As filed with the Securities and Exchange Commission on April 28, 2000.
File No. 33-60841
File No. 811-07315
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. ___ / /
Post-Effective Amendment No. 7 /X/
/X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9 /X/
TOMORROW FUNDS RETIREMENT TRUST
----------------------------------
(Exact name of Registrant as Specified in Charter)
ONE NEW YORK PLAZA, NEW YORK, NEW
YORK 10004 (Address of Principal
Executive Offices) (Zip Code)
Registrant's Telephone Number: 800-223-3332
------------
RONALD M. HOFFNER, WEISS, PECK & GREER, L.L.C.
ONE NEW YORK PLAZA, NEW YORK, NEW YORK 10004
--------------------------------------------
(Name and Address of Agent for Service)
Copies to:
Ernest V. Klein, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 2000 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on ___________ pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on ___________ pursuant to paragraph (a)(2) of Rule 485
<PAGE>
Tomorrow Funds
R E T I R E M E N T T R U S T
A Lifecycle Retirement Program
Prospectus
May 1, 2000
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
Adviser Class
and
Institutional Class Shares
One New York Plaza
New York, New York 10004
800-223-3332
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
CONTENTS
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Page
Risk/Return Summary ....................................................... 1
Investment Goals...................... ............................ 1
Tomorrow Long-Term Retirement Fund ................................ 5
Tomorrow Medium-Term Retirement Fund .............................. 6
Tomorrow Short-Term Retirement Fund ............................... 7
More About the Funds' Investments and Risks ............................... 8
Management of the Funds ................................................... 10
Eligible Investors ........................................................ 11
Variable Contract Holders ......................................... 11
Qualified Plans ................................................... 11
How to Buy, Exchange and Redeem Shares .................................... 11
How to Buy Shares for Qualified Plans ............................. 12
How to Exchange Shares for Qualified Plans ........................ 15
How to Redeem Shares for Qualified Plans .......................... 17
Share Price ............................................................... 19
Dividends, Distributions and Taxes ........................................ 19
Delivery of Prospectus and Shareholder Reports ............................ 19
Financial Highlights ...................................................... 20
For More Information .................................................Back Cover
ABOUT THE INVESTMENT ADVISER
Weiss, Peck & Greer, L.L.C. serves as the investment adviser to each of the
funds. WPG is headquartered in New York and is a subsidiary of Robeco Groep
N.V., a Dutch public limited liability company founded in 1929. As of the date
of this prospectus, Robeco had approximately $110 billion in assets under
management, including $18 billion managed directly by WPG. WPG, which has over
30 years experience as an investment adviser to institutional and individual
clients, is a member firm of the New York Stock Exchange.
WHO MAY INVEST
Shares of the funds may be purchased only by "qualified" pension or retirement
plans (including trustees of such plans for certain individuals funding their
individual retirement accounts or other qualified plans) and by insurance
company separate accounts to provide investment vehicles for variable annuity
and variable life insurance contracts. See "Eligible Investors" for further
information.
A WORD ABOUT RISK
An investment in the funds is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency.
<PAGE>
RISK/RETURN SUMMARY
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INVESTMENT GOALS
The funds seek to provide you, as a holder of a variable contract or a
participant in a qualified retirement plan, with an asset allocation strategy
designed to address your retirement funding needs. There are three Tomorrow
Funds, each of which is targeted for investors of different ages.
Each fund seeks to maximize total return while also increasingly emphasizing
current income and capital preservation as the average age of the target class
of investors in that particular fund increases.
LONG-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 23 and 36 years of age and with an average remaining life
expectancy of 49 years or more.
MEDIUM-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 37 and 51 years of age and with an average remaining life
expectancy in the range of 34-48 years.
SHORT-TERM FUND seeks to satisfy the retirement goals of investors who are
currently between 52 and 66 years of age and with an average remaining life
expectancy in the range of 19-33 years.
You are encouraged to select a fund based on your current age and the length of
the period during which you expect to maintain your investment. You may select
more than one fund in order to achieve a personalized investment program.
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PRINCIPAL INVESTMENTS
Each fund allocates its assets between equity and fixed-income securities.
Depending upon the funds' strategic asset allocations, each fund's assets
allocated to equity securities may further be divided among large, medium and
small capitalization stocks and foreign securities.
THE PERCENTAGE OF EACH FUND'S ASSETS ALLOCATED TO EQUITY AND FIXED-INCOME
SECURITIES AND TO LARGE, MEDIUM AND SMALL CAPITALIZATION STOCKS AND FOREIGN
SECURITIES DIFFERS. ACCORDINGLY, EACH FUND WILL NOT OWN THE SAME DOLLAR AMOUNT
OF ANY SECURITY. TO THE EXTENT THAT A FUND ALLOCATES ASSETS TO THE DIFFERENT
CATEGORIES OF INVESTMENTS, THE PERCENTAGE THAT A PARTICULAR SECURITY REPRESENTS
WITHIN A CATEGORY WILL REMAIN SUBSTANTIALLY THE SAME (UNLESS IT IS IMPRACTICAL
TO SO ALLOCATE).
Each fund adjusts its allocation between equity and fixed-income securities, and
further adjusts its allocation of large, medium and small capitalization stocks
and foreign securities, to reflect a level of risk that the adviser considers
appropriate for investors in that fund's target class, in general, given their
investment time horizon.
EQUITY SECURITIES include common stocks of large, medium and small
capitalization companies and may also include equity securities of foreign
companies.
FIXED-INCOME SECURITIES include bonds, notes, mortgage-backed and asset-based
securities, convertible securities, preferred stock, municipal securities, and
short-term debt securities. These fixed income securities are denominated in
U.S. dollars and may be issued by U.S. and foreign companies or governmental
entities.
CREDIT QUALITY. Exclusively investment grade. This means that the fixed income
securities are rated in one of the top four long-term rating categories by at
least one major rating agency or are of comparable credit quality.
MATURITY/DURATION. There is no limit on the average dollar-weighted maturity or
duration of a fund's portfolio of fixed income securities. Currently, the
adviser expects that the average duration (which will be substantially the same
for each fund) will be in the intermediate range.
-1-
<PAGE>
RISK/RETURN SUMMARY (continued)
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HOW THE ADVISER ALLOCATES ASSETS WITHIN THE FUNDS
As the average age of the target class of investors in a fund increases over
time, the adviser adjusts the fund's asset mix allocated between equity and
fixed-income securities, and further allocated among large, medium and small
capitalization stocks and foreign securities, to reflect a level of risk that
the adviser considers appropriate for investors in that target age class, in
general, given their investment time horizon.
- -- The longer the average life expectancy of the target class of investors in
a fund, the greater the allocation of assets of that fund to securities
with higher growth potential and, correspondingly, more risk, such as small
capitalization stocks.
- -- The shorter the average life expectancy of the target class of investors in
a fund, the greater the emphasis on current income and capital preservation
of assets and, therefore, the greater the allocation of assets of that fund
to fixed-income securities.
Each fund will be managed more conservatively as the average age of its target
class of investors increases. For example, assuming that current market
conditions remain the same, at a point fifteen years from now, the strategic
asset composition of the Long-Term Fund could be expected to look like the
current strategic asset composition of the Medium-Term Fund.
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CURRENT STRATEGIC ASSET ALLOCATION
A fund's strategic asset allocation mix represents the way that the fund's
investments will generally be allocated in the near-term. The adviser reviews
strategic asset allocations at least semiannually and adjusts the asset
allocations, if necessary, at that time. Currently, the adviser anticipates the
strategic asset allocation mix within each fund's portfolio to be approximately
as follows:
[THE OMITTED PIE CHARTS SHOW THE FOLLOWING:]
<TABLE>
<CAPTION>
LONG-TERM FUND MEDIUM-TERM FUND SHORT-TERM FUND
-------------- ---------------- ---------------
<S> <C> <C> <C>
Large Capitalization 42.0% 40.0% 35.0%
Medium Capitalization 14.0% 10.0%
Small Capitalization 14.0% 5.0%
Fixed Income 25.0% 40.0% 65.0%
Foreign 5.0% 5.0%
</TABLE>
A fund's actual asset allocation will vary from that shown above depending
primarily on the relative performance of the securities in the fund's portfolio
since the last rebalancing of the fund's portfolio and on the adviser's
evaluation of anticipated relative returns and risks among securities in the
near-term future.
-2-
<PAGE>
RISK/RETURN SUMMARY (continued)
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HOW THE ADVISER SELECTS EQUITY SECURITIES
With respect to the assets of each fund allocated to large, medium and small
capitalization stocks, the adviser uses quantitative methods to seek investment
results that exceed the performance of an appropriate benchmark. The benchmarks
are:
CATEGORY BENCHMARK
- -------- ---------
Large Cap S&P 500 Index
Medium Cap S&P 400 MidCap Index
Small Cap Russell 2000 Index
Using a proprietary multi-factor model for each category, the adviser:
- -- Identifies stocks with rising earnings expectations that the adviser
believes will outperform their peers.
- -- Identifies stocks from among this group that are selling at low relative
prices in light of their earnings expectations.
- -- Assesses the level of risk associated with each stock, and identifies
stocks with the maximum expected return at each acceptable level of risk.
Based on this information, the adviser selects the combination of stocks,
together with their appropriate weightings, that it believes will optimize each
fund's risk/return ratio for each category. The adviser seeks to maintain the
market capitalization, sector allocations and style characteristics of the
funds' assets allocated to a particular category similar to those of its
benchmark.
The funds' portfolios are rebalanced regularly to maintain the optimal
risk/return trade-off. The adviser assesses each stock's changing
characteristics relative to its contribution to portfolio risk for each
category. A stock is sold when it no longer offers an appropriate return-to-risk
tradeoff.
- --------------------------------------------------------------------------------
HOW THE ADVISER SELECTS FOREIGN SECURITIES
The adviser invests a fund's assets allocated to foreign securities in shares of
other mutual funds or closed-end funds. These other funds invest their assets
primarily in equity securities of foreign companies. The adviser selects these
other funds whose portfolios, when aggregated, resemble the composition of the
funds' benchmark for foreign securities, the Morgan Stanley Europe, Australia,
Far East Index (EAFE Index).
- --------------------------------------------------------------------------------
HOW THE ADVISER SELECTS FIXED INCOME SECURITIES
There are three principal factors in the adviser's selection process for fixed
income securities: maturity allocation, sector allocation and individual
security selection.
- -- The adviser studies the relationship between bond yields and maturities
under current market conditions and identifies maturities with high yields
relative to the amount of risk involved.
- -- The adviser uses qualitative and quantitative methods to identify bond
sectors that it believes are undervalued or will outperform other sectors.
Sectors include corporate securities, U.S. Treasury securities, U.S.
government agency securities, and mortgage-backed and asset-backed
securities.
- -- After the funds' maturity and sector allocations are made, the adviser
selects individual bonds within each sector. The adviser performs both
fundamental and quantitative analysis, looking at:
-- Stable or improving issuer credit quality
-- Market inefficiencies that cause individual bonds to have high
relative values
-- Structural features of securities, such as callability, liquidity, and
prepayment characteristics and expectations.
The funds' benchmark for fixed income securities is the Lehman Brothers
Aggregate Index.
-3-
<PAGE>
RISK/RETURN SUMMARY (continued)
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PRINCIPAL RISKS OF INVESTING IN THE FUNDS
Before investing in a fund, you should consider your personal tolerance for risk
recognizing that each fund is designed and managed to satisfy the retirement
goals of investors in a target age group with a corresponding average life
expectancy who anticipate retiring at approximately age 65. You should also
recognize that the strategic asset allocation of each fund and the particular
securities in which each fund invests are determined based upon the average age
of the particular fund's target class of investors. Because the funds are
managed to satisfy retirement goals based upon average life expectancy, the
funds may invest their assets in higher risk/higher return securities than
mutual funds designed for investors based solely on retirement dates.
Each fund is managed with the goal of achieving a different risk/return ratio,
with the Long-Term Fund seeking the highest risk/return ratio and the Short-Term
Fund seeking the lowest risk/return ratio among the funds. Each fund will be
managed to achieve an increasingly conservative risk/return ratio as the average
age of the target class of investors in that particular fund increases. The
risks associated with an investment in the funds vary depending on the amount of
a fund's assets allocated between fixed income and equity securities and among
large cap, medium cap and small cap securities and foreign securities.
You could lose money in a fund or a fund's performance could underperform other
possible investments if any of the following occurs:
EQUITY SECURITIES (INCLUDING LARGE, MEDIUM AND SMALL CAP SECURITIES):
-- The U.S. stock market goes down.
-- Stocks of large cap, medium cap or small cap companies temporarily
fall out of favor with investors.
-- Companies in which a fund invests suffer unexpected losses or lower
than expected earnings.
-- The adviser's judgment about the attractiveness, value or potential
appreciation of a particular company's common stock proves to be
wrong.
-- The factors considered by the multi-factor model fail to select stocks
with better relative performance than those included in the
benchmarks.
FOREIGN SECURITIES:
-- Foreign stock markets go down, or perform poorly relative to the U.S.
stock market.
-- Foreign stocks temporarily fall out of favor with investors.
-- The judgments about the attractiveness, value or potential
appreciation of a particular foreign company's stock or foreign market
prove to be wrong.
FIXED INCOME SECURITIES:
-- Interest rates rise, causing the bonds in a fund's portfolio to drop
in value.
-- The issuer or guarantor of a bond owned by a fund defaults on its
payment obligations, becomes insolvent or has its credit rating
downgraded.
-- As a result of declining interest rates, the issuer of a bond
exercises the right to prepay principal earlier than scheduled,
forcing a fund to reinvest in lower yielding bonds. This is known as
call or prepayment risk.
-- When interest rates are rising, the average life of a bond is
generally extended because of slower than expected principal payments.
This will lock in a below-market interest rate, increase the bond's
duration and reduce the value of the bond. This is known as extension
risk.
-- The adviser's judgments about the attractiveness, relative value or
potential income of particular fixed income sectors or bonds prove to
be wrong.
ASSET ALLOCATION:
-- The adviser's judgments about the relative attractiveness or potential
appreciation or yield between fixed income securities and equity
securities or among large cap, medium cap and small cap securities and
foreign securities prove to be wrong.
-4-
<PAGE>
RISK/RETURN SUMMARY TOMORROW LONG-TERM RETIREMENT FUND
- --------------------------------------------------------------------------------
THE LONG-TERM FUND'S PERFORMANCE
The bar chart and table shown below indicate the risks of investing in the
Long-Term Fund. Performance calculations in the bar chart and table do not
reflect separate account fees, which would reduce the fund's performance. The
bar chart shows changes in the performance of the Long Term fund's Adviser Class
shares from year to year over the life of the fund. Institutional Class shares
would have different performance due to their different expenses.
[GRAPH OMITTED:
BAR CHART SHOWING CHANGES IN THE PERFORMANCE OF THE FUND FROM YEAR TO YEAR]
LONG-TERM FUND
TOTAL RETURN
CALENDAR YEARS ENDED DECEMBER 31
1997 24.50%
1998 15.58%
1999 9.53%
The table shows the fund's average annual returns for different calendar periods
and since inception on April 2, 1996, for Institutional Class shares and on
March 7, 1996 for Adviser Class shares compared to those of the fund's
benchmark.
The benchmark is a compilation of five broad-based indices, one for each class
of securities in which the fund invests: the S&P 500 Index for large cap
securities; the S&P 400 MidCap Index for medium cap securities; the Russell 2000
Index for small cap securities; the EAFE Index for foreign securities; and the
Lehman Brothers Aggregate Index for fixed income securities. The benchmark is
composed of these indices in the same proportions as the fund's strategic asset
allocation, described on page 3 of this prospectus. The different indices are
unmanaged and are generally considered representative of the classes of
securities in which the fund invests.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999
SINCE
1 YEAR INCEPTION
------ ---------
Adviser Class 9.53% 15.24%
Institutional Class 10.07% 15.93%
Benchmark 15.74% 18.35%
FUND'S BEST AND WORST QUARTERLY TOTAL RETURNS
Best: 15.16% in the 3rd quarter of 1998
Worst: -7.39% in the 4th quarter of 1998
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT) NONE
ANNUAL FUND OPERATING EXPENSES
(PAID BY THE FUND AS A % OF NET ASSETS) ADVISER INSTITUTIONAL
CLASS CLASS
----- -----
Management fees 0.75% 0.75%
12b-1 distribution fees 0.50% None
Other expenses(1) 1.64% 2.71%
---- ----
Total annual operating expenses 2.89% 3.46%
Fee Waiver(2) (1.08%) (2.10%)
---- ----
Net annual operating expenses 1.81% 1.36%
==== ====
- -----------------
(1) Because custodian fees were reduced by credits for cash balances, the fund's
actual expenses for fiscal 1999 were:
Other expenses 1.58% 2.65%
Total annual operating expenses 2.83% 3.40%
Net annual operating expenses 1.75% 1.29%
(2) The adviser has agreed to cap the fund's operating expenses. The adviser may
not discontinue or modify this cap without the approval of the fund's
trustees.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.
NUMBER OF YEARS YOU
OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------ ------- ------- --------
Adviser Class $179 $556 $956 $2,076
Institutional Class $132 $411 $712 $1,564
The example assumes:
-- You invest $10,000 for the periods shown
-- You redeem at the end of each period
-- You reinvest all distributions and dividends without a sales charge
-- The fund's operating expenses have been capped by the adviser and
remain the same
-- Your investment has a 5% return each year
-5-
<PAGE>
RISK/RETURN SUMMARY TOMORROW MEDIUM-TERM RETIREMENT FUND
- --------------------------------------------------------------------------------
THE MEDIUM-TERM FUND'S PERFORMANCE
The bar chart and table shown below indicate the risks of investing in the
Medium-Term Fund. Performance calculations in the bar chart and table do not
reflect separate account fees, which would reduce the fund's performance. The
bar chart shows changes in the performance of the fund's Adviser Class shares
from year to year over the life of the fund. Institutional Class shares would
have different performance due to their different expenses.
[GRAPH OMITTED:
BAR CHART SHOWING CHANGES IN THE PERFORMANCE OF THE FUND FROM YEAR TO YEAR]
MEDIUM-TERM FUND
TOTAL RETURN
CALENDAR YEARS ENDED DECEMBER 31
1997 18.96%
1998 15.94%
1999 4.32%
The table shows the fund's average annual returns for different calendar periods
and since inception on April 2, 1996 for Institutional Class shares and on March
7, 1996 for Adviser Class shares compared to those of the fund's benchmark.
The benchmark is a compilation of five broad-based indices, one for each class
of securities in which the fund invests: the S&P 500 Index for large cap
securities; the S&P 400 MidCap Index for medium cap securities; the Russell 2000
Index for small cap securities; the EAFE Index for foreign securities; and the
Lehman Brothers Aggregate Index for fixed income securities. The benchmark is
composed of these indices in the same proportions as the fund's strategic asset
allocation, described on page 3 of this prospectus. The different indices are
unmanaged and are generally considered representative of the classes of
securities in which the fund invests.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
SINCE
1 YEAR INCEPTION
------ ---------
Adviser Class 4.32% 12.47%
Institutional Class 4.77% 13.00%
Benchmark 11.19% 16.65%
FUND'S BEST AND WORST QUARTERLY TOTAL RETURNS
Best: 11.70% in the 4th quarter of 1998
Worst: -4.66% in the 3rd quarter of 1998
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT) NONE
ANNUAL FUND OPERATING EXPENSES
(PAID BY THE FUND AS A % OF NET ASSETS) ADVISER INSTITUTIONAL
CLASS CLASS
----- -----
Management fees 0.75% 0.75%
12b-1 distribution fees 0.50% None
Other expenses(1) 0.96% 1.79%
---- ----
Total annual operating expenses 2.21% 2.54%
Fee Waiver(2) (0.43%) (1.20%)
---- ----
Net annual operating expenses 1.78% 1.34%
==== ====
- -----------------
(1) Because custodian fees were reduced by credits for cash balances, the
fund's actual expenses for fiscal 1999 were:
Other expenses 0.93% 1.76%
Total annual operating expenses 2.18% 2.51%
Net annual operating expenses 1.75% 1.31%
(2) The adviser has agreed to cap the fund's operating expenses. The adviser
may not discontinue or modify this cap without the approval of the fund's
trustees.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.
NUMBER OF YEARS YOU
OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------ ------- ------- --------
Adviser Class $179 $556 $956 $2,076
Institutional Class $134 $418 $722 $1,587
The example assumes:
-- You invest $10,000 for the periods shown
-- You redeem at the end of each period
-- You reinvest all distributions and dividends without a sales charge
-- The fund's operating expenses have been capped by the adviser and
remain the same
-- Your investment has a 5% return each year
-6-
<PAGE>
RISK/RETURN SUMMARY TOMORROW SHORT-TERM RETIREMENT FUND
- --------------------------------------------------------------------------------
THE SHORT-TERM FUND'S PERFORMANCE
The bar chart and table shown below indicate the risks of investing in the
Short-Term Fund. Performance calculations in the bar chart and table do not
reflect separate account fees, which would reduce the fund's performance. The
bar chart shows changes in the performance of the fund's Adviser Class shares
from year to year over the life of the fund. Institutional Class shares would
have different performance due to their different expenses.
[GRAPH OMITTED:
BAR CHART SHOWING CHANGES IN THE PERFORMANCE OF THE FUND FROM YEAR TO YEAR]
SHORT-TERM FUND
TOTAL RETURN
CALENDAR YEARS ENDED DECEMBER 31
1997 18.46%
1998 12.22%
1999 2.12
The table shows the fund's average annual returns for different calendar periods
and since inception on April 2, 1996 for Institutional Class shares and on March
7, 1996 for Adviser Class shares compared to those of the fund's benchmark.
The benchmark is a compilation of two broad-based indices, one for each class of
securities in which the fund invests: the Lehman Brothers Aggregate Index for
fixed income securities; and the S&P 500 Index for large cap securities. The
benchmark is composed of these indices in the same proportions as the fund's
strategic asset allocation, described on page 3 of this prospectus. The
different indices are unmanaged and are generally considered representative of
the classes of securities in which the fund invests.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
SINCE
1 YEAR INCEPTION
------ ---------
Adviser Class 2.12% 10.68%
Institutional Class 2.40% 11.07%
Benchmark 5.62% 14.46%
FUND'S BEST AND WORST QUARTERLY TOTAL RETURNS
Best: 9.97% in the 2nd quarter of 1997
Worst: -1.88% in the 3rd quarter of 1999
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT) NONE
ANNUAL FUND OPERATING EXPENSES
(PAID BY THE FUND AS A % OF NET ASSETS) ADVISER INSTITUTIONAL
CLASS CLASS
----- -----
Management fees 0.75% 0.75%
12b-1 distribution fees 0.50% None
Other expenses(1) 0.67% 0.87%
---- ----
Total annual operating expenses 1.92% 1.62%
Fee Waiver(2) (0.15%) (0.14%)
---- ----
Net annual operating expenses 1.77% 1.48%
==== ====
- -----------------
(1) Because custodian fees were reduced by credits for cash balances, the
fund's actual expenses for fiscal 1999 were:
Other expenses 0.65% 0.85%
Total annual operating expenses 1.90% 1.60%
Net annual operating expenses 1.75% 1.46%
(2) The adviser has agreed to cap the fund's operating expenses. The adviser
may not discontinue or modify this cap without the approval of the fund's
trustees.
EXAMPLE. This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.
NUMBER OF YEARS YOU
OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------ ------- ------- --------
Adviser Class $179 $556 $956 $2,076
Institutional Class $150 $465 $803 $1,756
The example assumes:
-- You invest $10,000 for the periods shown
-- You redeem at the end of each period
-- You reinvest all distributions and dividends without a sales charge
-- The fund's operating expenses have been capped by the adviser and
remain the same
-- Your investment has a 5% return each year
-7-
<PAGE>
MORE ABOUT THE FUNDS' INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
The Risk/Return Summary describes each fund's investment objective and its
principal investment strategies and risks. This section provides some additional
information about the funds' investments and certain portfolio management
techniques that the funds may use. More information about the funds' investments
and portfolio management techniques, some of which entail risks, is included in
the Statement of Additional Information (SAI).
EQUITY INVESTMENTS
The funds may invest in all types of equity securities. Equity securities
include exchange-traded and over- the-counter common and preferred stocks,
warrants, rights, convertible securities, depositary receipts and shares, trust
certificates, limited partnership interests, shares of other investment
companies and REITs, and equity participations.
FIXED INCOME INVESTMENTS
The funds may invest in all types of fixed income securities. Fixed income
investments include bonds, notes (including structured notes), mortgage-backed
securities, asset-backed securities, convertible securities, Eurodollar and
Yankee dollar instruments, preferred stocks and money market instruments. Fixed
income securities may be issued by corporate and governmental issuers and may
have all types of interest rate payment and reset terms, including fixed rate,
adjustable rate, zero coupon, contingent, deferred, payment-in-kind and auction
rate features.
The credit quality of securities held in a fund's portfolio is determined at the
time of investment. If a security is rated differently by multiple ratings
organizations, a fund treats the security as being rated in the higher rating
category. A fund may choose not to sell securities that are downgraded below
investment grade after their purchase.
Mortgage-backed securities may be issued by private companies or by agencies of
the U.S. government. Mortgage-backed securities represent direct or indirect
participation in, or are collateralized by and payable from, mortgage loans
secured by real property. Certain debt instruments may only pay principal at
maturity or may only represent the right to receive payments of principal or
payments of interest on underlying pools of mortgage or government securities,
but not both. The value of these types of instruments may change more
drastically than debt securities that pay both principal and interest during
periods of changing interest rates. Principal only mortgage-backed securities
are particularly subject to prepayment risk. A fund may obtain a below market
yield or incur a loss on such instruments during periods of declining interest
rates. Interest only instruments are particularly subject to extension risk. For
mortgage derivatives and structured securities that have imbedded leverage
features, small changes in interest or prepayment rates may cause large and
sudden price movements. Mortgage derivatives can also become illiquid and hard
to value in declining markets. The funds also may use mortgage dollar rolls to
finance the purchase of additional investments. Dollar rolls expose a fund to
the risk that it will lose money if the additional investments do not produce
enough income to cover the fund's dollar roll obligations. In addition, if the
adviser's prepayment assumptions are incorrect, a fund may have performed better
had the fund not entered into the mortgage dollar roll.
FOREIGN SECURITIES
The Long-Term Fund's and the Medium-Term Fund's assets allocated to foreign
securities are invested in shares of other mutual funds or closed-end funds.
These other funds invest their assets primarily in equity securities of foreign
companies. Accordingly, a fund's assets invested in shares of these other funds
are subject to the risks associated with a direct investment in foreign
securities. Investments in securities of foreign entities and securities
denominated in foreign currencies involve special risks. These include possible
political and economic instability and the possible imposition of exchange
controls or other restrictions on investments. Changes in foreign currency rates
relative to the U.S. dollar will affect the U.S. dollar value of a fund's assets
indirectly denominated or quoted in currencies other than the U.S. dollar.
Emerging market investments offer the potential for significant gains but also
involve greater risks than investing in more developed countries. Political or
economic instability, lack of market liquidity and government actions such as
currency controls or seizure of private business or property may be more likely
in emerging markets. In Europe, Economic and Monetary Union (EMU) and the
introduction of a single currency began on January 1, 1999. There are
significant political and economic risks associated with EMU, which may increase
the volatility of a fund's indirect European securities and present valuation
problems.
-8-
<PAGE>
MORE ABOUT THE FUNDS' INVESTMENTS AND RISKS (continued)
- --------------------------------------------------------------------------------
SECURITIES LENDING
Each fund may seek to increase its income by lending portfolio securities to
institutions, such as certain broker-dealers. Portfolio securities loans are
secured continuously by collateral maintained on a current basis at an amount at
least equal to the market value of the securities loaned. The value of the
securities loaned by a fund will not exceed 33 1/3% of the value of the fund's
total assets. A fund may experience a loss or delay in the recovery of its
securities if the borrowing institution breaches its agreement with the fund.
DERIVATIVE CONTRACTS
Each fund may, but need not, use derivative contracts for any of the following
purposes:
-- To hedge against adverse changes caused by changes in stock market
prices, currency exchange rates or interest rates in the market value
of its securities or securities to be bought
-- As a substitute for buying or selling currencies or securities
-- To enhance the fund's return in non-hedging situations
Examples of derivative contracts include: futures and options on securities or
securities indices; options on these futures; and interest rate swaps. A
derivative contract will obligate or entitle the fund to deliver or receive an
asset or cash payment that is based on the change in value of one or more
securities or indices. Even a small investment in derivative contracts can have
a big impact on a fund's stock market and interest rate exposure. Therefore,
using derivatives can disproportionately increase losses and reduce
opportunities for gains when stock prices or interest rates are changing. A fund
may not fully benefit from or may lose money on derivatives if changes in their
value do not correspond accurately to changes in the value of the fund's
holdings. The other parties to certain derivative contracts present the same
types of default risk as issuers of fixed income securities. Derivatives can
also make the fund less liquid and harder to value, especially in declining
markets.
TEMPORARY INVESTMENTS
Each fund may depart from its principal investment strategies in response to
adverse market, economic or political conditions by taking temporary defensive
positions in all types of money market and short-term debt securities. If a fund
were to take a temporary defensive position, it may be unable for a time to
achieve its investment goal.
INVESTMENT GOALS
Each fund's investment goal is not fundamental and may be changed without
shareholder approval by the fund's board of trustees. If there is a change in
your fund's investment goal, you should consider whether the fund remains an
appropriate investment.
OTHER CHANGES
From time to time, it will be necessary to change the name of each fund to
reflect the decreasing time period to retirement of the fund's intended class of
investors. As the average age of the intended investors in a fund approaches
retirement age, it is also anticipated that each fund's assets may begin to
decrease as a result of investor withdrawals. At that time, the fund will
consider what action would be appropriate.
-9-
<PAGE>
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
THE ADVISER
Weiss, Peck & Greer, L.L.C. serves as the investment adviser to each of the
funds. WPG is headquartered at One New York Plaza, New York, New York 10004, and
is a subsidiary of Robeco, a Dutch public limited liability company. Founded in
1929, Robeco is one of the world's oldest asset management organizations.
Subject to the general supervision of the funds' boards of trustees, WPG manages
the funds' portfolios and is responsible for the selection and management of all
portfolio investments of each fund in accordance with each fund's investment
objective and policies.
PORTFOLIO MANAGERS
The adviser supervises the portfolio management of the funds through the
adviser's Asset Allocation Committee, which meets on a regular basis to
evaluate, among other things, the strategic asset allocation mix between equity
and fixed-income securities and among large, medium and small capitalization and
foreign stocks. Each portfolio manager is primarily responsible for the
day-to-day management of the percentage of each funds' portfolio allocated to
his investment category.
MANAGER RESPONSIBLE FOR
------- ---------------
Daniel J. Cardell
Mr. Cardell has been a managing director Large, medium and small
of WPG since 1996. Prior to joining capitalization stocks
the adviser, Mr. Cardell was senior vice
president and director of equities for the
Bank of America.
Daniel S. Vandivort
Mr. Vandivort has been a managing director Fixed-income securities
of WPG since 1994. Prior thereto, Mr.
Vandivort served in various capacities with
CS First Boston Investment Management,
including managing director and head of U.S.
fixed income and senior portfolio manager
and director, global product development
and marketing.
Sid Bakst
Mr. Bakst has been a managing director of Fixed-income securities
the adviser since 1999, and principal of
WPG 1998 to 1999. Prior thereto, Mr. Bakst
served as a vice president and portfolio
manager for New York Life Asset Managment.
MANAGEMENT FEES
In return for services provided to each fund in its capacity as investment
adviser, WPG receives a management fee from each fund. Last year, the funds'
paid management fees to WPG as follows:
MANAGEMENT FEES PAID DURING THE FISCAL YEAR ENDED DECEMBER 31, 1999
(AS % OF AVERAGE DAILY NET ASSETS)
Long-Term Fund 0.00% Medium-Term Fund 0.29% Short-Term Fund 0.70%
EXPENSE CAP
The adviser has agreed to cap the operating expenses (excluding class-specific
expenses and extraordinary expenses) of the funds to 1.25% of their respective
average daily net assets. The adviser may not discontinue or modify such caps
without the approval of a fund's trustees.
Each fund will reimburse the adviser for fees foregone or other expenses paid by
the adviser pursuant to this expense limitation in later years in which
operating expenses for that fund are less than the expense limitations for any
such year.
DISTRIBUTION PLANS
Adviser Class
shares only
The funds have adopted Rule 12b-1 plans for their Adviser Class shares. Under
the plans, the funds pay distribution and service fees for the sale of these
shares and for administrative and shareholder services in an aggregate amount of
up to 0.50% of their average daily net assets attributable to Adviser Class
shares. These fees are an ongoing expense and over time will increase the cost
of your investment and may cost you more than other types of sales charges.
SERVICE PLANS
Institutional Class
shares only
The funds have also adopted service plans for their Institutional Class shares.
Under the plans, which were not adopted under Rule 12b-1, the funds pay fees for
certain administrative and shareholder services in an aggregate amount of up to
0.25% of their average daily net assets attributable to Institutional Class
shares. Like Rule 12b-1 fees, these fees are an ongoing expense and over time
will increase the cost of your investment.
-10-
<PAGE>
Eligible Investors
- --------------------------------------------------------------------------------
VARIABLE CONTRACT HOLDERS
Institutional Class shares of the funds are designed to provide investment
vehicles for variable annuity and Contract variable life insurance contracts
("Variable Contracts") of various insurance companies' separate accounts
("Separate Accounts"). Separate Accounts may not invest in Adviser Class shares.
QUALIFIED PLANS
Adviser Class shares and Institutional Class shares of the funds may be
purchased for the account of qualified pension or retirement plans ("Qualified
Plans"). Qualified Plans include: Qualified plans and trusts under Section
401(a) of the Internal Revenue Code, annuity plans under Code Section 403(a),
Code Section 403(b) annuities and custodial accounts, certain governmental
plans, simplified employee pension plans, deferred compensation arrangements
under Code Section 457(b) and certain Individual Retirement Accounts (IRAs).
IRAs that may invest in shares of the funds are limited to those established for
the benefit of: (a) current and former Trustees and officers of the Trust; (b)
current and former directors and employees of the Adviser; (c) directors,
officers and employees of companies and their affiliates that have an advisory
relationship with the Adviser; (d) directors, officers and employees of
companies and their affiliates serving in an advisory capacity to sponsors of
Qualified Plans and (e) members of the immediate families of any of the
foregoing persons.
Should you have any questions as to whether you are an eligible investor in
shares of the funds, please call WPG at 1-800-223-3332.
HOW TO BUY, EXCHANGE AND REDEEM SHARES
- --------------------------------------------------------------------------------
VARIABLE CONTRACT HOLDERS
Insurance Company Separate Accounts may only invest in Institutional Class
shares of the funds. Because holders of Variable Contracts may not purchase,
exchange or redeem Institutional Class shares of the funds directly, you should
read the prospectus of your insurance company Separate Account to obtain
instructions for purchasing a Variable Contract. Variable Contracts may or may
not make investments in all the funds described in this prospectus.
Separate Accounts purchase and redeem Institutional Class shares of the funds at
their respective net asset values. Redemptions will be effected by Separate
Accounts to meet obligations under Variable Contracts. Insurance companies who
wish to designate Institutional Class shares of the funds as investment vehicles
for their Separate Accounts should contact WPG at 1-800-223-3332.
QUALIFIED PLANS
The following information describes how participants in Qualified may arrange to
buy, sell (redeem) Plans and exchange Adviser and Institutional Class shares of
the funds for the account of their Qualified Plans.
If the trustee, custodian, plan administrator or other fiduciary (a "Plan
Fiduciary") responsible for making investments on behalf of a Qualified Plan
does not specify in the instructions to the funds which class of shares to
purchase, the funds will assume that the instructions apply to Adviser Class
shares. Both Adviser Class and Institutional Class shares are sold without a
sales charge. Adviser Class shares are subject to distribution fees of up to
0.25% and service fees of up to 0.25% of each fund's average daily net assets
attributable to Adviser Class Shares. Institutional Class shares are subject to
service fees of up to 0.25% of each fund's average daily net assets attributable
to Institutional Class Shares. See "Distribution Plans" and "Service Plans"
above in this prospectus.
-11-
<PAGE>
HOW TO BUY SHARES FOR QUALIFIED PLANS
- --------------------------------------------------------------------------------
THROUGH WHOM MAY
SHARES OF THE FUNDS
BE PURCHASED FOR
QUALIFIED PLANS?
Because you may not purchase directly, all orders to purchase shares must be
made shares of the funds through the Plan Fiduciary of your Qualified Plan. If
the monies you wish to invest in the funds are maintained in a Qualified Plan
sponsored by your employer, please consult with your employer for information
about how to purchase shares of the funds. If the monies you wish to invest in
the funds are maintained by your Plan Fiduciary in an IRA or other
self-administered Qualified Plan, please consult with your Plan Fiduciary for
information about how to purchase shares of the funds.
You may establish an IRA with the funds' custodian, through which you may invest
in the funds. Additionally, you may invest in the funds by "rolling over" an
existing IRA into an IRA maintained by the funds' custodian. Please call WPG at
1-800-223-3332 for information regarding how to establish an IRA with the funds'
custodian.
WHAT IS THE MINIMUM
INVESTMENT?
Plan Fiduciaries may invest in the funds for the account of Qualified Plans with
as little as $250. There is no minimum amount required for subsequent
investments.
AT WHAT PRICE ARE
SHARES OF THE FUNDS
OFFERED?
Shares of each class of the funds are sold at the net asset value (NAV) of such
class of shares next determined after the funds or their agents receive and
accept a purchase order. Purchase orders received and accepted by the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on any day on which the Exchange is open for business (a "Business Day") will be
effected as of the close of regular trading on the Exchange on that day.
Otherwise, orders will be effected at the NAV determined on the next Business
Day. The Exchange is generally open Monday through Friday except for most
national holidays.
HOW MAY PLAN
FIDUCIARIES INVEST IN
THE FUNDS FOR THE
ACCOUNT OF THEIR
QUALIFIED PLANS?
In order to make an initial investment in a fund for a Qualified Plan, Plan
Fiduciaries must open an account with the funds by furnishing to WPG the
information in the applicable Account Information Form included with this
prospectus. Please note that there is an Account Information Form applicable to
IRAs and an Account Information Form applicable to other Qualified Plans and to
insurance company Separate Accounts. Shares of the funds may be purchased by
Plan Fiduciaries for the account of Qualified Plans on any Business Day.
-12-
<PAGE>
PLAN FIDUCIARIES: TO MAKE AN INITIAL INVESTMENT FOR A QUALIFIED PLAN
BY MAIL: 1. Make a check payable to the Tomorrow Fund in which you
wish to invest.
2. Mail the completed Account Information Form and check to WPG.
- --------------------------------------------------------------------------------
BY WIRE: 1. Call 1-800-223-3332 to open an account and to receive an
application.
Funds may be wired after the application has been received.
2. Instruct your bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
Bank Routing No. 011-00123-4
Specify:
Name of Tomorrow Fund
Class of shares
Account Number
Name(s) in which account is to be registered
3. Mail the completed Account Information Form to WPG.
- --------------------------------------------------------------------------------
PLAN FIDUCIARIES: TO MAKE FURTHER INVESTMENTS FOR A QUALIFIED PLAN
AUTOMATICALLY: 1. Use the Automatic Investment Plan. Sign up for this service
when opening an account, or call 1-800-223-3332 to receive a
Services Form to add this privilege. Designate the bank or
credit union account from which funds will be drawn.
2. The amount to be invested will automatically be withdrawn
from the designated bank or credit union account on or about the
first Business Day of the month or quarter selected.
BY TELEPHONE: 1. Sign up for this service when opening an account, or call
1-800-223-3332 to receive a Services Form to add this privilege.
Designate the bank or credit union account from which funds will
be drawn. Note that in order to invest by phone, the account
must be in a bank or credit union that is a member of the
Automated Clearing House (ACH).
2. Once this service has been selected, Plan Fiduciaries may
purchase additional shares for the account of their Qualified
Plans by calling the funds, toll-free at 1-800-223-3332.
3. Give the funds' agent the name(s) in which the account is
registered, the Tomorrow Fund name, Class of shares, the account
number, and the amount of the investment.
4. An investment will normally be credited to the Qualified Plan
account upon receipt of payment. During periods of extreme
economic conditions or market changes, requests by telephone may
be difficult to make due to heavy volume. During such times
please consider placing purchase orders by mail.
- --------------------------------------------------------------------------------
-13-
<PAGE>
BY MAIL: 1. Include a note with the investment specifying:
Name of the Tomorrow Fund
Class of shares
Account Number
Name(s) in which account is registered
2. Make the check payable to the fund in which you wish to or
are instructed to invest. Indicate the account number on the
check.
3. Mail the account information and check to the fund at the
address indicated on the back cover of this prospectus.
- --------------------------------------------------------------------------------
BY WIRE: Instruct the bank to wire funds to:
Boston Safe Deposit and Trust Company
WPG Deposit Account No. 12-816-3
ABA Routing No. 011-00123-4
For credit to:
Name of Tomorrow Fund
Class of shares
Your Account Number
Name(s) in which account is registered
- --------------------------------------------------------------------------------
OTHER PURCHASE
INFORMATION
Each fund reserves the right to reject any purchase for any reason and to cancel
any purchase due to nonpayment. As a condition of this offering, if your
purchase is cancelled due to nonpayment or because your check does not clear
(and, therefore, shares in your account are required to be redeemed), you will
be responsible for any loss incurred by the fund(s) affected. All purchases must
be made in U.S. dollars. Checks drawn on foreign banks will delay purchases
until U.S. funds are received and a collection charge may be imposed. In such
cases, shares of the funds are priced at the net asset value computed after the
funds receive notification of the dollar equivalent from the funds' custodian
bank. Wire purchases normally take two or more hours to complete and, to be
accepted the same day, must be received by 4:00 p.m. Eastern time. Your bank may
charge a fee to wire funds. Telephone transactions are recorded to verify
information.
ACQUIRING SHARES IN
EXCHANGE FOR
SECURITIES
Shares of the funds may be purchased in whole or in part by delivering to the
funds' custodian securities determined by the adviser to be suitable for that
fund's portfolio.
-14-
<PAGE>
HOW TO EXCHANGE SHARES FOR QUALIFIED PLANS
- --------------------------------------------------------------------------------
MAY SHARES BE
EXCHANGED FOR SHARES
OTHER MUTUAL FUNDS?
Subject to the terms of your Qualified Plan, shares of a fund may be exchanged
for shares of the same of class of any other fund as well as for shares of any
of the WPG mutual funds. Please contact WPG at the address listed on the cover
page for a copy of the WPG mutual funds' prospectus. Please consider the
differences in investment objectives and expenses of a fund as described in its
prospectus before making an exchange.
DO SALES CHARGES APPLY
TO EXCHANGES?
As is the case with initial purchases of shares of the funds, exchanges of
shares are made without the imposition of a sales charge.
HOW MAY I MAKE AN
EXCHANGE FOR MY
QUALIFIED PLAN?
Because shares of the funds are held for the account of Qualified Plans, all
orders to exchange shares must be made through your Plan Fiduciary. If the
shares you wish to exchange are held for the account of a Qualified Plan
sponsored by your employer, please consult with your employer for information
about how to exchange shares of the funds. If the shares you wish to exchange
are maintained by your Plan Fiduciary in an IRA or other self-administered
Qualified Plan, please consult with your Plan Fiduciary for information about
how to exchange shares of the funds.
