvested
in full and fractional shares of the same class of the same Fund and
are not subject to federal income tax until withdrawn from the IRA.
Investors should consult their tax advisers for further tax
information, including information with respect to the imposition of
state and local income taxes and the effects of tax law changes.
The Trust has arranged for Boston Safe Deposit and Trust Company
to furnish the required custodial services for IRAs using any of the
Fund's shares as the underlying investment. The Bank will charge an
acceptance fee of $10 for each new IRA and an annual maintenance fee of
$15 for each year that an IRA is in existence. There is a $10 fee for
processing a premature distribution. These fees will be deducted from
the IRA account and may be changed by the Plan's Custodian upon 30
days' prior notice.
To establish an IRA for investment in a Fund, an investor must
complete an application and a custodial agreement on IRS Form 5305-A
(which has been supplemented to provide certain additional custodial
provisions) and must make an initial cash contribution to the IRA,
subject to the limitation on contributions described above. Pursuant to
IRS regulations, an investor may for seven days following establishment
of an IRA revoke the IRA. Detailed information on IRAs, together with
the necessary form of application and custodial agreement, is available
from the Trust and should be studied carefully by persons interested in
utilizing a Fund for IRA investments. Such persons should also consult
their own advisers regarding all aspects of the Funds as an appropriate
IRA investment vehicle.
Simplified Employee Pension Plans (SEP-IRA)
A simplified employee pension (SEP) allows an employer to make
contributions toward his or her own (if a self-employed individual) and
his or her employees' retirement and/or permits the employees to make
elective deferrals by salary reduction. A SEP requires an Individual
Retirement Account (a SEP-IRA) to be established for each "qualifying
employee," although the employer may include additional employees if it
wishes. A qualifying employee is one who: (a) is at least age 21, (b)
has worked for the employer during at least 3 of 5 years immediately
preceding the tax year, and (c) has received at least $400 (as indexed
for inflation) in compensation in the tax year.
An employer is not required to make any contribution to the
SEP-IRA. However, if the employer does make a contribution, the
contribution must be based on a written allocation formula and must not
discriminate in favor of highly compensated employees, as defined in
Code Section 414(q). The employer may make annual contributions on
behalf of each qualifying employee, provided that the contributions,
when combined with the employee's elective deferrals, do not exceed 15%
of the employee's compensation or $30,000, whichever is less.
A SEP-IRA may include a salary reduction arrangement under which
the employee can choose to have the employer make contributions
("elective deferrals") to his or her SEP-IRA out of his or her salary.
However, employees may make elective deferrals only if (i) at least 50%
of the employer's eligible employees choose elective deferrals; (ii)
the employer did not have more than 25 eligible employees at any time
during the preceding year; and (iii) the amount deferred each year by
each eligible highly compensated employee as a percentage of pay is no
more than 125% of the average deferral percentage of all other eligible
employees. An elective deferral arrangement is not available for a SEP
maintained by a state or local government, or any of their political
subdivisions, agencies, or instrumentalities, or to exempt
organizations.
In general, the total income which an employee can defer under a
salary reduction arrangement included in a SEP and certain other
elective deferral arrangements is limited to $9,240 (indexed annually
for inflation). This dollar limit applies only to the elective
deferrals, not to any contributions from employer funds. The Code may
require that contributions be further limited to prevent discrimination
in favor of highly compensated employees. An employee may also make
regular IRA contributions to his or her SEP-IRA (see discussion of
IRAs, above).
Under the terms of the SEP-IRA, contributions by or on behalf of
participants may be invested in shares of the Funds (or shares of other
funds designated by the Adviser as eligible investments), as specified
by the participant. All dividends and distributions on shares held in
SEP-IRAs are reinvested in full and fractional shares of the same class
of the same Fund. Since no Fund is intended as a complete investment
program it is important, in connection with the adoption of a SEP-IRA,
that employers give careful consideration to the fiduciary obligation
requirements of ERISA, particularly those pertaining to diversification
of investments.
Withdrawals before age 59 may involve the payment of a 10%
nondeductible penalty on the amount withdrawn. Withdrawals must
commence no later than the required beginning date (see discussions of
"Prototype Retirement Plans" above). The time and rate of withdrawal
must conform with Code requirements in order to avoid adverse tax
consequences. Contributions to a SEP-IRA by an employer are excluded
from the employee's income rather than deducted from it. Elective
deferrals made to an employee's SEP-IRA generally are excluded from his
income in the year of deferral, but are included in wages for social
security (FICA) and unemployment (FUTA) tax purposes. However, if the
employee makes regular IRA contributions to his SEP-IRA (other than
elective deferrals), he can deduct them the same way as contributions
to a regular IRA, up to the amount of his deduction limit. Investors
should consult their tax advisers for further tax information including
information with respect to the imposition of state and local income
taxes and the effects of tax law changes.
The Fund has arranged for Boston Safe Deposit and Trust Company to
furnish the required custodial services for SEP-IRAs using the Funds as
the underlying investment. Boston Safe Deposit and Trust Company will
charge an acceptance fee of $10 for each new SEP-IRA and an annual
maintenance fee of $15 for each year that a SEP-IRA is in existence.
There is a $10 fee for each premature distribution. These fees will be
deducted from the SEP-IRA account and may be changed by the Custodian
upon 30 days' prior written notice.
To establish a SEP-IRA, an employer and employee should complete
the WPG IRA application materials, as well as either IRS Form 5305A-SEP
(if employees will make elective deferrals) and/or IRS Form 5305-SEP
(only if employer contributions will be made). Pursuant to IRS
regulations, an investor may for seven days following establishment of
a SEP-IRA revoke the SEP-IRA. Detailed information on SEP-IRAs,
together with the necessary form of application and custodial
agreement, is available from the Fund and should be studied carefully
by persons interested in utilizing the Fund for SEP-IRA investments.
Such persons should also consult their own advisers regarding all
aspects of the Fund as an appropriate SEP-IRA investment vehicle.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund within the Trust is separate for investment and
accounting purposes and is treated as a separate entity for federal
income tax purposes.
A regulated investment company qualifying under Subchapter M of
the Code is not subject to federal income tax on distributed amounts to
the extent that it distributes annually its taxable and, if any,
tax-exempt net investment income and net realized capital gains in
accordance with the timing requirements of the Code. Each Fund intends
to elect and to qualify to be treated as a regulated investment company
and intends to continue to so qualify for each taxable year.
