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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14e-6(e)(2))
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TD WATERHOUSE DOW 30 FUND
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[LOGO] WATERHOUSE
September 20, 1999
Dear Shareholder,
As a fellow shareholder in the TD Waterhouse Dow 30 Fund (the "Fund"), I
wanted to write a personal note explaining the enclosed proxy and ask you to
vote in favor of the proposal to reorganize the Fund as a Delaware business
trust.
We believe that the proposal to reorganize the Fund will allow us greater
flexibility to conduct the operations of the Fund. Specifically, it will enable
us to continue to attempt to peg the net asset value per share of the Fund to
1/1000 of the closing value of the Dow Jones Industrial AverageSM ("DJIA"SM).
This enables you to monitor the daily closing value of the DJIA. You should
carefully read the Proxy Statement that discusses the proposal in detail. The
formal Notice of Special Meeting of Shareholders and the Proxy Statement setting
forth in detail the proposal are attached, and the form of Proxy is enclosed for
your use.
The Fund's Board of Directors has unanimously approved the proposal and
recommends it to you for your approval. Your vote is important and I urge you to
vote in its favor.
I thank you for your confidence and support.
Sincerely,
/s/ Frank Petrilli
Frank Petrilli
President and Chief Operating Officer
TD Waterhouse Group, Inc.
<PAGE>
[LOGO] WATERHOUSE
Important News for TD Waterhouse Dow 30 Fund Shareholders
Please Vote Immediately! You can vote by mail, telephone, or Web site - details
can be found on the enclosed proxy insert.
INFORMATION
The TD Waterhouse Dow 30 Fund will host a Special Meeting of Shareholders on
October 20, 1999 at The Continental Club, 180 Maiden Lane, 41st Floor, New York,
NY 10018. The purpose is to vote on an important proposal affecting the Fund.
The first few pages of this booklet summarize the Fund's proposal and explain
the proxy process - including how to cast your vote. Before you vote, please
read the full text of the Proxy Statement for a complete understanding of our
proposal.
Reorganization Into a Delaware Business Trust
We want to reorganize the Fund into a Delaware business trust. Currently, the
Fund is organized as a separate series of TD Waterhouse Family of Funds, Inc., a
Maryland corporation.
Why? As you know, the investment objective of the Fund is to track the total
return of the Dow Jones Industrial AverageSM ("DJIA"SM) before Fund expenses.
The Fund is permitted to employ certain techniques, including declaring reverse
share splits, in order to maintain the Fund's net asset value per share on any
given day at or near .001 (or 1/1000) of the closing value of the DJIA. The use
of these techniques will not change the absolute dollar value of a shareholder's
investment in the Fund or result in any additional tax burden to shareholders
(although the number of shares and the net asset value per share would change).
By reorganizing as a series of a Delaware business trust, as described in the
accompanying Proxy Statement, the Fund will have greater flexibility to declare
reverse share splits than if it remains a Maryland corporation. In addition,
while the Fund does not expect to declare regular share splits, it may do so in
the future if circumstances warrant.
Key Points: The reorganization would not change the Fund's investment objective
or policies. The Fund also would keep the same investment manager, distributor,
administrator and auditors. In addition, your vote would elect the same
individuals who are currently serving as Directors to the Fund to serve as
Trustees of the newly organized Delaware business trust.
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Q. I'm a small investor. Why should I bother to vote?
A. Your vote makes a difference. If numerous shareholders just like you fail to
vote their proxies, the Fund may not receive enough votes to go forward with its
meeting. If this happens, we'll need to mail proxies again - a costly
proposition!
Q. How can I vote?
A. You can vote in any one of four ways:
- Through the Internet at www.proxyvote.com
- By telephone, with a toll-free call to the number listed on your proxy card.
- By mail, with the enclosed ballot.
- In person at the meeting.
We encourage you to vote by Internet or telephone, using the 12-digit "control"
number that appears on your proxy card. These voting methods will save the Fund
a good deal of money (no return-mail postage!). Whichever method you choose,
please take the time to read the full text of our proxy statement before your
vote.
Q. How do you vote by Internet?
A. Go to the Web site www.proxyvote.com (the voting location).
Q. I plan to vote by mail. How should I sign my proxy card?
A. If you are an individual account owner, please sign exactly as your name
appears on the proxy card. Either owner of a joint account may sign the proxy
card, but the signer's name must exactly match one that appears on the card. You
should sign proxy cards for other types of accounts in a way that indicates your
authority (for instance, "John Brown, Custodian").
Q. When is the deadline for voting?
All votes must be received prior to the Special Meeting, which will be held
at 8:30 a.m. on October 20, 1999. However, to prevent additional costs from
being incurred, it is important that you cast your vote as soon as possible. If
we do not hear from you, you may receive a call from Shareholder Communications
Corporation requesting that you vote your shares.
2
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TD WATERHOUSE DOW 30 FUND
-----------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 20, 1999
-----------------------------------------------
To the Shareholders of TD Waterhouse Dow 30 Fund:
Your TD Waterhouse Dow 30 Fund (the "Fund") will host a Special Meeting of
shareholders on October 20, 1999 AT 8:30 A.M., EASTERN TIME, and at any
adjournments of the meeting. It will be held at The Continental Club, 180 Maiden
Lane, 41st Floor, New York, NY 10018. At the meeting, we'll ask shareholders to
vote on:
1. A proposal to approve an Agreement and Plan of Reorganization to reorganize
the Fund into a Delaware business trust, as more fully described in the
enclosed proxy statement and
2. Any other business properly brought before the meeting or any adjournments of
the meeting.
THE FUND'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSAL AND
RECOMMENDS IT TO YOU FOR YOUR APPROVAL.
Only shareholders of record of the Fund at the close of business on September
3, 1999 are entitled to receive notice of and to vote at the meeting, and at any
adjournments of the meeting, on all matters relating to the Fund. The Proxy
Statement and proxy card are being first mailed to shareholders on or about
September 21, 1999.
By Order of the Board of Directors
/s/ Christopher J. Kelley
Christopher J. Kelley
Secretary
New York, New York
September 17, 1999
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YOUR VOTE IS IMPORTANT REGARDLESS OF HOW MANY
SHARES YOU OWNED ON THE RECORD DATE!
-------------------------------------------------------
YOU CAN VOTE EASILY AND QUICKLY BY TOLL-FREE TELEPHONE CALL, AT OUR WEB SITE, OR
BY MAIL. JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON YOUR ENCLOSED PROXY
CARD. PLEASE HELP AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!
4
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TD WATERHOUSE DOW 30 FUND
100 Wall Street
New York, New York 10005
PROXY STATEMENT
Special Meeting of Shareholders
To be held on October 20, 1999
INTRODUCTION
This is the proxy statement for the TD Waterhouse Dow 30 Fund (the "Fund").
The Board of Directors has sent you this proxy statement to ask for your vote on
a proposal to reorganize the Fund as a Delaware business trust. We've divided
the proxy statement into four parts:
Part 1 - The Fund's Proposal to Reorganize begins on page 5.