PLAN FIDUCIARIES: TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
BY PHONE: 1. Use the telephone exchange privilege. The telephone exchange
privilege is not available automatically. It is necessary to
sign up for this privilege on the Account Application Form when
opening an account, or call 1-800-223-3332 to receive a Services
Form to add this privilege.
2. Once this privilege has been selected, simply call the fund
toll free at 1-800-223-3332 between 9:00 a.m. and 4:00 p.m.
Eastern time on any Business Day.
3. Give the following information to the fund representative:
Name of current Tomorrow Fund
Class of shares
Name of the fund into which the current Tomorrow Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be
exchanged
- --------------------------------------------------------------------------------
BY MAIL: 1. Mail a written request to the fund at the address listed on
the back cover of this prospectus specifying:
Name of current Tomorrow Fund
Class of shares
Name of the fund into which the current Tomorrow Fund
shares will be exchanged
Account Number
Name(s) in which your account is registered
The dollar amount or the number of shares to be
exchanged
2. The exchange request must be signed by all registered holders
for the account using the exact names in which the account is
registered or accompanied by executed power(s) of attorney.
- --------------------------------------------------------------------------------
-15-
<PAGE>
GENERAL EXCHANGE
INFORMATION
Shares exchanged are valued at their respective net asset values per share next
determined after the exchange request is received by the funds or their agents.
All exchanges are subject to the following exchange restrictions: (i) the fund
into which shares are being exchanged must be available for sale in your state;
(ii) exchanges may be made only between funds that are registered in the same
name, address and, if applicable, taxpayer identification number; (iii) the
minimum amount for exchanging from one fund into another fund is $100 or the
total value of your fund account (if less than $100) and must satisfy the
minimum account size of the fund to be exchanged into; and (iv) exchanges may
only be made for the same class of shares.
To confirm that telephone exchange requests are genuine, the funds employ
reasonable procedures, such as providing written confirmation of telephone
exchange transactions and tape recording of telephone exchange requests. If the
funds do not employ such reasonable procedures, they may be liable for any loss
incurred by a shareholder due to a fraudulent or unauthorized telephone exchange
request. Otherwise, neither the funds nor their agents will be liable for any
loss incurred by a shareholder as the result of following instructions
communicated by telephone that they reasonably believed to be genuine. The funds
may refuse any request made by telephone and may limit the dollar amount
involved or the number of telephone requests made by any shareholder. During
periods of extreme economic conditions or market changes, requests by telephone
may be difficult to make due to heavy volume. During such times please consider
placing your order by mail.
-16-
<PAGE>
HOW TO REDEEM SHARES FOR QUALIFIED PLANS
- --------------------------------------------------------------------------------
HOW MAY SHARES OF THE
FUNDS BE REDEEMED FOR
QUALIFIED PLANS?
Subject to the restrictions (if any) imposed by your Qualified Plan, you can
arrange to sell or "redeem" some or all of your shares on any Business Day. All
orders to redeem shares of the funds held for the account of Qualified Plans
must be made through your Plan Fiduciary. If the shares you wish to redeem are
held for the account of a Qualified Plan sponsored by your employer, please
consult with your employer for information about how to redeem shares of the
funds. If the shares you wish to redeem are maintained by your Plan Fiduciary in
an IRA or other self-administered Qualified Plan, please consult with your Plan
Fiduciary for information about how to redeem shares of the funds.
AT WHAT PRICE ARE
SHARES OF THE FUNDS
REDEEMED?
Shares of each class of the funds will be redeemed at the share price (NAV) of
such class of shares next calculated after a redemption order is received in
good order by the funds or their agents. Once shares are redeemed, sale proceeds
generally are available the next Business Day, but may take up to three Business
Days. For your protection, redemption proceeds will not be released until a
shareholder's account has been opened and payment for the shares to be redeemed
has been received by the fund, which may take up to fifteen days in the case of
payments made by check.
The net asset value per share received upon redemption or repurchase may be more
or less than the original cost of the shares, depending on the market value of
the portfolio at the time of redemption or repurchase.
- --------------------------------------------------------------------------------
PLAN FIDUCIARIES: TO REDEEM SHARES FOR A QUALIFIED PLAN
BY PHONE: 1. Use the telephone fax redemption privilege. This privilege is
not available automatically. It is necessary to sign up for this
privilege on the Account Application Form when opening an
account, or call 1-800-223-3332 to receive a Services Form to
add this privilege.
2. Give the following information:
Name of the current Tomorrow Fund
Class of shares
Name of the fund into which the current Tomorrow Fund
shares will be redeemed.
Account Number Name(s) in which account is registered
The dollar amount or the number of shares to be
redeemed
BY MAIL: 1. In a written request specify:
Name of the Tomorrow Fund
Class of shares
Account Number
Name(s) in which account is registered
The dollar amount or the number of shares to be redeemed
2. Mail the redemption request to the fund at the address
indicated on the back cover of this prospectus.
- --------------------------------------------------------------------------------
GENERAL REDEMPTION
INFORMATION
Redemption requests must be received by the funds or their agents before the
close of business on the New York Stock Exchange to receive that day's share
price (NAV). A written redemption request must be signed by all registered
shareholders for the account using the exact names in which the account is
registered or accompanied by executed power(s) of attorney. Unless otherwise
specified, redemption proceeds will be sent by check to the record address. Plan
Fiduciaries may elect to have redemption proceeds wired to a checking or bank
account if wire redemptions were authorized when the account was opened or have
subsequently been authorized.
-17-
<PAGE>
Redemptions may be suspended or postponed during any period in which any of the
following conditions exist: the New York Stock Exchange is closed or trading on
the Exchange is restricted; an emergency exists during which it is not
reasonably practicable for a fund to dispose of its portfolio securities or to
fairly determine its net asset value; or the SEC, by order, so permits. Although
the funds generally intend to satisfy redemption requests in cash, they may,
under certain circumstances, satisfy redemption requests in kind by delivering
portfolio securities. See the SAI.
CERTAIN REDEMPTION
REQUESTS MUST INCLUDE
A MEDALLION SIGNATURE
GUARANTEE
A medallion signature guarantee is a way to protect you and the funds from fraud
by verifying the signature on your redemption request. A medallion signature
guarantee is required if (a) the redemption proceeds are to be sent to an
address other than the address of record or to a person other than the
registered shareholder(s) for the account, (b) the redemption request is made
for the account of an IRA or (c) the net asset value of the shares redeemed is
$100,000 or more (this requirement may be waived by the adviser in its
discretion).
When a fund requires a signature guarantee, it must be a "medallion" signature
guarantee. A "medallion" signature guarantee may be obtained from a bank,
broker-dealer, or other financial institution that participates in a "medallion"
program recognized by the Securities Transfer Association. The three recognized
programs are: Securities Transfer Agents Medallion Program (STAMP), Stock
Exchange Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion
Signature Program (NYSE MSP). Any other signature guarantees will not be
accepted. Medallion signature guarantees cannot be obtained from a notary
public.
SMALL ACCOUNTS
In order to reduce the expense of maintaining numerous small accounts, the funds
may redeem any shareholder account (other than an IRA) if, as a result of
redemptions, the value of the account is less than $100. Shareholders will be
allowed at least 60 days after written notice to make an additional investment
to bring the account value up to at least $100 before the redemption is
processed.
CHANGE IN TAX STATUS
Insurance companies and Plan Fiduciaries are required to notify the fund if the
tax status of their Separate Account or Qualified Plan is revoked or challenged
by the Internal Revenue Service. The funds may redeem any fund account of any
shareholder whose qualification as a diversified segregated asset account or a
qualified pension or retirement plan satisfying the requirements of Treasury
Regulationss.1.817-5 is revoked or challenged. The funds will not treat an
investor as a qualified pension or retirement plan for this purpose unless the
investor is among the categories specifically enumerated in Revenue Ruling
94-62, 1994-2 C.B. 164. An Insurance Company or Qualified Plan whose tax status
is revoked or challenged by the Internal Revenue Service may be liable to the
funds or the adviser for losses incurred by the funds or the adviser as a result
of such action.
-18-
<PAGE>
SHARE PRICE
- --------------------------------------------------------------------------------
HOW SHARES ARE
VALUED
The net asset value per share of a class of a fund is determined by dividing the
value of its assets, less liabilities attributable to that class, by the number
of shares of that class outstanding. The net asset value is calculated as of the
close of regular trading of the New York Stock Exchange (normally 4:00 p.m.
Eastern time) on each Business Day. Adviser Class shares and Institutional Class
shares of the funds may have different net asset values.
Portfolio securities (other than certain money market instruments) are valued
primarily based on market quotations or, if market quotations are not available,
at fair market value as determined in good faith by a valuation committee
appointed by the Trustees. In accordance with procedures adopted by the
Trustees, each fund may use pricing services to value fixed-income investments.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS
The funds normally pay dividends and distribute capital gains, if any, as
follows:
INCOME DIVIDEND CAPITAL GAIN DISTRIBUTIONS ARE
FUND DISTRIBUTIONS DISTRIBUTIONS PRIMARILY FROM
---- ------------- ------------- --------------
Long-Term Fund Annually Annually Capital gain
Medium-Term Fund Annually Annually Both
Short-Term Fund Annually Annually Both
The funds may pay additional distributions and dividends at other times if
necessary for a fund to avoid federal tax. Unless you instruct otherwise,
capital gain distributions and dividends are reinvested in additional fund
shares of the same class that you hold. The funds' distributions and dividends,
whether received in cash or reinvested in additional fund shares, are subject to
federal income tax for any investor who does not qualify for tax exemption or
deferral. You do not pay a sales charge on reinvested distributions or
dividends.
TAXES
Participants in Qualified Plans may be eligible for tax deferral or exemption on
distributions a Qualified Plan receives from a fund and gains that arise from a
Qualified Plan's dispositions of fund shares. This prospectus does not describe
in any respect such tax treatment. Please consult your Plan Fiduciary or tax
adviser. For a discussion of the tax status of a Variable Contract, including
the tax consequences of withdrawals or other payments, refer to the prospectus
of the insurance company Separate Account.
It is suggested that holders of Variable Contracts and participants in Qualified
Plans keep all statements received from their insurance company or Qualified
Plan to assist in personal recordkeeping.
HOUSEHOLD
DELIVERY
With your express consent or your implied consent upon written notice, a fund
may elect to send prospectuses and shareholder reports on a "household" basis.
This means that a fund may send only one copy of a prospectus or annual report
to all members of a household that are fund shareholders. If at any time you
wish to revoke your consent to this practice, you may do so by contacting your
Plan Fiduciary, who should contact the fund, either orally or in writing, in the
manner described above. The fund will begin sending you individual copies of any
prospectus or shareholder report it delivers 30 days after receiving your
revocation from your Plan Fiduciary.
-19-
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PERFORMANCE OF THE FUNDS SINCE THEIR INCEPTION. CERTAIN INFORMATION REFLECTS
FINANCIAL RESULTS FOR A SINGLE SHARE FOR THE FUND'S FISCAL YEARS ENDED DECEMBER
31. TOTAL RETURNS REPRESENT THE RATE THAT A SHAREHOLDER WOULD HAVE EARNED (OR
LOST) ON A FUND SHARE ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS.
THE INFORMATION IN THE FOLLOWING TABLES WAS AUDITED BY KPMG LLP, INDEPENDENT
AUDITORS, WHOSE REPORT, ALONG WITH THE FUNDS' FINANCIAL STATEMENTS, ARE INCLUDED
IN THE ANNUAL REPORT (AVAILABLE UPON REQUEST).
<TABLE>
<CAPTION>
$ per share
NET
NET REALIZED TOTAL DIVIDENDS DISTRI-
ASSET AND INCOME FROM BUTIONS
VALUE AT NET UNREAL- FROM NET FROM NET TOTAL
BEGINNING INVEST- IZED INVEST- INVEST- REALIZED DISTRI-
OF PERIOD MENT GAINS MENT MENT GAINS BUTIONS
INCOME (LOSSES) OPERA- INCOME
ON TIONS
SECURITIES
----------------------------------------------------------
LONG-TERM RETIREMENT
ADVISER SHARES
For the period
March 7, 1996*
through
<S> <C> <C> <C> <C> <C> <C> <C>
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)
For the year ended
December 31, 1999 9.10 0.04 0.79 0.83 (0.05) (0.89) (0.94)
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)
For the year ended
December 31, 1999 9.23 0.08 0.81 0.89 (0.11) (0.89) (1.00)
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)
For the year ended
December 31, 1999 9.68 0.17 0.23 0.40 (0.16) (0.63) (0.79)
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)
For the year ended
December 31, 1999 9.43 0.19 0.24 0.43 (0.21) (0.63) (0.84)
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)
For the year ended
December 31, 1999 10.49 0.33 (0.11) 0.22 (0.29) (0.43) (0.72)
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)
For the year ended
December 31, 1999 10.54 0.31 (0.06) 0.25 (0.35) (0.43) (0.78)
RATIOS
- -------------------------------------------------------------------------------------------
RATIO INFORMATION
ASSUMING NO FEE
WAIVERS, REIMBURSE-
MENTS OR CUSTODY
RATIO OF FEE EARNINGS
NET CREDIT RECEIVED
NET NET RATIO OF INVEST- RATIO OF
ASSET ASSETS EXPENSES MENT RATIO OF NET
VALUE END OF TO AVER- INCOME PORT- EXPENSES INVEST-
AT END TOTAL PERIOD AGE NET TO AVER- FOLIO TO AVER- MENT
OF RETURN (000'S) ASSETS AGE NET TURN- AGE NET INCOME
PERIOD ASSETS OVER ASSETS NET
RATE 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
For the year ended
December 31, 1999 8.99 9.53 8,086 1.75 0.57 104.49 2.89 -0.57
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
For the year ended
December 31, 1999 9.12 10.07 2,031 1.29 1.03 104.49 3.46 -1.13
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
For the year ended
December 31, 1999 9.29 4.32 13,383 1.75 1.63 208.58 2.21 1.17
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
For the year ended
December 31, 1999 9.02 4.77 3,008 1.31 2.10 208.58 2.54 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
For the year ended
December 31, 1999 9.99 2.12 13,590 1.75 2.87 286.76 1.92 2.70
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
For the year ended
December 31, 1999 10.01 2.40 18,207 1.46 3.18 286.76 1.62 3.02
<FN>
+ Annualized
* Commencement of operations.
</FN>
</TABLE>
-20-
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
TOMORROW FUNDS
Retirement Trust
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
If you want more information about the Tomorrow Funds, the following documents
are available upon request:
SHAREHOLDER REPORTS
Annual and semiannual reports to shareholders provide additional information
about the funds' investments. These reports discuss the market conditions and
investment strategies that significantly affected each fund's performance during
its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) provides more detailed information
about each fund. It is incorporated into this prospectus by reference.
================================================================================
If someone makes a statement that is not in this prospectus about any of the
funds, you should not rely upon that information. Neither the funds nor their
distributor is offering to sell shares of the funds to any person to whom the
funds may not lawfully sell their shares.
HOW TO OBTAIN THIS INFORMATION
You may get free copies of the funds' shareholder reports and the SAI by
contacting the funds at:
Address: Tomorrow Funds Retirement Trust
c/o PFPC, Inc.
P.O. Box 60448
King of Prussia, PA 19406-0448
Telephone: 1-800-223-3332
You can review the funds' shareholder reports, prospectus and SAI at the Public
Reference Room of the Securities and Exchange Commission. You can get text-only
copies of these documents for free from the SEC's website at http://www.sec.gov,
or for a fee by writing, calling, or e-mailing:
Address: Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009
Telephone: 1-800-733-0330
e-mail: [email protected]
<PAGE>
WEISS, PECK & GREER INVESTMENTS
TOMORROW FUNDS RETIREMENT TRUST
TOMORROW LONG-TERM RETIREMENT FUND
TOMORROW MEDIUM-TERM RETIREMENT FUND
TOMORROW SHORT-TERM RETIREMENT FUND
TOMORROW POST-RETIREMENT FUND
(each a "Fund" and collectively, the "Funds"
or the "Tomorrow Funds")
----------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
ADVISER CLASS SHARES AND
INSTITUTIONAL CLASS SHARES
May 1, 2000
-----------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of the Funds, dated May 1, 2000, and as
amended and/or supplemented from time to time (the "Prospectus"), copies of
which may be obtained without charge by writing to Tomorrow Funds Retirement
Trust (the"Trust"), One New York Plaza, New York, NY 10004 or by calling
1-800-223-3332.
Additional information about each fund's investments is available in the funds'
annual and semi- annual reports to shareholders. Investors can obtain free
copies of reports and prospectuses by contacting the funds at the phone number
above. Each fund's financial statements, which are included in the 1999 annual
reports to shareholders, are incorporated by reference into this SAI.
THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
PAGE
The Funds' Investment Objectives and Policies...............................1
Investment Techniques.......................................................2
Calculation of the Funds' Returns..........................................22
Investment Restrictions ..................................................27
Advisory and Administrative Services.......................................30
Investment Adviser...................................................30
Administrator........................................................34
Principal Underwriter................................................36
Distribution Plans.........................................................36
Service Plans........................................................38
Code of Ethics.............................................................40
Trustees And Officers......................................................40
How to Purchase Shares.....................................................47
Redemption And Exchange of Shares .........................................48
Net Asset Value............................................................49
Investor Services..........................................................51
Dividends, Distributions And Tax Status....................................57
Portfolio Brokerage........................................................62
Brokerage Commissions......................................................66
Portfolio Turnover.........................................................66
Organization...............................................................67
Custodian..................................................................70
Transfer Agent.............................................................70
Legal Counsel..............................................................70
Financial Statements and Independent Auditors..............................70
Appendix...................................................................72
Glossary...................................................................74
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
All capitalized terms not defined herein shall have the meanings set forth
in the Prospectuses.
The securities in which each Fund may invest and certain other investment
policies are described in the Funds' Prospectus. This Statement of Additional
Information should be read in conjunction with the Prospectus.
The Appendix to this Statement of Additional Information contains a
description of the quality categories of corporate bonds in which the Funds may
invest, and a Glossary describing some of the Funds' investments.
QUANTITATIVE METHODOLOGY
Each Fund invests its assets, in varying amounts, in equity and
fixed-income securities of all types (the "Categories"). The amount of assets
allocated to equity securities is currently invested, in varying amounts, among
large capitalization stocks, medium capitalization stocks, small capitalization
stocks and, indirectly through other investment companies, foreign securities
(the "Subcategories"). From time to time, Weiss, Peck & Greer, L.L.C. (the
"Adviser" or "WPG") may select Subcategories for the fixed-income Category.
Further Subcategories may be selected in addition to or as a substitute for any
of the current Subcategories.
Each Fund invests the amount of its assets allocated to Large-Cap,
Medium-Cap and Small- Cap Subcategories in a portfolio of securities that is
considered more "efficient" than an applicable Benchmark. The Benchmarks for the
Large-Cap, Medium-Cap and Small-Cap Subcategories are the Standard & Poor's 500
Stock Index (the "S&P 500"), the Standard & Poor's 400 MidCap Index (the "S&P
400") and the Russell 2000 Index, respectively.
An efficient portfolio is one that has the maximum expected return for any
level of risk. The efficient mix of securities is established mathematically,
taking into account the expected return and volatility of returns for each
security in a given universe, as well as the historical price relationships
between the different securities in the universe.
To implement this strategy with respect to the Subcategories of the Funds,
the Adviser compiles the historical price data of all securities which comprise
the applicable Benchmark. The Adviser may eliminate a security from
consideration if it considers the security to have an inadequate or misleading
price history. Using this historical price data, the Adviser constructs and
analyzes a complete matrix of all the possible price relationships between the
securities in the applicable Benchmark.
Using a sophisticated software program that incorporates risk reduction
techniques developed by investment professionals of the Adviser, the Adviser
constructs a number of portfolios with respect to the Subcategories, which
portfolios are believed to have optimized risk/reward ratios.
- 1 -
<PAGE>
From these alternative portfolios, the Adviser selects the combination of
securities, together with their appropriate weightings, that the Adviser
believes will comprise the optimal portfolio for the Subcategories. The
respective optimal portfolios for the Subcategories are designed to have returns
greater than, but highly correlated with, the return of the applicable
Benchmark.
After each optimal portfolio is constructed, it may be rebalanced to
maintain the original optimal weights. The Adviser will sell a security when the
security's weight within an actual portfolio becomes significantly greater than
its optimal weight. The Adviser will buy a security when the security's weight
within an actual portfolio becomes significantly less than its optimal weight.
The Adviser repeats the entire optimization process at least semi-annually, at
which point a new portfolio is constructed with respect to the Subcategories
adding the most recent historical data, and deleting the oldest data. When a
security is removed from a Benchmark, it will not necessarily be removed from
the Funds' portfolios within a predetermined length of time.
The Adviser's research personnel will monitor and occasionally make
changes in the way the optimal portfolios are constructed or traded. Such
changes may include determining better ways to eliminate issues from
consideration in the matrix, improving the manner in which the matrix is
calculated, altering constraints in the optimization process and effecting
changes in trading procedure (to reduce transaction costs or to enhance the
effects of rebalancing). Any such changes are intended to be consistent with the
basic philosophy of seeking higher returns with respect to each Subcategory than
those that could be obtained by investing directly in all the stocks of each
Benchmark. Investors should be aware that no quantitative methodology or
technical analysis, including the Adviser's, has ever been proven to provide
enhanced investment return and reduced investment risk in actual long-term
portfolio results.
INVESTMENT TECHNIQUES
The following description of the Funds' investment techniques supplements
the discussion contained in the Prospectus.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with banks, broker-dealers
or other financial institutions in order to generate additional current income.
A repurchase agreement is an agreement under which a Fund acquires a security
from a seller subject to resale to the seller at an agreed upon price and date.
The resale price reflects an agreed upon interest rate effective for the time
period the security is held by a Fund. The repurchase price may be higher than
the purchase price, the difference being income to the Fund, or the purchase and
repurchase price may be the same, with interest at a stated rate due to the Fund
together with the repurchase price on repurchase. In either case, the income to
the Fund is unrelated to the interest rate on the security. Typically,
repurchase agreements are in effect for one week or less, but may be in effect
for longer periods of time. Repurchase agreements of more than one week's
duration are subject to each Fund's limitation on investments in illiquid
securities.
- 2 -
<PAGE>
Repurchase agreements are considered by the Securities and Exchange
Commission (the "SEC") to be loans by the purchaser collateralized by the
underlying securities. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Funds will generally enter into repurchase agreements
only with domestic banks with total assets in excess of one billion dollars,
primary dealers in U.S. Government securities reporting to the Federal Reserve
Bank of New York or broker-dealers approved by the Trust's Board of Trustees,
with respect to securities of the type in which the Funds may invest. The
Adviser will monitor the value of the underlying securities throughout the term
of the agreement to ensure that their market value always equals or exceeds the
agreed-upon repurchase price to be paid to a Fund. Each Fund will maintain a
segregated account with its custodian, Boston Safe Deposit and Trust Company
(the "Custodian"), or a subcustodian for the securities and other collateral, if
any, acquired under a repurchase agreement for the term of the agreement.
In addition to the risk of the seller's default or a decline in value of
the underlying security, a Fund also might incur disposition costs in connection
with liquidating the underlying securities. If the seller becomes insolvent and
subject to liquidation or reorganization under the Bankruptcy Code or other
laws, a court may determine that the underlying security is collateral for a
loan by a Fund not within the control of that Fund and therefore subject to sale
by the seller's trustee in bankruptcy. Finally, it is possible that a Fund may
not be able to perfect its interest in the underlying security and may be deemed
an unsecured creditor of the seller. While the Trust acknowledges these risks,
it is expected that they can be controlled through careful monitoring
procedures.
Each fund may enter into reverse repurchase agreements with domestic banks
or broker-dealers, subject to its policies and restrictions. Under a reverse
repurchase agreement, a fund sells a security held by it and agrees to
repurchase the instrument on a specified date at a specified price, which
includes interest. The fund will use the proceeds of a reverse repurchase
agreement to purchase other securities which either mature at a date
simultaneous with or prior to the expiration of the reverse repurchase agreement
or which are held under an agreement to resell maturing as of that time. The
funds will enter into reverse repurchase agreements only when the Adviser
believes the interest income and fees to be earned from the investment of the
proceeds of the transaction will be greater than the interest expense of the
transaction.
Under the Investment Company Act of 1940, as amended (the "1940 Act"),
reverse repurchase agreements may be considered borrowings by the seller. No
fund may enter into a reverse repurchase agreement if as a result its current
obligations under such agreements would exceed one-third of the current market
value of its total assets (less its liabilities other than under reverse
repurchase agreements).
In connection with entering into reverse repurchase agreements, the fund
will segregate U.S. Government securities, cash or cash equivalents with an
aggregate current value sufficient to repurchase the securities or equal to the
proceeds received upon the sale, plus accrued interest.
- 3 -
<PAGE>
EURODOLLAR AND YANKEE DOLLAR INVESTMENTS
The Funds may invest in obligations of foreign branches of U.S. banks
(Eurodollars) and U.S. branches of foreign banks (Yankee dollars) as well as
foreign branches of foreign banks. These investments involve risks that are
different from investments in securities of U.S. banks, including potential
unfavorable political and economic developments, different tax provisions,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or interest.
RISK CONSIDERATIONS OF MEDIUM GRADE SECURITIES
Obligations in the lowest investment grade (I.E., BBB or Baa), referred to
as "medium grade" obligations, have speculative characteristics, and changes in
economic conditions and other factors are more likely to lead to weakened
capacity to make interest payments and repay principal on these obligations than
is the case for higher rated securities. In the event that a security purchased
by a Fund is subsequently downgraded below investment grade, the Adviser will
consider such event in its determination of whether the fund should continue to
hold the security.
FORWARD COMMITMENT, DELAYED DELIVERY AND WHEN-ISSUED TRANSACTIONS
Each Fund may purchase securities on a when-issued, delayed delivery or
forward commitment basis. Securities transactions settled on a when-issued or
forward commitment basis are also known as delayed delivery transactions. The
phrase "delayed delivery" is not intended to address transactions involving the
purchase of securities where the delay in delivery involves only the brief
period usually required by the selling party and its agent solely to locate
appropriate certificates and prepare them for submission for clearance and
settlement in the customary way. Forward commitment and when-issued transactions
involve a commitment by the Fund to purchase or sell securities at a future date
(ordinarily up to 90 days later). The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitments are
negotiated directly with the other party, and such commitments are not traded on
exchanges. A Fund will not enter into such transactions for the purpose of
leverage.
When-issued purchases and forward commitments enable a Fund to lock in
what is believed to be an attractive price or yield on a particular security for
a period of time, regardless of future changes in interest rates. For instance,
in periods of rising interest rates and falling prices, a Fund might sell
securities it owns on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising prices, a Fund
might sell securities it owns and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher yields.
- 4 -
<PAGE>
The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value are reflected in the
computation of the Fund's net asset value starting on the date of the agreement
to purchase the securities, and the Fund is subject to the rights and risks of
ownership of the securities on that date. The Fund does not earn interest on the
securities it has committed to purchase until they are paid for and delivered on
the settlement date. When the Fund makes a forward commitment to sell securities
it owns, the proceeds to be received upon settlement are included in the Fund's
assets. Fluctuations in the market value of the underlying securities are not
reflected in the Fund's net asset value as long as the commitment to sell
remains in effect. Settlement of when-issued purchases and forward commitment
transactions generally takes place up to 90 days after the date of the
transaction, but a Fund may agree to a longer settlement period.
A Fund will make commitments to purchase securities on a when-issued basis
or to purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into. A Fund
also may sell securities it has committed to purchase before those securities
are delivered to the Fund on the settlement date.
When a Fund purchases securities on a when-issued or forward commitment
basis, the Fund will note on its records, or the Custodian will maintain in a
segregated account, securities having a value (determined daily) at least equal
to the amount of the Fund's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the Fund will note on its records, or
the Custodian will hold in a segregated account, the portfolio securities while
the commitment is outstanding. These procedures are designed to ensure that the
Fund will maintain sufficient assets at all times to cover its obligations under
when-issued purchases and forward commitments.
LOANS OF PORTFOLIO SECURITIES
Each Fund may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to financial
institutions, such as broker-dealers, and would be required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The rules of the New York Stock Exchange
("NYSE") give the Fund the right to call a loan and obtain the securities loaned
at any time on five days' notice. For the duration of a loan, the Fund would
receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation from the investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but the Fund would call
the loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. However, the loans would be made only to
firms deemed by the Adviser
- 5 -
<PAGE>
to be of good standing, and when, in the judgment of the Adviser, the
consideration which can be earned currently from securities loans of this type
justifies the attendant risk. If the Adviser determines to make securities
loans, it is intended that the value of the securities loaned would not exceed
33 1/3% of the value of the total assets of the Fund.
At the present time the staff of the SEC does not object if an investment
company pays reasonable negotiated fees to its custodian in connection with
loaned securities as long as such fees are pursuant to a contract approved by
the investment company's trustees.
OPTIONS
WRITING COVERED CALL OPTIONS ON SECURITIES. Each Fund may write (sell)
covered call options on securities ("calls") at such time or times as the
Adviser shall determine to be appropriate. When a Fund writes a call, it
receives a premium and sells to the purchaser the right to buy the underlying
security at any time during the call period (usually between three and nine
months) at a fixed exercise price regardless of market price changes during the
call period. If the call is exercised, the Fund forgoes any gain but is not
subject to any loss on any change in the market price of the underlying security
relative to the exercise price. A Fund will write such options subject to any
applicable limitations or restrictions imposed by law.
PURCHASING CALL OPTIONS. Each Fund may purchase a call option when the
Adviser believes the value of the underlying security will rise or to effect a
"closing purchase transaction." A Fund will realize a profit (or loss) from a
closing purchase transaction if the amount paid to purchase a call is less (or
more) than the amount received from the sale thereof.
PUT OPTIONS. Each Fund may also write and purchase put options on
securities ("puts"). A put written by a Fund obligates it to purchase the
specified security at a specified price if the option is exercised at any time
before the expiration date. All put options written by a Fund would be covered.
A Fund may purchase a put option when the Adviser believes the value of the
underlying security will decline. A Fund may purchase put options on securities
in its portfolio in order to hedge against a decline in the value of such
securities ("protective puts").
The purpose of writing covered put and call options is to hedge against
fluctuations in the market value of a Fund's portfolio securities. Each Fund may
purchase or sell call and put options on securities indices for a similar
purpose. Such a hedge is limited to the degree that the price change of the
underlying security is in an amount which is less than the difference between
the option premium received by the Fund and the option strike price. To the
extent that the underlying security's price change exceeds this amount, written
put and call options will not provide an effective hedge.
A written call option would be covered if the Fund owns the security
underlying the option. A written put option may be covered by the Fund
segregating cash or liquid securities, either on its records or with the
Custodian. While this will ensure that the Fund will have sufficient assets
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to meet its obligations under the option contract should it be exercised, it
does not reduce the potential loss to the Fund should the value of the
underlying security decrease and the option be exercised. A written call option
or put option may also be covered by purchasing an offsetting option or any
other option which, by virtue of its exercise price or otherwise, reduces the
Fund's net exposure on its written option position. Further, instead of
"covering" a written call option, the Fund may simply segregate cash or liquid
securities, either on its records or with the Custodian, in amounts sufficient
to ensure that it is able to meet its obligations under the written call should
it be exercised. This method does not reduce the potential loss to the Fund
should the value of the underlying security increase and the option be
exercised.
OPTIONS ON SECURITIES INDICES. Each Fund may purchase call and put options
on securities indices for the purpose of hedging against the risk of unfavorable
price movements adversely affecting the value of the Fund's securities or
securities the Fund intends to buy or to seek to increase total return. Such
Fund's net assets will be at risk as a result of such transactions. Unlike a
stock option, which gives the holder the right to purchase or sell a specified
stock at a specified price, an option on a securities index gives the holder the
right to receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the underlying
securities index on the exercise date multiplied by (ii) a fixed "index
multiplier."
A securities index fluctuates with changes in the market values of the
stocks included in the index. For example, some securities index options are
based on a broad market index such as the S&P 500 or the Value Line Composite
Index, or a narrower market index such as the Standard & Poor's 100 Stock Index
("S&P 100"). Indices may also be based on an industry or market segment such as
the AMEX Oil and Gas Index or the Computer and Business Equipment Index. Options
on securities indices are currently traded on the Chicago Board Options
Exchange, the NYSE and the American Stock Exchange.
The Funds may purchase put options to seek to hedge against an anticipated
decline in stock market prices that might adversely affect the value of a Fund's
portfolio securities. If a Fund purchases a put option on a securities index,
the amount of the payment it would receive upon exercising the option would
depend on the extent of any decline in the level of the securities index below
the exercise price. Such payments would tend to offset a decline in the value of
the Fund's portfolio securities. However, if the level of the securities index
increases and remains above the exercise price while the put option is
outstanding, a Fund will not be able to profitably exercise the option and will
lose the amount of the premium and any transaction costs. Such loss may be
partially or wholly offset by an increase in the value of a Fund's portfolio
securities.
The Funds may purchase call options on securities indices in order to
participate in an anticipated increase in stock market prices or to offset
anticipated price increases on securities that it intends to buy in the future.
If a Fund purchases a call option on a securities index, the amount of the
payment it receives upon exercising the option depends on the extent of any
increase in the level of the securities index above the exercise price. Such
payments would in
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effect allow the Fund to benefit from stock market appreciation even though it
may not have had sufficient cash to purchase the underlying stocks. Such
payments may also offset increases in the price of stocks that the Fund intends
to purchase. If, however, the level of the securities index declines and remains
below the exercise price while the call option is outstanding, a Fund will not
be able to exercise the option profitably and will lose the amount of the
premium and transaction costs. Such loss may be partially or wholly offset by a
reduction in the price a Fund pays to buy additional securities for its
portfolio.
The Funds may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration segregated either on the Fund's records or by its custodian) upon
conversion or exchange of other securities in their respective portfolio. The
Funds may also cover call and put options on a securities index by segregating
cash or liquid securities with a value equal to the exercise price either on the
Fund's records or with their custodian or by using the other methods described
above. When purchased, options on securities indices may not enable the Fund to
hedge effectively against interest rate or stock market risk if the stocks
comprising the index subject to the option are not highly correlated with the
composition of the Fund's portfolio. Moreover, the ability to hedge effectively
depends upon the ability to predict movements in interest rates or the stock
market. Some options on securities indices may not have a broad and liquid
secondary market, in which case options purchased by the Fund may not be closed
out and the Fund could lose more than its option premium when the option
expires.
The purchase and sale of option contracts is a highly specialized activity
which involves investment techniques and risks different from those ordinarily
associated with investment companies. It should be noted that transaction costs
relating to options transactions may tend to be higher than the transaction
costs with respect to transactions in securities. In addition, if a Fund were to
write a substantial number of option contracts which are exercised, the
portfolio turnover rate of that Fund could increase.
Securities for each Fund's portfolio will continue to be bought and sold
solely on the basis of appropriateness to fulfill the applicable Fund's
investment objective. Option transactions can be used, among other things, to
increase the return on portfolio positions.
FUTURES TRANSACTIONS
Each Fund may purchase and sell futures contracts for hedging purposes and
to seek to increase total return. A futures contract is an agreement between two
parties to buy and sell a security for a set price at a future time. Each Fund
may also enter into index-based futures contracts and interest rate futures
contracts. Futures contracts on indices provide for a final cash settlement on
the expiration date based on changes in the relevant index. All futures
contracts are traded on designated "contract markets" licensed and regulated by
the Commodity Futures
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Trading Commission (the "CFTC") which, through their clearing corporations,
guarantee performance of the contracts.
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). If a Fund holds long-term U.S.
Government securities and the Adviser anticipates a rise in long-term interest
rates, it could, in lieu of disposing of its portfolio securities, enter into
futures contracts for the sale of similar long-term securities. If rates
increased and the value of a Fund's portfolio securities declined, the value of
that Fund's futures contracts would increase, thereby protecting that Fund by
preventing net asset value from declining as much as it otherwise would have. If
the Adviser expects long-term interest rates to decline, a Fund might enter into
futures contracts for the purchase of long-term securities, so that it could
offset anticipated increases in the cost of such securities it intends to
purchase while continuing to hold higher-yielding short-term securities or
waiting for the long-term market to stabilize. Similar techniques may be used by
the Funds to hedge stock market risk.
Each Fund also may purchase and sell listed put and call options on
futures contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put), at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised, settlement is
effected by the payment of cash representing the difference between the current
market price of the futures contract and the exercise price of the option. The
risk of loss to a Fund purchasing an option on a futures contract is limited to
the premium paid for the option. A Fund may purchase put options on interest
rate futures contracts in lieu of, and for the same purpose as, its sale of a
futures contract: to seek to hedge a long position in the underlying futures
contract.
The purchase of call options on interest rate futures contracts is
intended to serve the same purpose as the actual purchase of the futures
contract.
A Fund would write a call option on a futures contract to seek to hedge
against a decline in the prices of the securities underlying the futures
contracts. If the price of the futures contract at expiration is below the
exercise price, the applicable Fund would retain the option premium, which would
offset, in part, any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the
purchase of the futures contract, except that, if the market price declines, a
Fund would pay more than the market price for the underlying securities. The net
cost to a Fund will be reduced, however, by the premium received on the sale of
the put, less any transaction costs. See "Dividends, Distributions and Tax
Status" below.
Each Fund may engage in "straddle" transactions, which involve the
purchase or sale of combinations of call and put options on the same underlying
securities or futures contracts.
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<PAGE>
In purchasing and selling futures contracts and related options, each Fund
intends to comply with rules and interpretations of the CFTC and of the SEC.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
Each Fund will engage in futures and related options transactions only for
hedging purposes in accordance with CFTC regulations or to seek to increase
total return to the extent permitted by such regulations. The Fund will
determine that the price fluctuations in the futures contracts and options on
futures contracts used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or which it expects to purchase.
Except as stated below, a Fund's futures transactions will be entered into for
traditional hedging purposes - that is, futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. As evidence of this hedging
intent, the Fund expects that on 75% or more of the occasions on which it takes
a long futures (or option) position (involving the purchase of futures
contracts), a Fund will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures (or option) position is closed out. However, in particular cases, when
it is economically advantageous for a Fund to do so, a long futures position may
be terminated (or an option may expire) without the corresponding purchase of
securities. As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits a Fund to elect to comply with a different
test, under which the sum of the amounts of initial margin deposits on its
existing futures positions and premiums paid for options on futures entered into
for the purpose of seeking to increase total return (net of the amount the
positions were "in the money" at the time of purchase) would not exceed 5% of
that Fund's net assets, after taking into account unrealized gains and losses on
such positions. A Fund will engage in transactions in futures contracts and
related options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for
maintaining its qualification as a regulated investment company for Federal
income tax purposes (see "Dividends, Distributions, and Tax Status").
A Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures contracts, to make margin
deposits, which will be held by a Fund's custodian for the benefit of the
merchant through whom a Fund engages in such futures and options transactions.
In the case of futures contracts or options thereon requiring the Fund to
purchase securities, the Fund must segregate cash or liquid securities in an
account maintained by the Custodian to cover such contracts and options. Cash or
liquid securities required to be in a segregated account will be marked to
market daily.
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SPECIAL CONSIDERATIONS AND RISKS RELATED TO OPTIONS AND FUTURES TRANSACTIONS
Exchange markets in options on certain securities are a relatively new and
untested concept. It is impossible to predict the amount of trading interest
that may exist in such options, and there can be no assurance that viable
exchange markets will develop or continue.
The exchanges will not continue indefinitely to introduce new expirations
to replace expiring options on particular issues because trading interest in
many issues of longer duration tends to center on the most recently auctioned
issues. The expirations introduced at the commencement of options trading on a
particular issue will be allowed to run out, with the possible addition of a
limited number of new expirations as the original expirations expire. Options
trading on each issue of securities with longer durations will thus be phased
out as new options are listed on more recent issues, and a full range of
expirations will not ordinarily be available for every issue on which options
are traded.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable, securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
markets for underlying securities close before the options markets, significant
price and rate movements can take place in the options markets that cannot be
reflected in the underlying markets. In addition, to the extent that the options
markets close before the markets for the underlying securities, price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets.
Prior to exercise or expiration, an option position can be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on an exchange for call or put options of the same series.
Similarly, positions in futures may be closed out only on an exchange which
provides a secondary market for such futures. A Fund will enter into an option
or futures position only if there appears to be a liquid secondary market for
such options or futures. However, there can be no assurance that a liquid
secondary market will exist for any particular call or put option or futures
contract at any specific time. Thus, it may not be possible to close an option
or futures position. In the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of maintenance margin for
futures contracts or options on futures contracts position written by that Fund.
A Fund may have to sell portfolio securities at a time when it may be
disadvantageous to do so if it had insufficient cash to meet the daily
maintenance margin requirements. In addition, a Fund may be required to take or
make delivery of the instruments underlying interest rate futures contracts it
holds. The inability to
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close options and futures positions also could have an adverse impact on a
Fund's ability to effectively hedge its portfolios.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security (whether or not
covered) which may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of applicable trading limits and it may impose other
sanctions or restrictions. The Trust and other clients advised by the Adviser
and its affiliates may be deemed to constitute a group for these purposes. In
light of these limits, the trustees of the Trust (the "Trustees") may determine
at any time to restrict or to terminate the Funds' transactions in options. The
Adviser does not believe that these trading and position limits will have any
adverse impact on the investment techniques for hedging the Trust's portfolios.
Over-the-counter ("OTC") options are purchased from or sold to securities
dealers, financial institutions or other parties ("Counterparties") through
direct agreement with the Counterparty. In contrast to exchange listed options,
which generally have standardized terms and performance mechanics, all the terms
of an OTC option, including such terms as method of settlement, term, exercise
price, premium, guarantees and security, are set by negotiation of the parties.
Unless the parties provide for it, there is no central clearing or
guaranty function in the OTC option market. As a result, if the Counterparty
fails to make delivery of the security or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with U.S.
Government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers," or broker dealers, domestic or foreign banks or other
financial institutions which have received, combined with any credit
enhancements, a long-term debt rating of A from Standard & Poor's Ratings Group
("Standard & Poor's") or Moody's Investor Services, Inc. ("Moody's") or an
equivalent rating from any other nationally recognized statistical rating
organization ("NRSRO") or that issue long-term debt determined to be of
equivalent credit quality by the Adviser. The Trust treats OTC options purchased
by a Fund, and portfolio securities "covering" the amount of a Fund's obligation
pursuant to an OTC option sold by it (the cost of the sell-back plus the
in-the-money amount, if any) as illiquid, and subject to each Fund's limitation
on investing no more than 15% of its net assets in illiquid securities. However,
for options written with "primary dealers" in U.S. Government securities
pursuant to an agreement requiring a closing transaction at a formula price, the
amount which is considered to be illiquid may be calculated by reference to a
formula price.
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<PAGE>
Utilization of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are the subject of the hedge. If the price of the
futures contract moves more or less than the price of the security, a Fund will
experience a gain or loss which will not be completely offset by movements in
the price of the securities which are the subject of the hedge. There is also a
risk of imperfect correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged.
Transactions in options on futures contracts involve similar risks.