Qualification of a Fund for treatment as a regulated investment
company under the Code requires, among other things, that (a) at least
90% of a Fund's annual gross income, without offset for losses from the
sale or other disposition of stock or securities or other transactions,
be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including but not
limited to gains from options, futures, or forward contracts) derived
with respect to its business of investing in such stock, securities or
currencies; (b) the Fund derive less than 30% of its annual gross
income from gains (without deduction for losses) from the sale or other
disposition of any of the following held (for tax purposes) for less
than three months: (i) stock or securities; (ii) options, futures or
forward contracts (not on foreign currencies) or (iii) foreign
currencies (or options, futures or forward contracts on foreign
currencies) not directly related to the Fund's principal business of
investing in stock or securities and related options or futures; (c)
the Fund distribute at least annually to its shareholders as dividends
at least 90% of its taxable and tax-exempt net investment income, the
excess of net short-term capital gain over net long-term capital loss
earned in each year and any other net income (except for the excess, if
any, of net long-term capital gain over net short-term capital loss,
which need not be distributed in order for the Fund to qualify as a
regulated investment company but is taxed to the Fund if it is not
distributed); and (d) the Fund diversify its assets so that, at the
close of each quarter of its taxable year, (i) at least 50% of the fair
market value of its total (gross) assets is comprised of cash, cash
items, U.S. Government securities, securities of other regulated
investment companies and other securities limited in respect of any one
issuer to no more than 5% of the fair market value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer and
(ii) no more than 25% of the fair market value of its total assets is
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged
in the same, similar, or related trades or businesses.
It is expected that Separate Accounts of Participating Insurance
Companies will be purchasing Institutional Class shares of the Funds.
As such, each Fund must, and intends to, comply with the
diversification requirements imposed by Section 817(h) of the Code and
the regulations thereunder. These requirements, which are in addition
to the diversification requirements imposed on a Fund by the 1940 Act
and Subchapter M of the Code, place certain limitations on the assets
of each Separate Account and, because Section 817(h) and those
regulations treat the assets of the Fund as assets of the related
Separate Account, the assets of a Fund, that may be invested in
securities of a single issuer. Specifically, the regulations provide
that, except as permitted by the "safe harbor" described below, as of
the end of each calendar quarter or within 30 days thereafter no more
than 55% of the total assets of a Fund may be represented by any one
investment, no more than 70% by any two investments, no more than 80%
by any three investments and no more than 90% by any four investments.
For this purpose, all securities of the same issuer are considered a
single investment, and each U.S. Government agency and instrumentality
is considered a separate issuer. Section 817(h) provides, as a safe
harbor, that a Separate Account will be treated as being adequately
diversified if the diversification requirements under Subchapter M of
the Code are satisfied and no more than 55% of the value of the
Separate Account's total assets are cash and cash items (including
receivables), U.S. Government securities and securities of other
regulated investment companies. Failure by a Fund to both qualify as a
regulated investment company and satisfy the Section 817(h)
requirements would generally result in treatment of the Variable
Contract holders other than as described in the applicable Variable
Contract prospectus, including inclusion in ordinary income of income
accrued under the contracts for the current and all prior taxable
years. Any such failure may also result in adverse tax consequences for
the Participating Insurance Company issuing the Variable Contracts.
Unless its only shareholders are life insurance company segregated
asset accounts held in connection with Variable Contracts, trusts that
are described in section 401(a) of the Code and exempt from tax under
section 501(a) of the Code, and investors of "seed money" not in excess
of $250,000, each Fund is subject to a 4% nondeductible federal excise
tax on amounts required to be but not distributed under a prescribed
formula. The formula requires that a Fund distribute (or be deemed to
have distributed) to shareholders during a calendar year at least 98%
of the Fund's ordinary income (not including tax-exempt interest) for
the calendar year, at least 98% of the excess of its capital gains over
the capital losses realized during the one-year period ending October
31 during such year, as well as any income or gain (as so computed)
from the prior calendar year that was not distributed for such year and
on which the Fund paid no federal income tax. Each Fund has
distribution policies that should generally enable it to avoid
liability for this tax.
Net investment income for each Fund is the Fund's investment
income less its expenses. Dividends from taxable net investment income
and the excess, if any, of net short-term capital gain over net
long-term capital loss of a Fund will be treated under the Code as
ordinary income, and dividends from net long-term capital gain in
excess of net short-term capital loss ("capital gain dividends") will
be treated under the Code as long-term capital gain, for federal income
tax purposes. These dividends are paid after taking into account, and
reducing the distribution to the extent of, any available capital loss
carryforwards. Distributions from a Fund's current or accumulated
earnings and profits, as computed for Federal income tax purposes, will
be treated as described above whether taken in shares or in cash.
Certain distributions received in January may be treated as if paid by
a Fund and received by a shareholder on December 31 of the prior year.
Dividends, including capital gain dividends, paid by a Fund
shortly after a shareholder's purchase of shares have the effect of
reducing the net asset value per share of his shares by the amount per
share of the dividend distribution. Although such dividends are, in
effect, a partial return of the shareholder's purchase price to the
shareholder, they may be characterized as ordinary income or capital
gain as described above.
Equity options (including options on stock and options on
narrow-based stock indices) and over-the-counter options on debt
securities written or purchased by a Fund will be subject to tax under
Section 1234 of the Code. In general, no loss is recognized by a Fund
upon payment of a premium in connection with the purchase of a put or
call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse
or sale of the option, on the Fund's holding period for the option, and
in the case of an exercise of the option, on the Fund's holding period
for the underlying security. The purchase of a put option may
constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying stock or security or
a substantially identical stock or security in the Fund's portfolio. If
a Fund writes a put or call option, no gain is recognized upon its
receipt of a premium. If the option lapses or is closed out, any gain
or loss is treated as a short-term capital gain or loss. If a call
option is exercised, whether the gain or loss is long-term or
short-term depends on the holding period of the underlying stock or
security. The exercise of a put option written by a Fund is not a
taxable transaction for the Fund.
All futures contracts entered into by a Fund and all listed
nonequity options written or purchased by a Fund (including options on
debt securities, options on futures contracts, options on securities
indices and options on broad-based stock indices) will be governed by
Section 1256 of the Code. Absent a tax election to the contrary, gain
or loss attributable to the lapse, exercise or closing out of any such
position will be treated as 60% long-term and 40% short-term capital
gain or loss, and on the last trading day of a Fund's taxable year, all
outstanding Section 1256 positions will be marked to market (i.e.,
treated as if such positions were closed out at their closing price on
such day), and any resulting gain or loss will be recognized as 60%
long-term and 40% short-term capital gain or loss. Under certain
circumstances, entry into a futures contract to sell a security may
constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying security or a
substantially identical security in a Fund's portfolio.
Because options and futures activities of a Fund may increase the
amount of gains from the sale of securities or investments held or
treated as held for less than three months, the Funds may have to limit
their options and futures transactions in order to comply with the 30%
limitation described above.
Positions of a Fund which consist of at least one stock and at
least one stock option or other position with respect to a related
security which substantially diminishes the Fund's risk of loss with
respect to such stock could be treated as a "straddle" which is
governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of stock or
securities and conversion of short-term capital losses into long-term
capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security
not governed by Section 1256 and at least one futures contract or
listed nonequity option governed by Section 1256 which substantially
diminishes the Fund's risk of loss with respect to such debt security
will be treated as a "mixed straddle." Although mixed straddles are
subject to the straddle rules of Section 1092 of the Code, certain tax
elections exist for them which reduce or eliminate the operation of
these rules. Each Fund will monitor its transactions in options and
futures and may make certain tax elections in order to mitigate the
operation of these rules and prevent disqualification of the Fund as a
regulated investment company for federal income tax purposes.
These special tax rules applicable to options and futures
transactions could affect the amount, timing and character of a Fund's
income or loss and hence of its distributions to shareholders by
causing holding period adjustments, converting short-term capital
losses into long-term capital losses, and accelerating a Fund's income
or deferring its losses.