Part 2 - More on Proxy Voting and Shareholder Meeting begins on page 10.
Part 3 - Fund Information begins on page 12.
Part 4 - Directors and Trustees Information begins on page 14.
Please be sure to read the entire proxy statement before casting your vote.
Questions? Call us at 1-800-934-4410. This proxy statement and the form of proxy
were first mailed to shareholders on or about September 21, 1999.
PART I - THE FUND'S PROPOSAL TO REORGANIZE INTO A DELAWARE BUSINESS TRUST
The Board of Directors has approved an Agreement and Plan of Reorganization
to reorganize the Fund into a newly created open-end management investment
company organized as a business trust under the Delaware Business Trust Act.
Under the reorganization plan, the Fund will transfer all of its assets to the
newly created Delaware business trust in exchange solely for voting shares of
beneficial interest in the trust and the trust's assumption of all the Fund's
liabilities. Attached to this Proxy Statement as Exhibit A is a form of the
reorganization plan.
By reorganizing as a Delaware business trust, the Fund will have greater
flexibility to conduct certain aspects of its business, such as declaring
reverse share splits, as explained below.
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To proceed with the reorganization plan, we need shareholder approval. The
next few pages of this proxy statement discuss important details of the
reorganization plan, including the following:
- Why we want to reorganize the Fund.
- How we plan to accomplish the reorganization.
- How the reorganization will affect the Fund.
- How a Delaware business trust compares to the Fund's current legal
structure.
- How many shareholder votes we need to approve the reorganization.
A. WHY WE WANT TO REORGANIZE THE FUND
REORGANIZING AS A DELAWARE BUSINESS TRUST WILL PROVIDE GREATER FLEXIBILITY TO
DECLARE REVERSE SHARE SPLITS. The investment objective of the Fund is to track
the total return of the Dow Jones Industrial AverageSM ("DJIA"SM) before Fund
expenses. The Fund is permitted to employ certain techniques to maintain the
Fund's net asset value per share on any given day at or near .001 (or 1/1000) of
the closing value of the DJIA (the "Ratio"). For example, the Fund declares
daily dividends of its net investment income and may declare a reverse share
split after a capital gains distribution to restore the net asset value per
share to correspond to the Ratio. To date, the Fund has not paid a capital gains
distribution, so it has not been necessary to take any such action to adjust the
Fund's net asset value per share.
Share splits and share dividends increase the number of shares outstanding,
which in turn decreases the net asset value per share. For example, a 2-for-1
split would double the number of shares outstanding, thereby halving the net
asset value per share. On the other hand, reverse splits reduce the number of
shares outstanding. For example, a 1-for-2 reverse share split would halve the
number of shares outstanding, thereby doubling the net asset value per share.
(Please keep in mind that these are just examples; in practice, the Fund's use
of these techniques is expected to have a much more limited impact on the Fund's
net asset value per share.) Although the number of shares and the net asset
value per share would change, the use of these techniques will not change the
absolute dollar value of a shareholder's investment in the Fund or result in any
additional tax burden to shareholders.
The Fund is a separate series of TD Waterhouse Family of Funds, Inc.
("WIFF"), a Maryland corporation consisting of four series. The Fund has been
advised that it would need to obtain shareholder approval to amend its Articles
of Incorporation to clarify that the Fund can declare reverse share splits in
the future without a shareholder vote. The Board of Directors of the Fund, based
on the recommendation of management and the advice of counsel, has determined it
advisable to take this opportunity to reorganize the Fund as a Delaware business
trust. The Board considered that, at least initially, the Fund
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will be the only series of the trust. As a result, reverse share splits of the
Fund's outstanding shares will not reduce the proportionate voting power of the
shareholders of the Fund as a whole in relation to the voting power of any other
series (as would currently be the case with respect to the Fund and the other
series of WIFF). In the event other series are added to the Delaware business
trust in the future, the Board of Trustees of the Delaware business trust will
have the authority under the trust's Declaration of Trust to convert the voting
rights of shareholders into "dollar based voting" if they believe it to be a
more equitable method of voting. This means that each shareholder would have the
right to cast a number of votes based on the aggregate net asset value of his or
her holdings in the trust, rather than based on the number of shares. The change
to dollar-based voting would ensure that shareholders' voting rights remain
proportionate to their financial interests and that a share split or a reverse
share split would not alter relative voting rights of shareholders.
While it is the Fund's current intention to maintain the Fund's net asset
value per share at or near the Ratio and to utilize these techniques for this
purpose, the Board of Directors (or Board of Trustees) may in the future decide
to change this policy. In the event that the Board of Directors/Trustees changes
this policy, shareholders will be notified.
DELAWARE BUSINESS TRUST LAW IS FAVORABLE TO MUTUAL FUNDS. We have proposed to
reorganize the Fund as a Delaware business trust because the Delaware business
trust organizational form offers greater flexibility than the Maryland corporate
form. A Maryland corporation is governed by the detailed requirements imposed by
Maryland corporate law and by the terms of its Articles of Incorporation. A
Delaware business trust is subject to fewer statutory requirements. The newly
organized Delaware business trust will be governed primarily by the terms of an
Agreement and Declaration of Trust ("Declaration of Trust"), which is its
governing instrument. As stated above, in particular, the newly organized
Delaware business trust will have greater flexibility to conduct certain aspects
of its business, such as declaring reverse share splits. In addition, while the
Fund does not expect to declare regular share splits, it may do so in the future
if circumstances warrant.
In addition, Delaware's business trust law contains provisions that are well
suited to mutual funds. For example, the Delaware business trust organizational
form limits inter-series liability in a multi-series business trust, so that the
assets of one series of a business trust are expressly protected against claims
by creditors and shareholders of another series of that business trust. The
"move" to Delaware will be largely on paper; the Fund will continue to operate
out of New York, just as it does now.
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B. HOW WE PLAN TO ACCOMPLISH THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The Board of Directors has approved a
written Agreement and Plan of Reorganization for the Fund. The reorganization
plan spells out the terms and conditions that will apply to the Fund's
reorganization into a Delaware business trust.
THREE STEPS TO REORGANIZE. In essence, the reorganization will be a
three-step process. The first step has already been taken. We have established a
Delaware business trust especially for the Fund, named TD Waterhouse Trust (the
"Trust"). The Trust has one series, named TD Waterhouse Dow 30 Fund (the
"Successor Fund"). Prior to the reorganization, the Successor Fund will issue a
single share to the Fund. Second, if the proposal is approved, the Fund will
transfer all of its assets and liabilities to the Successor Fund. As part of
this second step, the Successor Fund will open an account for each Fund
shareholder. The Successor Fund will then credit these accounts with the exact
number of full and fractional shares that each shareholder owned in the Fund on
the reorganization date. And third, we will terminate the Fund as a series of
WIFF.
EFFECTIVE AS SOON AS PRACTICABLE. If approved by shareholders, the
reorganization will take place as soon as feasible after the Fund receives the
necessary regulatory approvals and legal opinions. We think this could be
accomplished by November 5, 1999. However, at any time prior to the
reorganization, the Board of Directors may decide that it is in the best
interest of the Fund and its shareholders not to go forward with this project.