MORTGAGE-BACKED SECURITIES
The Funds may invest in mortgage pass-through certificates and
multiple-class pass-through securities, such as real estate mortgage investment
conduits ("REMIC") pass-through certificates and collateralized mortgage
obligations ("CMOs").
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and guaranteed by
the U.S. Government or one of its agencies or instrumentalities, including but
not limited to the Ginnie Mae, Fannie Mae and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the U.S. Government for timely payment of principal and
interest on the certificates. Fannie Mae certificates are guaranteed by Fannie
Mae, a federally chartered and privately owned corporation, for full and timely
payment of principal and interest on the certificates. Freddie Mac certificates
are guaranteed by Freddie Mac, a corporate instrumentality of the U.S.
Government, for timely payment of interest and the ultimate collection of all
principal of the related mortgage loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie
Mac certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs is
provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code
and invests in certain mortgages primarily secured by interests in real property
and other permitted investments.
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<PAGE>
Investors may purchase "regular" and "residual" interest shares of beneficial
interest in REMIC trusts although the funds do not intend to invest in residual
interests.
PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Funds may invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in mortgage
loans and other non-governmental entities (or representing custodial
arrangements administered by such institutions). These private originators and
institutions include savings and loan associations, mortgage bankers, commercial
banks, insurance companies, investment banks and special purpose subsidiaries of
the foregoing.
Privately issued mortgage-backed securities are generally backed by pools
of conventional (I.E., non-government guaranteed or insured) mortgage loans.
Since such mortgage-backed securities normally are not guaranteed by an entity
having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to
receive a high quality rating from the rating organizations (E.G., Standard &
Poor's or Moody's), they often are structured with one or more types of "credit
enhancement." Such credit enhancement falls into two categories: (1) liquidity
protection and (2) protection against losses resulting after default by a
borrower and liquidation of the collateral (E.G., sale of a house after
foreclosure). Liquidity protection refers to the payment of cash advances to
holders of mortgage-backed securities when a borrower on an underlying mortgage
fails to make its monthly payment on time. Protection against losses resulting
after default and liquidation is designed to cover losses resulting when, for
example, the proceeds of a foreclosure sale are insufficient to cover the
outstanding amount on the mortgage. Such protection may be provided through
guarantees, insurance policies or letters of credit, through various means of
structuring the securities or through a combination of such approaches.
Examples of credit enhancement arising out of the structure of the
transaction include "senior- subordinated securities" (multiple class securities
with one or more classes entitled to receive payment before other classes, with
the result that defaults on the underlying mortgages are borne first by the
holders of the subordinated class), creation of "spread accounts" or "reserve
funds" (where cash or investments are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on the underlying
mortgages in a pool exceed the amount required to be paid on the mortgage-backed
securities). The degree of credit enhancement for a particular issue of
mortgage-backed securities is based on the level of credit risk associated with
the particular mortgages in the related pool. Losses on a pool in excess of
anticipated levels could nevertheless result in losses to security holders since
credit enhancement rarely covers every dollar owed on a pool.
RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in
Mortgage-Backed Securities (such as those described above) involves certain
risks, including the failure of a counter-party to meet its commitments, adverse
interest rate changes and the effects of prepayments on mortgage cash flows.
Further, the yield characteristics of Mortgage-Backed Securities differ from
those of traditional fixed income securities. The major differences typically
include more frequent interest and principal payments (usually monthly), the
adjustability of
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interest rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When a Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. Government securities as a means of "locking in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment
rate will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates. The market for certain types of
Mortgage-Backed Securities (I.E., certain CMOs) may not be liquid under all
interest rate scenarios, which may prevent a fund from selling such securities
held in its portfolio at times or prices that it desires.
RISKS ASSOCIATED WITH SPECIFIC TYPES OF DERIVATIVE DEBT SECURITIES. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities.
Planned amortization class ("PAC") and target amortization class ("TAC")
CMO bonds involve less exposure to prepayment, extension and interest rate risk
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets.
The Funds may invest in floating rate securities based on the Cost of
Funds Index ("COFI floaters"), other "lagging rate" floating rate securities,
floating rate securities that are subject to a maximum interest rate ("capped
floaters"), and Mortgage-Backed Securities purchased at a discount. The primary
risks associated with these derivative debt securities are the potential
extension of average life and/or depreciation due to rising interest rates.
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MORTGAGE DOLLAR ROLL TRANSACTIONS
The Funds may enter into mortgage dollar roll transactions in which the
fund sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase similar (same type, coupon
and maturity), but not identical securities on a specified future date. During
the roll period, the fund will not receive principal and interest paid on the
securities sold. However, the fund would benefit to the extent of any difference
between the price received for the securities sold and the lower forward price
for the future purchase (often referred to as the "drop") or fee income plus the
interest on the cash proceeds of the securities sold until the settlement date
of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the fund compared
with what such performance would have been without the use of mortgage dollar
rolls. The funds will hold and maintain in a segregated account until the
settlement date cash or liquid, high grade debt securities in an amount equal to
the forward purchase price. Any benefits derived from the use of mortgage dollar
rolls may depend upon mortgage prepayment assumptions, which will be affected by
changes in interest rates. There is no assurance that mortgage dollar rolls can
be successfully employed.
ASSET-BACKED SECURITIES
The Funds may invest in asset-backed securities, which represent
participations in, or are secured by and payable from, pools of assets such as
motor vehicle installment sale contracts, installment loan contracts, leases of
various types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Asset-backed
securities may also be collateralized by a portfolio of U.S. Government
securities, but are not direct obligations of the U.S. Government, its agencies
or instrumentalities. Such asset pools are securitized through the use of
privately-formed trusts or special purpose corporations. Payments or
distributions of principal and interest on asset-backed securities may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution unaffiliated
with the trust or corporation, or other credit enhancements may be present;
however privately issued obligations collateralized by a portfolio of privately
issued asset-backed securities do not involve any government-related guarantee
or insurance. In addition to risks similar to those associated with
Mortgage-Backed Securities, asset-backed securities present further risks that
are not presented by Mortgage-Backed Securities because asset-backed securities
generally do not have the benefit of a security interest in collateral that is
comparable to mortgage assets. See "Risk Factors Associated with Mortgage-Backed
Securities."
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CONVERTIBLE SECURITIES AND PREFERRED STOCKS
The Funds may invest in debt securities or preferred stocks that are
convertible into or exchangeable for common stock. Preferred stocks are
securities that represent an ownership
interest in a company and provide their owner with claims on the company's
earnings and assets prior to the claims of owners of common stock but after
those of bond owners. Preferred stocks in which the Funds may invest include
sinking fund, convertible, perpetual fixed and adjustable rate (including
auction rate) preferred stocks. There is no minimum credit rating applicable to
a Fund's investment in preferred stocks and securities convertible into or
exchangeable for common stocks.
SMALL CAPITALIZATION STOCKS
Each Fund may invest in varying amounts in smaller, lesser known companies
which the Adviser believes offer a greater growth potential than larger, more
mature better known companies. There is a higher risk that a fund will lose
money because it invests in small capitalization stocks. Smaller companies may
have limited product lines, markets and financial resources. The prices of small
capitalization stocks tend to be more volatile than those of other stocks. Small
capitalization stocks are not priced as efficiently as stocks of larger
companies. In addition, it may be harder to sell these stocks, especially during
a down market or upon the occurrence of adverse company-specific events, which
can reduce their selling prices.
STRUCTURED OR HYBRID NOTES
The Funds may invest in "structured" or "hybrid" notes. The distinguishing
feature of a structured or hybrid note is that the amount of interest and/or
principal payable on the note is based on the performance of a benchmark asset
or market other than fixed-income securities or interest rates. Examples of
these benchmarks include stock prices, currency exchange rates and physical
commodity prices. Investing in a structured note allows the fund to gain
exposure to the benchmark market while fixing the maximum loss that the fund may
experience in the event that market does not perform as expected. Depending on
the terms of the note, the Fund may forego all or part of the interest and
principal that would be payable on a comparable conventional note; the fund's
loss cannot exceed this foregone interest and/or principal.
In addition to the risks associated with a direct investment in the
benchmark asset, investments in structured and hybrid notes involve the risk
that the issuer or counterparty to the obligation will fail to perform its
contractual obligations. Certain structured or hybrid notes may also be
leveraged to the extent that the magnitude of any change in the interest rate or
principal payable on the benchmark asset is a multiple of the change in the
reference price. Leverage enhances the price volatility of the security and,
therefore, the volatility of the fund's net asset value. Further, certain
structured or hybrid notes may be illiquid for purposes of the Funds' limitation
on investments in illiquid securities.
-17-
<PAGE>
PARTICIPATION INTERESTS
Each Fund may purchase from banks participation interests in all or part
of specific holdings of debt obligations. Each participation interest is backed
by an irrevocable letter of credit or guarantee of the selling bank that the
Adviser has determined meets the prescribed quality standards of each Fund.
Thus, even if the credit of the issuer of the debt obligation does not meet the
quality standards of a Fund, the credit of the selling bank will. Each Fund will
have the right to sell the participation interest back to the bank after seven
days' notice for the full principal amount of a Fund's interest in the debt
obligation plus accrued interest, but only (1) as required to provide liquidity
to that Fund, (2) to maintain the quality standards of each Fund's investment
portfolio or (3) upon a default under the terms of the debt obligation. The
selling bank may receive a fee from a Fund in connection with the arrangement.
SECURITIES OF FOREIGN ISSUERS
To the extent included in the applicable Benchmark, each Fund may invest
in certain types of U.S. dollar-denominated securities of foreign issuers,
including American Depository Receipts ("ADRs"). ADRs are U.S.
dollar-denominated certificates issued by a U.S. bank or trust company and
represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a U.S. bank. ADRs are traded on domestic
exchanges or in the U.S. over-the-counter market and, generally, are in
registered form. Investments in ADRs have certain advantages over direct
investment in the underlying non-U.S. securities because (i) ADRs are U.S.
dollar-denominated investments which are registered domestically, easily
transferable, and for which market quotations are readily available, and (ii)
issuers whose securities are represented by ADRs are subject to the same
auditing, accounting and financial reporting standards as domestic issuers. To
the extent a Fund acquires ADRs through banks which do not have a contractual
relationship with the foreign issuer of the security underlying the ADR to issue
and service such ADRs, there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions such as stock
splits or rights offerings involving the foreign issuer in a timely manner.
Although the Funds do not currently invest directly in foreign denominated
securities, the Long-Term Fund and the Medium-Term Fund will each invest in
other investment companies that will invest their assets in securities of
foreign issuers. The Long-Term and Medium-Term Funds may, therefore, be subject
to the risks associated with investing in foreign securities.
Investing in foreign securities may involve advantages and disadvantages
not present in domestic investments. There may be less publicly available
information about securities not registered domestically, or their issuers, than
is available about domestic issuers or their domestically registered securities.
Stock markets outside the U.S. may not be as developed as domestic markets, and
there may also be less government supervision of foreign exchanges and brokers.
Foreign denominated securities may be less liquid or more volatile than U.S.
securities. Trade settlements may be slower and could possibly be subject to
failure. In addition, brokerage commissions and custodial costs with respect to
foreign denominated securities may be higher than those for domestic
investments. Accounting, auditing, financial reporting, and disclosure standards
for foreign issuers may be different than those applicable to domestic issuers.
Foreign denominated securities may be affected favorably or unfavorably by
changes in currency exchange
- 18 -
<PAGE>
rates and exchange control regulations (including currency blockage) and a Fund
investing in such securities may incur costs in connection with conversions
between various currencies. Foreign securities may also involve risks due to
changes in the political or economic conditions of such foreign countries, the
possibility of expropriation of assets or nationalization, and possible
difficulty in obtaining and enforcing judgments against foreign entities.
ZERO COUPON AND CAPITAL APPRECIATION BONDS
The Funds may invest in zero coupon and capital appreciation bonds. Zero
coupon and capital appreciation bonds are debt securities issued or sold at a
discount from their face value that do not entitle the holder to any payment of
interest prior to maturity or a specified redemption date (or cash payment
date). The amount of the discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, the liquidity of the
security and the perceived credit quality of the issuer. These securities also
may take the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves or receipts or certificates
representing interests in such stripped debt obligations or coupons. The market
prices of zero coupon and capital appreciation bonds generally are more volatile
than the market prices of interest-bearing securities and are likely to respond
to a greater degree to changes in interest rates than interest-bearing
securities having similar maturities and credit quality.
REAL ESTATE INVESTMENT TRUSTS
Each Fund may invest in shares of real estate investment trusts ("REITs").
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Like
investment companies such as the Funds, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Code. Funds that invest in REITs will indirectly bear their proportionate
share of any expenses paid by such REITs in addition to the expenses paid by the
Funds.
Investing in REITs involves certain risks: equity REITs may be affected by
changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self-liquidation, and the possibilities of failing to
qualify for the exemption from tax for distributed income under the Code and
failing to maintain their exemptions from the 1940 Act. REITs whose underlying
assets include long-term health care
- 19 -
<PAGE>
properties, such as nursing, retirement and assisted living homes, may be
impacted by federal regulations concerning the health care industry.
Investing in REITs may involve risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P 500.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are either (i) backed by the full faith and
credit of the U.S. Government (E.G., U.S. Treasury bills), (ii) guaranteed by
the U.S. Treasury (E.G., Ginnie Mae mortgage-backed securities), (iii) supported
by the issuing agency's or instrumentality's right to borrow from the U.S.
Treasury (E.G., Fannie Mae discount notes) or (iv) supported only by the issuing
agency's or instrumentality's own credit (E.G. securities of each of the Federal
Home Loan Banks). Such guarantees of U.S. Government securities held by a fund
do not, however, guarantee the market value of the shares of the fund. There is
no guarantee that the U.S. Government will continue to provide support to its
agencies or instrumentalities in the future.
MARKET CHANGES
The market value of the Funds' investments, and thus the Funds' net
asset values, will change in response to market conditions affecting the value
of their portfolio securities. When interest rates decline, the value of fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of fixed rate obligations can be expected to decline. In contrast, as
interest rates on adjustable rate loans are reset periodically, yields on
investments in such loans will gradually align themselves to reflect changes in
market interest rates, causing the value of such investments to fluctuate less
dramatically in response to interest rate fluctuations than would investments in
fixed rate obligations.
PORTFOLIO TURNOVER
Although no Fund purchases securities with a view to rapid turnover,
there are no limitations on the length of time that securities must be held by
any Fund and a Fund's annual portfolio turnover rate may vary significantly from
year to year. A high rate of portfolio turnover (100% or more) involves
correspondingly greater transaction costs which must be borne by the applicable
Fund and its shareholders. The actual portfolio turnover rates for each Fund are
noted in the prospectus.
- 20 -
<PAGE>
RESTRICTED AND ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in illiquid
investments, which includes securities that are not readily marketable,
repurchase agreements maturing in more than seven days, privately issued
stripped mortgage-backed securities and "restricted securities" (I.E.,
securities that would be required to be registered prior to distribution to the
public), including restricted securities eligible for resale to certain
institutional investors pursuant to Rule 144A of the Securities Act of 1933, as
amended (the "1933 Act"). The Trustees have adopted guidelines and delegated to
the Adviser the daily function of determining and monitoring the liquidity of
portfolio securities. The Trustees, however, retain sufficient oversight and are
ultimately responsible for the determinations. Please see the non-fundamental
investment restrictions for further limitations regarding the Funds' investments
in restricted and illiquid securities.
Since it is not possible to predict with assurance exactly how the
market for restricted securities sold and offered under Rule 144A will develop,
the Trustees will carefully monitor each Fund's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in the Funds to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities. Notwithstanding the foregoing investment restrictions and
as further described below, each Fund may invest all or part of its assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as each Fund.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities trade when
they are not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market price is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
OTHER INVESTMENT COMPANIES
Each Fund, subject to authorization by the Trustees, may invest all of
its investable assets in the securities of a single open-end investment company
(a "Portfolio"). If authorized by the Trustees, a Fund would seek to achieve its
investment objective by investing in a Portfolio, which Portfolio would invest
in a portfolio of securities that complies with the Fund's investment
objectives, policies and restrictions. The Trustees do not intend to authorize
investing in this manner at this time.
Each Fund may invest up to 10% of its total assets, calculated at the
time of purchase, in the securities of other investment companies (other than
those affiliated with WPG) but may not invest more than 5% of its total assets
in the securities of any one investment company or acquire more than 3% of the
voting securities of any investment company. Investments in investment companies
will result in duplication of certain expenses, since the Fund will indirectly
bear its
- 21 -
<PAGE>
proportionate share of any expenses paid by investment companies in which it
invests in addition to the expenses paid by the Fund.
CALCULATION OF THE FUNDS' RETURNS
TOTAL RETURN
The average annual total return with respect to a class of shares of
each Fund is determined for a particular period by calculating the actual dollar
amount of the investment return on a $1,000 investment in that class of shares
of the Fund made at the net asset value of such shares at the beginning of the
period, and then calculating the annual compounded rate of return which would
produce that amount. Total return for a period of one year is equal to the
actual return of the Fund during that period. The following formula describes
the calculation:
ERV = P(1+T)n
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return with respect to the particular class of
shares. n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made
at the beginning of the indicated period.
This calculation assumes that (i) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period and
(ii) all recurring fees are included for applicable periods.
Each Fund may illustrate in advertisements and sales literature the
average annual total return and cumulative total return for several time periods
throughout the Fund's life based on an assumed initial investment of $1,000. Any
such cumulative total return for a Fund will assume the reinvestment of all
income dividends and capital gains distributions in the applicable class of
shares for the indicated periods and will include all recurring fees.
The average annual total return for the shares of each Class of each
Fund offering such shares during the periods indicated was as follows:
- 22 -
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN
FIVE YEARS
(OR COMMENCEMENT OF OPERATIONS) TEN YEARS
ENDED 12/31/99 ENDED 12/31/99
ONE YEAR ENDED
FUND 12/31/99 ANNUALIZED CUMULATIVE ANNUALIZED CUMULATIVE
---- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Long-Term Retirement Fund*
Institutional Class 10.07% 15.93% 74.02% N/A N/A
Adviser Class 9.53% 15.24% 71.92% N/A N/A
Medium-Term Retirement Fund*
Institutional Class 4.77% 13.00% 58.09% N/A N/A
Adviser Class 4.32% 12.47% 56.67% N/A N/A
Short-term Retirement Fund* 2.40% 11.07% 48.22% N/A N/A
Institutional Class 2.12% 10.68% 47.35% N/A N/A
Adviser Class
<FN>
- -------------------------
*THE INSTITUTIONAL CLASS AND ADVISER CLASS SHARES OF EACH FUND COMMENCED
OPERATIONS ON APRIL 2, 1996 AND MARCH 7, 1996, RESPECTIVELY. NONE OF THE
FUND'S IMPOSED THEIR ENTIRE ADVISORY FEE AND THE ADVISER REIMBURSED
CERTAIN OPERATING EXPENSES DURING VARIOUS PERIODS SINCE INCEPTION OF EACH
FUND. HAD THE ADVISER IMPOSED ITS ENTIRE FEE AND NOT LIMITED OPERATING
EXPENSES, THE FUNDS' TOTAL RETURNS FOR THE PERIODS INDICATED WOULD HAVE
BEEN LOWER.
</FN>
</TABLE>
- 23 -
<PAGE>
YIELD
The 30 day yield quotation with respect to a class of shares of each of
the Tomorrow Funds is computed by dividing the net investment income for the
period with respect to that class of shares of that Fund by the net asset value
per share of that class on the last day of the period, according to the
following formula:
YIELD = 2[(A-B + 1) 6-1]
---
CD
Where:
a = dividends and interest earned during the period.
b = net expenses accrued for the period.
c = the average daily number of shares of the particular class
outstanding during the period that were entitled to receive
dividends.
d = the offering price per share (net asset value per share) of the
particular class on the last day of the period.
YIELD FOR
30-DAY PERIOD
ENDED 12/31/99
--------------
1. Long-Term Retirement Fund
Institutional Class 0.84%
Adviser Class 0.39%
2. Medium-Term Retirement Fund
Institutional Class 2.16%
Adviser Class 1.63%
3. Short-Term Retirement Fund
Institutional Class 3.52%
Adviser Class 3.24%
Return for a Fund is not fixed or guaranteed and will fluctuate from time
to time, unlike bank deposits or other investments which pay a fixed yield or
return for a stated period of time, and a Fund's performance does not provide a
basis for determining future performance. Return is a function of portfolio
quality, composition, maturity and market conditions as well as the expenses
- 24 -
<PAGE>
incurred by each Fund. The return of a Fund may not be comparable to other
investment alternatives because of differences in the foregoing variables and
differences in the methods used to value portfolio securities, compute expenses
and calculate return.
OTHER QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports
to shareholders, the past performance of a Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, total return of a Fund's
classes may be compared to averages or rankings prepared by Lipper Analytical
Services, Inc., a widely recognized independent service which monitors mutual
fund performance; the Morgan Stanley Europe, Australia, Far East Index ("EAFE"),
an unmanaged index of international stock markets, the Lehman Government
Corporate Index, an unmanaged market weighted blend of all U.S. Government
Securities and all U.S. Corporate Securities, the S&P 400, an unmanaged index of
common stocks; the S&P 500, an unmanaged index of common stocks; the Russell
2000, an unmanaged index of common stocks; the Russell 3000 Index (the "Russell
3000"), an unmanaged index of common stocks; or the Dow Jones Industrial
Average, an unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange.
The S&P 500 is an unmanaged index of 500 common stocks which are traded on
the New York Stock Exchange, American Stock Exchange and the Nasdaq National
Market. The S&P 500 represents approximately 70% of the total domestic U.S.
equity market capitalization. The S&P 400 is an unmanaged index of common stocks
of 400 companies with mid-size market capitalizations. The S&P 500 and the S&P
400 are market value-weighted indices (shares outstanding times stock price) in
which each company's influence on the respective index is directly proportional
to its market value. The companies in the S&P 500 and the S&P 400 are selected
from four major industry sectors: industrials, utilities, financials and
transportation. The 500 companies chosen for the S&P 500 are not the 500 largest
companies in terms of market value. Rather, the companies chosen by S&P for
inclusion in the S&P 500 tend to be leaders in important industries within the
U.S. economy. The Russell 2000 is an unmanaged index of 2000 common stocks of
small capitalization companies. The Russell 2000 is composed of the 2000
smallest companies with respect to capitalization in the Russell 3000 and
represents approximately 7% of the Russell 3000 total market capitalization. The
Russell 3000 is an unmanaged index of 3000 common stocks of large United States
companies with market capitalizations ranging from approximately $60 million to
$80 billion. The Russell 3000 represents approximately 98% of the United States
equity market.
In addition, the performance of the classes of a Fund may be compared to
alternative investment or savings vehicles and/or to indexes or indicators of
economic activity, E.G., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Barron's, Business Week, Consumer's Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
- 25 -
<PAGE>
Magazine, Money Magazine, the New York Times, Smart Money, USA Today, U.S. News
and World Report, The Wall Street Journal and Worth may also be cited (if a Fund
is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Systems, CDA/Wiesenberger Investment Companies Service, Donoghue's
Mutual Fund Almanac, Investment Company Data, Inc., Johnson's Charts, Kanon
Bloch Carre & Co., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems.
In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Funds.
The Funds may also present, from time to time, historical information
depicting the value of a hypothetical account in one or more classes of a Fund
since the Fund's inception.
In presenting investment results, the Funds may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
and when to invest; and (c) his need to analyze his time frame for future
capital needs to determine how long to invest. The investor controls these three
factors, all of which affect the use of investments in building assets. The
Adviser's agreement to limit each Fund's operating expenses will increase
investment performance.
In advertisements, sales literature or reports to shareholders, the Funds
may include references to asset allocation strategies. According to information
supplied by B.G.B. Brinceson, B.D. Singer and G.L. Beebower, as of May/June
1991, 91% of investment performance is derived from asset allocation, the proper
mix of cash, bonds and stocks. In general, the remaining performance is derived
as follows: stock selection--5%, market timing--2%, and other--2%.
According to Standard & Poor's Ratings Group and Crandell, Pierce &
Company, the best and worst stock market returns (as represented by the Standard
& Poor's Index of 500 Common Stocks) annualized over the time periods from 1950
through June 1995 using monthly observations were as follows:
- 26 -
<PAGE>
TIME BEST WORST
PERIOD PERFORMANCE PERFORMANCE
------ ----------- -----------
One Year 61.3% -36.9%
Three Years 33.3% -10.6%
Five Years 29.6% - 4.2%
Seven Years 23.0% - 2.7%
Ten Years 19.2% 0.5%
Fifteen Years 17.2% 4.1%
Twenty Years 15.1% 6.4%
Thirty Years 11.2% 9.1%
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment restrictions
which may not be changed without approval of a majority of the applicable Fund's
outstanding voting securities. Under the 1940 Act, and as used in the
Prospectuses and this SAI, a "majority of the outstanding voting securities"
requires the approval of the lesser of (1) the holders of 67% or more of the
shares of a Fund represented at a meeting of the holders if more than 50% of the
outstanding shares of the Fund are present in person or by proxy or (2) the
holders of more than 50% of the outstanding shares of the Fund.
A Fund may not:
1. Issue senior securities, except as permitted by paragraphs 2, 5, and 6
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts, forward commitments and repurchase agreements
entered into in accordance with the Fund's investment policies or within
the meaning of paragraph 5 below, are not deemed to be senior securities.
2. Borrow money, except (i) from banks for temporary or short-term purposes
or for the clearance of transactions in amounts not to exceed 33 1/3% of
the value of the Fund's total assets (including the amount borrowed) taken
at market value, (ii) in connection with the redemption of Fund shares or
to finance failed settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; (iii) in order to
fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets and (iv) the Fund
may enter into reverse repurchase agreements and forward roll
transactions, but only if after each such borrowing there is asset
coverage of at least 300% as defined in the 1940 Act. For purposes of this
investment restriction, investments in short sales, futures contracts,
options on futures contracts, securities or indices and forward
commitments shall not constitute borrowing.
- 27 -
<PAGE>
3. Act as an underwriter with respect to the securities of other issuers,
except to the extent that in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter for purposes of
the 1933 Act; provided, however, that the Fund may invest all or part of
its investable assets in an open-end investment company with substantially
the same investment objective, policies and restrictions as the Fund.
4. Purchase or sell real estate except that the Fund may (i) acquire or lease
office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities
that are secured by real estate or interests therein, (iv) purchase and
sell mortgage-related securities and (v) hold and sell real estate
acquired by the Fund as a result of the ownership of securities.
5. Invest in commodities, except the Fund may purchase and sell options on
securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such futures,
forward foreign currency exchange contracts, forward commitments,
securities index put or call warrants and repurchase agreements entered
into in accordance with the Fund's investment policies.
6. Make loans, except that the Fund may (1) lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the Fund's
total assets taken at market value, (2) enter into repurchase agreements,
and (3) purchase all or a portion of an issue of debt securities, bank
loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase
is made upon the original issuance of the securities.
7. Purchase the securities of issuers conducting their principal activity in
the same industry if, immediately after such purchase, the value of its
investments in such industry would exceed 25% of its total assets taken at
market value at the time of such investment (except investments in
obligations of the U.S. Government or any of its agencies,
instrumentalities or authorities); provided, however, that the Fund may
invest all or part of its investable assets in an open-end investment
company with substantially the same investment objective, policies and
restrictions as the Fund.
8. For each Fund, with respect to 75% of its total assets, purchase
securities of an issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities or repurchase agreements collateralized
by U.S. Government securities and other investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total assets
taken at market value to be invested in the securities of such
issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund;
provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as the Fund.
- 28 -
<PAGE>
For purposes of the above fundamental investment restrictions regarding
senior securities, the Adviser generally classifies issuers by industry in
accordance with classifications set forth in the Standard & Poor's Stock Guide.
In the absence of such classification or if the Adviser determines in good faith
based on its own information that the economic characteristics affecting a
particular issuer make it more appropriately considered to be engaged in a
different industry, the Adviser may classify an issuer according to its own
sources.
The following restrictions are designated as non-fundamental and may be
changed by the Trustees without the approval of shareholders.
A Fund may not:
a. Pledge, mortgage or hypothecate its assets, except to secure
permitted borrowings and then only if such pledging, mortgaging or
hypothecating does not exceed 33 1/3% of the Fund's total assets
taken at market value. Collateral arrangements with respect to
margin, option and other risk management and when-issued and forward
commitment transactions are not deemed to be pledges or other
encumbrances for purposes of this restriction.
b. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable
to protect or enhance the value of an existing investment.
c. Purchase securities of any other investment company except as
permitted by the 1940 Act.
d. Purchase securities on margin, except any short-term credits which
may be necessary for the clearance of transactions and the initial
or maintenance margin in connection with options and futures
contracts and related options.
e. Invest more than 15% of its net assets in securities which are
illiquid.
f. Purchase additional securities if the Fund's borrowings exceed 5% of
its net assets.
Each Fund may, notwithstanding any other fundamental or non-fundamental
investment restriction or policy, invest all of its assets in the securities of
a single open-end investment company with substantially the same fundamental
investment objectives, restrictions and policies as the Fund.
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<PAGE>
Except with respect to the 300% asset coverage required by fundamental
restriction number 2, if a percentage restriction on investment or utilization
of assets as set forth above is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the values of a Fund's
assets will not be considered a violation of the restriction.
ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISER
As stated in the Prospectus, WPG, One New York Plaza, New York, New York
10004, serves as investment adviser and administrator to each Fund.
The Adviser is an indirect, wholly-owned subsidiary of Robeco Groep N.V.,
a Dutch public limited liability company ("Robeco"). Robeco was formed to be the
holding company for 100% of the shares of Robeco International B.V. and Robeco
Nederland B.V. ("Robeco Nederland") (collectively referred to as the "Robeco
Group"). Cooperatieve Centrale Raiffeisen- Boerenleenbank B.A., Rabobank
Netherland owns 50% of the shares of Robeco and the balance is owned by
shareholders of the Robeco Group funds.
The Robeco Group is a fund management group. Robeco Nederland advises and
manages investment funds, some of whose shares are traded primarily on the
Amsterdam Stock Exchange, which funds include (1) Robeco N.V., (2) Rolinco N.V.,
(3) Rorento N.V., (4) RG Rente Mixfund N.V., (5) RG Obligatie Mixfund N.V., (6)
RG Aandelen Mixfund N.V., (7) RG Florente Fund N.V., (8) RG Divirente Fund N.V.,
(9) RG America Fund N.V., (10) RG Europe Fund N.V., (11) RG Pacific Fund N.V.,
(12) Nettorente Fund N.V., (13) RG Hollands Bezit N.V., (14) RG Emerging Markets
Fund N.V., (15) RG Tactimix Funds, and (16) RG Zelfselect Landen Fund N.V.
Robeco Nederland also advises and manages a number of institutional funds. The
Robeco Group operates primarily outside of the United States, although it
currently holds significant ownership interests in three U.S. investment
advisers, in addition to being the parent company of WPG.
The Robeco Group, through its subsidiaries, has approximately 2,600
employees worldwide. Of the approximately $110 billion in assets under
management as of the date of this SAI, approximately $18 billion was managed in
the U.S.
The Board of Trustees of the Trust, including a majority of the Trustees
who are not "interested persons" (as such term is defined in the 1940 Act) of
the Trust or the Adviser (the "Independent Trustees"), most recently approved
the Funds' current investment advisory agreements (the "Advisory Agreements") at
a meeting held in April 2000. The Advisory Agreements were approved by a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
each Fund at a joint special meeting of shareholders held on July 29, 1998.
- 30 -
<PAGE>
Pursuant to the Advisory Agreements, the Adviser supervises and assists in
the management of the assets of each Fund and furnishes each Fund with research,
statistical and advisory services. In managing the assets of the Funds, the
Adviser furnishes continuously an investment program for each Fund consistent
with the investment objectives and policies of that Fund. More specifically, the
Adviser determines from time to time what securities shall be purchased for the
Fund, what securities shall be held or sold by the Fund and what portion of the
Fund's assets shall be held uninvested as cash, subject always to the provisions
of the Trust's Agreement and Declaration of Trust, By-Laws and its registration
statement under the 1940 Act and under the 1933 Act covering the Trust's shares,
as filed with the SEC, and to the investment objectives, policies and
restrictions of the Fund, as each of the same shall be from time to time in
effect, and subject, further, to such policies and instructions as the Board of
Trustees of the Trust may from time to time establish. To carry out such
determinations, the Adviser places orders for the investment and reinvestment of
each Fund's assets (see "Portfolio Brokerage").
For its investment advisory services under the Advisory Agreements, the
Adviser is entitled to receive an annual fee from each Fund, payable monthly,
equal to 0.75% (on an annual basis) of the Fund's average daily net assets,
except for the Post-Retirement Fund, for which the Adviser is entitled to a fee,
payable monthly, equal on an annual basis to 0.65% of such Fund's average daily
net assets. The advisory fees are accrued daily and will be prorated with
respect to any Fund if the Adviser shall not have acted as that Fund's
investment adviser during any entire monthly period.
The Adviser has voluntarily and temporarily agreed to limit each Fund's
operating expenses (excluding Rule 12b-1 fees with respect to the Adviser Class
shares, service fees with respect to the Institutional Class shares, any other
class-specific expenses, litigation, indemnification and other extraordinary
expenses) to 1.25% of its average daily net assets, except for the
Post-Retirement Fund which has not commenced operations. The Adviser may
discontinue or modify such limitation in the future at its discretion, although
it has no current intention to do so. Each Fund will reimburse the Adviser for
fees foregone or other expenses paid by the Adviser pursuant to this expense
limitation in later years in which operating expenses for the Fund are less than
the expense limitations set forth above for any such year. No interest, carrying
or finance charge will be paid by a Fund with respect to the amounts
representing fees foregone or other expenses paid. In addition, no Fund will pay
any unreimbursed amounts to the Adviser upon termination of its Advisory
Agreement. The advisory fee rates paid to the Adviser under the prior investment
advisory agreements for the fiscal years ended December 31, 1997, 1998 and 1999
are as follows:
- 31 -
<PAGE>
<TABLE>
<CAPTION>
ADVISORY FEES PAID ADVISORY FEES PAID ADVISORY FEES PAID
YEAR ENDED YEAR ENDED YEAR ENDED
FUND DECEMBER 31, 1997(1) DECEMBER 31, 1998(1) DECEMBER 31, 1999(1)
- ---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Long-Term Retirement Fund $ 0 $ 364 $0
Medium-Term Retirement Fund $ 7,722 $ 61,287 $69,269
Short-Term Retirement Fund $18,093 $186,335 $229,898
Post-Retirement Fund(2) N/A N/A N/A
- --------------------
(1) The Adviser voluntarily agreed not to impose all or a portion of its
advisory fee for each Fund during the fiscal years ended December 31, 1997, 1998
and 1999. In the absence of this agreement, the Funds would have paid advisory
fees as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
FUND DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
- ---- ----------------- ---------------- ----------------
Long-Term Retirement Fund $24,878 $56,079 $70,931
Medium-Term Retirement Fund $75,259 $116,439 $128,121
Short-Term Retirement Fund $94,563 $210,990 $246,107
<FN>
- ---------------
(2) The Post-Retirement Fund has not commenced operations.
</FN>
</TABLE>
Each Advisory Agreement provides that the Adviser will not be liable for
any loss sustained by the Trust or any Fund by reason of the adoption or
implementation of any investment policy or the purchase, sale or retention of
any security, whether or not such purchase, sale or retention shall have been
based upon the investigation and research of the Adviser, or upon investigation
and research made by any other individual, firm or corporation if such
recommendation shall have been made and such other individual, firm or
corporation shall have been selected with due care and in good faith, except for
a loss resulting from willful misfeasance, bad faith, or gross negligence in the
performance by the Adviser of its duties or by reason of the Adviser's reckless
disregard of its obligations and duties thereunder.
Each Advisory Agreement may be modified or amended only with the approval
of the holders of a "majority of the outstanding voting securities" (as defined
in the 1940 Act) of the applicable Fund and by a vote of the majority of the
Independent Trustees of the Trust. Each Advisory Agreement's continuance after
its initial two-year term must be approved annually by a vote of the majority of
the Trustees or by a vote of the holders of a "majority of the outstanding
voting securities" of the applicable Fund, cast in person at a meeting called
for the purpose of voting on such approval. Each Advisory Agreement may be
terminated without penalty, by either party, upon not more than 60 days' written
notice and will terminate automatically in the event of its assignment.
- 32 -
<PAGE>
As of December 31, 1999, WPG had capital of approximately $145 million.
WPG consists of 39 Managing Directors, one of whom is a member of the NYSE and
certain principals. WPG has approximately 300 full-time employees in addition to
its Managing Directors. As of December 31, 1999, WPG and its affiliates had
assets under management of approximately $18 billion, primarily for institutions
and high net worth individuals.
Roger J. Weiss is a Senior Managing Director of WPG and Chairman of the
Board, President and Trustee of the Trust. Stephen H. Weiss, brother of Roger J.
Weiss, is also a Senior Managing Director of WPG. Ronald M. Hoffner is a
Managing Director of WPG, and Executive Vice President and Treasurer of the
Trust. Daniel Cardell and Daniel S. Vandivort are Managing Directors of WPG
and Vice Presidents of the Trust. Sid Bakst is a Managing Director of WPG and a
Vice President of the Trust. Joseph J. Reardon is a Senior Vice President of WPG
and Vice President and Secretary of the Trust. Steven M. Pires is a Vice
President of WPG and Assistant Vice President of the Trust. The Managing
Directors of WPG who serve on WPG's executive committee are Stephen H. Weiss
(Chairman), Roger J. Weiss, Phillip Greer, Ronald M. Hoffner, Wesley W. Lang,
Jr., Constant Korthout and Gil Cogan.
In addition to the members of the Adviser's Asset Allocation Committee and
Messrs. Cardell, Vandivort and Bakst, Messrs. Stephen H. Weiss and Roger J.
Weiss may participate in each Fund's investment decisions and all of the
Managing Directors in WPG consult on a regular basis among themselves about
general market conditions, as well as specific securities and industries.
In the management of the Trust and their other accounts, WPG and its
subsidiaries allocate investment opportunities to all accounts for which they
are appropriate subject to the availability of cash in any particular account
and the final decision of the individual or individuals in charge of such
accounts. Where market supply is inadequate for a distribution to all such
accounts, securities are allocated on a pro rata basis. In some cases this
procedure may have an adverse effect on the price or volume of the security as
far as the Funds are concerned. However, it is the judgment of the Trustees that
the desirability of continuing the Trust's advisory arrangements with the
Adviser outweighs any disadvantages that may result from contemporaneous
transactions. See "Portfolio Brokerage."
In an attempt to avoid any potential conflict with portfolio transactions
for the Funds, the Adviser and the Trust, on behalf of each Fund, have adopted
extensive restrictions on personal securities trading by personnel of the
Adviser and its affiliates. These restrictions include: pre-clearance of all
personal securities transactions and a prohibition of purchasing initial public
offerings of securities. These restrictions are a continuation of the basic
principle that the interests of the Funds and their shareholders come before
those of the Adviser and its directors and employees.
In the event that neither the Adviser nor any of its affiliates acts as
investment adviser to the Trust, the name of the Trust will be changed to one
that does not contain the name "Weiss, Peck & Greer" or the initials "WPG" or
otherwise suggest an affiliation with the Adviser or contain the name "Tomorrow"
or any connotation or derivative of such name.
- 33 -
<PAGE>
ADMINISTRATOR
WPG, in its capacity as Administrator of each Fund, performs
administrative, certain transfer agency related and shareholder relations
services and certain clerical and accounting services for each Fund under
separate administration agreements (the "Administration Agreements"). More
specifically, these obligations pursuant to the Administration Agreements
include, subject to the general supervision of the Trustees of the Trust, (a)
providing supervision of all aspects of the Funds' non-investment operations
(the parties giving due recognition to the fact that certain of such operations
are performed by others pursuant to agreements with the Funds), (b) providing
the Funds, to the extent not provided pursuant to their custodian and transfer
agency agreements or agreements with other institutions, with personnel to
perform such executive, administrative, accounting and clerical services as are
reasonably necessary to provide effective administration of the Funds, (c)
arranging, to the extent not provided pursuant to such agreements, for the
preparation, at the Funds' expense, of its tax returns, reports to shareholders,
periodic updating of the prospectuses and reports filed with the SEC and other
regulatory authorities, (d) providing the Funds, to the extent not provided
pursuant to such agreements, with adequate office space and certain related
office equipment and services, (e) maintaining all of the Funds' records other
than those maintained pursuant to such agreements or the Advisory Agreements,
and (f) providing to the Funds transfer agency-related and shareholder relations
services and facilities and the services of one or more of its employees or
officers, or employees or officers of its affiliates, relating to such functions
(including salaries and benefits, office space and supplies, equipment and
teaching).
For its services under the Administration Agreements, the Administrator is
entitled to receive a fee, computed daily and payable monthly at an annual rate
equal to 0.09% of each Fund's average daily net assets. The Trustees review the
rate at which the administration fees are paid at least annually and may change
the rate of compensation without shareholder approval.
<TABLE>
<CAPTION>
ADMINISTRATION FEES ADMINISTRATION FEES ADMINISTRATION FEES
PAID PAID PAID
YEAR ENDED YEAR ENDED YEAR ENDED
FUND DECEMBER 31, 1997(1) DECEMBER 31, 1998(1) DECEMBER 31, 1999(1)
---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Long-Term Retirement Fund $0 $0 $0
Medium-Term Retirement Fund $0 $0 $0
Short-Term Retirement Fund $0 $0 $560
Post-Retirement Fund(2) N/A N/A N/A
- 34 -
<PAGE>
<FN>
- --------------------
(1) The Adviser voluntarily agreed not to impose all or a portion of its
administration fee for each Fund during the fiscal years ended December 31,
1997, 1998 and 1999. In the absence of this agreement, the Funds would have paid
administration fees as follows:
(2) The Post-Retirement Fund has not commenced operations.
YEAR ENDED YEAR ENDED YEAR ENDED
FUND DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
---- ---------------- ---------------- ----------------
Long-Term Retirement Fund $2,985 $6,729 $8,512
Medium-Term Retirement Fund $9,031 $13,973 $15,375
Short-Term Retirement Fund $11,348 $25,319 $29,533
</FN>
</TABLE>
Each Fund may also enter into arrangements with third parties that provide
omnibus accounting and transfer agency-related services (including recordkeeping
and nondistribution- related shareholder servicing) for the benefit of Fund
shareholders who are the beneficial owners of Fund shares held in nominee form
with the third parties. A Fund may compensate such third parties for the
provision of subaccounting and transfer agency-related services based on a
percentage of the Fund's assets for which such entities perform such services.
To the extent that a Fund compensates a third party for the provision of these
services, it will not incur duplicative fees with its transfer agent.
