Tomorrow Funds
R E T I R E M E N T T R U S T
A Lifecycle Retirement Program
Annual Report
DECEMBER 31, 1998
TOMORROW LONG-TERM RETIREMENT FUND
TOMORROW MEDIUM-TERM RETIREMENT FUND
TOMORROW SHORT-TERM RETIREMENT FUND
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
Table of Contents
Average Annual Total Returns .............................................. 2
Ten Largest Holdings ...................................................... 4
Schedules of Investments:
Tomorrow Long-Term Retirement Fund ........................................ 5
Tomorrow Medium-Term Retirement Fund ...................................... 9
Tomorrow Short-Term Retirement Fund ....................................... 13
Statements of Assets and Liabilities ...................................... 16
Statements of Operations .................................................. 17
Statements of Changes in Net Assets ....................................... 18
Notes to Financial Statements ............................................. 19
Financial Highlights ...................................................... 26
Independent Auditors' Report .............................................. 27
Page 1
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998
The Funds blended allocation of equities and fixed income securities lagged
their benchmarks for the year. This was primarily due to the performance
realized by the equity investments through a particularly difficult time period
for our specific investment style.
The Funds began neutral to the benchmark asset allocation at the beginning of
the year but moved to an underweight exposure relative to the equity targets at
the end of the second quarter. Into the beginning of the fourth quarter, the
allocations were again increased to be benchmark neutral, which is where they
remain.
Equity performance was compromised by the strong role that valuations play in
our stock selection process in a year that penalized the more value-oriented
issues. The fourth quarter saw a strong turnaround in this phenomenon that still
continues. Spreads on non-treasury fixed income securities widened significantly
in the summer, but have since tightened helping performance in the Funds.
Graph depicted here shows the comparison of a $10,000 investment between
Tomorrow Funds Medium Term Fund and the Benchmark for the period March 7, 1996
through December 1998.
MEDIUM TERM MEDIUM TERM
DATE FUND BENCHMARK
- ---- ---- ---------
3/96 $ 10,000 $ 10,000
6/96 10,200 10,234
12/96 10,890 11,051
6/97 11,847 12,376
12/97 12,952 13,661
6/98 14,123 15,115
12/98 15,015 16,123
- --------------------------------------------------------------------------------
ONE FROM
YEAR INCEPTION*
---- ----------
Tomorrow Medium-Term Institutional ........ 16.36% 16.15%
Tomorrow Medium-Term Adviser .............. 15.94% 15.52%
Benchmark (a) ............................. 17.69% 18.45%
(a) 40% S&P 500 Index, 40% Lehman Gov't Corp. Index, 10% S&P 400 Index,5%
Russell 2000 Index, 5% EAFE Index
- --------------------------------------------------------------------------------
Graph depicted here shows the comparison of a $10,000 investment between
Tomorrow Funds Long Term Fund and the Benchmark for the period March 7, 1996
through December 1998.
LONG TERM LONG TERM
DATE FUND BENCHMARK
- ---- ---- ---------
3/96 $ 10,000 $ 10,000
6/96 10,245 10,285
12/96 10,909 11,101
6/97 12,191 12,479
12/97 13,583 13,883
6/98 14,739 15,501
12/98 15,698 16,432
- --------------------------------------------------------------------------------
ONE FROM
YEAR INCEPTION*
---- ----------
Tomorrow Long-Term Institutional ........... 16.16% 18.14%
Tomorrow Long-Term Adviser ................. 15.58% 17.34%
Benchmark (a) .............................. 17.96% 19.23%
(a) 45% S&P 500 Index, 15% Russell 2000 Index, 15% S&P 400 Index, 20% Lehman
Gov't Corp. Index, 5% EAFE Index
- --------------------------------------------------------------------------------
Graph depicted here shows the comparison of a $10,000 investment between
Tomorrow Funds Short Term Fund and the Benchmark for the period March 7, 1996
through December 1998.
SHORT TERM SHORT TERM
DATE FUND BENCHMARK
- ---- ---- ---------
3/96 $ 10,000 $ 10,000
6/96 10,153 10,198
12/96 10,854 11,039
6/97 11,813 12,309
12/97 12,860 13,619
6/98 13,768 14,831
12/98 14,430 15,832
- --------------------------------------------------------------------------------
ONE FROM
YEAR INCEPTION*
---- ----------
Tomorrow Short-Term Institutional 12.68% 14.40%
Tomorrow Short-Term Adviser 12.22% 13.89%
Benchmark (a) 16.11% 17.69%
(a) 65% Lehman Gov't Corp. Index, 35% S&P 500 Index
- --------------------------------------------------------------------------------
NOTE:
* Inception of Fund: Adviser Shares and Benchmark 3/7/96, Institutional Shares
4/2/96.
Page 2
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998
Performance represents historical data. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Each Fund's
results and their indices assume the reinvestment of all capital gain
distributions and income dividends. Each Fund's past performance is not
indicative of future performance and should be considered in light of each
Fund's investment policy and objectives, the characteristics and quality of its
portfolio securities and the periods selected. The S&P 500 Stock Index and the
S&P 400 MidCap Stock Index are each broad based measurements of changes in stock
market conditions based on the average performance of 500 and 400, respectively,
widely held common stocks. The Russell 2000 Index is a measurement of changes in
stock market conditions based on the average performance of 2,000 small
capitalization companies. The Lehman Government Corporate Index is a market
weighted blend of all U.S. Government securities and all U.S. Corporate
securities. The Morgan Stanley Capital International Europe, Australia, Far East
("EAFE") is an index of more than 800 companies in Europe, Australia and the Far
East.
Page 3
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
TEN LARGEST HOLDINGS AT DECEMBER 31, 1998*
<TABLE>
<CAPTION>
PERCENT
LONG-TERM TOMORROW FUND VALUE OF NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
UST-Note 6.125% Due 8/15/07 .................. $ 562,478 6.4%
S&P Depository Receipt ....................... 553,549 6.3%
UST-Bill 0% 1/7/99 ........................... 499,583 5.6%
UST-Note 6.125% Due 12/31/01 ................. 452,670 5.1%
BT EAFE Equity Index Fund .................... 446,207 5.0%
UST-Bond 6.125% Due 11/15/27 ................. 240,665 2.7%
UST-Note 6.375% Due 4/30/99 .................. 150,843 1.7%
Microsoft Corp. .............................. 124,819 1.4%
General Electric ............................. 122,475 1.4%
Exxon Corp. .................................. 102,375 1.2%
---------- ----
$3,255,664 36.8%
========== ====
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MEDIUM-TERM TOMORROW FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
UST-Note 6.125% Due 12/31/01 ................. $1,045,823 6.2%
BT EAFE Equity Index Fund .................... 883,540 5.2%
UST-Note 6.125% Due 8/15/07 .................. 846,447 5.0%
UST-Bond 6.125% Due 11/15/27 ................. 811,543 4.8%
UST-Note 6.500% Due 5/31/01 .................. 656,284 3.9%
UST-Note 5.625% Due 5/15/08 .................. 394,801 2.3%
FNMA 5.750% Due 2/15/08 ..................... 310,641 1.9%
Merck & Co. Inc. ............................. 251,069 1.5%
General Electric ............................. 224,538 1.3%
Microsoft Corp. .............................. 221,900 1.3%
---------- ----
$5,646,586 33.4%
========== ====
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM TOMORROW FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
UST-Bond 6.125% Due 11/15/27 ................. $2,238,740 6.7%
UST-Note 5.625% Due 5/15/08 .................. 1,691,243 5.1%
UST-Note 6.500% Due 10/15/06 ................. 1,159,135 3.5%
UST-Note 6.125% Due 12/31/01 ................. 905,339 2.7%
Salomon Smith Barney Inc. 7.300% Due 5/15/02 901,263 2.7%
UST-Note 4.75% Due 11/15/08 .................. 765,936 2.3%
FHLMC 7.000% Due 3/15/08 ..................... 756,719 2.3%
Commercial Credit 8.250% Due 11/1/01 ......... 546,944 1.7%
Norwest Financial Inc. 5.375% Due 9/30/03 .... 546,821 1.6%
FNMA 5.750% Due 2/15/08 ...................... 533,267 1.6%
----------- ----
$10,045,407 30.2%
=========== ====
<FN>
*The composition of the largest securities in each portfolio is subject to
change.