If that happens, the Fund will continue to operate as it is currently organized.
C. HOW THE REORGANIZATION WILL AFFECT THE FUND
THE FUND'S INVESTMENT OBJECTIVE, POLICIES, INVESTMENT MANAGER, AND FISCAL
YEAR WILL STAY THE SAME. THE SAME INDIVIDUALS WHO ARE THE FUND'S EXISTING
DIRECTORS WILL SERVE AS TRUSTEES OF THE TRUST. The reorganization will not
change any of these. Your vote in favor of the reorganization will be treated as
approval of the Successor Fund's investment management agreement with TD
Waterhouse Asset Management, Inc. and of the election of the Directors of WIFF
as Trustees of the Trust.
THE REORGANIZATION WILL HAVE NO IMPACT ON THE FUND'S SHARE PRICE. On the day
of the reorganization, the Successor Fund's share price will be the same as that
of the Fund. The reorganization will not cause the Fund's share price to go up
or down, and you will own the same number of shares. Any declared but
undistributed dividends or capital gains for the Fund will carry over in the
reorganization. TD Waterhouse Investor Services, Inc. ("TD Waterhouse") will pay
the costs of the reorganization.
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THE FUND'S EXISTING INDEPENDENT AUDITORS WILL BE RATIFIED. We will treat
shareholder approval of the reorganization as ratification of the Fund's
existing independent auditors, Ernst & Young LLP. In this role, Ernst & Young
LLP audits and certifies the Fund's financial statements. Ernst & Young LLP also
reviews the Fund's Annual Reports to shareholders and its filings with the U.S.
Securities and Exchange Commission. Neither Ernst & Young LLP nor any of its
partners have any direct or material indirect financial interest in the Fund. If
you wish to request the attendance of an Ernst & Young LLP representative at the
shareholder meeting, you should contact the Fund's Secretary at 100 Wall Street,
New York, NY 10005.
THE REORGANIZATION IS CONDITIONED ON TAX-FREE TREATMENT AT THE FEDERAL LEVEL. We
fully expect that the reorganization will have no federal income tax
consequences for you or the Fund. We will not proceed with the reorganization
until this point is confirmed by an opinion of counsel in writing. Following the
reorganization, from a tax standpoint, the adjusted basis of the Fund shares and
your holding period will be the same as before. We do not expect shareholders to
incur any personal state or local taxes as a result of the reorganization, but
you may wish to consult your own tax adviser to be sure.
D. HOW A DELAWARE BUSINESS TRUST COMPARES TO THE FUND'S CURRENT LEGAL STRUCTURE
Federal securities laws have much to say about the way that mutual funds
operate, but they do not cover every aspect of a fund's existence. State law and
each fund's governing documents fill in most of the gaps. The following
discussion compares the state law and documents currently governing the Fund
with the state law and documents that will apply if it reorganizes as a Delaware
business trust. This discussion is not a comprehensive review of all technical
distinctions between the different legal structures. (You or your attorney would
need to review the laws and Fund documents firsthand for that sort of analysis.)
We simply want you to know how a Delaware business trust compares in certain key
areas to a Maryland corporation--the Fund's present legal structure.
SHAREHOLDER LIABILITY. Shareholders of a Fund organized as a Maryland
corporation or Delaware business trust generally have no personal liability for
the Fund's obligations.
DIRECTOR AND TRUSTEE LIABILITY AND INDEMNIFICATION. With a Maryland
corporation, directors cannot be held liable for their activities in that role
so long as they perform their duties in good faith, prudently, and in the Fund's
best interests. The same is generally true for the trustees of a
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Delaware business trust, if provided in the fund's governing documents, as in
the case of the Trust and the Successor Fund. Under each legal structure, the
fund can indemnify its directors or trustees from claims and expenses arising
out of their service to the fund - unless, that is, a director or trustee has
acted improperly in a particular matter.
SHAREHOLDER VOTING RIGHTS AND MEETINGS. As either a Maryland corporation or a
Delaware business trust, a Fund is not required to hold annual meetings. The
voting rights of shareholders of the Fund currently are based on the number of
shares that they own. This will be true of the voting rights of shareholders of
the Successor Fund; however, the Board of Trustees of the Trust will have the
authority to change the voting rights to a dollar-based voting system. Both the
Fund and the Successor Fund generally must call a shareholder meeting if one is
requested in writing by investors entitled to cast 10% or more of the Fund's
votes.
E. HOW MANY SHAREHOLDER VOTES WE NEED TO APPROVE THE REORGANIZATION
Under the applicable provisions of the Fund's Articles of Incorporation, to
go forward with the reorganization, an affirmative vote of the holders of a
majority of the Fund's outstanding shares on September 3, 1999, must vote in
favor of this proposal. If the reorganization plan is not approved, the Fund
will continue to operate as a Maryland corporation. THE FUND'S BOARD OF
DIRECTORS RECOMMENDS THAT YOU APPROVE THE REORGANIZATION.
PART 2 - MORE ON PROXY VOTING AND SHAREHOLDER MEETINGS
This section provides information on a number of topics relating to proxy
voting and shareholder meetings.
PROXY SOLICITATION METHODS. The Fund will solicit shareholder proxies in a
variety of ways. All shareholders who are entitled to vote will receive these
proxy materials by mail. In addition, Fund employees and officers may solicit
shareholder proxies in person, by telephone, or through the Internet. We may
also arrange for an outside firm, Shareholder Communications Corporation, to
solicit shareholder votes by telephone on the Fund's behalf. This procedure,
which is expected to cost the Fund approximately $4.10 per shareholder vote,
will be employed only after more cost-effective means of soliciting shareholder
votes have been exhausted.
PROXY SOLICITATION COSTS. TD Waterhouse will pay all costs of soliciting
proxies from Fund shareholders, including costs relating to the printing,
mailing, and tabulation of proxies. The Fund estimates that the costs of
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solicitation will be approximately $140,000. By voting immediately, you can help
avoid the considerable expense of a second solicitation.
QUORUM AND VOTING. In order for the shareholder meeting to go forward, we
must achieve a quorum. This means that one-third of the Fund's shares must be
represented at the meeting - either in person or by proxy. All returned proxies
count towards a quorum, regardless of how they are voted ("For," "Against," or
"Abstain"). The Fund will count abstentions and broker non-votes toward a
quorum, but not toward the approval of the proposal. Abstentions and broker
non-votes will have the effect of votes against the proposal. (Broker non-votes
are shares for which (i) the underlying owner has not voted and (ii) the broker
holding the shares does not have discretionary authority to vote on the
particular matter.) If, by the time scheduled for the Special Meeting, a quorum
of shareholders of the Fund is not present or if a quorum of the Fund's
shareholders is present but sufficient votes in favor of the proposal are not
received, the persons present in person or by proxy (or the persons named as
proxies) may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies from shareholders of the Fund. Any such
adjournment will require the affirmative vote of a majority of the shares of the
Fund present in person or represented by proxy at the session of the Special
Meeting to be adjourned. The persons named as proxies will vote in favor of any
such adjournment if they determine that such adjournment and additional
solicitation are reasonable and in the interests of the Fund's shareholders.