A Fund's investment in zero coupon securities or other securities
having original issue discount (or market discount, if the Fund elects
to include market discount in income currently) will generally cause it
to realize income prior to the receipt of cash payments with respect to
these securities. The mark to market rules described above may also
require a Fund to recognize gains without a concurrent receipt of cash.
In such case, a Fund will not be able to purchase additional income
producing securities with the cash generated by the sale of such
securities but will be required to use such cash to make such required
distributions, and its current portfolio income may ultimately be
reduced accordingly. In order to distribute this income or gains,
maintain its qualification as a regulated investment company, and avoid
federal income or excise taxes, the Fund may be required to liquidate
portfolio securities that it might otherwise have continued to hold.
The Funds may be subject to foreign withholding or other foreign
taxes with respect to income (possibly including, in some cases,
capital gains) derived from foreign securities. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax
treaty. However, the Funds will not be eligible to pass through to
shareholders any foreign tax credits or deductions for foreign taxes
paid by the Funds that are not thus reduced or eliminated. Certain
foreign exchange gains and losses realized by the Funds with respect to
such securities or related currency transactions will generally be
treated as ordinary income and losses. Certain uses of foreign currency
and investments by the Funds in certain "passive foreign investment
companies" may be limited in order to avoid adverse tax consequences
for the Funds (or an election, if available, may be made with respect
to such investments).
Different tax treatment, including a penalty on certain
distributions, excess contributions or other transactions is accorded
to accounts maintained as IRAs or other retirement plans. Investors
should consult their tax advisers for more information. See "Prototype
Retirement Plan For Employers and Self-Employed Individuals,"
"Simplified Employee Pension Plans (SEP-IRA)," and "Individual
Retirement Accounts."
Redemptions, including exchanges, of shares may give rise to
realized gains or losses, recognizable for tax purposes except for
investors subject to tax provisions that do not require them to
recognize such gains or losses. All or a portion of a loss realized
upon the redemption of shares may be disallowed under "wash sale" rules
to the extent shares are purchased (including shares acquired by means
of reinvested dividends) within a 61-day period beginning 30 days
before and ending 30 days after such redemption. Any loss realized upon
a shareholder's sale, redemption or other disposition of shares with a
tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any distribution of long-term capital
gains with respect to such shares. Exchanges and withdrawals under the
Systematic Withdrawal Plan are treated as redemptions for federal
income tax purposes.
The Trust is organized as a Delaware business trust, and neither
the Trust nor the Funds will be subject to any corporate excise or
franchise tax in the State of Delaware, nor will they be liable for
Delaware income taxes provided that each Fund qualifies as a regulated
investment company for federal income tax purposes and satisfies
certain income source requirements of Delaware law. If each Fund so
qualifies and distributes all of its income and capital gains, it will
also be exempt from the New York State franchise tax and the New York
City general corporation tax, except for small minimum taxes.
The foregoing discussion of U.S. federal income tax law does not
address the special tax rules applicable to certain classes of
investors, such as insurance companies. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Funds, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30%
(or at a lower rate under an applicable income tax treaty) on Fund
distributions treated as ordinary dividends.
This discussion of the federal income tax treatment of the Funds
and their distributions is based on the federal income tax law in
effect as of the date of this Statement of Additional Information.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional
information and about the possible application of state, local and
foreign taxes in light of their particular tax situations.
<PAGE>
PORTFOLIO BROKERAGE
(See "Portfolio Brokerage" in the Prospectuses.)
It is the general policy of the Trust not to employ any broker in
the purchase or sale of securities for a Fund's portfolio unless the
Trust believes that the broker will obtain the best results for the
Fund, taking into consideration such relevant factors as price, the
ability of the broker to effect the transaction and the broker's
facilities, reliability and financial responsibility. Commission rates,
being a component of price, are considered together with such factors.
Subject to the foregoing, where transactions are effected on securities
exchanges, the Trust intends to employ primarily WPG as its broker. The
Trust is not obligated to deal with any broker or group of brokers in
the execution of transactions in portfolio securities.
WPG acts as broker for the Funds on exchange transactions,
subject, however, to the general policy of the Trust set forth above
and the procedures adopted by the Trustees. Commissions paid to WPG
must be at least as favorable as those believed to be contemporaneously
charged by other brokers in connection with comparable transactions
involving similar securities being purchased or sold on a securities
exchange. A transaction is not placed with WPG if a Fund would have to
pay a commission rate less favorable than WPG's contemporaneous charges
for comparable transactions for its other most favored, but
unaffiliated, customers except for accounts for which WPG acts as a
clearing broker for another brokerage firm, and any customers of WPG
determined by a majority of the Independent Trustees not to be
comparable to the Funds. With regard to comparable customers, in
isolated situations, subject to the approval of a majority of the
Independent Trustees, exceptions may be made. Since WPG has, as
investment adviser to the Funds, the obligation to provide management,
which includes elements of research and related skills, such research
and related skills will not be used by WPG as a basis for negotiating
commissions at a rate higher than that determined in accordance with
the above criteria.
The commission rate on all exchange orders is subject to
negotiation. Section 17(e) of the 1940 Act limits to "the usual and
customary broker's commission" the amount which can be paid by the
Trust to an affiliated person, such as WPG, acting as broker in
connection with transactions effected on a securities exchange. The
Trustees, including a majority of the Independent Trustees, have
adopted procedures designed to comply with the requirements of Section
17(e) of the 1940 Act and Rule 17e-1 thereunder to ensure a broker's
commission that is "reasonable and fair compared to the commission, fee
or other remuneration received by other brokers in connection with
comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time ...."
Rule 17e-1 also requires the Trustees, including a majority of the
Independent Trustees, to adopt procedures reasonably designed to
provide that the commission paid is consistent with the above standard,
review those procedures at least annually to determine that they
continue to be appropriate and determine at least quarterly that
transactions have been effected in compliance with those procedures.
The Trustees of the Trust, including a majority of the Independent
Trustees, have adopted procedures designed to comply with the
requirements of Rule 17e-1.
In selecting brokers other than WPG to effect transactions on
securities exchanges, the Trust considers the factors set forth in the
first paragraph under this heading and any investment products or
services provided by such brokers, subject to the criteria of Section
28(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Section 28(e) specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest rate available. To obtain the
benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions
paid are "reasonable in relation to the value of the brokerage and
research services provided viewed in terms of either that particular
transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion." Accordingly,
if the Trust determines in good faith that the amount of commissions
charged by a broker is reasonable in relation to the value of the
brokerage and research products and services provided by such broker,
the Trust may pay commissions to such broker in an amount greater than
the amount another firm might charge. Research products and services
provided to the Trust include research reports on particular industries
and companies, economic surveys and analyses, recommendations as to
specific securities and other products or services (e.g., quotation
equipment and computer related costs and expenses) providing lawful and
appropriate assistance to WPG (and its subsidiaries) in the performance
of their decision-making responsibilities.
