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 and Institutional Class Shares
May 1, 1997
This Prospectus describes Adviser Class and 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 are designed to provide investment vehicles for
variable annuity and variable life insurance contracts ("Variable Contracts") of
various insurance companies. Adviser Class shares, as well as Institutional
Class shares of the Tomorrow Funds, may 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 May 1, 1997. 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 is available upon request by
calling Weiss, Peck & Greer, L.L.C. at 1-800- 223-3332 (toll free). Shares of a
Tomorrow Fund may not be available for sale 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.
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 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.
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<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.
TABLE OF CONTENTS
Page
----
Expense Information.......................................... 3
Financial Highlights......................................... 7
Investment Objectives and Policies........................... 8
Eligible Investors........................................... 13
Insurance Company Separate Accounts.......................... 13
Qualified Plans.............................................. 14
Alternative Purchase Arrangements......................... 14
How to Buy Shares......................................... 14
How to Sell Shares........................................ 17
How to Exchange Shares.................................... 19
How Each Tomorrow Fund's Share Price is Determined........... 20
Management of the Tomorrow Funds............................. 21
Distribution Plans........................................... 22
Service Plans................................................ 22
Dividends and Taxes.......................................... 23
Portfolio Brokerage.......................................... 24
The Trust.................................................... 24
Investment Performance....................................... 26
Risk Considerations and Other Investment Practices
and Policies.............................................. 27
Additional Information....................................... 34
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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 shares
of either class of a Tomorrow Fund.
<TABLE>
<S> <C> <C> <C> <C>
Adviser and Institutional Class Shares
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
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
expenses, expressed as a percentage of average net assets, are based on expenses
incurred during the fiscal year ended December 31, 1996.
Institutional Class Shares
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>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Adviser Class Shares
Post-
Retire-
Long-Term Medium-Term Short-Term ment
Fund Fund Fund Fund+
---- ---- ---- ----
Management Fee (after voluntary waiver) 0.00%* 0.00%* 0.00%* 0.00%*
12b-1 Fee2 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 1.75%* 1.75%* 1.75%* 1.65%*
(after expense limitation) ====== ====== ====== ======
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:
After After After After
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Long-Term Fund
Institutional Class $15 $48 $82 $180
Adviser Class $18 $56 $96 $208
Medium-Term Fund
Institutional Class $15 $48 $82 $180
Adviser Class $18 $56 $96 $208
Short-Term Fund
Institutional Class $15 $48 $82 $180
Adviser Class $18 $56 $96 $208
Post-Retirement Fund+
Institutional Class $14 $45 N/A N/A
Adviser Class $17 $52 N/A N/A
The purpose of the above table and Example is to assist you in
understanding the various costs and expenses of the Tomorrow Funds that an
investor will bear directly or indirectly. See page 22. The figures shown in the
table under the caption "Other Expenses" and in the hypothetical example are
based on the Tomorrow Funds' expenses for the fiscal year ended 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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<PAGE>
---------------
<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 of Institutional Class shares 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 22.
2 Rule 12b-1 Fees consist of a 0.25% distribution fee and a 0.25%
service fee. See "Distribution Plans" on page 22.
* 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 22.
</FN>
</TABLE>
In addition, for the fiscal year ended December 31, 1996, in the absence of
the expense limitation, Management Fees, Other Expenses and Total Fund Operating
Expenses (expressed as a percentage of average daily net assets) of the Tomorrow
Funds would have been as set forth below. Management Fees, Other Expenses and
Total Fund Operating Expenses of the Post-Retirement Fund are estimates.
<TABLE>
<S> <C> <C> <C>
Management Other Total Fund
Fees Expenses Operating Expenses
---------- -------- ------------------
Long-Term Fund
Institutional Class 0.75% 39.74% 40.49%
Adviser Class 0.75% 44.11% 45.36%
Medium-Term Fund
Institutional Class 0.75% 20.11% 20.86%
Adviser Class 0.75% 14.63% 15.88%
Short-Term Fund
Institutional Class 0.75% 18.35% 19.10%
Adviser Class 0.75% 14.43% 15.68%
Post-Retirement Fund
Institutional Class 0.65% 4.60% 5.25%
Adviser Class 0.65% 4.35% 5.50%
</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 Conduct Rules 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.