If you submit a proxy without indicating how you want to vote, your proxy
will be voted "FOR" the reorganization.
VOTING SECURITIES AND PRINCIPAL HOLDERS. The only voting securities of the
Fund are its common stock par value $0.0001 per share. Shares of the Fund have
the exclusive right to vote on matters affecting only the rights of the holders
of shares of the Fund. The Board of Directors of the Fund has fixed the close of
business on September 3, 1999 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting. As of the record
date, the Fund had 14,711,111 shares outstanding.
As of the record date, TD Investments Inc., 909 Fannin, Suite 1700, Houston,
Texas 77010, owned of record and beneficially 574,593 shares of the Fund, or
approximately 4% of the Fund's outstanding shares. As of the same date, the
officers and directors of the Fund, as a group, owned less than 1% of the
outstanding shares of the Fund.
REVOKING YOUR PROXY. You may revoke your proxy at any time up until voting
results are announced at the shareholder meeting. You can do this
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by writing to the Fund's Secretary, at 100 Wall Street, New York, NY 10005, or
by voting in person at the meeting. In addition, you can revoke a prior proxy
simply by voting again - using your original proxy card, by toll-free telephone
call, or at our Web site.
SHAREHOLDER PROPOSALS. The Fund has no current plans to hold an annual or
special meeting in 2000. Any shareholder proposals to be included in the proxy
statement for the Fund's next meeting of shareholders must be received by the
Fund within a reasonable period of time prior to that meeting.
NOMINEE ACCOUNTS. Upon request, the Fund will reimburse nominees for their
reasonable expenses in forwarding proxy materials to beneficial owners of the
Fund's shares. Please let us know the number of copies needed and submit expense
invoices for our review to 100 Wall Street, New York, NY 10005.
ANNUAL/SEMIANNUAL REPORTS. The Fund's most recent annual and semiannual
reports to shareholders are available at no cost. To request a report, please
call us toll-free at 1-800-934-4410 or write us at TD Waterhouse, Mutual Fund
Services, 100 Wall Street, New York, NY 10005.
OTHER MATTERS. At this point, we know of no other business to be brought
before the shareholder meeting. However, if any other matters do come up, we
will use our best judgment to vote on your behalf.
PART 3 - FUND INFORMATION
This section contains background information about the Fund and its
investment manager.
A. THE FUND
The Fund is a series of TD Waterhouse Family of Funds, Inc. ("WIFF"). WIFF is
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), as an open-end management investment company. WIFF was organized
under Maryland law on August 16, 1995 under the name Waterhouse Investors Cash
Management Fund, Inc. WIFF's name was changed to Waterhouse Investor's Family of
Funds, Inc. on December 18, 1997 and renamed under its current name on September
20, 1999. WIFF currently has four investment series (including the Fund) with
various investment objectives and policies.
The Fund commenced operations on March 31, 1998 and was originally called the
Waterhouse Dow Jones Industrial AverageSM Index Fund. The Fund's name was
changed to Waterhouse Dow 30 Fund on July 22, 1998 and renamed
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under its current name on September 20, 1999. The investment objective of the
Fund is to track the total return of the Dow Jones Industrial AverageSM
("DJIA"SM) before Fund expenses. As of September 3, 1999, the Fund had net
assets of $162,934,712 and 14,711,111 outstanding shares.
B. THE FUND'S INVESTMENT MANAGER, ADMINISTRATOR AND DISTRIBUTOR
TD Waterhouse Asset Management, Inc. (the "Investment Manager"), a Delaware
corporation, 100 Wall Street, New York, NY 10005, is the Fund's investment
manager. The Investment Manager oversees the Fund's investment program, places
orders for the Fund's purchases and sales of portfolio securities and maintains
records relating to such purchases and sales.
For its services, the Investment Manager is entitled to an annual fee of
0.20% of the Fund's average daily net assets. The Investment Manager and its
affiliates may, from time to time, voluntarily waive or reimburse all or part of
the Fund's operating expenses. Expense reimbursements by the Investment Manager
or its affiliates will increase the Fund's total return. The Investment Manager
has agreed to assume certain expenses of the Fund (or waive its fees) so that
the total operating expenses payable will not exceed 0.25% of its average daily
net assets. Thereafter, any such fee waivers or reductions will be voluntary and
may be reduced or eliminated at any time without further notice to investors.
For the fiscal period ended October 31, 1998, the Investment Manager waived its
entire investment management fee of $33,188.
In addition to the Fund and the other series of WIFF, the Investment Manager
currently serves as investment manager to National Investors Cash Management
Fund, Inc. and TD Waterhouse Bank N.A. (of which it is an affiliate) and as of
September 3, 1999, had total assets under management in excess of $11 billion.
TD Waterhouse, an affiliate of the Investment Manager, 100 Wall Street, New
York, NY 10005, as Administrator, provides administrative and management
services to the Fund. The Investment Manager (and not the Fund) compensates TD
Waterhouse for providing these services. TD Waterhouse has entered into an
agreement with Funds Distributor, Inc. ("FDI") whereby FDI performs certain
administrative services for WIFF's portfolios. TD Waterhouse pays FDI's fees for
providing these services.
The Distributor of WIFF is FDI, 60 State Street, Suite 1300, Boston,
Massachusetts 02109. Pursuant to a Distribution Agreement between WIFF and FDI,
FDI has the exclusive right to distribute shares of WIFF. FDI may enter into
dealer or agency agreements with affiliates of the Investment Manager and other
firms for the sale of WIFF shares. FDI has entered into
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such an agency agreement with TD Waterhouse. FDI receives no fee from WIFF under
the Distribution Agreement for acting as distributor to WIFF. From time to time
and out of its own resources, the Investment Manager or its affiliates may pay
fees to broker-dealers or other persons for distribution or other services
related to the Fund.
PART 4 - DIRECTOR/TRUSTEE INFORMATION
Your "yes" vote on the reorganization proposal will be treated as a vote to
elect the individuals currently serving as Directors of the Fund as Trustees of
the Trust. Following the reorganization, the Trustees will serve until the next
election or until their term is for some reason terminated.
This section provides detailed information about the individual Directors of the
Fund, including:
- The backgrounds and qualifications of the Directors.
- The identity of the Fund's principal executive officers.
- How many Fund shares are owned by management.
- How often the Board and its committees meet.
- How Directors are compensated.
14
<PAGE>
A. THE BACKGROUNDS AND QUALIFICATIONS OF DIRECTORS/TRUSTEES
Except as otherwise noted, the individuals listed below currently serve as
the Directors and executive officers of WIFF. Their affiliations, if any, with
the Investment Manager and FDI, WIFF's distributor, are listed below, along with
their principal occupations over the past five years.