Each Fund bears all expenses of its own operation (subject to the expense
limitations described above), which expenses include: (i) fees and expenses of
any investment adviser or administrator of the Fund; (ii) organization expenses
of the Trust; (iii) fees and expenses incurred by the Fund in connection with
membership in investment company organizations; (iv) brokers' commissions; (v)
payment for portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses (including an allocable portion of the cost of
its employees rendering legal services to the Funds); (vii) interest, insurance
premiums, taxes or governmental fees; (viii) the fees and expenses of the
transfer agent of the Funds; (ix) the cost of preparing stock certificates or
any other expenses, including, without limitation, clerical expenses of issue,
redemption or repurchase of shares of the Funds; (x) the expenses of and fees
for registering or qualifying shares of the Funds for sale and of maintaining
the registration of the Funds; (xi) the fees and expenses of Trustees of the
Trust who are not affiliated with the Adviser; (xii) the cost of preparing and
distributing reports and notices to existing shareholders, the SEC and other
regulatory authorities; (xiii) the fees or disbursements of custodians of the
Funds' assets, including expenses incurred in the performance of any obligations
enumerated by the Declaration of Trust or By-Laws of the Trust insofar as they
govern agreements with any such custodian; (xiv) costs in connection with annual
or special meetings of shareholders, including proxy material preparation,
printing and mailing; (xv) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Funds'
business; and (xvi) distribution fees and service fees applicable to Adviser
Class shares and service fees applicable to Institutional Class shares.
- 35 -
<PAGE>
WPG has voluntarily and temporarily agreed to cap the operating expenses
(excluding Rule 12b-1 fees applicable to the Adviser Class shares, service fees
applicable to the Institutional Class shares, any other class-specific expenses,
litigation, indemnification and other extraordinary expenses) of the Funds to
1.25% of their respective average daily net assets. WPG may discontinue or
modify such caps in the future at its discretion, although it has no current
intention to do so. Each fund will reimburse the adviser for fees foregone or
other expenses paid by the adviser pursuant to this expense limitation in later
years in which operating expenses for that fund are less than the expense
limitations for any such year. No interest, carrying or finance charge will be
paid by a Fund with respect to the amounts representing fees foregone or other
expenses paid. In addition, no Fund will pay any unreimbursed amounts to WPG
upon termination of its investment advisory agreement.
From time to time, WPG may compensate insurance companies and other
entities or their affiliates who hold shares of the Funds for the account of
their customers for providing a variety of record-keeping, administrative,
marketing and/or shareholder support services. This compensation will be paid
from WPG's own resources and not from the assets of any Fund.
The Funds' Advisory and Administration Agreements each provide that WPG,
in its capacities as investment adviser and administrator, may render similar
services to others so long as the services provided thereunder are not impaired
thereby.
PRINCIPAL UNDERWRITER
Provident Distributors, Inc., a subsidiary of PFPC, Inc., (formerly First
Data Distributors, Inc.) Four Falls Corporate Center, Suite 600, West
Conshokochen, Pennsylvania 19428-2961 (the "Underwriter") serves as the
principal underwriter in connection with the continuous offering of the shares
of the Trust pursuant to an Underwriting Agreement, dated as of August 1998. The
continuance of the Underwriting Agreement after its initial two-year term must
be approved annually by the Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Underwriting Agreement was initially approved on July 22, 1998.
See "Distribution Plans" below. The Underwriting Agreement provides that the
Underwriter will bear certain distribution expenses not borne by the Funds.
The Underwriter bears all expenses it incurs in providing services under
the Underwriting Agreement. The Underwriter also pays certain expenses in
connection with the distribution of the Funds' shares, including the cost of
preparing, printing and distributing advertising or promotional materials, and
the cost of printing and distributing prospectuses and supplements to
prospective shareholders. Each Fund bears the cost of registering its shares
under federal, state and foreign securities law.
- 36 -
<PAGE>
DISTRIBUTION PLANS
Each Fund, with respect to its Adviser class shares, has adopted a plan of
distribution pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The
Trustees, including a majority of the Independent Trustees, most recently
approved the current Plans at a meeting held in April 2000. Each Plan was
approved by a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the Adviser Class shares of the applicable Fund at a joint special
meeting held on July 29, 1998.
Each Plan provides that a Fund shall pay WPG, for its distributions
services with respect to the Funds' Adviser class shares, a distribution fee
equal on an annual basis to 0.25% of the Fund's average daily net assets
attributable to Adviser Class shares and will pay WPG a service fee equal on an
annual basis to 0.25% of the Fund's average daily net assets attributable to
Adviser Class shares (which WPG will in turn pay to Authorized Firms which enter
into a sales or services agreement with WPG at a rate of up to 0.25% of the
Fund's average daily net assets attributable to Adviser Class shares owned by
investors for whom that Authorized Firm is the holder or dealer of record). This
service fee is intended to be consideration for personal services and/or account
maintenance services rendered by the Authorized Firm with respect to Adviser
Class shares. Personal and account maintenance services for which WPG or any of
its affiliates, banks or dealers may be compensated pursuant to the Plans
include, without limitation: payments made to or on account of WPG or any of its
affiliates, banks, other brokers and dealers who are members of the NASD, or
their officers, sales representatives and employees, who respond to inquiries
of, and furnish assistance to, shareholders regarding their ownership of Adviser
Class shares or their accounts or who provide similar services not otherwise
provided by or on behalf of the Funds. Authorized Firms may from time to time be
required to meet certain other criteria in order to receive service fees. WPG or
its affiliates are entitled to retain all service fees payable under the Plans
for which there is no Authorized Firm of record or for which qualification
standards have not been met as partial consideration for personal services
and/or account maintenance services performed by WPG or its affiliates for
shareholder accounts.
The purpose of distribution payments to WPG under the Plans is to
compensate WPG for its distribution services related to the Adviser Class shares
of the Funds.
In accordance with the terms of the Plans, WPG provides to the Trust for
review by the Trustees a quarterly written report of the amounts expended under
the Plans and the purpose for which such expenditures were made.
No interested person of the Trust, nor any Trustee of the Trust who is an
Independent Trustee, has any direct or indirect financial interest in the
operation of the Plans except to the extent that WPG may be deemed to have such
an interest as a result of receiving a portion of the amounts expended under the
Plans by the Funds and except to the extent WPG may be deemed to receive a
benefit under the Advisory and Administration Agreements.
In approving the Plans, the Trustees identified and considered a number of
potential benefits which the Plans may provide. The Trustees believe that there
is a reasonable likelihood that the Plans will benefit the Funds and their
respective Adviser Class shareholders. Under their terms, the Plans remain in
effect from year to year provided such continuance is approved annually by vote
of the Trustees in the manner described above. The Plans may not be amended to
- 37 -
<PAGE>
increase materially the annual percentage limitation of average net assets
which may be spent for the services described therein without approval of the
shareholders of the Adviser Class shares, and material amendments of the Plans
must also be approved by the Trustees in the manner described above. Each Plan
will remain in effect from year to year provided that the continuance of the
Plan is approved annually by a majority vote of the Trustees, including a
majority of the Independent Trustees who have no direct or indirect financial
interest in the Plans. A Plan may be terminated at any time, without payment of
any penalty, by vote of the majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Adviser Class of the
applicable Fund. A Plan will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
During the fiscal year ended December 31, 1999, the Funds paid to WPG the
following amounts under the prior plans (all of such amounts were spent as
compensation to dealers):
<TABLE>
<CAPTION>
DISTRIBUTION FEES PAID
FUND DECEMBER 31, 1999
----- -----------------
<S> <C>
Long-Term Retirement Fund $15,448
Medium-Term Retirement Fund $30,159
Short-Term Retirement Fund $33,043
Post-Retirement Fund(1) N/A
<FN>
- ---------------
(1) The Post-Retirement Fund has not commenced operations.
</FN>
</TABLE>
SERVICE PLANS
Each Fund, with respect to its Institutional Class shares, adopted a
service plan (collectively, the "Service Plans").
Each Service Plan provides that a Fund shall compensate plan fiduciaries
or other service providers to Qualified Plans for the benefit of the Qualified
Plans (for purposes of this section, collectively, "Plan Fiduciaries") for
providing certain personal, account administration and/or shareholder liaison
services to plan participants who are beneficial owners of Institutional Class
shares. Pursuant to the Service Plans, the Funds may enter into agreements with
Plan Fiduciaries which purchase Institutional Class shares of the Fund ("Service
Agreements"). Under such Service Agreements or otherwise, the Plan Fiduciaries
may perform some or all of the following services: (a) act as the sole
shareholder of record and nominee for all plan participants, (b) maintain
account records for each plan participant who beneficially owns Institutional
Class shares of the Funds, (c) answer questions and handle correspondence from
plan participants regarding their accounts, (d) process plan participants'
- 38 -
<PAGE>
orders to purchase, redeem and exchange Institutional Class shares of the Funds,
and handle the transmission of funds representing the participants' purchase
price or redemption proceeds, (e) issue confirmations for transactions in shares
by participants, (f) provide facilities to answer questions from participants
and existing investors about Institutional Class shares of the Funds, (g)
receive and answer shareholder correspondence, including requests for
prospectuses and statements of additional information, (h) assist participants
in selecting dividend and other account options and opening custody accounts
with the Plan Fiduciaries and (i) act as liaison between participants and the
Funds, including obtaining information from the Funds, working with the Funds to
correct errors and resolve problems and providing statistical and other
information to the Funds. As compensation for such services, the Funds may pay
each Plan Fiduciary a service fee in an amount up to 0.25% (on an annualized
basis) of the Fund's average daily net assets attributable to Institutional
Class shares of the Funds that are attributable to or held in the name of such
Plan Fiduciary. Plan Fiduciaries may from time to time be required to meet
certain other criteria in order to receive service fees.
Conflict of interest restrictions (including the Employee Retirement
Income Security Act of 1974) may apply to a Plan Fiduciary's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
assets in Institutional Class shares of the Funds. Plan Fiduciaries and
investment advisers and other money managers subject to the jurisdiction of the
SEC, the Department of Labor or state securities commissions, are urged to
consult legal advisers before investing fiduciary assets in Institutional Class
shares of the Funds.
In accordance with the terms of the Service Plans, WPG provides to the
Trust for review by the Trustees a quarterly written report of the amounts
expended under the Service Plans and the purpose for which such expenditures
were made. In the Trustees' quarterly review of the Service Plans, they will
consider the continued appropriateness and the level of compensation that the
Service Plans provide.
During the fiscal year ended December 31, 1999, the Funds paid to Plan
Fiduciaries the following amounts under the Service Plans:
<TABLE>
<CAPTION>
SERVICE FEES PAID
FUND DECEMBER 31, 1999
---- -----------------
<S> <C>
Long-Term Retirement Fund $487
Medium-Term Retirement Fund $644
Short-Term Retirement Fund $36,416
Post-Retirement Fund(1) N/A
<FN>
- -------------
(1) The Post-Retirement Fund has not commenced operations.
</FN>
</TABLE>
- 39 -
<PAGE>
Each Service Plan will remain in effect from year to year provided that the
continuance of the Service Plan is approved annually by a majority vote of the
Trustees, including a majority of the Independent Trustees who have no direct or
indirect financial interest in the Service Plans. All material amendments of the
Service Plans must also be approved by the Trustees in the manner described
above. The Service Plans may be terminated at any time as to any Fund without
payment of any penalty by a vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding voting securities of the affected Fund.
The Trustees have determined that in their judgment there is a reasonable
likelihood that the Service Plans will benefit the Funds and the Institutional
Class shareholders.
CODE OF ETHICS
The Funds and WPG have each adopted Codes of Ethics under Rule 17j-1 of the 1940
Act. These Codes contain policies restricting securities trading in personal
trading accounts of Trustees and others who normally come into possess of
information on portfolio transactions. These Codes are on public file with and
available from the SEC.
TRUSTEES AND OFFICERS
The Trustees have responsibility for management of the business of the
Trust. The executive officers of the Trust are responsible for its day to day
operations. Set forth below is certain information concerning the Trustees and
officers.
<TABLE>
<CAPTION>
NAME, ADDRESS, PRINCIPAL OCCUPATIONS
DATE OF BIRTH AND TITLE DURING PAST FIVE YEARS
- ----------------------- ----------------------
<S> <C>
Roger J. Weiss* Senior Managing Director, Weiss, Peck & Greer,
One New York Plaza L.L.C.
New York, NY 10004 Chairman of the Board of all WPG Funds
4/29/39 President, Weiss, Peck & Greer International Fund
Executive Vice President and Director, WPG
Chairman of the Board, President Advisers, Inc.
and Trustee Former Executive Vice President and Director,
Tudor Management Company
Raymond R. Herrmann, Jr.** Chairman of the Board, Sunbelt Beverage
654 Madison Avenue Corporation (distributor of wines and liquors)
Suite 1400 Former Vice Chairman and Director, McKesson
New York, NY 10017 Corporation (U.S. distributor of drugs and health
9/11/20 care products, wine and spirits)
Life Member, Board of Overseers of Cornell
Trustee Medical College
Member of Board and Executive Committee, Sky
Ranch for Boys
Member, Evaluation Advisory Board,
Biotechnology Investments, Ltd.
Trustee, all WPG Funds
- 40 -
<PAGE>
NAME, ADDRESS, PRINCIPAL OCCUPATIONS
DATE OF BIRTH AND TITLE DURING PAST FIVE YEARS
- ----------------------- ----------------------
Lawrence J. Israel** Private Investor
200 Broadway Director and Trustee of the Touro Infirmary
Suite 249 Member of the Intercollegiate Athletics Committee
New Orleans, LA 70118 of the Administrators of the Tulane Educational
12/13/34 Fund
Trustee, all WPG Funds
Trustee
Graham E. Jones** Financial Manager, Practice Management Systems
330 Garfield Street (Medical Services Company)
Suite 200 Trustee, all WPG Funds
Santa Fe, NM 87501 Director, The Malaysia Fund
1/31/33 Director, The Thai Fund
Director, The Turkish Investment Fund
Trustee Trustee, various investment companies
Ronald M. Hoffner* Managing Director, Weiss, Peck & Greer, L.L.C.
One New York Plaza Executive Vice President of all WPG Funds
New York, NY 10004
10/6/50
Executive Vice President and
Treasurer
Joseph J. Reardon* Senior Vice President, Mutual Fund Operations,
One New York Plaza Weiss, Peck & Greer, L.L.C.
New York, NY 10004
4/4/60
Vice President and Secretary
Daniel Cardell* Managing Director, Weiss, Peck & Greer, L.L.C.
One New York Plaza since May 1996
New York, NY 10004 Former Senior Vice President and Director of
7/31/57 Equities, Bank of America
Vice President
- 41 -
<PAGE>
NAME, ADDRESS, PRINCIPAL OCCUPATIONS
DATE OF BIRTH AND TITLE DURING PAST FIVE YEARS
- ----------------------- ----------------------
Daniel S. Vandivort* Managing Director, Weiss, Peck & Greer, L.L.C.
One New York Plaza
30th Floor
New York, NY 10004
7/4/54
Vice President
Sid Bakst* Managing Director, Weiss, Peck & Greer, L.L.C.
One New York Plaza since 1999. Principal, 1998-1999.
30th Floor Vice President and Portfolio Manager, New York
New York, NY 10004 Life Asset Management prior thereto.
8/9/62
Vice President
Steven M. Pires* Vice President, Mutual Fund Operations Weiss,
One New York Plaza Peck & Greer L.L.C. since 1999.
New York, NY 10004 Assistant Vice President Smith Barney Asset
9/12/56 Management, 1996-1999
Senior Accountant, United Continental Corp. prior
Assistant Vice President thereto.
Therese Hogan Manager, State Regulation, PFPC, Inc.
PFPC, Inc.
53 State Street
Boston, MA 02109
2/27/62
Assistant Secretary
<FN>
- ----------------
* "Interested Person" within the meaning of the 1940 Act.
** Each of the non-interested Trustees is a trustee of each of the other WPG
Funds and a Member of the Trust's Audit Committee and Special Nominating
Committee.
</FN>
</TABLE>
- 42 -
<PAGE>
COMPENSATION OF TRUSTEES AND OFFICERS
The Funds pay no compensation to the Trust's Trustees affiliated with the
Adviser or its officers. None of the Trust's Trustees or officers have engaged
in any financial transactions with any Fund or the Adviser, except that certain
Trustees and officers who are managing directors of the Adviser may, from time
to time, purchase and sell ownership interests in the Adviser.
The following table sets forth the amount of compensation paid to the
Trust's Trustees for the fiscal year ended December 31, 1999. In addition, each
Trustee is reimbursed for out-of-pocket expenses associated with attending
Trustee meetings.
- 43 -
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION PAID TO TRUSTEES FOR THE YEAR ENDED DECEMBER 31, 1999
PENSION OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
ACCRUED AS FROM THE FUNDS
LONG-TERM MEDIUM-TERM SHORT-TERM PART OF AND OTHER
RETIREMENT RETIREMENT RETIREMENT Funds' Funds
NAME OF TRUSTEE FUND FUND FUND EXPENSES IN COMPLEX*
- --------------- ---- ---- ---- -------- ----------
<S> <C> <C> <C> <C> <C>
Roger J. Weiss $0 $0 $0 $0 $0
Raymond R. Herrmann, Jr. 2,500 2,500 2,500 0 29,000
Lawrence J. Israel 2,500 2,500 2,500 0 29,000
Graham E. Jones 2,500 2,500 2,500 0 29,000
<FN>
- -----------------
*As of December 31, 1999, there were 12 mutual funds in the Weiss, Peck & Greer
group of funds (including the Funds) that publicly offer their shares.
</FN>
</TABLE>
CERTAIN SHAREHOLDERS
As of February 29, 2000, the Trustees and officers of the Trust as a group
beneficially owned (I.E., had voting or investing power) less than 1% of the
outstanding shares of each Fund.
As of February 29, 2000, no person within the knowledge of the management
of the Trust owned of record or beneficially 5% or more of the outstanding
voting securities (I.E., shares) of any Fund, except as set forth below:
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
TOMORROW LONG-TERM RETIREMENT FUND
Norwest Bank Colorado, N.A. Cust 25.0%
FBO Chicago Transit Authority
Employees' Deferred Compensation PI
% Great-West Life, Recordkeeper
8515 East Orchard Road
Englewood, CO 80111
AIG Life Insurance Co. 21.9%
Separate Account I
C/O Variable Accounting
PO Box 667
Wilmington, DE 19899-0667
- 44 -
<PAGE>
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
Sheet Metal Workers Local #73 17.7%
Annuity Plan
205 West Wacker Dr Ste 1700
Chicago, IL 60606
Nationwide GPVA 10.4%
C/O Nationwide Life Insurance Co.
Attn: IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
San Diego Labor Union 401K Plan 7.1%
C/O Gigna R&IS Trading Unit M-80
One Commercial Plaza
PO Box 2975
Hartford, CT 06104-2975
TOMORROW MEDIUM-TERM RETIREMENT FUND
Norwest Bank Colorado, N.A. Cust 32.9%
FBO Chicago Transit Authority
Employees' Deferred Compensation PI
% Great-West Life, Recordkeeper
8515 East Orchard Road
Englewood, CO 80111
- 45 -
<PAGE>
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
San Diego Labor Union 401K Plan 22.6%
C/O Gigna R&IS Trading Unit M-80
One Commercial Plaza
PO Box 2975
Hartford, CT 06104-2975
AIG Life Insurance Co. 13.4%
Separate Account I
C/O Variable Accounting
PO Box 667
Wilmington, DE 19899-0667
Sheet Metal Workers Local #73 9.0%
Annuity Plan
205 West Wacker Dr Ste 1700
Chicago, IL 60606
Nationwide GPVA 8.7%
C/O Nationwide Life Insurance Co.
Attn: IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218-2029
TOMORROW SHORT-TERM RETIREMENT FUND
Sheet Metal Workers Local #73 88.1%
c/o CIGNA
Attn: Trading Unit
280 Trumbull St. H06A
Hartford, CT 06103
- 46 -
<PAGE>
HOW TO PURCHASE SHARES
(See "How to Buy Shares" in the Prospectus.)
The Trust continuously offers shares of each Fund. The Trust may terminate
the continuous offering of its shares with respect to any Fund at any time at
the discretion of the Trustees.
In the case of telephone subscriptions, if full payment for telephone
subscriptions is not received by the Trust within the customary time period for
settlement then in effect after the acceptance of the order by the Trust, the
order is subject to cancellation and the purchaser will be liable to the
affected Fund for any loss suffered as a result of such cancellation. To recoup
such loss each Fund reserves the right to redeem shares owned by any shareholder
whose purchase order is cancelled for non-payment, and such purchaser may be
prohibited from placing further telephone orders.
If a subscription or redemption of Fund shares is arranged and settlement
made through a member of the NASD, then that member may, in its discretion,
charge a fee for this service.
Signature guarantees, when required, must be obtained from any one of the
following institutions, provided that such institution meets credit standards
established by the Funds' Transfer Agent: (i) a bank; (ii) a securities broker
or dealer, including a government or municipal securities broker or dealer, that
is a member of a clearing corporation or has net capital of at least $100,000;
(iii) a credit union having authority to issue signature guarantees; (iv) a
savings and loan association, a building and loan association, a cooperative
bank, or a federal savings bank or association; or (v) a national securities
exchange, a registered securities exchange or a clearing agency.
In addition to the Transfer Agent, each Fund has authorized one or more
brokers, dealers and other entities to accept on its behalf orders for the
purchase and redemption of Fund shares. Under certain conditions, such
authorized entities may designate other intermediaries to accept orders for the
purchase and redemption of Fund shares. In accordance with a position taken by
the staff of the SEC, such purchase and redemption orders are considered to have
been received by a Fund when accepted by the authorized entity or, if
applicable, the authorized entity's designee. Also in accordance with the
position taken by the staff of the SEC, such purchase and redemption orders will
receive the appropriate Fund's net asset value per share next computed after the
purchase or redemption order is accepted by the authorized entity or, if
applicable, the authorized entity's designee.
ACQUIRING SHARES OF THE FUNDS IN EXCHANGE FOR SECURITIES
Shares of the Funds may be purchased in whole or in part by delivering to
the Funds' Custodian securities acceptable to WPG. If the securities are not
suitable for a Fund's portfolio, the securities will be sold by the Custodian as
agent for the account of their owner on the day of
- 47 -
<PAGE>
their receipt by the Custodian or as soon thereafter as possible. The number of
shares of a class of a Fund to be issued in exchange for securities will be the
aggregate proceeds from the sale of such securities, divided by the net asset
value per share of the applicable class of the applicable Fund on the day such
proceeds are received. WPG will use reasonable efforts to obtain the current
market price for such securities but does not guarantee the best available
price. WPG will absorb any transaction costs, such as commissions, on the sale
of securities.
Securities determined by WPG to be acceptable should be transferred by
book entry or physically delivered, in proper form for transfer. Please contact
WPG for transfer instructions.
Investors who are contemplating an exchange of securities for shares of a
Fund must contact WPG to determine whether the securities are acceptable before
forwarding such securities to the Custodian. WPG reserves the right to reject
any securities. Exchanging securities for shares of the Funds may create a
taxable gain or loss. Please consult your tax adviser with respect to the
particular Federal, state and local tax consequences of exchanging securities
for Fund shares.
REDEMPTION AND EXCHANGE OF SHARES
(See "How to Sell Shares" and "How to Exchange Shares" in the Prospectus.)
SYSTEMATIC WITHDRAWAL PLAN
A Systematic Withdrawal Plan is available only for the Post-Retirement
Fund, without expense to any shareholder with a minimum investment of $10,000 in
value in such Fund's shares (at the then current offering price). The Transfer
Agent may be directed, as agent of the purchaser, to redeem without a redemption
charge shares of such Funds held in his account as may be required so that the
shareholder or any person designated by him will receive a monthly or quarterly
check in a stated amount not to be less than $100 although such amount is not
necessarily a recommended amount. Dividends and capital gains distributions will
be reinvested in additional shares of the same class of such Fund at net asset
value as of the reinvestment date.
Redemption of shares of the Post-Retirement Fund under the Systematic
Withdrawal Plan may reduce or even liquidate the account, particularly in a
declining market. Such payments paid to a shareholder cannot be considered a
yield or income on the investment. Payments to a shareholder in excess of
distributions of investment income will constitute a return of his invested
principal, and the liquidation of Fund shares pursuant to this Plan is a sale
which may have tax consequences for any shareholder that is subject to tax.
Withdrawals at the same time as regular purchases of shares of either
class of the Post-Retirement Fund ordinarily will not be permitted since
purchases are intended to accumulate capital and the Systematic Withdrawal Plan
is designed for the regular withdrawal of monies, except that a shareholder may
make lump sum investments, of $5,000 or more. The Systematic Withdrawal Plan may
be terminated by the shareholder, without penalty, at any time and the Trust
- 48 -
<PAGE>
may terminate the Plan at will. There are no contractual rights on the part of
either party with respect to the Plan.
IN-KIND REDEMPTIONS
The redemption price may be paid in cash or portfolio securities at each
Fund's discretion. The Funds have, however, elected to be governed by Rule 18f-1
under the 1940 Act pursuant to which each Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund during any 90-day period for any one shareholder. Should redemptions by any
shareholder exceed such limitation, a Fund will have the option of redeeming the
excess in cash or portfolio securities. In the latter case, the securities are
taken at their value employed in determining the redemption price and the
shareholder may incur a brokerage charge when the shareholder sells the
securities he receives. The selection of such securities will be made in such
manner as the officers of the affected Fund deem fair and reasonable.
EXCHANGES
To prevent abuse of the exchange privilege to the detriment of other
shareholders, the Trust may limit the number of exchanges and
purchase/redemption transactions by any one shareholder account (or group of
accounts under common management) to a total of six transactions per year. This
policy applies to exchanges into or out of any series of the Trust and any pair
of transactions involving a purchase of shares of any series of the Trust
followed by a redemption of an offsetting or substantially equivalent dollar
amount of shares of that same series. If a Plan Fiduciary violates this policy,
his/her future purchases of, or exchanges into, the series of the Trust may be
permanently refused. This policy does not prohibit redemptions of shares of any
series. This policy may be waived by WPG in its discretion. Further, the
exchange privilege may be changed or discontinued and may be subject to
additional limitations upon sixty (60) days' notice to shareholders, including
certain restrictions on purchases by market-timer accounts.
NET ASSET VALUE
Under the 1940 Act, the Trustees are responsible for determining in good
faith the fair value of securities of the Funds. The net asset value per share
of each class of each Fund is determined once daily, Monday through Friday as of
the close of regular trading on the NYSE (normally 4:00 p.m. New York City time)
on each Business Day (as defined in the Prospectus) in which there is a
sufficient degree of trading in that Fund's portfolio securities that the
current net asset value of that Fund's shares might be materially affected. A
Fund may not determine its net asset value on any day during which its shares
were not tendered for redemption and the Trust did not receive any order to
purchase or sell shares of that Fund. In accordance with procedures approved by
the Trustees, the net asset value per share of each class of each Fund is
calculated by determining the value of the net assets attributable to each class
of that Fund and dividing by the number of outstanding shares of that class. The
NYSE is not open for trading on weekends or on New Year's Day (January 1), Dr.
Martin Luther King, Jr. Day (the third Monday in January),
- 49 -
<PAGE>
Presidents' Day (the third Monday in February), Good Friday, Memorial Day (the
last Monday in May), Independence Day (July 4), Labor Day (the first Monday in
September), Thanksgiving Day (the fourth Thursday in November) and Christmas Day
(December 25).
The public offering price per share of a class of a Fund is the net asset
value per share of that class of that Fund next determined after receipt of an
order. Orders for shares which have been received by the Trust or the Transfer
Agent or other authorized representative prior to the close of regular trading
of the NYSE are confirmed at the offering price effective at the close of
regular trading of the NYSE on that day, while orders received subsequent to the
close of regular trading of the NYSE will be confirmed at the offering price
effective at the close of regular trading of the NYSE on the next day on which
the net asset value is calculated.
Bonds and other fixed-income securities (other than short-term obligations
but including listed issues) in a Fund's portfolio are valued on the basis of
valuations furnished by a pricing service which utilizes both dealer-supplied
valuations and electronic data processing techniques which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, when such valuations are believed
to reflect the fair value of such securities.
In determining the net asset value, unlisted securities for which market
quotations are available are valued at the mean between the most recent bid and
asked prices. Securities, options on securities, futures contracts and options
thereon which are listed or admitted to trading on a national exchange, are
valued at their last sale on such exchange prior to the time of determining net
asset value; or if no sales are reported on such exchange on that day, at the
mean between the most recent bid and asked price. Securities listed on more than
one exchange shall be valued on the exchange on which the security is most
extensively traded. Other securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by the Valuation Committee as authorized by the Trustees.
For purposes of determining the net asset value of the Funds' shares,
options transactions will be treated as follows: When a Fund sells an option, an
amount equal to the premium received by that Fund will be included in that
Fund's accounts as an asset and a deferred liability will be created in the
amount of the option. The amount of the liability will be marked to the market
to reflect the current market value of the option. If the option expires or if
that Fund enters into a closing purchase transaction, that Fund will realize a
gain (or a loss if the cost of the closing purchase exceeds the premium
received), and the related liability will be extinguished. If a call option
contract sold by a Fund is exercised, that Fund will realize the gain or loss
from the sale of the underlying security and the sale proceeds will be increased
by the premium originally received.
Portfolio securities traded on more than one U.S. national securities
exchange or on a U.S. exchange and a foreign securities exchange are valued at
the last sale price from the exchange representing the principal market for such
securities on the business day when such value is
- 50 -
<PAGE>
determined. The value of all assets and liabilities expressed in foreign
currencies will be converted into U.S. dollar values at currency exchange rates
determined by the Fund's custodian to be representative of fair levels at times
prior to the close of trading on the NYSE. Trading in securities on European and
Far Eastern securities exchanges and over-the-counter markets is normally
completed well before the close of business on the NYSE and may not take place
on all business days that the NYSE is open and may take place on days when the
NYSE is closed. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular trading on
the NYSE will not be reflected in a Fund's calculation of net asset value unless
the Adviser determines that the particular event would materially affect net
asset value, in which case an adjustment may be made.
INVESTOR SERVICES
(See "How to Buy Shares," "How to Sell Shares" and "How to Exchange Shares" in
the Prospectus.)
The Trust offers a variety of services, described in the sections that
follow, designed to meet the needs of its shareholders. The costs of providing
such services are borne by the Funds.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan enables shareholders to make regular
(monthly or quarterly) investments in shares of any of the Funds through an
automatic withdrawal from a designated bank account by simply completing the
Automatic Investment Plan application. Please call 1-800-223-3332 or write to
WPG to receive this form. By completing the form, the shareholder authorizes the
Trust's Custodian to periodically draw money from a designated bank or federal
credit union account, and to invest such amounts in account(s) of the Fund(s)
specified. The transaction will be automatically processed to the mutual fund
account on or about the first business day of the month or quarter designated.
Please be aware that: (1) the Automatic Investment Plan privilege may be
revoked without prior notice if any check is not paid upon presentation; (2) the
Custodian is under no obligation to notify the shareholder as to the non-payment
of any check, and (3) this service may be modified or discontinued by the
Custodian upon thirty (30) days' written notice prior to any payment date, or
may be discontinued by you by written notice to the Transfer Agent, at least ten
(10) days before the next payment date.
PROTOTYPE RETIREMENT PLAN FOR EMPLOYERS AND SELF-EMPLOYED INDIVIDUALS
Prototype retirement plans (the "Retirement Plan") are available for those
entities or self-employed individuals who wish to purchase shares of a Fund in
connection with a money purchase plan or a profit sharing plan maintained by
their employer. The Retirement Plans were designed to conform to the
requirements of the Code and the Employee Retirement Income
- 51 -
<PAGE>
Security Act of 1974, as amended ("ERISA"). The Retirement Plans received
opinion letters from the Internal Revenue Service (the "IRS") on March 29, 1990
that the form of the Retirement Plans is acceptable under Section 401 of the
Code.
Annual tax-deductible contributions to the Retirement Plan may be made up
to the lesser of $30,000 or 25% of the participant's earned income (disregarding
any compensation in excess of $160,000 (as adjusted by the IRS for inflation).
Under the terms of the Retirement Plan, contributions by or on behalf of
participants may be invested in a Fund with the designated custodian under the
Retirement Plan (the "Retirement Plan's Custodian"). Investment in other mutual
funds advised by the Adviser or one of its affiliates may also be available.
Employers adopting the Retirement Plan may elect either that a participant shall
specify the investments to be made with contributions by or on behalf of such
participant or that the employer shall specify the investments to be made with
all such contributions. Since no Fund is intended as a complete investment
program it is important, in connection with such election, that employers give
careful consideration to the fiduciary obligation requirements of ERISA.
All dividends and distributions received by the Retirement Plan's
Custodian on the Funds' shares held by the Plan's Custodian will be reinvested
in the applicable Fund's shares of the same class at net asset value.
Distributions of benefits to participants, when made, will be paid first in
cash, to the extent that any amount credited to a participant's account is not
invested in the applicable Fund's shares and then in full Fund shares of the
applicable class (and cash in lieu of fractional shares).
Boston Safe Deposit and Trust Company serves as the Retirement Plan's
Custodian under a Custodial Agreement. Custodian fees which are payable by the
employer to the Retirement Plan's Custodian under such Custodial Agreement are a
$10 application fee for processing the Retirement Plan application, an annual
maintenance fee of $15 per participant, and a distribution fee of $10 for each
distribution from a participant's account. Such fees may be altered from time to
time by agreement of the employer and the Retirement Plan's Custodian. For
further details see the terms of the Retirement Plan which are available from
the Trust.
Distributions must be made pursuant to the terms of the Retirement Plan
and generally may not commence before retirement, disability, death, termination
of employment, or termination of the Retirement Plan and must commence no later
than April 1 of the year following the year in which the participant attains age
70 (the "required beginning date"). Distributions are taxed as ordinary income
when received, except the portion, if any, considered a return of a
participant's nondeductible contributions. Certain distributions before age 59
may be subject to a 10% nondeductible penalty on the taxable portion of the
distribution. Failure to make minimum required distributions by the required
beginning date may be subject to a 50% excise tax.
It should be noted that the Retirement Plan is a retirement investment
program involving commitments covering future years. In deciding whether to
utilize the Retirement Plan, it is important that the employer consider his or
her needs and those of the Retirement Plan
- 52 -
<PAGE>
participants and whether the investment objectives of the Funds are likely to
fulfill such needs. Termination or curtailment of the Retirement Plan for other
than business reasons within a few years after its adoption may result in
adverse tax consequences.
Employers who contemplate adoption of the Retirement Plan should consult
an attorney or financial adviser regarding all aspects of the Retirement Plan as
a retirement plan vehicle (including fiduciary obligations under ERISA).
INDIVIDUAL RETIREMENT ACCOUNT
Persons with earned income, whether or not they are active participants in
a pension, profit-sharing or stock bonus plan described in Code Section 401(a),
Federal, state or local pension plan, an annuity plan described in Code Section
403(a), an annuity contract or custodial account described in Code Section
403(b), a simplified employee pension plan described in Code Section 408(k), or
a trust described in Code Section 501(c)(18) ("active participant"), generally
are eligible to establish an Individual Retirement Account ("IRA"). An
individual may make a deductible contribution to an IRA only if (i) the
individual is not an active participant, or (ii) the individual has an adjusted
gross income below a certain level ($50,000 for married individuals filing a
joint return, with a phase-out for adjusted gross income between $50,000 and
$60,000; $30,000 for a single individual, with a phase-out for adjusted gross
income between $30,000 and $40,000). The phase-out ranges for deductibility are
increased in years after 1998 until they reach $50,000 to $60,000 for single
taxpayers for the year 2005 and thereafter and $80,000 to $100,000 for married
taxpayers filing jointly for the years 2007 and thereafter. The phase-out range
of $0 to $10,000 of AGI for an active participant, married and filing separately
does not increase. An individual whose spouse is an active participant may still
be able to make a deductible contribution if he or she is not an active
participant, subject to a phase-out range of $150,000 to $160,000 of modified
AGI if filing jointly. An individual who is not permitted to make a deductible
contribution to an IRA for a taxable year may nonetheless make annual
nondeductible contributions to an IRA up to the lesser of 100% of the
individual's earned income or $2,000 to an IRA (up to $4,000 to IRAs for an
individual and his or her spouse) for that year. There are special rules for
determining how withdrawals are to be taxed if an IRA contains both deductible
and nondeductible amounts. In general, a proportionate amount of each withdrawal
will be deemed to be made from nondeductible contributions; amounts treated as a
return of nondeductible contributions will not be taxable. Also, annual
contributions may be made to a spousal IRA even if the spouse has no earnings in
a given year.
Withdrawals from the IRA (other than the portion treated as a return of
nondeductible contributions) are taxed as ordinary income when received, may be
made without penalty after the participant reaches age 59 1/2 and must commence
no later than the required beginning date (see discussion of "Prototype
Retirement Plans" above). Withdrawals before age 59 1/2 may involve the payment
of a 10% nondeductible penalty on the taxable portion of the amount withdrawn.
The time and rate of withdrawal must conform with Code requirements in order to
avoid adverse tax consequences. All dividends and distributions on shares of a
Fund held in IRA accounts are
- 53 -
<PAGE>
reinvested in full and fractional shares of the same class of the same Fund and
are not subject to federal income tax until withdrawn from the IRA. Investors
should consult their tax advisers for further tax information, including
information with respect to the imposition of state and local income taxes and
the effects of tax law changes.
The Trust has arranged for Boston Safe Deposit and Trust Company to
furnish the required custodial services for IRAs using any of the Fund's shares
as the underlying investment. The Bank will charge an acceptance fee of $10 for
each new IRA and an annual maintenance fee of $15 for each year that an IRA is
in existence. There is a $10 fee for processing a premature distribution. These
fees will be deducted from the IRA account and may be changed by the Plan's
Custodian upon 30 days' prior notice.
To establish an IRA for investment in a Fund, an investor must complete an
application and a custodial agreement that includes IRS Form 5305-A (which has
been supplemented to provide certain additional custodial provisions) and must
make an initial cash contribution to the IRA, subject to the limitation on
contributions described above. Pursuant to IRS regulations, an investor may for
seven days following establishment of an IRA revoke the IRA. Detailed
information on IRAs, together with the necessary form of application and
custodial agreement, is available from the Trust and should be studied carefully
by persons interested in utilizing a Fund for IRA investments. Such persons
should also consult their own advisers regarding all aspects of the Funds as an
appropriate IRA investment vehicle.
ROTH INDIVIDUAL RETIREMENT ACCOUNT
Like the traditional IRA described above, a Roth IRA is a program through
which taxpayers may obtain certain income tax benefits for themselves. Unlike a
traditional IRA, contributions to a Roth IRA are not deductible. However, a Roth
IRA is a tax-sheltered account and, if certain conditions are met, distributions
from a Roth IRA will be tax free.
Annual contributions to a Roth IRA must be in cash and (other than
rollover or conversion contributions) when combined with contributions to both
traditional IRAs and other Roth IRAs may not exceed the lesser of $2,000 or 100
percent of compensation. The $2,000 maximum amount is reduced and phased out for
a single taxpayer with modified adjusted gross income (AGI) between $95,000 and
$110,000, and for a husband and wife who file joint returns and have AGIs
between $150,000 and $160,000. The $2,000 maximum is reduced and phased out for
married taxpayers filing separately with AGIs between zero and $10,000.
Participation in a Roth IRA contribution is not limited by participation
in a retirement plan or program other than a traditional IRA, as discussed
above. In addition, unlike traditional IRAs, contributions to a Roth IRA may be
made after age 70 1/2 so long as the IRA owner has compensation and an AGI below
the maximum thresholds discussed above.
- 54 -
<PAGE>
Provided that all of the applicable rollover rules are followed, a Roth
IRA may be rolled over to another Roth IRA, or may receive rollover
contributions from either a traditional IRA or Roth IRA.
If AGI is less than $100,000, an individual may rollover (or convert) all
or any portion of any existing traditional IRA into a Roth IRA. The conversion
amount or the amount of the rollover from the traditional IRA to the Roth IRA is
treated as a distribution for income tax purposes and is includible in gross
income (except for any nondeductible contributions). Although the rollover
amount is generally included in income, the 10 percent early distribution excise
tax does not apply to rollovers or conversions from a traditional IRA to a Roth
IRA.
For a rollover of assets from a traditional IRA to a Roth IRA prior to
January 1, 1999, the taxable amount of the distribution is included in gross
income ratably over a four year period beginning with 1998.
Qualified distributions from a Roth IRA are NOT includable in income.
Qualified distributions are distributions made AFTER the fifth taxable year
period beginning with the first taxable year for which a contribution (or
conversion from a traditional IRA) was made to the Roth IRA, and which is made
after age 59-1/2, death, disability, or for first-time home buyer expenses.
SIMPLIFIED EMPLOYEE PENSION PLANS
A simplified employee pension (a "SEP") allows an employer to make
contributions toward his or her own (if a self-employed individual) and his or
her employees' retirement and, for certain SEPs established prior to 1997, may
permit the employees to make elective deferrals by salary reduction. A SEP
requires an Individual Retirement Account (a "SEP-IRA") to be established for
each "qualifying employee," although the employer may include additional
employees if it wishes. A qualifying employee is one who: (a) is at least age
21, (b) has worked for the employer during at least 3 of 5 years immediately
preceding the tax year, and (c) has received at least $400 for 1998 (as indexed
for inflation) in compensation in the tax year.
An employer is not required to make any contribution to the SEP-IRA.
However, if the employer does make a contribution, the contribution must be
based on a written allocation formula and must not discriminate in favor of
highly compensated employees, as defined in Code Section 414(q). The employer
may make annual contributions on behalf of each qualifying employee, provided
that the contributions, when combined with the employee's elective deferrals, do
not exceed 15% of the employee's compensation or $30,000, whichever is less.
A SEP-IRA that is part of a SEP established before 1997 may include a
salary reduction arrangement under which the employee can choose to have the
employer make contributions ("elective deferrals") to his or her SEP-IRA out of
his or her salary. However, employees may make elective deferrals only if (i) at
least 50% of the employer's eligible employees choose elective deferrals; (ii)
the employer did not have more than 25 eligible employees at any time
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during the preceding year; and (iii) the amount deferred each year by each
eligible highly compensated employee as a percentage of pay is no more than 125%
of the average deferral percentage of all other eligible employees. An elective
deferral arrangement is not available for a SEP maintained by a state or local
government, or any of their political subdivisions, agencies, or
instrumentalities, or to exempt organizations.
In general, the total income which an employee can defer under a salary
reduction arrangement included in a SEP and certain other elective deferral
arrangements is limited to $10,000 (indexed annually for inflation). This dollar
limit applies only to the elective deferrals, not to any contributions from
employer funds. The Code may require that contributions be further limited to
prevent discrimination in favor of highly compensated employees. An employee may
also make regular IRA contributions to his or her SEP-IRA (see discussion of
IRAs, above).
Under the terms of the SEP-IRA, contributions by or on behalf of
participants may be invested in shares of the Funds (or shares of other funds
designated by the Adviser as eligible investments), as specified by the
participant. All dividends and distributions on shares held in SEP-IRAs are
reinvested in full and fractional shares of the same class of the same Fund.
Since no Fund is intended as a complete investment program it is important, in
connection with the adoption of a SEP-IRA, that employers give careful
consideration to the fiduciary obligation requirements of ERISA, particularly
those pertaining to diversification of investments.
Withdrawals before age 59 may involve the payment of a 10% nondeductible
penalty on the amount withdrawn. Withdrawals must commence no later than the
required beginning date (see discussions of "Prototype Retirement Plans" above).