Each year, the Adviser considers the amount and nature of the
research products and services provided by other brokers as well as the
extent to which such products and services are relied upon, and
attempts to allocate a portion of the brokerage business of their
clients, such as the Trust, on the basis of that consideration. In
addition, brokers sometimes suggest a level of business they would like
to receive in return for the various services they provide. Actual
brokerage business received by any broker may be less than the
suggested allocations, but can (and often does) exceed the suggestions,
because total brokerage is allocated on the basis of all the
considerations described above. In no instance is a broker excluded
from receiving business because it has not been identified as providing
research services. As permitted by Section 28(e), the investment
information received from other brokers may be used by WPG (and its
subsidiaries) in servicing all its accounts and not all such
information may be used by WPG, in its capacity as the Adviser, in
connection with the Trust. Nonetheless, the Trust believes that such
investment information provides the Trust with benefits by
supplementing the research otherwise available to the Trust.
As set forth above, the Trust employs WPG, a member firm of the
NYSE, as its principal broker on U.S. exchange transactions. Section
11(a) of the Exchange Act provides that a member firm of a national
securities exchange (such as WPG) may not effect transactions on such
exchange for the account of an investment company (such as the Trust)
of which the member firm or its affiliate (such as the Adviser) is the
investment adviser unless certain conditions are met. These conditions
require that the investment company authorize the practice and that the
investment company receive from the member firm at least annually a
statement of all commissions paid in connection with such transactions.
WPG's transactions on behalf of the Funds are effected in compliance
with these conditions.
WPG furnishes to the Trust at least quarterly a statement setting
forth the total amount of all compensation retained by WPG or any
associated person of WPG in connection with effecting transactions for
the account of the Trust, and the Trustees of the Trust review and
approve all the Trust's portfolio transactions and the compensation
received by WPG in connection therewith.
WPG does not knowingly participate in commissions paid by the
Trust to other brokers or dealers and does not seek or knowingly
receive any reciprocal business as the result of the payment of such
commissions. In the event WPG at any time learns that it has knowingly
received reciprocal business, it will so inform the Trustees.
To the extent that WPG receives brokerage commissions on Trust
portfolio transactions, officers and Trustees of the Trust who are also
principals in WPG may receive indirect compensation from the Trust
through their participation in such brokerage commissions.
In certain instances there may be securities which are suitable
for a Fund's portfolio as well as for that of another Fund or one or
more of the other clients of the Adviser. Investment decisions for a
Fund and for the Adviser's other clients are made with a view to
achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though
it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or
more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated
among clients in a manner believed to be equitable to each. It is
recognized that in some cases this system could have a detrimental
effect on the price or volume of the security in a particular
transaction as far as a Fund is concerned. The Trust believes that over
time its ability to participate in volume transactions will produce
better executions for the Funds. When appropriate, orders for the
account of the Funds are combined with orders for other investment
companies or other clients advised by WPG in order to obtain a more
favorable commission rate. When the same security is purchased for a
Fund and one or more other funds or other clients on the same day, each
party pays the average price and commissions paid are allocated in
direct proportion to the number of shares purchased.
The U.S. Government and debt securities in which the Funds invest
are traded primarily in the over-the-counter market. Transactions in
the over-the-counter market are generally principal transactions with
dealers and the costs of such transactions involve dealer spreads
rather than brokerage commissions. With respect to over-the-counter
transactions, the Trust, where possible, deals directly with the
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available
elsewhere. Under the 1940 Act, persons affiliated with the Trust are
prohibited from dealing with the Trust as a principal in the purchase
and sale of securities. Since transactions in the over-the-counter
market usually involve transactions with dealers acting as principal
for their own account, affiliated persons of the Trust, including WPG,
may not serve as the Trust's dealer in connection with such
transactions. However, affiliated persons of the Trust may serve as its
broker in transactions conducted on an exchange or over-the-counter
transactions conducted on an agency basis. On occasion, certain money
market instruments may be purchased directly from an issuer, in which
case no commissions or discounts are paid.
Subject to the supervision of the Trustees, all investment
decisions of the Trust are executed through WPG's trading department.
PORTFOLIO TURNOVER
See "Risk Considerations and Other Investment Practices and
Policies -- Portfolio Turnover" in the Prospectus.
The annual portfolio turnover rate of a Fund is calculated by
dividing the lesser of the purchase or sales of a Fund's portfolio
securities for the year by the monthly average of the value of the
portfolio securities owned by that Fund during the year. The monthly
average is calculated by totalling the values of the portfolio
securities as of the beginning and end of the first month of the year
and as of the end of the succeeding 11 months and dividing the sum by
13. In determining portfolio turnover, securities (including options)
which have maturities at the time of acquisition of one year or less
("short-term securities"), are excluded. A turnover rate of 100% would
occur if all of a Fund's portfolio securities (other than short-term
securities) were replaced once in a period of one year. It should be
noted that if a Fund were to write a substantial number of options
which are exercised, the portfolio turnover rate of that Fund would
increase. Increased portfolio turnover results in increased brokerage
costs which the Trust must pay and the possibility of more short-term
gains which may increase the difficulty of qualifying as a regulated
investment company.
To the extent that their portfolios are traded for short-term
market considerations and exceeds 100%, the annual portfolio turnover
rate of the Funds could be higher than most mutual funds. None of the
Funds will engage in short-term trading to an extent which would
disqualify them as regulated investment companies under Subchapter M of
the Code.
ORGANIZATION
(See "Management of the Funds" and "The Trust" in the
Prospectuses.)
As a Delaware business trust, the Trust's operations are governed
by its Agreement and Declaration of Trust dated June 21, 1995 (the
"Declaration of Trust"). A copy of the Trust's Certificate of Trust,
also dated June 21, 1995, is on file with the Office of the Secretary
of State of the State of Delaware. Upon the initial purchase of shares,
the shareholder agrees to be bound by the Trust's Declaration of Trust,
as amended from time to time. Generally, Delaware business trust
shareholders are not personally liable for obligations of the Delaware
business trust under Delaware law. The Delaware Business Trust Act (the
"Delaware Act") provides that a shareholder of a Delaware business
trust shall be entitled to the same limitation of liability extended to
shareholders of private for-profit corporations. The Trust's
Declaration of Trust expressly provides that the Trust has been
organized under the Delaware Act and that the Declaration of Trust is
to be governed by Delaware law. It is nevertheless possible that a
Delaware business trust, such as the Trust, might become a party to an
action in another state whose courts refused to apply Delaware law, in
which case the Trust's shareholders could be subject to personal
liability.
To guard against this risk, the Declaration of Trust (i) contains
an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides that notice of such disclaimer may be given
in each agreement, obligation and instrument entered into or executed
by the Trust or its Trustees, (ii) provides for the indemnification out
of Trust property of any shareholders held personally liable for any
obligations of the Trust or any series of the Trust and (iii) provides
that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, the risk of a Trust shareholder
incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the
following factors are present: (1) a court refused to apply Delaware
law; (2) the liability arose under tort law or, if not, no contractual
limitation of lability was in effect; and (3) the Trust itself would be
unable to meet its obligations. In the light of Delaware law, the
nature of the Trust's business and the nature of its assets, the risk
of personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Trust shall
indemnify each of its Trustees and officers against liabilities and
expenses reasonably incurred by them, in connection with, or arising
out of, any action, suit or proceeding, threatened against or otherwise
involving such Trustee or officer, directly or indirectly, by reason of
being or having been a Trustee or officer of the Trust. The Declaration
of Trust does not authorize the Trust to indemnify any Trustee or
officer against any liability to which he or she would otherwise be
subject by reason of or for willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties.
