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As filed with the Securities and Exchange Commission on August 6, 1999
1933 Act Registration No. 333-____
1940 Act Registration No. 811-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
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TD WATERHOUSE TRUST
(Exact Name of Registrant as Specified in Charter)
100 WALL STREET, NEW YORK, NEW YORK 10005
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(617) 557-3416
CHRISTOPHER J. KELLEY, ESQ.
TD WATERHOUSE TRUST
C/O FUNDS DISTRIBUTOR, INC.
60 STATE STREET, SUITE 1300, BOSTON, MASSACHUSETTS 02109
(Name and Address of Agent for Service)
Copies of communications to:
Margery K. Neale, Esq.
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York, 10022-9998
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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[front cover]
TD WATERHOUSE
DOW 30 FUND
PROSPECTUS
[TD Bank and Waterhouse Securities logos]
[prospectus date]
As with any mutual fund, the Securities and Exchange Commission (SEC) has not
approved or disapproved the Fund's shares or determined whether this
prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
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[inside front cover]
TD WATERHOUSE DOW 30 FUND
TABLE OF CONTENTS
ABOUT THE FUND
Investment Objective
Investment Approach
Risks
Who May Want to Invest
Expenses
ABOUT THE DOW JONES INDUSTRIAL AVERAGE (service mark)
HOW TO BUY AND SELL SHARES
How to Buy Shares
How to Sell Shares
Telephone Transactions
Brokerage Account Requirements
SHAREHOLDER INFORMATION
Pricing Your Shares
Dividends
Taxes
Year 2000 Information
FUND MANAGEMENT
Investment Manager
Administrator
Distributor
Shareholder Servicing
FINANCIAL HIGHLIGHTS
FOR MORE INFORMATION back cover
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TD WATERHOUSE DOW 30 FUND
ABOUT THE FUND
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INVESTMENT OBJECTIVE
The Fund seeks to track the total return of the Dow Jones
Industrial Average (the "DJIA" (service mark)) before Fund expenses. There can
be no assurance that the Fund will achieve this objective.
INVESTMENT APPROACH
The Fund is an "index fund" and invests primarily in the equity securities of
the 30 companies comprising the DJIA (known as the "Dow 30" (service mark)) in
the same proportions that they are represented in the DJIA. The Fund employs a
"passively" managed investment approach.
The DJIA currently consists of 30 of the most widely held and actively traded
stocks listed on the New York Stock Exchange. The stocks in the DJIA represent
companies that typically are dominant firms in their respective industries.
The Fund will normally invest substantially all of its total assets in the
stocks of the DJIA and "Equity Equivalents" (described below) that offer
participation in the performance of the stocks in the DJIA. The portion of the
Fund's total assets invested in the stocks in the DJIA will vary from time to
time.
Equity Equivalents include stock index futures contracts and publicly-traded
index securities (such as DIAMONDS (service mark)). Stock index futures
contracts are agreements whereby two parties agree to take or make delivery of
an amount of cash based on the value of an index (such as the DJIA) on a
specified future date. Investment in index futures contracts allows an investor
to participate in the performance of the index without the costs of buying the
stocks comprising the index. DIAMONDS represent proportionate undivided
interests in a portfolio of securities consisting of all of the component common
stocks of the DJIA and are listed on the American Stock Exchange. Equity
Equivalents may be used for several purposes: to simulate full investment in the
underlying index while retaining a cash balance for fund management purposes, to
facilitate trading, to reduce transaction costs or to seek higher investment
returns where an Equity Equivalent is priced more attractively than securities
in the DJIA.
The Fund will attempt to achieve a correlation between the total return
performance of its portfolio and that of the total return of the DJIA of at
least .98 before expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Fund's net asset value,
including the value of its dividend and capital gain distributions, increases
or decreases in exact proportion to changes in the total return of the DJIA.
The investment manager monitors the correlation of the performance of the Fund
in relation to the DJIA under the supervision of the Board of Trustees. In the
unlikely event that a high correlation is not achieved, the Board of Trustees
will take appropriate steps based on the reasons for the lower than expected
correlation.
RISKS
You could lose money on your investment in the Fund, or the Fund could
underperform other investments, if the value of the DJIA goes down. Unlike
other funds that do not attempt to track an index, the Fund may not use
certain techniques to reduce the risk of loss. For example, the Fund will not
keep any significant portion of its assets in cash. As a result, the Fund may
go down in value more than an actively managed fund in the event of a general
market decline. In
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addition, because the Fund has expenses whereas the DJIA does not, the Fund's
performance will tend to underperform the performance of the DJIA.
The Fund's "non-diversified" status allows it to invest more than 5% of its
assets in the stock of a single company. To the extent the Fund invests a
greater percentage of its assets in a single company, the Fund has greater
exposure to the performance and risks of the stock of that company.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
WHO MAY WANT TO INVEST
The Fund may be appropriate for the following investors:
o Investors looking for a convenient way to seek to track the total
return of the DJIA, one of the most widely followed market indicators
in the world.
o Investors seeking capital growth over the long term (at least five
years).
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EXPENSES
As a shareholder, you may pay certain fees and expenses in connection with the
Fund, which are described in the table below. Fund operating expenses are paid
out of Fund assets, so their effect is included in the share price.
SHAREHOLDER TRANSACTION FEES (fees paid directly from your investment)(1)
Maximum Sales Charge (Load) Imposed on Purchases None
ANNUAL OPERATING EXPENSES (expenses deducted from Fund assets)
Management Fees(2) 0.20%
Distribution (12b-1) Fees None
Service Fees(2) 0.25%
Other Expenses(2) 0.36%
-- ----
Total Operating Expenses(2) 0.81%
1 Broker-dealers that are not affiliates of the Fund's investment manager
may impose service fees in connection with the sale of Fund shares, no part of
which may be received by the Fund, the investment manager or affiliates of the
investment manager. These fees may differ according to the type of account held
by the investor.
2 The table shows the Fund's expenses for the Fund's first fiscal period
(March 31, 1998 through October 31, 1998) before expense reductions by the
Fund's investment manager. The investment manager agreed to reduce expenses of
the Fund (through paying certain expenses and waiving fees) for the first twelve
months of the Fund's operations (March 31, 1998 through March 31, 1999), so that
the Fund's total operating expenses during the period would not exceed 0.25%.
Thereafter, any expense reductions are voluntary and may be changed or
eliminated at any time without notifying investors. After expense reductions,
actual Fund expenses for the Fund's first fiscal period were:
Management Fees 0.00%
Service Fees 0.03%
Other Expenses 0.22%
-----
Total Operating Expenses 0.25%
This footnote reflects the Fund's current overall expense ratio. However, the
investment manager currently anticipates that it will limit the Fund's expense
ratio to no more than the amount indicated in this footnote indefinitely.
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.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs* would be:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$83 $259 $450 $1,002
* Assuming current expense reduction arrangements, your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$26 $80 $141 $318
The amounts in this footnote reflect current expenses as set forth in footnote
2 above. The investment manager currently anticipates that it will limit the
Fund's overall expense ratio to no more than the amount indicated in footnote
2 above.
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ABOUT THE DOW JONES INDUSTRIAL AVERAGE (service mark)
- --------------------------------------------------------------------------------
The Dow Jones Industrial Average was introduced to the investing public by
Charles Dow on May 26, 1896 and originally was composed of only 12 stocks. It
has since become one of the most well known and widely followed indicators of
the U.S. stock market and is the oldest continuing stock market index in the
world. As of [date], the 30 "blue-chip" stocks in the DJIA represented
approximately 19% of the over $10 trillion market value of all U.S. stocks and
about 21% of the market value of all stocks listed on the New York Stock
Exchange. Many of the companies represented in the DJIA are household names and
leaders in their respective industries, and their stocks are broadly held by
both individual and institutional investors. Because the DJIA is so well known
and its performance is generally perceived to reflect that of the overall
domestic equity market, it is often used as a benchmark for investments in
equities, mutual funds, and other asset classes.
The DJIA is unique for a market index -- it is price-weighted rather than
market capitalization-weighted. In essence, the DJIA consists of one share of
each of the 30 stocks included in the DJIA. As a result, the relative value of
the stocks in the DJIA are affected only by market price changes. In contrast,
the relative value of stocks comprising other indices are affected by changes
in market capitalization. The market capitalization of a company is determined
by multiplying the market price of its stock by the number of shares
outstanding (or, in other words, available in the market). This distinction
stems from the fact that, when initially created, the DJIA was a simple
average (hence the name), and was computed merely by adding up the prices of
the stocks in the index and dividing that sum by the total number of stocks in
the index. However, it eventually became clear that a method was needed to
smooth out the effects of stock splits and composition changes to prevent
these events from distorting the level of the index. Therefore, a divisor was
created that has been periodically adjusted over time. This divisor, when
divided into the sum of the prices of the stocks in the DJIA, generates the
number that is reported every day in newspapers, on television and radio, and
over the Internet. With the incorporation of the divisor, the DJIA is not
technically an average anymore.
The DJIA is selected and maintained by the editors of The Wall Street Journal
(without consultation with any company that comprises the DJIA), which is
published by Dow Jones & Company, Inc. ("Dow Jones" (service mark)).
Periodically, the editors review and make changes to the composition of the
DJIA. In selecting a company's stock to be included in the DJIA, the following
criteria are generally used: (1) the firm is not a utility or a transportation
company (there are separate Dow Jones indices for these sectors); (2) the
company has an excellent reputation in its field; (3) the company has grown
successfully; and (4) the company has a large individual and institutional
investor base. All of the 30 stocks currently included in the DJIA are listed on
the New York Stock Exchange, although this is not a criterion for selection. The
inclusion of any particular company in the DJIA does not constitute a prediction
as to the company's future results of operations or stock market performance.
For the sake of historical continuity, composition changes are rare, and
generally have occurred only after corporate acquisitions or other dramatic
shifts in a company's core business. When the editors do decide that a component
stock needs to be changed, they also review the other stocks in the index to
confirm their continued presence. Thus, when a review is completed, multiple
changes often occur. The most recent composition changes, for example, occurred
on March 17, 1997, and resulted in the withdrawal of Bethlehem Steel Corp.,
Texaco Inc., Westinghouse Electric Corp.
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<PAGE>
(now CBS Corp.), and Woolworth Corp., and the addition of Hewlett-Packard Co.,
Johnson & Johnson, Travelers Group Inc. (now Citigroup Inc.), and Wal-Mart
Stores, Inc.
The DJIA currently consists of the common stock of the following 30 companies:
AlliedSignal Inc. Hewlett-Packard Co.
Aluminum Co. of America International Business Machines Corp.
American Express Co. International Paper Co.
AT&T Corp. J.P. Morgan & Co., Inc.
The Boeing Co. Johnson & Johnson
Caterpillar Inc. McDonald's Corp.
Chevron Corp. Merck & Co., Inc.
Citigroup Inc. Minnesota Mining & Manufacturing Co.
The Coca-Cola Company Philip Morris Cos. Inc.
E.I. du Pont de Nemours and Co. The Procter & Gamble Co.
Eastman Kodak Co. Sears, Roebuck and Co.
Exxon Corp. Union Carbide Corp.
General Electric Co. United Technologies Corp.
General Motors Corp. Wal-Mart Stores, Inc.
The Goodyear Tire & Rubber Co. The Walt Disney Co.
(C) 1998 Dow Jones & Co., Inc.
The following graph shows information regarding the historical performance of
the DJIA. The information in this Prospectus concerning Dow Jones and the DJIA
has been obtained from sources that the Fund believes to be reliable, but the
Fund takes no responsibility for the accuracy of such information. The Fund's
performance is likely to differ from that of the DJIA because of Fund expenses
and transaction costs. Moreover, past performance is not predictive of future
results.
-8-
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HISTORY OF THE DJIA (1897 - [date])
[THE FOLLOWING TABLE REPRESENTS A
BAR GRAPH CHART]
[THE FOLLOWING TABLE REPRESENTS A BAR GRAPH CHART]
Year
Ended Annual Return Year-End Dividend Yield
----- ------------- -----------------------
1896 NA
1897 22.2%
1898 22.5%
1899 9.2%
1900 7.0%
1901 -8.7%
1902 -0.4%
1903 -23.6%
1904 41.7%
1905 38.2%
1906 -1.9%
1907 -37.7%
1908 46.6%
1909 15.0%
1910 -17.9%
1911 0.4%
1912 7.6%
1913 -10.3%
1914 -30.7%
1915 81.7%
1916 -4.2%
1917 -21.7%
1918 10.5%
1919 30.5%
1920 -32.9%
1921 12.7%
1922 21.7%
1923 -3.3%
1924 26.2%
1925 30.0%
1926 0.3%
1927 28.8%
1928 48.2%
1929 -17.2% 5.13%
1930 -33.8% 6.76%
1931 -52.7% 10.78%
1932 -23.1% 7.71%
1933 66.7% 3.40%
1934 4.1% 3.52%
1935 38.5% 3.16%
1936 24.8% 3.92%
1937 -32.8% 7.27%
1938 28.1% 3.22%
1939 -2.9% 4.07%
1940 -12.7% 5.38%
1941 -15.4% 6.84%
1942 7.6% 5.36%
1943 13.8% 4.64%
1944 12.1% 4.31%
1945 26.6% 3.47%
1946 -8.1% 4.23%
1947 2.2% 5.08%
1948 -2.1% 6.49%
1949 12.9% 6.39%
1950 17.6% 6.85%
1951 14.4% 6.07%
1952 8.4% 5.29%
1953 -3.8% 5.74%
1954 44.0% 4.32%
1955 20.8% 4.42%
1956 2.3% 4.60%
1957 -12.8% 4.96%
1958 34.0% 3.43%
1959 16.4% 3.05%
1960 -9.3% 3.47%
1961 18.7% 3.11%
1962 -10.8% 3.57%
1963 17.0% 3.07%
1964 14.6% 3.57%
1965 10.9% 2.95%
1966 -18.9% 4.06%
1967 15.2% 3.34%
1968 4.3% 3.32%
1969 -15.2% 4.24%
1970 4.8% 3.76%
1971 6.1% 3.47%
1972 14.6% 3.16%
1973 -16.6% 4.15%
1974 -27.6% 6.12%
1975 38.3% 4.39%
1976 17.9% 4.12%
1977 -17.3% 5.52%
1978 -3.1% 6.03%
1979 4.2% 6.08%
1980 14.9% 5.64%
1981 -9.2% 6.43%
1982 19.6% 5.17%
1983 20.3% 4.48%
1984 -3.7% 5.00%
1985 27.7% 4.01%
1986 22.6% 3.54%
1987 2.3% 3.67%
1988 11.8% 3.67%
1989 27.0% 3.74%
1990 -4.3% 3.94%
1991 20.3% 3.00%
1992 4.2% 3.05%
1993 13.7% 2.65%
1994 2.1% 2.76%
1995 33.5% 2.28%
1996 26.0% 2.03%
1997 22.6% 1.72%
1998* 0.5% 1.90%
* annualized return (1/1/98 - 9/30/98)
HOW TO BUY AND SELL SHARES
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Investors may purchase shares of the Fund through an account maintained with
Waterhouse Securities, Inc. ("Waterhouse Securities") or certain other
broker-dealers.
If you would like to purchase shares of the Fund through Waterhouse Securities
and you are not already a customer, you need to open a Waterhouse Securities
account by completing and signing a Waterhouse Securities New Account
Application. To request a TD Waterhouse Dow 30 Fund application, please call
1-800-934-4410. Mail it, together with your check in the amount you wish to
purchase, in the self-addressed stamped envelope provided with the Waterhouse
Securities New Account Application.
Existing Waterhouse Securities customers must have funds in their Waterhouse
Securities account to buy shares of the Fund.
ACCOUNT PROTECTION. Within your Waterhouse Securities brokerage account, you
have access to other investments available at Waterhouse Securities such as
stocks, bonds, options, and other mutual funds. The securities in your
Waterhouse Securities brokerage account, including shares
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of the Fund, are protected up to $150 million for loss of securities (not
including loss due to market fluctuations of securities or economic conditions).
The first $500,000 is provided by Securities Investor Protection Corporation
(known as "SIPC") of which $100,000 covers cash. The remaining $149.5 million,
which covers securities only, is provided by a private insurance carrier.
INVESTMENT MINIMUMS. There is a $1,000 minimum for initial purchases and a
$100 minimum for subsequent purchases of shares of the Fund. The Fund may
waive the investment minimums for existing customers of Waterhouse Securities
and otherwise may waive these minimums in its discretion. Initial investment
minimums do not apply to investments made through a periodic investment
program for investors who make a monthly investment of $100 or more or a
quarterly investment of $300 or more or to Waterhouse Securities IRA accounts.
Shares are purchased at the next net asset value (NAV) per share calculated
after an order and payment is received by the Fund. There is no sales charge
to buy shares of the Fund.
The Fund reserves the right to suspend the offering of shares for a period of
time and to reject any specific purchase order, including purchase orders
that, in the reasonable belief of the Fund, have been made by market timers or
short-term traders.
HOW TO BUY SHARES
CUSTOMERS OF WATERHOUSE SECURITIES
Waterhouse Securities brokerage customers may purchase shares of the Fund by
mail or by placing an order directly with a Waterhouse Securities
Representative by telephone at 1-800-934-4443. Waterhouse Securities also
allows the purchase of Fund shares by electronic means for customers with
WATERHOUSE WEBBROKER or Personal Access for Windows Accounts.
Whether by mail, telephone or electronically, please indicate your wish to buy
the TD Waterhouse Dow 30 Fund and provide the following information:
o your Waterhouse Securities account number
o the dollar or share amount you wish to invest
o the dividend and distribution option you have selected, either:
(a) reinvest dividends and any capital gain distributions; or
(b) pay both dividends and any capital gain distributions in cash; or
(c) reinvest dividends and pay any capital gain distributions in
cash; or
(d) reinvest any capital gain distributions and pay dividends in
cash.
BY MAIL. You may buy shares of the Fund by mailing a letter of instruction
with the information requested above, signed by one of the registered account
holders in the exact form specified on
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the account with a check to Waterhouse Securities, Inc., Processing Center, 525
Washington Boulevard, P.O. Box 2021, Jersey City, NJ 07303-2021. Checks should
be made payable to "Waterhouse Securities, Inc." and you should write your
Waterhouse Securities account number on the check. Once you mail your letter,
you may not modify or cancel your instructions.
BY TELEPHONE. You may purchase shares of the Fund by calling your Waterhouse
Securities Representative at 1-800-934-4443.
ELECTRONICALLY. Please refer to product and services information regarding
WATERHOUSE WEBBROKER, Personal Access for Windows and TradeDirect (touch tone
trading). The World Wide Web address for Waterhouse Securities is
http://www.waterhouse.com.
THROUGH PERIODIC INVESTMENT. You may authorize monthly or quarterly amounts of
$100 or more to be withdrawn automatically from your Waterhouse Securities
brokerage account and invested in the Fund. You may sign up for this service
when you open your account at Waterhouse Securities or at another time by
calling your Waterhouse Securities Representative at 1-800-934-4443.