The time and rate of withdrawal must conform with Code requirements in order to
avoid adverse tax consequences. Contributions to a SEP-IRA by an employer are
excluded from the employee's income rather than deducted from it. Elective
deferrals made to an employee's SEP-IRA generally are excluded from his income
in the year of deferral, but are included in wages for social security (FICA)
and unemployment (FUTA) tax purposes. However, if the employee makes regular IRA
contributions to his SEP-IRA (other than elective deferrals), he can deduct them
the same way as contributions to a regular IRA, up to the amount of his
deduction limit. Investors should consult their tax advisers for further tax
information including information with respect to the imposition of state and
local income taxes and the effects of tax law changes.
The Fund has arranged for Boston Safe Deposit and Trust Company to furnish
the required custodial services for SEP-IRAs using the Funds as the underlying
investment. Boston Safe Deposit and Trust Company will charge an acceptance fee
of $10 for each new SEP-IRA and an annual maintenance fee of $15 for each year
that a SEP-IRA is in existence. There is a $10 fee for each premature
distribution. These fees will be deducted from the SEP-IRA account and may be
changed by the Custodian upon 30 days' prior written notice.
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To establish a SEP-IRA, an employer and employee should complete the WPG
IRA application materials, as well as IRS Form 5305-SEP. Pursuant to IRS
regulations, an investor may for seven days following establishment of a SEP-IRA
revoke the SEP-IRA. Detailed information on SEP-IRAs, together with the
necessary form of application and custodial agreement, is available from the
Fund and should be studied carefully by persons interested in utilizing the Fund
for SEP-IRA investments. Such persons should also consult their own advisers
regarding all aspects of the Fund as an appropriate SEP-IRA investment vehicle.
Effective for plan years after 1996, an employer may establish a SIMPLE
retirement plan under new Section 408(p) of the Code. Under such plan, the
employer may make contributions to individual retirement accounts established
for each employee. Such individual retirement accounts must, by their terms, be
limited to contributions under a SIMPLE retirement program. THE WEISS, PECK &
GREER IRA IS NOT SO LIMITED AND MAY NOT BE USED TO FUND A SIMPLE RETIREMENT
PROGRAM.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund within the Trust is separate for investment and accounting
purposes and is treated as a separate entity for federal income tax purposes.
A regulated investment company qualifying under Subchapter M of the Code
is not subject to federal income tax on distributed amounts to the extent that
it distributes its taxable and, if any, tax-exempt net investment income and net
realized capital gains in accordance with the timing and other requirements of
the Code. Each Fund intends to qualify and be treated as a regulated investment
company for each taxable year.
Qualification of a Fund for treatment as a regulated investment company
under the Code requires, among other things, that (a) at least 90% of a Fund's
gross income for its taxable year, without offset for losses from the sale or
other disposition of stock or securities or other transactions, be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (b) the Fund distributes for its taxable year
(in accordance with the Code's timing and other requirements) to its
shareholders as dividends at least 90% of the sum of its taxable and tax-exempt
net investment income, the excess of net short-term capital gain over net
long-term capital loss earned in such year and any other net income (except for
the excess, if any, of net long-term capital gain over net short-term capital
loss, which need not be distributed in order for the Fund to qualify as a
regulated investment company but is taxed to the Fund if it is not distributed);
and (c) the Fund diversify its assets so that, at the close of each quarter of
its taxable year, (i) at least 50% of the fair market value of its total (gross)
assets is comprised of cash, cash items, U.S. Government securities, securities
of other regulated investment companies and other securities, with such other
securities limited in respect of any one issuer to no more than 5% of the fair
market value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer and (ii) no more than 25% of the fair market value of
its total assets is invested in the securities of any one issuer
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(other than U.S. Government securities and securities of other regulated
investment companies) or of two or more issuers controlled by the Fund and
engaged in the same, similar, or related trades or businesses.
It is expected that separate accounts of insurance companies will be
purchasing Institutional Class shares of the Funds. As such, each Fund must, and
intends to, comply with the diversification requirements imposed by Section
817(h) of the Code and the regulations thereunder. These requirements, which are
in addition to the diversification requirements imposed on a Fund by the 1940
Act and Subchapter M of the Code, place certain limitations on the assets of
each separate account and, because Section 817(h) and those regulations treat
the assets of the Fund as assets of the related separate account, the assets of
a Fund, that may be invested in securities of a single issuer or a small number
of issuers or interests in the same commodity. Specifically, the regulations
provide that, except as permitted by the "safe harbor" described below, as of
the end of each calendar quarter or within 30 days thereafter no more than 55%
of the total assets of a Fund may be represented by any one investment, no more
than 70% by any two investments, no more than 80% by any three investments and
no more than 90% by any four investments. For this purpose, (1) a single
"investment" includes all securities of the same issuer, cash items, certain
partnership interests, and all interests in the same commodity, and (2) each
U.S. Government agency and instrumentality is considered a separate issuer.
Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M of the Code are satisfied and no more than 55% of the value
of the account's total assets are cash and cash items (including receivables),
U.S. Government securities and securities of other regulated investment
companies. Failure by a Fund to both qualify as a regulated investment company
and satisfy the Section 817(h) requirements would generally result in treatment
of the variable contract holders other than as described in the prospectus for
such contracts, including inclusion in ordinary income of income accrued under
the contracts for the current and all prior taxable years. Any such failure may
also result in adverse tax consequences for the insurance company issuing the
contracts.
Unless its only shareholders are life insurance company segregated asset
accounts held in connection with variable contracts, trusts that are described
in section 401(a) of the Code and exempt from tax under section 501(a) of the
Code, and investors of "seed money" not in excess of $250,000, each Fund is
subject to a 4% nondeductible federal excise tax on amounts required to be but
not distributed under a prescribed formula. The formula requires that a Fund
distribute (or be deemed to have distributed) to shareholders during a calendar
year at least 98% of the Fund's ordinary income (not including tax-exempt
interest) for the calendar year, at least 98% of the excess of its capital gains
over its capital losses realized during the one-year period ending October 31
during such year, as well as any income or gain (as so computed) from the prior
calendar year that was not distributed for such year and on which the Fund paid
no federal income tax. Each Fund expects generally to avoid liability for this
tax.
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Net investment income for each Fund is the Fund's investment income less
its expenses. Dividends from net investment income and the excess, if any, of
net short-term capital gain over net long-term capital loss of a Fund will be
treated under the Code as ordinary income, and dividends from net long-term
capital gain in excess of net short-term capital loss ("capital gain dividends")
will be treated under the Code as long-term capital gain, for federal income tax
purposes. Each Fund's dividends are paid after taking into account, and reducing
the distribution to the extent of, any available capital loss carryforwards.
Distributions from a Fund's current or accumulated earnings and profits, as
computed for Federal income tax purposes, will be treated as described above
whether taken in shares or in cash. Dividends, including capital gain dividends,
declared in October, November or December as of a record date in such a month
and paid in the following January are treated under the Code as if they were
received on December 31 of the year in which they are declared.
Dividends, including capital gain dividends, paid by a Fund shortly after
a shareholder's purchase of shares have the effect of reducing the net asset
value per share of his shares by the amount per share of the dividend
distribution. Although such dividends are, in effect, a partial return of the
shareholder's purchase price to the shareholder, they may be characterized as
ordinary income or capital gain as described above.
Equity options (including options on stock and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by a Fund will be subject to tax under Section 1234 of the Code. In
general, no loss is recognized by a Fund upon payment of a premium in connection
with the purchase of a put or call option. The character of any gain or loss
recognized (I.E., long-term or short-term) will generally depend, in the case of
a lapse or sale of the option, on the Fund's holding period for the option, and
in the case of an exercise of the option, on the Fund's holding period for the
underlying security. The purchase of a put option may constitute a short sale
for federal income tax purposes, possibly requiring the recognition of gain in
an appreciated, substantially identical portfolio stock or security or causing
an adjustment in the holding period of such a stock or security in the Fund's
portfolio. If a Fund writes a put or call option, no gain is recognized upon its
receipt of a premium. If the option lapses or is closed out, any gain or loss is
generally treated as a short-term capital gain or loss. If a call option is
exercised, whether the gain or loss is long-term or short-term depends on the
holding period of the underlying stock or security. The exercise of a put option
written by a Fund is not a taxable transaction for the Fund.
All futures contracts entered into by a Fund and all listed nonequity
options written or purchased by a Fund (including options on debt securities,
options on futures contracts, options on securities indices and options on
broad-based stock indices) will be governed by Section 1256 of the Code. Absent
a tax election to the contrary, gain or loss attributable to the lapse, exercise
or closing out of any such position will be treated as 60% long-term and 40%
short-term capital gain or loss, and on the last trading day of a Fund's taxable
year, all outstanding Section 1256 positions will be marked to market (I.E.,
treated as if such positions were closed out at their closing price on such
day), and any resulting gain or loss will be recognized as 60% long-term and 40%
short-term capital gain or loss. Under certain circumstances, entry into a
futures contract to sell a security may constitute a short sale for federal
income tax purposes, causing an adjustment
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in the holding period of the underlying security or a substantially identical
security in a Fund's portfolio. Additionally, a Fund may be required to
recognize gain if an option, futures contract, short sale, or other transaction
that is not marked to market under Section 1256 of the Code is treated as a
constructive sale of an appreciated financial position in the Fund's portfolio.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security not
governed by Section 1256 and at least one futures contract or listed nonequity
option governed by Section 1256 which substantially diminishes the Fund's risk
of loss with respect to such debt security will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. Each Fund will monitor its transactions in options
and futures and may make certain tax elections in order to mitigate the
operation of these rules and prevent disqualification of the Fund as a regulated
investment company for federal income tax purposes.
These special tax rules applicable to options and futures transactions and
constructive sales could affect the amount, timing and character of a Fund's
income or loss and hence of its distributions to shareholders by causing holding
period adjustments, converting short-term capital losses into long-term capital
losses, and accelerating a Fund's income or gains or deferring its losses.
The federal income tax rules applicable to dollar rolls and certain
structured or hybrid securities are not or may not be settled, and a Fund may be
required to account for these transactions or investments in a manner that,
under certain circumstances, may limit the extent of its use of such
transactions or investments.
A Fund's investment in zero coupon securities, capital appreciation bonds
or other securities having original issue discount (or market discount, if the
Fund elects to include market discount in income currently) will generally cause
it to realize income prior to the receipt of cash payments with respect to these
securities. The mark to market and constructive sale rules described above may
also require a Fund to recognize income or gains without a concurrent receipt of
cash. In such case, a Fund will not be able to purchase additional income
producing securities with the cash generated by the sale of such securities but
will be required to use such cash to make such required distributions, and its
current portfolio income may ultimately be reduced accordingly. In order to
distribute this income or gains, maintain its qualification as a regulated
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investmentcompany, and avoid federal income or excise taxes, the Fund may be
required to liquidate portfolio securities that it might otherwise have
continued to hold.
The Funds may be subject to foreign withholding or other foreign taxes
with respect to income (possibly including, in some cases, capital gains)
derived from foreign securities. These taxes may be reduced or eliminated under
the terms of an applicable U.S. income tax treaty in some cases. However, the
Funds will not be eligible to pass through to shareholders these taxes and any
associated foreign tax credits or deductions for foreign taxes paid by the Funds
that are not thus reduced or eliminated. Certain foreign exchange gains and
losses realized by the Funds with respect to such securities or related currency
transactions will generally be treated as ordinary income and losses. Certain
uses of foreign currency and investments by the Funds in certain "passive
foreign investment companies" may be limited in order to avoid adverse tax
consequences for the Funds (or an election, if available, may be made with
respect to such investments).
Different tax treatment, including a penalty on certain distributions,
excess contributions or other transactions is accorded to accounts maintained as
IRAs or other retirement plans. Investors should consult their tax advisers for
more information. See "Prototype Retirement Plan For Employers and Self-Employed
Individuals," "Simplified Employee Pension Plans (SEP-IRA)," and "Individual
Retirement Accounts."
Redemptions, including exchanges, of shares may give rise to realized
gains or losses, recognizable for tax purposes except for investors subject to
tax provisions that do not require them to recognize such gains or losses. All
or a portion of a loss realized upon the redemption or other disposition of
shares of a Fund may be disallowed under "wash sale" rules to the extent shares
of the same Fund are purchased (including shares acquired by means of reinvested
dividends) within a 61-day period beginning 30 days before and ending 30 days
after such redemption or other disposition. Any loss realized upon a
shareholder's sale, redemption or other disposition of shares with a tax holding
period of six months or less will be treated as a long-term capital loss to the
extent of any capital gain dividend paid with respect to such shares. Exchanges
and withdrawals under the Systematic Withdrawal Plan are treated as redemptions
for federal income tax purposes.
The Funds may be required to pay state taxes in states that have
jurisdiction to tax them, except to the extent an exemption may be available,
but the Funds do not anticipate that their state tax liabilities will be
substantial.
The foregoing discussion of U.S. federal income tax law does not address
the special tax rules applicable to certain classes of investors, such as
insurance companies and qualified retirement plans or accounts. Each shareholder
who is not a U.S. person should consider the U.S. and foreign tax consequences
of ownership of shares of the Funds, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on Fund distributions treated
as ordinary dividends.
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This discussion of the federal income tax treatment of the Funds and their
distributions is based on the federal income tax law in effect as of the date of
this Statement of Additional Information. Shareholders should consult their tax
advisers about the application of the provisions of tax law described in this
statement of additional information and about the possible application of state,
local and foreign taxes in light of their particular tax situations.
PORTFOLIO BROKERAGE
It is the general policy of the Trust not to employ any broker-dealer in
the purchase or sale of securities for a Fund's portfolio unless the Trust
believes that the broker-dealer will obtain the best results for the Fund under
the circumstances, taking into consideration such relevant factors as price, the
ability of the broker-dealer to effect the transaction and the broker-dealer's
facilities, reliability and financial responsibility. Commission rates, being a
component of price, are considered together with such factors. Subject to the
foregoing, where transactions are effected on securities exchanges, the Trust
intends to employ primarily WPG as its broker. The Trust is not obligated to
deal with any broker-dealer or group of broker-dealers in the execution of
transactions in portfolio securities.
WPG acts as broker for the Funds on exchange transactions, subject,
however, to the general policy of the Trust set forth above and the procedures
adopted by the Trustees. Commissions paid to WPG must be at least as favorable
as those believed to be contemporaneously charged by other broker-dealers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange. A transaction is not placed with WPG
if a Fund would have to pay a commission rate less favorable than WPG's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers except for accounts for which WPG acts as a clearing
broker for another brokerage firm, and any customers of WPG determined by a
majority of the Independent Trustees not to be comparable to the Funds. With
regard to comparable customers, in isolated situations, subject to the approval
of a majority of the Independent Trustees, exceptions may be made. Since WPG
has, as investment adviser to the Funds, the obligation to provide management,
which includes elements of research and related skills, such research and
related skills will not be used by WPG as a basis for negotiating commissions at
a rate higher than that determined in accordance with the above criteria.
The commission rate on all exchange orders is subject to negotiation.
Section 17(e) of the 1940 Act limits to "the usual and customary broker's
commission" the amount which can be paid by the Trust to an affiliated person,
such as WPG, acting as broker in connection with transactions effected on a
securities exchange. The Trustees, including a majority of the Independent
Trustees, have adopted procedures designed to comply with the requirements of
Section 17(e) of the 1940 Act and Rule 17e-1 thereunder to ensure a broker's
commission that is "reasonable and fair compared to the commission, fee or other
remuneration received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time ...." Rule 17e-1 also
requires the Trustees, including a majority of the Independent Trustees, to
adopt procedures reasonably
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designed to provide that the commission paid is consistent with the above
standard, review those procedures at least annually to determine that they
continue to be appropriate and determine at least quarterly that transactions
have been effected in compliance with those procedures. The Trustees of the
Trust, including a majority of the Independent Trustees, have adopted procedures
designed to comply with the requirements of Rule 17e-1.
In selecting broker-dealers other than WPG to effect transactions on
securities exchanges, the Trust considers the factors set forth in the first
paragraph under this heading and any investment products or services provided by
such broker-dealers, subject to the criteria of Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Section 28(e) specifies
that a person with investment discretion shall not be "deemed to have acted
unlawfully or to have breached a fiduciary duty" solely because such person has
caused the account to pay a higher commission than the lowest rate available. To
obtain the benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided viewed in terms of either that particular transaction or his overall
responsibilities with respect to the accounts as to which he exercises
investment discretion." Accordingly, if the WPG determines in good faith that
the amount of commissions charged by a broker-dealer is reasonable in relation
to the value of the brokerage and research products and services provided by
such broker-dealer, the Trust may pay commissions to such broker-dealer in an
amount greater than the amount another firm might charge.
Research services may include (i) furnishing advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchases or sellers of securities, (ii)
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends, portfolio
strategy, access to research analysts, corporate management personnel, industry
experts and economists, comparative performance evaluation and technical
measurement services and quotation services, and products and other services
(such as third party publications, reports and analysis, and computer and
electronic access, equipment, software, information and accessories that
deliver, process or otherwise utilize information, including the research
described above) providing lawful and appropriate assistance to the Adviser (and
its affiliates) in carrying out their decision-making responsibilities and (iii)
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement).
Each year, WPG considers the amount and nature of the research products
and services provided by other broker-dealers as well as the extent to which
such products and services are relied upon, and attempts to allocate a portion
of the brokerage business of their clients, such as the Trust, on the basis of
that consideration. In addition, broker-dealers sometimes suggest a level of
business they would like to receive in return for the various services they
provide. Actual brokerage business received by any broker-dealers may be less
than the suggested allocations, but can (and often does) exceed the suggestions,
because total brokerage is allocated on the basis of
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all the considerations described above. In no instance is a broker-dealer
excluded from receiving business because it has not been identified as providing
research services. As permitted by Section 28(e), the investment information
received from other broker-dealers may be used by WPG (and its affiliates) in
servicing all its accounts and not all such information may be used by WPG, in
its capacity as the Adviser, in connection with the Trust. Nonetheless, the
Trust believes that such investment information provides the Trust with benefits
by supplementing the research otherwise available to WPG.
As set forth above, the Trust employs WPG, a member firm of the NYSE, as
its principal broker on U.S. exchange transactions. Section 11(a) of the
Exchange Act provides that a member firm of a national securities exchange (such
as WPG) may not effect transactions on such exchange for the account of an
investment company (such as the Trust) of which the member firm or its affiliate
(such as the Adviser) is the investment adviser unless certain conditions are
met. These conditions require that the investment company authorize the practice
and that the investment company receive from the member firm at least annually a
statement of all commissions paid in connection with such transactions. WPG's
transactions on behalf of the Funds are effected in compliance with these
conditions.
WPG furnishes to the Trust at least quarterly a statement setting forth
the total amount of all compensation retained by WPG or any associated person of
WPG in connection with effecting transactions for the account of the Trust, and
the Trustees of the Trust review and approve all the Trust's portfolio
transactions and the compensation received by WPG in connection therewith.
WPG does not knowingly participate in commissions paid by the Trust to
other brokers or dealers and does not seek or knowingly receive any reciprocal
business as the result of the payment of such commissions. In the event WPG at
any time learns that it has knowingly received reciprocal business, it will so
inform the Trustees.
To the extent that WPG receives brokerage commissions on Trust portfolio
transactions, officers and Trustees of the Trust who are also directors of WPG
may receive indirect compensation from the Trust through their participation in
such brokerage commissions.
In certain instances there may be securities which are suitable for a
Fund's portfolio as well as for that of another Fund or one or more of the other
clients of WPG. Investment decisions for a Fund and for WPG's other clients are
made with a view to achieving their respective investment objectives. It may
develop that a particular security is bought or sold for only one client even
though it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or more other
clients are selling that same security. Some simultaneous transactions are
inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could
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have a detrimental effect on the price or volume of the security in a particular
transaction as far as a Fund is concerned. The Trust believes that over time its
ability to participate in volume transactions will produce better executions for
the Funds. When appropriate, orders for the account of the Funds are combined
with orders for other investment companies or other clients advised by WPG in
order to obtain a more favorable commission rate. When the same security is
purchased for a Fund and one or more other funds or other clients on the same
day, each party pays the average price and commissions paid are allocated in
direct proportion to the number of shares purchased.
The U.S. Government and debt securities in which the Funds invest are
traded primarily in the over-the-counter market. Transactions in the
over-the-counter market are generally principal transactions with dealers and
the costs of such transactions involve dealer spreads rather than brokerage
commissions. Such spreads are commonly referred to as markups or mark downs
based on the price that dealers initially paid for such securities. With respect
to over-the-counter transactions, the Trust, where possible, deals directly with
the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Under
the 1940 Act, persons affiliated with the Trust are prohibited from dealing with
the Trust as a principal in the purchase and sale of securities. Since
transactions in the over-the-counter market usually involve transactions with
dealers acting as principal for their own account, affiliated persons of the
Trust, including WPG, may not serve as the Trust's dealer in connection with
such transactions. However, affiliated persons of the Trust may serve as its
broker in transactions conducted on an exchange or over-the-counter transactions
conducted on an agency basis. On occasion, certain money market instruments may
be purchased directly from an issuer, in which case no commissions or discounts
are paid.
Subject to the supervision of the Trustees, all investment decisions of
the Trust are executed through WPG's trading department.
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<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
PERCENTAGE OF
AGGREGATE
AGGREGATE BROKERAGE AMOUNT OF
COMMISSIONS TRANSACTIONS
INVOLVING THE
PERCENTAGE OF PAYMENT OF
AGGREGATE COMMISSIONS
COMMISSIONS EFFECTED
PAID TO WPG THROUGH WPG
FUND 1997 1998 1999 DURING 1999 DURING 1999
- ---- ---- ---- ---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Long-Term Retirement Fund $ 4,750 $ 5,305 $ 9,728 79% 79%
Medium-Term Retirement Fund 10,488 7,031 13,718 75 75
Short-Term Retirement Fund 12,134 13,180 15,629 68 68
AGGREGATE BROKERAGE COMMISSIONS PAID TO WPG
FUND 1997 1998 1999
- ---- ---- ---- ----
Long-Term Retirement Fund $ 4,655 $ 5,099 $ 7,663
Medium-Term Retirement Fund 10,176 6,944 10,292
Short-Term Retirement Fund 11,952 13,065 10,596
</TABLE>
The foregoing amounts do not include any profits or losses realized by
brokers or dealers on "net" transactions for the account of any Fund (such as
transactions in U.S. Government securities and transactions executed through
market makers and in the over-the-counter market).
PORTFOLIO TURNOVER
(See "Financial Highlights" in the Prospectus.)
The annual portfolio turnover rate of a Fund is calculated by dividing the
lesser of the purchase or sales of a Fund's portfolio securities for the year by
the monthly average of the value of the portfolio securities owned by that Fund
during the year. The monthly average is calculated by totalling the values of
the portfolio securities as of the beginning and end of the first month of the
year and as of the end of the succeeding 11 months and dividing the sum by 13.
In determining portfolio turnover, securities (including options) which have
maturities at the time of acquisition of one year or less ("short-term
securities"), are excluded. A turnover rate of 100% would occur if all of a
Fund's portfolio securities (other than short-term securities) were replaced
once in a period of one year. It should be noted that if a Fund were to write a
- 66 -
<PAGE>
substantial number of options which are exercised, the portfolio turnover rate
of that Fund would increase. Increased portfolio turnover results in increased
brokerage costs which the Trust must pay.
To the extent that their portfolios are traded for short-term market
considerations and the turnover rate exceeds 100%, the annual portfolio turnover
rate of the Funds could be higher than most mutual funds.
ORGANIZATION
As a Delaware business trust, the Trust's operations are governed by its
Agreement and Declaration of Trust dated June 21, 1995 (the "Declaration of
Trust"). A copy of the Trust's Certificate of Trust, also dated June 21, 1995,
is on file with the Office of the Secretary of State of the State of Delaware.
Upon the initial purchase of shares, the shareholder agrees to be bound by the
Trust's Declaration of Trust, as amended from time to time. Generally, Delaware
business trust shareholders are not personally liable for obligations of the
Delaware business trust under Delaware law. The Delaware Business Trust Act (the
"Delaware Act") provides that a shareholder of a Delaware business trust shall
be entitled to the same limitation of liability extended to shareholders of
private for-profit corporations. The Trust's Declaration of Trust expressly
provides that the Trust has been organized under the Delaware Act and that the
Declaration of Trust is to be governed by Delaware law. It is nevertheless
possible that a Delaware business trust, such as the Trust, might become a party
to an action in another state whose courts refused to apply Delaware law, in
which case the Trust's shareholders could be subject to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides that notice of such disclaimer may be given in each agreement,
obligation and instrument entered into or executed by the Trust or its Trustees,
(ii) provides for the indemnification out of Trust property of any shareholders
held personally liable for any obligations of the Trust or any series of the
Trust and (iii) provides that the Trust shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. Thus, the risk of a Trust shareholder
incurring financial loss beyond his or her investment because of shareholder
liability is limited to circumstances in which all of the following factors are
present: (1) a court refused to apply Delaware law; (2) the liability arose
under tort law or, if not, no contractual limitation of liability was in effect;
and (3) the Trust itself would be unable to meet its obligations. In the light
of Delaware law, the nature of the Trust's business and the nature of its
assets, the risk of personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Trust shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Trust. The Declaration of Trust does not authorize the Trust to indemnify
- 67 -
<PAGE>
any Trustee or officer against any liability to which he or she would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
Under the Declaration of Trust, the Trust is not required to hold annual
meetings to elect Trustees or for other purposes. It is not anticipated that the
Trust will hold shareholders' meetings unless required by law or the Declaration
of Trust. The Trust will be required to hold a meeting to elect Trustees to fill
any existing vacancies on the Board if, at any time, fewer than a majority of
the Trustees have been elected by the shareholders of the Trust. The Board is
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
Shares of the Trust do not entitle their holders to cumulative voting
rights, so that the holders of more than 50% of the outstanding shares of the
Trust may elect all of the Trustees, in which case the holders of the remaining
shares would not be able to elect any Trustees. As determined by the Trustees,
shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held or one vote for each dollar of net asset value
(number of shares held times the net asset value of the applicable class of the
applicable Fund).
As it is expected that separate accounts of insurance companies will be
purchasing Institutional Class shares of each of the Funds, it should be noted
that the rights, if any, of variable contract holders to vote the shares of a
Fund are governed by the relevant variable contract.
Pursuant to the Declaration of Trust, the Trustees may create additional
funds by establishing additional series of shares in the Trust. The
establishment of additional series would not affect the interests of current
shareholders in the existing four Funds.
As of the date of this SAI, the shares of the Trust are divided into four
series: Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement
Fund, Tomorrow Short- Term Retirement Fund and Tomorrow Post-Retirement Fund. No
series is entitled to share in the assets of any other series or is liable for
the expenses or liabilities of any other series. Shares of a particular series
vote separately on matters affecting only that series, including the approval of
an investment advisory agreement and changes in fundamental policies or
restrictions of a particular series in the Trust.
Pursuant to the Declaration of Trust, the Board may establish and issue
multiple classes of shares for each Fund. As of the date of this Statement of
Additional Information, the Trustees have authorized the issuance of two classes
of shares for each series, designated Adviser Class and Institutional Class. The
shares of each Class represent an interest in the same portfolio of investments
of that series. Each Class has equal rights as to voting, redemption, dividends
and liquidation, except that each Class bears different distribution fees and
may bear other exclusive voting rights with respect to the Rule 12b-1
distribution plan adopted by holders of Adviser Class shares of that Tomorrow
Fund. Pursuant to the Declaration of Trust, the Trustees may abolish any
existing class of shares or involuntarily redeem shareholders of any such class.
- 68 -
<PAGE>
Each share of each class of a Fund is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund
which are attributable to such class as are declared in the discretion of the
Board. In the event of the liquidation or dissolution of the Trust, shares of
each class of each Fund are entitled to receive their proportionate share of the
assets which are attributable to such class of such Fund and which are available
for distribution as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive, conversion or subscription
rights. All shares, when issued, will be fully paid and non-assessable by the
Trust.
Pursuant to the Declaration of Trust and subject to shareholder approval
(if then required), the Trustees may authorize each Fund to invest all or part
of its investable assets in a single open-end investment company that has
substantially the same investment objectives, policies and restrictions as the
Fund.
An insurance company issuing a Variable Contract that participates in
Institutional Class shares of a Tomorrow Fund will vote such shares held by the
insurance company Separate Accounts as required by law. In accordance with
current law and interpretations thereof, participating insurance companies are
required to request voting instructions from policy owners and must vote shares
of the Tomorrow Funds in proportion to the voting instructions received. For a
further discussion of voting rights, please refer to your insurance company
Separate Account prospectus.
In addition to the requirements under Delaware law, the Declaration of
Trust provides that a shareholder of the Trust may bring a derivative action on
behalf of the Trust only if the following conditions are met: (a) shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding shares of the Trust, or 10% of the outstanding shares of
the series or class to which such action relates, shall join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Trust for
the expense of any such advisers in the event that the Trustees determines not
to bring such action.
The Trustees of the Trust do not expect any disadvantages to investors
arising out of the fact that each Tomorrow Fund may offer a class of its shares
to Separate Accounts that serve as investment medium for Variable Contracts or
that each Tomorrow Fund may offer its shares to Qualified Plans. Nevertheless,
the Trustees intend to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise, and to determine what action,
if any, should be taken in response to such conflicts. If such a conflict were
to occur, one or more Separate Accounts or Qualified Plans might be required to
withdraw their investments in one or more Tomorrow Funds and shares of another
series of the Trust may be substituted. This might force a Tomorrow Fund to sell
securities at disadvantageous prices.
- 69 -
<PAGE>
In the interests of economy and convenience, the Trust does not issue
certificates representing the Tomorrow Funds' shares. Instead, the Transfer
Agent maintains a record of each shareholder's ownership. Although each Tomorrow
Fund is offering only its own shares, since the Tomorrow Funds use a combined
Prospectus, it is possible that one Tomorrow Fund might become liable for a
misstatement or omission in the Prospectus regarding another Tomorrow Fund. The
Trustees have considered this factor in approving the use of a combined
Prospectus.
"Tomorrow Funds Retirement Trust" is the designation of the Trust for the
time being under the Declaration of Trust, and all persons dealing with a Fund
must look solely to the property of that Fund for the enforcement of any claims
against that Fund as neither the Trustees, officers, agents or shareholders
assume any personal liability for obligations entered into on behalf of a Fund
or the Trust. No Fund is liable for the obligations of any other Fund. Since the
Funds use a combined prospectus, however, it is possible that one Fund might
become liable for a misstatement or omission in its prospectus regarding the
other Fund with which its disclosure is combined. The Trustees have considered
this factor in approving the use of the combined prospectus.
CUSTODIAN
The Custodian for the Trust is Boston Safe Deposit and Trust Company at
One Exchange Place, Boston, Massachusetts 02109. In its capacity as Custodian,
Boston Safe Deposit and Trust Company performs all accounting services, holds
the assets of the Trust and is responsible for calculating the net asset value
per share.
TRANSFER AGENT
PFPC, Inc. acts as transfer agent for the Trust and, in such capacity,
processes purchases, transfers and redemptions of shares, acts as dividend
disbursing agent, and maintains records and handles correspondence with respect
to shareholder accounts.
LEGAL COUNSEL
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, serves as
legal counsel to the Trust.
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS
KPMG LLP ("KPMG"), 345 Park Avenue, New York, New York 10154, are the
independent auditors for the Trust. Professional services performed by KPMG
include audits of the financial statements of the Trust, consultation on
financial, accounting and reporting matters, review and
- 70 -
<PAGE>
consultation regarding various filings with the SEC and attendance at the
meetings of the Audit Committee and Board of Trustees. KPMG also performs other
professional services for the Trust including preparation of income tax returns
of the Funds. Each Fund's audited financial statements and related report of
KPMG, independent auditors, included in the Annual Report to Shareholders of the
Funds for the year ended December 31, 1999, is attached hereto and hereby
incorporated by reference into this Statement of Additional Information.
- 71 -
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's also provides credit ratings for preferred stocks. It should be
borne in mind that preferred stock occupies a junior position to bonds within a
particular capital structure and that these securities are rated within the
universe of preferred stocks.
aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least
risk of dividend impairment within the universe of preferred stocks.
aa: An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
a: An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protections are,
nevertheless, expected to be maintained at adequate levels.
- 72 -
<PAGE>
baa: An issue which is rated "baa" is considered to be a medium grade
preferred stock, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be questionable over
any great length of time.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG 2 are of high quality, with margins of protection ample although
not so large as in the preceding group. A short term issue having a demand
feature (I.E. payment relying on external liquidity and usually payable on
demand rather than fixed maturity dates) is differentiated by Moody's with the
use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax-exempt commercial paper.
These are promissory obligations (1) not having an original maturity in excess
of nine months, and (2) backed by commercial banks. Notes bearing the
designation P-1 have a superior capacity for repayment. Notes bearing the
designation P-2 have a strong capacity for repayment.
STANDARD & POOR'S RATINGS GROUP
AAA: Bonds rated AAA have the higher rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a very strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in higher
rated categories.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. The designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added for those issues determined to possess overwhelming
safety characteristics. An "SP-2" designation indicates a satisfactory capacity
to pay principal and interest.
Commercial paper rated A-2 or better by S&P is described as having a very
strong degree of safety regarding timeliness and capacity to repay.
Additionally, as a precondition for receiving an
- 73 -
<PAGE>
S&P commercial paper rating, a bank credit line and/or liquid assets must be
present to cover the amount of commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity for
repayment of short-term promissory obligations.
GLOSSARY
Commercial Paper: Short-term promissory notes of large corporations with
excellent credit ratings issued to finance their current operations.
Certificates of Deposit: Negotiable certificates representing a commercial
bank's obligations to repay funds deposited with it, earning specified rates of
interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a draft which
has been drawn on it by a customer. These obligations are backed by large banks
and usually are backed by goods in international trade.
Time Deposits: Non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and other
business organizations in order to finance their long-term credit needs.
- 74 -
<PAGE>
TOMORROW FUNDS
RETIREMENT TRUST
A LIFECYCLE RETIREMENT PROGRAM
ANNUAL REPORT
DECEMBER 31, 1999
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 .............................................. 28
Page 1
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
The Funds experienced a difficult year primarily due to the performance of the
equity portion of the portfolios.
We have observed two trends in the market that hampered the WPG Quantitative
Equity model during 1999, particularly in the first and fourth quarters. The
first, negative or perverse return to value, deals with a contradiction to
widely held beliefs about stock valuation. Traditional measures of favorable
stock valuation such as low Price to Earnings ratios have not just failed to
predict positive relative return but have actually been predictive of negative
relative returns. The second trend, narrow markets, has also hampered
Quantitative Equity model performance. During the fourth quarter most of the
index returns in the large and mid cap segments of the market have been
concentrated in a very few of the larger and mostly technology stocks in the
index. Missing just a few of these names in stock selection means certain
underperformance. For example, the top 10 names in terms of contribution to
S&P500 and S&P Mid Cap index returns for the year accounted for almost half and
almost three quarters respectively of the total return to those indexes.
It is our expectation that these trends are temporary and the historical
relationships that our model is based upon will return. We believe earnings and
the price paid for those earnings will again be important to investors causing
the markets to broaden and valuation to again be predictive.
[GRAPH DEPICTED HERE]
Graph depicted here shows the growth comparison of the Tomorrow Long-Term Funds
from the period March 1996 through December 31, 1999 as compared to the Long
Term Benchmark ( 45% S&P 500 Index, 15% S&P 400 Index, 15% Russell 2000 Index,
20% Lehman Gov't Corp. Index, 5% EAFE Index.)
Tomorrow L/T Fund
(Advisor Class)
L/T Fund L/T Benchmark
$ $
------ -------
03/07/96 10,000 10,000
6/30/96 10,309 10,339
9/30/96 10,372 10,549
12/31/96 10,977 11,154
3/31/97 10,850 11,041
6/30/97 12,266 12,541
9/30/97 13,320 13,793
12/31/97 13,668 11,154
3/31/98 14,832 12,321
6/30/98 14,831 12,451
9/30/98 13,735 11,288
12/31/98 15,796 13,218
3/31/99 15,447 13,254
6/30/99 16,643 14,244
9/30/99 15,949 13,571
12/31/99 17,296 15,299
- --------------------------------------------------------------------------------
ONE FROM
YEAR INCEPTION*
---- ----------
Tomorrow Long-Term Institutional 10.07% 15.93%
Tomorrow Long-Term Adviser 9.53% 15.24%
Benchmark (a) 15.74% 18.35%
(a) 45% S&P 500 Index, 15% S&P 400 Index, 15% Russell 2000 Index, 20% Lehman
Gov't Corp. Index, 5% EAFE Index
- --------------------------------------------------------------------------------
[GRAPH DEPICTED HERE]
Graph depicted here shows the growth comparison of the Tomorrow Medium-Term
Funds from the period March 1996 through December 31, 1999 as compared to the
Long Term Benchmark (40% S&P 500 Index, 40% Lehman Gov't Corp. Index, 10% S&P
400 Index, 5% Russell 2000 Index, 5% EAFE Index.)
Tomorrow M/T Fund
(Advisor Class)
M/T Fund M/T Benchmark
$ $
------ -------
3/7/96 $10,000 $10,000
6/30/96 $10,228 $10,302
9/30/96 $10,362 $10,527
12/31/96 $10,919 $11,120
3/31/97 $10,757 $11,079
6/30/97 $11,880 $12,457
9/30/97 $12,758 $13,486
12/31/97 $12,989 $13,756
3/31/98 $13,986 $14,921
6/30/98 $14,162 $15,217
9/30/98 $13,501 $14,444
12/31/98 $15,058 $16,308
3/31/99 $14,793 $16,416
6/30/99 $15,445 $17,178
9/30/99 $14,886 $16,618
12/31/99 $15,708 $18,132
- --------------------------------------------------------------------------------
ONE FROM
YEAR INCEPTION*
---- ----------
Tomorrow Medium-Term Institutional 4.77% 13.00%
Tomorrow Medium-Term Adviser 4.32% 12.47%
Benchmark (a) 11.19% 16.65%
(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]
Graph depicted here shows the growth comparison of the Tomorrow Short-Term
Funds from the period March 1996 through December 31, 1999 as compared to the
Long Term Benchmark (65% Lehman Gov't Corp. Index, 35% S&P 500 Index.)