Under the Declaration of Trust, the Trust is not required to hold
annual meetings to elect Trustees or for other purposes. It is not
anticipated that the Trust will hold shareholders' meetings unless
required by law or the Declaration of Trust. The Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on
the Board if, at any time, fewer than a majority of the Trustees have
been elected by the shareholders of the Trust. The Board is required to
call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of
not less than 10% of the outstanding shares of the Trust.
Shares of the Trust do not entitle their holders to cumulative
voting rights, so that the holders of more than 50% of the outstanding
shares of the Trust may elect all of the Trustees, in which case the
holders of the remaining shares would not be able to elect any
Trustees. As determined by the Trustees, shareholders are entitled to
one vote for each full share held and fractional votes for fractional
shares held or one vote for each dollar of net asset value (number of
shares held times the net asset value of the applicable class of the
applicable Fund).
As it is expected that Separate Accounts of Participating
Insurance Companies will be purchasing Institutional Class shares of
each of the Funds, it should be noted that the rights, if any, of
Variable Contract holders to vote the Institutional Class shares of a
Fund beneficially owned by such Variable Contract holders are governed
by the relevant Variable Contract.
Pursuant to the Declaration of Trust, the Trustees may create
additional funds by establishing additional series of shares in the
Trust. The establishment of additional series would not affect the
interests of current shareholders in the existing six Funds. As of the
date of this Statement of Additional Information, the Board does not
have any plan to establish another series of shares in the Trust.
Pursuant to the Declaration of Trust, the Board may establish and
issue multiple classes of shares for each Fund. As of the date of this
Statement of Additional Information, the Trustees have authorized the
issuance of two classes of shares for each series, designated Adviser
Class and Institutional Class. See "The Trust" in the Prospectuses for
a detailed description of the respective rights of the two classes of
shares. The Trustees do not have any plan to establish additional
classes of shares for any Fund.
Each share of each class of a Fund is entitled to such dividends
and distributions out of the income earned on the assets belonging to
that Fund which are attributable to such class as are declared in the
discretion of the Board. In the event of the liquidation or dissolution
of the Trust, shares of each class of each Fund are entitled to receive
their proportionate share of the assets which are attributable to such
class of such Fund and which are available for distribution as the
Trustees in their sole discretion may determine. Shareholders are not
entitled to any preemptive, conversion or subscription rights. All
shares, when issued, will be fully paid and non-assessable by the
Trust.
Pursuant to the Declaration of Trust and subject to shareholder
approval (if then required), the Trustees may authorize each Fund to
invest all or part of its investable assets in a single open-end
investment company that has substantially the same investment
objectives, policies and restrictions as the Fund. As of the date of
this Statement of Additional Information, the Board does not have any
plan to authorize any Fund to so invest its assets.
"Tomorrow Funds Retirement Trust" is the designation of the Trust
for the time being under the Declaration of Trust, and all persons
dealing with a Fund must look solely to the property of that Fund for
the enforcement of any claims against that Fund as neither the
Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of a Fund or the
Trust. No Fund is liable for the obligations of any other Fund. Since
the Funds use combined prospectuses, however, it is possible that one
Fund might become liable for a misstatement or omission in its
prospectus regarding the other Fund with which its disclosure is
combined. The Trustees have considered this factor in approving the use
of the combined prospectuses.
<PAGE>
CUSTODIAN
The Custodian for the Trust is Boston Safe Deposit and Trust
Company at One Exchange Place, Boston, Massachusetts 02109. In its
capacity as Custodian, Boston Safe Deposit and Trust Company performs
all accounting services, holds the assets of the Trust and is
responsible for calculating the net asset value per share.
TRANSFER AGENT
The Shareholder Services Group, Inc. acts as transfer agent for
the Trust and, in such capacity, processes purchases, transfers and
redemptions of shares, acts as dividend disbursing agent, and maintains
records and handles correspondence with respect to shareholder
accounts.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("KPMG"), 345 Park Avenue, New York, New
York 10154, are the independent auditors for the Trust. Professional
services performed by KPMG include audits of the financial statements
of the Trust, consultation on financial, accounting and reporting
matters, review and consultation regarding various filings with the SEC
and attendance at the meetings of the Audit Committee and Board of
Trustees. KPMG also performs other professional services for the Trust
including preparation of income tax returns of the Funds.
<PAGE>
APPENDIX
Description of Bond Ratings Moody's Investors Service, Inc.
Aaa: Bonds which 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 edge." 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 which 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 fluctuations of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A: Bonds which 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
sometime in the future.
Baa: Bonds which 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.
Moody's also provides credit ratings for preferred stocks. It
should be borne in mind that preferred stock occupies a junior position
to bonds within a particular capital structure and that these
securities are rated within the universe of preferred stocks.
aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
aa: An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
<PAGE>
a: An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classifications, earnings and asset
protections are, nevertheless, expected to be maintained at adequate
levels.
baa: An issue which is rated "baa" is considered to be a medium grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in
recognition of the differences between short-term and long-term credit
risk. Loans bearing the designation MIG 1 are of the best quality,
enjoying strong protection by establishing cash flows of funds for
their servicing or by established and broad-based access to the market
for refinancing, or both. Loans bearing the designation MIG 2 are of
high quality, with margins of protection ample although not so large as
in the preceding group. A short term issue having a demand feature
(i.e. payment relying on external liquidity and usually payable on
demand rather than fixed maturity dates) is differentiated by Moody's
with the use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax-exempt commercial
paper. These are promissory obligations (1) not having an original
maturity in excess of nine months, and (2) backed by commercial banks.
Notes bearing the designation P-1 have a superior capacity for
repayment. Notes bearing the designation P-2 have a strong capacity for
repayment.
Standard & Poor's Ratings Group
AAA: Bonds rated AAA have the higher rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small
degree.
A: Bonds rated A have a very 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 bonds in this category than in higher
rated categories.
S&P's top ratings for municipal notes issued after July 29, 1984
are SP-1 and SP-2. The designation SP-1 indicates a very strong
capacity to pay principal and interest. A "+" is added for those issues
determined to possess overwhelming safety characteristics. An "SP-2"
designation indicates a satisfactory capacity to pay principal and
interest.
Commercial paper rated A-2 or better by S&P is described as having
a very strong degree of safety regarding timeliness and capacity to
repay. Additionally, as a precondition for receiving an S&P commercial
paper rating, a bank credit line and/or liquid assets must be present
to cover the amount of commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity
for repayment of short-term promissory obligations.
<PAGE>
GLOSSARY
Commercial Paper: Short-term promissory notes of large
corporations with excellent credit ratings issued to finance their
current operations.
Certificates of Deposit: Negotiable certificates representing a
commercial bank's obligations to repay funds deposited with it, earning
specified rates of interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a
draft which has been drawn on it by a customer. These obligations
are backed by large banks and usually are backed by goods in
international trade.