</FN>
</TABLE>
Page 4
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND
COMMON STOCKS (63.8%)
BASIC MATERIALS (3.2%)
<C> <S> <C>
750 Air Products & Chemicals Inc. ........................ 30,000
425 +AK Steel Holding Corp. ............................... 9,987
320 Birmingham Steel Corp. ............................... 1,340
200 Brady Corp. .......................................... 5,387
200 Cambrex Corp. ........................................ 4,800
300 Crompton & Knowles Corp. ............................. 6,206
116 Delta & Pine Land Co. ................................ 4,292
800 Georgia Pacific ...................................... 19,050
270 Intermet Corp. ....................................... 3,527
950 Kimberly Clark Corp. ................................. 51,775
180 Lilly Industries Inc. - Cl A ......................... 3,532
270 MacDermid Inc. ....................................... 10,564
370 +Nashua Corp. ......................................... 4,926
700 Pope & Talbot Inc. ................................... 5,862
180 Quanex Corp. ......................................... 4,050
1,200 Rohm & Haas Co. ...................................... 36,150
900 Schulman Inc. ........................................ 20,419
180 +Scotts Co. - Cl A .................................... 6,919
250 Solutia, Inc. ........................................ 5,594
400 Tosco Corporation .................................... 10,350
900 Transocean Offshore Inc. ............................. 24,131
50 Unisource Worldwide Inc. ............................. 363
650 USX US Steel Group ................................... 14,950
----------
284,174
----------
COMMERCIAL SERVICES (1.5%)
200 ABM Industries Inc. .................................. 6,925
200 +Acxiom Corp. ......................................... 6,200
180 +Billing Information Concepts ......................... 1,980
2,300 Comdisco Inc. ........................................ 38,813
180 +Envoy Corp. .......................................... 10,485
200 GTech Holding Corp. .................................. 5,125
136 +Halter Marine Group Inc. ............................. 663
640 +Instituform Technologies - Cl A ...................... 9,280
400 Ryder Systems Inc. ................................... 10,400
100 Stone & Webster Inc. ................................. 3,313
300 Tidewater Inc. ....................................... 6,956
1,280 True North Communications ............................ 34,400
----------
134,540
----------
CONSUMER CYCLICALS (5.1%)
375 +Best Buy Company ..................................... 23,016
180 +Breed Technologies Inc. .............................. 1,474
350 Cash America International Inc. ...................... 5,316
270 +Champion Enterprises Inc. ............................ 7,391
270 Clarcor Inc. ......................................... 5,400
850 Dillards Inc. - Cl A ................................. 24,119
650 Dress Barn Inc. ...................................... 9,872
1,400 Ford Motor Co. ....................................... 82,163
375 Gap, Inc. ............................................ 21,094
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND (continued)
200 +Houghton Mifflin Company .............................$ 9,450
300 +Jones Apparel Group .................................. 6,619
270 Juno Lighting Inc. ................................... 6,311
180 Kellwood Co. ......................................... 4,500
206 Metris Companies Inc. ................................ 10,363
350 Miller (Herman) Inc. ................................. 9,406
180 +Nautica Enterprises Inc. ............................. 2,700
180 Oakwood Homes Corp. .................................. 2,733
360 Osh Kosh B'Gosh - Cl A ............................... 7,267
270 Ryland Group Inc. .................................... 7,796
180 Skyline Corp. ........................................ 5,850
150 South Down Inc. ...................................... 8,890
460 +Southern Energy Homes ................................ 2,818
350 +Sports Authority ..................................... 1,838
350 +Staples Inc. ......................................... 15,291
100 Storage USA .......................................... 3,231
180 TJ International Inc. ................................ 4,624
2,550 TJX Companies Inc. ................................... 73,950
180 +Toll Brothers Inc. ................................... 4,061
50 Tommy Hilfiger Corp. ................................. 3,000
350 Toro Co. ............................................. 9,975
90 +US Home Corp. ........................................ 2,992
350 USG Corp. ............................................ 17,828
400 VF Corp. ............................................. 18,750
200 Wabash National Corp. ................................ 4,063
200 +Williams Sonoma Inc. ................................. 8,063
550 Winnebago Industries ................................. 8,319
200 York International ................................... 8,162
100 +Zale Corp. New ....................................... 3,225
----------
451,920
----------
CONSUMER NON-CYCLICALS (5.6%)
900 Adolph Coors ......................................... 50,794
800 Coca Cola Co. ........................................ 53,500
700 Corning Inc. ......................................... 31,500
1,050 Dial Corp. ........................................... 30,253
180 Dimon Inc. ........................................... 1,294
1,650 Fleming Companies Inc. ............................... 17,119
250 Hanson PLC ADR ....................................... 9,750
800 Philip Morris Companies Inc. ......................... 42,800
950 Premark International ................................ 32,894
600 Proctor & Gamble Co. ................................. 54,787
950 Quaker Oats .......................................... 56,525
100 Richfood Holdings Inc. ............................... 2,075
550 +Safeway Inc. ......................................... 33,516
800 Sara Lee Corp. ....................................... 22,550
450 Supervalu Inc. ....................................... 12,600
1,400 Universal Foods Corp. ................................ 38,412
90 +Whole Foods Market Inc. .............................. 4,354
2 WLR Foods Inc. ....................................... 18
----------
494,741
----------
See Notes to Financial Statements
Page 5
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND (continued)
CONSUMER SERVICES (4.5%)
100 Brinker International Inc. ...........................$ 2,888
270 +Carmike Cinemas Inc. - Cl A .......................... 5,451
150 +Citrix System ........................................ 14,559
2,100 Darden Restaurants Inc. .............................. 37,800
360 +Devry Inc. ........................................... 11,025
300 Eastman Kodak Co. .................................... 21,600
1,080 Gannet Inc. .......................................... 69,660
370 Grand Casinos Inc. ................................... 2,983
100 Harley Davidson Inc. ................................. 4,738
325 International Game Technology ........................ 7,901
200 +King World Productions Inc. .......................... 5,887
550 Marriott International Inc. .......................... 15,950
100 McDonald's Corp. ..................................... 7,663
550 +MediaOne Group Inc. .................................. 25,850
200 +Promus Hotel Corp. ................................... 6,475
550 Reynolds & Reynolds .................................. 12,616
1,460 Ruby Tuesday Inc. .................................... 31,025
180 +Rural/ Metro Corp. ................................... 1,968
750 +Staffmark Inc. ....................................... 16,781
625 Viad Corp. ........................................... 18,984
100 Wallace Computer Services Inc. ....................... 2,638
900 Wal Mart Stores Inc. ................................. 73,294
----------
397,736
----------
ENERGY (2.8%)
200 +Barrett Resources Corp. .............................. 4,800
650 Chevron Corp. ........................................ 53,909
1,740 Coastal Corp. ........................................ 60,791
270 Cross Timbers Oil Co. ................................ 2,042
1,400 Exxon Corp. ..........................................102,375
250 Murphy Oil Corp. ..................................... 10,313
180 +New Field Exploration Co. ............................ 3,758
920 +Oceaneering International Inc. ....................... 12,880
----------
250,868
----------
FINANCIAL (9.5%)
250 AFLAC Inc. ........................................... 11,000
325 A G Edwards Inc. ..................................... 12,106
1,300 Allstate Corp. ....................................... 50,213
125 AMBAC Inc. ........................................... 7,523
225 American Express Co. ................................. 23,006
200 +Amresco Inc. ......................................... 1,750
925 Amsouth Bancorp ...................................... 42,203
732 Associates First Capital Corp. ....................... 31,019
90 Astoria Financial Corp. .............................. 4,118
756 BankAmerica Corp. .................................... 45,455
8 BSB Bancorp Inc. ..................................... 263
100 Capital One Financial Corp. .......................... 11,500
100 Centura Banks Inc. ................................... 7,438
1,050 Chase Manhattan Corp. ................................ 71,466
300 Cigna Corp. .......................................... 23,194
400 City National Corp. .................................. 16,650
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND (continued)
100 CMAC Investment Corp. ................................$ 4,594
500 Comerica Inc. ........................................ 34,094
135 Commercial Fed Corp. ................................. 3,130
180 +CompDent Corp. ....................................... 1,868
725 Conseco Inc. ......................................... 22,158
100 Cullen/Frost Bankers Inc. ............................ 5,488
367 Dime Bancorp Inc. .................................... 9,703
600 Federal National Mortgage Corp. ...................... 44,400
336 Fidelity National Financial Inc. ..................... 10,233
600 First Tennessee National Bank ........................ 22,837
900 Fleet Financial Group Inc. ........................... 40,219
100 Franchise Finance Corp. of America ................... 2,400
180 Fremont General Corp. ................................ 4,455
99 Frontier Insurance Group Inc. ........................ 1,275
50 Golden West Financial ................................ 4,584
300 Hartford Financial Services Group .................... 16,462
550 Hibernia Corp. - Cl A ................................ 9,556
270 Hilb, Rogal & Hamilton Co. ........................... 5,366
126 Huntington Bancshares ................................ 3,788
180 JSB Financial Inc. ................................... 9,788
180 Keystone Financial Inc. .............................. 6,660
232 Legg Mason Inc. ...................................... 7,323
450 Marsh & McLennan Companies ........................... 26,297
525 +Morgan Stanley Dean Witter & Co. ..................... 37,275
180 Mutual Risk Management ............................... 7,042
300 National City Corp. .................................. 21,600
300 Northern Trust Corp. ................................. 26,194
700 North Fork Bancorp ................................... 16,756
2 One Valley Bancorp Inc. .............................. 65
180 Orion Capital Corp. .................................. 7,165
350 +PNC Bank ............................................. 18,944
90 Provident Financial Group Inc. ....................... 3,397
444 Sovereign Bancorp Inc. ............................... 6,327
180 St. Paul Bancorp ..................................... 4,899
150 State Street Corp. ................................... 10,434
150 The PMI Group Inc. ................................... 7,406
100 T. Rowe Price Associates Inc. ........................ 3,425
180 Trenwick Group Inc. .................................. 5,872
90 US Trust Corp. ....................................... 6,840
----------
839,223
----------
HEALTH CARE (7.4%)
1,000 Abbott Laboratories .................................. 49,000
270 +Advanced Tissue Sciences Inc. ........................ 700
350 Allegiance Corp. ..................................... 16,319
200 +AmeriSource Health Corp. ............................. 13,000
1,400 Becton Dickinson & Co. ............................... 59,762
500 Bergen Brunswig Corp. ................................ 17,437
200 +Biogen Inc. .......................................... 16,600
400 Bristol-Myers Squibb ................................. 53,525
350 +Cor Therapeutics ..................................... 4,637
See Notes to Financial Statements
Page 6
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND (continued)
250 +Cygnus Inc. ..........................................$ 1,219
257 +Enzo Biochem Inc. .................................... 2,650
200 +Express Scripts Inc. - Cl A .......................... 13,425
300 DENTSPLY International ............................... 7,725
200 +Eli Lilly & Co. ...................................... 17,775
198 +Integrated Health Services Inc. ...................... 2,797
200 Johnson & Johnson .................................... 16,775
90 +Magellan Health Services Inc. ........................ 754
180 +Medimmune Inc. ....................................... 17,899
180 Mentor Corp. ......................................... 4,218
600 Merck & Co. Inc. ..................................... 88,612
550 Mylan Labs ........................................... 17,325
180 +Orthodontic Centers of America ....................... 3,499
270 Owens & Minor Inc. ................................... 4,253
150 +PacifiCare Health Systems - Cl B ..................... 11,925
180 +Respironics Inc. ..................................... 3,606
180 +Safeskin Corp. ....................................... 4,343
800 Schering-Plough Corp. ................................ 44,200
180 +Sola International Inc. .............................. 3,105
180 +Steris Corp. ......................................... 5,119
350 +Total Renal Care Holdings ............................ 10,347
180 +Vertex Pharmaceutical Inc. ........................... 5,355
1,050 Warner Lambert Co. ................................... 78,947
625 +Wellpoint Health Networks ............................ 54,375
----------
651,228
----------
INDUSTRIAL (3.7%)
400 +American Power Conversion ............................ 19,375
730 +Anixter International Inc. ........................... 14,828
570 Applied Power Inc. ................................... 21,517
150 +Ferro Corp. .......................................... 3,900
1,200 General Electric .....................................122,475
270 Imco Recycling Inc. .................................. 4,168
750 Ingersoll Rand Co. ................................... 35,203
100 Johnson Controls ..................................... 5,900
90 Manitowoc Inc. ....................................... 3,994
90 Robbins & Myers Inc. ................................. 1,986
90 +SPS Technologies Inc. ................................ 5,006
800 Thomas & Betts Corp. ................................. 34,650