Tomorrow S/T Fund
S/T Fund S/T Benchmark
$ $
------ -------
3/7/96 $10,000 $10,000
6/30/96 $10,213 $10,280
9/30/96 $10,366 $10,523
12/31/96 $10,918 $11,123
3/31/97 $10,822 $11,132
6/30/97 $11,883 $12,406
9/30/97 $12,612 $13,308
12/31/97 $12,936 $13,724
3/31/98 $13,651 $14,519
6/30/98 $13,849 $14,937
9/30/98 $13,676 $14,912
12/31/98 $14,516 $15,993
3/31/99 $14,516 $16,146
6/30/99 $14,751 $16,427
9/30/99 $14,475 $16,122
12/31/99 $14,824 $16,894
- --------------------------------------------------------------------------------
ONE FROM
YEAR INCEPTION*
---- ----------
Tomorrow Short-Term Institutional 2.40% 11.07%
Tomorrow Short-Term Adviser. 2.12% 10.68%
Benchmark (a). 5.62% 14.46%
(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, 1999
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>
<TABLE>
<CAPTION>
TOMORROW FUNDS RETIREMENT TRUST
TEN LARGEST HOLDINGS AT DECEMBER 31, 1999
MARKET PERCENT
LONG-TERM TOMORROW FUND VALUE OF FUND
- ----------------------- ----- -------
<S> <C> <C>
UST-Note 6.125% Due 12/31/01 ........................ $ 798,248 7.9%
BT EAFE Equity Index Fund ........................... 561,321 5.5%
UST-Note 6.125% Due 8/15/07 ......................... 360,750 3.6%
Microsoft Corp. ..................................... 274,363 2.7%
General Electric Corp. .............................. 189,568 1.9%
Cisco Systems ....................................... 187,469 1.9%
UST-Note 5.500% Due 5/15/09 ......................... 149,075 1.5%
UST-Note 5.625% Due 5/15/08 ......................... 136,390 1.3%
UST-Note 5.250% Due 11/25/28 ........................ 135,919 1.3%
Wal Mart Stores Inc. ................................ 119,241 1.2%
----------- ----
$ 2,912,344 28.8%
=========== ====
MEDIUM-TERM TOMORROW FUND
- -------------------------
UST-Note 6.125% Due 12/31/01 ........................ $ 1,855,927 11.3%
UST-Note 5.625% Due 5/15/08 ......................... 1,124,041 6.9%
BT EAFE Equity Index Fund ........................... 860,220 5.2%
Microsoft Corp. ..................................... 408,625 2.5%
General Electric .................................... 317,238 1.9%
Cisco Systems ....................................... 305,306 1.9%
Wal Mart Stores Inc. ................................ 197,006 1.2%
GMAC 5.375% Due 9/30/02 ............................. 191,552 1.2%
Intel Corp. ......................................... 187,261 1.1%
Time Warner 9.125% Due 1/15/13 ...................... 186,277 1.1%
----------- ----
$ 5,633,453 34.3%
=========== ====
SHORT-TERM TOMORROW FUND
- ------------------------
UST-Bond 5.625% Due 5/15/08 ......................... $ 4,373,883 13.8%
UST-Note 6.125% Due 12/31/01 ........................ 2,055,489 6.5%
Salomon Inc. 7.300% Due 5/15/02 ..................... 862,606 2.7%
Microsoft Corp. ..................................... 659,638 2.1%
Barclays Bank Plc Yankee 7.400% Due 12/15/09 ........ 564,138 1.8%
Commercial Credit 8.250% Due 11/1/01 ................ 520,985 1.6%
Ford Motor Credit 6.570% Due 3/19/01 ................ 518,336 1.6%
Ford Motor Credit 7.375% Due 10/28/09 ............... 518,306 1.6%
Norwest Financial 5.375% 9/30/03 .................... 518,199 1.6%
Fortune Brands Inc. 7.125% Due 11/1/04 .............. 517,124 1.6%
----------- ----
$11,108,704 34.9%
=========== ====
Page 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW LONG-TERM RETIREMENT FUND
COMMON STOCKS (71.3%)
BASIC MATERIALS (3.3%)
<C> <S> <C>
850 AK Steel Holding Corp. ......................... $16,044
425 Aptargroup Inc. ................................ 10,678
1,550 Boise Cascade Group ............................ 62,775
1,825 +Cytec Industries Inc. .......................... 42,203
350 Eastman Kodak Co. .............................. 23,188
750 Fortune Brands ................................. 24,797
525 Georgia Pacific Corp. .......................... 26,644
650 Glatfelter (PH) Co. ............................ 9,466
150 Ferro Corp. .................................... 3,300
550 Imco Recycling Inc. ............................ 6,944
1,200 Intermet Corp. ................................. 13,950
375 Lilly Industries Inc. - Cl A ................... 5,039
350 Lubrizol Corp. ................................. 10,806
350 MacDermid Inc. ................................. 14,372
370 Nashua Corp. ................................... 2,775
700 Pope & Talbot Inc. ............................. 11,200
180 Quanex Corp. ................................... 4,590
550 Ryerson Tull Inc. .............................. 10,690
1,100 Sherwin - Williams Co. ......................... 23,100
550 Solutia, Inc. .................................. 8,490
-------
331,051
-------
COMMERCIAL SERVICES (1.3%)
425 ABM Industries Inc. ............................ 8,659
950 +Billing Concepts Corp. ......................... 6,175
650 Comdisco Inc. .................................. 24,213
200 +GTech Holding Corp. ............................ 4,400
1,880 True North Communications ...................... 84,013
-------
127,460
-------
CONSUMER CYCLICALS (6.3%)
250 Abercrombie & Fitch Co. ........................ 6,672
350 Applied Power Inc. ............................. 12,862
200 Arvin Industries Inc. .......................... 5,675
500 BJ's Wholesale Club Inc. ....................... 18,250
270 +Champion Enterprises Inc. ...................... 2,312
350 +Convergys Corp. ................................ 10,762
550 Dayton Hudson Corp. ............................ 40,391
650 +Dress Barn Inc. ................................ 10,806
180 Federal Realty Investors Trust ................. 3,386
750 +Federated Department Store ..................... 37,922
350 +Footstar Inc. .................................. 10,675
1,400 Ford Motor Co. ................................. 74,813
100 Franchise Finance Corp. ........................
of America ..................................... 2,394
225 General Growth Properties ...................... 6,300
675 Glenborough Realty ............................. 9,028
200 Highwood Properties ............................ 4,650
640 +Insituform Technologies - Cl A ................. 18,080
180 Kellwood Co. ................................... 3,499
100 Liberty Property Trust ......................... 2,425
100 Mack-Cali Realty Corp. ......................... $ 2,606
600 Mascotech Inc. ................................. 7,613
350 +The Men's Warehouse ............................ 10,281
675 Meritor Automotive ............................. 13,078
1,160 +Morrison Knudson Co. ........................... 9,063
180 +Nautica Enterprises Inc. ....................... 2,036
360 Osh Kosh B'Gosh - Cl A ......................... 7,583
1,075 Pier 1 Imports Inc. ............................ 6,853
600 Ross Stores .................................... 10,763
270 Ryland Group Inc. .............................. 6,227
1,050 Shaw Industries Inc. ........................... 16,209
460 +Southern Energy Homes .......................... 1,078
100 Storage USA .................................... 3,025
150 Tiffany & Company .............................. 13,387
950 +Toys R Us ..................................... 13,597
225 USG Corp. ...................................... 10,603
200 Wabash National Corp. .......................... 3,000
1,725 Wal Mart Stores Inc. ........................... 119,241
400 Warnaco Group Cl A ............................. 4,925
200 +Williams Sonoma Inc. ........................... 9,200
550 Winnebago Industries ........................... 11,034
600 Young & Rubicam Inc. ........................... 42,450
650 Zale Corp. ..................................... 31,444
-------
636,198
-------
CONSUMER NON-CYCLICALS (3.7%)
500 Anheuser - Busch Co. ........................... 35,438
500 Best Foods ..................................... 26,281
500 Casey's General Store .......................... 5,219
180 Dimon Inc. ..................................... 585
1,000 General Mills Inc. ............................. 35,750
350 Hormel Foods Corp. ............................. 14,219
400 Interstate Bakeries Corp. ...................... 7,250
250 Lancaster Colony ............................... 8,281
200 Libbey Inc. .................................... 5,750
800 Philip Morris Companies Inc. ................... 18,550
600 Proctor & Gamble Co. ........................... 65,737
625 +Quaker Oats .................................... 41,016
475 +Ralcorp Holding Inc. ........................... 9,470
850 Sara Lee Corp. ................................. 18,753
350 +Smithfield Foods Inc. .......................... 8,400
300 +Suiza Foods Corp. .............................. 11,888
2,604 Supervalu Inc. ................................. 52,080
325 Tupperware Corporation ......................... 5,505
2 +WLR Foods Inc .................................. 11
-------
370,183
-------
CONSUMER SERVICES (3.8%)
350 Adaptive Broadband Corp. ....................... 25,834
700 Arctic Cat Inc. ................................ 7,000
350 +Brinker International Inc. ..................... 8,400
1,500 Brunswick Corp. ................................ 33,375
270 +Carmike Cinemas Inc. - Cl A .................... 2,109
See Notes to Financial Statements
Page 5
<PAGE>
TOMORROW LONG-TERM RETIREMENT FUND (CONTINUED)
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
1,950 Darden Restaurants Inc. ........................ $35,344
360 +Devry Inc. ..................................... 6,705
1,000 Donnelley RR & Sons ............................ 24,812
200 Harley Davidson Inc. ........................... 12,812
975 +Harrah's Entertainment Inc. .................... 25,777
1,900 Jack in the Box Inc. ........................... 39,306
325 +Mandalay Resort Group .......................... 6,541
640 New England Business Service ................... 15,640
550 +Park Place Entertainment Corp. ................. 6,875
200 Polaris Industries ............................. 7,250
250 +Readers Digest Association Inc. ................ 7,313
1,100 Reynolds & Reynolds ............................ 24,750
650 Time Warner Inc. ............................... 47,084
175 +Univision Communications Inc. .................. 17,882
950 Viad Corp. ..................................... 26,481
-------
381,290
-------
ENERGY (3.7%)
300 +BJ Services Co. ................................ 12,544
200 +Barrett Resources Corp. ........................ 5,887
900 Coastal Corp. .................................. 31,894
600 Exxon Mobil Corp. .............................. 48,338
77 Friede Goldman Halter Inc ...................... 534
350 Murphy Oil Corp. ............................... 20,081
180 +New Field Exploration Co. ...................... 4,815
575 Noble Drilling Corp. ........................... 18,831
1,650 Occidental Petroleum Corp. ..................... 35,681
920 +Oceaneering International Inc. ................. 13,743
1,550 Royal Dutch Petroleum ADR ...................... 93,678
1,500 +Santa Fe Snyder Corp. .......................... 12,000
325 Tosco Corporation .............................. 8,836
925 +Transocean Sedco Forex Inc. .................... 31,161
1,625 USX - Marathon Group ........................... 40,117
-------
378,140
-------
FINANCE (8.8%)
625 AMBAC Financial Group Inc. ..................... 32,617
593 American International Group ................... 64,118
200 +Amresco Inc. .................................. 281
325 Amsouth Bancorportion .......................... 6,277
90 Astoria Financial Corp. ........................ 2,739
8 BSB Bancorp Inc. ............................... 154
450 BankNorth Group Inc. ........................... 12,037
315 Bear Stearns Cos. Inc. ......................... 13,466
100 Centura Banks Inc. ............................. 4,412
178 Charter One Financial .......................... 3,404
400 Chase Manhattan Corp. .......................... 31,075
1,750 Citigroup Inc. ................................. 97,234
650 Comerica Inc. .................................. 30,347
135 Commercial Federal Corp. ....................... 2,405
500 Compass Bancshares Inc. ........................ 11,156
200 Cullen/Frost Bankers Inc. ...................... 5,150
156 +Delphi Financial Group ........................ 4,680
875 Dime Bancorp Inc. .............................. $13,234
750 Federal National Mortgage Corp. ................ 46,828
100 Felcor Lodging Trust ........................... 1,750
335 Fidelity National Financial Inc. ............... 4,816
200 Finova Group Inc. .............................. 7,100
400 First American Financial ....................... 4,975
425 FirstMerit Corp. ............................... 9,775
1,000 First Union Corp. .............................. 32,812
950 Fleet Boston Financial Group Inc. .............. 33,072
99 +Frontier Insurance Group Inc. .................. 340
100 Health Care Property Investors ................. 2,388
270 Hilb, Rogal & Hamilton Co. ..................... 7,628
900 Household International Inc. ................... 33,525
360 Hudson United Bancorp .......................... 9,203
180 JSB Financial Inc. ............................. 9,338
180 Keystone Financial Inc. ........................ 3,791
325 Legg Mason Inc. ................................ 11,781
300 Lincoln National Corp. Ltd. .................... 12,000
275 MAF Bancorp .................................... 5,758
275 Marshall & Ilsley Corp. ........................ 17,273
600 Metris Companies Inc. .......................... 21,413
300 Morgan Stanley Dean Witter & Co. ............... 42,825
180 Mutual Risk Management ......................... 3,026
550 National Commerce
Bancorporation ................................. 12,478
200 Nationwide Financial Services .................. 5,588
700 North Fork Bancorp ............................. 12,250
2 One Valley Bancorp Inc. ........................ 61
775 The PMI Group Inc. ............................. 37,830
925 PNC Bank ....................................... 41,163
550 Paine Webber Group Inc. ........................ 21,347
275 T. Rowe Price Associates Inc. .................. 10,158
300 Provident Financial Group ...................... 10,763
100 Radian Group Inc. .............................. 4,775
500 Raymond James Financial ........................ 9,344
750 Southtrust Corp. ............................... 28,359
375 TCF Financial Corp. ............................ 9,328
180 Trenwick Group Inc. ............................ 3,049
525 UST Corp. ...................................... 16,669
90 US Trust Corp. ................................. 7,217
-------
886,582
-------
HEALTH CARE (7.1%)
270 Advanced Tissue Sciences Inc. .................. 675
200 Allergen Inc. .................................. 9,950
650 Alpharma Inc. Cl A ............................. 19,987
400 AmeriSource Health Corp. ....................... 6,075
225 Bard (CR) Inc. ................................. 11,925
300 Baxter International ........................... 18,844
375 Biogen Inc. .................................... 31,687
1,450 Bristol-Myers Squibb ........................... 93,072
550 Cambrex Corp. .................................. 18,941
625 DENTSPLY International ......................... 14,766
See Notes to Financial Statements
Page 6
<PAGE>
TOMORROW LONG-TERM RETIREMENT FUND (CONTINUED)
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
200 Express Scripts Inc. - Cl A .................... $12,800
425 Ivax Corp. ..................................... 10,944
500 Johnson & Johnson Co. .......................... 46,563
90 Magellan Health Services Inc. .................. 568
510 Medimmune Inc. ................................. 84,596
180 Mentor Corp. ................................... 4,646
1,025 Merck & Co. Inc. ............................... 68,739
180 Orthodontic Centers of America ................. 2,149
270 Owens & Minor Inc. ............................. 2,413
250 +Pacificare Health Systems - Cl B ............... 13,250
1,525 Pfizer Inc. .................................... 49,467
209 +Quintiles Transnational Corp. .................. 3,906
180 Respironics Inc. ............................... 1,434
180 +Rural/ Metro Corp. ............................. 771
180 Safeskin Corp. ................................. 2,182
850 Schering Plough Corp. .......................... 35,859
521 Shire Pharmaceuticals Group -ADR ............... 15,184
180 Sola International Inc. ........................ 2,498
350 Visx Inc. ...................................... 18,113
950 Warner Lambert Co. ............................. 77,841
625 +Wellpoint Health Networks ...................... 41,211
-------
721,056
-------
INDUSTRIAL (4.1%)
730 Anixter International Inc. ..................... 15,056
1,425 Belden Inc. .................................... 29,925
950 CDI Corp. ...................................... 22,919
270 Clarcor Inc. ................................... 4,860
1,225 General Electric ............................... 189,568
350 Kennametal Inc. ................................ 11,769
135 Manitowoc Inc. ................................. 4,590
450 Mark IV Industries Inc. ........................ 7,959
275 Minnesota Mining
& Manufacturing .............................. 26,916
90 SPS Technologies Inc. .......................... 2,874
150 +SPX Corp. ..................................... 12,122
525 Toro Co. ....................................... 19,589
1,650 Tyco International Ltd. ........................ 64,144
-------
412,291
-------
REAL ESTATE INVESTMENT TRUST (0.1%)
400 Charles Smith Residential ...................... 14,150
TECHNOLOGY (20.5%)
555 AAR Corp. ...................................... 9,955
550 +ADC Telecommunications Inc. .................... 39,909
200 +Acxiom Corp. ................................... 4,800
775 +Adaptec Inc. ................................... 38,653
225 Adobe Systems Inc. ............................. 15,131
300 Affiliated Computer Services ................... 13,800
1,150 Altera Corp. ................................... 56,997
450 American Management Systems .................... 14,119
300 Applied Materials Inc. ......................... 38,006
200 Aspect Communications Inc. ..................... 7,825
400 +Atmel Corp. .................................... $11,825
400 +C-Cube Microsystems Inc. ....................... 24,900
600 Ciber Inc. ..................................... 16,500
1,750 +Cisco Systems .................................. 187,469
200 +Citrix Systems ................................. 24,600
180 Cognex Corp. ................................... 7,020
475 Computer Associates
International Inc. ............................. 33,220
675 Computer Task Group ............................ 9,998
1,800 +Compuware Corp. ................................ 67,050
75 Comverse Technology ............................ 10,856
500 Concord EFS Inc. ............................... 12,875
1,000 Cypress Semiconductor .......................... 32,375
350 Dallas Semiconductors .......................... 22,553
375 +EMC Corp. ...................................... 40,969
1,800 Filenet Corp. .................................. 45,900
1,275 Gerber Scientific Inc. ......................... 27,970
675 +Integrated Device Technology ................... 19,575
1,350 Intel Corp. .................................... 111,122
750 International Business
Machines Corp. ................................. 81,000
575 +Intervoice - Brite Inc. ........................ 13,369
375 +Intuit ......................................... 22,478
150 Jabil Circuit Inc. ............................. 10,950
875 Johnson Controls ............................... 49,766
820 +Kemet Corp. .................................... 36,951
350 +LSI Logic Corp. ................................ 23,625
500 +Lexmark International Group - Cl A ............. 45,250
125 +Litton Industries Inc. ......................... 6,234
1,000 Lucent Technologies ............................ 74,813
460 Microchip Technology Inc. ...................... 31,481
2,350 +Microsoft Corp. ................................ 274,363
1,300 +Midway Games Inc. .............................. 31,119
325 Novellus Systems Inc. .......................... 39,823
74 PeopleSoft Inc. ................................ 1,583
100 Precision Castparts Corp. ...................... 2,625
180 Read-Rite Corp. ................................ 855
125 SCI Systems Inc. ............................... 10,273
180 +S3 Incorporated ................................ 2,081
180 Sanmina Corp. .................................. 17,978
100 Sterling Software Industry ..................... 3,150
800 +Sun Microsystems Inc. ......................... 61,950
350 Symantec Corp. ................................. 20,519
200 Synopsys Inc. .................................. 13,350
325 Technitrol Inc. ................................ 14,463
850 +Tellabs Inc. .................................. 54,559
150 Teradyne Inc. ................................... 9,900
900 United Technologies ............................ 58,500
425 Veritas Software Corp. ......................... 60,828
325 Vishay International Inc. ...................... 10,278
250 Vitesse Semiconductor Corp. .................... 13,109
175 Waters Corp. ................................... 9,275
350 Xircom ......................................... 26,250
---------
2,078,720
---------
See Notes to Financial Statements
Page 7
<PAGE>
TOMORROW LONG-TERM RETIREMENT FUND (CONTINUED)
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TELECOMMUNICATIONS (5.4%)
1,525 AT&T Corp. ..................................... $77,394
425 Alltel Corp. ................................... 35,142
1,300 Bell Atlantic Corp. ............................ 80,031
1,400 BellSouth Corp. ................................ 65,537
450 Centurytel Inc. ................................ 21,319
150 +DST System ..................................... 11,447
225 Dycom Industries ............................... 9,914
550 +General Communication - Cl A ................... 2,406
100 +Hispanic Broadcasting Corp. .................... 9,222
1,275 +MCI Worldcom Inc. .............................. 67,655
400 +Nextel Communications Inc. ..................... 41,250
625 +Voicestream Wireless Corp. ..................... 88,945
625 +Western Wireless Co. ........................... 41,719
-------
551,981
-------
TRANSPORTATION (0.6%)
475 +AMR Corp. ...................................... 31,825
550 +Alaska Air Group ............................... 19,319
750 +Yellow Corp. ................................... 12,609
-------
63,753
-------
UTILITIES (2.6%)
2,100 Allegheny Energy Inc. .......................... 56,569
200 +Analog Devices Inc. ............................ 18,600
650 Conectiv, Inc. ................................. 10,928
1,275 Eastern Utilities .............................. 38,648
800 Energy East Corp. .............................. 16,650
800 FPL Group Inc. ................................. 34,250
225 Florida Progress Co. ........................... 9,520
500 GPU Inc. ....................................... 14,969
500 +MidAmerican Energy ............................. 16,844
700 Northwest Natural Gas Co. ...................... 15,356
200 Pinnacle West Capital .......................... 6,113
1,250 Questar Corp. .................................. 18,750
300 Utilicorp United Inc. .......................... 5,831
-------
263,028
-------
TOTAL COMMON STOCKS
(Cost $6,165,114) 7,215,883
---------
OPEN END INVESTMENT COMPANY (5.5%)
(Cost $405,706)
38,499 BT EAFE Equity Index Fund ...................... 561,321
UNIT INVESTMENT TRUST (1.0%)
(Cost $64,473)
669 Standard & Poor's Depositary
Receipt ........................................ 98,259
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
U.S. GOVERNMENT OBLIGATIONS (18.0%)
U.S. TREASURY NOTES (15.7%)
$800,000 6.125% Due 12/31/01 ............................. $798,248
115,000 5.250% Due 8/15/03 .............................. 110,885
370,000 6.125% Due 8/15/07 .............................. 360,750
145,000 5.625% Due 5/15/08 .............................. 136,390
160,000 5.500% Due 5/15/09 .............................. 149,075
30,000 6.000% Due 8/15/09 .............................. 29,063
---------
1,584,411
---------
U.S. TREASURY BONDS (1.3%)
165,000 5.250% Due 11/15/28 ............................ 135,919
---------
U.S. TREASURY STRIP (1.0%)
105,000 Due 2/15/15 .................................... 37,546
170,000 Due 11/15/22 ................................... 37,257
125,000 Due 11/15/27 ................................... 20,971
---------
95,774
---------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $1,904,828) ............................. 1,816,104
---------
ASSET BACKED SECURITY (0.4%)
(Cost $47,375)
45,000 MBNA Master Credit Card
Series 1995-C
6.450% Due 2/15/08 ............................ 43,734
---------
EURODOLLAR DEPOSIT (3.4%)
(Cost $339,000)
339,000 Societe Generale
3.000% Due 1/3/00 ............................. 339,000
---------
TOTAL INVESTMENTS (99.6%)
(Cost $8,926,496) 10,074,301
OTHER ASSETS IN EXCESS OF
LIABILITIES (0.4%) 42,700
---------
TOTAL NET ASSETS (100.0%) $10,117,001
===========
<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, 1999
<TABLE>
<CAPTION>
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND
COMMON STOCK - 55.9%
BASIC MATERIALS (2.3%)
<C> <S> <C>
1,450 AK Steel Holding Corp. ......................... $27,369
200 Aptargroup Inc. ................................ 5,025
100 +Birmingham Steel Co ............................ 531
2,250 Boise Cascade Corp. ............................ 91,125
2,300 +Cytec Industries Inc. .......................... 53,188
575 Eastman Kodak .................................. 38,094
875 Georgia Pacific Co. ............................ 44,406
750 Glatfelter Co. ................................. 10,922
275 Imco Recycling, Inc ............................ 3,472
575 Intermet Corp. ................................. 6,684
200 Lilly Industries ............................... 2,687
400 Lubrizol Corp. ................................. 12,350
150 MacDermid Inc. ................................. 6,159
300 +Nashua Corp. ................................... 2,250
400 Pope & Talbot Inc. ............................. 6,400
100 Quanex Corp. ................................... 2,550
575 Ryerson Tull Inc. .............................. 11,177
2,000 Sherwin - Williams Co. ......................... 42,000
650 Solutia, Inc ................................... 10,034
-------
376,423
-------
CAPITAL GOODS (0.0%)
100 Ryland Group Inc. .............................. 2,306
COMMERCIAL SERVICES (1.9%)
200 ABM Industries Inc. ............................ 4,075
350 +Affiliated Computer Services ................... 16,100
200 +American Management Systems .................... 6,275
450 +Billing Concepts Corp. ......................... 2,925
275 +Ciber Inc. ..................................... 7,563
600 Comdisco Inc. .................................. 22,350
325 Computer Task Group ............................ 4,814
525 +Concord EFS Inc. ............................... 13,519
500 +Convergys Corp. ................................ 15,375
175 +DST System ..................................... 13,355
350 +GTech Holding Corp. ............................ 7,700
1,000 Ryder Systems .................................. 24,437
1,300 True North Communication ....................... 58,094
1,400 Viad Corp. ..................................... 39,025
1,000 Young & Rubicam Inc. ........................... 70,750
-------
306,357
-------
CONSUMER CYCLICALS (4.3%)
300 +Abercrombie & Fitch ............................ 8,006
175 Applied Power Inc. ............................. 6,431
225 Arvin Industries Inc. .......................... 6,384
550 BJ's Wholesale Club Inc. ....................... 20,075
150 +Champion Enterprise ............................ 1,284
900 Dayton Hudson Corp. ............................ 66,094
350 +Dress Barn Inc. ................................ 5,819
100 Federal Realty Investment Trust ................ 1,881
750 +Federated Department Store ..................... $37,922
175 +Footstar Inc. .................................. 5,337
2,700 Ford Motor Company ............................. 144,281
100 Franchise Finance Corp. of America ............. 2,394
100 General Growth Properties ...................... 2,800
150 Glenborough Realty ............................. 2,006
100 Highwood Properties Inc. ....................... 2,325
300 +Insituform Technology .......................... 8,475
100 Kellwood Company ............................... 1,944
100 Liberty Property Trust ......................... 2,425
100 Mack-Cali Realty Corp. ......................... 2,606
300 Mascotech Inc. ................................. 3,806
175 +The Men's Wearhouse ............................ 5,141
650 Meritor Automotive ............................. 12,594
550 +Morrison Knudsen Co. .......................... 4,297
100 +Nautica Enterprises Inc. ....................... 1,131
200 Osh Kosh B'Gosh Class `A' ...................... 4,213
500 Pier 1 Imports Inc. ............................ 3,187
700 Ross Stores .................................... 12,556
1,275 Shaw Industries Inc. ........................... 19,683
200 Smith Charles Residential ...................... 7,075
250 +Southern Energy Home ........................... 586
100 Storage USA .................................... 3,025
175 Tiffany & Company .............................. 15,619
2,350 +Toys R Us ...................................... 33,634
225 USG Corp. ...................................... 10,603
100 Wabash National Corp. .......................... 1,500
2,850 Wal Mart Stores Inc. ........................... 197,006
500 Warnaco Group Cl A ............................. 6,156
100 +Williams Sonoma ................................ 4,600
300 Winnebago Industries ........................... 6,019
475 +Zale Corp. ..................................... 22,978
703,898
CONSUMER NON CYCLICALS (3.4%)
850 Anheuser-Busch Co. ............................. 60,244
850 Best Foods ..................................... 44,678
250 Caseys General Store ........................... 2,609
100 Dimon Inc ...................................... 325
1,225 Fortune Brands ................................. 40,502
48 +General Cigar Holdings ......................... 399
1,525 General Mills Inc. ............................. 54,519
350 Hormel Foods Corp. ............................. 14,219
525 Interstate Bakeries Corp. ...................... 9,516
275 Lancaster Colony ............................... 9,109
100 Libbey Inc. .................................... 2,875
1,600 Philip Morris Companies Inc. ................... 37,100
875 Proctor & Gamble Co. ........................... 95,867
825 Quaker Oats .................................... 54,141
225 +Ralcorp Holding Inc. ........................... 4,486
1,450 Sara Lee Corp. ................................. 31,991
175 +Smithfield Foods Inc. .......................... 4,200
300 +Suiza Foods Corp. .............................. 11,888
See Notes to Financial Statements
Page 9
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (continued)
3,664 Supervalu Inc. ................................. $73,280
375 Tupperware Corporation ......................... 6,352
-------
558,300
-------
CONSUMER SERVICE (3.0%)
300 +Adaptive Broadband ............................. 22,144
325 Arctic Cat Inc. ................................ 3,250
325 +Brinker International Inc. ..................... 7,800
2,400 Brunswick Corp. ................................ 53,400
675 +CDI Corp. ...................................... 16,284
100 +Carmike Cinemas Inc ............................ 781
3,100 Darden Restaurants ............................. 56,187
200 +Devry Inc. ..................................... 3,725
1,600 Donnelley RR & Sons ............................ 39,700
200 Harley Davidson Inc. ........................... 12,813
1,650 Harrah's Entertainment Inc. .................... 43,622
125 +Hispanic Broadcasting Corp. .................... 11,527
2,600 +Jack in the Box Inc. ........................... 53,787
350 +Mandalay Resort Group .......................... 7,044
300 New England Business Service ................... 7,331
750 Park Place Entertainment Corp. ................. 9,375
100 Polaris Industries ............................. 3,625
250 Readers Digest Association Inc. ................ 7,313
1,150 Reynolds & Reynolds Cl A ....................... 25,875
1,100 Time Warner Inc. ............................... 79,681
200 +Univision Communications Inc. .................. 20,438
---------
485,702
---------
ENERGY (3.2%)
325 +BJ Services Co. ................................ 13,589
100 +Barrett Resources Corp. ........................ 2,944
1,550 Coastal Corp. .................................. 54,928
800 Exxon Mobil Corp. Co. .......................... 64,450
42 +Friede Goldman Halter Inc ...................... 291
375 Murphy Oil Corp. ............................... 21,516
100 New Field Exploration Co. ...................... 2,675
675 +Noble Drilling Corp. ........................... 22,106
2,700 Occidental Petroleum Corp. ..................... 58,387
500 +Oceaneering International Inc. ................. 7,469
2,550 Royal Dutch Petroleum .......................... 154,116
700 +Santa Fe Snyder Corp. .......................... 5,600
300 Tosco Corporation .............................. 8,156
1,450 +Transocean Sedco Forex Inc. .................... 48,847
2,700 USX - Marathon Group ........................... 66,656
---------
531,730
---------
FINANCE (7.2%)
1,000 AMBAC Financial Group Inc. ..................... 52,188
900 American International Group Inc. .............. 97,313
100 +Amresco Inc .................................... 141
375 Amsouth Bancorporation ......................... 7,242
200 BankNorth Group Inc. ........................... 5,350
315 Bear Stearns Cos ............................... $13,466
200 Cash America International ..................... 1,950
50 Centura Banks Inc. ............................. 2,206
99 Charter One Financial .......................... 1,893
500 Chase Manhattan Corp. .......................... 38,844
2,900 Citigroup Inc. ................................. 161,131
900 Comerica Inc. .................................. 42,019
75 Commercial Federal Corp. ....................... 1,336
550 Compass Bancshares Inc. ........................ 12,272
100 Cullen Frost Banker ............................ 2,575
77 +Delphi Financial Group ......................... 2,310
750 Dime Bancorp Inc. .............................. 11,344
100 +Express Scripts Inc. Cl-A ...................... 6,400
1,425 Federal National Mortgage Association .......... 88,973
100 Felcor Lodging Trust Inc. ...................... 1,750
181 Fidelity National Financial Inc. ............... 2,602
175 Finova Group Inc. .............................. 6,213
200 First American Financial ....................... 2,487
1,650 First Union Corp. .............................. 54,141
200 FirstMerit Corporation ......................... 4,600
2,150 Fleet Boston Financial Group ................... 74,847
55 +Frontier Insurance ............................. 189
100 Health Care Property Investors ................. 2,388
150 Hilb, Rogal, and Hamilton Co ................... 4,237
1,350 Household International Inc. ................... 50,288
180 Hudson United Banco ............................ 4,601
100 Indymac Mortgage Holdings ...................... 1,275
100 JSB Financial .................................. 5,188
100 Keystone Financial Inc. ........................ 2,106
132 Legg Mason Inc. ................................ 4,785
475 Lincoln National Corp. Ltd. .................... 19,000
250 MAF Bancorp .................................... 5,234
300 Marshall & Ilsley Corp. ........................ 18,844
300 Metris Companies ............................... 10,706
475 Morgan Stanley Dean Witter & Co. ............... 67,806
75 Mutual Risk Management ......................... 1,261
600 National Commerce Bancorporation ............... 13,612
225 Nationwide Financial Services .................. 6,286
900 North Fork Bancorporation ...................... 15,750
975 The PMI Group Inc. ............................. 47,592
1,550 PNC Bank ....................................... 68,975
850 Paine Webber Group Inc. ........................ 32,991
325 T. Rowe Price Associates Inc. .................. 12,005
325 Provident Financial Group Inc. ................. 11,659
50 Radian Group ................................... 2,387
225 Raymond James Financial ........................ 4,205
1,175 Southtrust Corp. ............................... 44,430
450 TCF Financial Corp. ............................ 11,194
100 Trenwick Group Inc. ............................ 1,694
250 UST Corp. ...................................... 7,937
50 US Trust Corp. ................................. 4,009
---------
1,178,227
---------
See Notes to Financial Statements
Page 10
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (continued)
HEALTH CARE (5.4%)
200 Allergen Inc. .................................. $ 9,950
525 Alpharma Inc. Cl A ............................. 16,144
400 +AmeriSource Health ............................. 6,075
275 Bard (CR) Inc. ................................. 14,575
550 Baxter International ........................... 34,547
400 +Biogen Inc. .................................... 33,800
2,250 Bristol-Myers Squibb ........................... 144,422
275 Cambrex Corp. .................................. 9,470
625 DENTSPLY International ......................... 14,766
300 +Ivax Corp. ..................................... 7,725
850 Johnson & Johnson .............................. 79,156
50 +Magellan Health Services Inc ................... 316
375 +Medimmune Inc. ................................. 62,203
100 Mentor Corp. ................................... 2,581
1,675 Merck & Co. Inc. ............................... 112,330
100 +Orthodontic Centers of America ................. 1,194
150 Owens & Minor Inc. ............................. 1,341
200 Pacificare Health Service ...................... 10,600
2,550 Pfizer Inc. .................................... 82,716
116 +Quintiles Transnational ........................ 2,168
100 +Respironics Inc ................................ 797
100 +Rural/Metro Corp ............................... 428
100 +Safeskin Corp. ................................. 1,213
1,100 Schering-Plough Corp. .......................... 46,406
234 +Shire Pharmaceuticals Group-ADR ................ 6,833
100 +Sola International Inc. ........................ 1,387
225 +Visx Inc. ...................................... 11,644
1,450 Warner Lambert Co. ............................. 118,809
875 +Wellpoint Health NE ............................ 57,695
----------
891,291
----------
INDUSTRIAL (3.3%)
400 +Anixter International .......................... 8,250
1,150 Belden Inc. .................................... 24,150
150 Clarcor Inc. ................................... 2,700
2,050 General Electric ............................... 317,238
375 Kennametal Inc. ................................ 12,609
75 Manitowoc Inc. ................................. 2,550
525 Mark IV Industries Inc. ........................ 9,286
375 Minnesota Mining & Manufacturing ............... 36,703
50 +SPS Technologies Inc. .......................... 1,597
150 +SPX Corp. ...................................... 12,122
250 Toro Co. ....................................... 9,328
2,475 Tyco International ............................. 96,216
----------
532,749
----------
TECHNOLOGY (15.8%)
300 AAR Corp. ...................................... 5,381
875 +ADC Telecommunications Inc. .................... 63,492
100 +Acxiom Corporation ............................. 2,400
1,050 +Adaptec Inc. ................................... 52,369
250 Adobe Systems Inc. ............................. 16,812
1,450 +Altera Corp. ................................... $71,866
210 +Analog Devices Inc. ............................ 19,530
525 +Applied Materials Inc. ......................... 66,511
100 +Aspect Telecommunications ...................... 3,913
450 +Atmel Corp. .................................... 13,303
150 +C-Cube Microsystems ............................ 9,337
2,850 +Cisco Systems .................................. 305,306
100 +Cognex Corp. ................................... 3,900
775 Computer Associates International Inc. ......... 54,202
2,600 +Compuware Corp. ................................ 96,850
100 +Comverse Technology ............................ 14,475
1,100 +Cypress Semiconductor .......................... 35,613
175 Dallas Semiconductors .......................... 11,277
625 +EMC Corp. ...................................... 68,281
425 +Filenet Corp. .................................. 10,837
650 Gerber Scientific Inc. ......................... 14,259
750 +Integrated Device Technology ................... 21,750
2,275 Intel Corp. .................................... 187,261
1,250 International Business Machines Corp. .......... 135,000
275 +Intervoice-Brite Inc. .......................... 6,394
375 +Intuit ......................................... 22,477
150 +Jabil Circuit Inc. ............................. 10,950
800 Johnson Controls ............................... 45,500
450 +Kemet Corp. .................................... 20,278
550 +LSI Logic Corp. ................................ 37,125
835 +Lexmark Holdings Cl A .......................... 75,568
125 +Litton Industries .............................. 6,234
1,675 Lucent Technologies ............................ 125,311
200 +Microchip Technology Inc. ...................... 13,687
3,500 +Microsoft Corp. ................................ 408,625
600 +Midway Games Inc. .............................. 14,363
150 +Novellus Systems Inc. .......................... 18,380
41 +PeopleSoft Inc ................................. 879
100 +Read - Rite Corp ............................... 475
150 +SCI Systems .................................... 12,328
550 +S3 Incorporated ................................ 6,359
100 +Sanmina Corp. .................................. 9,987
300 +Siebel Systems Inc. ............................ 25,200
1,400 +Sun Microsystems Inc. .......................... 108,412
375 +Symantec Corp. ................................. 21,984
200 +Synopsys Inc. .................................. 13,350
150 Technitrol Inc. ................................ 6,675
1,400 +Tellabs Inc. ................................... 89,862
150 +Teradyne Inc. .................................. 9,900
1,300 United Technologies ............................ 84,500
450 +Veritas Software ............................... 64,406
350 +Vishay International ........................... 11,069
270 +Vitesse Semiconductor Corp. .................... 14,158
200 +Waters Corp. ................................... 10,600
175 +Xircom ......................................... 13,125
---------
2,592,086
---------
See Notes to Financial Statements
Page 11
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (continued)
TELECOMMUNICATIONS (3.9%)
2,250 AT & T Corp. ................................... $114,188
600 Alltel Corp. ................................... 49,612
1,525 Bell Atlantic Corp. ............................ 93,883
1,450 BellSouth Corp. ................................ 67,878
450 Centurytel Inc. ................................ 21,319
1,575 GTE Corporation ................................ 111,136
300 +General Communication .......................... 1,313
2,062 +MCI Worldcom Inc. .............................. 109,441
300 +Voicestream Wireless ........................... 42,694
300 +Western Wireless ............................... 20,025
-------
631,489
-------
TRANSPORTATION (0.5%)
925 +AMR Corp. ...................................... 61,975
525 +Alaska Air Group ............................... 18,441
400 +Yellow Corp. ................................... 6,725
-------
87,141
-------
UTILITIES (1.7%)
3,875 Allegheny Energy Inc. .......................... 104,383
700 Conectiv Inc. .................................. 11,769
300 DTE Energy Co. ................................. 9,412
625 Easterns Utilities ............................. 18,945
700 Energy East Corp. .............................. 14,569
1,000 FPL Group Inc. ................................. 42,812
225 Florida Progress Co. ........................... 9,520
550 GPU Inc. ....................................... 16,466
100 MidAmerican Energy Holdings Co. ................ 3,369
350 Northwest Natural Gas Co. ...................... 7,678
450 Pinnacle West Capital .......................... 13,753
1,350 Questar Corp. .................................. 20,250
600 Utilicorp United Inc. .......................... 11,662
-------
284,588
-------
TOTAL COMMON STOCKS
(Cost $7,921,029) ............................. 9,162,287
----------
OPEN END INVESTMENT COMPANY (5.2%)
(Cost $597,441)
59,000 BT EAFE Equity Index Fund ...................... 860,220
----------
PRINCIPAL
AMOUNT
- ------
U.S. GOVERNMENT OBLIGATIONS &
AGENCY NOTES (22.6%)
U.S. TREASURY BOND (0.3%)
$60,000 5.250% Due 2/15/29 ............................. 49,612
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
U.S. TREASURY STRIPS (1.6%)
$330,000 Due 2/15/15 .................................... $118,001
370,000 Due 11/15/22 ................................... 81,089
405,000 Due 11/15/27 ................................... 67,947
---------
267,037
---------
U.S. TREASURY NOTES (19.7%)
1,860,000 6.125% Due 12/31/01 ............................ 1,855,927
1,195,000 5.625% Due 5/15/08 ............................. 1,124,041
120,000 5.500% Due 5/15/09 ............................. 111,806
135,000 6.000% Due 8/15/09 ............................. 130,781
----------
3,222,555
----------
FEDERAL AGENCY AND GOVERNMENT (1.0%)
165,000 Federal National Mortgage Association
6.500% Due 8/15/04 ........................... 162,938
TOTAL U.S. GOVERNMENT OBLIGATIONS
& AGENCY NOTES
(Cost $3,811,675) .............................. 3,702,142
CORPORATE DEBENTURES (14.8%)
FINANCE (9.7%)
150,000 American General Finance
5.750% Due 11/1/03 .................... 141,868
150,000 Barclay's Bank PLC
7.400% Due 12/15/09 ................... 147,166
175,000 Bear Stearns Co. Inc.
7.625% Due 12/7/09 .................... 171,836
100,000 #Dresdner Funding Trust
8.151% Due 6/30/31 .................... 93,684
130,000 FINOVA Capital Corp.
6.150% Due 3/31/03 .................... 125,052
175,000 Ford Motor Credit
7.375% Due 10/28/09 ................... 172,769
200,000 GMAC
5.375% Due 9/30/02 .................... 191,552
140,000 Merrill Lynch & Co.
5.870% Due 11/15/01 ................... 137,395
150,000 Morgan Stanley Dean Witter
7.125% Due 1/15/03 .................... 149,882
150,000 Salomon Inc.
7.300% Due 5/15/02 .................... 150,454
110,000 Sprint Capital Corp.
6.900% Due 5/1/19 .................... 100,043
---------
1,581,701
---------
See Notes to Financial Statements
Page 12
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW MEDIUM-TERM RETIREMENT FUND (CONTINUED)
INDUSTRIAL (5.1%)
$85,000 Abitibi - Consolidated
7.500% Due 4/1/28 ..................... $73,188
100,000 Amerada Hess Corp.
7.875% Due 10/1/29 .................... 97,530
50,000 Burlington Resources
9.125% Due 10/1/21 .................... 55,470
175,000 Cooper Tire & Rubber Co.
8.000% Due 12/15/19 ................... 168,117
95,000 Laidlaw Inc.
7.875% Due 4/15/05 .................... 89,820
170,000 Time Warner
9.125% Due 1/15/13 .................... 186,177
175,000 #Yosemite Securities Trust
8.250% Due 11/15/04 ................... 172,204
---------
842,506
---------
TOTAL CORPORATE DEBENTURES
(Cost $2,476,983) .......................... 2,424,207
---------
ASSET BACKED SECURITIES (0.9%)
(Cost $163,180)
155,000 MBNA Master Credit Card
6.450% Due 2/15/08 ........................ 150,640
TOTAL INVESTMENTS (99.4%)
(Cost $14,970,308) ........................ 16,299,496
OTHER ASSETS IN EXCESS
OF LIABILITIES (0.6%) ...................... 91,004
TOTAL NET ASSETS (100.0%) ..................... $16,390,500
<FN>
+ Non-income producing security.
# SEC Rule 144A Security. Such security has limited markets and trades
only among qualified institutional buyers.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND
COMMON STOCKS (34.5%)
BASIC MATERIALS (1.3%)
<C> <S> <C>
2,050 AK Steel Holding Corp. ......................... $38,694
3,450 Boise Cascade Corp. ............................ 139,725
2,350 +Cytec Industries Inc. .......................... 54,344
900 Eastman Kodak Co. .............................. 59,625
1,325 Georgia Pacific Co. ............................ 67,244
2,700 Sherwin Williams Co. ........................... 56,700
----------
416,332
----------
COMMERCIAL SERVICES (0.5%)
2,550 Viad Corp. ..................................... 71,081
1,350 Young & Rubicam Inc. ........................... 95,513
----------
166,594
----------
CONSUMER CYCLICALS (2.6%)
500 Dayton Hudson Corp. ............................ 36,719
1,850 +Federated Department Stores .................... 93,541
3,550 Ford Motor Company ............................. 189,703
2,475 Home Depot Inc. ................................ 169,692
3,400 +Toys R Us ...................................... 48,663
4,050 Wal Mart Stores Inc. ........................... 279,956
----------
818,274
----------
CONSUMER NON CYCLICALS (2.7%)
1,200 Anheuser- Busch Companies Inc. ................. 85,050
1,300 Best Foods ..................................... 68,331
1,850 Fortune Brands ................................. 61,166
3,300 General Mills Inc. ............................. 117,975
1,175 The PMI Group Inc. ............................. 57,355
2,400 Philip Morris Companies Inc. ................... 55,650
1,450 Proctor & Gamble Co. ........................... 158,866
1,700 +Quaker Oats .................................... 111,562
2,800 Sara Lee Corp. ................................. 61,775
3,650 Supervalu Inc. ................................. 73,000
----------
850,730
----------
CONSUMER SERVICES (1.4%)
2,800 Brunswick Corp. ................................ 62,300
4,050 Darden Restaurants Inc. ........................ 73,406
1,900 Donnelley RR & Sons ............................ 47,144
2,450 +Harrah's Entertainment ......................... 64,772
3,100 +Jack in the Box Inc. ........................... 64,131
1,600 Time Warner Inc. ............................... 115,900
----------
427,653
----------
ENERGY (2.1%)
1,950 Coastal Corp. .................................. 69,103
1,600 Exxon Mobil Corp. .............................. 128,900
4,100 Occidental Petroleum Corp. ..................... 88,662
3,650 Royal Dutch Petroleum .......................... 220,597
1,800 +Transocean Sedco Forex Inc. ................... 60,638
4,100 USX - Marathon Group ........................... 101,219
----------
669,119
----------
See Notes to Financial Statements
Page 13
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
NUMBER
OF SHARES SECURITY VALUE
- --------- -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (continued)
FINANCE (4.3%)
1,150 AMBAC Financial Group Inc. ..................... $60,016
1,500 American International Group ................... 162,187
1,150 Chase Manhattan Corp. .......................... 89,340
4,150 Citigroup Inc. ................................. 230,584
1,350 Comerica Inc. .................................. 63,028
2,000 Federal National Mortgage Association .......... 124,875
2,500 First Union Corp. .............................. 82,031
3,375 Fleet Boston Financial Group Inc. .............. 117,492
2,100 Household International Inc. ................... 78,225
725 Lincoln National Corp. Ltd. .................... 29,000
725 Morgan Stanley Dean Witter & Co. ............... 103,494
2,500 PNC Bank ....................................... 111,250
1,350 Paine Webber Group Inc. ........................ 52,397
1,800 Southtrust Corp. ............................... 68,063
---------
1,371,982
---------
HEALTH CARE (3.3%)
800 Baxter International ........................... 50,250
3,500 Bristol-Myers Squibb Co. ....................... 224,656
1,300 Johnson & Johnson Co. .......................... 121,063
2,550 Merck & Co. Inc. ............................... 171,009
950 +Pacificare Health Systems ..................... 50,350
4,750 Pfizer Inc. .................................... 154,078
2,000 Schering-Plough Corp. .......................... 84,375
2,350 Warner Lambert Co. ............................. 192,553
---------
1,048,334
---------
INDUSTRIAL (2.2%)
3,100 General Electric ............................... 479,725
675 Minnesota Mining & Manufacturing ............... 66,066
4,175 Tyco International Ltd. ........................ 162,303
---------
708,094
---------
TECHNOLOGY (10.1%)
1,350 +ADC Telecommunications ......................... 97,959
1,400 +Adaptec Inc. ................................... 69,825
1,650 +Altera Corp. ................................... 81,778
800 +Applied Materials Inc. ......................... 101,350
4,450 +Cisco Systems .................................. 476,706
1,200 Computer Associates International Inc. ......... 83,925
3,450 +Compuware Corp. ................................ 128,512
925 +EMC Corp. ...................................... 101,056
3,575 Intel Corp. .................................... 294,267
1,950 International Business Machines Corp. .......... 210,600
1,750 Johnson Controls ............................... 99,531
950 +LSI Logic Corp. ................................ 64,125
1,150 +Lexmark Holdings Class A ....................... 104,075
850 +Litton Industries .............................. 42,394
2,650 Lucent Technologies ............................ $198,253
5,650 +Microsoft Corp. ................................ 659,638
2,100 +Sun Microsystems Inc. .......................... 162,619
1,900 +Tellabs Inc. ................................... 121,956
1,950 United Technologies ............................ 126,750
---------
3,225,319
---------
TELECOMMUNICATION (3.0%)
4,075 A T & T Corp. .................................. 206,806
1,075 Alltel Corp. ................................... 88,889
3,100 Bell Atlantic Corp. ............................ 190,844
3,250 BellSouth Corp. ................................ 152,141
3,712 +MCI Worldcom Inc. .............................. 196,994
1,250 +Nextel Communications Inc. ..................... 128,906
---------
964,580
---------
TRANSPORTATION (0.3%)
1,450 +AMR Corp. ...................................... 97,150
UTILITY (0.7%)
2,350 Constellation Energy Group ..................... 68,150
3,300 FPL Group Inc. ................................. 141,281
209,431
Total Common Stock
(Cost $9,584,450) ............................ 10,973,592
PRINCIPAL
AMOUNT
U.S. GOVERNMENT OBLIGATIONS AND
AGENCY NOTES (26.9%)
U.S. TREASURY BONDS (1.1%)
$410,000 5.250% Due 2/15/29 ............................. 339,018
U.S. TREASURY STRIPS (2.7%)
980,000 Due 2/15/15 .................................... 350,428
1,375,000 Due 11/15/22 ................................... 301,345
1,210,000 Due 11/15/27 ................................... 203,002
854,775
U.S. TREASURY NOTES (21.6%)
2,060,000 6.125% Due 12/31/01 ........................... 2,055,489
4,650,000 5.625% Due 5/15/08 ............................ 4,373,883
240,000 5.500% Due 5/15/09 ............................ 223,613
235,000 6.000% Due 8/15/09 ............................ 227,656
6,880,641
FEDERAL AGENCY AND
GOVERNMENT (1.5%)
490,000 Federal National Mortgage Association Note
6.500% Due 8/15/04 483,875
---------
See Notes to Financial Statements
Page 14
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
TOMORROW SHORT-TERM RETIREMENT FUND (CONTINUED)
TOTAL U.S. GOVERNMENT OBLIGATIONS
& AGENCY NOTES
(Cost $8,815,529) ........................... $8,558,309
CORPORATE DEBENTURES (34.4%)
CONSUMER NON CYCLICALS (0.7%)
$230,000 McKesson Corp. 6.600% Due 3/1/00 ............... 230,039
FINANCE (24.4%)
70,000 Associates Corp. NA
7.520% Due 3/1/00 .............................. 70,162
400,000 Associates Corp. NA
6.500% Due 10/15/02 ............................ 394,628
575,000 Barclays Bank Plc Yankee
7.400% Due 12/15/09 ............................ 564,138
235,000 Bear Stearns Companies Inc.