Time Deposits: Non-negotiable deposits in a banking institution
earning a specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and
other business organizations in order to finance their long-term
credit needs.
<PAGE>
Tomorrow Funds Retirement Trust
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
September 21, 1995
<S> <C>
Core
Large-Cap
Stock
Fund
Assets:
Cash....................................... $100,000
100,000
Liabilities: 0
Total Net Assets........................... 100,000
Net Assets Represented By:
Shares of Beneficial Interest.............. 10
Paid in Surplus............................ 99,990
Net assets, at value, applicable to
10,000 outstanding shares of
beneficial interest with
$0.001 par value........................ $100,000
Net asset value, offering and redemption
price per share......................... $10.00
<FN>
NOTES:
(1) The Tomorrow Funds Retirement Trust (the "Trust") was organized as a
Delaware Business Trust and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust has
had no operations through September 21, 1995 other than those relating
to organizational matters. The Trust is comprised of the Core Large-Cap Stock
Fund, the Core Small-Cap Stock Fund, the Tomorrow Long-Term Retirement Fund,
the Tomorrow Medium-Term Retirement Fund, the Tomorrow Short-Term Retirement
Fund and the Tomorrow Post-Retirement Fund.
(2) Each Fund in the Trust has entered into an investment advisory agreement
with Weiss, Peck & Greer, L.L.C., ("WPG") to act as investment adviser, as well
as a separate administration agreement with WPG to provide shareholder and
accounting services.
(3) WPG has advanced all organizational and start-up expenses of the Trust,
estimated to total $275,000, which will be reimbursed by the Trust. Such
expenses have been deferred and will be amortized on a straight line basis
over a sixty month period that commences the effective date of the Fund's
initial prospectus. WPG has agreed in the event that any of the initial
10,000 shares are redeemed by any holder thereof during the period of
amortization of the Fund's organizational and start-up expenses, the
redemption proceeds will be reduced by any such organizational expenses in the
same proportion as the number of initial shares being redeemed bears to the
number of the initial shares outstanding at the time of the redemption.
(4) Each Fund intends to comply in its initial year and thereafter with the
requirements of the Internal Revenue Code necessary to qualify as a regulated
investment company and as such will not be subject to Federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders.
(5) There are two classes in each Fund of the Trust. The Institutional Class
has a service fee of 0.25% and the Advisor Class which has a 12b-1 Fee of
0.50%. The deposit of $100,000 seed capital has been made exclusively to
the Institutional Class of shares in the Core Large-Cap Stock Fund.
</FN>
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements: Attached to and incorporated
by reference into the Statements of Additional
Information:
Statement of Assets and Liabilities
Report of Independent Public Accountants
(b) Exhibits:
1.(a) Agreement and Declaration of Trust.*
1.(b) Certificate of Trust.*
2. By-Laws.*
3. None.
4. None.
5.(a) Form of Investment Advisory Agreement
between the Registrant, on behalf of
Tomorrow Long-Term Retirement Fund, and
Weiss, Peck & Greer, L.L.C. ("WPG").*
5.(b) Form of Investment Advisory Agreement
between the Registrant, on behalf of
Tomorrow Medium-Term Retirement Fund, and
WPG.*
5.(c) Form of Investment Advisory Agreement
between the Registrant, on behalf of
Tomorrow Short-Term Retirement Fund, and
WPG.*
5.(d) Form of Investment Advisory Agreement
between the Registrant, on behalf of
Tomorrow Post-Retirement Fund, and WPG.*
5.(e) Form of Investment Advisory Agreement
between the Registrant, on behalf of Core
Large-Cap Stock Fund, and WPG.*
5.(f) Form of Investment Advisory Agreement
between the Registrant, on behalf of Core
Small-Cap Stock Fund, and WPG.*
C-1
<PAGE>
5.(g) Form of Administration Agreement between
the Registrant, on behalf of Tomorrow Long-
Term Retirement Fund, and WPG.*
5.(h) Form of Administration Agreement between
the Registrant, on behalf of Tomorrow
Medium-Term Retirement Fund, and WPG.*
5.(i) Form of Administration Agreement between
the Registrant, on behalf of Tomorrow
Short-Term Retirement Fund, and WPG.*
5.(j) Form of Administration Agreement between
the Registrant, on behalf of Tomorrow Post-
Retirement Fund, and WPG.*
5.(k) Form of Administration Agreement between
the Registrant, on behalf of Core Large-Cap
Stock Fund, and WPG.*
5.(l) Form of Administration Agreement between
the Registrant, on behalf of Core Small-Cap
Stock Fund, and WPG.*
6. Form of Underwriting Agreement between the
Registrant and WPG.**
7. None.
8. Form of Custodian Agreement between the
Registrant and Boston Safe Deposit and
Trust Company.**
9.(a) Form of Transfer Agency Agreement between
the Registrant and The Shareholder Services
Group, Inc.**
9.(b) Form of Account Administration Agreement
between the Registrant and The Shareholder
Services Group, Inc.**
9.(c) Form of Institutional Class Shares Service
Plan.
10. Opinion and Consent of Counsel.*
11. Consent of Independent Public Accountants.
12. None.
13. Form of Share Purchase Agreement.**
C-2
<PAGE>
14. Not applicable.
15. Form of Adviser Class Shares Distribution
Plan.**
16. None.
17. None.
18. Multiple Class Plan adopted pursuant to
Rule 18f-3.**
19. Powers of Attorney.
______________
Filed herewith.
* Filed with the Registrant's initial registration statement on
Form N-1A on July 3, 1995.
** Filed with Pre-Effective Amendment No. 1 on September 22,
1995.
Item 25. Persons Controlled By or Under
Common Control With Registrant.
Just prior to the effective date of this Registration
Statement, it is expected that WPG will own all of the issued and
outstanding shares of the Registrant.
Item 26. Number of Holders of Securities.
Just prior to the effective date of this Registration
Statement, it is expected that there will be one record holder,
WPG, of the Registrant's shares of beneficial interest.
Number of
Record Holders As
Title of Class of November 15, 1995
Tomorrow Long-Term Retirement Fund
Institutional Class 0
Adviser Class 0
Tomorrow Medium-Term Retirement Fund
Institutional Class 0
Adviser Class 0
C-3
<PAGE>
Tomorrow Short-Term Retirement Fund
Institutional Class 0
Adviser Class 0
Tomorrow Post-Retirement Fund
Institutional Class 0
Adviser Class 0
Core Large-Cap Stock Fund
Institutional Class 1
Adviser Class 0
Core Small-Cap Stock Fund
Institutional Class 0
Adviser Class 0
Item 27. Indemnification.
Except for the Agreement and Declaration of Trust dated
June 21, 1995, establishing the Registrant as a Trust under
Delaware law, there is no contract, arrangement or statute under
which any trustee, officer, underwriter or affiliated person of
the Registrant is insured or indemnified. The Agreement and
Declaration of Trust provides that no Trustee or officer will be
indemnified against any liability to which the Registrant would
otherwise be subject by reason of or for willful misfeasance, bad
faith, gross negligence or reckless disregard of such person's
duties.