250 Trinity Industries ................................... 9,625
300 Tyco International Ltd. .............................. 22,631
200 +Waters Corp. ......................................... 17,450
----------
322,708
----------
INDUSTRIAL SERVICES (1.3%)
600 +America On Line Inc. ................................. 96,000
175 Omnicom Group Inc. ................................... 10,150
350 Sotheby' Holdings - Cl A ............................. 11,200
----------
117,350
----------
REAL ESTATE INVESTMENT TRUST (0.5%)
180 Federal Realty Investors Trust .......................$ 4,253
100 Felcor Lodging Trust ................................. 2,306
100 General Growth Properties ............................ 3,787
100 Health Care Property Investors ....................... 3,075
100 Indymac Mortgage Holdings ............................ 1,056
100 Liberty Property Trust ............................... 2,463
100 Mack-Cali Realty Corp. ............................... 3,088
640 New England Business Service ......................... 25,040
----------
45,068
----------
TECHNOLOGY (11.5%)
555 AAR Corp. ............................................ 13,112
1,000 +Advanced Micro Devices Inc. .......................... 28,938
1,400 Allegheny Energy Inc. ................................ 48,300
325 +Altera Corp. ......................................... 19,784
300 +Apple Computer Inc. .................................. 12,281
200 +Aspect Telecommunications ............................ 3,450
350 +California Microwave Inc. ............................ 3,281
180 +Cognex Corp. ......................................... 3,600
800 Computer Associates
International Inc. ................................... 34,100
375 +Compuware Corp. ...................................... 29,297
225 +Comverse Technology .................................. 15,975
875 +Dell Computer Corp. .................................. 64,039
100 +ETEC Systems Inc. .................................... 4,000
920 +Geotek Communications Inc. ........................... 19
1,190 Gerber Scientific Inc. ............................... 28,337
400 Harris Corp. ......................................... 14,650
100 Honeywell Inc. ....................................... 7,531
180 +Input/Output Inc. .................................... 1,316
400 +Intel Corp. .......................................... 47,425
400 International Business
Machines Corp. ....................................... 73,900
350 +Keane Inc. ........................................... 13,978
820 +Kemet Corp. .......................................... 9,225
90 +Kulicke & Soffa Industries Inc. ...................... 1,598
250 +Lexmark International Group - Cl A ................... 25,125
444 Lucent Technologies .................................. 48,840
460 +Microchip Technology Inc. ............................ 17,020
900 +Microsoft Corp. ......................................124,819
100 +Networks Associates .................................. 6,625
300 Nicor Inc. ........................................... 12,675
1,450 Pitney Bowes Inc. .................................... 95,791
650 +Platinum Technology Inc. ............................. 12,431
100 Precision Castparts Corp. ............................ 4,425
180 +Read-Rite Corp. ...................................... 2,661
180 +S3 Inc. .............................................. 1,325
180 +Sanmina Corp. ........................................ 11,250
125 Sundstrand Corp. ..................................... 6,484
800 Texas Instruments Inc. ............................... 68,450
See Notes to Financial Statements
Page 7
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND (continued)
568 +United Technologies ..................................$61,770
90 +Vantive Corp. ........................................ 720
300 Xerox Corp. .......................................... 35,400
----------
1,013,947
----------
TELECOMMUNICATIONS (3.5%)
350 Aliant Communications ................................ 14,306
900 Ameritech Corp. ...................................... 57,038
800 AT&T Corp. ........................................... 60,200
1,400 Bell Atlantic Corp. .................................. 74,200
400 BellSouth Corp. ...................................... 19,950
300 Century Telephone Enterprises ........................ 20,250
550 +General Communication - Cl A ......................... 2,234
900 US West Inc. ......................................... 58,163
----------
306,341
----------
TRANSPORTATION (1.0%)
300 Airborne Freight Corp. ............................... 10,819
600 +AMR Corp. ............................................ 35,625
300 +Borg Warner Automotive ............................... 16,725
300 +Continental Air Cl B ................................. 10,050
750 +Yellow Corp. ......................................... 14,344
----------
87,563
----------
UTILITIES (2.7%)
150 Apache Corp. ......................................... 3,797
500 +California Energy Inc. ............................... 17,312
150 Columbia Energy Inc. ................................. 8,663
550 Conectiv, Inc. ....................................... 13,475
1,560 Eastern Utilities .................................... 44,070
400 +Energy East Corp. .................................... 22,600
800 FPL Group Inc. ....................................... 49,300
550 Montana Power Co. .................................... 31,109
700 Northwest Natural Gas Co. ............................ 18,112
200 Pinnacle West Capital ................................ 8,475
700 Questar Corp. ........................................ 13,562
200 Utilicorp United Inc. ................................ 7,338
----------
237,813
----------
TOTAL COMMON STOCKS
(Cost $4,657,382) .............................. 5,635,220
OPEN END INVESTMENT COMPANY (5.0%)
38,499 (Cost $405,706)
BT EAFE EQUITY INDEX FUND ........................ 446,207
UNIT INVESTMENT TRUST (6.3%)
4,489 (Cost $440,938)
Standard & Poor's Depository
Receipt ........................................ 553,549
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW LONG-TERM RETIREMENT FUND (CONTINUED)
U.S. GOVERNMENT OBLIGATIONS (25.1%)
U.S. TREASURY BILL (5.7%)
$ 500,000 Due 1/7/99 ...........................................$499,583
U.S. TREASURY NOTES (16.0%)
150,000 6.375% Due 4/30/99 ...................................150,843
20,000 5.875% Due 7/31/99 ................................... 20,134
90,000 6.500% Due 5/31/01 ................................... 93,755
435,000 6.125% Due 12/31/01 ..................................452,670
65,000 7.000% Due 7/15/06 ................................... 74,008
50,000 6.500% Due 10/15/06 .................................. 55,460
515,000 6.125% Due 8/15/07 ...................................562,478
----------
1,409,348
----------
U.S. TREASURY BONDS (2.8%)
5,000 8.125% Due 8/15/19 ................................... 6,677
215,000 6.125% Due 11/15/27 ..................................240,665
----------
247,342
----------
U.S. TREASURY STRIP (0.0%)
10,000 Due 5/15/17 .......................................... 3,634
----------
U.S. GOVERNMENT AGENCY (0.6%)
55,000 Federal National Mortgage Association
5.750% Due 2/15/08 .............................. 56,951
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $2,154,013) ................................. 2,216,858
----------
CORPORATE DEBENTURE (0.3%)
(Cost $25,310)
FINANCE (0.3%)
25,000 Standard C.C. Master Trust
6.800% Due 4/7/99 ................................ 25,078
---------
ASSET BACKED SECURITY (0.5%)
(Cost $47,376)
45,000 MBNA Master Credit Card
6.450% Due 2/15/08 ............................... 46,914
---------
TOTAL INVESTMENTS (101.0%)
(Cost $7,730,725) ............................. 8,923,826
LIABILITIES IN EXCESS OF
OTHER ASSETS (-1.0%). ............................ (86,014)
---------
TOTAL NET ASSETS (100.0%) ....................... $8,837,812
==========
<FN>
+ Non-income producing security.
</FN>
</TABLE>
See Notes to Financial Statements
Page 8
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND
COMMON STOCK (51.2%)
BASIC MATERIALS (1.6%)
<C> <S> <C>
550 +AK Steel Holdings Corp. ..............................$12,925
1,200 Air Products & Chemicals Inc. ........................ 48,000
100 Cambrex Corp. ........................................ 2,400
350 +Crompton & Knowles Corp. ............................. 7,242
66 Delta & Pine Land Co. ................................ 2,442
1,000 Georgia-Pacific (Timber Group) ....................... 23,812
150 Intermet Corp. ....................................... 1,959
450 Kemet Corp. .......................................... 5,062
400 Pope & Talbot Inc. ................................... 3,350
2,400 Rohm & Haas Co. ...................................... 72,300
850 Schulman Inc. ........................................ 19,284
100 Scotts Company (The) Cl A ............................ 3,844
300 Solutia, Inc. ........................................ 6,713
650 Tosco Corp. .......................................... 16,819
1,650 Transocean Offshore Inc. ............................. 44,241
100 Unisource Worldwide Inc. ............................. 725
250 USG Corp. ............................................ 12,734
-----------
283,852
-----------
CONSUMER CYCLICALS (4.2%)
425 +Best Buy Company ..................................... 26,084
100 +Billing Concepts Corp. ............................... 1,100
100 Breed Technologies Inc. .............................. 819
100 Carmike Cinemas Inc. Cl A ............................ 2,019
150 Champion Enterprises Inc. ............................ 4,106
100 +Citrix System ........................................ 9,706
1,500 Dillards International Cl A .......................... 42,562
350 Dress Barn Inc. ...................................... 5,316
3,300 Ford Motor Company ...................................193,669
1,300 Gannet Inc. .......................................... 83,850
975 Gap, Inc. ............................................ 54,844
200 Grand Casinos Inc. ................................... 1,613
350 GTECH Holding Corp. .................................. 8,969
350 International Game Technology ........................ 8,509
500 +Jones Apparel Group .................................. 11,031
150 Juno Lighting Inc. ................................... 3,506
100 Kellwood Company ..................................... 2,500
1,650 +King World Productions Inc. .......................... 48,572
1,100 Marriott International, Inc., Cl A ................... 31,900
413 Metris Cos. Inc. ..................................... 20,779
300 Nashua Corp. ......................................... 3,994
100 Nautica Enterprises Inc. ............................. 1,500
400 Omnicom Group Inc. ................................... 23,200
200 Osh Kosh B'Gosh Class 'A' ............................ 4,037
800 Ruby Tuesday Inc. .................................... 17,000
100 Skyline Corp. ........................................ 3,250
200 Sports Authority ..................................... 1,050
250 +Staples, Inc. ........................................ 10,922
100 Storage USA .......................................... 3,231
50 Tommy Hilfiger Corp. ................................. 3,000
250 Toro Co. ............................................. 7,125
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
900 VF Corp. .............................................$42,188
100 Wabash National Corp. ................................ 2,031
100 +Williams-Sonoma ...................................... 4,031
300 Winnebago Industries ................................. 4,538
300 +Zale Corporation ..................................... 9,675
-----------
702,226
-----------
CONSUMER NON-CYCLICALS (6.7%)
100 Acxiom Corp. ......................................... 3,100
1,800 Adolph Coors .........................................101,587
200 Brinker Intl Inc. .................................... 5,775
200 Cash America International Inc. ...................... 3,038
1,900 Coca Cola Co. ........................................127,063
1,250 Corning Inc. ......................................... 56,250
2,950 Darden Restaurants Inc. .............................. 53,100
200 +Devry Inc. ........................................... 6,125
2,200 Fleming Cos .......................................... 22,825
1,750 Kimberly Clark Corp. ................................. 95,375
300 McDonald's Corp. ..................................... 22,987
750 Miller (Herman) Inc. ................................. 20,156
100 Oakwood Homes Corp. .................................. 1,519
1,325 Philip Morris Cos Inc. ............................... 70,888
1,350 Premark International ................................ 46,744
1,400 Proctor & Gamble Co. .................................127,837
1,500 Quaker Oats .......................................... 89,250
100 Richfood Holdings Inc. ............................... 2,075
1,100 +Safeway Inc. ......................................... 67,031
1,600 Sara Lee Corp. ....................................... 45,100
400 Supervalu Inc. ....................................... 11,200
3,750 TJX Cos Inc. .........................................108,750
700 Universal Foods Corp. ................................ 19,206
50 Whole Foods Market Inc. .............................. 2,419
350 York International ................................... 14,284
-----------
1,123,684
-----------
CONSUMER SERVICE (2.0%)
3,450 Comdisco Inc. ........................................ 58,219
500 Eastman Kodak ........................................ 36,000
100 Envoy Corp. .......................................... 5,825
200 Harley Davidson Inc. ................................. 9,475
250 +Houghton Mifflin Co. ................................. 11,812
1,000 +MediaOne Group Inc. .................................. 47,000
225 +Promus Hotel Corp. ................................... 7,284
100 Rural/Metro Corp. .................................... 1,094
1,000 Ryder Systems Inc. ................................... 26,000
600 +Staffmark Inc. ....................................... 13,425
600 Viad Corp. ........................................... 18,225
1,350 Wal-Mart Stores Inc. .................................109,941
-----------
344,300
-----------
ENERGY (2.7%)
100 Barrett Resources Corp. .............................. 2,400
400 +BJ Services .......................................... 6,250
See Notes to Financial Statements
Page 9
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
1,600 Chevron Corp. .......................................$132,700
3,500 Coastal Corp. ........................................122,281
700 Conectiv, Inc. ....................................... 17,150
150 Cross Timbers Oil Co. ................................ 1,134
200 Ensco International Inc. ............................. 2,138
1,850 Exxon ................................................135,281
150 Imco Recycling, Inc. ................................. 2,316
250 Murphy Oil Corp. ..................................... 10,313
100 New Field Exploration Co. ............................ 2,088
500 Oceaneering Intl Inc. ................................ 7,000
500 Questar Corp. ........................................ 9,687
-----------
450,738
-----------
FINANCIAL (8.0%)