CUSTOMERS OF SELECTED BROKER-DEALERS
Shares may be purchased and redeemed through certain authorized broker-dealers
other than Waterhouse Securities that have entered into a selling agreement
with the Fund's distributor ("Selected Brokers"). Affiliates of Waterhouse
Securities, including National Investor Services Corp., may be Selected
Brokers. Selected Brokers may receive payments as a processing agent from the
Transfer Agent. In addition, Selected Brokers may charge their customers a fee
for their services, no part of which is received by the Fund or Waterhouse
Securities.
Investors who purchase shares through a Selected Broker will be subject to the
procedures of their Selected Broker, which may include charges, limitations,
investment minimums, cutoff times and restrictions in addition to, or
different from, those generally applicable to Waterhouse Securities customers.
Any such charges would reduce the return on an investment in the Fund.
Investors should acquaint themselves with their Selected Broker's procedures
and should read this prospectus in conjunction with any material and
information provided by their Selected Broker. Investors who purchase the
Fund's shares though a Selected Broker may or may not be the shareholder of
record. Selected Brokers are responsible for promptly transmitting purchase,
redemption and other requests to the Fund.
Certain shareholder services, such as periodic investment programs, may not be
available to customers of Selected Brokers or may differ in scope from
programs available to Waterhouse Securities customers. Shareholders should
contact their Selected Broker for further information. The Fund may confirm
purchases and redemptions of a Selected Broker's customers directly to the
Selected Broker, which in turn will provide its customers with confirmation
and periodic statements. The Fund is not responsible for the failure of any
Selected Broker to carry out its obligations to its customer.
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<PAGE>
HOW TO SELL SHARES
To sell (redeem) shares of the Fund, you may use any of the methods outlined
above under "How to Buy Shares." Shareholders who have invested through a
Selected Broker should redeem their shares through the Selected Broker. Shares
of the Fund are redeemed at the next NAV calculated after receipt by the Fund
of a redemption request in proper form.
PAYMENT. The proceeds of the redemption of your Fund shares ordinarily will be
credited to your brokerage account the following business day after receipt by
the Fund of a redemption request in proper form, but not later than seven
calendar days after an order to sell shares is received. If you purchased
shares by check, proceeds may be held in your brokerage account to allow for
clearance of the check (which may take up to ten calendar days). The Fund
reserves the right to make redemption payments in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the Fund's NAV per share.
TELEPHONE TRANSACTIONS
Customers of Waterhouse Securities automatically have the privilege of
purchasing or redeeming Fund shares by telephone. Waterhouse Securities will
employ reasonable procedures to verify the genuineness of telephone redemption
requests. These procedures involve requiring certain personal identification
information. If such procedures are not followed, Waterhouse Securities may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
Waterhouse Securities nor the Fund will be liable for following instructions
communicated by telephone that are reasonably believed to be genuine. You
should verify the accuracy of your account statements immediately after you
receive them and contact your Waterhouse Securities Account Officer if you
question any activity in the account.
The Fund reserves the right to refuse to honor requests made by telephone if
the Fund believes them not to be genuine. The Fund also may limit the amount
involved or the number of such requests. During periods of drastic economic or
market change, telephone redemption privileges may be difficult to implement.
The Fund reserves the right to terminate or modify this privilege at any time.
BROKERAGE ACCOUNT REQUIREMENTS
Currently, only customers of Waterhouse Securities and Selected Brokers are
eligible to purchase shares of the Fund. Fund shares may be redeemed
automatically should the brokerage account in which they are held be closed.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING YOUR SHARES
The price of a Fund share on any given day is its NAV. The Fund calculates its
NAV per share each day as of the close of the regular session of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time). Shares are not
priced on days when either the New York Stock Exchange or the Fund's custodian
is closed. Securities owned by the Fund for which market quotations are
readily available are valued at current market value or, in their absence, at
fair value as determined by the Board of Trustees pursuant to procedures
approved by the Board. The Fund's shares are sold at the next NAV per share
calculated after an order and payment are accepted by the Fund in the manner
described under "How to Buy and Sell Shares."
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RELATIONSHIP TO THE VALUE OF THE DJIA. The Fund intends to conduct its
operations so that its NAV per share on any given day will approximate .001
(or 1/1000) of the closing value of the DJIA (the "Ratio"). There can be no
assurance, however, that the Fund will be able to maintain the NAV per share
at or near the Ratio. For example, as with most mutual funds, each capital
gain distribution will cause a reduction of the NAV per share to the extent of
the amount distributed. In order to maintain the Fund's NAV per share at or
near the Ratio, the Fund may employ certain techniques, including declaring a
share split, share dividend or reverse share split. Share splits and dividends
increase the number of shares outstanding, resulting in a corresponding
decrease in the NAV per share. For example, a 2-for-1 split would double the
number of shares outstanding, thereby halving the NAV per share. Conversely,
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 NAV per share. These examples are given to illustrate the
principles relating to these techniques; the Fund's use of these techniques is
expected to have a more limited impact on the Fund's NAV per share. The use
of any of these techniques will not change the absolute dollar value of a
shareholder's investment in the Fund (although the number of shares and the
NAV per share would change) or result in any additional tax burden to
shareholders. While it is the Fund's current intention to maintain the Fund's
NAV per share at or near the Ratio and to utilize the techniques described in
this paragraph for this purpose, the Board of Trustees may in the future
determine to change this policy. In the event that the Board of Trustees
changes this policy, shareholders will be notified.
DIVIDENDS
It is currently contemplated that dividends of the Fund's net investment
income will be declared daily and paid monthly. No dividend will be declared
on any day on which the Fund does not receive dividend or interest income from
the securities in its portfolio. In addition, any dividends declared will be
net of Fund expenses accrued to date. In the event that the Board of Trustees
changes the daily dividend policy, shareholders will be notified. Net capital
gain, if any, realized by the Fund will be distributed at least annually.
Unless a shareholder elects payment in cash, all dividends and distributions
of the Fund are automatically reinvested in additional full and fractional
shares of the Fund at the NAV per share as of the payment date of the dividend
or distribution.
TAXES
Dividends derived from the Fund's net investment income and short-term capital
gains are generally taxable to a shareholder as ordinary income, even when
reinvested in additional Fund shares. Due to the nature of its investments,
the Fund's distributions will consist primarily of ordinary income.
Distributions of net capital gain, if any, realized by the Fund are taxable to
shareholders of the Fund as a long-term capital gain (at different rates
depending on how long the Fund held its assets and when such assets were sold
by the Fund), regardless of the length of time the shareholder may have held
shares in the Fund at the time of distribution.
Required tax information will be provided annually. You are encouraged to
retain copies of your account statements or year-end statements for tax
reporting purposes. However, if you have incomplete records, you may obtain
historical account transaction information at a reasonable fee.
-13-
<PAGE>
You should consult your tax adviser regarding specific questions as to
federal, state and local taxes.
YEAR 2000 INFORMATION
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000 Problem"). Like other investment companies
and financial and business organizations, the Fund could be adversely affected
if the computer systems used by the investment manager or other Fund service
providers do not properly address this problem prior to January 1, 2000. The
investment manager and its affiliates have established a dedicated group to
analyze these issues and to implement any systems modifications necessary to
prepare for the Year 2000. Currently, the investment manager does not
anticipate that the transition to the Year 2000 will have any material impact
on its ability to continue to service the Fund at current levels. In addition,
the investment manager has sought assurances from the Fund's other service
providers that they are taking all necessary steps to ensure that their
computer systems will accurately reflect the Year 2000, and the investment
manager will continue to monitor the situation. At this time, however, no
assurance can be given that the Fund or its service providers have anticipated
every step necessary to avoid any adverse effect on the Fund attributable to
the Year 2000 Problem or that interaction with other non-complying computer
systems will not impact their services.
FUND MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
TD Waterhouse Asset Management, Inc., 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 receives an annual fee of 0.20% of the
Fund's average daily net assets. The investment manager agreed to assume certain
expenses of the Fund (or waive its fees) for the first twelve months of the
Fund's operations, so that the total operating expenses payable by the Fund
during the period will not exceed 0.25% of its average daily net assets.
Thereafter, any expense reductions are voluntary and may be changed or
eliminated at any time without further notice to investors.
In addition to the Fund, the investment manager currently serves as investment
manager to Waterhouse National Bank (of which it is an affiliate) and to other
mutual funds, and as of [date], had total assets under management in excess of
$[ ] billion.
ADMINISTRATOR
As administrator, Waterhouse Securities, an affiliate of the investment
manager, provides certain administrative and management services to the Fund.
The investment manager (and not the Fund) compensates Waterhouse Securities
for providing these services. Waterhouse Securities has entered into an
agreement with Funds Distributor, Inc. ("FDI") whereby FDI performs
-14-
<PAGE>
certain administrative services for the Fund. Waterhouse Securities pays FDI's
fees for providing these services.
DISTRIBUTOR
FDI acts as distributor of the Fund's shares for no compensation.
SHAREHOLDER SERVICING
The Fund's Shareholder Servicing Plan permits the Fund to pay banks,
broker-dealers or other financial institutions (including Waterhouse
Securities and its affiliates) for shareholder support services they provide,
at a rate of up to 0.25% of the average daily net assets of the Fund. These
services may include, among other services, providing general shareholder
liaison services (including responding to shareholder inquiries), providing
information on shareholder investments, and establishing and maintaining
shareholder accounts and records.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total return amount in the table
represents the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). Prior to
[date], the Fund operated as a series of another investment company. The
financial highlights for the year ended October 31, 1998 has been audited by
Ernst & Young LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request by calling
Customer Service at 1-800-934-4410.
-15-
<PAGE>
<TABLE>
<CAPTION>
Six Months
----------
Ended April 30, 1999 Period Ended
-------------------- ------------
(Unaudited) October 31, 1998*
----------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $8.59 $8.78
----- -----
INVESTMENT OPERATIONS
Net investment income 0.07 0.08
Net realized and unrealized gains(losses) on investments 2.20 (0.19)
---- ------
TOTAL FROM INVESTMENT OPERATIONS 2.27 (0.11)
Distributions from net investment income (0.07) (0.08)
------ ------
Net asset value, end of period $10.79 $8.59
====== =====
RATIOS
Ratio of net expenses to average net assets 0.25% (A) 0.25% (A)
Ratio of net investment income to average net assets 1.41% (A) 1.48% (A)
Decrease reflected in above expense ratios due to
waivers/reimbursements by the Investment Manager
and its affiliates 0.56% (A) 0.55% (A)
SUPPLEMENTAL DATA
Portfolio turnover rate 27% (A) 8% (A)
Total investment return 26.52% (B) (1.19%) (B)
Net assets, end of period $119,582,569 $62,211,054
============ ===========
Average net assets $86,561,468 $28,460,853
=========== ===========
</TABLE>
* The Fund commenced operations on March 31, 1998.
(A) Annualized.
(B) Total investment return is calculated assuming a purchase of shares
on the first day and a sale on the last day of the period reported
and includes reinvestment of dividends.
-16-
<PAGE>
[inside back cover]
DOW JONES & COMPANY, INC. ("DOW JONES" (service mark)) DOES NOT GUARANTEE THE
ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES INDUSTRIAL AVERAGE(service
mark) OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY WATERHOUSE ASSET MANAGEMENT,
INC. (THE "INVESTMENT MANAGER"), SHAREHOLDERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE DJIA OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES
NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
DJIA OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE
POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR
ARRANGEMENTS BETWEEN DOW JONES, THE INVESTMENT MANAGER AND THE FUND.
"Dow Jones (service mark)," "Dow Jones Industrial Average(service mark),"
"DJIA(service mark)" and "DIAMONDS(service mark)" are service marks of Dow Jones
& Company, Inc. and have been licensed by the investment manager in connection
with the operation of the Fund. The Fund is not sponsored, endorsed, sold or
promoted by Dow Jones or any corporation that is included in the DJIA. Dow Jones
makes no representation or warranty, express or implied, to the shareholders of
the Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly. Dow Jones' only relationship
to the investment manager is the licensing of certain trademarks and trade names
of Dow Jones and of the DJIA, which is determined, composed and calculated by
Dow Jones without regard to the investment manager or the Fund. Dow Jones has no
obligation to take the needs of the investment manager or the shareholders of
the Fund into consideration in determining, composing or calculating the DJIA.
Dow Jones is not responsible for and has not participated in the determination
of the timing of, prices at, or quantities of Fund shares to be issued or in the
determination or calculation of the equation by which Fund shares are to be
converted into cash. Dow Jones has no obligation or liability in connection with
the administration, marketing or offering of the Fund.
-17-
<PAGE>
[back cover]
TD WATERHOUSE DOW 30 FUND
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
More information on the Fund is available upon request, including the
following:
SHAREHOLDER REPORTS. Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to shareholders. In the
Fund's annual report, you will find a discussion of the market conditions that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI includes more information
about the Fund and its policies. The SAI is on file with the Securities and
Exchange Commission (SEC) and is incorporated by reference into (is legally
considered a part of) this prospectus.
You may request free copies of these materials, along with other information
about the Fund and make shareholder inquiries by contacting:
Waterhouse Securities, Inc.
Mutual Fund Services
100 Wall Street
New York, New York 10005
Telephone: 1-800-457-6516
Hearing impaired: TTY 1-800-933-0555
Email: http://www.waterhouse.com
Text-only versions of the Fund's prospectus can be viewed online or downloaded
from Waterhouse Securities ((http://www.waterhouse.com). Other documents
pertaining to the Fund can be viewed online or downloaded from the SEC
(http://www.sec.gov).
You also can review the Fund's reports and SAI at the SEC's public reference
room in Washington, DC. For a fee, you may obtain this information by writing
the SEC's Public Reference Section, Washington, DC 20549-6009. For more
information about these services, call 1-800-SEC-0330.
The Fund is a series of TD Waterhouse Trust, whose investment company
registration number is [smaller font:] 811-____.
-18-
<PAGE>
TD WATERHOUSE DOW 30 FUND
100 WALL STREET, NEW YORK, NEW YORK 10005
WATERHOUSE SECURITIES, CUSTOMER SERVICE - 1-800-934-4410
STATEMENT OF ADDITIONAL INFORMATION
[DATE]
This Statement of Additional Information (the "SAI") is not a
prospectus. It should be read in conjunction with the prospectus dated
[date] (the "Prospectus") for the TD Waterhouse Dow 30 Fund (the
"Fund"), a series of TD Waterhouse Trust (the "Trust").
The Fund's financial statements and financial highlights for the fiscal
period ended October 31, 1998, including the independent auditors'
report thereon, are included in the Fund's Annual Report and are
incorporated herein by reference. The Fund's unaudited financial
statements for the period ended April 30, 1999 are included in the
Fund's Semiannual Report and are incorporated herein by reference.
To obtain a free copy of the Prospectus or Annual Report, please write
to Waterhouse Securities, Inc., Customer Service, at 100 Wall Street,
New York, New York 10005, or call 1-800-934-4410.
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION ABOUT THE FUND...................................
INVESTMENT POLICIES AND RESTRICTIONS ................................
PORTFOLIO TRANSACTIONS ..............................................
TRUSTEES AND EXECUTIVE OFFICERS .....................................
INVESTMENT MANAGEMENT, DISTRIBUTION
AND OTHER SERVICES ..................................................
DIVIDENDS AND TAXES .................................................
SHARE PRICE CALCULATION .............................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ......................
PERFORMANCE .........................................................
SHAREHOLDER INFORMATION .............................................
<PAGE>
DOW JONES & COMPANY, INC. (("DOW JONES"(service mark)) DOES NOT GUARANTEE THE
ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES INDUSTRIAL AVERAGE(service
mark) ("DJIA"(service mark)) OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
WATERHOUSE ASSET MANAGEMENT, INC. (THE "INVESTMENT MANAGER"), SHAREHOLDERS OF
THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DJIA OR ANY DATA
INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DJIA OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY
LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL
DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES,
THE INVESTMENT MANAGER AND THE FUND.
"Dow Jones(service mark)," "Dow Jones Industrial Average(service mark),"
"DJIA(service mark)" and "DIAMONDS(service mark)" are service marks of Dow Jones
& Company, Inc. and have been licensed by the Investment Manager in connection
with the operation of the Fund. The Fund is not sponsored, endorsed, sold or
promoted by Dow Jones or any corporation that is included in the DJIA. Dow Jones
makes no representation or warranty, express or implied, to the shareholders of
the Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly. Dow Jones' only relationship
to the Investment Manager is the licensing of certain trademarks and trade names
of Dow Jones and of the DJIA, which is determined, composed and calculated by
Dow Jones without regard to the Investment Manager or the Fund. Dow Jones has no
obligation to take the needs of the Investment Manager or the shareholders of
the Fund into consideration in determining, composing or calculating the DJIA.
Dow Jones is not responsible for and has not participated in the determination
of the timing of, prices at, or quantities of Fund shares to be issued or in the
determination or calculation of the equation by which Fund shares are to be
converted into cash. Dow Jones has no obligation or liability in connection with
the administration, marketing or offering of the Fund.
-2-
<PAGE>
TD WATERHOUSE DOW 30 FUND
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
The investment objective of the Fund is to track the total return of
the Dow Jones Industrial Average(service mark) ("DJIA"(service mark))
before Fund expenses. The investment manager of the Fund is TD
Waterhouse Asset Management, Inc. (the "Investment Manager").
The Trust is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management
investment company. The Fund was originally a series of Waterhouse
Investors Family of Funds, Inc. On [date], the Fund was reorganized as
the initial series of TD Waterhouse Trust, a Delaware business trust.
At that time, the Fund's name was changed from "Waterhouse Dow 30 Fund"
to its present name.
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective, and its investment policies and
restrictions that are designated as fundamental, may not be changed
without approval by holders of a "majority of the outstanding voting
securities" of the Fund. Except as otherwise indicated, however, the
Fund's investment policies are not fundamental and may be changed
without shareholder approval. As defined in the Investment Company Act,
and as used herein, the term "majority of the outstanding voting
securities" of the Company, or of the Fund, means, respectively, the
vote of the holders of the lesser of (i) 67% of the shares of the
Company or of the Fund or represented by proxy at a meeting where more
than 50% of the outstanding shares of the Company or the Fund are
present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Company or the Fund.
The following policies and restrictions supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of the Fund's assets that may
be invested in any security or other assets, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the Fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies with
the Fund's investment policies and restrictions.
COMMON STOCK
The Fund will invest primarily in the common stock of the 30 companies
comprising the DJIA. Common stockholders are the owners of the company
issuing the stock and, accordingly, vote on various corporate
governance matters such as mergers. They are not creditors of the
company, but rather, upon liquidation of the company are entitled to
their pro rata share of the company's assets after creditors (including
fixed income security holders) and, if applicable, preferred
stockholders, are paid.
-3-
<PAGE>
CASH AND CASH EQUIVALENTS
The Fund will hold from time to time a certain portion of its assets in
cash or cash equivalents to retain flexibility in meeting redemptions,
paying expenses, and timing of new investments. Cash equivalents may
include (i) short-term obligations issued or guaranteed by the United
States government, its agencies or instrumentalities ("U.S. Government
Securities"), (ii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in
the United States that have a minimum rating of A-1 from Standard &
Poor's ("S&P") or P-1 from Moody's Investors Service ("Moody's") or a
comparable rating from another nationally recognized statistical rating
organization ("NRSRO") or unrated securities of comparable quality,
(iii) commercial paper rated at least A-1 by S&P or P-1 by Moody's or a
comparable rating from another NRSRO or unrated securities of
comparable quality, (iv) repurchase agreements covering any of the
securities in which the Fund may invest directly, and (v) money market
mutual funds. The Fund will not invest in cash or cash equivalents as
part of a temporary defensive strategy to protect against potential
stock market declines.