Principal Occupation during the
Name Age last Five Years and Other Directorships
- ---- --- ---------------------------------------
Richard W. Dalrymple 56 Director. Mr. Dalrymple has served as a
Director of each of WIFF and National
Investors Cash Management Fund, Inc.
("NICM") since December 12, 1995 and
February 26, 1998, respectively. Mr.
Dalrymple has been the President of
Teamwork Management, Inc. since January
1997. Mr. Dalrymple has served as a
Director of Dime Bancorp, Inc. since
1990. Mr. Dalrymple has been a Trustee of
The Shannon McCormack Foundation since
1988, the Kevin Scott Dalrymple
Foundation since 1993 and a Director of
National Center for Disability Services
since 1983. From 1990 through 1995, Mr.
Dalrymple served as President and Chief
Operating Officer of Anchor Bank. From
1985 through 1990, Mr. Dalrymple worked
for the Bank of Boston. During this time,
Mr. Dalrymple served as the President of
Massachusetts Banking and the Southern
New England Region, and as Department
Executive of Banking Services. Mr.
Dalrymple's address is 45 Rockefeller
Plaza, New York, NY 10111.
Carolyn B. Lewis 62 Director. Ms. Lewis has served as a
Director of each of WIFF and NICM since
February 26, 1998. Since March 1997, Ms.
Lewis has served as President of The CBL
Group providing professional services to
clients in the securities and healthcare
industries. Ms. Lewis spent over 30 years
at the United States Securities and
Exchange Commission (SEC) in various
positions including Senior Financial
Analyst, Branch Chief and Assistant
Director. In September 1997, Ms. Lewis
was appointed a member of the Board of
Governors of the Philadelphia Stock
Exchange. Presently, Ms. Lewis is a
member of the Board of Directors of the
Metropolitan
15
<PAGE>
Washington Airports Authority and a
director on various healthcare and
hospital Boards, including Chairman Elect
of the Board of Trustees of the American
Hospital Association. Ms. Lewis' address
is 2920 W Street Southeast, Washington,
DC 20020.
George F. Staudter * 67 Director. Mr. Staudter has served as
Chairman of the Board of Directors of
WIFF since December 12, 1995. Mr.
Staudter is a Director of Koger Equity,
Inc. Mr. Staudter served as a Director of
Waterhouse Investor Services, Inc. from
1987 to 1996. Since 1989, Mr. Staudter
has served as a Managerial and Financial
Consultant, rendering investment
management, tax and estate planning
services to individual clients, and
strategic planning advice to corporate
clients. From 1993 through 1994, Mr.
Staudter was the Chief Executive Officer
and served on the Board of Directors for
Family Steak Houses of Florida, Inc. From
1986 through 1988, Mr. Staudter was a
principal and a principal shareholder of
Douglas Capital Management, Inc. In this
capacity, Mr. Staudter served as a member
of the Investment Committee and provided
investment counseling and tax and
financial planning services. Mr.
Staudter's address is 9637 Preston Trail
West, Ponte Vedra, FL 32082.
Lawrence J. Toal 62 Director. Mr. Toal has served as a
Director of WIFF since December 12, 1995.
Mr. Toal is Chairman, President and Chief
Executive Officer of Dime Bancorp, Inc.
and its subsidiary, The Dime Savings Bank
of New York, FSB (the "Dime"). He joined
the Dime in 1991 as President and Chief
Operating Officer. Prior to joining the
Dime, Mr. Toal had been President of
PSFS, a $10 billion Philadelphia thrift
from 1988 to 1991. Mr. Toal spent 26
years at The Chase Manhattan Bank, N.A.,
in various senior management positions in
consumer, corporate and international
banking areas in the United States,
Europe and Asia. Mr. Toal's address is
589 Fifth Avenue, 3rd Floor, New York, NY
10017.
* Mr. Staudter is considered an "interested person" of WIFF
16
<PAGE>
B. PRINCIPAL EXECUTIVE OFFICERS
The following individuals are the principal executive officers of WIFF.
Principal Occupation during the
Name Age last Five Years and Other Directorships
- ---- --- ---------------------------------------
George A. Rio 44 President, Treasurer and Chief Financial
Officer. Mr. Rio is Executive Vice
President and Director of Client Services
of FDI since April 1998. From June 1995
to March 1998, Mr. Rio was Senior Vice
President and Senior Key Account Manager
for Putnam Mutual Funds. From May 1994 to
June 1995, Mr. Rio was Director of
Business Development for First Data
Corporation. His address is 60 State
Street, Suite 1300, Boston, MA 02109.
Christopher J. Kelley 34 Vice President and Secretary. Mr. Kelley
is Vice President and Senior Associate
General Counsel of FDI, and an officer of
certain investment companies distributed
by FDI or its affiliates. From April 1994
to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. His
address is 60 State Street, Suite 1300,
Boston, MA 02109.
C. FUND SHARES OWNED BY DIRECTORS AND OFFICERS
On September 3, 1999, the Directors and officers of WIFF, as a group, owned
less than 1% of the outstanding shares of the Fund.
D. BOARD AND COMMITTEE MEETINGS
During fiscal year ended 1998, WIFF's Board of Directors held five meetings.
The Board has a standing Audit Committee, which consists of all Directors who
are not "interested persons" of the Fund, namely Messrs. Dalrymple and Toal and
Ms. Lewis. During the fiscal year ended October 31, 1998, the Audit Committee
held two meetings. The Audit Committee is responsible for establishing and
maintaining internal controls. In fulfilling this responsibility, the role of
the Audit Committee is to:
1. assess the effectiveness and related costs of controls related to audits,
2. safeguard assets against unauthorized acquisition, use or disposition and
3. ensure that financial statements prepared for external purposes are fairly
rep-
17
<PAGE>
resented in conformity with generally accepted accounting principles.
During fiscal year 1998, no incumbent director attended fewer than 75% of
Board and Audit Committee meetings on which he or she was elected to serve.
Following the reorganization, the Fund's Board of Trustees will form a similar
committee.
E. DIRECTOR AND OFFICER COMPENSATION
INDEPENDENT DIRECTORS. WIFF pays its Directors an annual retainer and a per
meeting fee and reimburses them for their expenses. WIFF expects to pay or
accrue total directors' fees of approximately $45,000 per year to those
directors who are not designated as interested persons.
"INTERESTED" DIRECTORS AND OFFICERS. The Fund's interested director, George
F. Staudter, receives no compensation from WIFF for his services in that
capacity. However, Directors who are interested persons of WIFF may be
compensated by the Investment Manager for their services to WIFF. Officers of
WIFF are not compensated by WIFF.
COMPENSATION TABLE. The amounts of compensation that WIFF paid to each
director for the fiscal year ended October 31, 1998, are as follows:
November 1, 1997 through October 31, 1998
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation from
Compensation from Accrued as Part of Benefits Upon Fund Complex (1) Paid to
Name of Board Members WIFF (5) WIFF's Expenses Retirement Board Members (5)
- --------------------- -------- --------------- ---------- -----------------
<S> <C> <C> <C> <C>
Richard W. Dalrymple $17,268 $0 $0 $22,148
Carolyn B. Lewis (2) $9,268 $0 $0 $14,148
Theodore Rosen (3) $8,000 $0 $0 $17,157
George F. Staudter (4) $0 $0 $0 $0
Lawrence J. Toal $20,000 $0 $0 $20,000
</TABLE>
(1) "Fund Complex" includes WIFF and NICM, an investment company also advised by
the Investment Manager.