400 AFLAC Inc. ........................................... 17,600
400 A G Edwards Inc. ..................................... 14,900
1,600 Allstate Corp. ....................................... 61,800
100 American Bankers Insurance
Group Inc. ......................................... 4,838
200 +Ambac Financial Group ............................... 12,038
100 Amresco Inc. ......................................... 875
2,800 Amsouth Bancorp ......................................127,750
1,728 Associates First Capital Corp. ....................... 73,224
50 Astoria Financial Corp. .............................. 2,288
669 BankAmerica Corp. .................................... 40,224
10 BSB Bancorp Inc. ..................................... 329
100 Capital One Financial Corp. .......................... 11,500
50 Centura Banks Inc. ................................... 3,719
1,000 Chase Manhattan Corp. ................................ 68,062
600 Cigna Corp. .......................................... 46,387
600 City National Corp. .................................. 24,975
50 CMAC Investment Corp. ................................ 2,297
900 Comerica Inc. ........................................ 61,369
75 Commercial Fed Corp. ................................. 1,739
100 CompDent Corp. ....................................... 1,037
1,100 Conseco Inc. ......................................... 33,619
50 Cullen/Frost Bankers Inc. ............................ 2,744
600 Dime Bancorp Inc. .................................... 15,862
1,425 Federal National Mortgage ............................105,450
182 Fidelity National Financial Inc. ..................... 5,536
700 First Tennessee National Corp. ....................... 26,644
1,075 First Union Corp. .................................... 65,373
1,614 Fleet Financial Group Inc. ........................... 72,126
100 Franchise Finance Corp..
of America ......................................... 2,400
100 Fremont General Corp. ................................ 2,475
55 Frontier Insurance Group Inc. ........................ 708
150 Golden West Financial ................................ 13,753
800 Hartford Financial Services
Group ............................................... 43,900
150 Hilb, Rogal, and Hamilton Co. ........................ 2,981
450 Hibernia Corp. Cl A .................................. 7,819
126 Huntington Bancshares ................................ 3,788
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
100 JSB Financial Inc. ...................................$ 5,437
100 Keystone Financial Inc. .............................. 3,700
132 Legg Mason Inc. ...................................... 4,166
975 Marsh & McLennan Cos ................................. 56,977
975 Morgan Stanley Dean Witter & Co. ..................... 69,225
100 Mutual Risk Management ............................... 3,912
600 National City Corp. .................................. 43,200
550 Northern Trust Corp. ................................. 48,022
900 North Fork Bancorporation ............................ 21,544
100 Orion Capital Corp. .................................. 3,981
450 Pinnacle West Capital ................................ 19,069
200 The PMI Group Inc. ................................... 9,875
1,200 +PNC Bank ............................................ 64,950
50 Provident Financial Group Inc. ....................... 1,887
240 Sovereign Bancorp Inc. ............................... 3,420
100 St Paul Bancorp ...................................... 2,722
200 T Rowe Price Associates Inc. ......................... 6,850
100 Trenwick Group Inc. .................................. 3,262
50 US Trust Corp. ....................................... 3,800
-----------
1,358,128
-----------
HEALTH CARE (6.1%)
2,500 Abbott Laboratories ..................................122,500
150 Advanced Tissue Science .............................. 389
550 Allegiance Corporation ............................... 25,644
200 +AmeriSource Health Corp. ............................. 13,000
1,200 Becton Dickinson & Co. ............................... 51,225
700 Bergen Brunswig Corp. ................................ 24,412
200 +Biogen Inc. .......................................... 16,600
500 Bristol-Myers Squibb ................................. 66,906
200 Cor Therapeutics ..................................... 2,650
150 Cygnus Inc. .......................................... 731
425 DENTSPLY International ............................... 10,944
157 +Enzo Biochem Inc. .................................... 1,619
100 +Express Scripts Inc. Cl-A ............................ 6,713
1,100 +Eli Lilly & Co. ...................................... 97,763
108 Integrated Health Services Inc. ...................... 1,525
50 Magellan Health Services Inc. ........................ 419
100 Medimmune Inc. ....................................... 9,944
100 Mentor Corp. ......................................... 2,344
1,700 Merck & Co. Inc. .....................................251,069
650 Mylan Labs ........................................... 20,475
100 Orthodontic Centers Of America ....................... 1,944
150 Owens & Minor Inc. ................................... 2,362
150 +PacifiCare Health Service ............................ 11,925
100 Respironics Inc. ..................................... 2,003
100 +Safeskin Corp. ....................................... 2,412
1,100 Schering-Plough Corp. ................................ 60,775
100 Sola International Inc. .............................. 1,725
100 +Steris Corp. ......................................... 2,844
400 +Total Renal Care Holdings ............................ 11,825
100 Vertex Pharmaceutical Inc. ........................... 2,975
1,350 Warner Lambert Co. ...................................101,503
See Notes to Financial Statements
Page 10
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
1,100 +Wellpoint Health Networks ...........................$95,700
-----------
1,024,865
-----------
INDUSTRIALS (4.3%)
100 ABM Industrial Inc. .................................. 3,463
1 Albany International Corp. ........................... 19
350 +American Power Conversion Corp. ...................... 16,953
400 Anixter International ................................ 8,125
735 Applied Power Inc. ................................... 27,746
100 Birmingham Steel Corporation ......................... 419
100 Brady Corp. .......................................... 2,694
150 Clarcor Inc. ......................................... 3,000
900 Dial Corp. New ....................................... 25,931
100 Dimon Inc. ........................................... 719
500 +Ferro Corp. .......................................... 13,000
48 General Cigar Holdings, Inc. ......................... 417
2,200 General Electric .....................................224,538
75 Halter Marine Group, Inc. ............................ 366
600 Hanson PLC ADR ....................................... 23,400
1,250 Ingersoll Rand Co. ................................... 58,672
300 Insituform Technologies Class ........................ 4,350
100 Lilly Industries Inc. Cl A ........................... 1,963
150 MacDermid Inc. ....................................... 5,869
50 Manitowoc Inc. ....................................... 2,219
2,100 Pitney Bowes Inc. ....................................138,731
100 Quanex Corp. ......................................... 2,250
100 Read-Rite Corp. ...................................... 1,478
50 Robbins & Myers Inc. ................................. 1,103
100 Ryland Group Inc. .................................... 2,888
750 Sotheby's Holdings Class A ........................... 24,000
200 South Down Inc. ...................................... 11,838
250 Southern Energy Homes ................................ 1,531
50 Stone & Webster, Inc. ................................ 1,656
120 Sundstrand Corp. ..................................... 6,225
100 TJ International Inc. ................................ 2,569
100 Toll Brothers Inc. ................................... 2,256
250 Trinity Industries Inc. .............................. 9,625
700 True North Communications ............................ 18,812
600 Tyco International Ltd. .............................. 45,262
50 US Home Corp. ........................................ 1,662
1,075 USX US Steel Group ................................... 24,725
50 Vantive Corp. ........................................ 400
150 +Waters Corp. ......................................... 13,087
-----------
733,961
-----------
REAL ESTATE INVESTMENT TRUST
(REIT) (0.5%)
450 +Allied Waste Industrial .............................. 10,631
100 Federal Realty Investment Trust ...................... 2,363
100 Felcor Lodging Trust Inc. REIT ....................... 2,306
275 Florida Progress Co. ................................. 12,323
100 General Growth Properties ............................ 3,788
100 Health Care Property Investors ....................... 3,075
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
100 Highwood Properties Inc. .............................$ 2,575
100 Indymac Mortgage Holdings ............................ 1,056
100 Liberty Property Trust ............................... 2,463
100 Mack-Cali Realty Corp. ............................... 3,087
350 New England Business Service ......................... 13,694
500 Nicor Inc. ........................................... 21,125
-----------
78,486
-----------
TECHNOLOGY (11.6%)
300 AAR Corp. ............................................ 7,088
2,450 +Advanced Micro Device ................................ 70,897
450 Aliant Communications ................................ 18,394
3,100 Allegheny Energy International .......................106,950
425 +Altera Corp. ......................................... 25,872
700 +America Online Inc. ..................................112,000
425 +Apple Computer Inc. .................................. 17,398
100 Aspect Telecommunications ............................ 1,725
1,000 BellSouth Corp. ...................................... 49,875
300 California Microwave Inc. ............................ 2,813
300 Century Telephone Enterprises ........................ 20,250
100 Cognex Corp. ......................................... 2,000
300 Communications Satellite Corp. ....................... 10,800
1,400 Computer Associates International Inc. ............... 59,675
600 Compuware Corp. ...................................... 46,875
350 +Comverse Technology .................................. 24,850
1,600 +Dell Computer ........................................117,100
50 ETEC Systems Inc. .................................... 2,000
300 General Communication Cl A ........................... 1,219
500 Geotek Communications Inc. ........................... 11
650 Gerber Scientific Inc. ............................... 15,478
1,575 GTE Corp. ............................................102,375
1,000 Harris Corp. ......................................... 36,625
200 Honeywell Inc. ....................................... 15,062
100 Input/Output Inc. .................................... 731
700 +Intel Corp. .......................................... 82,994
1,000 Intl Business Machines Corp. .........................184,750
450 +Keane Inc. ........................................... 17,972
50 Kulicke & Soffa Industries Inc. ...................... 887
300 +Lexmark Holdings Cl A ................................ 30,150
650 Lucent Technologies .................................. 71,500
200 Microchip Technology Inc. ............................ 7,400
1,600 +Microsoft Corp. ......................................221,900
1,100 +Platinum Technology Inc. ............................. 21,037
200 Precision Castparts Corp. ............................ 8,850
450 Reynolds & Reynolds Cl A ............................. 10,322
100 S3 Incorporated ...................................... 736
100 +Sanmina Corp. ........................................ 6,250
50 SPS Technologies Inc. ................................ 2,781
1,000 Texas Instruments, Inc. .............................. 85,562
1,500 Thomas & Betts Corp. ................................. 64,969
1,000 +United Technologies ..................................108,750
1,050 US West Inc. ......................................... 67,856
See Notes to Financial Statements
Page 11
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
250 Wallace Computer Services Inc. .......................$ 6,594
700 Xerox Corp. .......................................... 82,600
1,951,923
------------
TRANSPORTATION (0.7%)
700 Airborne Freight Corp. ............................... 25,244
1,025 +AMR Corp. ............................................ 60,859
400 +Borg-Warner Automotive ............................... 22,300
250 +Continental Air Corp. ................................ 8,375
400 Yellow Corp. ......................................... 7,650
------------
124,428
------------
UTILITIES (2.8%)
1,300 Ameritech Corp. ...................................... 82,387
550 Apache Corp. ......................................... 13,922
3,200 Bell Atlantic Corp. ..................................169,600
100 California Energy Inc. ............................... 3,462
850 Eastern Utilities .................................... 24,013
350 +Energy East Corp. .................................... 19,775
1,000 FPL Group Inc. ....................................... 61,625
1,200 Montana Power Co. .................................... 67,875
350 Northwest Natural Gas Co. ............................ 9,056
200 +Tidewater Inc. ....................................... 4,638
400 Utilicorp United Inc. ................................ 14,675
------------
471,028
------------
TOTAL COMMON STOCKS
(Cost $6,900,763) ............................. 8,647,619
------------
OPEN END INVESTMENT COMPANY (5.2%)
(Cost $777,418)
76,233 BT EAFE Equity Index Fund ........................ 883,540
------------
UNIT INVESTMENT TRUST (1.0%)
(Cost $141,867)
1,414 Standard & Poors Depositary
Receipts ....................................... 174,364
------------
PRINCIPAL
AMOUNT
- ------
U.S. GOVERNMENT OBLIGATIONS &
AGENCY NOTES (26.2%)
U.S. TREASURY NOTES (19.6%)
$ 80,000 5.875% Due 7/31/99 ................................... 80,538
630,000 6.500% Due 5/31/01 ...................................656,284
1,005,000 6.125% Due 12/31/01 ................................1,045,823
70,000 7.000% Due 7/15/06 ................................... 79,701
775,000 6.125% Due 8/15/07 ...................................846,447
370,000 5.625% Due 5/15/08 ...................................394,801
200,000 4.750% Due 11/15/08 ..................................201,562
------------
3,305,156
------------
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
U.S. TREASURY BOND (4.8%)
$ 725,000 6.125% Due 11/15/27 ..................................$811,543
------------
U.S. TREASURY STRIP (0.0%)
10,000 Due 5/15/17 .......................................... 3,634
------------
U.S. GOVERNMENT AGENCY (1.8%)
Federal National Mortgage
300,000 Association 5.750% 2/15/08 ...........................310,641
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
& AGENCY NOTES
(Cost $4,384,135) ................................. 4,430,974
------------
CORPORATE DEBENTURES (13.0%)
FINANCE (9.8%)
150,000 American General Finance Corp.