DIAMONDS(service mark) AND OTHER INDEX SECURITIES
The Fund may invest in publicly-traded index securities, including
DIAMONDS. DIAMONDS are shares of a publicly-traded unit investment
trust that owns the stocks in the DJIA in approximately the same
proportions as represented in the DJIA. DIAMONDS trade on the AMEX at
approximately .01 (or 1/100) of the value of the DJIA. Because DIAMONDS
replicate the DJIA, any price movement away from the value of the
underlying stocks is generally quickly eliminated by professional
traders. In light of the structural features of DIAMONDS, the
Investment Manager believes that the movement of DIAMONDS share prices
should closely track the movement of the DJIA. The DIAMONDS program
bears operational expenses, which are deducted from the dividends paid
to DIAMONDS investors. To the extent the Fund invests in these
securities, the Fund must bear these expenses in addition to the
expenses of its own operation. The Fund also may invest in Standard &
Poor's Depositary Receipts, index securities similar to DIAMONDS that
are based on the Standard & Poor's 500 Index and also are traded on the
AMEX.
INVESTMENT COMPANY SECURITIES
The Fund may invest in securities issued by other investment companies
(or series thereof) to the extent that such investments are consistent
with the Fund's investment objectives and policies and are permissible
under the Investment Company Act. Under one of the Investment Company
Act's limitations, the Fund may invest in shares of investment
companies to the extent the Fund and its affiliated persons do not own
more than 3% of the outstanding securities of any one issuer of these
securities, provided that the issuer is not obligated to redeem
securities representing more than 1% of the issuer's total outstanding
securities during any period of less than 30 days. A separate
limitation of the Investment Company Act may limit the Fund from (i)
investing more than 10% of its assets in shares of investment
companies; (ii) investing more than 5% of its assets in any one
investment company; or (iii) acquiring more than 3% of the voting stock
of an acquired investment company. As a shareholder of another
investment company, the Fund would bear, along with other shareholders,
its pro rata
-4-
<PAGE>
portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own
operations. Investment company securities include shares of registered
unit investment trusts, including DIAMONDS and Standard & Poor's
Depositary Receipts.
FUTURES CONTRACTS
The Fund may invest in stock index futures contracts. A futures
contract is a bilateral agreement wherein one party agrees to accept,
and the other party agrees to make, delivery of cash, an underlying
debt security or the currency as called for in the contract at a
specified future date and at a specified price. For futures contracts
with respect to an index, delivery is of an amount of cash equal to a
specified dollar amount times the difference between the index value at
the time of the contract and the close of trading of the contract. Use
of futures contracts is subject to regulation by the several futures
exchanges upon which futures are traded and the Commodity Futures
Trading Commission (the "CFTC").
The Fund may purchase index futures contracts for several reasons: to
simulate full investment in the underlying index while retaining a cash
balance for fund management purposes, to facilitate trading, to reduce
transactions costs, or to seek higher investment returns when a futures
contract is priced more attractively than securities in the index.
As required by applicable regulatory guidelines, the Fund will set
aside cash or other appropriate liquid assets in a segregated account
in the prescribed manner. Any assets held in a segregated account
cannot be sold or closed out while the futures contract is outstanding,
unless they are replaced with similar assets. As a result, there is a
possibility that the use of segregation involving a large percentage of
the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES TRADING. No price is paid
upon entering into futures contracts; rather, the Fund is required to
deposit an amount of cash or U.S. Government securities generally equal
to 5% or less of the contract value. This amount is known as initial
margin. Subsequent payments, called variation margin, to and from the
broker, would be made on a daily basis as the value of the futures
position varies. The initial margin in futures transactions is in the
nature of a performance bond or good-faith deposit on the contract that
is returned to the Fund upon termination of the contract, assuming all
contractual obligations have been satisfied.
Holders of futures contracts can enter into offsetting closing
transactions by selling a futures contract with the same terms as the
position held. Positions in futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts.
Under certain circumstances, futures exchanges may establish daily
limits in the amount that the price of a futures contract may vary
either up or down from the previous day's settlement price. Once the
daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit. Prices could
-5-
<PAGE>
move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of
positions. In such event, it may not be possible for the Fund to close
a position, and in the event of adverse price movements, the Fund would
have to make daily cash payments of variation margin. In addition:
(1) Successful use of futures contracts will require different
skills and techniques than investing in individual securities.
Moreover, futures contracts relate not to the current level of the
underlying instrument but to the anticipated levels at some point in
the future; thus, for example, trading of stock index futures contracts
may not reflect the trading of the securities that are used to
formulate an index or even actual fluctuations in the index itself.
(2) The price of index futures contracts may not correlate
perfectly with movement in the index due to price distortions in the
futures market or otherwise. There may be several reasons unrelated to
the value of the underlying securities that cause this situation to
occur.
(3) There is no assurance that a liquid secondary market will
exist for any particular contract at any particular time. In such
event, it may not be possible to close a position, and in the event of
adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin.
(4) The Fund's activities in the futures markets may result in
a higher portfolio turnover rate and additional transaction costs in
the form of added brokerage commissions.
CFTC REQUIREMENTS. The Fund will invest in futures contracts that are
subject to the jurisdiction of the CFTC subject to the requirements of
Section 4.5 of the rules of the CFTC. Under that section the Fund is
permitted to purchase such futures or options contracts only for bona
fide hedging purposes within the meaning of the rules of the CFTC;
provided, however, that in addition, with respect to positions in
commodity futures contracts not for bona fide hedging purposes, the
Fund will limit the aggregate initial margin and premiums required to
establish these positions (subject to certain exclusions) to no more
than 5% of the liquidation value of the Fund's assets after taking into
account unrealized profits and losses on any such contract into which
the Fund has entered.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, which are instruments
under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a
mutually agreed upon time and price (which price is higher than the
Fund's purchase price), thereby determining the yield during the Fund's
holding period. Repurchase agreements are, in effect, loans
collateralized by the underlying securities. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the
Fund might have expenses in enforcing its rights to the proceeds of the
repurchase agreement or collateral thereunder, and could experience
losses, including a decline in the value of the underlying security and
loss of income.
-6-
<PAGE>
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which the Fund sells
a security and simultaneously commits to repurchase that security from
the buyer at an agreed-upon price on an agreed-upon future date. The
resale price in a reverse repurchase agreement reflects a market rate
of interest that is not related to the coupon rate or maturity of the
sold security. For certain demand agreements, there is no agreed-upon
repurchase date and interest payments are calculated daily, often based
upon the prevailing overnight repurchase rate.
Generally, a reverse repurchase agreement enables the Fund to recover
for the term of the reverse repurchase agreement all or most of the
cash invested in the portfolio securities sold and to keep the interest
income associated with those portfolio securities. Such transactions
are advantageous only if the interest cost to the Fund of the reverse
repurchase transaction is less than the cost of obtaining the cash
otherwise. In addition, interest costs on the money received in a
reverse repurchase agreement may exceed the return received on the
investments made by the Fund with those monies. The use of reverse
repurchase agreement proceeds to make investments may be considered to
be a speculative technique.
While a reverse repurchase agreement is outstanding, the Fund will
maintain appropriate liquid assets in a segregated custodial account to
cover its obligation under the agreement. The Fund will enter into
reverse repurchase agreements only with parties whose creditworthiness
has been found satisfactory by the Investment Manager.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means securities that
cannot be disposed of within seven days in the ordinary course of
business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements
maturing in more than seven days.
The Board of Trustees has the ultimate responsibility for determining
whether specific securities are liquid or illiquid. The Board has
delegated the function of making day-to-day determinations of liquidity
to the Investment Manager, pursuant to guidelines approved by the
Board. The Investment Manager takes into account a number of factors in
reaching liquidity determinations, including but not limited to: (1)
the frequency of trades and quotations for the security; (2) the number
of dealers willing to purchase or sell the security and the number of
other potential buyers; (3) the willingness of dealers to undertake to
make a market in the security; and (4) the nature of trading in the
marketplace, including the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer. The
Investment Manager monitors the liquidity of the securities in the
Fund's portfolio and reports periodically on such decisions to the
Board.
SECURITIES LENDING
The Fund may lend portfolio securities in amounts up to 33 1/3% of its
total assets to brokers, dealers and other financial institutions,
provided such loans are callable at any time by the Fund and are at all
times secured by cash or by equivalent collateral. By
-7-
<PAGE>
lending its portfolio securities, the Fund will receive income while
retaining the securities' potential for capital appreciation. As with
any extensions of credit, there are risks of delay in recovery and, in
some cases, even loss of rights in the collateral should the borrower
of the securities fail financially. However, such loans of securities
will only be made to firms deemed to be creditworthy by the Investment
Manager.
BORROWING
The Fund may borrow from banks and engage in reverse repurchase
agreements. As a matter of fundamental policy, the Fund will limit
borrowings (including any reverse repurchase agreements) to amounts not
in excess of 33 1/3% of the value of the Fund's total assets less
liabilities (other than borrowings). As a non-fundamental policy, the
Fund will borrow money only as a temporary measure for defensive or
emergency purposes, in order to meet redemption requests without
immediately selling any portfolio securities.
DIVERSIFICATION AND CONCENTRATION
The Fund is classified as "non-diversified" for purposes of the
Investment Company Act, which means that the Fund is not limited by the
Investment Company Act with regard to the portion of its assets that
may be invested in the securities of a single issuer. To the extent the
Fund makes investments in excess of 5% of its assets in the securities
of a particular issuer, its exposure to the risks associated with that
issuer is increased. Because the Fund invests in a limited number of
issuers, the performance of particular securities may adversely affect
the performance of the Fund or subject the Fund to greater price
volatility than that experienced by diversified investment companies.
The Fund will not concentrate its assets in the securities of issuers
in any industry. As a fundamental policy, except as set forth below,
the Fund may not purchase securities if, immediately after the
purchase, more than 25% of the value of the Fund's total assets would
be invested in the securities of issuers conducting their principal
business activities in the same industry. This limitation does not
apply to investments in U.S. Government Securities, repurchase
agreements covering U.S. Government Securities and shares of other
investment companies, including unit investment trusts and mutual
funds. The Fund's investments in issuers representing particular
industries will reflect the composition of the DJIA which, by design,
reflects a range of industries; however, in the event that the DJIA
includes concentration in a particular industry, the Fund's holdings
will reflect a comparable level of concentration. Historically,
emphasis by the DJIA in particular industries has been minimized
through periodic recomposition.
INVESTMENT RESTRICTIONS. THE FOLLOWING ARE THE FUNDAMENTAL INVESTMENT
RESTRICTIONS OF THE FUND. THE FUND MAY NOT (UNLESS NOTED OTHERWISE):
(1) issue senior securities, except as permitted under the Investment
Company Act;
(2) make short sales of securities, except as may be described in the
Prospectus and SAI from time to time, or purchase securities on margin
(but the Fund may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of securities);
-8-
<PAGE>
(3) borrow money, except as permitted under the Investment Company Act;
(4) act as an underwriter (except as it may be deemed such in a sale of
restricted securities);
(5) purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities, repurchase agreements with respect to these
securities, and shares of investment companies and series thereof) if,
as a result, more than 25% of the Fund's total assets would be invested
in the securities of companies whose principal business activities are
in the same industry; provided, however, that this restriction does not
apply to the extent that more than 25% of the DJIA is represented by
securities of companies whose principal business activities are in any
one industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the Fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) buy or sell physical commodities or physical commodity (futures)
contracts, which do not include financial futures and options thereon
as described in the Prospectus and SAI from time to time; or
(8) lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be loaned to other parties, but this
limit does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT RESTRICTIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED BY VOTE OF THE BOARD OF TRUSTEES WITHOUT SHAREHOLDER APPROVAL.
THE FUND MAY NOT:
(i) purchase or hold any security if, as a result, more than 15% of its
net assets would be invested in securities that are deemed to be
illiquid because they are subject to legal or contractual restrictions
on resale or because they cannot be sold or disposed of in the ordinary
course of business at approximately the prices at which they are
valued, including repurchase agreements not entitling the holder to
payment of principal and interest within seven days upon notice and
securities restricted as to disposition under federal securities laws,
except for commercial paper issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933 and securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which are determined to be
liquid pursuant to procedures adopted by the Trust's Board of Trustees;
or
(ii) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act; however, the Fund may,
notwithstanding any other fundamental investment policy or limitation,
invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies, and restrictions as the Fund.
-9-
<PAGE>
LICENSE AGREEMENT
The Investment Manager is a party to the License Agreement with Dow
Jones that grants to the Investment Manager and to the Fund a
non-exclusive license to use the DJIA, the proprietary data contained
therein, and related trademarks and service marks solely in connection
with the operations of the Fund. As the licensee, the Investment
Manager pays Dow Jones a licensing fee. Accordingly, the DJIA and Dow
Jones related marks are not assets of the Fund and can be withdrawn
from the Fund. Currently, the License Agreement is scheduled to expire
five years from the commencement date of initial issuance of the Fund
and is subject to a renewal term of three years (the "Renewal Term")
after which the license is automatically extended for successive
additional terms of one year each (each, an "Additional Term") unless
either Dow Jones or the Investment Manager gives written notice to the
other that the Agreement will not be extended at least 90 days before
the expiration of the Renewal Term or such Additional Term. As a
condition to the Renewal Term, the assets of the Fund must be at least
$250 million. The parties thereto may extend the term of the License
Agreement beyond its final expiration date without the consent of any
of the shareholders of the Fund.
PORTFOLIO TRANSACTIONS
The Investment Manager places orders for the purchase and sale of
assets with brokers and dealers selected by and in the discretion of
the Investment Manager. In placing orders for the Fund's portfolio
transactions, the Investment Manager seeks "best execution" (i.e.,
prompt and efficient execution at the most favorable prices).
Consistent with the policy of "best execution," orders for portfolio
transactions are placed with broker-dealer firms giving consideration
to the quality, quantity and nature of the firms' professional services
which include execution, clearance procedures, reliability and other
factors. In selecting among the firms believed to meet the criteria for
handling a particular transaction, the Investment Manager may give
consideration to those firms that provide market, statistical and other
research information to the Fund and the Investment Manager. In
addition, the Fund may pay higher than the lowest available commission
rates when the Investment Manager believes it is reasonable to do so in
light of the value of the brokerage and research services provided by
the broker effecting the transaction, viewed in terms of either the
particular transaction or the Investment Manager's overall
responsibilities with respect to accounts as to which it exercises
investment discretion. Any research benefits derived are available for
all clients. Because statistical and other research information is only
supplementary to the Investment Manager's research efforts and still
must be analyzed and reviewed by its staff, the receipt of research
information is not expected to significantly reduce its expenses. In no
event will a broker-dealer that is affiliated with the Investment
Manager receive brokerage commissions in recognition of research
services provided to the Investment Manager.
The Investment Manager intends to employ broker-dealer affiliates of
the Investment Manager (collectively "Affiliated Brokers") to effect
portfolio transactions for the Fund, provided certain conditions are
satisfied. Payment of brokerage commissions to
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<PAGE>
Affiliated Brokers is subject to Section 17(e) of the Investment
Company Act and Rule 17e-1 thereunder, which require, among other
things, that commissions for transactions on securities exchanges paid
by a registered investment company to a broker which is an affiliated
person of such investment company, or an affiliated person of another
person so affiliated, not exceed the usual and customary brokers'
commissions for such transactions. The Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Trust
within the meaning of such term as defined in the Investment Company
Act ("Disinterested Trustees"), has adopted procedures to ensure that
commissions paid to affiliates of the Investment Manager by the Fund
satisfy the standards of Section 17(e) and Rule 17e-1. Certain
transactions may be effected for the Fund by a broker-dealer affiliate
of the Investment Manager at no net cost to the Fund; however, the
broker-dealer may be compensated by another broker-dealer in connection
with such transaction for the order flow to the second broker-dealer.
Receipt of such compensation will be subject to the Fund's procedures
pursuant to Section 17(e) and Rule 17e-1.
The investment decisions for the Fund will be reached independently
from those for other accounts, if any, managed by the Investment
Manager. On occasions when the Investment Manager deems the purchase or
sale of securities to be in the best interest of one or more clients of
the Investment Manager, the Investment Manager, to the extent permitted
by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be so sold or purchased in
order to obtain the most favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Investment Manager in accordance with its policy
for aggregation of orders, as in effect from time to time. In some
cases this procedure may affect the size or price of the position
obtainable for the Fund.
Purchases and sales of equity securities on exchanges are generally
effected through brokers who charge commissions. In transactions on
stock exchanges in the United States, these commissions generally are
negotiated. In all cases, the Fund will attempt to negotiate best
execution.
Purchases and sales of fixed income portfolio securities are generally
effected as principal transactions. These securities are normally
purchased directly from the issuer or from an underwriter or market
maker for the securities. There usually are no brokerage commissions
paid for such purchases. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers
include the spread between the bid and ask prices. In the case of
securities traded in the over-the-counter markets, there is generally
no stated commission, but the price usually includes an undisclosed
commission or markup.
For the fiscal period ended October 31, 1998, the Fund paid no
brokerage commissions.
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<PAGE>
TRUSTEES AND EXECUTIVE OFFICERS
Responsibility for overall management of the Fund rests with the Board
of Trustees of the Trust in accordance with Delaware law.
The trustees and executive officers of the Trust, along with their
principal occupations over the past five years and their affiliations,
if any, with the Investment Manager and Funds Distributor, Inc.
("FDI"), the Fund's distributor, are listed below.
[RICHARD W. DALRYMPLE, Trustee. Mr. Dalrymple has served as a Trustee
of the Trust since [date]. Mr. Dalrymple has served as a Director of
each of Waterhouse Investors Family of Funds, Inc. ("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. He is 54 years
old. Mr. Dalrymple's address is 45 Rockefeller Plaza, New York, NY
10111.]
[CAROLYN B. LEWIS, Trustee. Ms. Lewis has served as a Trustee of the
Trust since [date]. 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 Washington Airports Authority and a director on
various healthcare and hospital Boards, including the Board of Trustees
of the American Hospital Association. She is 62 years old. Ms. Lewis'
address is 2920 W Street Southeast, Washington, DC 20020.]
[GEORGE F. STAUDTER*, Trustee. Mr. Staudter has served as Chairman of
the Board of Trustees of the Trust since [date]. 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.
-12-
<PAGE>
He is 67 years old. Mr. Staudter's address is 9637 Preston Trail West,
Ponte Vedra, FL 32082.]
[LAWRENCE J. TOAL, Trustee. Mr. Toal has served as a Trustee of the
Trust since [date]. 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. He
is 60 years old. Mr. Toal's address is 589 Fifth Avenue, 3rd Floor, New
York, NY 10017.]