(2) Became a Director of WIFF and NICM on February 26, 1998.
(3) Served as a Director of WIFF through February 26, 1998.
(4) Interested Director of WIFF.
(5) Amounts do not include reimbursed expenses for attending Board meetings.
18
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
8th day of September, 1999, by and between TD Waterhouse Investors Family of
Funds, Inc., a Maryland corporation ("Corporation"), on behalf of the TD
Waterhouse Dow 30 Fund (the "Old Fund"), and TD Waterhouse Trust, a Delaware
business trust ("Trust"), on behalf of, TD Waterhouse Dow 30 Fund (the "New
Fund"). (Each of the Old Fund and New Fund is sometimes referred to herein
individually as a "Fund" and collectively as the "Funds"; Corporation and Trust
are sometimes referred to herein individually as an "Investment Company" and
collectively as the "Investment Companies.") All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by a
Fund are made and shall be taken or undertaken by Corporation on behalf of the
Old Fund and by Trust on behalf of the New Fund.
The Old Fund intends to change its identity, form, and place of organization
- - by converting from a series of a Maryland corporation to a series of a
Delaware business trust - through a reorganization within the meaning of section
368(a) (1) (F) of the Internal Revenue Code of 1986, as amended ("Code"). The
Old Fund desires to accomplish such conversion by transferring all its assets to
the New Fund (which is being established solely for the purpose of acquiring
such assets and continuing the Old Fund's business) in exchange solely for
voting shares of beneficial interest in the New Fund ("New Fund Shares") and the
New Fund's assumption of the Old Fund's liabilities, followed by the
constructive distribution of the New Fund Shares pro rata to the holders of
shares of common stock of the Old Fund ("Old Fund Shares") in exchange therefor,
all on the terms and conditions set forth in this Agreement (which is intended
to be, and is adopted as, a "plan of reorganization" for federal income tax
purposes). All such transactions involving the Old Fund and the New Fund are
referred to herein as the "Reorganization."
In consideration of the mutual promises herein contained, the parties agree
as follows:
1. Plan of Reorganization and Termination of Old Fund.
1.1.Old Fund agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to New Fund. New Fund agrees in
exchange therefor-
19
<PAGE>
(a) to issue and deliver to Old Fund the number of full and fractional
(rounded to the third decimal place) New Fund Shares equal to the number of full
and fractional Old Fund Shares then outstanding; and
(b) to assume all of the Old Fund's liabilities described in paragraph
1.3 ("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 2.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Old Fund's books, and other property owned by Old Fund at the
Effective Time (as defined in paragraph 2.1).
1.3. The Liabilities shall include all of the Old Fund's liabilities,
debts, obligations, and duties of whatever kind of nature, whether absolute,
accrued, contingent, or otherwise, whether or not determinable at the Effective
Time, and whether or not specifically referred to herein.
1.4. At the Effective Time (or as soon thereafter as is reasonably
practicable, (a) the New Fund Share issued pursuant to paragraph 4.4 shall be
redeemed by New Fund for $1.00 and (b) Old Fund shall constructively distribute
the New Fund Shares received by it pursuant to paragraph 1.1 to Old Fund's
shareholders of record, determined as of the Effective Time (collectively,
"Shareholders" and each individually, a "Shareholder"), in exchange for their
Old Fund Shares. Such distribution shall be accomplished by Trust's transfer
agent ("Transfer Agent") opening accounts on New Fund's share transfer books in
the Shareholder's names and transferring such New Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) New Fund Shares due
that Shareholder. All outstanding Old Fund Shares, including those represented
by certificates, shall simultaneously be canceled on Old Fund's share transfer
books. New Fund shall not issue certificates representing the New Fund Shares in
connection with the Reorganization. However, certificates representing Old Fund
Shares shall represent New Fund Shares after the Reorganization.
1.5. As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 1.4, Old Fund shall be terminated as a series of
Corporation and any further actions shall be taken in connection therewith as
required by applicable law.
1.6. Any transfer taxes payable on issuance of New Fund Shares in a name
20
<PAGE>
other than that of the registered holder of Old Fund's books of the Old Fund
Shares constructively exchanged therefor shall be paid by the person to whom
such New Fund Shares are to be issued, as a condition of such transfer.
1.7. Any reporting responsibility of Old Fund to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
2. Closing.
2.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Investment Companies' principal office
on November 5, 1999, or on such other date and at such other place upon which
the parties may agree. All acts taking place at the Closing shall be deemed to
take place simultaneously as of the Investment Companies' close of business on
the date thereof or at such other time as the parties may agree (the "Effective
Time").
2.2. Corporation shall deliver to Trust at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Old Fund's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
New Fund at the Effective Time and (b) all necessary taxes in conjunction with
the delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
2.3. Corporation shall deliver to Trust at the Closing a list of the
Shareholders' names and addresses and the number of outstanding Old Fund Shares
owned by each Shareholder, all as of the Effective Time, certified by
Corporation's Secretary or Assistant Secretary. The Transfer Agent shall deliver
at the Closing a certificate as to the opening on New Fund's share transfer
books of account in the Shareholder's names. Trust shall issue and deliver a
confirmation to Corporation evidencing the New Fund Shares to be credited to Old
Fund at the Effective Time or provide evidence satisfactory to Corporation that
such shares have been credited to Old Fund's account on such books. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as the other party
or its counsel may reasonably request.
2.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by the Agreement.
21
<PAGE>
3. Representations and Warranties.
3.1. Old Fund represents and warrants as follows:
3.1.1. Corporation is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Maryland;
3.1.2. Corporation is duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"), and such registration is in full force and effect;
3.1.3. Old Fund is a duly established and designated series of
Corporation;
3.1.4. Old Fund is not, and the execution, delivery and performance of
this Agreement will not result, in violation of any provision of the Articles of
Incorporation or By-laws of the Corporation or any material agreement,
indenture, instrument, contract, lease or other undertaking to which the
Corporation on behalf of Old Fund is a party or by which Old Fund is bound;
3.1.5. The execution, delivery and performance of this Agreement has
been duly authorized by the Board of Directors of the Corporation and by all
necessary corporate action, other than shareholder approval, on the part of the
Corporation on behalf of Old Fund, and this Agreement constitutes a valid and
binding obligation of the Corporation on behalf of Old Fund;
3.1.6. At the Closing, Old Fund will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer, and
deliver the assets free of any liens or other encumbrances and upon delivery and
payment for the Assets, New Fund will acquire good and marketable title thereto;
3.1.7. New Fund Shares are not being acquired for the purpose of making
any distribution thereof, other than in accordance with the terms hereof;
3.1.8. Old Fund is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it commenced
operations and will continue to meet all the requirements for such qualification
for its current taxable year (and the Assets will be invested at all times
through the Effective Time in a manner that ensures compliance
22
<PAGE>
with the foregoing); it has no earnings and profits accumulated in any taxable
year in which the provisions of Subchapter M did not apply to it; and it has
made all distributions for each such past taxable year that are necessary to
avoid the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed for any such year;
3.1.9. There is no plan or intention of Shareholders who individually
own 5% or more of Old Fund Shares - and, to the best of the Corporation's
management's knowledge, there is no plan or intention of the remaining
Shareholders - to redeem or otherwise dispose of any New Fund Shares to be
received by them in the Reorganization. Management does not anticipate
dispositions of those shares at the time of or soon after the Reorganization to
exceed the usual rate and frequency of redemptions of shares of Old Fund as a
series of an open-end investment company. Consequently, management expects that
the percentage of Shareholder interests, if any, that will be disposed of as a
result of or at the time of the Reorganization will be de minimis.