5.750% Due 11/1/03 ........................ 150,405
200,000 General Motors Acceptance Corp.
5.375% Due 9/30/02 ........................ 198,920
125,000 Liberty Mutual
7.500% Due 1/15/18 ........................ 110,751
140,000 Merrill Lynch & Co.
5.870% Due 11/15/01 ....................... 141,376
150,000 Merrill Lynch & Co.
5.750% Due 11/4/02 ........................ 150,415
200,000 Morgan Stanley Dean Witter
5.940% Due 2/28/00 ........................ 201,450
160,000 Newcourt Credit Group
7.125% Due 12/17/03 (A) ................... 159,000
150,000 Salomon Smith Barney
7.300% Due 5/15/02 ........................ 157,197
100,000 Salomon Smith Barney
6.250% Due 1/15/05 ........................ 100,861
135,000 Standard Credit Card Master Trust
6.800% Due 4/7/99 ......................... 135,421
150,000 TransAmerica Financial Corp.
6.125% Due 11/1/01 ........................ 150,846
------------
1,656,642
------------
INDUSTRIAL (1.8%)
170,000 Dillards Inc.
6.310% Due 8/1/02 .......................... 170,352
115,000 Time Warner Entertainment
8.375% Due 7/15/33 ......................... 140,937
------------
311,289
------------
REAL ESTATE INVESTMENT TRUST (0.9%)
160,000 Health Care Properties
6.875% Due 6/8/05 ......................... 151,259
------------
See Notes to Financial Statements
Page 12
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
UTILITIES (0.4%)
$70,000 Sprint Capital Corp.
6.875% Due 11/18/28 ........................ $72,751
-----------
TOTAL CORPORATE DEBENTURES
(Cost $2,199,555) .......................... 2,191,941
-----------
ASSET BACKED SECURITY (1.0%)
(Cost $163,180)
155,000 MBNA Master Credit Card Trust
6.450% Due 2/15/08 ......................... 161,587
-----------
TOTAL INVESTMENTS (97.6%)
(Cost $14,566,918) ........................ 16,490,025
-----------
OTHER ASSETS IN EXCESS
OF LIABILITIES (2.4%) ......................... 402,916
-----------
TOTAL NET ASSETS (100.0%) ....................... $16,892,941
===========
<FN>
+ Non-income producing security.
(A) SEC Rule 144A Security. Such security has limited markets and
is traded among "qualified institutional buyers."
</FN>
</TABLE>
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
<TABLE>
<CAPTION>
TOMORROW SHORT-TERM RETIREMENT FUND
COMMON STOCKS (34.1%)
BASIC MATERIALS (1.1%)
<C> <S> <C>
900 Aluminum Company of America ..........................$67,106
1,100 Dow Chemical Co. .....................................100,031
1,000 Omnicom Group Inc. ................................... 58,000
3,450 Rohm & Haas Co. ......................................103,931
1,900 Transocean Offshore .................................. 50,944
-----------
380,012
-----------
COMMERCIAL SERVICES (0.1%)
1,800 Ryder Systems Inc. ................................... 46,800
CONSUMER CYCLICALS (3.1%)
1,150 Dillards International - Cl A ........................ 32,631
3,800 Ford Motor Company ...................................223,013
2,400 Gap Inc. .............................................135,000
3,250 Lowe's Companies Inc. ................................166,359
2,100 Premark International ................................ 72,713
2,400 TJX Companies Inc. ................................... 69,600
1,900 +Viad Corp. .......................................... 57,713
3,400 Wal-Mart Stores Inc. .................................276,888
-----------
1,033,917
-----------
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (CONTINUED)
CONSUMER NON-CYCLICALS (3.9%)
2,300 Anheuser - Busch Companies Inc. ......................$150,938
2,200 Avon Products Inc. ................................... 97,350
2,000 Coca Cola Company ....................................133,750
750 Coors (Adolph) ....................................... 42,328
1,450 Corning Inc. ......................................... 65,250
1,800 Dial Corp. ........................................... 51,863
1,500 General Mills Inc. ...................................116,625
1,700 +MediaOne Group Inc. .................................. 79,900
3,200 Philip Morris Companies Inc. .........................171,200
1,100 Proctor & Gamble Co. .................................100,444
1,800 Quaker Oats ..........................................107,100
3,900 Supervalu Inc. .......................................109,200
1,900 Universal Foods Corp. ................................ 52,131
-----------
1,278,079
-----------
CONSUMER SERVICES (1.4%)
6,600 Darden Restaurants Inc. ..............................118,800
700 Eastman Kodak Co. .................................... 50,400
1,500 Gannet Inc. .......................................... 96,750
3,600 +King World Productions Inc. .........................105,975
2,300 Marriott International, Inc. CI A .................... 66,700
350 McDonald's Corp. ..................................... 26,819
-----------
465,444
-----------
ENERGY (2.3%)
2,250 Apache Corp. ......................................... 56,953
1,800 Baltimore Gas & Electric ............................. 55,350
1,900 Chevron Corp. ........................................157,581
2,100 Coastal Corp. ........................................ 73,369
4,500 Exxon ................................................329,063
2,100 Phillips Petroleum Co. ............................... 89,513
-----------
761,829
-----------
FINANCIAL (5.5%)
3,400 Allstate Corp. .......................................131,325
500 American General Corp. ............................... 39,000
3,900 Amsouth Bancorporation ...............................177,938
3,300 Bank of New York .....................................132,825
2,400 Chase Manhattan Corp. ................................163,350
750 Cigna Corp. .......................................... 57,984
1,050 Comerica Inc. ........................................ 71,597
900 First Union Corp. .................................... 54,731
4,800 Fleet Financial Group Inc. ...........................214,500
2,150 Federal National Mortgage
Association ..........................................159,100
2,475 Marsh & McLennan Companies ...........................144,633
1,600 Morgan Stanley Dean Witter ...........................113,600
2,100 +National City Corp. .................................151,200
1,900 PNC Bank .............................................102,838
1,350 Providian Financial Corp. ............................101,250
-----------
1,815,871
-----------
Page 13
See Notes to Financial Statements
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (CONTINUED)
HEALTH CARE (4.3%)
4,800 Abbott Laboratories .................................$235,200
1,000 +Amgen Inc. ...........................................104,562
1,575 Bristol-Myers Squibb Co. .............................210,755
3,750 Eli Lilly & Co. ......................................333,281
2,700 +HCR Manor Care Inc. .................................. 79,313
4,800 Schering-Plough Corp. ................................265,200
2,700 Warner Lambert Corp. .................................203,006
-----------
1,431,317
-----------
INDUSTRIAL (2.5%)
3,700 General Electric .....................................377,631
1,800 Ingersoll Rand Co. ................................... 84,486
2,600 Kimberly Clark Corp. .................................141,700
1,050 +Lexmark Holdings Class A ............................105,525
1,600 Tyco International ...................................120,700
-----------
830,042
-----------
TECHNOLOGY (6.4%)
1,925 Computer Associates International Inc. ............... 82,053
3,300 +Dell Computer Corp. ..................................241,519
1,650 Honeywell Inc. .......................................124,266
1,750 Intel Corp. ..........................................207,484
1,150 International Business Machines
Corp. ................................................212,463
900 +Litton Industries .................................... 58,725
1,000 Lucent Technologies ..................................110,000
2,400 +Microsoft Corp. ......................................332,850
1,800 +Oracle Systems ....................................... 77,625
3,400 +Sun Microsystems Inc. ................................291,125
2,000 Texas Instruments Inc. ...............................171,125
2,100 Thomas & Betts Corp. ................................. 90,956
1,200 +United Technologies ..................................130,500
-----------
2,130,691
-----------
TELECOMMUNICATION (2.5%)
2,200 A T & T Corp. ........................................165,550
2,400 Ameritech Corp. ......................................152,100
5,400 Bell Atlantic Corp. ..................................286,200
2,000 BellSouth Corp. ...................................... 99,750
1,900 US West Inc. .........................................122,786
-----------
826,386
-----------
TRANSPORTATION (0.3%)
1,800 +AMR Corp. ............................................106,875
-----------
UTILITY (0.7%)
3,900 FPL Group Inc. .......................................240,336
-----------
TOTAL COMMON STOCK
(Cost $9,238,582) ............................. 11,347,599
-----------
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (CONTINUED)
UNIT INVESTMENT TRUST (0.2%)
(Cost $60,295)
572 Standard & Poor's Depository Receipt .................$70,535
-----------
PRINCIPAL
AMOUNT
- ------
U.S. GOVERNMENT OBLIGATIONS (27.8%)
U.S. TREASURY NOTES (16.0%)
$ 240,000 5.875% Due 7/31/99 ...................................241,613
395,000 6.500% Due 5/31/01 ...................................411,479
870,000 6.125% Due 12/31/01 ..................................905,339
1,045,000 6.500% Due 10/15/06 ................................1,159,135
150,000 6.125% Due 8/15/07 ...................................163,828
1,585,000 5.625% Due 5/15/08 .................................1,691,243
760,000 4.750% Due 11/15/08 ..................................765,936
-----------
5,338,573
-----------
U.S. TREASURY BOND (7.2%)
2,000,000 6.125% Due 11/15/27 ................................2,238,740
140,000 5.500% Due 8/15/28 ...................................146,541
-----------
2,385,281
-----------
U.S. TREASURY STRIP (0.7%)
645,000 Due 5/15/17 ..........................................234,374
U.S. GOVERNMENT AGENCY (3.9%)
725,000 Federal Home Loan Mortgage Corp. 7.000% Due 3/15/08 ..756,719
515,000 Federal National Mortgage Association 5.750%
Due 2/15/08 ..................................... 533,267
-----------
1,289,986
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $9,128,863) ............................ 9,248,214
-----------
CORPORATE DEBENTURES (32.7%)
CONSUMER CYCLICALS (0.6%)
200,000 Sears Roebuck Acceptance 6.680% Due 8/14/01 ..........205,132
-----------
CONSUMER NON-CYCLICALS (0.7%)
230,000 McKesson Corp. 6.600% Due 3/1/00 .....................232,346
-----------
FINANCE (23.5%)
120,000 Associates Corp. NA 6.375% Due 8/15/99 ...............120,763
150,000 Associates Corp. NA 6.680% Due 9/17/99 ...............151,424
70,000 Associates Corp. NA 7.520% Due 3/1/00 ................ 71,690
See Notes to Financial Statements
Page 14
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1998
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (CONTINUED)
$ 400,000 Associates Corp. NA 6.500% Due 10/15/02 ..............$413,264
235,000 Bear Stearns Companies Inc. 6.500% Due 7/5/00 ........237,390
205,000 Beneficial Corp. 8.170% Due 11/9/99 ..................210,004
160,000 Beneficial Corp. 6.250% Due 2/18/03 ..................162,800
510,000 Commercial Credit 8.250% Due 11/1/01 .................546,944
225,000 First Union Corp. 6.600% Due 6/15/00 .................228,499
230,000 Ford Motor Credit 8.150% Due 3/16/99 .................231,295
520,000 Ford Motor Credit 6.570% Due 3/19/01 .................532,548
50,000 Ford Motor Credit 6.125% Due 1/9/06 .................. 51,302
200,000 G.E. Capital Corp. 8.750% Due 5/21/07 ................244,148
450,000 General Motors Acceptance Corp. 5.750% Due 11/10/03 ..453,492
205,000 Liberty Mutual 7.500% Due 1/15/18 ....................181,631
100,000 Liberty Property Ltd. 6.375% Due 1/15/03 ............. 95,045
275,000 Merrill Lynch & Co. 6.620% Due 6/13/00 ...............279,458
285,000 Merrill Lynch & Co. 5.870% Due 11/15/01 ..............287,802
200,000 Morgan Stanley Capital I 1998-XL2 A2
6.170% Due 10/15/08 ..................................200,906
400,000 Morgan Stanley Dean Witter 6.090% Due 3/9/11 .........405,340
480,000 Newcourt Credit Group 7.125% Due 12/17/03 (B) ........477,000
550,000 Norwest Financial Inc. 5.375% Due 9/30/03 ............546,821
215,000 Salomon Smith Barney Inc. 6.700% Due 7/5/00 ..........218,618
860,000 Salomon Smith Barney Inc. 7.300% Due 5/15/02 .........901,263
205,000 Salomon Smith Barney Inc. 6.250% Due 1/15/05 .........206,765
230,000 Standard C.C. Master Trust 6.800% Due 4/7/99 .........230,718
120,000 USL Capital Corp. 6.500% Due 12/1/03 .................124,915
---------
7,811,845
---------
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (CONTINUED)
INDUSTRIAL (4.9%)
$ 500,000 Dillards Inc. 6.310% Due 8/1/02 ......................$501,035
90,000 dupont EI deNemours 8.750% Due 1/12/01 ................ 96,087
520,000 IMC Global Inc. 7.625% Due 11/1/05 ....................532,345
405,000 Time Warner Entertainment 8.375% Due 7/15/33 ..........496,344
----------
1,625,811
----------
REAL ESTATE INVESTMENT TRUST (2.1%)
235,000 CarrAmerica Realty Corp.