6.500% Due 7/5/00 .............................. 234,718
525,000 Bear Stearns Companies Inc.
7.625% Due 12/7/09 ............................. 515,508
160,000 Beneficial Corp.
6.250% Due 2/18/03 ............................. 154,829
510,000 Commercial Credit
8.250% Due 11/1/01 ............................. 520,985
450,000 Finova Cap Corp.
6.150% Due 3/31/03 ............................. 432,873
225,000 First Union Corp.
6.600% Due 6/15/00 ............................. 225,038
520,000 Ford Motor Credit
6.570% Due 3/19/01 ............................. 518,336
50,000 Ford Motor Credit
6.125% Due 1/9/06 .............................. 46,808
525,000 Ford Motor Credit
7.375% Due 10/28/09 ............................ 518,306
200,000 G.E. Capital Corp.
8.750% Due 5/21/07 ............................. 216,048
450,000 GMAC 5.750% Due 11/10/03 ....................... 428,472
275,000 Merrill Lynch & Co.
6.620% Due 6/13/00 ............................. 275,429
285,000 Merrill Lynch & Co.
5.870% Due 11/15/01 ............................ 279,696
400,000 Morgan Stanley Dean Witter & Co.
6.090% Due 3/9/11 .............................. 397,148
550,000 Norwest Financial Inc.
5.375% Due 9/30/03 ............................. 518,199
215,000 Salomon Inc.
6.700% Due 7/5/00 .............................. 215,095
860,000 Salomon Inc.
7.300% Due 5/15/02 ............................. 862,606
265,000 Sprint Capital Corp.
6.900% Due 5/1/19 .............................. 241,012
120,000 USL Capital Corp.
6.500% Due 12/1/03 ............................. 116,702
---------
7,746,736
---------
PRINCIPAL
AMOUNT SECURITY VALUE
- ------ -------- -----
INDUSTRIAL (7.5%)
$300,000 Abitibi-Consolidated 7.500% Due 4/1/28 ......... $258,309
315,000 Amerada Hess Corp.7.875% Due 10/1/29 ........... 307,219
125,000 Burlington Resources 9.125% Due 10/1/21 ........ 138,675
500,000 Cooper Tire & Rubber Co. 8.000% Due 12/15/19 ... 480,335
525,000 #Fortune Brands Inc. 7.125% Due 11/1/04 ......... 517,124
155,000 Time Warner 9.125% Due 1/15/13 ................. 169,750
525,000 #Yosemite Securities Trust 8.250% Due 11/15/04 .. 516,610
---------
2,388,022
---------
REAL ESTATE INVESTMENT TRUST (1.8%)
235,000 Carramerica Realty Corp. 6.625% Due 10/1/00 .... 232,782
350,000 #Dresdner Funding Trust I 8.151% Due 6/30/31 .... 327,894
---------
560,676
---------
TOTAL CORPORATE DEBENTURES
(Cost $11,188,645) 10,925,473
-----------
ASSET BACKED SECURITIES (1.5%)
(Cost $505,331)
480,000 MBNA Master Credit Card
6.450% Due 2/15/08 466,498
-----------
EURODOLLAR DEPOSIT (2.2%)
(Cost $699,000)
699,000 Societe Generale
3.000% Due 1/3/00 699,000
-----------
TOTAL INVESTMENTS (99.5%)
(Cost $30,792,955) 31,622,872
OTHER ASSETS IN EXCESS
OF LIABILITIES (0.5%) 174,156
-----------
TOTAL NET ASSETS (100.0%) $31,797,028
===========
<FN>
+ Non-income producing security.
# SEC Rule 144A Security. Such security has limited markets and is
trades among qualified institutional buyers.
</FN>
</TABLE>
See Notes to Financial Statements
Page 15
<PAGE>
<TABLE>
<CAPTION>
TOMORROW FUNDS RETIREMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 1999
LONG- MEDIUM- SHORT-
TERM TERM TERM
RETIREMENT RETIREMENT RETIREMENT
---------- ---------- ----------
ASSETS
<S> <C> <C> <C>
Investments at value # .............................. $ 10,074,301 $ 16,299,496 $ 31,622,872
Cash ................................................ 14,635 132,842 231
Receivable for Fund shares sold ..................... 47,157 15,708 10,702
Receivable from Adviser ............................. 2,724 0 0
Dividends and interest receivable ................... 21,877 63,001 235,790
Deferred organizational costs and prepaid expenses . 10,459 11,365 10,663
------------ ------------ ------------
10,171,153 16,522,412 31,880,258
------------ ------------ ------------
LIABILITIES
Advisory fees payable (Note 5) ...................... 0 3,178 19,785
Administration fees payable (Note 5) ................ 0 0 841
Payable for investment securities purchased ......... 14,225 0 0
Payable for Fund shares redeemed .................... 165 84,055 8,948
Distribution fees payable (Adviser Shares) ......... 7,430 1,479 14,345
Service fees payable (Institutional Shares) ........ 595 12,448 2,823
Other accrued expenses .............................. 31,737 30,752 36,488
------------ ------------ ------------
54,152 131,912 83,230
------------ ------------ ------------
NET ASSETS .......................................... $ 10,117,001 $ 16,390,500 $ 31,797,028
============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest (par $0.001) .......... $ 1,122 $ 1,773 $ 3,180
Paid-in surplus ..................................... 8,935,573 14,929,608 30,903,962
Accumulated undistributed net investment income ..... 7,700 48,222 6,258
Undistributed realized gains on investments ......... 24,801 81,709 53,711
Net unrealized appreciation on investments .......... 1,147,805 1,329,188 829,917
------------ ------------ ------------
NET ASSETS .......................................... $ 10,117,001 $ 16,390,500 $ 31,797,028
============ ============ ============
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE:
ADVISER SHARES:
Net Assets .......................................... $ 8,085,763 $ 13,382,915 $ 13,590,142
Shares of beneficial interest issued and outstanding 899,209 1,439,815 1,361,038
------------ ------------ ------------
Net asset value per share ........................... $ 8.99 $ 9.29 $ 9.99
============ ============ ============
INSTITUTIONAL SHARES:
Net Assets .......................................... $ 2,031,238 $ 3,007,585 $ 18,206,886
Shares of beneficial interest issued and outstanding 222,699 333,348 1,819,113
------------ ------------ ------------
Net asset value per share ........................... $ 9.12 $ 9.02 $ 10.01
============ ============ ============
# INVESTMENTS AT COST ............................... 8,926,496 14,970,308 30,792,955
UNREALIZED APPRECIATION/(DEPRECIATION): *
Gross appreciation ................................. 1,743,561 2,064,641 1,920,635
Gross depreciation ................................. (595,756) (735,453) (1,090,718)
------------ ------------ ------------
NET UNREALIZED APPRECIATION ........................ 1,147,805 1,329,188 829,917
============ ============ ============
<FN>
* Based on cost of securities for Federal Income tax purposes which does not
differ substantially from book cost.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOMORROW FUNDS RETIREMENT TRUST
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
LONG-TERM MEDIUM-TERM SHORT-TERM
RETIREMENT RETIREMENT RETIREMENT
---------- ---------- ----------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends .................................. $ 96,205 $ 137,044 $ 147,719
Interest ................................... 123,444 441,778 1,371,919
------- ------- ---------
219,649 578,822 1,519,638
------- ------- ---------
EXPENSES:
Investment advisory fees - Note 5 .......... 70,931 128,121 246,106
Fund accounting fees ....................... 42,813 48,311 47,207
Registration fees and expenses ............. 15,260 13,225 17,260
Professional fees .......................... 26,120 26,527 35,145
Transfer agent fees and expenses
(Advisor Shares) ................... 24,182 24,211 24,528
Transfer agent fees and expenses
(Institutional Shares) ............. 24,497 24,419 24,815
Distribution fees (Adviser Shares) - Note 5 38,178 72,383 79,577
Custodian fees and expenses - Note 7 ....... 11,391 8,373 14,339
Amortization of organization expenses ...... 9,494 9,479 9,479
ShareholdersO reports ...................... 594 3,040 2,674
TrusteesO fees and expenses ................ 7,662 7,672 8,008
Administration fees - Note 5 ............... 8,512 15,374 29,533
Service fees (Institutional Shares) - Note 5 766 1,578 35,727
Other expenses ............................. 3,100 3,148 4,733
------- ------- ---------
TOTAL EXPENSES ............................. 283,500 385,861 579,131
Less fees waived by Adviser and
Administrator - Note 5 ............. (79,442) (74,226) (45,171)
Less expenses reimbursed
by Adviser - Note 5 ................ (41,284) (19,819) (1,905)
Less expenses paid indirectly - Note 7 ..... (5,613) (4,310) (6,580)
------- ------- ---------
NET EXPENSES ............................... 157,161 287,506 525,475
------- ------- ---------
NET INVESTMENT INCOME ...................... 62,488 291,316 994,163
------- ------- ---------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS
Net realized gain on investments ........... 892,051 1,036,935 1,222,327
Change in unrealized (depreciation)
on investments ..................... (45,296) (593,919) (1,463,153)
------- ------- ---------
Net Gain/(Loss) on Investments ............. 846,755 443,016 (240,826)
------- ------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................... $ 909,243 $ 734,332 $ 753,337
========= =========== ===========
</TABLE>
See Notes to Financial Statements
Page 17
<PAGE>
<TABLE>
<CAPTION>
TOMORROW FUNDS RETIREMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
LONG-TERM MEDIUM-TERM SHORT-TERM
RETIREMENT RETIREMENT RETIREMENT
---------- ---------- ----------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................ $ 62,488 $ 93,857 $ 291,316 $ 303,595 $ 994,163 $ 881,606
Net realized gain
on investments and futures ... 892,051 75,545 1,036,935 764,785 1,222,327 675,315
Change in unrealized appreciation/
(depreciation) on investments
and futures .................. (45,296) 874,375 (593,919) 1,147,490 (1,463,153) 1,647,460
------------ ----------- ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .... 909,243 1,043,777 734,332 2,215,870 753,337 3,204,381
------------ ----------- ------------ ------------ ------------ ------------
DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Adviser Shares ....................... (40,650) (54,368) (216,431) (212,159) (388,593) (403,730)
Institutional Shares ................. (22,314) (16,152) (62,826) (40,769) (580,239) (438,476)
------------ ----------- ------------ ------------ ------------ ------------
TOTAL DIVIDENDS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME ............ (62,964) (70,520) (279,257) (252,928) (968,832) (842,206)
------------ ----------- ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDER
FROM NET REALIZED GAINS:
Adviser Shares ............... (723,406) (38,834) (852,199) (594,045) (576,190) (341,618)
Institutional Shares ......... (180,540) (8,974) (188,477) (95,128) (712,866) (321,549)
------------ ----------- ------------ ------------ ------------ ------------
Total distributions from net
realized gains ............... (903,946) (47,808) (1,040,676) (689,173) (1,289,056) (663,167)
------------ ----------- ------------ ------------ ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Received on issuance:
Shares sold .................. 3,377,686 5,150,936 3,578,706 5,725,284 6,753,326 24,857,758
Shares issued in reinvestment
of dividends and distributions 967,753 118,328 1,319,933 942,101 2,257,888 1,505,372
Shares redeemed .............. (3,008,583) (2,639,065) (4,815,479) (4,700,383) (8,974,365) (10,406,723)
------------ ----------- ------------ ------------ ------------ ------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS ................ 1,336,856 2,630,199 83,160 1,967,002 36,849 15,956,407
------------ ----------- ------------ ------------ ------------ ------------
TOTAL INCREASE/(DECREASE)
IN NET ASSETS ................ 1,279,189 3,555,648 (502,441) 3,240,771 (1,467,702) 17,655,415
NET ASSETS:
Beginning of year .................... 8,837,812 5,282,164 16,892,941 13,652,170 33,264,730 15,609,315
------------ ----------- ------------ ------------ ------------ ------------
End of year .......................... $ 10,117,001 $ 8,837,812 $ 16,390,500 $ 16,892,941 $ 31,797,028 $ 33,264,730
============ =========== ============ ============ ============ ============
<FN>
+ Includes undistributed
net investment income ........ $ 7,700 $ 17,323 $ 48,222 $ 44,740 $ 6,258 $ 50,960
------------ ----------- ------------ ------------ ------------ ------------
</FN>
</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"), 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 (continued)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 market 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.
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, 1999, none of the Funds in the Trust entered
into the following transactions: futures, options, forward currency contracts or
foreign currency transactions.
FEDERAL INCOME TAXES
- --------------------
Each Fund's 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 ex-dividend
date.
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.
Page 20
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST (continued)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 Fund 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 Fund's
average daily net assets. For the year ended December 31, 1999 WPG voluntarily
agreed not to impose its advisory fee applicable to the Long-Term Fund, and
waived $74,226 and $45,171 from the Medium-Term Fund and Short-Term Fund,
respectively.
WPG has agreed to voluntarily limit each Fund's total operating expenses,
(excluding taxes, brokerage commissions, interest, dividends paid on securities
sold short, service fees of Institutional Class Shares, distribution fees of
Adviser Class Shares and extraordinary legal fees and expenses) to 1.25% of the
average daily net assets for each class. 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 Fund's average daily
net assets. WPG voluntarily agreed to waive it's entire administration services
fee applicable to the Funds for the year ended December 31, 1999.
Page 21
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST (continued)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, 1999 payments pursuant to the Distribution Plan
from the Long-Term Fund, Medium-Term Fund and Short-Term Fund amounted to
$38,178, $72,383 and $79,577, respectively. Of these amounts, WPG earned
$16,803, $32,628 and $35,616, 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), total commissions and commissions received by WPG on such
transactions for the year ended December 31, 1999 were as follows:
PROCEEDS COST OF COMMISSIONS
FROM SECURITIES SECURITIES TOTAL RECEIVED
SOLD PURCHASED COMMISSIONS BY WPG
---- --------- ----------- ------
Long-Term Fund $9,399,535 $10,054,217 $9,728 $7,663
Medium-Term Fund 35,329,839 35,037,411 13,718 10,292
Short-Term Fund 91,489,111 92,165,565 15,629 10,596
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 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. The Funds' custodian fee and related offset for
the year ended December 31, 1999 were as follows:
CUSTODIAN
CUSTODIAN FEE CREDIT RECEIVED
------------- ---------------
Long-Term Fund $11,391 $5,613
Medium-Term Fund 8,373 4,310
Short-Term Fund 14,339 6,580
Page 22
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST (continued)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. CAPITAL SHARE TRANSACTIONS
Transaction in shares of the Funds for the years ended December 31, 1999 and
1998 are summarized below:
LONG-TERM
1999 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
ADVISER CLASS SHARES
Sold ..................... 284,126 $ 2,596,712 499,807 $ 4,212,181
Reinvested from dividends
and distributions ..... 88,326 764,019 10,519 93,202
Redeemed ................. (258,737) (2,386,405) (250,398) (2,085,866)
-------- ----------- -------- -----------
Net increase ............. 113,715 $ 974,326 259,928 $ 2,219,517
-------- ----------- -------- -----------
INSTITUTIONAL CLASS SHARES
Sold ..................... 83,542 780,974 110,457 $ 938,755
Reinvested from dividends
and distributions 23,231 203,734 2,795 25,126
Redeemed ................. (66,795) (622,178) (65,357) (553,199)
-------- ----------- -------- -----------
Net increase ............. 39,978 $ 362,530 47,895 $ 410,682
-------- ----------- -------- -----------
Net increase in Fund ..... 153,693 $ 1,336,856 307,823 $ 2,630,199
-------- ----------- -------- -----------
Page 23
<PAGE>
MEDIUM-TERM
1999 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Adviser Class Shares
Sold ..................... 230,644 $ 2,192,178 487,640 $ 4,563,226
Reinvested from dividends
and distributions ..... 117,747 1,068,630 84,863 806,203
Redeemed ................. (418,915) (4,031,392) (415,935) (3,903,770)
-------- ----------- -------- -----------
Net increase - Adviser Class (70,524) ($ 770,584) 156,568 $ 1,465,659
-------- ----------- -------- -----------
Institutional Class Shares
Sold ..................... 147,133 $ 1,386,528 121,042 $ 1,162,058
Reinvested from dividends
and distributions ..... 28,550 251,303 14,692 135,897
Redeemed ................. (83,754) (784,087) (87,303) (796,612)
-------- ----------- -------- -----------
Net increase - Institutional 91,929 $ 853,744 48,431 $ 501,343
-------- ----------- -------- -----------
Net increase in Fund ..... 21,405 $ 83,160 204,999 $ 1,967,002
-------- ----------- -------- -----------
================================================================================
SHORT-TERM
1999 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Adviser Class Shares
Sold ..................... 210,906 $ 2,217,623 823,411 $ 8,407,160
Reinvested from dividends
and distributions ..... 96,963 964,783 71,806 745,348
Redeemed ................. (583,021) (6,119,476) (668,780) (6,895,655)
-------- ----------- -------- -----------
Net increase - Adviser Class (275,152) ($2,937,070) 226,437 $ 2,256,853
-------- ----------- -------- -----------
Institutional Class Shares
Sold ..................... 469,584 $ 4,535,703 1,607,353 $16,450,598
Reinvested from dividends
and distributions ..... 129,700 1,293,105 72,869 760,024
Redeemed ................. (308,892) (2,854,889) (337,168) (3,511,068)
-------- ----------- -------- -----------
Net increase - Institutional 290,392 $ 2,973,919 1,343,054 $13,699,554
-------- ----------- -------- -----------
Net increase in Fund ..... 15,240 $ 36,849 1,569,491 $15,956,407
-------- ----------- -------- -----------
Page 24
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST (continued)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
Long-term capital gain distributions paid to shareholders by the Funds
during the year ended December 31, 1999, whether taken in shares or cash were as
follows: Long-Term Fund $617,992, Medium-Term Fund $1,157,639 and Short-Term
Fund $1,182,920.
Page 25
<PAGE>
<TABLE>
<CAPTION>
TOMORROW FUNDS RETIREMENT TRUST
Financial Highlights
$ PER SHARE
NET
NET REALIZED TOTAL DIVIDENDS DISTRI- NET
ASSET AND INCOME FROM BUTIONS ASSET
VALUE AT NET UNREALIZED FROM NET FROM TOTAL VALUE AT NET
BEGINNING INVESTMENT GAINS ON INVESTMENT INVESTMENT CAPITAL DISTR- END OF TOTAL ASSETS
OF PERIOD INCOME SECURITIES OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN (000'S)
--------- ------ ---------- ---------- ------ ----- -------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 $ 6.50 $ 0.04 $ 0.55 $ 0.59 $(0.06) $ (0.05) $(0.11) $ 6.98 9.08% $978
For the year ended
December 31, 1997 ....... 6.98 0.09 1.62 1.71 (0.08) (0.63) (0.71) 7.98 24.50 4,194
For the year ended
December 31, 1998 ....... 7.98 0.10 1.14 1.24 (0.07) (0.05) (0.12) 9.10 15.58 7,150
For the year ended
December 31, 1999 ....... 9.10 0.04 0.79 0.83 (0.05) (0.89) (0.94) 8.99 9.53 8,086
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 6.51 0.04 0.55 0.59 0.00 (0.05) (0.05) 7.05 9.03 282
For the year ended
December 31, 1997 ....... 7.05 0.06 1.69 1.75 (0.10) (0.63) (0.73) 8.07 24.84 1,088
For the year ended
December 31, 1998 ....... 8.07 0.13 1.17 1.30 (0.09) (0.05) (0.14) 9.23 16.16 1,687
For the year ended
December 31, 1999 ....... 9.23 0.08 0.81 0.89 (0.11) (0.89) (1.00) 9.12 10.07 2,031
Medium-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 7.50 0.04 0.63 0.67 (0.03) (0.07) (0.10) 8.07 8.89 3,416
For the year ended
December 31, 1997 ....... 8.07 0.13 1.40 1.53 (0.13) (0.62) (0.75) 8.85 18.96 11,987
For the year ended
December 31, 1998 ....... 8.85 0.18 1.22 1.40 (0.15) (0.42) (0.57) 9.68 15.94 14,617
For the year ended
December 31, 1999 ....... 9.68 0.17 0.23 0.40 (0.16) (0.63) (0.79) 9.29 4.32 13,383
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 7.53 0.10 0.55 0.65 (0.25) (0.07) (0.32) 7.86 8.54 265
For the year ended
December 31, 1997 ....... 7.86 0.24 1.29 1.53 (0.15) (0.61) (0.76) 8.63 19.48 1,165
For the year ended
December 31, 1998 ....... 8.63 0.22 1.18 1.40 (0.18) (0.42) (0.60) 9.43 16.36 2,276
For the year ended
December 31, 1999 ....... 9.43 0.19 0.24 0.43 (0.21) (0.63) (0.84) 9.02 4.77 3,008
</TABLE>
<TABLE>
<CAPTION>
RATIOS
RATIO INFORMATION
ASSUMING NO FEE WAIVERS,
REIMBURSEMENTS OR
CUSTODY FEE
RATIO OF EARNINGS CREDIT RECEIVED
RATIO OF NET -------------------------
EXPENSES INCOME TO RATIO OF RATIO OF
TO AVERAGE AVERAGE PORTFOLIO EXPENSES NET INCOME
Long-Term Retirement NET NET TURNOVER TO AVERAGE TO AVERAGE
Adviser Shares ASSETS ASSETS RATE NET ASSETS NET ASSETS
- -------------- ------ ------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the period March 7, 1996*
through December 31, 1996 1.75%+ 1.63%+ 25.09% 45.36%+ -41.98%+
For the year ended
December 31, 1997 ....... 1.75%+ 1.30 66.64 5.61 -2.56
For the year ended
December 31, 1998 ....... 1.75 1.17 60.96 3.25 -0.33
For the year ended
December 31, 1999 ....... 1.75 0.57 104.49 2.89 -0.57
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 1.50+ 1.97+ 25.09 40.49+ -37.02+
For the year ended
December 31, 1997 ....... 1.45 1.67 66.64 7.52 -4.40
For the year ended
December 31, 1998 ....... 1.27 1.64 60.96 4.09 -1.18
For the year ended
December 31, 1999 ....... 1.29 1.03 104.49 3.46 -1.13
Medium-Term Retirement
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 1.75+ 1.73+ 22.56 15.88+ -12.40+
For the year ended
December 31, 1997 ....... 1.75 1.80 90.67 2.92 0.63
For the year ended
December 31, 1998 ....... 1.75 1.89 155.74 2.23 1.41
For the year ended
December 31, 1999 ....... 1.75 1.63 208.58 2.21 1.17
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 1.50+ 1.96+ 22.56 20.86+ -17.40+
For the year ended
December 31, 1997 ....... 1.39 2.33 90.67 4.41 -0.69
For the year ended
December 31, 1998 ....... 1.28 2.38 155.74 2.79 0.87
For the year ended
December 31, 1999 ....... 1.31 2.10 208.58 2.54 0.87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$ PER SHARE
NET
NET REALIZED TOTAL DIVIDENDS DISTRI- NET
ASSET AND INCOME FROM BUTIONS ASSET
VALUE AT NET UNREALIZED FROM NET FROM TOTAL VALUE AT NET
BEGINNING INVESTMENT GAINS ON INVESTMENT INVESTMENT CAPITAL DISTR- END OF TOTAL ASSETS
OF PERIOD INCOME SECURITIES OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN (000'S)
--------- ------ ---------- ---------- ------ ----- -------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM RETIREMENT
Adviser Shares
For the period March 7, 1996*
through December 31, 1996 $ 8.50 $ 0.06 $ 0.72 $ 0.78 $ (0.06) $ (0.06) $ (0.12) $ 9.16 8.54% $4,459
For the year ended
December 31, 1997 ....... 9.16 0.22 1.47 1.69 (0.20) (0.87) (1.07) 9.78 18.46 13,786
For the year ended
December 31, 1998 ....... 9.78 0.30 0.89 1.19 (0.26) (0.22) (0.48) 10.49 12.22 17,157
For the year ended
December 31, 1999 ....... 10.49 0.33 (0.11) 0.22 (0.29) (0.43) (0.72) 9.99 2.12 13,590
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 8.51 0.00 0.70 0.70 0.00 0.00 0.00 9.21 8.23 304
For the year ended
December 31, 1997 ....... 9.21 0.17 1.55 1.72 (0.24) (0.87) (1.11) 9.82 18.69 1,823
For the year ended
December 31, 1998 ....... 9.82 0.34 0.90 1.24 (0.30) (0.22) (0.52) 10.54 12.68 16,108
For the year ended
December 31, 1999 ....... 10.54 0.31 (0.06) 0.25 (0.35) (0.43) (0.78) 10.01 2.40 18,207
</TABLE>
<TABLE>
<CAPTION>
RATIOS
RATIO INFORMATION
ASSUMING NO FEE WAIVERS,
REIMBURSEMENTS OR
CUSTODY FEE
RATIO OF EARNINGS CREDIT RECEIVED
RATIO OF NET -------------------------
EXPENSES INCOME TO RATIO OF RATIO OF
TO AVERAGE AVERAGE PORTFOLIO EXPENSES NET INCOME
NET NET TURNOVER TO AVERAGE TO AVERAGE
ASSETS ASSETS RATE NET ASSETS NET ASSETS
------ ------ ---- ---------- ----------
SHORT-TERM RETIREMENT
Adviser Shares
<S> <C> <C> <C> <C> <C>
For the period March 7, 1996*
through December 31, 1996 1.75%+ 2.08%+ 14.16% 15.68%+ -11.85%+
For the year ended
December 31, 1997 1.75 2.41 145.44 2.65 1.51
For the year ended
December 31, 1998 1.75 3.00 263.77 1.96 2.79
For the year ended
December 31, 1999 1.75 2.87 286.76 1.92 2.70
Institutional Shares
For the period April 2, 1996*
through December 31, 1996 1.50+ 2.31+ 14.16 19.10+ -15.29+
For the year ended
December 31, 1997 1.44 2.87 145.44 4.01 0.30
For the year ended
December 31, 1998 1.45 3.31 263.77 1.64 3.12
For the year ended
December 31, 1999 1.46 3.18 286.76 1.62 3.02
<FN>
+ Annualized
* Commencement of operations.
</FN>
</TABLE>
See notes to financial statements.
Page 27
<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, 1999, 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
three-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, 1999 by correspondence with the custodian . As to securities
purchased but not yet received, we performed other appropriate auditing
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, 1999, 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 three-year period t hen 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 20, 2000
Page 28
<PAGE>
TOMORROW FUNDS
--------------
R E T I R E M E N T T R U S T
A Lifecycle Retirement Program
--------------------------------------
ONE NEW YORK PLAZA, NEW YORK, NY 10004
(800) 223-3332
INDEPENDENT TRUSTEES AND MEMBERS
OF AUDIT COMMITTEE
Raymond R. Herrmann, Jr.
Lawrence J. Israel
Graham E. Jones
OFFICERS
ROGER J. WEISS
Chairman of the Board, President and Trustee
RONALD M. HOFFNER
Executive Vice President and Treasurer
JOSEPH J. REARDON
Vice President and Secretary
DANIEL CARDELL
Vice President
DANIEL S. VANDIVORT
Vice President
STEVEN M. PIRES
Assistant 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
PFPC 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.
<PAGE>
TOMORROW FUNDS RETIREMENT TRUST
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
(a)(1) Agreement and Declaration of Trust.**
(a)(2) Certificate of Trust.**
(a)(3) Termination of Series.**
(b) By-Laws.**
(c) None.
(d)(1) Form of Investment Advisory Agreement between the Registrant,
on behalf of Tomorrow Long-Term Retirement Fund, and Weiss,
Peck & Greer, L.L.C. ("WPG").*
(d)(2) Form of Investment Advisory Agreement between the
Registrant, on behalf of Tomorrow Medium-Term
Retirement Fund, and WPG.*
(d)(3) Form of Investment Advisory Agreement between the
Registrant, on behalf of Tomorrow Short-Term
Retirement Fund, and WPG.*
(d)(4) Form of Investment Advisory Agreement between the
Registrant, on behalf of Tomorrow Post-Retirement
Fund, and WPG.**
(e) Principal Underwriting Agreement.***
(f) None.
(g) Form of Custodian Agreement between the Registrant and Boston
Safe Deposit and Trust Company.**
(h) Services Agreement between the Registrant and First Data
Investor Services, Inc.***
(i) Opinion and Consent of Counsel.**
(j) Consent of Independent Public Accountants.+
(k) None.
(l) Not applicable.
<PAGE>
(m) Form of Adviser Class Shares Distribution Plan.*
(o) Multiple Class Plan adopted pursuant to Rule 18f-3.*
(p) Form of Code of Ethics. +
(q)(1) Form of Share Purchase Agreement.**
(q)(2) Powers of Attorney.+
- --------------
+ Filed herewith.
* Filed with Post-Effective Amendment No. 4 on June 12, 1998.
** Filed with Post-Effective Amendment No. 3 on May 1, 1998.
*** Filed with Post-Effective Amendment No. 6 on February 26, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 25. INDEMNIFICATION.
Except for the Agreement and Declaration of Trust dated
June 21, 1995, establishing the Registrant as a Trust under Delaware law, there
is no contract, arrangement or statute under which any trustee, officer,
underwriter or affiliated person of the Registrant is insured or indemnified.
The Agreement and Declaration of Trust provides that no Trustee or officer will
be indemnified against any liability to which the Registrant would otherwise be
subject by reason of or for willful misfeasance, bad faith, gross negligence or
reckless disregard of such person's duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act"), may be available to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment of the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
-2-
<PAGE>
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
All of the information required by this item is set forth
in the Form ADV, as currently amended, of WPG (File No. 801-6604). The following
sections of such Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2;
(b) Section 6, Business Background, of each Schedule D.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Provident Distributors, Inc. (formerly First Data Distributors,
Inc.), a subsidiary of PFPC, Inc., the principal underwriter of
shares of the Registrant (the "Principal Underwriter") acts as
principal underwriter to each investment company in the Weiss,
Peck & Greer Group of Mutual Funds. These mutual funds include:
Weiss, Peck & Greer Funds Trust, which consists of WPG Government
Money Market Fund, WPG Tax-Free Money Market Fund, WPG Core Bond
Fund, WPG Intermediate Municipal Bond Fund and WPG Quantitative
Equity Fund; Weiss, Peck & Greer International Fund; WPG Tudor
Fund; and WPG Growth and Income Fund. In addition, the Principal
Underwriter acts as principal underwriter to the following other
investment companies:
International Dollar Reserve Fund I, Ltd.
Provident Institutional Funds Trust
Columbia Common Stock Fund, Inc.
Columbia Growth Fund, Inc.
Columbia International Stock Fund, Inc.
Columbia Special Fund, Inc.
Columbia Small Cap Fund, Inc.
Columbia Real Estate Equity Fund, Inc.
Columbia Balanced Fund, Inc.
Columbia Daily Income Company
Columbia U.S. Government Securities Fund, Inc.
Columbia Fixed Income Securities Fund, Inc.
Columbia Municipal Bond Fund, Inc.
Columbia High Yield Fund, Inc.
Columbia National Municipal Bond Fund, Inc.
GAMNA Series Funds, Inc.
WT Investment Trust
Kalmar Pooled Investment Trust
The RBB Fund, Inc.
Robertson Stephens Investment Trust
HT Insight Funds, Inc.
Harris Insight Funds Trust
Hilliard-Lyons Government Fund, Inc
Hilliard-Lyons Growth Fund, Inc.
Hilliard-Lyons Research Trust
Senbanc Fund
Warburg Pincus Trust
ABN AMRO Funds
Alleghany Funds
BT Insurance Funds Trust
First Choice Funds Trust
Forward Funds, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
IBJ Funds Trust
Light Index Funds, Inc.
LKCM Funds
Matthews International Funds
McM Funds
Metropolitan West Funds
New Covenant Funds, Inc.
Panorama Trust
Smith Breeden Series Funds
Smith Breeden Trust
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
The Stratton Funds, Inc.
The Galaxy Fund
The Galaxy VIP Fund
Galaxy Fund II
The Govett Funds, Inc.
Trainer, Wortham First Mutual Funds
Undiscovered Managers Funds
Wilshire Target Funds, Inc.
The BlackRock Funds, Inc. (Distributed by BlackRock
Distributors, Inc. a wholly owned subsidiary of Provident
Distributors, Inc.)
Northern Funds Trust and Northern Institutional Funds Trust
(Distributed by Northern Funds Distributors, LLC. a wholly
owned subsidiary of Provident Distributors, Inc.)
The Offit Investment Fund, Inc. (Distributed by Offit Funds
Distributor, Inc. a wholly owned subsidiary of Provident
Distributors, Inc.)
The Offit Variable Insurance Fund, Inc. (Distributed by
Offit Funds Distributor, Inc. a wholly owned subsidiary of
Provident Distributors, Inc.)
The Principal Underwriter is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. The Principal Underwriter is located at Four
Falls Corporate Center, Suite 600, West Conshohocken, Pennsylvania 19428-2961.
(b) The following is a list of the executive officers, directors and
partners of the Principal Underwriter:
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
---- -------------------------- ---------------
Philip H. Rinnander President and Treasurer None
Jane Haegele Secretary and Sole Director None
Jason A. Greim Vice President None
Barbara A. Rice Vice President None
Jennifer K. Rinnander Vice President None
Lisa M. Buono Vice President and None
Compliance Officer
The principal business address of each person listed above
is Four Falls Corporate Center, Suite 600, West
Conshohocken, Pennsylvania 19428-2961.
-3-
<PAGE>
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All account, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
thereunder will be maintained (1) at the offices of the Registrant at One New
York Plaza, New York, New York 10004 (2) at the offices of the Registrant's
Custodian, Boston Safe Deposit and Trust Company, at One Boston Place, Boston,
MA 02109 and (3) at the offices of the Registrant's Transfer Agent, PFPC, Inc.,
P.O. Box 60448,King of Prussia, PA 19406-0448
ITEM 29. MANAGEMENT SERVICES
The Registrant is not a party to any management-related
service contract, except as described in the prospectuses and the statements of
additional information.
ITEM 30. UNDERTAKINGS
Not applicable.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to the Registration Statement meets all the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and the Registrant has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York on the 25th day
of April, 2000.
TOMORROW FUNDS RETIREMENT TRUST
/S/RONALD M. HOFFNER
--------------------
Ronald M. Hoffner
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/S/ROGER J. WEISS Chairman of the Board April 25, 2000
- ---------------------------
Roger J. Weiss (Principal Executive Officer)
and Trustee
/S/RONALD M. HOFFNER Executive Vice President and April 25, 2000
- --------------------
Ronald M. Hoffner Treasurer (Principal Financial
and Accounting Officer)
RAYMOND R. HERRMANN, JR.* Trustee April 25, 2000
- ---------------------------
Raymond R. Herrmann, Jr.
LAWRENCE J. ISRAEL* Trustee April 25, 2000
- ---------------------------
Lawrence J. Israel
GRAHAM E. JONES* Trustee April 25, 2000
- ---------------------------
Graham E. Jones
*By: /S/RONALD M. HOFFNER April 25, 2000
---------------------
Ronald M. Hoffner
Attorney-in-Fact
-5-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DOCUMENT TITLE
- ------ --------------
(j) Consent of Independent Public Accountants.
(p) Form of Code of Ethics.
(q)(2) Powers of Attorney
-6-
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholders of:
Tomorrow Long-Term Retirement Fund
Tomorrow Medium-Term Retirement Fund
Tomorrow Short-Term Retirement Fund
We consent to the use of our report dated January 20, 2000 incorporated herein
by reference and to the references to our firm under the headings "Financial
Highlights" in the Prospectus and "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information.
KPMG LLP
New York, New York
April 26, 2000
WPG CORE BOND FUND
WPG GOVERNMENT MONEY MARKET FUND
WPG GROWTH AND INCOME FUND
WPG INTERMEDIATE MUNICIPAL BOND FUND
WEISS, PECK & GREER INTERNATIONAL FUND
WPG QUANTITATIVE EQUITY FUND
WPG TAX-FREE MONEY MARKET FUND
WPG TUDOR FUND
TOMORROW LONG-TERM RETIREMENT FUND
TOMORROW MEDIUM-TERM RETIREMENT FUND
TOMORROW SHORT-TERM RETIREMENT FUND
CODE OF ETHICS
--------------
INTRODUCTION
This Code of Ethics is divided into three parts. The first part contains
provisions applicable to access persons of the Fund who are also access persons
of Weiss, Peck & Greer, L.L.C. ("WPG") or, with respect to Weiss, Peck & Greer
International Fund, access persons of either WPG or Robeco Institutional Asset
Management US Inc. ("RIAM") (where applicable, each of WPG and RIAM are referred
to herein as the "Adviser"). The second part of this Code of Ethics pertains to
"disinterested" trustees of the Fund. The third part contains record keeping and
other provisions.
The Fund's board of trustees has determined that the Fund appropriately may
apply the high standards of ethics established by the Adviser in the area of
personal trading, without change, to those access persons of the Fund who are
also access persons of the Adviser. Such persons may have frequent opportunities
for knowledge of, and in some cases influence over, Fund portfolio transactions.
In the experience of the Fund, trustees who are unaffiliated with the Adviser
(E.G., disinterested trustees) have comparatively less current knowledge and
considerably less influence over specific purchases and sales of securities by
the Fund. Therefore, this Code of Ethics contains separate provisions applicable
to such access persons.
DEFINITIONS
For purposes of this Code of Ethics, the following definitions shall
apply:
a. The term "access person" with respect to the Fund shall mean any
trustee, officer or advisory person (as defined below) of the Fund. The term
"access person" with respect to the Adviser shall mean any principal, director,
officer or advisory person (as defined below) of the Adviser.
b. The term "advisory person" shall mean (i) every employee of the
Fund (or of any company in a control relationship to the Fund) who, in
connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding, the purchase or sale of a security (as defined
below) by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales and (ii) every natural
person in a control relationship to the Fund who obtains information concerning
recommendations made to the Fund with regard to the purchase or sale of a
security.
c. The term "beneficial ownership" shall mean a direct or indirect
"pecuniary interest" (as defined in subparagraph (a)(2) of Rule 16a-1 under the
Securities Exchange Act of 1934, as amended) that is held or shared by a person
directly or indirectly (through any contract, arrangement, understanding,
relationship or otherwise) in a security. While the definition of "pecuniary
interest" in subparagraph (a)(2) of Rule 16a-1 is complex, the term generally
means the opportunity directly or indirectly to provide or share in any profit
derived from a transaction in a security. An indirect pecuniary interest in
1
<PAGE>
securities by a person would be deemed to exist as a result of: (i) ownership of
securities by any of such person's immediate family members sharing the same
household (including child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother- or father-in-law, sister- or
brother-in-law, and son- or daughter-in-law); (ii) the person's partnership
interest in the portfolio securities held by a general partnership or, in
certain instances, a limited partnership; (iii) the existence of certain types
of performance-related fees (not simply an asset-based fee) received by such
person as broker, dealer, investment adviser or manager to a securities account;
(iv) the person's right to receive dividends from a security provided such right
is separate or separable from the underlying securities; (v) the person's
interest in securities held by a trust under certain circumstances; and (vi) the
person's right to acquire securities through the exercise or conversion of a
"derivative security" (which term excludes (a) a broad-based index option or
future, (b) a right with an exercise or conversion privilege at a price that is
not fixed, and (c) a security giving rise to the right to receive such other
security only PRO RATA and by virtue of a merger, consolidation or exchange
offer involving the issuer of the first security).
d. The term "control" shall mean the power to exercise a controlling
influence over the management or policies of the Fund, unless such power is
solely the result of an official position with the Fund, all as determined in
accordance with Section 2(a)(9) of the Investment Company Act of 1940, as
amended (the "1940 Act").
e. The term "disinterested trustee" shall mean a trustee of the Fund
who is not an "interested person" of the Fund within the meaning of Section
2(a)(19) of the 1940 Act.
f. The term "Fund" shall mean, individually, each of WPG Core Bond
Fund, WPG Government Money Market Fund, WPG Growth and Income Fund, WPG
Intermediate Municipal Bond Fund, Weiss, Peck & Greer International Fund, WPG
Quantitative Equity Fund, WPG Tax-Free Money Market Fund, WPG Tudor Fund,
Tomorrow Long-Term Retirement Fund, Tomorrow Medium-Term Retirement Fund and
Tomorrow Short-Term Retirement Fund and any other investment company in the
Weiss, Peck & Greer Group of Funds that from time to time adopts this Code of
Ethics.
g. The term "investment personnel" shall mean all portfolio managers
of the Fund and other advisory persons who assist the portfolio managers in
making and implementing investment decisions for the Fund, including, but not
limited to, analysts and traders of the Adviser.
h. The term "material non-public information" with respect to an
issuer shall mean information, not yet released to the public, that would have a
substantial likelihood of affecting a reasonable investor's decision to buy or
sell any securities of such issuer.
i. The term "purchase" shall include the writing of an option to
purchase.
j. The term "Review Officer" shall mean that person designated from
time to time by the Board of Trustees of the Fund to receive and review reports
of purchases and sales by access persons. The term "Alternative Review Officer"
shall mean that person designated from time to time by the Board of Trustees of
the Fund to receive and review reports of purchases and sales by the Review
Officer, and who shall act in all respects in the manner prescribed herein for
the Review Officer.
k. The term "sale" shall include the writing of an option to sell.
l. The term "security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include shares of registered
open-end investment companies (whether or not affiliated with WPG), securities
issued by the United States government within the meaning of Section 2(a)(16) of
the 1940 Act (I.E., U.S. Treasury securities, as distinct from securities of
U.S. Government agencies or instrumentalities), bankers' acceptances, bank
certificates of deposit, commercial paper, repurchase agreements and such other
money market instruments as may be designated from time to time by the Board of
Trustees.