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<PAGE>
FINANCIAL HIGHLIGHTS
The following tables represent a condensed financial history for each
Tomorrow Fund since inception. The condensed financial information for each
Fund, which is set forth in the tables, has been derived from the financial
statements of each Fund, which financial statements have been audited by the
Funds' independent auditors, KPMG Peat Marwick, LLP, independent certified
public accountants, whose unqualified reports thereon are incorporated by
reference into each Fund's Statement of Additional Information. The tables
express the information for each Tomorrow Fund in terms of a single share for
the Tomorrow Fund outstanding throughout the period. The Tomorrow Funds' Annual
Report includes more information about the Tomorrow Funds' performance and is
available free of charge by writing to the Trust at the address shown on the
cover of this Prospectus.
<TABLE>
$ per share
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Net Total Dividends Distri- Net
Asset Realized Income From butions Asset
Value at Net and From Net from Total Value at
Beginning Investment Unrealized Investment Investment Capital Distri- End of
of Period Income Gains Operations Income Gains butions Period
Long-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 6.50 0.04 0.55 0.59 (0.06) (0.05) (0.11) 6.98
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 6.51 0.04 0.55 0.59 0.00 (0.05) (0.05) 7.05
Medium-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 7.50 0.04 0.63 0.67 (0.03) (0.07) (0.10) 8.07
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 7.53 0.10 0.55 0.65 (0.25) (0.07) (0.32) 7.86
Short-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 8.50 0.06 0.72 0.78 (0.06) (0.06) (0.12) 9.16
Institutional Shares
For the period March 7, 1996*
through December 31, 1996 8.51 0.00 0.70 0.70 0.00 0.00 0.00 9.21
</TABLE>
<TABLE>
ratios
<S> <C> <C> <C> <C> <C> <C> <C> <C>
assuming no fee waivers,
reimbursements or
Ratio of custody fee
Ratio of Net earnings credit receive
Expenses Income to Ratio of Ratio of
Net To Average Average Portfolio Average Expenses Net Income
Total Assets Net Net Turnover Commissions To Average To Average
Return++ (000's) Assets+ Assets+ Rate Per Share Net Assets+ Net Assets+
Ratio information
assuming no fee waivers,
Long-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 9.08% 978 1.75% 1.63% 25.09% 0.035 45.36% -41.98%
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 9.03% 282 1.50% 1.97% 25.09% 0.035 40.49% -37.02%
Medium-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 8.89% 3,416 1.75% 1.73% 22.56% 0.035 15.88% -12.40%
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 8.54% 265 1.50% 1.96% 22.56% 0.035 20.86% -17.40%
Short-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 8.54% 4,459 1.75% 2.08% 14.16% 0.035 15.68% -11.85%
Institutional Shares
For the period March 7, 1996*
through December 31, 1996 8.23% 304 1.50% 2.31% 14.16% 0.035 19.10% -15.29%
<FN>
+ Annualized.
++ Not annualized.
* Commencement of operations.
</FN>
</TABLE>
<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 FUND
seeks to satisfy the goals of investors who seek to maximize
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
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<PAGE>
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:
[ PIE CHARTS APPEAR HERE ]
These charts visually depict the composition of each Fund as follows:
LONG-TERM FUND
Large Capitalization....... 45.0%
Fixed Income............... 20.0%
Small Capitalization....... 15.0%
Medium Capitalization...... 15.0%
Foreign.................... 5.0%*
MEDIUM-TERM FUND
Large Capitalization....... 40.0%
Fixed Income............... 40.0%
Small Capitalization....... 5.0%
Medium Capitalization...... 10.0%
Foreign.................... 5.0%*
SHORT-TERM FUND
Fixed Income............... 65.0%
Large Capitalization....... 35.0%
POST-RETIREMENT FUND
Fixed Income............... 70.0%
Large Capitalization....... 30.0%
- -------------
* 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 12.
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 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
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<PAGE>
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 33.
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. 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 27 of this Prospectus.
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<PAGE>
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 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 seek 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, illiquid and structured 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 27 of this Prospectus.
EQUITY SECURITIES
A Tomorrow Fund's assets allocated to equity securities are 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
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<PAGE>
combination of securities, together with their appropriate weightings, that the
Adviser believes will comprise the optimal portfolio for each Subcategory. It is
expected that the optimal portfolio for each Subcategory will not include all
the stocks in and will be weighted differently than the applicable Benchmark.