6.625% Due 10/1/00 ............................... 234,415
475,000 Health Care Properties
6.875% Due 6/8/05 ............................... 449,051
----------
683,466
----------
UTILITY (0.9%)
300,000 Sprint Capital Corp.
6.875% Due 11/15/28 .............................. 311,789
-----------
TOTAL CORPORATE DEBENTURES
(Cost $10,810,981) ............................. 10,870,389
-----------
ASSET BACKED SECURITY (1.5%)
(Cost $505,331)
480,000 MBNA Master Credit Card Trust 6.450% Due 2/15/08 .....500,400
-----------
EURODOLLAR DEPOSIT (3.6%)
(Cost $1,210,000)
1,210,000 SBC Warburg Inc. 4.250% Due 1/14/99 ................1,210,000
-----------
TOTAL INVESTMENTS (99.9%)
(Cost $30,954,052) ..............................33,247,137
OTHER ASSETS IN EXCESS
OF LIABILITIES (0.01%) .......................... 17,593
-----------
TOTAL NET ASSETS (100.0%) ....................... $33,264,730
===========
<FN>
+ Non-income producing security.
(B) SEC Rule 144A Security. Such security has limited markets and is
traded among "qualified institutional buyers."
</FN>
</TABLE>
Page 15
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
LONG- MEDIUM- SHORT-
TERM TERM TERM
RETIREMENT RETIREMENT RETIREMENT
---------- ---------- ----------
ASSETS
<S> <C> <C> <C>
Investments at value # $ 8,923,826 $ 16,490,025 $ 33,247,137
Cash 0 317,354 896
Receivable for Fund shares sold 13,551 88,347 17,034
Receivable from Adviser 1,248 0 0
Dividends and interest receivable 27,372 85,234 258,860
Deferred organizational costs and
prepaid expenses 20,011 20,492 20,515
------------ ------------ ------------
8,986,008 17,001,452 33,544,442
------------ ------------ ------------
LIABILITIES
Payable to custodian bank 89,312 0 0
Payable for Management Fees (Note 5) 0 7,989 20,766
Administration fee payable 0 0 2,567
Payable for investment securities purchased 5,576 27,882 167,291
Payable for Fund shares redeemed 22,205 38,818 46,235
Accrued distribution fees payable
(Adviser Shares) 3,018 6,269 7,828
Accrued service fees payable
(Institutional Shares) 292 530 2,739
Other accrued expenses 27,793 27,023 32,286
------------ ------------ ------------
148,196 108,511 279,712
------------ ------------ ------------
NET ASSETS $ 8,837,812 $ 16,892,941 $ 33,264,730
============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest (par $0.001). $ 968 $ 1,752 $ 3,165
Paid-in surplus 7,598,871 14,846,471 30,867,015
Accumulated undistributed net
investment income 17,323 44,740 50,960
Undistributed realized gains on
investments 27,549 76,871 50,506
Net unrealized appreciation on investments. 1,193,101 1,923,107 2,293,084
------------ ------------ ------------
NET ASSETS $ 8,837,812 $ 16,892,941 $ 33,264,730
============ ============ ============
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE:
ADVISER SHARES:
Net Assets $ 7,150,419 $ 14,616,934 $ 17,156,943
Shares of beneficial interest issued and
outstanding 785,494 1,510,339 1,636,190
------------ ------------ ------------
Net asset value per share $ 9.10 $ 9.68 $ 10.49
============ ============ ============
INSTITUTIONAL SHARES:
Net Assets $ 1,687,393 $ 2,276,007 $ 16,107,787
Shares of beneficial interest issued and
outstanding 182,721 241,419 1,528,721
------------ ------------ ------------
Net asset value per share $ 9.23 $ 9.43 $ 10.54
============ ============ ============
# Investments at cost 7,730,725 14,566,918 30,954,052
UNREALIZED APPRECIATION/(DEPRECIATION): *
Gross appreciation 1,428,354 2,192,931 2,527,845
Gross depreciation (235,253) (269,824) (234,761)
------------ ------------ ------------
NET UNREALIZED APPRECIATION 1,193,101 1,923,107 2,293,084
============ ============ ============
<FN>
* Based on cost of securities for book purposes which does not differ
significantly from Federal income tax cost.
</FN>
</TABLE>
See Notes to Financial Statements
Page 16
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
Statements of Operations for the Year Ended December 31, 1998
<TABLE>
<CAPTION>
LONG-TERM MEDIUM-TERM SHORT-TERM
RETIREMENT RETIREMENT RETIREMENT
---------- ---------- ----------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 96,318 $ 165,326 $ 146,009
Interest 121,608 400,530 1,191,160
Other 0 34 0
----------- ----------- -----------
217,926 565,890 1,337,169
----------- ----------- -----------
EXPENSES:
Investment advisory fees - (Note 5) 56,079 116,439 210,990
Fund accounting fees 38,935 41,416 41,826
Registration fees and expenses 11,702 10,737 18,253
Professional fees 29,641 26,395 26,679
Transfer agent fees and expenses
(Adviser Shares) 23,999 23,999 23,999
Transfer agent fees and expenses
(Institutional Shares) 23,999 23,999 23,999
Distribution fees (Adviser Shares) - (Note 5) 30,310 67,738 79,212
Custodian fees and expenses - (Note 7) 9,669 9,014 13,438
Amortization of organization expenses 9,494 9,479 9,479
Shareholders' reports 4,037 3,008 2,864
Trustees' fees and expenses 7,501 7,669 7,197
Administration fees - (Note 5) 6,729 13,973 25,319
Service fees (Institutional Shares) - (Note 5) 298 514 24,882
Other expenses 2,579 3,388 3,272
----------- ----------- -----------
TOTAL EXPENSES 254,972 357,768 511,409
Less fees waived by Adviser and
Administrator - (Note 5) (62,808) (68,362) (49,975)
Less expenses reimbursed
by Adviser - (Note 5) (60,012) (21,233) (298)
Less expenses paid indirectly - (Note 7) (8,083) (5,878) (5,573)
----------- ----------- -----------
NET EXPENSES 124,069 262,295 455,563
----------- ----------- -----------
NET INVESTMENT INCOME 93,857 303,595 881,606
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments
and futures 75,545 764,785 675,315
Net change in unrealized appreciation on
Investments 874,375 1,147,490 1,647,460
----------- ----------- -----------
NET GAIN ON INVESTMENTS 949,920 1,912,275 2,322,775
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,043,777 $ 2,215,870 $ 3,204,381
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
Page 17
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LONG-TERM MEDIUM-TERM SHORT-TERM
RETIREMENT RETIREMENT RETIREMENT
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ............... $ 93,857 $ 45,573 $ 303,595 $ 185,259 $ 881,606 $ 307,633
Net realized gain on
investments and futures ............. 75,545 374,798 764,785 878,691 675,315 1,287,442
Net change in unrealized appreciation
on investments and futures .......... 874,375 286,101 1,147,490 704,152 1,647,460 565,729
----------- ----------- ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........... 1,043,777 706,472 2,215,870 1,768,102 3,204,381 2,160,804
----------- ----------- ------------ ------------ ------------ ------------
DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Adviser Shares ...................... (54,368) (37,625) (212,159) (161,291) (403,730) (254,014)
Institutional Shares ................ (16,152) (12,531) (40,769) (26,581) (438,476) (39,448)
----------- ----------- ------------ ------------ ------------ ------------
TOTAL DIVIDENDS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME ................... (70,520) (50,156) (252,928) (187,872) (842,206) (293,462)
----------- ----------- ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET REALIZED GAINS:
Adviser Shares ...................... (38,834) (296,298) (594,045) (769,235) (341,618) (1,104,962)
Institutional Shares ................ (8,974) (78,947) (95,128) (108,096) (321,549) (142,997)
----------- ----------- ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS
FROM NET REALIZED GAINS ............. (47,808) (375,245) (689,173) (877,331) (663,167) (1,247,959)
----------- ----------- ------------ ------------ ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Received on issuance:
Shares sold ......................... 5,150,936 5,046,755 5,725,284 10,697,459 24,857,758 13,042,308
Shares issued in reinvestment
of dividends and distributions ...... 118,328 425,402 942,101 1,065,203 1,505,372 1,541,421
Shares redeemed ..................... (2,639,065) (1,730,955) (4,700,383) (2,494,576) (10,406,723) (4,356,467)
----------- ----------- ------------ ------------ ------------ ------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS .......... 2,630,199 3,741,202 1,967,002 9,268,086 15,956,407 10,227,262
----------- ----------- ------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS ........ 3,555,648 4,022,273 3,240,771 9,970,985 17,655,415 10,846,645
NET ASSETS:
Beginning of year ................... 5,282,164 1,259,891 13,652,170 3,681,185 15,609,315 4,762,670
----------- ----------- ------------ ------------ ------------ ------------
End of year + ....................... $ 8,837,812 $ 5,282,164 $ 16,892,941 $ 13,652,170 $ 33,264,730 $ 15,609,315
=========== =========== ============ ============ ============ ============
+Includes undistributed/
(overdistributed) net
investment income ................... $ 17,323 ($ 5,974) $ 44,740 ($ 5,906) $ 50,960 $ 12,383
=========== =========== ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
Page 18
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
The Tomorrow Long-Term Retirement Fund ("Long-Term Fund"), Tomorrow
Medium-Term Retirement Fund ("Medium-Term Fund") and Tomorrow Short-Term
Retirement Fund ("Short-Term Fund"), are separate funds of the Tomorrow Funds
Retirement Trust (the "Trust"). The Trust is a Delaware business trust
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end investment company. All of the funds are diversified. The
accompanying financial statements and notes relate to the Long-Term Fund,
Medium-Term Fund and Short-Term Fund (collectively the "Funds").