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m. The phrase "security held or to be acquired" shall mean any
security which, within the most recent 15 days, is or has been held by the Fund
or is being or has been considered for purchase by the Fund or the Adviser for
purchase by the Fund.
n. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
I. RULES APPLICABLE TO ACCESS PERSONS OF THE FUND WHO ARE ALSO ACCESS
PERSONS OF THE ADVISER.
A. INCORPORATION OF THE ADVISER'S CODE OF ETHICS.
---------------------------------------------
1. The provisions of the Adviser's Code of Ethics, which is attached
as APPENDIX A hereto, as such may be amended from time to time, are hereby
incorporated by reference as the Fund's Code of Ethics applicable to access
persons of the Fund who are also access persons of the Adviser.
2. A violation of the Adviser's Code of Ethics by an access person of
the Fund who is also an access person of the Adviser shall constitute a
violation of this Code of Ethics.
B. REPORTS
-------
1. Access persons of the Fund who are access persons of the Adviser
shall file the reports required under the Adviser's Code of Ethics with the
Review Officer and, if the Review Officer is an access person, the Review
Officer shall submit his/her reports to the Alternate Review Officer.
2. As an alternative to compliance with the reporting requirements of
subparagraph 1 of this Section, an access person of the Fund who is also an
access person of the Adviser shall be considered to have satisfied his or her
reporting requirements PROVIDED THAT:
(i) the access person complies with the alternative reporting
provisions of the Adviser's Code of Ethics; and
(ii) the Adviser provides to the Review Officer all reports
required to be made by its access persons under its Code of
Ethics.
II. RULES APPLICABLE TO DISINTERESTED TRUSTEES.
A. LEGAL REQUIREMENTS.
------------------
Section 17(j) the 1940 Act provides, among other things, that it is
unlawful for any disinterested trustee of the Fund to engage in any act,
practice or course of business in connection with the purchase or sale, directly
or indirectly, by such disinterested trustee of any security held or to be
acquired by the Fund in contravention of such rules and regulations as the
Securities and Exchange Commission (the "Commission") may adopt to define and
prescribe means reasonably necessary to prevent such acts, practices or courses
of business as are fraudulent, deceptive or manipulative. Pursuant to Section
17(j), the Commission has adopted Rule 17j-1 which provides, among other things,
that it is unlawful for any disinterested trustee of the Fund in connection with
the purchase or sale, directly or indirectly, by such person of a security held
or to be acquired by the Fund:
(i) to employ any device, scheme or artifice to defraud the
Fund;
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(ii) to make to the Fund any untrue statement of a material fact
or omit to state to the Fund a material fact necessary in
order to make the statement made, in light of the
circumstances under which they were made, not misleading;
(iii) to engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the
Fund; or
(iv) to engage in any manipulative practice with respect to the
Fund.
B. STATEMENT OF POLICY.
-------------------
It is the policy of the Fund that no disinterested trustee shall engage in
any act, practice or course of conduct that would violate the provisions of Rule
17j-1. The fundamental position of the Fund is, and has been, that each
disinterested trustee shall place at all times the interests of Fund and its
shareholders first. Accordingly, private securities transactions by
disinterested trustees of the Fund must be conducted consistent with this Code
of Ethics and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of a disinterested trustee's position of trust and
responsibility. Further, disinterested trustees should not take inappropriate
advantage of their positions with or on behalf of the Fund.
Without limiting in any manner the fiduciary duty owed by disinterested
trustees to the Fund or the provisions of this Code of Ethics, it should be
noted that the Fund considers it proper that purchases and sales be made by its
disinterested trustees in the marketplace of securities owned by the Fund;
PROVIDED, HOWEVER, that such personal securities transactions comply with the
spirit of, and the specific restrictions and limitations set forth in, this Code
of Ethics. In making personal investment decisions with respect to any security,
extreme care must be exercised by disinterested trustees to ensure that the
prohibitions of this Code of Ethics are not violated. It bears emphasis that
technical compliance with the procedures, prohibitions and limitations of this
Code of Ethics will not automatically insulate from scrutiny personal securities
transactions which show a pattern of abuse by a disinterested trustee of his or
her fiduciary duty to the Fund.
C. PROHIBITED ACTIVITIES.
---------------------
A violation of the Statement of Policy set forth above would always include
at least the following prohibited activities. Should you have any questions
regarding this Code of Ethics or whether an action is prohibited by this Code,
please contact the Review Officer before taking such action.
1. COMPETING WITH FUND TRADES. No disinterested trustee shall,
directly or indirectly, purchase or sell securities in such a way
that the disinterested trustee knew, or reasonably should have known,
that such securities transactions compete in the market with actual
or considered securities transactions for the Fund, or otherwise
personally act to injure the Fund's securities transactions.
2. PERSONAL USE OF FUND TRADING KNOWLEDGE. No disinterested trustee
shall use any knowledge of securities purchased or sold by the Fund
or securities being considered for purchase or sale by the Fund to
profit personally, directly or indirectly, by the market effect of
such transactions.
3. DISCLOSURE OF CLIENT TRADING KNOWLEDGE. No disinterested trustee
shall, directly or indirectly, communicate to any person who is not
an access person of the Fund (or other appropriate agent of the Fund)
any material non-public information relating to the Fund or any
issuer of any security owned by the Fund, including, without
limitation, the purchase or sale or considered purchase or sale of a
security on behalf of the Fund.
4
<PAGE>
D. EXEMPT TRANSACTIONS AND CONDUCT.
-------------------------------
The following types of transactions and securities are exempt from the TRADING
RESTRICTIONS, but not from the REPORTING REQUIREMENTS of this Code of Ethics:
1. Purchases or sales of securities for an account over which the
disinterested trustee has no direct or indirect influence or control;
2. Purchases or sales of securities which are non-volitional on the
part of the disinterested trustee;
3. Purchases and sales of securities which are part of an automatic
dividend reinvestment, cash purchase or withdrawal plan provided that
no adjustment is made by the disinterested trustee to the rate at
which securities are purchased or sold, as the case may be, under
such a plan during any period in which the security is being
considered for purchase or sale by the Fund;
4. Purchases of securities made by exercising rights distributed by
an issuer PRO RATA to all holders of a class of its securities, to
the extent such rights were acquired by the disinterested trustee
from the issuer, and sales of such rights so acquired;
5. Tenders of securities pursuant to tender offers which are
expressly conditioned on the tender offer's acquisition of all of the
securities of the same class; and
6. Purchases or sales of securities for which the disinterested
trustee has received prior written approval from the Fund. Prior
approval shall be granted only if a purchase or sale of securities is
consistent with the purposes of this Code of Ethics and Section 17(j)
of the 1940 Act and Rule 17j-1 thereunder.
E. JOINT PARTICIPATION.
-------------------
Disinterested trustees should be aware that a specific provision of the
1940 Act prohibits such persons, in the absence of an order of the Commission,
from effecting a transaction in which the Fund is a "joint or a joint and
several participant" with such person. Any transaction which suggests the
possibility of a question in this area should be presented to legal counsel for
review.
F. REPORTING REQUIREMENTS.
----------------------
1. MANDATORY REPORTING. Each disinterested trustee shall submit to
the Fund a report as to all securities transactions effected during
each quarterly period, in which such disinterested trustee has, or by
reason of such transactions acquires or disposes of, any beneficial
ownership of a security; PROVIDED, HOWEVER, that a disinterested
trustee shall not be required to file a report unless such trustee,
at the time of that transaction, knew or should have known that,
during the 15-day period immediately preceding the date of the
transaction by the trustee, such security was purchased or sold by
the Fund or such security was being considered by the Fund or the
Adviser for purchase or sale by the Fund.
This mandatory reporting requirement shall apply whether or not one
of the exemptions listed in Section D applies, except that a
disinterested trustee shall not be required to make a report with
respect to transactions effected for any account over which such
person does not have any direct or indirect influence or control.
2. VOLUNTARY REPORTING. Each disinterested trustee may submit to the
Fund a report as to all securities transactions effected during each
quarterly period, in which such disinterested trustee has, or by
reason of such transactions acquires or disposes of, any beneficial
ownership of a security.
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<PAGE>
3. Every report required by subparagraph 1 of this Section shall
contain a brief statement of the exemption provided in Section D that
was relied upon in effecting the securities transaction and the
circumstances of the transaction. In addition, every report submitted
pursuant to this Section shall be in the form annexed hereto as FORM
A, or in similar form (such as a computer printout), and shall set
forth at least the following information:
a. The date of each transaction, the title, class
and number of shares, and the principal amount of
each security involved;
b. The nature of each transaction (I.E., purchase,
sale or other type of acquisition or
disposition);
c. The price at which each transaction was effected;
and
d. The name of the broker, dealer or bank with or
though whom each transaction was effected.
4. As an alternative to the literal compliance with the reporting
requirements of this Section, a disinterested trustee shall be
considered to have satisfied his or her reporting requirement, if:
a. the disinterested trustee agrees to execute, and
does execute, with or through WPG all trades in
securities in which such disinterested trustee
has a beneficial ownership interest;
b. a computer printout or similar report is produced
by WPG and delivered to the Fund no less
frequently than the frequency set forth in
subparagraph 1 of this Section and containing
with respect to the disinterested trustee at
least the information that would otherwise have
been required by subparagraph 3 of this Section;
and
c. such disinterested trustee certifies annually in
writing to WPG that, during the prior calendar
year, he or she in fact maintained with WPG all
brokerage accounts in which such person had a
beneficial ownership interest and executed all
trades required to be reported by subparagraph 1
of this Section with or through WPG.
G. ANNUAL CERTIFICATION OF COMPLIANCE.
----------------------------------
All disinterested trustees shall certify annually on the form annexed
hereto as FORM B that they (i) have read and understand this Code of Ethics and
recognize that they are subject hereto, (ii) have complied with the requirements
of this Code of Ethics and (iii) have disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to the
requirements of this Code of Ethics.
III. MISCELLANEOUS
A. RECORDKEEPING REQUIREMENTS.
--------------------------
The Fund shall maintain and preserve:
1. a copy of this Code of Ethics (and any prior code of ethics that
was in effect at any time during the past five years) in an easily
accessible place for a period of not less than five years;
2. a record of any violation of this Code of Ethics and of any action
taken as a result of such violation in an easily accessible place for
a period of not less than five years following the end of the fiscal
year in which the violation occurs;
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<PAGE>
3. a copy of each report (or computer printout) submitted under this
Code of Ethics for a period of not less than five years, (and those
reports submitted during the previous two years must be maintained
and preserved in an easily accessible place); and
4. in an easily accessible place, a list of all persons who are, or
within the past five years were, required to make reports pursuant to
this Code of Ethics.
B. CONFIDENTIALITY.
---------------
All information obtained from any access person hereunder shall be
kept in strict confidence by the Fund, except that reports of securities
transactions and other information reported hereunder will be made available to
the Commission, any other regulatory or self-regulatory organization or other
third party to the extent required by law or regulation or to the extent the
Fund considers necessary or advisable in cooperating with an investigation or
inquiry by the Commission or any other regulatory or self-regulatory
organization and, in certain circumstances, the Fund may make such information
available to other civil and criminal authorities. In addition, information
regarding violations of this Code of Ethics may be provided to clients or former
clients of the Adviser.
C. AMENDMENT TO THE CODE OF ETHICS.
-------------------------------
Any material change to this Code of Ethics or the Adviser's Code of
Ethics (such Codes of Ethics having initially been approved by a majority of the
Fund's trustees, including a majority of the disinterested trustees) shall be
reviewed by all of the disinterested trustees; and a majority of the trustees,
including a majority of the disinterested trustees shall have determined, no
later than six months after such material change is adopted, that this Code of
Ethics or the Adviser's Code of Ethics, as applicable, in light of such material
change, contains provisions reasonably necessary to prevent access persons from
engaging in any unlawful conduct described in paragraph A of Part II of this
Code of Ethics.
D. REVIEW OF REPORTS.
-----------------
1. The Review Officer shall compare the reported personal securities
transactions of each access person with completed and contemplated
portfolio transactions of the Fund to determine whether a violation
of this Code of Ethics may have occurred. In the case of reports of
personal securities transactions of the Review Officer, the
Alternative Review Officer shall perform such comparison. Before
making any determination that a violation has been committed by any
access person, the Review Officer or Alternative Review Officer, as
the case may be, shall provide such person an opportunity to supply
additional explanatory material.
2. If the Review Officer or Alternative Review Officer, as the case
may be, determines that a violation of this Code of Ethics has or may
have occurred, he shall submit a written determination, together with
the related report by the access person and any additional
explanatory material provided by the access person to the Chairman of
the Fund, who shall make an independent determination of whether a
violation has occurred.
3. On a quarterly basis, the Review Officer shall prepare a summary
of the level of compliance by all access persons with this Code of
Ethics during the previous quarter, including without limitation the
percentage of reports timely filed and the number and nature of all
material violations. On an annual basis, the Review Officer shall
prepare a report identifying any recommended changes to existing
restrictions or procedures based upon the Fund's experience under
this Code of Ethics, evolving industry practices and developments in
applicable laws or regulations. The Alternative Review Officer shall
prepare reports with respect to compliance by the Review Officer.
7
<PAGE>
E. SANCTIONS.
---------
Any violation of the substantive or procedural requirements of this
Code of Ethics by an access person shall result in the imposition of such
sanctions as the Board of Trustees (without the presence of and participation by
the disinterested trustee at issue, if applicable) of the Fund may deem
appropriate under the circumstances, which may include, but are not limited to,
removal or suspension from office, termination of employment, a letter of
censure, referral to the Commission and/or other criminal and civil authorities
and/or restitution to the Fund of an amount equal to the advantage the offending
person shall have gained by reason of such violation.
F. INTERPRETATION.
--------------
The Fund's Board of Trustees may from time to time adopt such
interpretations of this Code of Ethics as it deems appropriate.
8
<PAGE>
APPENDIX A
WEISS, PECK & GREER, L.L.C.
ROBECO INSTITUTIONAL ASSET MANAGEMENT US INC.
CODE OF ETHICS
--------------
1. DEFINITIONS.
-----------
For purposes of this Code of Ethics ("Code"), the following definitions shall
apply:
a. The term "access person" shall mean any principal, officer or
advisory person (as defined below) of the Adviser.
b. The term "Adviser" shall mean each of Weiss, Peck & Greer, L.L.C.
and Robeco Institutional Asset Management US Inc.
c. The term "advisory person" shall mean (i) every employee of the
Adviser (or of any company in a control relationship to the Adviser)
who, in connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding, the
purchase or sale of a security (as defined below) by a client of the
Adviser, or whose functions relate to the making of any
recommendations with respect to such purchases or sales and (ii)
every natural person in a control relationship to the Adviser who
obtains information concerning recommendations made to a client of
the Adviser with regard to the purchase or sale of a security.
d. The term "beneficial ownership" shall mean a direct or indirect
"pecuniary interest" (as defined in subparagraph (a)(2) of Rule 16a-1
under the Securities Exchange Act of 1934, as amended) that is held
or shared by a person directly or indirectly (through any contract,
arrangement, understanding, relationship or otherwise) in a security.
While the definition of "pecuniary interest" in subparagraph (a)(2)
of Rule 16a-1 is complex, the term generally means the opportunity
directly or indirectly to provide or share in any profit derived from
a transaction in a security. An indirect pecuniary interest in
securities by a person would be deemed to exist as a result of: (i)
ownership of securities by any of such person's immediate family
members sharing the same household (including child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-
or father-in-law, sister- or brother-in-law, and son- or
daughter-in-law); (ii) the person's partnership interest in the
portfolio securities held by a general partnership or, in certain
instances, a limited partnership; (iii) the existence certain types
of performance-related fees (not simply an asset-based fee) received
by such person as broker, dealer, investment adviser or manager to a
securities account; (iv) the person's right to receive dividends from
a security provided such right is separate or separable from the
underlying securities; (v) the person's interest in securities held
by a trust under certain circumstances; and (vi) the person's right
to acquire securities through the exercise or conversion of a
"derivative security" (which term excludes (a) a broad-based index
option or future, (b) a right with an exercise or conversion
privilege at a price that is not fixed, and (c) a security giving
rise to the right to receive such other security only PRO RATA and by
virtue of a merger, consolidation or exchange offer involving the
issuer of the first security).
e. The term "control" shall mean the power to exercise a controlling
influence over the management or policies of the Adviser, unless such
power is solely the result of an official position with the Adviser,
all as determined in accordance with Section 2(a)(9) of the
Investment Company Act of 1940 (the "1940 Act").
f. The term "Investment Company" shall mean a management investment
company registered as such under the 1940 Act and for which the
Adviser is the investment adviser.
A-1
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g. The term "investment personnel" shall mean all portfolio managers
of the Adviser and other advisory persons who assist the portfolio
managers in making investment decisions for a client of the Adviser,
including, but not limited to, analysts and traders of the Adviser.
h. The term "material non-public information" with respect to an
issuer shall mean information, not yet released to the public, that
would have a substantial likelihood of affecting a reasonable
investor's decision to buy or sell any securities of such issuer.
i. The term "portfolio manager" shall mean every person who is
responsible for the day-to-day management of a client of the Adviser
or who shares such responsibility with another portfolio manager.
j. The term "Preclearance Officer" shall mean the officer of the
Adviser designated from time to time by the Adviser to receive and
review Personal Investment Preclearance Forms (in the form attached
hereto as FORM C) submitted by access persons. The term "Alternative
Preclearance Officer" shall mean the officer of the Adviser
designated from time to time by the Adviser to receive and review
Personal Investment Preclearance Forms submitted by the Preclearance
Officer, and who shall act in all respects in the manner prescribed
herein for the Preclearance Officer.
k. The term "purchase" shall include the writing of an option to
purchase.
l. The term "Review Officer" shall mean the officer of the Adviser
designated from time to time by the Adviser to receive and review
reports of purchases and sales by access persons. The term
"Alternative Review Officer" shall mean the officer of the Adviser
designated from time to time by the Adviser to receive and review
reports of purchases and sales by the Review Officer, and who shall
act in all respects in the manner prescribed herein for the Review
Officer.
m. The term "sale" shall include the writing of an option to sell.
n. The term "security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include shares of
registered open-end investment companies (whether or not affiliated
with the Adviser), securities issued by the United States government
within the meaning of Section 2(a)(16) of the 1940 Act (I.E., U.S.
Treasury securities, as distinct from securities of U.S. Government
agencies or instrumentalities), bankers' acceptances, bank
certificates of deposit, commercial paper, repurchase agreements and
such other money market instruments as may be designated from time to
time by the Adviser.
o. The phrase "security held or to be acquired" shall mean any
security which, within the most recent 15 days, is or has been held
by a client of the Adviser or is being or has been considered for
purchase by a client of the Adviser or the Adviser for purchase by a
client of the Adviser.
p. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
2. LEGAL REQUIREMENTS.
------------------
This Code of Ethics of the Adviser is adopted in accordance with the
regulatory requirements of Section 17(j) of 1940 Act and Rule 17j-1 promulgated
thereunder by the Securities and Exchange Commission (the "Commission"), and is
also intended to prohibit activities that would violate the fiduciary duties
owed by the Adviser and its employees to clients of the Adviser under Section
206 of the Investment Advisers Act of 1940 (the "Advisers Act"), the Employee
Retirement Income Security Act of 1974 and common law. Section 17(j) of the 1940
Act and Section 206 of the Advisers Act generally provide that it is unlawful
for the Adviser or any employee of the Adviser in connection with the purchase
or sale, directly or indirectly, by such person of a security held or to be
acquired by any client or prospective client:
A-2
<PAGE>
(i) to employ any device, scheme or artifice to defraud any
client or prospective client;
(ii) to make to any client or prospective client any untrue
statement of a material fact or omit to state to any client
or prospective client a material fact necessary in order to
make the statement made, in light of the circumstances
under which they were made, not misleading;
(iii) to engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon any
client or prospective client; or
(iv) to engage in any act, practice or course of business that
is fraudulent, deceptive or manipulative.
3. STATEMENT OF POLICY.
-------------------
It is the policy of the Adviser that no access person shall engage in any
act, practice or course of conduct that would violate the provisions of this
Code, Section 206 of the Advisers Act, ERISA, the fiduciary duty owed by the
Adviser and its employees to its clients under common law, Section 17(j) of the
1940 Act Rule 17j-1 thereunder. The fundamental position of the Adviser is, and
has been, that each access person shall place at all times the interests of
clients of the Adviser first. Accordingly, private securities transactions by
access persons of the Adviser must be conducted consistent with this Code and in
such a manner as to avoid any actual or potential conflict of interest or any
abuse of an access person's position of trust and responsibility. Further,
access persons should not take inappropriate advantage of their positions with
or on behalf of any clients of the Adviser.
Without limiting in any manner the fiduciary duty owed by access persons to
the clients of the Adviser or the provisions of this Code, it should be noted
that the Adviser considers it proper for access persons to make purchases and
sales in the marketplace of securities owned by clients of the Adviser;
PROVIDED, HOWEVER, that such securities transactions must comply with the spirit
of, and the specific restrictions and limitations set forth in, this Code. Such
personal securities transactions should also be made in amounts consistent with
the normal investment practice of the person involved and with an investment,
rather than a trading, outlook. Not only does this policy encourage investment
freedom and result in investment experience, but it also fosters a continuing
personal interest in such investments by those responsible for the continuous
supervision of clients' portfolios. It is also evidence of confidence in the
investments made. In making personal investment decisions with respect to any
security, however, access persons must exercise extreme care to ensure that the
prohibitions of this Code are not violated. Further, personal investing by an
access person should be conducted in such a manner so as to eliminate the
possibility that the access person's time and attention is being devoted to his
or her personal investments at the expense of time and attention that should be
devoted to management of any client's portfolio. It bears emphasis that
technical compliance with the procedures, prohibitions and limitations of this
Code will not automatically insulate from scrutiny personal securities
transactions which show a pattern of abuse by an access person of his or her
fiduciary duty to any client of the Adviser.
4. PROHIBITED ACTIVITIES.
---------------------
A violation of the Statement of Policy set forth above would always include
at least the following prohibited activities. Should you have any questions
regarding this Code or whether an action is prohibited by this Code, please
contact the Review Officer before taking such action.
a. COMPETING WITH CLIENT TRADES. No access person shall, directly or
indirectly, purchase or sell securities in such a way that the access
person knew, or reasonably should have known, that such securities
A-3
<PAGE>
transactions compete in the market with actual or considered
securities transactions for any client of the Adviser, or otherwise
personally act to injure any such client's securities transactions;
b. PERSONAL USE OF CLIENT TRADING KNOWLEDGE. No access person shall
use the knowledge of securities purchased or sold by any client of
the Adviser or securities being considered for purchase or sale by
any client of the Adviser to profit personally, directly or
indirectly, by the market effect of such transactions;
c. DISCLOSURE OF CLIENT TRADING KNOWLEDGE. No access person shall,
directly or indirectly, communicate to any person who is not an
access person (or other approved agent of the Adviser) any material
non-public information relating to any client of the Adviser or any
issuer of any security owned by any client of the Adviser, including,
without limitation, the purchase or sale or considered purchase or
sale of a security on behalf of any client of the Adviser, except to
the extent necessary to effectuate securities transactions on behalf
of the client of the Adviser.
d. PUBLIC OFFERINGS. Investment personnel shall not, directly or
indirectly, purchase any security sold in a public offering (initial
or otherwise) of an issuer;
e. PRIVATE PLACEMENTS. Investment personnel shall not, directly or
indirectly, purchase any security issued pursuant to a private
placement without obtaining prior written approval from the Review
Officer. Investment personnel shall not recommend any securities
transaction by a client of the Adviser without having previously
disclosed any beneficial ownership interest in securities issued
pursuant to a private placement or the issuer thereof to the Adviser,
including without limitation:
(i) his or her beneficial ownership of any such securities of
such issuer;
(ii) any contemplated transaction by such person in such
securities;
(iii) any position with such issuer or its affiliates; and
(iv) any present or proposed business relationship
between such issuer or its affiliates and such
person or any party in which such person has a
significant interest.
Such interested investment personnel may not participate in the
decision for a client of the Adviser to purchase and sell securities
of such issuer.
f. ACCEPTANCE OF GIFTS. Investment personnel shall not accept any
gift or personal benefit valued in excess of $100 annually from any
single person or entity that does business with or on behalf of the
Adviser or a client of the Adviser. Gifts of a DE MINIMIS value
(I.E., gifts whose reasonable value is no more than $100 annually
from any single person or entity), and customary business lunches,
dinners and entertainment at which both the advisory person and the
giver are present, and promotional items of DE MINIMIS value may be
accepted. Any solicitation of gifts or gratuities is unprofessional
and is strictly prohibited.
g. BOARD SERVICE. Investment personnel shall not serve on the board
of directors of any publicly traded company, absent prior written
authorization by the Review Officer. In determining whether to
approve such board service, the Review Officer shall consider such
factors as he deems appropriate, including whether such service may
involve an actual or perceived conflict of interest with client
trading or may otherwise materially interfere with the Adviser's
ability to discharge effectively its duties to its clients.
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h. SEVEN-DAY BLACKOUT. No portfolio manager shall, directly or
indirectly, purchase or sell any security in which he or she has, or
by reason of such purchase acquires, any beneficial ownership
interest within a period of 7 calendar days before and after any
client of the Adviser that is advised by the portfolio manager has
purchased or sold such security. In calculating the 7 calendar day
period, the trade date of the managed account's transaction is not
counted. Any securities transaction by a portfolio manager in
violation of this subparagraph h must be unwound, if possible, and
the profits, if any, must be disgorged. Notwithstanding the
foregoing, the Review Officer will review any extenuating
circumstances that may warrant waiving an inadvertent violation of
this restriction. In addition, a portfolio manager may, without
regard to the seven-day blackout restriction set forth in this
paragraph h, purchase or sell a publicly traded equity security of an
issuer having a market capitalization of at least U.S. $25 billion in
one or more transactions having an aggregate value not exceeding U.S.
$10,000 in any one day. Such transactions shall otherwise remain
subject to all other substantive and procedural provisions of this
Code, including the pre-clearance requirements.
5. EXEMPT TRANSACTIONS AND CONDUCT.
-------------------------------
The following types of transactions and securities are exempt from
the TRADING RESTRICTION and PRE-CLEARANCE REQUIREMENTS, but not the REPORTING
REQUIREMENTS of:
a. Purchases or sales of securities for an account over which the
access person has no direct or indirect influence or control;
b. Purchases or sales of securities which are non-volitional on the
part of the access person;
c. Purchases and sales of securities which are part of an automatic
dividend reinvestment, cash purchase or withdrawal plan provided that
no adjustment is made by the access person to the rate at which
securities are purchased or sold, as the case may be, under such a
plan during any period in which the security is being considered for
purchase or sale by a client of the Adviser;
d. Purchases of securities made by exercising rights distributed by
an issuer PRO RATA to all holders of a class of its securities, to
the extent such rights were acquired by the access person from the
issuer, and sales of such rights so acquired;
e. Tenders of securities pursuant to tender offers which are
expressly conditioned on the tender offer's acquisition of all of the
securities of the same class;
f. Purchases or sales of securities for which the access person has
received prior written approval from the Fund. Prior approval shall
be granted only if a purchase or sale of securities is consistent
with the purposes of this Code and Section 17(j) of the 1940 Act and
rules thereunder; or
g. Purchases or sales of securities made in good faith on behalf of a
client of the Adviser, it being understood by, and disclosed to, each
client that the Adviser may make contemporaneous investment decisions
and cause to be effected contemporaneous executions on behalf of one
or more clients and that such executions may increase or decrease the
price at which securities are purchased or sold for the clients.
6. RULES ADOPTED BY THE ADVISER.
----------------------------
All principals and employees of the Adviser, including access persons, are
subject to the rules adopted by the Adviser, as set forth in the Statement of
Policy on Personal Securities Transactions by Managing Directors, Principals,
Employees and Related Accounts dated June 17, 1999 and as amended from time to
time (the "Trading Policy"), in addition to the requirements of this Code. The
Trading Policy is attached hereto as EXHIBIT A. The Trading Policy generally
requires, among other things, that (i) investments beneficially owned by
employees of the Adviser be held at risk for specified time periods, (ii)
securities transactions by a client of the Adviser receive the best price in
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relation to securities transactions by employees of the Adviser which are
executed on the same day and (iii) employees of the Adviser obtain approval from
the Adviser before selling personally any security which was previously
purchased by a client of the Adviser based, in whole or in part, upon his or her
recommendation or advice.
The restriction in the Trading Policy that investments beneficially owned by
employees of the Adviser be held at risk for specified time periods is imposed
because (i) it has been suggested that personal investing activities of a
trading nature may give rise to the possibility of an impropriety, even when the
transactions themselves are entirely appropriate and beyond reproach, (ii) the
amount of time and attention required by investment activities of a trading
nature may divert time and attention away from time that should be devoted to
management of assets of clients of the Adviser, (iii) it does not seem wise to
foster a trading attitude among those responsible for investments by clients of
the Adviser.
Any violation of the Trading Policy which adversely affects a client of the
Adviser shall be deemed to be a violation of this Code.
7. JOINT PARTICIPATION.
-------------------
Access persons should be aware that a specific provision of the 1940 Act
prohibits such persons, in the absence of an order of the Commission, from
effecting a transaction in which an Investment Company is a "joint or a joint
and several participant" with such person. Any transaction which suggests the
possibility of a question in this area should be presented to legal counsel for
review.
8. BROKERAGE ACCOUNTS.
------------------
a. Access persons are required to maintain with the Adviser all
brokerage accounts in which they have a beneficial ownership
interest, unless an exemption from this requirement is sought from,
and granted by, the Adviser.
b. Access persons who are exempted from the requirement to maintain
their brokerage accounts with the Adviser are required to direct
their brokers to supply to the Adviser on a timely basis duplicate
copies of confirmations of all securities transactions in which the
access person has a beneficial ownership interest, whether or not one
of the exemptions listed in Section 5 applies.
9. PRECLEARANCE PROCEDURE.
----------------------
With certain limited exceptions set forth in Section 5 above, prior
to effecting any transaction in which an access person has, or by reason of such
transaction will acquire or dispose of, a beneficial ownership interest in a
security, the access person must receive written approval from the Preclearance
Officer. The Preclearance Officer shall preclear his personal securities
transactions with the Alternative Preclearance Officer. Each request for
preclearance must be submitted to the Preclearance Officer on a Personal
Investment Preclearance Form (See FORM C attached to this Code). Verbal approval
of personal securities transactions is not permitted.
Any approval by the Preclearance Officer is valid only for the day on
which the approval is granted. If an access person is unable to effect the
securities transaction on that day, he or she must resubmit a completed Personal
Investment Preclearance Form and reobtain approval from the Preclearance Officer
prior to effecting the securities transaction.
The Preclearance Officer will base his decision whether to approve a
personal securities transaction for an access person after considering the
specific restrictions and limitations set forth in, and the spirit of, this
Code, including without limitation whether the security at issue is being
considered for purchase or sale for a client of the Adviser. The Preclearance
Officer is not required to give any explanation for refusing to approve a
securities transaction and their decision shall be final and binding.
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The Adviser may from time to time establish specific hours during
which preclearance requests will be accepted and responded to by the
Preclearance Officer.
10. REPORTING REQUIREMENTS.
----------------------
a. Unless utilizing the alternative reporting procedure described in
Section 11 below, each access person shall submit to the Adviser a
report in the form annexed hereto as FORM A or in similar form (such
as a computer printout) which report shall set forth at least the
information described in subparagraph b of this Section as to all
securities transactions during each quarterly period, in which such
access person has, or by reason of such transactions acquires or
disposes of, any beneficial ownership of a security, whether or not
one of the exemptions listed in Section 5 applies. Access persons
shall not be required to report securities transactions effected for
any account over which such persons do not have any direct or
indirect influence.
b. Every report on FORM A shall be made not later than 10 days after
the end of each calendar quarter in which the reported transaction(s)
were effected and shall contain the following information:
(i) The date of each transaction, the title, the
interest rate and maturity date (if applicable),
and number of shares and the principal amount of
each security involved;
(ii) The nature of each transaction (I.E., purchase,
sale or other type of acquisition or
disposition);
(iii) The price at which each transaction was effected;
and
(iv) The name of the broker, dealer or bank with or
though whom each transaction was effected, and
the date on which the access person's account was
opened with such broker, dealer or bank;
PROVIDED, HOWEVER, if no transactions in any securities required to
be reported were effected during a quarterly period by an access
person, such access person shall submit to the Adviser a report on
FORM A within the time-frame specified above stating that no
reportable securities transactions were effected.
c. Every report concerning a securities transaction with respect to
which the reporting person relies upon one of the exceptions provided
in Section 5 shall contain a brief statement of the exemption relied
upon and the circumstances of the transactions.
d. Notwithstanding subparagraph a of this Section, an access person
need not report securities transactions pursuant to this Code where
the reported information would be duplicative of information reported
pursuant to Rules 204-2(a)(12) or 204-2(a)(13) under the Investment
Advisers Act of 1940.
11. ALTERNATIVE REPORTING PROVISIONS.
--------------------------------
As an alternative to the literal compliance with the reporting requirements
of Section 10, an access person shall be considered to have satisfied his or her
reporting requirements provided that:
a. With respect to an access person who maintains with the Adviser
all brokerage accounts in which such person has a beneficial
ownership interest and executes all trades required to be reported by
Section 10 through the Adviser, such access person certifies annually
in writing to the Adviser that, during the prior calendar year, such
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person maintained with the Adviser all such brokerage accounts and
executed all such trades through the Adviser. With respect to such
access persons, the Adviser shall prepare a computer printout or
similar report no less frequently than the frequency set forth in
subparagraph b of Section 10 and containing with respect to the
access person at least the information that would otherwise have been
required by subparagraph b of Section 10.
b. With respect to an access person who maintains with a firm other
than the Adviser a brokerage account in which such person has a
beneficial ownership interest pursuant to the exemption set forth in
Section 8, (i) such person arranges for the Adviser to receive and
the Adviser does receive, no less frequently than the frequency set
forth in subparagraph b of Section 10, brokerage statements
concerning such accounts containing at least the information which
would have been required by subparagraph b of Section 10; and (ii)
such access person certifies annually in writing to the Adviser that,
during the prior calendar year, such person has obtained the
necessary approval for the maintenance of such accounts and specifies
in the certificate the name and location of all such accounts.
12. INITIAL AND ANNUAL DISCLOSURE OF PERSONAL HOLDINGS.
--------------------------------------------------
All access persons shall submit to the Adviser within 10 days after
becoming an access person and annually thereafter a report disclosing:
a. The title, number of shares and principal amount of each security
in which the access person had any direct or indirect beneficial
ownership at the time of becoming an access person;
b. The name of any broker, dealer or bank with whom the access person
maintained an account in which any securities were held for the
direct or indirect benefit of the access person as of the date such
person became an access person; and
c. The date the report is submitted by the access person.
For each such annual report, the information shall be current as of a
date no more than 30 days before the report is submitted.
13. ANNUAL CERTIFICATION OF COMPLIANCE.
----------------------------------
All access persons shall certify annually on the form annexed hereto
as FORM A that they (i) have read and understand this Code and recognize that
they are subject hereto, (ii) have complied with the requirements of this Code
and (iii) have disclosed or reported all personal securities transactions
required to be disclosed or reported pursuant to the requirements of this Code.
14. CONFIDENTIALITY.
---------------
All information obtained from any access person hereunder shall be
kept in strict confidence by the Adviser, except that reports of securities
transactions and other information reported hereunder will be made available to
the Commission or any other regulatory or self-regulatory organization or other
third party to the extent required by law or regulation or to the extent the
Adviser considers necessary or advisable in cooperating with an investigation or
inquiry by the Commission or any other regulatory or self-regulatory
organization and, in certain circumstances, the Adviser may make such
information available to other civil and criminal authorities. In addition,
information regarding violations of this Code may be provided to clients of the
Adviser.
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15. NOTICE TO ACCESS PERSONS.
------------------------
The Adviser shall identify all persons who are considered to be
"access persons," "investment personnel" and "portfolio managers," inform such
persons of their respective duties and provide such persons with copies of this
Code. The Adviser shall continue, in the ordinary course through its portfolio
reports, to advise all access persons of the securities held by the Adviser
during each quarterly period.
16. REVIEW OF REPORTS.
-----------------
a. Within 20 days of each month-end, the Review Officer shall prepare
a summary of all transactions by access persons in securities which
were purchased, sold, held or considered for purchase or sale by each
client of the Adviser during the prior month.
b. The Review Officer shall compare the reported personal securities
transactions with completed and contemplated portfolio transactions
of the clients of the Adviser to determine whether a violation of
this Code may have occurred. In the case of reports of personal
securities transactions of the Review Officer, the Alternative Review
Officer shall perform such comparison. Before making any
determination that a violation has been committed by any person, the
Review Officer or the Alternative Review Officer, as the case may be,
shall give such person an opportunity to supply additional
explanatory material.
c. If the Review Officer or the Alternative Review Officer, as the
case may be, determines that a violation of this Code has or may have
occurred, he shall submit a written determination, together with the
related report by the access person and any additional explanatory
material provided by the access person to the ___________________ of
the Adviser, who shall make an independent determination of whether a
violation has occurred.
d. On a quarterly basis, the Review Officer shall prepare a summary
of the level of compliance with this Code during the previous
quarter, including without limitation the percentage of reports
timely filed and the number and nature of all material violations. On
an annual basis, the Review Officer shall prepare a report
identifying any recommended changes in existing restrictions or
procedures based upon the Adviser's experience under this Code,
evolving industry practices and developments in applicable laws or
regulations. The Alternative Review Officer shall prepare separate
reports with respect to compliance by the Review Officer.
17. SANCTIONS.
---------
Any violation of the substantive or procedural requirements of this Code
shall result in the imposition of such sanctions as the Adviser may deem
appropriate under the circumstances, which may include, but are not limited to,
removal or suspension from office, termination of employment, a letter of
censure, referred to the Commission and/or other civil and criminal authorities
and/or restitution to the effected client of an amount equal to the advantage
the offending person shall have gained by reason of such violation.
18. RECORDKEEPING REQUIREMENTS.
--------------------------
The Adviser shall maintain and preserve:
a. a copy of this Code (and any prior code of ethics that was in
effect at any time during the past five years) in an easily
accessible place for a period of five years;
b. a record of any violation of this Code and of any action taken as
a result of such violation in an easily accessible place for a period
of five years following the end of the fiscal year in which the
violation occurs;
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c. a copy of each report (or computer printout) submitted under this
Code for a period of not less than five years, (and those reports
submitted during the previous two years must be maintained and
preserved in an easily accessible place);
d. in an easily accessible place, a list of all persons who are, or
within the past five years were, required to make reports pursuant to
this Code; and
e. a written record of any decision, and the reasons supporting the
decision, to approve the acquisition by an access person of any
security in a private placement transaction in an easily accessible
place for a period of not less than five years following the end of
the fiscal year in which the approval was granted.
POWERS OF ATTORNEY
WEISS, PECK & GREER FUNDS TRUST, a Massachusetts Business Trust
WPG GROWTH & INCOME FUND, a Massachusetts Business Trust
WEISS, PECK & GREER INTERNATIONAL FUND, a Massachusetts Business Trust
WPG TUDOR FUND, a Massachusetts Business Trust
TOMORROW FUNDS RETIREMENT TRUST, a Delaware Business Trust
(each, a "Trust")
Each of the undersigned Trustees of each Trust, does hereby constitute
and appoint Ronald M. Hoffner, Joseph J. Reardon and Roger J. Weiss, and each of
them acting singly, to be his true, sufficient and lawful attorneys, with full
power of substitution to each of them, and each of them acting singly, to sign
for him, in his name and in the capacities indicated below, (1) any and all
amendments to the Registration Statements on Form N-8A and Form N-1A to be filed
by each Trust under the Investment Company Act of 1940, as amended (the "1940
Act"), and/or the Securities Act of 1933, as amended (the "1933 Act"), (2) any
registration statement on Form N-14, and any and all amendments thereto, filed
by each Trust and (3) any and all other documents and papers relating thereto,
and generally to do all such things in his name and on his behalf in the
capacities indicated below to enable each Trust to comply with the 1940 Act and
the 1933 Act and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming his signature as it may be signed by
said attorneys or each of them to any and all such documents.
IN WITNESS WHEREOF, each of the undersigned has executed this
instrument this 19th day of April, 2000.
/s/Roger J. Weiss /s/ Raymond R. Herrmann, Jr.
- --------------------------- ----------------------------
Roger J. Weiss Raymond R. Herrmann, Jr.
as Trustee and not individually as Trustee and not individually
One New York Plaza 654 Madison Avenue
New York, NY 10004 Suite 1400
New York, NY 10017
/s/ Lawrence J. Israel /s/ Graham E. Jones
- ------------------------------------ -------------------
Lawrence J. Israel Graham E. Jones
as Trustee and not individually as Trustee and not individually
220 Broadway 330 Garfield Street, Suite 200
Suite 249 Santa Fe, NM 87501
New Orleans, LA 70118
/s/ William B. Ross /s/ Robert A. Straniere
- ------------------------------------ -----------------------
William B. Ross Robert A. Straniere
as Trustee and not individually as Trustee and not individually
2733 E. Newton Avenue 182 Rose Avenue
Shorewood, WI 53211 Staten Island, NY 10306