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.
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 27 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.
-11-
<PAGE>
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, asset-backed and structured 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 27 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").
Adviser Class shares and Institutional Class shares of the Tomorrow Funds
may 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 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 shares of the Tomorrow Funds, please call WPG at 1-800-223-3332.
INSURANCE COMPANY SEPARATE ACCOUNTS
Insurance Company Separate Accounts may only invest in Institutional
Class shares of the Tomorrow Funds. 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.
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<PAGE>
QUALIFIED PLANS
The following information describes how participants in Qualified Plans
may arrange to buy, sell (redeem) and exchange Adviser and Institutional Class
shares of the Tomorrow Funds for the account of their Qualified Plans.
A. ALTERNATIVE PURCHASE ARRANGEMENTS
Each Tomorrow Fund continuously offers through this Prospectus Adviser
and Institutional Class shares to Qualified Plans. If the trustee, custodian,
plan administrator or other fiduciary (each, a "Plan Fiduciary") responsible for
making investments on behalf of a Qualified Plan does not specify in the
instructions to the Tomorrow Funds which class of shares to purchase, the
Tomorrow Funds will assume that the instructions apply to Adviser Class shares.
Both Adviser Class and Institutional Class shares are sold without a
sales charge. Adviser Class shares are subject to distribution fees of up to
0.25% and service fees of up to 0.25% of each Tomorrow Fund's average daily net
assets attributable to Adviser Class Shares. Institutional Class shares are
subject to service fees of up to 0.25% of each Tomorrow Fund's average daily net
assets attributable to Institutional Class Shares. See "Distribution Plans" and
"Service Plans" below in this Prospectus.
B. HOW TO BUY SHARES
THROUGH WHOM MAY SHARES OF THE TOMORROW FUNDS BE PURCHASED FOR QUALIFIED PLANS?
Because you may not purchase shares of the Tomorrow Funds directly, all
orders to purchase shares must be made through the 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 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 SHARES OF THE TOMORROW FUNDS OFFERED?
Shares of each class of the Tomorrow Funds are sold at the net asset
value (NAV) of such class of shares next determined after First Data Investor
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
(normally 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.
-13-
<PAGE>
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
included with 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 receive
an application. Funds may be wired after the
application has been received.
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
Class of 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 Services 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 receive a
Services Form to add this privilege. 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).
- -------------------------------------------------------------------------------
-14-
<PAGE>
- -------------------------------------------------------------------------------
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, 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,
Class of shares, 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
Class of 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
Class of 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, 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.
-15-
<PAGE>
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.
C. HOW TO SELL SHARES
HOW MAY 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 shares of the Tomorrow Funds held for the account of
Qualified Plans must be made through your Plan Fiduciary. If the 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 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 SHARES OF THE TOMORROW FUNDS REDEEMED?
Shares of each Class of the Tomorrow Funds will be redeemed at the
share price (NAV) of such Class of 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
Class of 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
Fund Only): for this service when opening an account, or call
1-800-223-3332 to receive a Services Form to add
this privilege.
- -------------------------------------------------------------------------------
-16-
<PAGE>
- -------------------------------------------------------------------------------
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. 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 REDEMPTION 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 redemption 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 ss. 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. An Insurance Company or Qualified Plan whose tax
status is revoked or challenged by the Internal Revenue Service may be liable to
the Trust for losses incurred by the Trust as a result of such action.
-17-
<PAGE>
D. HOW TO EXCHANGE SHARES
MAY SHARES BE EXCHANGED FOR SHARES OF OTHER MUTUAL FUNDS?
Subject to the terms of your Qualified Plan, shares of a Tomorrow Fund
may be exchanged for shares of the same class of any other Tomorrow Fund. Please
consider the differences in investment objectives and expenses of a fund as
described in its prospectus before making an exchange.
DO SALES CHARGES APPLY TO EXCHANGES?
As is the case with initial purchases of shares of the Tomorrow Funds,
exchanges of 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 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 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 a Services Form to add
this privilege.
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
Class of 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
Class of shares
- -------------------------------------------------------------------------------
-18-
<PAGE>
- -------------------------------------------------------------------------------
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 available 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; (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; and (iv) exchanges may only be made for the same class of shares.