[GEORGE A. RIO**, 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. From September 1983 to May 1994, Mr. Rio was
Senior Vice President and Manager of Client Services and Director of
Internal Audit at The Boston Company. He is 43 years old.]
[CHRISTOPHER J. KELLEY**, 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. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. He is 34 years old.]
* THIS TRUSTEE IS AN "INTERESTED PERSON" OF THE TRUST.
** ADDRESS: 60 STATE STREET, SUITE 1300, BOSTON, MA 02109
On [date], the officers and trustees of the Trust, as a group, owned
less than 1% of the outstanding shares of the Fund.
Officers and trustees who are interested persons of the Investment
Manager or FDI receive no compensation from the Fund. Each trustee who
is not an interested person serving on the board of a company in the
"Fund Complex" (which also includes WIFF and NICM, other investment
companies advised by the Investment Manager) receives a (i)
complex-wide annual retainer of $12,000, (ii) a supplemental annual
retainer of $5,000 if serving on the board of more than one fund in the
Fund Complex (the Trust and WIFF are treated as one fund for purposes
of calculating this fee), and (iii) a meeting fee of $2,000 for each
meeting attended. Trustees who are interested persons of the Trust may
be compensated by the Investment Manager or its affiliates for their
services to the Trust.
The Trust pays its trustees an annual retainer and a per meeting fee
and reimburses them for their expenses. The amounts of compensation
that the Trust (and Fund Complex) paid to each trustee (or director, as
the case may be) for the fiscal year ended
-13-
<PAGE>
October 31, 1998, is contained in the table below. Amounts for the Fund
are based on amounts paid by WIFF for the period which were
attributable to the Fund as a series of WIFF.
<TABLE>
<CAPTION>
Aggregate Pension or Estimated
Compensation Retirement Benefits Annual Total Compensation
Name of Board from Accrued as Part of Benefits Upon from Fund Complex (1)
Member Trust (3) Fund's Expenses Retirement Paid to Board Members (3)
------ --------- --------------- ---------- -------------------------
<S> <C> <C> <C> <C>
Richard W. Dalrymple $ $0 $0 $19,125
Carolyn B. Lewis $ $0 $0 $11,125
George F. Staudter (2) $ $0 $0 $0
Lawrence J. Toal $ $0 $0 $20,000
---------------------------------
</TABLE>
(1) "Fund Complex" includes the Trust, WIFF and NICM, investment
companies also advised by the Investment Manager.
(2) Interested trustee of the Trust.
(3) Amounts do not include reimbursed expenses for attending Board
meetings or compensation from the Investment Manager or its
affiliates.
INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES
INVESTMENT MANAGEMENT
TD Waterhouse Asset Management, Inc., a Delaware corporation, is the
Investment Manager of the Fund. Pursuant to the Investment Management
Agreement with the Trust, the Investment Manager manages the Fund's
investments in accordance with its stated policies and restrictions,
subject to oversight by the Fund's Board of Trustees.
The Investment Manager is an indirect majority-owned subsidiary of The
Toronto-Dominion Bank ("TD Bank"). TD Bank, a Canadian chartered bank,
is subject to the provisions of the Bank Act of Canada. The Investment
Manager also currently serves as investment manager to other mutual
funds and to the Bank and as of [date] had total assets
under management in excess of $[ ] billion. Personnel of the Investment
Manager may invest in securities for their own account pursuant to a
code of ethics that sets forth all employees' fiduciary
responsibilities regarding the Trust, establishes procedures for
personal investing and restricts certain transactions.
The Investment Management Agreement, which is dated [date], will
continue in effect for an initial two-year term, and thereafter from
year to year so long as continuation is specifically approved at least
annually by a vote of the Board of Trustees or by vote of the
shareholders of the Fund, and in either case by a majority of
Disinterested Trustees who have no direct or indirect financial
interest in the Agreement. The agreement may be terminated as to the
Fund at any time upon 60 days prior written notice, without penalty, by
either party, or by a majority vote of the outstanding shares of the
Fund, and will terminate automatically upon assignment.
-14-
<PAGE>
The Investment Management Agreement provides that the Investment
Manager will not be liable for any error of judgment or of law, or for
any loss suffered by the Fund in connection with the matters to which
such agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Investment Manager's
part in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under such
agreement. The services of the Investment Manager to the Fund under the
Investment Management Agreement are not exclusive and it is free to
render similar services to others.
For the investment management services furnished to the Fund, the Fund
pays the Investment Manager an annual investment management fee,
accrued daily and payable monthly, 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 a 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) for the first twelve months of the Fund's operations, so that the
total operating expenses payable by the Fund during the period 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 and reimbursed
the Fund $14,245 for other operating expenses.
ADMINISTRATION
Pursuant to an Administration Agreement with the Trust and the
Investment Manager, Waterhouse Securities, as Administrator, provides
administrative services to the Fund. Administrative services furnished
by Waterhouse Securities include, among others, maintaining and
preserving the records of the Fund, including financial and corporate
records, computing net asset value, dividends, performance data and
financial information regarding the Fund, preparing reports, overseeing
the preparation and filing with the Securities and Exchange Commission
(the "SEC") and state securities regulators of registration statements,
notices, reports and other material required to be filed under
applicable laws, developing and implementing procedures for monitoring
compliance with regulatory requirements, providing routine accounting
services, providing office facilities and clerical support as well as
providing general oversight of other service providers. The Investment
Manager (and not the Fund) compensates Waterhouse Securities for
providing services under the Administration Agreement at the annual
rate of 0.10% of the Fund's average daily net assets.
Waterhouse Securities has entered into a Subadministration Agreement
with FDI pursuant to which FDI performs certain of the foregoing
administrative services for the Fund. Waterhouse Securities pays FDI's
fees for providing the services under the Agreement. In addition,
Waterhouse Securities may enter into subadministration agreements with
other persons to perform such services from time to time.
The Administration Agreement, which is dated [date], will continue in
effect for an initial two-year term, and thereafter from year to year
so long as such continuation is
-15-
<PAGE>
specifically approved at least annually by a vote of the Board of
Trustees, including a majority of Disinterested Trustees who have no
direct or indirect financial interest in the Agreement. The Fund or
Waterhouse Securities may terminate the Administration Agreement on 60
days' prior written notice without penalty. Termination by the Fund may
be by vote of the Board of Trustees, or a majority of the Disinterested
Trustees who have no direct or indirect financial interest in the
Agreement, or by a majority of the outstanding voting securities of the
Fund. The Agreement terminates automatically in the event of its
"assignment" as defined in the Investment Company Act.
The Administration Agreement provides that Waterhouse Securities will
not be liable for any error of judgment or of law, or for any loss
suffered by the Fund in connection with the matters to which such
agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on Waterhouse Securities' part in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under such agreement.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from engaging in the business
of underwriting, selling or distributing securities. While the matter
is not free from doubt, Waterhouse Securities and the Investment
Manager believe that such laws should not preclude them from acting as
administrator and investment manager, respectively, to the Fund.
Accordingly, Waterhouse Securities under the Administration Agreement
and the Investment Manager under the Investment Management Agreement
will perform only administrative and investment management servicing
functions, respectively. However, judicial and administrative decisions
or interpretations of such laws as well as changes in either state
statutes or regulations relating to the permissible activities of banks
or their subsidiaries or affiliates could prevent Waterhouse Securities
or the Investment Manager from continuing to perform all or a part of
their administration or investment management activities, respectively.
If Waterhouse Securities or the Investment Manager were prohibited from
so acting, alternative means of continuing such services would be
sought by the Board of Trustees.
DISTRIBUTION
The distributor of the Trust is FDI, 60 State Street, Suite 1300,
Boston, Massachusetts 02109. Pursuant to a Distribution Agreement
between the Trust and FDI, FDI has the exclusive right to distribute
shares of the Fund. FDI may enter into dealer or agency agreements with
affiliates of the Investment Manager and other firms for the sale of
Fund shares. FDI has entered into such an agency agreement with
Waterhouse Securities. FDI receives no fee from the Trust under the
Distribution Agreement for acting as distributor to the Trust. FDI also
acts as a subadministrator for the Trust. 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.
The Distribution Agreement will continue in effect only if such
continuance is specifically approved at least annually by a vote of the
Board of Trustees, including a majority of Disinterested Trustees who
have no direct or indirect financial interest in
-16-
<PAGE>
the Agreement. The Agreement was approved by the Board of Trustees,
including a majority of Disinterested Trustees who have no direct or
indirect financial interest in the Agreement. The Fund may terminate
the Distribution Agreement on 60 days' prior written notice without
penalty. Termination by the Fund may be by vote of a majority of the
Board of Trustees, or a majority of the Disinterested Trustees, or by a
majority of the outstanding voting securities of the Fund. The
Agreement terminates automatically in the event of its "assignment" as
defined in the Investment Company Act.
SHAREHOLDER SERVICING
The Board of Trustees has approved a Shareholder Servicing Plan
("Servicing Plan") pursuant to which the Fund may pay banks,
broker-dealers or other financial institutions that have entered into a
shareholder services agreement with the Trust ("Servicing Agents") in
connection with shareholder support services that they provide.
Payments under the Servicing Plan will be calculated daily and paid
monthly at an annual rate that may not exceed 0.25% of the average
daily net assets of the Fund. The shareholder services provided by the
Servicing Agents pursuant to the Servicing Plan may include, among
other services, providing general shareholder liaison services
(including responding to shareholder inquiries), providing information
on shareholder investments, establishing and maintaining shareholder
accounts and records, and providing such other similar services as may
be reasonably requested.
The Servicing Plan was approved by the Board of Trustees, including a
majority of the Disinterested Trustees who have no direct or indirect
financial interest in the Plan or the Shareholder Services Agreement.
The Servicing Plan continues in effect as long as such continuance is
specifically so approved at least annually. The Servicing Plan may be
terminated by the Trust with respect to the Fund by a vote of a
majority of the Disinterested Trustees who have no direct or indirect
financial interest in the Plan or any agreements relating thereto.
Pursuant to a Shareholder Services Agreement between the Trust and
Waterhouse Securities, Waterhouse Securities has agreed to provide
shareholder services to the Fund pursuant to the Shareholder Servicing
Plan. The Trust may enter into similar agreements with other service
organizations, including broker-dealers and banks whose clients are
shareholders of the Fund, to act as Servicing Agents and to perform
shareholder support services with respect to such clients. For the
fiscal year ended October 31, 1998, Waterhouse Securities was paid
$4,585 in shareholder servicing fees.
The Shareholder Services Agreement with Waterhouse Securities will
continue in effect only if such continuance is specifically approved at
least annually by a vote of the Board of Trustees, including a majority
of the Disinterested Trustees who have no direct or indirect financial
interest in the Agreement. The Agreement was approved by the Board of
Trustees, including a majority of the Disinterested Trustees who have
no direct or indirect financial interest in the Agreement. The Fund may
terminate the Shareholder Services Agreement on 60 days' prior written
notice without penalty. Termination by the Fund may be by vote of the
Board of Trustees, or a majority of the Disinterested Trustees who have
no direct or indirect financial interest in the Agreement. The
Agreement terminates automatically in the event of its "assignment" as
defined in the Investment Company Act.
-17-
<PAGE>
Conflict of interest restrictions may apply to the receipt by Servicing
Agents of compensation from the Trust in connection with the investment
of fiduciary assets in Fund shares. Servicing Agents, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board
or the Federal Deposit Insurance Corporation, and investment advisers
and other money managers are urged to consult their legal advisers
before investing such assets in Fund shares.
TRANSFER AGENT AND CUSTODIAN
National Investor Services Corp. (the "Transfer Agent"), 55 Water
Street, New York, an affiliate of the Investment Manager, serves as
transfer and dividend disbursing agent for the Fund. For the services
provided under the Transfer Agency and Dividend Disbursing Agency
Agreement, which include furnishing periodic and year-end shareholder
statements and confirmations of purchases and sales, reporting share
ownership, aggregating, processing and recording purchases and
redemptions of shares, processing dividend and distribution payments,
forwarding shareholder communications such as proxies, shareholder
reports, dividend notices and prospectuses to beneficial owners,
receiving, tabulating and transmitting proxies executed by beneficial
owners and sending year-end tax reporting to shareholders and the
Internal Revenue Service, the Transfer Agent receives an annual fee,
payable monthly, of 0.05% of the Fund's average daily net assets. The
Transfer Agent is permitted to subcontract any or all of its functions
with respect to all or any portion of the Fund's shareholders to one or
more qualified sub-transfer agents or processing agents, which may be
affiliates of the Transfer Agent, FDI or broker-dealers authorized to
sell shares of the Fund pursuant to a selling agreement with FDI. The
Transfer Agent is permitted to compensate those agents for their
services; however, that compensation may not increase the aggregate
amount of payments by the Fund to the Transfer Agent. For the fiscal
year ended October 31, 1998, the Transfer Agent waived its entire fee
of $8,297.
Pursuant to a Custodian Agreement, The Bank of New York (the
"Custodian"), 90 Washington Street, New York, NY 10286, acts as the
custodian of the Fund's assets. The Custodian, among other things,
maintains a custody account or accounts in the name of the Fund,
receives and delivers all assets for the Fund upon purchase and upon
sale or maturity, collects all income and other payments and
distributions with respect to the assets of the Fund, and pays expenses
of the Fund.
OTHER EXPENSES
The Fund pays the expenses of its operations, including the costs of
shareholder and board meetings; the fees and expenses of blue sky and
pricing services, independent auditors, counsel, the Custodian and the
Transfer Agent; reports and notices to shareholders; the costs of
calculating net asset value; brokerage commissions or transaction
costs; taxes; interest; insurance premiums; Investment Company
Institute dues; and the fees and expenses of qualifying the Fund and
its shares for distribution under federal and state securities laws. In
addition, the Fund pays for typesetting, printing and mailing proxy
material, prospectuses, statements of additional information, notices
and reports to existing shareholders, and the fees of the Disinterested
Trustees. The Fund is also liable for such nonrecurring expenses as may
arise, including costs of any litigation to which the Trust be a party,
and any obligation it may have to
-18-
<PAGE>
indemnify the Trust's officers and trustees with respect to any
litigation. The Trust's expenses generally are allocated among its
investment portfolios (such as the Fund) on the basis of relative net
assets at the time of allocation, except that expenses directly
attributable to a particular investment portfolio are charged to that
portfolio.
DIVIDENDS AND TAXES
DIVIDENDS
It is currently contemplated that dividends of the Fund's net
investment income will be declared daily and paid monthly. No dividends
will be declared on any day on which the Fund does not receive
dividends or interest income from the securities in its portfolio. In
addition, any dividends declared will be net of Fund expenses accrued
to date. In the event the Board of Trustees changes the daily dividend
policy, shareholders will be notified.
CAPITAL GAIN DISTRIBUTIONS
If the Fund realizes any net capital gain, such gain will be
distributed at least once during the year as determined by the Board of
Trustees. Short-term capital gain distributions by the Fund are taxable
to shareholders as ordinary income, not as capital gain. Any realized
capital loss to the extent not offset by realized capital gain will be
carried forward.
TAX STATUS OF THE TRUST
The Fund intends to continue to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its investment company taxable income and net
realized gain, if any, to shareholders. Accordingly, it is not
anticipated that the Fund will be liable for Federal income or excise
taxes to which it would otherwise be subject. Qualification as a
regulated investment company does not, of course, involve governmental
supervision of management or investment practices or policies.
The Fund will be treated as a separate entity from any other investment
portfolio of the Trust for tax purposes.
OTHER TAX INFORMATION
The Transfer Agent will send each shareholder a notice in January
describing the tax status of dividend and capital gain distributions
(where applicable) for the prior year.
Long-term capital gains realized by non-corporate taxpayers are subject
to a reduced maximum tax rate.
It is expected that a portion of the Fund's dividends from net
investment income will be eligible for the dividends received deduction
for corporations. The amount of such dividends eligible for the
dividends received deduction is in general, limited to the amount of
qualifying dividends from domestic corporations received during the
Fund's fiscal year. You should consult with your tax adviser in this
regard.
-19-
<PAGE>
Any dividend or distribution received by a shareholder on shares of the
Fund will have the effect of reducing the NAV of the shares by the
amount of the dividend or distribution. Furthermore, a dividend or
distribution made shortly after the purchase of shares by a
shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to the shareholder as described above.
Dividends declared in October, November or December to shareholders of
record and paid during the following January are treated as paid on
December 31 for federal income and excise tax purposes. The Fund may
adjust its schedule for dividend reinvestment for the month of December
to assist in complying with reporting and minimum distribution
requirements contained in the Internal Revenue Code.
Redemptions of Fund shares are taxable events, and, accordingly,
shareholders may recognize gains or losses on such transactions. Except
for dealers, any such gains or losses will be capital gains or losses,
and will be long-term capital gains or losses if such shares were held
for more than 12 months. In the case of an individual, any such capital
gain will be taxable at the maximum rate of 20%. In the case of a
corporation, long-term capital gain is taxable at the same rates as
ordinary income. A loss realized on a redemption of Fund shares will be
disallowed if other Fund shares are acquired (whether through dividend
reinvestment or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date the shares are redeemed. In
such case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss. If a shareholder holds shares for six months or
less and during that period receives a distribution taxable to the
shareholder as a capital gain, any loss realized on the sale of the
shares during that six-month period would be a long-term capital loss
to the extent of the distribution.
The Fund generally is required by law to withhold 31% ("back-up
withholding") of certain dividends, distributions of capital gains and
redemption proceeds paid to certain shareholders who do not furnish a
correct taxpayer identification number (in the case of individuals, a
social security number and in the case of entities, an employer
identification number) and in certain other circumstances. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the shareholder of the account, and may be
claimed as a credit on such shareholder's federal income tax return.
You should consult your own tax adviser regarding the withholding
requirement. Dividends paid to foreign investors generally will be
subject to a 30% (or lower treaty rate) withholding tax.
The information above, together with the information set forth in the
Prospectus and this SAI, is only a summary of some of the federal
income tax consequences generally affecting the Fund and its
shareholders, and no attempt has been made to present a detailed
explanation of the tax treatment of the Fund or to discuss individual
tax consequences. In addition to federal income taxes, shareholders may
be subject to state and local taxes on Trust distributions and on
redemptions or other dispositions of shares of the Fund, and shares may
be subject to state and local personal property taxes. Investors should
consult their tax advisers regarding specific questions as to federal,
state and local taxes or to determine whether the Fund is suitable to
their particular tax situation.
-20-
<PAGE>
Foreign shareholders should consult their tax advisers regarding
foreign tax consequences applicable to their purchase of Fund shares.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS
The Trust's independent auditors, Ernst & Young LLP, 787 Seventh
Avenue, New York, New York 10019, audit and report on the Fund's annual
financial statements, review certain regulatory reports and the Fund's
federal income tax returns, and perform other professional accounting,
auditing, tax and advisory services when engaged to do so by the Trust.
Shareholders will receive annual audited financial statements and
semi-annual unaudited financial statements. The Fund's October 31, 1998
financial statements and the report thereon of Ernst & Young LLP from
the Fund's October 31, 1998 annual report, as well as the Fund's April
30, 1999 unaudited financial statements (as filed with the SEC on
December 10, 1998 and June 21, 1999, respectively, pursuant to Section
30(b) of the Investment Company Act and Rule 30b2-1 thereunder
(Accession Numbers 0000889812-98-002900 and 0000889812-99-001896,
respectively)) are incorporated herein by reference.