3.1.10. The Liabilities were incurred by Old Fund in the ordinary
course of its business and are associated with the Assets;
3.1.11. Old Fund is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within the
meaning of section 368(a)(3)(A) of the Code;
3.1.12. As of the Effective Time, Old Fund will not have outstanding
any warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire Old Fund Shares;
3.1.13. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Old Fund's shareholders;
and
3.1.14. Old Fund will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within twelve months after the
Effective Time.
3.2. New Fund represents and warrants as follows:
3.2.1. Trust is a business trust duly organized, validly existing, and
in good standing under the laws of the State of Delaware; and Trust has been
established in accordance with the terms of the Trust's Declaration of Trust.
3.2.2. At the Effective Time, Trust will be duly registered as an
23
<PAGE>
open-end management investment company under the 1940 Act;
3.2.3. Trust is not, and the execution, delivery and performance of
this Agreement will not, result in violation of any provision of the Declaration
of Trust or By-Laws of Trust, or any material agreement, indenture, instrument,
contract, lease or other undertaking to which Trust is a party or by which Trust
is bound.
3.2.4. The execution, delivery and performance of this Agreement has
been duly authorized by the Trustee of the Trust and by all necessary Trust
action on the part of the Trust and this Agreement constitutes a valid and
binding obligation of the Trust.
3.2.5. Before the Effective Time, New Fund will be a duly established
and designated series of Trust;
3.2.6. New Fund has not commenced operations and will not commence
operations until after the Closing;
3.2.7. Prior to the Effective Time, there will be no issued and
outstanding shares in New Fund or any other securities issued by New Fund,
except as provided in paragraph 4.4;
3.2.8. No consideration other than New Fund Shares (and New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in the
Reorganization;
3.2.9. The New Fund Shares to be issued and delivered to Old Fund
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of New Fund, fully paid and non-assessable;
3.2.10. New Fund will be a "fund" as defined in section 851(g)(2) of
the Code and will meet all the requirements to qualify for treatment as a RIC
for its taxable year in which the Reorganization occurs;
3.2.11. New Fund has no plan or intention to issue additional New Fund
Shares following the Reorganization except for shares issued in the ordinary
course of its business as a series of an open-end investment company; nor does
New Fund have any plan or intention to redeem or otherwise reacquire any New
Fund Shares issued pursuant to the Reorganization, other than in the ordinary
course of that business or to the extent necessary to comply with its legal
obligation under Section 22(e) of the 1940 Act;
24
<PAGE>
3.2.12. New Fund will actively continue Old Fund's business in
substantially the same manner that Old Fund conducted that business immediately
before the Reorganization; and New Fund has no plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made in the
ordinary course of its business and dispositions necessary to maintain its
qualification as a RIC;
3.2.13. There is no plan or intention for New Fund to be dissolved or
merged into another corporation or business trust or "fund" thereof (within the
meaning of section 851(g)(2) of the Code) following the Reorganization; and
3.3. Each Fund represents and warrants as follows:
3.3.1. The fair market value of the New Fund Shares received by each
Shareholder will be approximately equal to the fair market value of the Old Fund
Shares constructively surrendered in exchange therefor;
3.3.2. Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such shares solely by
reason of their ownership of Old Fund Shares immediately before the
Reorganization;
3.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
3.3.4. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount; and
3.3.5. Immediately following consummation of the Reorganization, New
Fund will hold the same assets - except for assets distributed to shareholders
in the course of its business as a RIC and assets used to pay expenses incurred
in connection with the Reorganization - and be subject to the same liabilities
that Old Fund held or was subject to immediately prior to the Reorganization,
plus any liabilities for expenses of the parties incurred in connection with the
Reorganization. Such excepted assets, together with the amount of all
redemptions and distributions (other than regular, normal dividends) made by Old
Fund immediately preceding the Reorganization, will, in the aggregate,
constitute less than 1% of its net assets.
4. Conditions Precedent.
Each Fund's obligations hereunder shall be subject to (a) performance by
the other party of all its obligations to be performed hereunder at or before
the
25
<PAGE>
Effective Time, (b) all representations and warranties of the other party
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made on
and as of the Effective Time, and (c) the further conditions that, at or before
the Effective Time:
4.1. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either Investment Company to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain same would not involve
a risk of a material adverse effect on the assets or properties of either Fund,
provided that either Investment Company may for itself waive any of such
conditions;
4.2. Corporation shall have prepared the Proxy Statement in compliance with
the Securities Exchange Act of 1934, the 1940 Act and the rules and regulations
under each Act, and shall have called a meeting of Old Fund's shareholders
("Shareholders Meeting") to consider and act on this Agreement and the
Reorganization, and at such meeting those shareholders shall have approved
thereof in accordance with applicable law;
4.3. Each party shall have received an opinion from Swidler Berlin Shereff
Friedman, LLP as to the federal income tax consequences mentioned below. In
rendering such opinion, such counsel may rely as to factual matters, exclusively
and without independent verification, on the representations made in this
Agreement (or in separate letters or certifications addressed to such counsel)
and the certificates delivered pursuant to paragraph 2.4. Such opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein and conditioned on consummation of the Reorganization in accordance with
this Agreement, for federal income tax purposes:
4.3.1. The Reorganization will constitute a reorganization within the
meaning of section 368(a)(1)(F) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
4.3.2. No gain or loss will be recognized to Old Fund on the transfer
of the Assets to New Fund in exchange solely for New Fund Shares and New Fund's
assumption of the Liabilities or on the subsequent distribution of those shares
to the Shareholders, in constructive exchange for their Old Fund Shares, in
liquidation of Old Fund;
26
<PAGE>
4.3.3. No gain or loss will be recognized to New Fund on its receipt of
the Assets in exchange for New Fund Shares and its assumption of the
Liabilities;
4.3.4. New Fund's basis for the Assets will be the same as the basis
thereof in Old Fund's hands immediately before the Reorganization, and New
Fund's holding period for the Assets will include Old Fund's holding period
therefor;
4.3.5. A shareholder will recognize no gain or loss on the constructive
exchange of all its Old Fund Shares solely for New Fund Shares pursuant to the
Reorganization;
4.3.6. A Shareholder's basis for the New Fund Shares to be received by
it in the Reorganization will be the same as the basis for its Old Fund Shares
to be constructively surrendered in exchange for those New Fund Shares, and its
holding period for those New Fund Shares will include its holding period for
those Old Fund Shares, provided they are held as capital assets by the
Shareholder at the Effective Time; and
4.3.7. For purposes of section 381 of the Code, New Fund will be
treated as if there had been no Reorganization. Accordingly, the Reorganization
will not result in the termination of Old Fund's taxable year, Old Fund's tax
attributes enumerated in section 381(c) of the Code will be taken into account
by New Fund as if there had been no Reorganization, and the part of Old Fund's
taxable year before the Reorganization will be included in New Fund's taxable
year after the Reorganization;
4.4. Prior to the Closing, Trust's trustees shall have authorized the
issuance of, and New Fund shall have issued, one New Fund Share to Old Fund in
consideration of the payment of $1.00 for the purpose of enabling Corporation,
on behalf of Old Fund, to elect the Corporation's directors as Trust's trustees
(to serve without limit in time, except as they may resign or be removed by
action of Trust's trustees or shareholders), to ratify the selection of Trust's
independent certified public accountants, and to vote on the matters referred to
in paragraph 4.5; and
4.5. Trust (on behalf of and with respect to New Fund) shall have entered
into an investment management agreement, an administration agreement,
distribution agreement, transfer agency agreement, custodian agreement,
shareholder servicing plan and related agreements, and such other agreements as
are necessary for the New Fund's operation as a series of an open-end investment
company. Each such agreement shall have been approved by Trust's trustees and,
to the extent required by law, by such of those trustees who are not "interested
27
<PAGE>
persons" thereof (as defined in the 1940 Act) and by Corporation as the sole
shareholder of the New Fund.