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 calculated as of the close of regular trading of the New York Stock
Exchange (normally 4:00 p.m. New York City time) on each Business Day. Adviser
Class shares and Institutional Class shares of the Tomorrow Funds may have
different net asset values.
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<PAGE>
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 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. Daniel J. Cardell is primarily responsible
for the day-to-day management of the assets of each Tomorrow Fund allocated to
large, medium and small capitalization stocks. Mr. Cardell has been a principal
of WPG since May 1996. Prior to joining the Adviser, Mr. Cardell was Senior Vice
President and Director of Equities for the Bank of America. 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.
-20
<PAGE>
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 expenses 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 the Adviser Class shares 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 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.
SERVICE PLANS
The Trust, on behalf of the Institutional Class shares 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
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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
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 Plans.
DIVIDENDS AND TAXES
Each Tomorrow Fund is treated as a separate entity for federal income
tax purposes and has elected and has qualified to be treated as a "regulated
investment company" under the Internal Revenue Code and intends 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.
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.
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. 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.
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 shares of the same Class 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
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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 may 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.
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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 as 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 31 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.
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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.
As of March 31, 1997, AIG Life Insurance Company Separate Account I,
P.O. Box 667, Wilmington, DE 19899 beneficially owned in excess of 25% of the
outstanding Institutional Class shares of the Long-Term Fund, Medium-Term Fund
and Short-Term Fund and its affiliate, American International Life Assurance Co.
of New York Separate Account A beneficially owned in excess of 25% of the
outstanding Institutional Class shares of the Short- Term Fund. Accordingly,
each such entity is deemed to be a controlling person.
INVESTMENT PERFORMANCE
Each Tomorrow Fund may illustrate in advertisements and sales
literature its average annual total return, 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 shares of a Class 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 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 shares of the Tomorrow Fund for the indicated periods and
will include all recurring fees.
Each Tomorrow Fund may also illustrate in advertisements and sales
literature its yield and effective yield. Yield is based on income generated by
an investment in shares of a Class 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 shares of a Class 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.
Each Tomorrow Fund's yield and total return will be calculated
separately for Adviser Class and Institutional Class shares. Because each Class
of shares is subject to different expenses, the yield and total return
calculations with respect to each Class of shares of a Tomorrow Fund will
differ. The investment performance of the Adviser Class and Institutional Class
shares will be affected by the payment of distribution and service fees.
The performance 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
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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
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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.
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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 for
these securities 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.
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
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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.
STRUCTURED SECURITIES. Each Tomorrow Fund may invest in "structured" securities,
such as notes, bonds or debentures. The distinguishing feature of a structured
security is that the value of the principal of and/or interest payable on the
security is determined by reference to the value of a benchmark or the relative
change in two or more benchmarks. These benchmarks include stock prices and
indices, currency exchange rates and physical commodity prices. Structured
securities may be positively or negatively indexed, so that appreciation of the
benchmark may produce an increase or decrease in the interest rate or value of
the structured security at maturity. Certain structured securities may also be
leveraged to the extent that the magnitude of any change in the interest rate or
principal payable on the benchmark asset is a multiple of the change in the
reference price. Leverage enhances the price volatility of the security and,
therefore, the Fund's net asset value. Further, certain structured or hybrid
notes may be illiquid for purposes of the Fund's limitation on investments in
illiquid securities. See "Restricted and Illiquid Securities" on page 32.
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,
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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.
For example, the Tomorrow Funds may invest in Standard & Poor's Depository
Receipts ("Spiders"), shares of a closed-end investment company, whose
performance is designed to replicate the performance of the S&P 500 Index. 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.
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 counter
party 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 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.
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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 seek 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 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 investment 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 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 net 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, certain structured securities and
"restricted securities" (i.e.,
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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, unless the Trustees determine, based
upon a continuing review of the trading markets for the specific restricted
security, that such restricted securities are liquid. The Trustees have adopted
guidelines and delegated to the Adviser the daily function of determining and
monitoring the liquidity of portfolio 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 increase.
Conversely, when interest rates increase, 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. See "Financial Highlights" for the portfolio turnover rates of the
Tomorrow Funds.
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 a small number of issuers 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
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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, 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
First Data Investor Services Group, Inc., 4400 Computer Drive,
Westboro, MA 01581 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 AUDITORS
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 LLP, 60 State Street, Boston, Massachusetts 02109, is
legal counsel to the Trust.
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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.
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