Insofar as indemnification for liability arising under
the Securities Act of 1933, as amended (the "Act"), may be
available to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment of the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
C-4
<PAGE>
Item 28. Business and Other Connections of Investment Adviser.
All of the information required by this item is set
forth in the Form ADV, as currently amended, of WPG (File
No. 801-6604). The following sections of such Form ADV are
incorporated herein by reference:
(a) Items 1 and 2 of Part 2;
(b) Section 6, Business Background, of each
Schedule D.
Item 29. Principal Underwriter
(a) WPG serves as the investment adviser to each
investment company in the Weiss, Peck & Greer Investments Group of
Mutual Funds. These mutual funds include: Weiss, Peck & Greer
Funds Trust, which consists of WPG Government Money Market Fund,
WPG Tax-Free Money Market Fund, WPG Government Securities Fund,
WPG Municipal Bond Fund and WPG Quantitative Equity Fund; Weiss,
Peck & Greer International Fund; WPG Tudor Fund; WPG Growth Fund;
WPG Growth and Income Fund; and U.S. Large Stock Fund. WPG also
serves as the investment adviser or subadviser to SEI PA Tax
Exempt Money Market Fund, SEI MuniBond Fund, Bullock American Fund
and Bullock Optimization USA Fund.
(b) Principals and Officers of WPG:
Positions and Offices Positions and Offices
Name* with WPG with Registrant
Samuel H. Armacost Principal
Annette Bianchi Principal
John P. Callaghan Principal
Gill Cogan Principal
Candice Eggerss Principal
Ellen M. Feeney Principal
Janet Fiorenza Principal
Margery Z. Flicker Principal
Anthony J. Giammalva Principal
Philip Greer Senior Managing
Principal
Ronald M. Hoffner Principal
Steven N. Hutchinson Principal
James W. Kiley Principal
A. Roy Knutsen Principal
Alan D. Kohn Principal
Wesley W. Lang, Jr. Principal
Steven Lear Principal
C-5
<PAGE>
Gary R. Lisk Principal
Marvin B. Markowitz Principal
Howard G. Mattsson Principal
Kathleen A. McCarragher Principal
John Murabito Principal
Jay C. Nadel Principal Executive Vice
President and
Secretary
Joseph N. Pappo Principal
Bradford R. Peck Principal
Peter B. Pfister Principal
Steven Pomerantz Principal
McGehee Porter Principal
Stuart W. Porter Principal
Francis H. Powers Principal Executive Vice
President and
Treasurer
R. Scott Richter Principal
Nelson Schaenen, Jr. Principal
James S. Schainuck Principal
Gary E. Scheier Principal
David J. Schilder Principal
Arthur L. Schwarz Principal
Melville Straus Principal
Daniel S. Vandivort Principal
Robert D. Weiss Principal
Roger J. Weiss Senior Managing Chairman and President
Principal
Stephen H. Weiss Chairman of the
Executive Committee/
Senior Managing Principal
Ellen P. Welsh Principal
Hugh S. Zurkuhlen Principal
____________
* The principal business address of each principal and officer of
WPG is One New York Plaza, New York, New York 10004
(c) Not applicable.
Item 30. Location of Accounts and Records
All account, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
thereunder will be maintained (1) at the offices of the Registrant
at One New York Plaza, New York, New York 10004 (2) at the offices
of the Registrant's Custodian, Boston Safe Deposit and Trust
Company, at One Boston Place, Boston, MA 02109 and (3) at the
C-6
<PAGE>
offices of the Registrant's Transfer Agent, The Shareholder
Services Group, Inc., P.O. Box 9037, Boston, MA 02205.
Item 31. Management Services
The Registrant is not a party to any management-related
service contract, except as described in the prospectuses and the
statements of additional information.
Item 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be certified,
within four to six months from the later of the effective date of
this Registration Statement or the commencement of operations of
the series of the Registrant to which the financial statements
relate.
(c) The Registrant undertakes to deliver, or cause to
be delivered with the each prospectus, to each person to whom such
prospectus is sent or given a copy of the Registrant's report to
shareholders furnished pursuant to and meeting the requirements of
Rule 30d-1 from which the specified information is incorporated by
reference, unless such person currently holds securities of the
Registrant and otherwise has received a copy of such report, in
which case the Registrant shall state in each prospectus that it
will furnish, without charge, a copy of such report on request,
and the name, address and telephone number of the person to whom
such a request should be directed.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Pre-Effective Amendment No. 2 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City and State of New York, on the 17th
day of November, 1995.
TOMORROW FUNDS RETIREMENT TRUST
/s/ Roger J. Weiss
Roger J. Weiss, President
Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated:
Signature Title
Roger J. Weiss* Chairman of the Board,)
Roger J. Weiss Trustee and President )
(Principal Executive )
Officer) )
)
)
Raymond R. Herrmann, Jr.* Trustee )
Raymond R. Herrmann, Jr. ) November 17, 1995
)
)
)
Lawrence J. Israel* Trustee )
Lawrence J. Israel )
)
)
)
Harvey E. Sampson* Trustee )
Harvey E. Sampson )
)
)
)
Francis H. Powers* Executive Vice President )
Francis H. Powers and Treasurer (Principal )
Financial and Accounting )
Officer) )
________________
*By:/s/ Jay C. Nadel November 17, 1995
Jay C. Nadel
Attorney-in-fact
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Exhibit Index
Exhibit
Number Document Title
9.(c) Form of Institutional Class Shares Service Plan.
11. Consent of Independent Public Accountants.
18. Multiple Class Plan adopted pursuant to Rule 18f-3.
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TOMORROW FUNDS RETIREMENT TRUST
(INSTITUTIONAL CLASS)
FORM OF SERVICE PLAN
_______________, 1995
WHEREAS, Tomorrow Funds Retirement Trust (the "Trust")
engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of
1940, as amended;
WHEREAS, the trust has six series of Funds, each of which is
a separate pool of assets with its own investment policies (the
"Funds") and each Fund is divided into two separate classes: the
Institutional Class and the Administration Class;
WHEREAS, the Trust, on behalf of the Institutional Class of
each Fund, desires to adopt a Service Plan and the Board of
Trustees of the Trust has determined that there is a reasonable
likelihood that adoption of this Service Plan will benefit each
Fund and its Institutional Class shareholders; and
WHEREAS, the Trust, on behalf of the Institutional Class of
each Fund, employs fiduciaries and administrators of qualified
retirement plans (the "Service Organizations"), to act as nominees
and record holders of Institutional Class Shares for their
respective plan participants who are or may become beneficial
owners of Institutional Class Shares (the "Customers") and to
perform certain account administration and shareholder liaison
services with respect to the Customers pursuant to Service
Agreements between the Trust, on behalf of the Institutional Class
of each Fund, and such Service Organizations (the "Agreements").