4.6. At any time prior to the Closing, any of the foregoing conditions
(except that set forth in paragraph 4.2) may be waived by the directors/trustees
of either Investment Company if, in their judgment, such waiver will not have a
material adverse effect on the interests of Old Fund's shareholders.
5. Expenses.
Except as otherwise provided in subparagraph 3.3.3, all expenses
incurred in connection with the transactions contemplated by this Agreement
(regardless of whether they are consummated) will be borne by the parties as
they mutually agree.
6. Entire Agreement; Survival.
Neither party has made any representation, warranty, or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties. The representations, warranties, and covenants contained herein or
in any document delivered pursuant hereto or in connection herewith shall
survive the Closing.
7. Amendment.
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Old Fund's shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
8. Termination.
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by Old Fund's shareholders:
8.1. By either Fund (a) in the event of the other Fund's material
breach of any representation, warranty or covenant contained herein to be
performed at or prior to the Effective Time, or (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met; or
8.2. By the parties' mutual agreement.
Except as otherwise provided in paragraph 5, in the event of termination under
28
<PAGE>
paragraphs 8.1 or 8.2, there shall be no liability for damages on the part of
either Fund-or the directors or trustees, as the case may be, or officers of
either Investment Company-to the other Fund.
9. Miscellaneous.
9.1. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
9.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
9.3. The execution and delivery of this Agreement have been authorized
by the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of Trust acting as such; neither such authorization by such
trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them of any shareholder of Trust personally, but shall bind only the assets and
property of the New Fund, as provided in Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
Attest: WATERHOUSE INVESTORS FAMILY OF FUNDS,
INC., on behalf of TD Waterhouse Dow 30
Fund
/S/ Karen-Jacoppo-Wood By: /S/ Christopher J. Kelley
Title: Vice President and Secretary
Attest: TD WATERHOUSE TRUST
on behalf of TD Waterhouse Dow 30 Fund
/S/ Karen-Jacoppo-Wood By: /S/ Christopher J. Kelley
Title: Vice President and Secretary
29
<PAGE>
3 WAYS TO VOTE YOUR PROXY
THE ENCLOSED PROXY STATEMENT PROVIDES DETAILS ON IMPORTANT ISSUES AFFECTING YOUR
FUND. THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
[phone art] [computer art] [mail art]
TELEPHONE
TO VOTE BY PHONE:
1. Read the Proxy Statement and have the Proxy Card at hand.
2. Call 1-800-690-6903.
3. Enter the 12-digit control number set forth on the Proxy Card and follow
the simple instructions.
INTERNET
TO VOTE BY INTERNET:
1. Read the Proxy Statement and have the Proxy Card at hand.
2. Go to www.proxyvote.com
3. Enter the 12-digit control number set forth on the Proxy Card and follow
the simple instructions.
MAIL
TO VOTE BY MAIL:
1. Simply return your completed Proxy in the enclosed postage paid envelope.
PLEASE VOTE. IT'S IMPORTANT. THANK YOU. TD WATERHOUSE [LOGO]
TDW 1383 Rev. 9-99
<PAGE>
[LOGO] WATERHOUSE
WATERHOUSE DOW 30 FUND (THE "FUND")
PROXY SOLICITED BY THE BOARD OF DIRECTORS
By my signature below, I appoint Messr. Richard H. Neiman and Ms. Michele R.
Teichner as my attorneys to vote all Fund shares that I am entitled to vote at
the Special Meeting of Shareholders to be held at The Continental Club, 180
Maiden Lane, 41st Floor, New York, NY 10018 on October 20, 1999, at 8:30a.m.,
Eastern Time and at any adjournments of the meeting. Any one or more of Messr.
Richard H. Neiman and Ms. Michele R. Teichner may vote my shares, and they may
appoint substitutes to vote my shares on their behalf. I instruct Messr. Richard
H. Neiman and Ms. Michele R. Teichner to vote this proxy as specified below, and
I revoke any previous proxies that I have executed. I acknowledge receipt of the
Fund's Notice of Special Meeting of Shareholders and proxy statement.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE IF YOU ARE NOT VOTING
BY PHONE OR INTERNET.
Please refer to the Proxy Statement discussion of this proposal. THE PROXY WILL
BE VOTED FOR THE PROPOSAL IF YOU DO NOT SPECIFY OTHERWISE.
To vote by Telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Web site www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X WATFUN
KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
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WATERHOUSE DOW 30 FUND
Your appointed attorneys will vote any other matters that arise at the meeting
in accordance with their best judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
Vote On Proposal (Please vote by checking the appropriate box)
For Against Abstain
/ / / / / /
1. To approve an Agreement and Plan of Reorganization to reorganize the Fund
into a Delaware business trust, as more fully described in the enclosed
proxy statement.
2. Any other business properly brought before the meeting or any adjournments
of the meeting.
NOTE: Please sign exactly as your name appears on this proxy. When signing in a
fiduciary capacity, such as executor, administrator, trustee, attorney,
guardian, etc., please so indicate. Corporate and partnership proxies should be
signed by an authorized person indicating the person's title.
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Signature Date Signature Date
[PLEASE SIGN WITHIN BOX] (Joint Owners)
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