SHARE PRICE CALCULATION
The price of the Fund's shares on any given day is its net asset value
("NAV") per share. NAV is calculated for the Fund on each day that the
New York Stock Exchange (the "NYSE") and the Custodian are open.
Currently, the NYSE is closed on weekends and New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
In addition to these holidays, the Custodian generally is closed on
Veteran's Day and Columbus Day.
Securities owned by the Fund for which market quotations are readily
available are valued at current market value. The Fund values its
securities as follows. A security listed or traded on an exchange is
valued at its last sale price (prior to the time as of which assets are
valued) on the exchange where it is principally traded. Lacking any
such sales on the day of valuation, the security is valued at the mean
of the last bid and asked prices. All other securities for which
over-the-counter market quotations are readily available generally are
valued at the mean of the current bid and asked prices. When market
quotations are not readily available, securities are valued at fair
value as determined in good faith by the Board. Debt securities may be
valued on the basis of valuations furnished by pricing services that
utilize electronic data processing techniques to determine valuations
for normal institutional-size trading units of debt securities, without
regard to sale or bid prices, when such valuations are believed to more
accurately reflect the fair market value of such securities. Debt
obligations with remaining maturities of 60 days or less generally are
valued at amortized cost. The amortized cost method involves valuing a
security at its cost and amortizing any discount or premium over the
period until maturity, regardless of the impact of fluctuating interest
rates on the market value of the security.
The Fund intends to conduct its operations so that its NAV per share on
any given day will approximate .001 (or 1/1000) of the closing value of
the DJIA (the "Ratio"). There
-21-
<PAGE>
can be no assurance, however, that the Fund will be able to maintain
the NAV per share at or near the Ratio. For example, as with most
mutual funds, each capital gain distribution will cause a reduction of
the NAV per share to the extent of the amount distributed. In order to
maintain the Fund's NAV per share at or near the Ratio, the Fund may
employ certain techniques, including declaring a share split, share
dividend or reverse share split. Share splits and dividends increase
the number of shares outstanding, resulting in a corresponding decrease
in the NAV per share. For example, a 2-for-1 split would double the
number of shares outstanding, thereby halving the NAV per share.
Conversely, 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 NAV per share. These examples are
given to illustrate the principles relating to these techniques; the
Fund's use of these techniques is expected to have a more moderate
impact on the Fund's NAV per share. The use of any of these techniques
will not change the absolute dollar value of a shareholder's investment
in the Fund (although the number of shares and the NAV per share would
change) or result in any additional tax burden to shareholders. While
it is the Fund's current intention to maintain the Fund's NAV per share
at or near the Ratio and to utilize the techniques described in this
paragraph for this purpose, the Board of Trustees may in the future
determine to change this policy. In the event that the Board of
Trustees changes this policy, shareholders will be notified.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are sold on a continuous basis by the distributor.
The minimum initial investment in shares of the Fund is $1,000. The
minimum subsequent investment is $100. Minimum requirements may be
imposed or changed at any time and the Fund may waive minimum
investment requirements in its discretion. Initial investment minimums
do not apply to investments made through a periodic investment program
for investors who make a monthly investment of $100 or more or a
quarterly investment of $300 or more or to Waterhouse Securities IRA
accounts.
The NAV per share of the Fund is normally calculated as of the close of
the regular session of trading on the NYSE (normally 4:00 p.m. Eastern
time) each day that the NYSE and the bank which serves as the Custodian
are open. To the extent that portfolio securities are traded in other
markets on days when the NYSE or the Custodian are closed, the Fund's
net asset value may be affected on days when investors do not have
access to the Fund to purchase or redeem shares. In addition, trading
in some of the Fund's portfolio securities may not occur on days when
the Trust is open for business.
If the Board of Trustees determines that existing conditions make cash
payments undesirable, redemption payments may be made in whole or in
part in securities or other property, valued for this purpose as they
are valued in computing the Fund's NAV per share. Shareholders
receiving securities or other property on redemption may realize a gain
or loss for tax purposes, and will incur any costs of sale, as well as
the associated inconveniences. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have
difficulty in finding a buyer for portfolio securities received in
payment for redeemed shares. Portfolio securities may decline in
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<PAGE>
value between the time of receipt by the shareholder and conversion
to cash. A redemption in kind of the Fund's portfolio securities could
result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's portfolio.
The Trust may suspend redemption rights and postpone payments at times
when trading on the NYSE is restricted, the NYSE is closed for any
reason other than its customary weekend or holiday closings, emergency
circumstances as determined by the SEC exist, or for such other
circumstances as the SEC may permit.
PERFORMANCE
The historical performance calculation for the Fund may be shown in the
form of "total return" or "yield." These various measures of
performance are described below.
Quotations of performance may from time to time be used in
advertisements, sales literature, shareholder reports or other
communications to shareholders or prospective investors. All
performance information supplied by the Fund is historical and is not
intended to indicate future returns. The Fund's total return and yield
fluctuate in response to market conditions and other factors. The value
of the Fund's shares when redeemed may be more or less than their
original cost.
In performance advertising, the Fund may compare its performance
information with data published by independent evaluators such as
Morningstar, Inc., Lipper Analytical Services, Inc., or other companies
that track the investment performance of investment companies ("Fund
Tracking Companies"). The Fund may also compare any of its performance
information with the performance of recognized stock, bond and other
indexes, including but not limited to the Dow Jones Industrial Average,
Standard & Poor's 500 Composite Stock Index, Russell 2000 Index, Morgan
Stanley - Europe, Australian and Far East Index, Lehman Brothers
Intermediate Government Index, Lehman Brothers Intermediate
Government/Corporate Index, Salomon Brothers Bond Index, Shearson
Lehman Bond Index, U.S. Treasury bonds, bills or notes and changes in
the Consumer Price Index as published by the U.S. Department of
Commerce. The Fund may refer to general market performances over past
time periods such as those published by Ibbotson Associates (for
instance, its "Stocks, Bonds, Bills and Inflation Yearbook"). In
addition, the Fund may refer in such materials to mutual fund
performance rankings and other data published by Fund Tracking
Companies. Performance advertising may also refer to discussions of the
Fund and comparative mutual fund data and ratings reported in
independent periodicals, such as newspapers and financial magazines.
TOTAL RETURN CALCULATIONS
Standardized total returns quoted in advertising and sales literature
reflect all aspects of the Fund's return, including the effect of
reinvesting dividends and capital gain distributions, and any change in
the Fund's net asset value per share over the period. Average annual
returns are calculated by determining the growth or decline in value of
a hypothetical historical investment in the Fund over a stated period,
and then calculating the annually compounded percentage rate that would
have produced the
-23-
<PAGE>
same result if the rate of growth or decline in value had been constant
over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis
in ten years. While average annual returns are a convenient means of
comparing investment alternatives, investors should realize that the
performance is not constant over time but changes from year to year,
and that average annual returns represent averaged figures as opposed
to the actual year-to-year performance of the Fund.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment, over such
periods according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at
the end of the applicable period, of a hypothetical
$1,000 payment made at the beginning of the
applicable period.
Since March 30, 1998 (the Fund's inception) through October 31, 1998,
the Fund's total return (unannualized) was - 1.19%.
In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Total returns may be broken down into
their components of income and capital (including capital gain and
changes in share price) in order to illustrate the relationship of
these factors and their contributions to total return. Total returns,
yields, and other performance information may be quoted numerically or
in a table, graph, or similar illustration. Period total return is
calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return.
The other definitions are the same as in average
annual total return above.
SEC YIELD CALCULATIONS
Although published yield information is useful to investors in
reviewing the Fund's performance, investors should be aware that the
Fund's yield fluctuates from day to day and that the Fund's yield for
any given period is not an indication or representation by the Fund of
future yields or rates of return on the Fund's shares. The yields of
the Fund are not fixed or guaranteed, and an investment in the Fund is
not insured or guaranteed. Accordingly, yield information may not
necessarily be used to compare shares of the Fund with investment
alternatives which, like money market instruments or bank
-24-
<PAGE>
accounts, may provide a fixed rate of interest. Also, it may not be
appropriate to compare the Fund's yield information directly to similar
information regarding investment alternatives which are insured or
guaranteed.
Standardized yields for the Fund used in advertising are computed by
dividing the Fund's dividend and interest income (in accordance with
specific standardized rules) for a given 30 days or one month period,
net of expenses, by the average number of shares entitled to receive
distributions during the period, dividing this figure by the Fund's NAV
per share at the end of the period and annualizing the result (assuming
compounding of income in accordance with specific standardized rules)
in order to arrive at an annual percentage rate. Capital gain and loss
generally are excluded from these calculations.
Income calculated for the purpose of determining the Fund's
standardized yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used,
and because of the compounding assumed in yield calculations, the yield
quoted for the Fund may differ from the rate of distribution the Fund
paid over the same period or the rate of income reported in the Fund's
financial statements.
OTHER ADVERTISEMENT MATTERS
The Fund may advertise other forms of performance. For example, the
Fund may quote unaveraged or cumulative total returns reflecting the
change in the value of an investment over a stated period. Average
annual and cumulative total returns may be quoted as a percentage or as
a dollar amount, and may be calculated for a single investment, a
series of investments, and/or a series of redemptions over any time
period.
The Fund may also include various information in its advertisements.
Information included in the Fund's advertisements may include, but is
not limited to (i) portfolio holdings and portfolio allocation as of
certain dates, such as portfolio diversification by instrument type, by
instrument, by location of issuer, industry or by maturity, (ii)
statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed by an investor to
meet specific financial goals, such as funding retirement, paying for
children's education and financially supporting aging parents, (iii)
information regarding the effects of automatic investment and
systematic withdrawal plans, including the principle of dollar cost
averaging, (iv) descriptions of the Fund's portfolio manager(s) and the
portfolio management staff of the Investment Manager or summaries of
the views of the portfolio managers with respect to the financial
markets, (v) the results of a hypothetical investment in the Fund or
the DJIA over a given number of years, including the amount that the
investment would be at the end of the period, (vi) the effects of
investing in a tax-deferred account, such as an individual retirement
account or Section 401(k) pension plan and (vii) the net asset value,
net assets or number of shareholders of the Fund as of one or more
dates.
In connection with its advertisements, the Fund may provide information
about its Investment Manager, Waterhouse Securities or any of the
Fund's other service
-25-
<PAGE>
providers, including information relating to policies, business
practices or services. For instance, the Fund may provide information
about Waterhouse Securities in its advertisements, including the
difference between commissions paid on stock trades executed by
Waterhouse Securities compared to full-price and discount brokers (as
illustrated below) and a description of services available through
Waterhouse Securities. This example is for illustrative purposes only;
investors should contact the Customer Service Department at Waterhouse
Securities at 1-800-934-4410 for information about services and
commissions.
<TABLE>
<CAPTION>
Full Price 200 shares 300 shares 500 shares 500 shares 1,000 shares
Brokers @ $25 @ $20 @ $15 @ $18 @ $14
------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Merrill Lynch $129.50 $164.85 $205.54 $225.23 $308.28
Salomon Smith
Barney 139.61 166.39 212.15 235.26 351.51
Prudential 146.35 173.35 218.35 240.35 359.35
Waterhouse
Securities 35.00 40.82 52.05 57.62 90.33
<CAPTION>
Discount 200 shares 300 shares 500 shares 500 shares 1,000 shares
Brokers @ $25 @ $20 @ $15 @ $18 @ $14
------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Schwab $89.00 $95.60 $101.50 $106.60 $123.60
Fidelity 113.00 127.00 155.00 155.00 165.00
Quick & Reilly 60.50 65.00 77.75 81.50 94.00
Waterhouse
Securities 35.00 40.82 52.05 57.62 90.33
</TABLE>
-------
Survey date 12/9/98. Services may vary by firm. Commission rates
surveyed are for stocks and may vary for other products. Waterhouse
Securities minimum commission $35. This information is subject to
change.
The Fund may advertise information regarding the effects of periodic
investment, including the principle of dollar cost averaging. In a
dollar cost averaging program, an investor invests a fixed dollar
amount in the Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a
strategy does not ensure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower
than if fixed numbers of shares had been purchased at those intervals.
In evaluating such a plan, investors should consider their ability to
continue purchasing shares through periods of low price levels. For
example, if an investor invests $100 a month for a period of six months
in the Fund the following will be the relationship between average cost
per share ($14.35 in the example given) and average price per share:
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<PAGE>
Systematic Share Shares
Period Investment Price Purchased
------ ---------- ----- ---------
1 $100 $10 10.000
2 $100 $12 8.333
3 $100 $15 6.666
4 $100 $20 5.000
5 $100 $18 5.555
6 $100 $16 6.250
---- --- -----
Total Invested $600 Avg. Price $15.17 Total Shares 41.804
SHAREHOLDER INFORMATION
The Trust has an unlimited number of authorized shares of beneficial
interest. The Board of Trustees may divide the authorized shares into
an unlimited number of separate portfolios or series and may divide
portfolios or series into classes of shares without shareholder
approval. Currently, the Trust has one series (the "Fund"). Shares are
fully paid and nonassessable when issued, are transferable without
restriction, and have no preemptive or conversion rights. Shares of the
Trust have equal rights with respect to voting, except that the holders
of shares of the Fund will have the exclusive right to vote on matters
affecting only the rights of the holders of the Fund. For example,
holders of a particular investment portfolio will have the exclusive
right to vote on any investment management agreement or investment
restriction that relates only to such investment portfolio.
Shareholders of the investment portfolios do not have cumulative voting
rights, and therefore the holders of more than 50% of the outstanding
shares of the Trust voting together for the election of trustees may
elect all of the members of the Board of Trustees. In such event, the
remaining holders cannot elect any members of the Board of Trustees.
The Trust will not normally hold annual shareholders' meetings. Under
Delaware law and the Trust's By-laws, an annual meeting is not required
to be held in any year in which the election of trustees is not
required to be acted upon under the Investment Company Act. The Trust's
By-Laws provide that special meetings of shareholders, unless otherwise
provided by law or by the Agreement and Declaration of Trust, may be
called for any purpose or purposes by a majority of the Board of
Trustees, the Chairman of the Board, the President, or the written
request of the holders of at least 10% of the outstanding shares of the
Fund entitled to be voted at such meeting to the extent permitted by
Delaware law and the By-Laws of the Trust.
Currently, shareholders' voting rights are based on the number of
shares that they own. Under the Declaration of Trust, the Board of
Trustees has the authority to change the voting rights to a
dollar-based voting system. Under a dollar-based voting system, each
dollar of net asset value (number of shares of the Fund owned times its
net asset value per share of such series or class, as applicable) is
entitled to one vote on any matter on which those shares are entitled
to vote and each fractional dollar amount is entitled to a
proportionate fractional vote.
Each trustee serves until the next election of trustees and until the
election and qualification of his or her successor or until such
trustee sooner dies, resigns, retires or is removed by the affirmative
vote of a majority of the outstanding voting securities of the Trust.
In accordance with the Investment Company Act (i) the Trust will hold a
shareholder meeting for the election of trustees at such time as less
than a majority of the trustees have been elected by shareholders, and
(ii) if, as a result of a vacancy in the Board of Trustees, less than
two-thirds of the trustees have been elected by the shareholders, that
vacancy will be filled only by a vote of the shareholders.
-27-
<PAGE>
Delaware law provides that shareholders shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states,
however, have indicated that they and the courts in their states may
decline to apply Delaware law on this point. To guard against this
risk, the Fund's Agreement and Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification out of Fund property of any
shareholder held personally liable for obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which Delaware law
does not apply (or no contractual limitation of liability was in
effect) and the portfolio is unable to meet its obligation. In light of
Delaware law and the nature of the Trust's business, the Investment
Manager believes that the risk of personal liability to shareholders is
extremely remote.
As permitted under Delaware law, the debts, liabilities, obligations
and expenses incurred, contracted for or otherwise existing with
respect to a particular series of the Trust (including the Fund) is
enforceable against the assets of that series only and not against the
assets of the Trust generally or another series of the Trust.
As of [date], Toronto Dominion Investments Inc. owned of record and
beneficially approximately [ ]% of the Fund's outstanding shares.
-28-
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
---------
(a) (1) Certificate of Trust (filed herewith)
(2) Agreement and Declaration of Trust (filed herewith)
(b) By-Laws (filed herewith)
(c) Instruments Defining Shareholder Rights (incorporated by
reference to Exhibits a and b to the Registration Statement
above)
(d) Investment Management Agreement (to be filed by amendment)
(e) (1) Distribution Agreement (to be filed by amendment)
(2) Form of Agency Selling Agreement (to be filed by amendment)
(3) Agency Selling Agreement for Waterhouse Securities, Inc. (to
be filed by amendment)
(f) Inapplicable
(g) (1) Custody Agreement (to be filed by amendment)
(h) (1) Transfer Agency and Dividend Disbursing Agency Agreement (to
be filed by amendment)
(2) Form of Shareholder Servicing Plan (to be filed by amendment)
(3) Form of Shareholder Services Agreement (to be filed by
amendment)
(4) Shareholder Services Agreement for Waterhouse Securities Inc.
(to be filed by amendment)
(5) Administration Agreement (to be filed by amendment)
(6) Subadministration Agreement (to be filed by amendment)
(7) Accounting Services Agreement (to be filed by amendment)
(8) State Registration Services Agreement (to be filed by
amendment)
(i) Opinion and Consent of Swidler Berlin Shereff Friedman, LLP
as to legality of the securities being registered (to be
filed by amendment)
(j) Consent of Independent Auditors (filed herewith)
(k) Inapplicable
(l) Subscription Agreement (to be filed by amendment)
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Not applicable.
Item 25. Indemnification.
----------------
As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940, as amended (the "Investment Company Act"), and pursuant to Article VII of
the Agreement and Declaration of Trust (Exhibit (a)(2) to the Registration
Statement) and Article XI of the Trust's By-Laws (Exhibit (b) to the
Registration Statement), officers, trustees, employees and agents of the
Registrant will not be liable to the Registrant, any stockholder, officer,
director, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 3817 of the Delaware Business Trust permits indemnification of trustees
who acted in good faith and reasonably believed that the conduct was in the best
interest of the Registrant. As permitted by Section 17(i) of the Investment
Company Act, pursuant to Section 1.9 of the Distribution Agreement (to be filed
by amendment), the Distributor of the Registrant may be indemnified against
liabilities which it may incur, except liabilities arising from bad faith, gross
negligence, willful misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted 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 Investment Company Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in connection
with the successful defense of any action, suit or proceeding) is asserted
against the Registrant by such trustee, officer or controlling person in
connection with the shares 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 Investment
Company Act and will be governed by the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers
and trustees against liabilities, and certain costs of defending claims against
such officers and trustees, to the extent such officers and trustees are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and trustees under certain circumstances.
Section 6 of the Investment Management Agreement (to be filed by
amendment) limits the liability of the Investment Manager to liabilities arising
from willful misfeasance, bad faith or gross negligence in the performance of
its duties or from reckless disregard by it of its obligations and duties under
the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and the Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the
Investment Company Act as long as the interpretation of Section 17(h) and 17(i)
of such Act remains in effect and is consistently applied.