The Trust offers two classes of shares: Adviser Class Shares and
Institutional Class Shares. Adviser Shares and Institutional Shares are
substantially the same except that Adviser Shares bear the fees payable under a
plan adopted by the Trust's Board of Trustees pursuant to Rule 12b-1 under the
Act (the "Distribution Plan") at an annual rate of up to 0.50% of the average
daily net assets attributable to the Adviser Shares; Institutional Shares bear
the fees that are payable under a Service Plan (the "Service Plan") at an annual
rate of up to 0.25% of the average daily net assets attributable to the
Institutional Shares. In addition to fees paid pursuant to the Distribution Plan
and Service Plan, each class also bears the expense associated with transfer
agent fees.
Investment income, expenses (other than expenses incurred under the
Distribution Plan, the Service Plan and transfer agent fees and expenses), and
realized and unrealized gains and losses on investments of a Fund are allocated
to the separate classes of shares based upon their relative net asset value on
the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
The Funds first commenced offering Adviser Shares on March 7, 1996 and
Institutional Shares on April 2, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
PORTFOLIO VALUATION
- -------------------
COMMON STOCK - Securities listed or admitted to trading on a national
securities exchange, including options, are valued at the last sale price on
such exchange as of the close of regular trading on the New York Stock Exchange
("NYSE") on each day that the Funds calculate their net asset values. Unlisted
securities and listed securities for which there are no sales reported on the
valuation date are valued at the mean between the most recent bid and ask
prices.
BONDS - Bonds and other fixed income securities (other than short-term
obligations but including listed issues) in the Funds' portfolios are valued by
a pricing service which utilizes both dealer-supplied valuations and electronic
data processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices, exchange or
over-the-counter prices, when such valuations are believed to reflect the market
value of such securities.
Page 19
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MONEY MARKET SECURITIES - Investments in money market and other short-term (60
days or less) securities are valued at amortized cost, which has been determined
by the Trust's Board of Trustees to represent the fair value of such securities.
FOREIGN SECURITIES - Securities listed or admitted to trading on an
international securities exchange, including options, are valued at the last
sale price, at the close of the primary international exchange on the day that
the Fund's calculate their net asset values. Unlisted foreign securities and
listed foreign securities for which there are no sales reported on the valuation
date are valued at the mean between the most recent bid and asked prices.
FUTURES - A futures contract is an agreement between two parties to buy and
sell a security at a set price on a future date. Upon entering into such a
contract, a Fund is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contract, the Fund agrees to receive from, or pay to the broker,
an amount of cash equal to the daily fluctuation in value of the contract. Such
a receipt or payment is known as a "variation margin" and is recorded by each
Fund as an unrealized gain or loss. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed. The
Fund is also required to fully collateralize futures contracts purchased. The
Fund only enters into futures contracts which are traded on exchanges.
Certain risks result from investing in foreign securities in addition to the
usual risk inherent in domestic investments. Such risks include future
political, economical and currency exchange developments including restrictions
and changes in foreign law.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on a trade date basis. Realized gains and
losses from security transactions are recorded utilizing the specific
identification method. Interest income is recognized on an accrual basis and
dividend income is recognized on ex-dividend date. Discounts on fixed income
securities are accreted to interest income over the life of the security or
until an applicable call date if sooner, with a corresponding increase in cost
basis.
During the year ended December 31, 1998, none of the Funds in the Trust
entered into the following transactions: options, forward currency contracts or
foreign currency transactions.
FEDERAL INCOME TAXES
Each Funds' policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Accordingly, no
federal tax or excise tax provisions are required.
The federal income tax basis of investments approximates cost.
DISTRIBUTIONS TO SHAREHOLDERS
DIVIDENDS FROM NET INVESTMENT INCOME - Dividends from net investment income
are declared and paid annually when available and are recorded on the
ex-dividend date.
Page 20
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DISTRIBUTIONS FROM NET REALIZED GAINS - Distributions from net realized
gains are declared and paid by December 31 of the year in which they are earned.
However, to the extent that the net realized gains of a Fund can be offset by
capital loss carryovers of that Fund, such gains will not be distributed.
The amounts of dividends from net investment income and distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or net
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
USE OF ESTIMATES
Estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
3. ORGANIZATIONAL EXPENSES
Weiss, Peck & Greer, L.L.C. ("WPG"), the Funds' Investment Adviser, paid the
organizational expenses of the Funds approximating $141,000 ($47,000 each for
the Long-Term, Medium-Term and Short-Term Funds). The Funds will reimburse WPG
for these expenses which have been deferred and are being amortized by the Funds
on a straight line method over a period of five years from the commencement of
operations.
4. EXPENSES
The Trust accounts separately for the assets, liabilities and operations of
each Fund. Direct expenses of a Fund are charged to that Fund while general
Trust expenses are allocated among the Trust's respective Funds.
5. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust, with respect to each Fund, has entered into an Investment
Advisory Agreement with WPG which entitles WPG to receive a fee, which is
accrued daily and paid monthly, at an annual rate of 0.75% of each Funds'
average daily net assets. For the year ended December 31, 1998, WPG voluntarily
agreed not to impose its advisory fee applicable to the Long-Term Fund, and
waived $54,389 and $24,656 from the Medium-Term Fund and Short-Term Fund,
respectively.
Page 21
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WPG has agreed to voluntarily limit each Funds' total operating expenses,
(excluding taxes, brokerage commissions, interest, dividends paid on securities
sold short, service fees of Institutional Class Shares and extraordinary legal
fees and expenses) to 1.75% of the average daily net assets for the Adviser
Class Shares and 1.25% of the average daily net assets for the Institutional
class shares. WPG will reduce its advisory fee (but not below $0) when the total
operating expenses exceed these limits.
The Trust has entered into an Administration Agreement with WPG. For its
administrative services, WPG is entitled to receive a fee, which is accrued
daily and paid monthly, at an annual rate of 0.09% of each Funds' average daily
net assets. WPG voluntarily agreed to waive its administration services fee
applicable to the Funds for the year ended December 31, 1998.
The Trust with respect to the Adviser Class of each Fund has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Act. Under the Distribution
Plan, each Fund pays distribution and service fees at an aggregate annual rate
of up to 0.50% of the daily average net assets attributable to the Adviser Class
Shares. Up to 0.25% of this fee is for service fees and is intended to be
compensation for personnel services and/or account maintenance services. The
remaining amount is for distribution fees and is intended to compensate WPG for
its services and expenses associated with serving as principal underwriter of
the Adviser Class. These payments are borne solely by the Adviser Class Shares.
For the year ended December 31, 1998, payments pursuant to the Distribution Plan
from the Long-Term Fund, Medium-Term Fund and Short-Term Fund amounted to
$30,310, $67,738, and $79,212, respectively. Of these amounts, WPG earned
$13,649, $30,834 and $38,856, respectively.
The Trust with respect to the Institutional Class of each Fund has also
adopted a Service Plan (the "Institutional Service Plan") pursuant to which each
Fund has agreed to pay fiduciaries of retirement plans investing in the Funds a
fee for various services and/or account maintenance services relating to the
Institutional Class Shares. The Institutional Service Plan fee is accrued daily
and paid monthly at an annual rate of up to 0.25% of the average daily net asset
value attributable to the Institutional Class Shares of each Fund, and is borne
solely by the Institutional Class Shares.
6. SECURITIES TRANSACTIONS
Sale proceeds, cost of securities purchased, (other than short term
investments and options written), total commissions and commissions received by
WPG on such transactions for the year ended December 31, 1998 were as follows:
PROCEEDS COST OF COMMISSIONS
OF SECURITIES SECURITIES TOTAL RECEIVED
SOLD PURCHASED COMMISSIONS BY WPG
---- --------- ----------- ------
Long-Term Fund .......... $4,043,764 $6,646,695 $5,305 $5,099
Medium-Term Fund ........ 23,170,254 24,750,604 7,031 6,944
Short-Term Fund ......... 66,752,646 81,759,332 13,180 13,065
Page 22
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. CUSTODIAN FEES
Each Fund has entered into an expense offset arrangement with its
custodian wherein it receives credit toward the reduction of custodian fees
whenever there are uninvested cash balances. The Funds' custodian fee and
related offset for the year ended December 31, 1998 were as follows:
CUSTODIAN FEE OFFSET CREDIT
------------- -------------
Long-term Fund $9,669 $8,083
Medium-Term Fund 9,014 5,878
Short-Term Fund 13,438 5,573
The Funds could have invested its cash balances elsewhere if it had not
agreed to a reduction in fees under the expense offset agreement with its
custodian.
8. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the years ended December 31, 1998
and 1997 are summarized below:
LONG-TERM FUND
<TABLE>
<CAPTION>
1998 1997
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
ADVISER CLASS SHARES
Sold ..................... 499,807 $ 4,212,181 517,001 $ 4,000,125
Reinvested from dividends
and distributions ........ 10,519 93,202 41,845 333,924
Redeemed ................. (250,398) (2,085,866) (173,325) (1,350,497)
-------- ----------- -------- -----------
Net increase ............. 259,928 $ 2,219,517 385,521 $ 2,983,552
-------- ----------- -------- -----------
INSTITUTIONAL CLASS SHARES
Sold ..................... 110,457 $ 938,755 130,869 $ 1,046,630
Reinvested from dividends
and distributions ........ 2,795 25,126 11,350 91,478
Redeemed ................. (65,357) (553,199) (47,406) (380,458)
-------- ----------- -------- -----------
Net increase ............. 47,895 $ 410,682 94,813 $ 757,650
-------- ----------- -------- -----------
Net increase in Fund ..... 307,823 $ 2,630,199 480,334 $ 3,741,202
-------- ----------- -------- -----------
</TABLE>
Page 23
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MEDIUM-TERM FUND
1998 1997
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Adviser Class Shares
Sold ..................... 487,640 $ 4,563,226 1,067,650 $ 9,105,586
Reinvested from dividends
and distributions ........ 84,863 806,203 105,144 930,526
Redeemed ................. (415,935) (3,903,770) (242,410) (2,140,638)
-------- ----------- ---------- -----------
Net increase ............. 156,568 $ 1,465,659 930,384 $ 7,895,474
-------- ----------- ---------- -----------
Institutional Class Shares
Sold ..................... 121,042 $ 1,162,058 184,045 $ 1,591,873
Reinvested from dividends
and distributions ........ 14,692 135,897 15,624 134,677
Redeemed ................. (87,303) (796,612) (40,414) (353,938)
-------- ----------- ---------- -----------
Net increase ............. 48,431 $ 501,343 159,255 $ 1,372,612
-------- ----------- ---------- -----------
Net increase in Fund ..... 204,999 $ 1,967,002 1,089,639 $ 9,268,086
-------- ----------- ---------- -----------
</TABLE>
SHORT-TERM FUND
<TABLE>
<CAPTION>
1998 1997
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Adviser Class Shares
Sold ..................... 823,411 $ 8,407,160 1,186,636 $ 11,350,629
Reinvested from dividends
and distributions ........ 71,806 745,348 139,097 1,358,976
Redeemed ................. (668,780) (6,895,655) (402,581) (4,019,735)
---------- ------------ ---------- ------------
Net increase ............. 226,437 $ 2,256,853 923,152 $ 8,689,870
---------- ------------ ---------- ------------
Institutional Class Shares
Sold ..................... 1,607,353 $ 16,450,598 167,729 $ 1,691,679
Reinvested from dividends
and distributions ........ 72,869 760,024 18,598 182,445
Redeemed ................. (337,168) (3,511,068) (33,676) (336,732)
---------- ------------ ---------- ------------
Net increase ............. 1,343,054 $ 13,699,554 152,651 $ 1,537,392
---------- ------------ ---------- ------------
Net increase in Fund ..... 1,569,491 $ 15,956,407 1,075,803 $ 10,227,262
---------- ------------ ---------- ------------
</TABLE>
Page 24
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with the adoption of Statement of Position 93-2
"Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies",
reclassifications were made to the Funds' capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change. At December 31, 1998, the amounts reclassified
were as follows:
UNDISTRIBUTED UNDISTRIBUTED ADDITIONAL
NET INVESTMET NET REALIZED PAID-IN
INCOME GAINS SURPLUS
------ ----- -------
Long-Term Fund ......... ($40) $29 $11
Medium-Term Fund ....... (21) 21 0
Short-Term Fund ........ (823) 920 (97)
10. FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
Long-term capital gain distributions paid to shareholders by the Funds
during the year ended December 31, 1998, whether taken in shares or cash were as
follows: Long-Term Fund $47,808, Medium-Term Fund $475,857 and Short-Term Fund
$301,439.
Page 25
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
$ PER SHARE
NET
NET REALIZED TOTAL DIVIDENDS DISTR-
ASSET AND INCOME FROM BUTIONS
VALUE AT NET UNREAL- FROM NET FROM NET TOTAL
BEGINNING INVEST- IZED INVEST- INVEST- REALIZED DISTR-
OF PERIOD MENT GAINS MENT MENT GAINS BUTIONS
INCOME ON OPERA- INCOME
SECUR- TIONS
ITIES
- -------------------------------------------------------------------------------------------------
LONG-TERM RETIREMENT
ADVISER SHARES
For the period March 7, 1996*
<S> <C> <C> <C> <C> <C> <C> <C>
through December 31, 1996 $ 6.50$ 0.04$ 0.55$ 0.59 ($ 0.06)($ 0.05)($ 0.11)
For the year ended
December 31, 1997 6.98 0.09 1.62 1.71 (0.08) (0.63) (0.71)
For the year ended
December 31, 1998 7.98 0.10 1.14 1.24 (0.07) (0.05) (0.12)
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)
For the year ended
December 31, 1997 7.05 0.06 1.69 1.75 (0.10) (0.63) (0.73)
For the year ended
December 31, 1998 8.07 0.13 1.17 1.30 (0.09) (0.05) (0.14)
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)
For the year ended
December 31, 1997 8.07 0.13 1.40 1.53 (0.13) (0.62) (0.75)
For the year ended
December 31, 1998 8.85 0.18 1.22 1.40 (0.15) (0.42) (0.57)
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)
For the year ended
December 31, 1997 7.86 0.24 1.29 1.53 (0.15) (0.61) (0.76)
For the year ended
December 31, 1998 8.63 0.22 1.18 1.40 (0.18) (0.42) (0.60)
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)
For the year ended
December 31, 1997 9.16 0.22 1.47 1.69 (0.20) (0.87) (1.07)
For the year ended
December 31, 1998 9.78 0.30 0.89 1.19 (0.26) (0.22) (0.48)
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
For the year ended
December 31, 1997 9.21 0.17 1.55 1.72 (0.24) (0.87) (1.11)
For the year ended
December 31, 1998 9.82 0.34 0.90 1.24 (0.30) (0.22) (0.52)
RATIOS
RATIO INFORMATION
ASSUMING NO FEE WAIVERS,
REIMBURSEMENTS OR
RATIO OF CUSTODY FEE
NET EARNINGS CREDIT RECEIVED
NET NET RATIO OF INVESTMENT RATIO OR
ASSET ASSETS EXPENSES INCOME TO RATIO OF NET INVEST-
VALUE AT END OF TO AVERAGE AVERAGE PORTFOLIO EXPENSES MENT INCOME
END OF TOTAL PERIOD NET NET TURNOVER TO AVERAGE TO AVERAGE
PERIOD RETURN (000'S) ASSETS ASSETS RATE NET ASSETS NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
LONG-TERM RETIREMENT
ADVISER SHARES
For the period March 7, 1996*
through December 31, 1996 $ 6.98 9.08% 978 1.75%+ 1.63%+ 25.09% 45.36%+ -41.98%+
For the year ended
December 31, 1997 7.98 24.50 4,194 1.75 1.30 66.64 5.61 -2.56
For the year ended
December 31, 1998 9.10 15.58 7,150 1.75 1.17 60.96 3.25 -0.33
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 7.05 9.03 282 1.50+ 1.97+ 25.09 40.49+ -37.02+
For the year ended
December 31, 1997 8.07 24.84 1,088 1.45 1.67 66.64 7.52 -4.40
For the year ended
December 31, 1998 9.23 16.16 1,687 1.27 1.64 60.96 4.09 -1.18
MEDIUM-TERM RETIREMENT
ADVISER SHARES
For the period March 7, 1996*
through December 31, 1996 8.07 8.89 3,416 1.75+ 1.73+ 22.56 15.88+ -12.40+
For the year ended
December 31, 1997 8.85 18.96 11,987 1.75 1.80 90.67 2.92 0.63
For the year ended
December 31, 1998 9.68 15.94 14,617 1.75 1.89 155.74 2.23 1.41
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 7.86 8.54 265 1.50+ 1.96+ 22.56 20.86+ -17.40+
For the year ended
December 31, 1997 8.63 19.48 1,165 1.39 2.33 90.67 4.41 -0.69
For the year ended
December 31, 1998 9.43 16.36 2,276 1.28 2.38 155.74 2.79 0.87
SHORT-TERM RETIREMENT
ADVISER SHARES
For the period March 7, 1996*
through December 31, 1996 9.16 8.54 4,459 1.75+ 2.08+ 14.16 15.68+ -11.85+
For the year ended
December 31, 1997 9.78 18.46 13,786 1.75 2.41 145.44 2.65 1.51
For the year ended
December 31, 1998 10.49 12.22 17,157 1.75 3.00 263.77 1.96 2.79
Institutional Shares
For the period March 7, 1996*
through December 31, 1996 9.21 8.23 304 1.50+ 2.31+ 14.16 19.10+ -15.29+
For the year ended
December 31, 1997 9.82 18.69 1,823 1.44 2.87 145.44 4.01 0.30
For the year ended
December 31, 1998 10.54 12.68 16,108 1.45 3.31 263.77 1.64 3.12
<FN>
+ Annualized
* Commencement of operations.
</FN>
</TABLE>
Page 26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of:
TOMORROW LONG-TERM RETIREMENT FUND
TOMORROW MEDIUM-TERM RETIREMENT FUND
TOMORROW SHORT-TERM RETIREMENT FUND
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of Tomorrow Long-Term Retirement Fund, Tomorrow
Medium-Term Retirement Fund and Tomorrow Short-Term Retirement Fund as of
December 31, 1998, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
two-year period then ended and the period from March 7, 1996 (commencement of
operations) to December 31, 1996. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and the performance of
other appropriate audit procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement Fund and
Tomorrow Short-Term Retirement Fund as of December 31, 1998, the results of
their operations for the year then ended and the changes in their net assets for
each of the years in the two-year period then ended and financial highlights for
each of the years in the two-year period then ended and the period from March 7,
1996 to December 31, 1996 , in conformity with generally accepted accounting
principles.
KPMG LLP
New York, New York
January 19, 1999
Page 27
<PAGE>
TOMORROW FUNDS
RETIREMENT TRUST
A Lifecycle Retirement Program
-------------------------------------------
ONE NEW YORK PLAZA, NEW YORK, NY 10004
(800) 223-3332
INDEPENDENT TRUSTEES AND MEMBERS INVESTMENT ADVISER
OF AUDIT COMMITTEE Weiss, Peck & Greer, L.L.C.
Raymond R. Herrmann, Jr. One New York Plaza
Lawrence J. Israel New York, NY 10004
Graham E. Jones
CUSTODIAN
Boston Safe Deposit and Trust Company
OFFICERS One Exchange Place
Boston, MA 02109
ROGER J. WEISS
Chairman of the Board, DIVIDEND DISBURSING AND
President and Trustee TRANSFER AGENT
First Data Investor Services Group, Inc.
JAY C. NADEL P.O. Box 60448
Executive Vice President King of Prussia, PA 19406-0448
and Secretary
LEGAL COUNSEL
FRANCIS H. POWERS Hale and Dorr
Executive Vice President 60 State Street
and Treasurer Boston, MA 02109
DANIEL CARDELL
Vice President INDEPENDENT AUDITORS
KPMG LLP
JOSEPH J. REARDON 345 Park Avenue
Vice President New York, NY 10154
DANIEL S. VANDIVORT
Vice President
INVESTMENT ADVISER
Weiss, Peck & Greer, L.L.C.
One New York Plaza
New York, NY 10004
CUSTODIAN
Boston Safe Deposit and Trust Company
One Exchange Place
Boston, MA 02109
DIVIDEND DISBURSING AND
TRANSFER AGENT
First Data Investor Services Group, Inc.
P.O. Box 60448
King of Prussia, PA 19406-0448
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, MA 02109
INDEPENDENT AUDITORS
KPMG LLP
345 Park Avenue
New York, NY 10154
This report is submitted for the general information of shareholders and is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus. Nothing herein is to be considered an
offer of sale or solicitation of an offer to buy shares of the Tomorrow Funds
Retirement Trust. Such offering is made only by prospectus, which includes
details as to offering and other material information.