NOW THEREFORE, the Trust, on behalf of the Institutional
Class of each Fund, hereby adopts this Service Plan (the "Plan")
on the following terms and conditions:
1. (a) The Trust, on behalf of each Institutional Class of
each Fund, is authorized to pay each Service Organization the
monthly or quarterly service fee specified in the Agreement with
such Service Organization for (1) administration services and (2)
personal and account maintenance services performed and expenses
incurred by the Service Organization in connection with such
Fund's Institutional Class Shares. The fee paid for such services
during any one year shall not exceed 0.25% of the average daily
net asset value of the Institutional Class Shares of such Fund
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which are owned beneficially by the Customers of such Service
Organization during the period.
(b) Administration services and expenses for which a
Service Organization may be compensated under this Plan include,
without limitation, (i) acting as record holder and nominee of all
Institutional Class Shares beneficially owned by Customers; (ii)
establishing and maintaining individual accounts and records with
respect to Institutional Class Shares owned by each Customer;
(iii) processing and issuing confirmations concerning Customer
orders to purchase, redeem and exchange Institutional Class
Shares; (iv) receiving and transmitting funds representing the
purchase price or redemption proceeds of such Institutional Class
Shares; (v) providing such statistical and other information as
may be reasonably requested by the Trust or necessary for the
Trust to comply with applicable federal or state law;
(vi) responding to shareholder requests for prospectuses; and
(vii) assisting shareholders in selecting dividend and other
account options and opening custody accounts with the Service
Organization.
(c) Personal and account maintenance services and
expenses for which a Service Organization may be compensated under
this Plan include, without limitation, (i) providing facilities to
answer inquiries and respond to correspondence with Customers and
other investors about the status of their accounts or about other
aspects of the Trust or the applicable Fund; and (ii) acting as
liaison between Customers and the Trust, including obtaining
information from the Trust and assisting the Trust in correcting
errors and resolving problems.
(d) Appropriate adjustments to payments made pursuant
to clause (a) of this paragraph 1 shall be made whenever necessary
to ensure that no payment is made by the Trust on behalf of a Fund
in excess of the applicable maximum cap imposed on asset based
sales charges by subsection (d) of Section 26 of Article III of
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
2. This Plan shall not take effect as to any Fund until the
Plan, together with any related agreements, has been approved for
such Fund by votes of a majority of both (a) the Board of Trustees
of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or any
agreements related to it (the "non-interested Trustees") cast in
person at a meeting (or meetings) called for the purpose of voting
on the Plan and such related agreements.
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<PAGE>
3. This Plan shall remain in effect until and
shall continue in effect thereafter so long as such continuance is
specifically approved at least annually in the manner provided for
approval of this Plan in paragraph 2.
4. The officers of the Trust shall provide the Board of
Trustees of the Trust and the Board shall review, at least
quarterly, a written report of services performed by and fees paid
to each Service Organization under the Agreements and this Plan.
5. This Plan may be terminated as to the Institutional
Class of any Fund at any time by vote of a majority of the non-
interested Trustees.
6. No material amendment to the Plan shall be made unless
approved in the manner provided in paragraph 2 hereof.
7. The Trust shall preserve copies of this Plan and any
related agreements and all reports made pursuant to paragraph 4
hereof, for a period of not less than six years from the date of
the Plan, any such agreement or any such report, as the case may
be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Trust, on behalf of the Institutional
Class of each Fund, has executed this Service Plan as of the day
and year first written above.
TOMORROW FUNDS RETIREMENT TRUST
(on behalf of the Institutional Class of
each Fund)
By:
Its:
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Independent Auditors' Consent
The Shareholder and Board of Trustees of
The Tomorrow Funds Retirement Trust:
We consent to the use of our report dated September 21, 1995
included in this Registration Statement on Form N-1A and to the
reference to our firm under the heading "Independent Accountants"
in the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
November 21, 1995
New York, New York
TOMORROW FUNDS RETIREMENT TRUST
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
Tomorrow Post-Retirement Fund
Core Large-Cap Stock Fund
Core Small-Cap Stock Fund
Multiple Class Plan Pursuant to Rule 18f-3
Adopted July 19, 1995
As Amended
Each class of shares of Tomorrow Long-Term Retirement Fund,
Tomorrow Medium-Term Retirement Fund, Tomorrow Short-Term Retirement
Fund, Tomorrow Post-Retirement Fund, Core Large-Cap Stock Fund and
Core Small-Cap Stock Fund (each, a "Fund"), each a series of
Tomorrow Funds Retirement Trust, a Delaware business trust (the
"Trust"), will have the same relative rights and privileges and be
subject to the same fees and expenses, except as set forth below.
The Board of Trustees may determine in the future that other
distribution arrangements, allocations of sales charges (if any),
expenses (whether ordinary or extraordinary) or services to be
provided to a class of shares are appropriate and amend this Plan
accordingly without the approval of shareholders of any class.
Shares of a class of a Fund may be exchanged only for shares of
the same class of another Fund. Shares of a class of a Fund shall
have no rights to convert into shares of any other class of any
Fund.
Article I. Adviser Class Shares
Adviser Class shares of the Funds are sold at net asset value
without the imposition of any sales charge (initial, contingent,
deferred or otherwise). Adviser Class shares shall be entitled to
the shareholder services set forth from time to time in the Funds'
prospectuses with respect to Adviser Class shares. Adviser Class
shares of the Funds are subject to distribution and service fees
calculated upon a stated percentage of a Funds' net assets
attributable to Adviser Class shares on the terms set forth in the
Funds' Adviser Class Rule 12b-1 Distribution Plans. The Adviser
Class shareholders of a particular Fund have exclusive voting
rights, if any, with respect to such Fund's Adviser Class
Distribution Plan. Transfer agency fees are allocated to Adviser
Class shares on a per account basis except to the extent, if any,
such an allocation would cause a Fund to fail to satisfy any
requirements necessary to obtain and rely on a private letter
ruling from the Internal Revenue Service relating to the issuance
of multiple classes of shares.
<PAGE>
Article II. Institutional Class Shares
Institutional Class shares of the Funds are sold at net asset
value without the imposition of any sales charge (initial,
contingent, deferred or otherwise). Institutional Class shares
shall be entitled to the shareholder services set forth from time
to time in the Funds' prospectuses with respect to Institutional
Class shares. Institutional Class shares of the Funds are subject
to service fees calculated upon a stated percentage of a Fund's
net assets attributable to Institutional Class shares on the terms
set forth in the Funds' Institutional Class Service Plans. The
Institutional Class shareholders of a particular Fund have
exclusive voting rights, if any, with respect to such Fund's
Institutional Class Service Plan. Transfer agency fees are
allocated to Institutional Class shares on a per account basis
except to the extent, if any, such an allocation would cause a
Fund to fail to satisfy any requirements necessary to obtain and
rely on a private letter ruling from the Internal Revenue Service
relating to the issuance of multiple classes of shares.
Article III. Approval by Board of Trustees
This Plan shall not take effect until it has been approved
with respect to each Fund by the vote of a majority (or whatever
greater percentage may, from time to time, be required under Rule
18f-3 under the Investment Company Act of 1940, as amended (the
"Act")) of (a) all of the Trustees of the Trust and (b) the
Trustees who are not "interested persons" (as such term is defined
under the Act) of the Trust.
Article IV. Amendments
No material amendment to this Plan shall be effective unless
it is approved by the Board of Trustees in the same manner
provided in Article III.
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