Item 26. Business and Other Connections of Investment Adviser.
-----------------------------------------------------
The following persons are the directors and officers of the Investment
Manager:
DAVID HARTMAN*, Senior Vice President and Chief Investment Officer.
From February 1995 through August 1995, Mr. Hartman served as Senior Vice
President and Senior Portfolio Manager of Fixed Income Separate Accounts at
Mitchell Hutchins - Paine Webber. Mr. Hartman also served in similar capacities
for Kidder Peabody & Co. from 1983 to 1995.
RICHARD H. NEIMAN*, Director and Secretary. Mr. Neiman has served as
Executive Vice President, General Counsel, Director and Secretary of Waterhouse
Investor Services, Inc. since July 1994. Mr. Neiman also serves in similar
capacities for Waterhouse Securities, Inc. Mr. Neiman has served as General
Counsel, Director and Secretary of Waterhouse National Bank and National
Investor Services Corp. since July 1994 and September 1995, respectively.
[KEITH GRAY] [Add disclosure]
<PAGE>
B. KEVIN STERNS**, Senior Vice President, Chief Financial Officer and
Treasurer. Mr. Sterns has served as Executive Vice President, Chief Financial
Officer and Treasurer of Waterhouse Investor Services, Inc. and Waterhouse
Securities, Inc. since October 1996. Prior to that, Mr. Sterns served as
Director of Toronto-Dominion Bank from October 1970 to October 1996
MICHELE R. TEICHNER*, Senior Vice President Operations and Compliance.
Ms. Teichner has been serving as Senior Vice President of Waterhouse Asset
Management, Inc. since August 1996, with responsibility for operations and
compliance. From August 1994 to July 1996, Ms. Teichner served as President of
Mutual Fund Training & Consulting, Inc.
LAWRENCE M. WATERHOUSE, Jr.*, Director. Mr. Waterhouse has served as
Chairman of Waterhouse Investor Services, Inc. since its inception in 1987 and
Chief Executive Officer from August 1989 to March 1998. Mr. Waterhouse is the
founder of Waterhouse Securities, Inc. and has served as Chief Executive Officer
since its inception in March 1979. Mr. Waterhouse also serves as Chairman of
Waterhouse National Bank and Director of National Investor Services Corp. since
July 1994 and September 1995, respectively.
* Address: 100 Wall Street, New York, NY 10005
** Address: 55 Water Street, New York, NY 10041
Item 27. Principal Underwriters.
- ---------------------------------
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following other investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds Inc.
Founders Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
<PAGE>
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
SoGen Funds, Inc.
SoGen Variable Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
Funds Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers. Funds Distributor is an indirect wholly-owned subsidiary of
Boston Institutional Group, Inc., a holding company all of whose outstanding
shares are owned by key employees.
(b) The following is a list of the executive officers, directors
and partners of Funds Distributor, Inc.
Director, President and Chief Executive Officer - Marie E. Connolly
Executive Vice President - George A. Rio
Executive Vice President - Donald R. Roberson
Executive Vice President - William S. Nichols
Senior Vice President, General Counsel, Chief - Margaret W. Chambers
Compliance Officer, Secretary and Clerk
Director, Senior Vice President, Treasurer and - Joseph F. Tower, III
Chief Financial Officer
Senior Vice President - Paula R. David
Senior Vice President - Gary S. MacDonald
Senior Vice President - Judith K. Benson
Chairman and Director - William J. Nutt
(c) Not applicable.
Item 28. Location of Accounts and Records.
---------------------------------
All accounts, books and other documents required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the Rules
thereunder are maintained at the offices of the Registrant, the offices of the
Registrant's Investment Adviser and Administrator, TD Waterhouse Asset
Management, Inc. and Waterhouse Securities, Inc., respectively, 100 Wall
Street, New York, New York 10005, or (i) in the case of records concerning
custodial functions, at the offices of the Registrant's Custodian, The Bank of
New York, 48 Wall Street, New York, New York 10286; (ii) in the case of
records concerning transfer agency functions, at the offices of the
Registrant's Transfer Agent and Dividend Disbursing Agent, National Investor
Services Corp., 55 Water Street, New York, New York 10041; (iii) in the case
of records concerning distribution, administration and certain other
functions, at the offices of the Fund's Distributor and Sub-Administrator,
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109; and (iv) in the case of records concerning fund accounting functions,
at the offices of the Fund's fund accountant, Countrywide Fund Services Inc.,
312 Walnut Street, Cincinnati, Ohio 45202.
Item 29. Management Services.
--------------------
Not applicable.
Item 30. Undertakings.
-------------
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston and Commonwealth of Massachusetts on the 6th
day of August, 1999.
TD WATERHOUSE TRUST
Registrant
By /s/ Christopher J. Kelley
--------------------------
Christopher J. Kelley
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below on behalf of the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Christopher J. Kelley President (Principal Executive August 6, 1999
- --------------------------- Officer)
Christopher J. Kelley
/s/ George A. Rio Vice President, Treasurer and August 6, 1999
-------------------------- Chief Financial Officer (Principal
George A. Rio Financial and Accounting Officer)
/s/ Christopher J. Kelley Sole Trustee August 6, 1999
- ---------------------------
Christopher J. Kelley
</TABLE>
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) (1) Certificate of Trust
(2) Agreement and Declaration of Trust
(b) By-Laws
(j) Consent of Independent Auditors
<PAGE>
CERTIFICATE OF TRUST
This Certificate of Trust of TD Waterhouse Trust (the "Trust"), dated
August 6, 1999, is being duly executed and filed to form a business trust under
the Delaware Business Trust Act (12 Del. C. Sections 3801 et seq.).
1. Name. The name of the business trust formed hereby is
TD Waterhouse Trust.
2. Registered Agent. The business address of the registered office of
the Trust in the State of Delaware is 1209 Orange Street, Wilmington, Delaware
19801. The name of the Trust's registered agent at such address is The
Corporation Trust Company.
3. Effective Date. This Certificate of Trust shall be effective upon
the date and time of filing.
4. Series Trust. Notice is hereby given that pursuant to Section 3804
of the Delaware Business Trust Act, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of such
series only and not against the assets of the Trust generally or any other
series thereof, and, unless otherwise provided in the governing instrument of
the Trust, none of the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to the Trust generally or any
other series thereof shall be enforceable against the assets of such series. The
Trust is, or will become prior to or within 180 days following the first
issuance of beneficial interests therein, a registered investment company under
the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned, being the sole Trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
/s/ Christopher J. Kelley
-----------------------------------
Christopher J. Kelley
as Trustee and not individually
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
of
TD WATERHOUSE TRUST
a Delaware Business Trust
Principal Place of Business:
100 Wall Street
New York, New York 10005
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND DECLARATION OF TRUST
<TABLE>
<S> <C>
ARTICLE I Name and Definitions..................................................................................1
Section 1. Name.........................................................................................1
Section 2. Definitions. ...............................................................................1
(a) "By-Laws".........................................................................1
(b) "Certificate of Trust".............................................................1
(c) "Class"............................................................................1
(d) "Commission" and "Principal Underwriter"...........................................1
(e) "Declaration of Trust".............................................................1
(f) "Delaware Act".....................................................................2
(g) "Interested Person"................................................................2
(h) "Investment Manager" or "Manager"..................................................2
(i) "1940 Act".........................................................................2
(j) "Person"...........................................................................2
(k) "Series"...........................................................................2
(l) "Shareholder"......................................................................2
(m) "Shares"...........................................................................2
(n) "Trust"............................................................................2
(o) "Trust Property"...................................................................2
(p) "Trustee"..........................................................................2
ARTICLE II Purpose of Trust.....................................................................................3
ARTICLE III Shares..............................................................................................3
Section 1. Division of Beneficial Interest. ...........................................................3
Section 2. Ownership of Shares. .......................................................................4
Section 3. Transfer of Shares. ........................................................................4
Section 4. Investments in the Trust. .................................................................4
Section 5. Status of Shares and Limitation of Personal Liability........................................4
Section 6. Establishment and Designation of Series. ...................................................5
(a) Assets Held with Respect to a Particular Series. .................................5
(b) Liabilities Held with Respect to a Particular Series. ............................6
(c) Dividends, Distributions, Redemptions, and Repurchases. ..........................6
(d) Equality. ........................................................................6
(e) Fractions. .......................................................................6
(f) Exchange Privilege. ..............................................................7
(g) Combination of Series. ...........................................................7
(h) Elimination of Series. ...........................................................7
Section 7. Indemnification of Shareholders. ...........................................................7
ARTICLE IV The Board of Trustees................................................................................7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 1. Number, Election and Tenure. ...............................................................7
Section 2. Effect of Death, Resignation, etc. of a Trustee. ..........................................8
Section 3. Powers. ....................................................................................8
Section 4. Payment of Expenses by the Trust. .........................................................12
Section 5. Payment of Expenses by Shareholders. ......................................................12
Section 6. Ownership of Assets of the Trust. .........................................................12
Section 7. Service Contracts...........................................................................12
Section 8. Trustees and Officers as Shareholders. ....................................................14
ARTICLE V Shareholders' Voting Powers and Meetings.............................................................14
Section 1. Voting Powers, Meetings, Notice and Record Dates. .........................................14
Section 2. Quorum and Required Vote. .................................................................15
Section 3. Record Dates. .............................................................................15
Section 4. Additional Provisions. ....................................................................15
ARTICLE VI Net Asset Value, Distributions and Redemptions......................................................15
Section 1. Determination of Net Asset Value, Net Income, and Distributions. ..........................15
Section 2. Redemptions and Repurchases.................................................................16
ARTICLE VII Compensation and Limitation of Liability of Trustee................................................17
Section 1. Compensation. .............................................................................17
Section 2. Indemnification and Limitation of Liability. ..............................................17
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or Surety. .............................18
Section 4. Insurance. ................................................................................18
ARTICLE VIII Miscellaneous ....................................................................................18
Section 1. Liability of Third Persons Dealing with Trustee. ..........................................18
Section 2. Termination of Trust or Series..............................................................18
Section 3. Reorganization and Master/Feeder............................................................19
Section 4. Amendments. ...............................................................................20
Section 5. Filing of Copies, References, Headings. ...................................................20
Section 6. Applicable Law..............................................................................21
Section 7. Provisions in Conflict with Law or Regulations..............................................21
Section 8. Business Trust Only. ......................................................................22
Section 9. Derivative Actions. .......................................................................22
</TABLE>
ii
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
TD WATERHOUSE TRUST
THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as of
the date set forth below by the Trustee named hereunder for the purpose of
forming a Delaware business trust in accordance with the provisions hereinafter
set forth.
NOW, THEREFORE, the Trustee hereby directs that the Certificate of
Trust be filed with the Office of the Secretary of State of the State of
Delaware and does hereby declare that the Trustee will hold IN TRUST all cash,
securities and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same upon
the following terms and conditions for the benefit of the holders of Shares in
this Trust.
Name and Definitions
Name. This Trust shall be known as TD WATERHOUSE TRUST and the Trustee
shall conduct the business of the Trust under that name or any other name as he
or she may from time to time determine.
Definitions. Whenever used herein, unless otherwise required by the
context or specifically provided:
"By-Laws" shall mean the By-Laws of the Trust as amended from time to time,
which By-Laws are expressly herein incorporated by reference as part of the
"governing instrument" within the meaning of the Delaware Act;.
"Certificate of Trust" means the certificate of trust, as amended or restated
from time to time, filed by the Trustee in the Office of the Secretary of State
of the State of Delaware in accordance with the Delaware Act;
"Class" means a class of Shares of a Series of the Trust established in
accordance with the provisions of Article III hereof;
"Commission" and "Principal Underwriter" shall have the meanings given them
in the 1940 Act;
"Declaration of Trust" means this Agreement and Declaration of Trust, as
amended or restated from time to time;
"Delaware Act" means the Delaware Business Trust Act, 12 Del. C. Sections 3801
et seq., as amended from time to time;
1
<PAGE>
"Interested Person" shall have the meaning given it in Section 2(a)(19) of the
1940 Act;
"Investment Manager" or "Manager" means a party furnishing services to the Trust
pursuant to any contract described in Article IV, Section 7(a) hereof;
"1940 Act" means the Investment Company Act of 1940 and the Rules and
Regulations thereunder, all as amended from time to time;
"Person" means and includes individuals, corporations, partnerships, trusts,
associations, joint ventures, estates and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof,
whether domestic or foreign;
"Series" means each Series of Shares established and designated under or in
accordance with the provisions of Article III;
"Shareholder" means a record owner of outstanding Shares;
"Shares" means the shares of beneficial interest into which the beneficial
interest in the Trust shall be divided from time to time and includes fractions
of Shares as well as whole Shares;
"Trust" means the Delaware Business Trust established under the Delaware Act by
this Declaration of Trust and the filing of the Certificate of Trust in the
Office of the Secretary of State of the State of Delaware;
"Trust Property" means any and all property, real or personal, tangible or
intangible, which is from time to time owned or held by or for the account of
the Trust; and
"Trustees" means the person who has signed this Declaration of Trust and all
other Person or Persons who may from time to time be duly elected or appointed
to serve as Trustee or Trustees in accordance with the provisions hereof, in
each case so long as such Person or Persons shall continue in office in
accordance with the terms of this Declaration of Trust, and reference herein to
a Trustee or the Trustees shall refer to such Person or Persons in his, her or
their capacities as trustee or trustees hereunder. Unless otherwise required by
the context or specifically provided, any reference herein to the Trustees shall
refer to the Trustee at any time that there is only one Trustee of the Trust.
2
<PAGE>
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities, and to carry on
such other business as the Trustees may from time to time determine pursuant to
their authority under this Declaration of Trust.
Shares
Division of Beneficial Interest. The beneficial interest in the Trust
shall be divided into one or more Series. Each Series may be divided into two or
more Classes. Subject to the further provisions of this Article III and any
applicable requirements of the 1940 Act, the Trustees shall have full power and
authority, in their sole discretion, and without obtaining any authorization or
vote of the Shareholders of any Series or Class thereof, (i) to divide the
beneficial interest in each Series or Class thereof into Shares, with or without
par value as the Trustees shall determine, (ii) to issue Shares without
limitation as to number (including fractional Shares), to such Persons and for
such amount and type of consideration, subject to any restriction set forth in
the By-Laws, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, (iii) to establish and designate and
to change in any manner any Series or Class thereof and to fix such preferences,
voting powers, rights, duties and privileges and business purpose of each Series
or Class thereof as the Trustees may from time to time determine, which
preferences, voting powers, rights, duties and privileges may be senior or
subordinate to (or in the case of business purpose, different from) any existing
Series or Class thereof and may be limited to specified property or obligations
of the Trust or profits and losses associated with specified property or
obligations of the Trust, (iv) to divide or combine the Shares of any Series or
Class thereof into a greater or lesser number without thereby materially
changing the proportionate beneficial interest of the Shares of such Series or
Class in the assets held with respect to that Series, (v) to classify or
reclassify any issued Shares of any Series or Class thereof into shares of one
or more Series or Classes thereof and (vi) to take such other action with
respect to the Shares as the Trustees may deem desirable.
Subject to the distinctions permitted among Classes of the same Series
as established by the Trustees consistent with the requirements of the 1940 Act,
each Share of a Series of the Trust shall represent an equal beneficial interest
in the net assets of such Series, and each holder of Shares of a Series shall be
entitled to receive such holder's pro rata share of distributions of income and
capital gains, if any, made with respect to such Series. Upon redemption of the
Shares of any Series, the applicable Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.
All references to Shares in this Declaration of Trust shall be deemed
to be Shares of any or all Series or Classes thereof, as the context may
require. All provisions herein relating to the
3
<PAGE>
Trust shall apply equally to each Series of the Trust and each Class thereof,
except as the context otherwise requires.
All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend in Shares or a split or reverse split of
Shares, shall be fully paid and non-assessable. Except as otherwise provided by
the Trustees, Shareholders shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust.
Ownership of Shares. The Ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent for the Trust, which books
shall be maintained separately for the Shares of each Series (or Class). No
certificates certifying the ownership of Shares shall be issued except as the
Board of Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, the transfer of Shares of each Series (or Class) and similar
matters. The record books of the Trust as kept by the Trust or any transfer or
similar agent, as the case may be, shall be conclusive as to the identity of the
Shareholders of each Series (or Class) and as to the number of Shares of each
Series (or Class) held from time to time by each Shareholder.
Transfer of Shares. Except as otherwise provided by the Trustees,
Shares shall be transferable on the books of the Trust only by the record holder
thereof or by his duly authorized agent upon delivery to the Trustees or the
Trust's transfer agent of a duly executed instrument of transfer, together with
a Share certificate if one is outstanding, and such evidence of the genuineness
of each such execution and authorization and of such other matters as may be
required by the Trustees. Upon such delivery, and subject to any further
requirements specified by the Trustees or contained in the By-Laws, the transfer
shall be recorded on the books of the Trust. Until a transfer is so recorded,
the Shareholder of record of Shares shall be deemed to be the holder of such
Shares for all purposes hereunder and neither the Trustees nor the Trust, nor
any transfer agent or registrar or any officer, employee or agent of the Trust,
shall be affected by any notice of a proposed transfer.
Investments in the Trust. Investments may be accepted by the Trust
from such Persons, at such times, on such terms, and for such consideration as
the Trustees from time to time may authorize.
Status of Shares and Limitation of Personal Liability. Shares shall be
deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof. The death,
incapacity, dissolution, termination or bankruptcy of a Shareholder during the
existence of the Trust shall not operate to terminate the Trust, nor entitle the
representative of any such Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but entitles such
representative only to the rights of such Shareholder under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust Property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders as partners. Neither
4
<PAGE>
the Trust nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholders, nor, except as
specifically provided herein, to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
Establishment and Designation of Series. The establishment and
designation of any Series (or Class) of Shares shall be effective upon the
adoption by a majority of the then Trustees of a resolution that sets forth such
establishment and designation and the relative rights and preferences of such
Series (or Class), whether directly in such resolution or by reference to
another document including, without limitation, any registration statement of
the Trust, or as otherwise provided in such resolution. The Trustees hereby
establish one Series, to be known as TD Waterhouse Dow 30 Fund, consisting of a
single Class of Shares.
Shares of each Series (or Class) established pursuant to this Article
III, unless otherwise provided in the resolution establishing such Series, shall
have the following relative rights and preferences:
Assets Held with Respect to a Particular Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably be held with
respect to that Series for all purposes, subject only to the rights of creditors
of such Series, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits and proceeds thereof, from
whatever source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds, in whatever form the same may
be, are herein referred to as "assets held with respect to" that Series. In the
event that there are any assets, income, earnings, profits and proceeds thereof,
funds or payments which are not readily identifiable as assets held with respect
to any particular Series (collectively "General Assets"), the Trustees shall
allocate such General Assets to, between or among any one or more of the Series
in such manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable, and any General Assets so allocated to a particular Series
shall be held with respect to that Series. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes. Separate and distinct records shall be maintained for each Series and
the assets held with respect to each Series shall be held and accounted for
separately from the assets held with respect to all other Series and the General
Assets of the Trust not allocated to such Series.
Liabilities Held with Respect to a Particular Series. The assets of the Trust
held with respect to each particular Series shall be charged against the
liabilities of the Trust held with respect to that Series and all expenses,
costs, charges and reserves attributable to that Series. Any general liabilities
of the Trust which are not readily identifiable as being held with respect to
any particular Series shall be allocated and charged by the Trustees to and
among any one or more of
5
<PAGE>
the Series in such manner and on such basis as the Trustees in their sole
discretion deems fair and equitable. All liabilities, expenses, costs, charges,
and reserves so charged to a Series are herein referred to as "liabilities held
with respect to" that Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
holders of all Series for all purposes. All liabilities held with respect to a
particular Series shall be enforceable against the assets held with respect to
such Series only and not against the assets of the Trust generally or against
the assets held with respect to any other Series and, except as otherwise
provided in this Declaration of Trust, none of the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to the Trust generally or any other Series thereof shall be enforceable
against the assets of such Series. Notice of this contractual limitation on the
liability of each Series shall be set forth in the Certificate of Trust or in an
amendment thereto prior to the issuance of any Shares of a Series.
Dividends, Distributions, Redemptions, and Repurchases. Notwithstanding any
other provisions of this Declaration of Trust, including, without limitation,
Article VI, no dividend or distribution, including, without limitation, any
distribution paid upon termination of the Trust or of any Series (or Class) with
respect to, nor any redemption or repurchase of, the Shares of any Series (or
Class) shall be effected by the Trust other than from the assets held with
respect to such Series, nor shall any Shareholder of any particular Series
otherwise have any right or claim against the assets held with respect to any
other Series except to the extent that such Shareholder has such a right or
claim hereunder as a Shareholder of such other Series. The Trustees shall have
full discretion, to the extent not inconsistent with the 1940 Act, to determine
which items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
Equality. All the Shares of each particular Series shall represent an equal
proportionate interest in the assets held with respect to that Series (subject
to the liabilities held with respect to that Series and such rights and
preferences as may have been established and designated with respect to Classes
of Shares within such Series), and each Share of any particular Series shall be
equal to each other Share of that Series.
Fractions. Any fractional Share of a Series shall carry proportionately all the
rights and obligations of a whole Share of that Series, including rights with
respect to voting, receipt of dividends and distributions, redemption of Shares
and termination of the Trust.
Exchange Privilege. The Trustees shall have the authority to provide that the
holders of Shares of any Series shall have the right to exchange said Shares for
Shares of one or more other Series of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
Combination of Series. The Trustees shall have the authority, without the
approval of the Shareholders of any Series unless otherwise required by
applicable law, to combine the assets and liabilities held with respect to any
two or more Series into assets and liabilities held with respect to a single
Series.
6
<PAGE>
Elimination of Series. At any time that there are no Shares outstanding of any
particular Series (or Class) previously established and designated, the Trustees
may by resolution of a majority of the then Trustees abolish that Series (or
Class) and rescind the establishment and designation thereof.
Indemnification of Shareholders. If any Shareholder or former
Shareholder shall be exposed to liability by reason of a claim or demand
relating to such Person being or having been a Shareholder, and not because of
such Person's acts or omissions, the Shareholder or former Shareholder (or such
Person's heirs, executors, administrators, or other legal representatives or in
the case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified out of the
assets of the Trust against all loss and expense arising from such claim or
demand, but only out of the assets held with respect to the particular Series of
Shares of which such Person is or was a Shareholder and from or in relation to
which such liability arose.
The Board of Trustees
Number, Election and Tenure. The number of Trustees shall initially be
one, who shall be Christopher J. Kelley. Hereafter, the number of Trustees shall
at all times be at least one and no more than fifteen as determined, from time
to time, by the Trustees pursuant to Section 3 of this Article IV. Each Trustee
shall serve during the continued lifetime of the Trust until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of his or her successor or, if sooner, until he or she dies,
resigns, retires, or is removed by the affirmative vote of a majority of the
outstanding Shares of the Trust. If there is more than one Trustee, in the event
that less than the majority of the Trustees holding office have been elected by
the Shareholders, to the extent required by the 1940 Act, but only to such
extent, the Trustees then in office shall call a Shareholders' meeting for the
election of Trustees. Any Trustee may resign at any time by written instrument
signed by the Trustee and delivered to any officer of the Trust or to a meeting
of the Trustees. Such resignation shall be effective upon receipt unless
specified to be effective at some other time. Except to the extent expressly
provided in a written agreement with the Trust, no Trustee resigning and no
Trustee removed shall have any right to any compensation for any period
following the effective date of his or her resignation or removal, or any right
to damages on account of such removal. The Shareholders may elect Trustees at
any meeting of Shareholders called by the Trustees for that purpose. Any Trustee
may be removed at any meeting of Shareholders by the affirmative vote of the
majority of the outstanding Shares of the Trust.
Effect of Death, Resignation, etc. of a Trustee. The death, declination
to serve, resignation, retirement, removal, or incapacity of one or more
Trustees, or all of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever there shall be fewer than the designated number of Trustees, until
additional Trustees are elected or appointed as provided herein to bring the
total number of Trustees equal to the designated number, the Trustees in office,
regardless of their number, shall
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have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustee by this Declaration of Trust. As conclusive evidence of
such vacancy, a written instrument certifying the existence of such vacancy may
be executed by an officer of the Trust or by a majority of the Trustees. In the
event of the death, declination, resignation, retirement, removal, or incapacity
of all the then Trustees within a short period of time and without the
opportunity for at least one Trustee being able to appoint additional Trustees
to replace those no longer serving, the Trust's Investment Manager(s) are
empowered to appoint new Trustees subject to the provisions of Section 16(a) of
the 1940 Act.
Powers. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and the Trustees shall
have all powers necessary or convenient to carry out that responsibility
including the power to engage in securities transactions of all kinds on behalf
of the Trust. Without limiting the foregoing, the Trustees may: adopt By-Laws
not inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the Shareholders; enlarge
or reduce their number; remove any Trustee with or without cause at any time by
written instrument signed by at least two-thirds of the number of Trustees prior
to such removal, specifying the date when such removal shall become effective,
and fill vacancies caused by enlargement of their number or by the death,
resignation or removal of a Trustee; elect and remove, with or without cause,
such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees consisting of one or more Trustees which may exercise the powers
and authority of the Board of Trustees to the extent that the Trustees
determine; employ one or more custodians of the assets of the Trust and
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank; retain a transfer agent or a shareholder servicing
agent, or both; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; set record dates for
the determination of Shareholders with respect to various matters; declare and
pay dividends and distributions to Shareholders of each Series from the assets
of such Series; and in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian, transfer or
Shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Trustees shall be deemed effective if approved or taken by a majority of the
Trustees present at a meeting of Trustees at which a quorum (as defined in the
By-Laws as may be amended from time to time) of Trustees are present, within or
without the State of Delaware.
Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):
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To invest and reinvest cash, to hold cash uninvested, and to subscribe for,
invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell,
assign, transfer, exchange, distribute, write options on, lend or otherwise deal
in or dispose of contracts for the future acquisition or delivery of fixed
income or other securities, and securities of every nature and kind, including,
without limitation, all types of bonds, debentures, stocks, negotiable or
non-negotiable instruments, obligations, evidences of indebtedness, certificates
of deposit or indebtedness, commercial paper, repurchase agreements, bankers'
acceptances, and other securities of any kind, issued, created, guaranteed, or
sponsored by any and all Persons, including, without limitation, states,
territories, and possessions of the United States and the District of Columbia
and any political subdivision, agency, or instrumentality thereof, any foreign
government or any political subdivision of the U.S. Government or any foreign
government, or any international instrumentality, or by any bank or savings
institution, or by any corporation or organization organized under the laws of
the United States or of any state, territory, or possession thereof, or by any
corporation or organization organized under any foreign law, or in "when issued"
contracts for any such securities, to change the investments of the assets of
the Trust; and to exercise any and all rights, powers, and privileges of
ownership or interest in respect of any and all such investments of every kind
and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more Persons,
to exercise any of said rights, powers, and privileges in respect of any of said
instruments;
To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write options
(including, options on futures contracts) with respect to or otherwise deal in
any property rights relating to any or all of the assets of the Trust or any
Series;
To vote or give assent, or exercise any rights of ownership, with respect to
stock or other securities or property; and to execute and deliver proxies or
powers of attorney to such Person or Persons as the Trustees shall deem proper,
granting to such Person or Persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
To exercise powers and right of subscription or otherwise which in any manner
arise out of ownership of securities;
To hold any security or property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in its own name or in the name
of a custodian or subcustodian or a nominee or nominees or otherwise;
To consent to or participate in any plan for the reorganization, consolidation
or merger of any corporation or issuer of any security which is held in the
Trust; to consent to any contract, lease, mortgage, purchase or sale of property
by such corporation or issuer; and to pay calls or subscriptions with respect to
any security held in the Trust;
To join with other security holders in acting through a committee, depository,
voting trustee or otherwise, and in that connection to deposit any security
with, or transfer any security to, any such committee, depository or trustee,
and to delegate to them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees shall deem
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proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or trustee as the Trustees shall deem
proper;
To compromise, arbitrate or otherwise adjust claims in favor of or against the
Trust or any matter in controversy, including, but not limited to, claims for
taxes;
To enter into joint ventures, general or limited partnerships and any other
combinations or associations;
To borrow funds or other property in the name of the Trust exclusively for Trust
purposes and in connection therewith issue notes or other evidence of
indebtedness; and to mortgage and pledge the Trust Property or any part thereof
to secure any or all of such indebtedness;
To endorse or guarantee the payment of any notes or other obligations of any
Person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the Trust Property or
any part thereof to secure any of or all of such obligations;
To purchase and pay for entirely out of Trust Property such insurance as the
Trustees may deem necessary or appropriate for the conduct of the business,
including, without limitation, insurance policies insuring the assets of the
Trust or payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, the Trustees, officers,
employees, agents, investment advisers, principal underwriters, or independent
contractors of the Trust, individually against all claims and liabilities of
every nature arising by reason of holding Shares, holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability;
To adopt, establish and carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and benefit plans and
trusts, including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust;
To operate as and carry out the business of an investment company, and exercise
all the powers necessary or appropriate to the conduct of such operations;
To enter into contracts of any kind and description;
To employ one or more banks, trust companies or companies that are members of a
national securities exchange or such other entities as the Commission may permit
as custodians of any assets of the Trust subject to any conditions set forth in
this Declaration of Trust or in the By-Laws;
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To interpret the investment policies, practices or limitations of any Series or
Class; and
To invest part or all of the Trust Property (or part or all of the assets of any
Series), or to dispose of part or all of the Trust Property (or part or all of
the assets of any Series) and invest the proceeds of such disposition, in
securities issued by one or more other investment companies registered under the
1940 Act (including investment by means of transfer of part or all of the Trust
Property in exchange for an interest or interests in such one or more investment
companies) all without any requirement of approval by Shareholders unless
required by the 1940 Act. Any such other investment company may (but need not)
be a trust (formed under the laws of the State of Delaware or of any other
state) which is classified as a partnership for federal income tax purposes.
Subject to the 1940 Act, to engage in any other lawful act or activity in which
a business trust organized under the Delaware Act may engage.
The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. The Trust shall not be required
to obtain any court order to deal with any assets of the Trust or take any other
action hereunder.
Payment of Expenses by the Trust. The Trustees are authorized to pay or
cause to be paid out of the principal or income of the Trust, or partly out of
the principal and partly out of income, as they deem fair, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with the Trust,
or in connection with the management thereof, including, but not limited to, the
Trustees compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser or manager, Principal
Underwriter, auditors, counsel, custodian, transfer agent, shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur, which
expenses, fees, charges, taxes and liabilities shall be allocated in accordance
with Article III, Section 6 hereof.
Payment of Expenses by Shareholders. The Trustees shall have the power,
as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series, to pay directly, in advance or arrears,
for charges of the Trust's custodian or transfer, Shareholder servicing or
similar agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such charges due from such Shareholder.
Ownership of Assets of the Trust. Title to all of the assets of the
Trust shall at all times be considered as vested in the Trust, except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust,
or in the name of any other Person as nominee, on such terms as the Trustees may
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determine. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee, he or she shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
Service Contracts
Subject to such requirements and restrictions as may be set forth under federal
and/or state law and in the By-Laws, including, without limitation, the
requirements of Section 15 of the 1940 Act, the Trustees may, at any time and
from time to time, contract for exclusive or nonexclusive advisory, management
and/or administrative services for the Trust or for any Series (or Class
thereof) with any corporation, trust, association or other organization; and any
such contract may contain such other terms as the Trustees may determine,
including, without limitation, authority for the Investment Manager or
administrator to delegate certain or all of its duties under such contracts to
qualified investment advisers and administrators and to determine from time to
time without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be delegated to such
party.
The Trustees may also, at any time and from time to time, contract with any
corporation, trust, association or other organization, appointing it exclusive
or nonexclusive distributor or Principal Underwriter for the Shares of one or
more of the Series (or Classes) or other securities to be issued by the Trust.
Every such contract shall comply with such requirements and restrictions as may
be set forth under federal and/or state law and in the By-Laws, including,
without limitation, the requirements of Section 15 of the 1940 Act; and any such
contract may contain such other terms as the Trustees may determine.
The Trustees are also empowered, at any time and from time to time, to contract
with any corporations, trusts, associations or other organizations, appointing
it or them the custodian, transfer agent and/or Shareholder servicing agent for
the Trust or one or more of its Series. Every such contract shall comply with
such requirements and restrictions as may be set forth under federal and/or
state law and in the By-Laws or stipulated by resolution of the Trustees.
Subject to applicable law, the Trustees are further empowered, at any time and
from time to time, to contract with any entity to provide such other services to
the Trust or one or more of the Series, as the Trustees determine to be in the
best interests of the Trust and the applicable Series.
The fact that:
any of the Shareholders, Trustees, or officers of the Trust is a shareholder,
director, officer, partner, trustee, employee, Manager, adviser, Principal
Underwriter, distributor, or affiliate or agent of or for any corporation,
trust, association, or other organization, or for any parent or
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affiliate of any organization with which an advisory, management or
administration contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other type of service contract may have
been or may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory, management or administration contract or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other type of service contract may have been
or may hereafter be made also has an advisory, management or
administration contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other service contract
with one or more other corporations, trusts, associations, or other
organizations, or has other business or interests, shall not affect the
validity of any such contract or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same, or create
any liability or accountability to the Trust or its Shareholders,
provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
Trustees and Officers as Shareholders. Any Trustee, officer or agent of
the Trust may acquire, own and dispose of Shares to the same extent as if he
were not a Trustee, officer or agent; and the Trustees may issue and sell and
cause to be issued and sold Shares to, and redeem such Shares from, any such
Person or any firm or company in which such Person is interested, subject only
to the general limitations contained herein or in the By-Laws relating to the
sale and redemption of such Shares.
Shareholders' Voting Powers and Meetings
Voting Powers, Meetings, Notice and Record Dates. The Shareholders
shall have power to vote only (i) for the election or removal of Trustees as
provided in Article IV, Section 1, and (ii) with respect to such additional
matters relating to the Trust as may be required by applicable law, this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. As determined by the Trustees without the vote
or consent of Shareholders (except as required by the 1940 Act), on any matter
submitted to a vote of Shareholders, either (i) each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote or (ii)
each dollar of Net Asset Value (number of Shares owned times Net Asset Value per
share of such Series or Class, as applicable) shall be entitled to one vote on
any matter on which such Shares are entitled to vote and each fractional dollar
amount shall be entitled to a proportionate fractional vote. Without limiting
the power of the Trustees in any way to designate otherwise in accordance with
the preceding sentence, the Trustees hereby establish that each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote.
Notwithstanding any other provision of this Declaration of Trust,
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on any matter submitted to a vote of the Shareholders, all Shares of the Trust
then entitled to vote shall be voted in aggregate, except (i) when required by
the 1940 Act, Shares shall be voted by individual Series; (ii) when the matter
involves the termination of a Series or any other action that the Trustees have
determined will affect only the interests of one or more Series, then only
Shareholders of such Series shall be entitled to vote thereon; and (iii) when
the matter involves any action that the Trustees have determined will affect
only the interests of one or more Classes, then only the Shareholders of such
Class or Classes shall be entitled to vote thereon. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy may be given in writing. The By-Laws may provide that proxies may also, or
may instead, be given by any electronic or telecommunications device or in any
other manner. Notwithstanding anything else contained herein or in the By-Laws,
in the event a proposal by anyone other than the officers or the Trustees of the
Trust is submitted to a vote of the shareholders of one or more Series or
Classes thereof or of the Trust, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or the
Trustees of the Trust, Shares may be voted only in person or by written proxy at
a meeting. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of Trust
or the By-Laws to be taken by the Shareholders. Meetings of the Shareholders
shall be called and notice thereof and record dates therefor shall be given and
set as provided in the By-Laws.
Quorum and Required Vote. Except when a larger quorum is required by
applicable law, by the By-Laws or by this Declaration of Trust, the holders of
Shares entitled to cast one-third of the votes, present in person or by proxy,
shall constitute a quorum at a Shareholders' meeting. When any one or more
Series (or Class) is to vote as a single class separate from any other Shares,
the holders of Shares of each such Series (or Class) entitled to cast one-third
of the votes, present in person or by proxy, shall constitute a quorum at a
Shareholders' meeting of that Series (or Class). Except when a larger vote is
required by any provision of this Declaration of Trust or the By-Laws or by
applicable law, when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality of the Shares voted
shall elect a Trustee, provided that where any provision of law or of this
Declaration of Trust requires that the holders of any Series shall vote as a
Series (or that holders of a Class shall vote as a Class), then a majority of
the Shares of that Series (or Class) voted on the matter (or a plurality with
respect to the election of a Trustee) shall decide that matter insofar as that
Series (or Class) is concerned.
Record Dates. For the purpose of determining the Shareholders of any
Series (or Class) who are entitled to receive payment of any dividend or of any
other distribution, the Trustees may from time to time fix a date, which shall
be before the date for the payment of such dividend or such other payment, as
the record date for determining the Shareholders of such Series (or Class)
having the right to receive such dividend or distribution. Without fixing a
record date, the Trustees may for distribution purposes close the register or
transfer books for one or more Series (or Classes) at any time prior to the
payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different Series
(or Classes).
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Additional Provisions. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters.
Net Asset Value, Distributions and Redemptions
Determination of Net Asset Value, Net Income, and Distributions.
Subject to applicable law and Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in a duly adopted
vote of the Trustees such bases and time for determining the per Share or net
asset value of the Shares of any Series (or Class) or net income attributable to
the Shares of any Series (or Class), or the declaration and payment of dividends
and distributions on the Shares of any Series (or Class), as they may deem
necessary or desirable.
Redemptions and Repurchases.
The Trust shall purchase such Shares as are offered by any Shareholder for
redemption, upon the presentation of a proper instrument of transfer together
with a request directed to the Trust or a Person designated by the Trust that
the Trust purchase such Shares or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and the Trust will
pay therefor the net asset value thereof as determined by the Trustees (or on
their behalf), in accordance with any applicable provisions of the By-Laws and
applicable law, less any fees imposed on such redemption. Unless extraordinary
circumstances exist, payment for said Shares shall be made by the Trust to the
Shareholder within seven (7) days after the date on which the request is made in
proper form. The obligation set forth in this Section 3 is subject to the
provision that in the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if permitted by
the rules and regulations or an order of the Commission during periods when
trading on the Exchange is restricted or during any emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets held with respect to
such Series or during any other period permitted by order of the Commission for
the protection of investors, such obligations may be suspended or postponed by
the Trustees. In the case of a suspension of the right of redemption as provided
herein, a Shareholder may either withdraw the request for redemption or receive
payment based on the net asset value per share next determined after the
termination of such suspension, less any fees imposed on such redemption.
The redemption price may in any case or cases be paid wholly or partly in kind
if the Trustees determine that such payment is advisable in the interest of the
remaining Shareholders of the Series for which the Shares are being redeemed.
Subject to the foregoing, the fair value, selection and quantity of securities
or other property so paid or delivered as all or part of the redemption price
may be determined by or under authority of the Trustees. In no case shall the
Trust be liable for any delay of any corporation or other Person in transferring
securities selected for delivery as all or part of any payment in kind.
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The Trustees may require Shareholders to redeem Shares for any reason under
terms set by the Trustees, including, but not limited to, (i) the determination
of the Trustees that direct or indirect ownership of Shares of any Series has or
may become concentrated in such Shareholder to an extent that would disqualify
any Series as a regulated investment company under the Internal Revenue Code of
1986, as amended (or any successor statute thereto), (ii) the failure of a
Shareholder to supply a tax identification number if required to do so, or to
have the minimum investment required (which may vary by Series), or (iii) the
failure of a Shareholder to pay when due for the purchase of Shares issued to
him. Any such redemption shall be effected at the redemption price and in the
manner provided in this Article VI.
The holders of Shares shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code of 1986, as amended (or any successor statute thereto), or to comply with
the requirements of any other taxing authority.
Compensation and Limitation of Liability of Trustees
Compensation. The Trustees as such shall be entitled to reasonable
compensation from the Trust, and the Trustees may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Indemnification and Limitation of Liability. A Trustee, when acting in
such capacity, shall not be personally liable to any Person, other than the
Trust or a Shareholder to the extent provided in this Article VII, for any act,
omission or obligation of the Trust, of such Trustee or of any other Trustee.
The Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, Manager, adviser, sub-adviser or
Principal Underwriter of the Trust. The Trust shall indemnify each Person who
is, or has been, a Trustee, officer, employee or agent of the Trust and any
Person who is serving or has served at the Trust's request as a director,
officer, trustee, employee or agent of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise to the extent and in
the manner provided in the By-Laws. All persons extending credit to, contracting
with or having any claim against the Trust or the Trustees shall look only to
the assets of the Series that such person extended credit to, contracted with or
has a claim against, or, if the Trustees have yet to establish Series, of the
Trust for payment under such credit, contract or claim; and neither the Trustees
nor the Shareholders, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor. Every
note, bond, contract, instrument, certificate or undertaking and every other act
or thing whatsoever executed or done by or on behalf of the Trust or the
Trustees by any of them in connection with the Trust shall conclusively be
deemed to have been executed or done only in or with respect to his or her
capacity as Trustee or Trustees and such Trustee or Trustees shall not be
personally liable thereon. At the Trustees' discretion, any note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officer or officers may give notice that the Certificate of Trust is
on file in the
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Office of the Secretary of State of the State of Delaware and that a limitation
on liability of Series exists and such note, bond, contract, instrument,
certificate or undertaking may, if the Trustees so determines, recite that the
same was executed or made on behalf of the Trust by a Trustee or Trustees in
such capacity and not individually or by an officer or officers in such capacity
and not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only on the
assets and property of the Trust or a Series thereof, and may contain such
further recital as such Person or Persons may deem appropriate. The omission of
any such notice or recital shall in no way operate to bind any Trustees,
officers or Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable to the Trust and to
any Shareholder solely for the his or her own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee, and shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in accordance with such
advice nor for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.
Insurance. The Trustees shall be entitled and empowered to the fullest
extent permitted by law to purchase with Trust assets insurance for liability
and for all expenses reasonably incurred or paid or expected to be paid by a
Trustee, officer, employee or agent of the Trust in connection with any claim,
action, suit or proceeding in which he or she becomes involved by virtue of his
or her capacity or former capacity with the Trust.
Miscellaneous
Liability of Third Persons Dealing with Trustees. No Person dealing
with the Trustee shall be bound to make any inquiry concerning the validity of
any transaction made or to be made by the Trustees or to see to the application
of any payments made or property transferred to the Trust or upon its order.
Termination of Trust or Series.
Unless terminated as provided herein, the Trust shall continue without
limitation of time. The Trust may be terminated at any time by vote of a
majority of the Shares of each Series entitled to vote, voting separately by
Series, or by the Trustees by written notice to the Shareholders. Any Series of
Shares or Class thereof may be terminated at any time by vote of a majority of
the Shares of such Series or Class entitled to vote or by the Trustees by
written notice to the Shareholders of such Series or Class.
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Upon the requisite Shareholder vote or action by the Trustees to terminate the
Trust or any one or more Series of Shares or any Class thereof, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, of the Trust or of the particular Series or any
Class thereof as may be determined by the Trustees, the Trust shall in
accordance with such procedures as the Trustees consider appropriate reduce the
remaining assets of the Trust or of the affected Series or Class to
distributable form in cash or Shares (if any Series remain) or other securities,
or any combination thereof, and distribute the proceeds to the Shareholders of
the Series or Classes involved, ratably according to the number of Shares of
such Series or Class held by the several Shareholders of such Series or Class on
the date of distribution. Thereupon, the Trust or any affected Series or Class
shall terminate and the Trustees and the Trust shall be discharged of any and
all further liabilities and duties relating thereto or arising therefrom, and
the right, title and interest of all parties with respect to the Trust or such
Series or Class shall be canceled and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
Certificate of Trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
Reorganization and Master/Feeder
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by applicable law, (i) cause the Trust
to merge or consolidate with or into one or more trusts (or series thereof to
the extent permitted by law), partnerships, associations, corporations or other
business entities (including trusts, partnerships, associations, corporations or
other business entities created by the Trustees to accomplish such merger or
consolidation) so long as the surviving or resulting entity is an open-end
management investment company under the 1940 Act, or is a series thereof, that
will succeed to or assume the Trust's registration under the 1940 Act and that
is formed, organized or existing under the laws of the United States or of a
state, commonwealth, possession or colony of the United States, (ii) cause the
Shares to be exchanged under or pursuant to any state or federal statute to the
extent permitted by law or (iii) cause the Trust to incorporate under the laws
of Delaware. Any agreement of merger or consolidation or exchange or certificate
of merger may be signed by a majority of the Trustees and facsimile signatures
conveyed by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in this
Declaration of Trust, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 3 may effect any amendment to the
governing instrument of the Trust or effect the adoption of a new trust
instrument of the Trust if the Trust is the surviving or resulting trust in the
merger or consolidation.
The Trustees may create one or more business trusts to which all or any part of
the assets, liabilities, profits or losses of the Trust or any Series or class
thereof may be transferred and may
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provide for the conversion of Shares in the Trust or any Series or Class thereof
into beneficial interests in any such newly created trust or trusts or any
series or classes thereof.
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval, invest all or a portion of the Trust Property of any Series, or
dispose of all or a portion of the Trust Property of any Series, and invest the
proceeds of such disposition in interests issued by one or more other investment
companies registered under the 1940 Act. Any such other investment company may
(but need not) be a trust (formed under the laws of the State of Delaware or any
other state or jurisdiction) (or subtrust thereof) which is classified as a
partnership for federal income tax purposes. Notwithstanding anything else
herein, the Trustees may, without Shareholder approval unless such approval is
required by applicable law, cause a Series that is organized in the
master/feeder fund structure to withdraw or redeem its Trust Property from the
master fund and cause such series to invest its Trust Property directly in
securities and other financial instruments or in another master fund.
Amendments. Except as specifically provided in this Section, the
Trustees may, without Shareholder vote, restate, amend or otherwise supplement
this Declaration of Trust. Shareholders shall have the right to vote (i) on any
amendment that would affect their right to vote granted in Article V, Section 1
hereof, (ii) on any amendment to this Section 4 of Article VIII, (iii) on any
amendment that may be required to be approved by Shareholders by applicable law
or by the Trust's registration statement filed with the Commission and (iv) on
any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to the Shareholders that, as the Trustees determine,
shall affect the Shareholders of one or more Series shall be authorized by a
vote of the Shareholders of each Series affected and no vote of Shareholders of
a Series not affected shall be required. Notwithstanding anything else herein,
no amendment hereof shall limit the rights to insurance provided by Article VII,
Section 4 with respect to any acts or omissions of Persons covered thereby prior
to such amendment nor shall any such amendment limit the rights to
indemnification referenced in Article VII, Section 2 hereof as provided in the
By-Laws with respect to any actions or omissions of Persons covered thereby
prior to such amendment. The Trustees may, without Shareholder vote, restate,
amend, or otherwise supplement the Certificate of Trust as the Trustees deem
necessary or desirable.
Filing of Copies, References, Headings. The original or a copy of this
instrument and of each restatement and/or amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such restatements and/or amendments have been made and as to
any matters in connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an officer of the Trust
to be a copy of this instrument or of any such restatements and/or amendments.
In this instrument and in any such restatements and/or amendments, references to
this instrument, and all expressions such as "herein", "hereof" and "hereunder",
shall be deemed to refer to this instrument as amended or affected by any such
restatements and/or amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. Whenever the singular number
is used herein, the same shall include the plural; and the neuter, masculine and
feminine genders shall include
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each other, as applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Applicable Law.
The Trust is created under, and this Declaration of Trust is to be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware. The Trust shall be of the type commonly called a business trust, and
without limiting the provisions hereof, the Trust specifically reserves the
right to exercise any of the powers or privileges afforded to business trusts or
actions that may be engaged in by business trusts under the Delaware Act, and
the absence of a specific reference herein to any such power, privilege or
action shall not imply that the Trust may not exercise such power or privilege
or take such actions.
Notwithstanding the first sentence of Section 6(a) of this Article VIII, there
shall not be applicable to the Trust, the Trustees or this Declaration of Trust
(x) the provisions of Section 3540 of Title 12 of the Delaware Code or (y) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts that relate to or regulate: (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining a court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums applicable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards or responsibilities or limitations on the acts or powers of
trustees that are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this
Declaration of Trust.
Provisions in Conflict with Law or Regulations.
The provisions of the Declaration of Trust are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provision is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended (or any successor statute thereto),
and the regulations thereunder, the Delaware Act or with other applicable laws
and regulations, the conflicting provision shall be deemed never to have
constituted a part of the Declaration of Trust; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
If any provision of the Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration of Trust in any jurisdiction.
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Business Trust Only. It is the intention of the Trustees to create a
business trust pursuant to the Delaware Act. It is not the intention of the
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other than
a business trust pursuant to the Delaware Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners or members of a joint stock association.
Derivative Actions. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on
behalf of the Trust only if the following conditions are met:
The Shareholder or Shareholders must make a pre-suit demand upon the Trustees to
bring the subject action unless an effort to cause the Trustees to bring such an
action is not likely to succeed. For purposes of this Section 9(a), a demand on
the Trustees shall only be deemed not likely to succeed and therefore excused if
a majority of the Board of Trustees, or a majority of any committee established
to consider the merits of such action, has a personal financial interest in the
transaction at issue, and a Trustee shall not be deemed interested in a
transaction or otherwise disqualified from ruling on the merits of a Shareholder
demand by virtue of the fact that such Trustee receives remuneration for his
service on the Board of Trustees of the Trust or on the boards of one or more
trusts that are under common management with or otherwise affiliated with the
Trust.
Unless a demand is not required under paragraph (a) of this Section 9,
Shareholders eligible to bring such derivative action under the Delaware Act who
collectively hold at least 10% of the Outstanding Shares of the Trust, or who
collectively hold at least 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
Unless a demand is not required under paragraph (a) of this Section 9, the
Trustees must be afforded a reasonable amount of time to consider such
shareholder request and to investigate the basis of such claim. The Trustees
shall be entitled to retain counsel or other advisors 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 advisors in the event
that the Trustees determines not to bring such action.
For purposes of this Section 9, the Board of Trustees may designate a
committee of one Trustee to consider a Shareholder demand if necessary to create
a committee with a majority of Trustees who do not have a personal financial
interest in the transaction at issue. The Trustees shall be entitled to retain
counsel or other advisors in considering the merits of the request and may
require an undertaking by the Shareholders making such request to reimburse the
Trust for the expense of any such advisors in the event that the Trustees
determine not to bring such action.
IN WITNESS WHEREOF, the Trustees named below does hereby make and enter
into this Declaration of Trust as of the 6th day of August, 1999
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/s/ Christopher J. Kelley
- --------------------------------
Christopher J. Kelley
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS:
100 Wall Street
New York, New York 10005
<PAGE>
BY-LAWS
OF
TD WATERHOUSE TRUST
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I AGREEMENT AND DECLARATION OF TRUST..............................................................1
Section 1. Agreement and Declaration of Trust..................................................1
Section 2. Definitions.........................................................................1
ARTICLE II OFFICES.........................................................................................1
Section 1. Principal Office....................................................................1
Section 2. Registered Office and Other Offices.................................................1
ARTICLE III SHAREHOLDERS.........................................................................................1
Section 1. Meetings............................................................................1
Section 2. Notice of Meetings..................................................................2
Section 3. Record Date for Meetings............................................................2
Section 4. Proxies.............................................................................2
Section 5. Inspection of Books.................................................................3
Section 6. Action Without Meeting..............................................................3
Section 7. Application of this Article.........................................................3
ARTICLE IV TRUSTEES..............................................................................................3
Section 1. Meetings of the Trustees............................................................3
Section 2. Quorum and Manner of Acting.........................................................4
Section 3. Removal of Trustees.................................................................4
ARTICLE V COMMITTEES......................................................................................4
Section 1. Executive Committee.................................................................4
Section 2. Other Committees....................................................................4
Section 3. Meetings, Quorum and Manner of Acting...............................................5
ARTICLE VI OFFICERS...............................................................................................5
Section 1. General Provisions..................................................................5
Section 2. Term of Office and Qualifications...................................................5
Section 3. Removal.............................................................................5
Section 4. Powers and Duties of the Chairman...................................................5
Section 5. Powers and Duties of the President..................................................6
Section 6. Powers and Duties of the Vice President.............................................6
Section 7. Powers and Duties of the Treasurer..................................................6
Section 8. Powers and Duties of the Secretary..................................................6
Section 9. Powers and Duties of Assistant Treasurers...........................................7
Section 10. Powers and Duties of Assistant Secretaries.........................................7
Section 11. Compensation of Officers and the Trustees..........................................7
ARTICLE VII FISCAL YEAR.....................................................................................7
ARTICLE VIII SEAL............................................................................................7
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE IX WAIVERS OF NOTICE...............................................................................7
ARTICLE X CUSTODY OF SECURITIES...........................................................................8
Section 1. Employment of a Custodian...........................................................8
Section 2. Action upon Termination of Custodian Agreement......................................8
Section 3. Provisions of Custodian Contract....................................................8
Section 4. Central Certificate System..........................................................9
ARTICLE XI INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND OTHER AGENTS...............................9
Section 1. Agents, Proceedings, Expenses.......................................................9
Section 2. Indemnification.....................................................................9
Section 3. Limitations, Settlements............................................................9
Section 4. Insurance, Rights Not Exclusive....................................................10
Section 5. Advance of Expenses................................................................10
Section 6. Fiduciaries of Employee Benefit Plan...............................................10
ARTICLE XII Certificates...................................................................................11
ARTICLE XIII Amendments.....................................................................................11
</TABLE>
ii
<PAGE>
BY-LAWS
OF
TD WATERHOUSE TRUST
Agreement and Declaration of Trust
Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time amended,
supplemented or restated (the "Declaration of Trust") of TD Waterhouse Trust
(the "Trust").
Definitions. Unless otherwise defined herein, the terms used herein
have the respective meanings given them in the Declaration of Trust.
Offices
Principal Office. The principal office of the Trust shall be located at
100 Wall Street, New York, New York 10005, or such other location as the
Trustees may from time to time determine.
Registered Office and Other Offices. The registered office of the Trust
shall be located in the City of Wilmington, State of Delaware or such other
location within the State of Delaware as the Trustees may from time to time
determine. The Trust may establish and maintain such other offices and places of
business as the Trustees may from time to time determine.
Shareholders
Meetings. Meetings of the Shareholders shall be held at the principal
executive offices of the Trust or at such other place within the United States
of America as the Trustees shall designate. Meetings of the Shareholders shall
be called by the Secretary whenever (i) ordered by a majority of the Board of
Trustees, the Chairman of the Board or the President or (ii) requested in
writing by Shareholders holding at least ten percent (10%) of the outstanding
Shares entitled to vote. If the Secretary, when so ordered or requested, refuses
or neglects for more than 10 days to call such meetings, the Trustees or the
Shareholders so requesting, may, in the name of the Secretary, call the meeting
by giving notice thereof in the manner required when notice is given by the
Secretary.
<PAGE>
Notice of Meetings. Except as otherwise herein provided, notice of all
meetings of the Shareholders, stating the time, place and purposes of the
meeting, shall be given by the Secretary by delivering or mailing, postage
prepaid, to each Shareholder entitled to vote at said meeting at his or her
address as recorded on the register of the Trust at least ten (10) days and not
more than ninety (90) days before the meeting. Only the business stated in the
notice of the meeting shall be considered at such meeting. Notice of adjournment
of a Shareholders' meeting to another time or place need not be given, if such
time and place are announced at the meeting and the adjourned meeting is held
within a reasonable time after the date set for the original meeting. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his or her current address or if a written waiver of notice, executed before or
after the meeting by the Shareholder or his or her attorney thereunto
authorized, is filed with the records of the meeting.
Record Date for Meetings. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than ninety (90) days
prior to the date of any meeting of Shareholders as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.
Proxies. At any meeting of Shareholders, any holder of Shares entitled
to vote thereat may vote either in person or by written proxy signed by the
Shareholder, provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, for verification prior to the
time at which such vote shall be taken; provided, however, that notwithstanding
any other provision of this Section 4 to the contrary, the Trustees may at any
time adopt one or more electronic, telecommunication, telephonic, computerized
or other alternatives to execution of a written instrument that will enable
holders of Shares entitled to vote at any meeting to appoint a proxy to vote
such holders' Shares at such meeting. Proxies may be solicited in the name of
one or more of the Trustees, or one or more of the officers of the Trust. Only
Shareholders of record shall be entitled to vote. When any Share is held jointly
by several persons, any one of them may vote at any meeting in person or by
proxy in respect of such Share, but if more than one of them shall be present at
such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such Share is a minor or a person of unsound mind, and subject to
guardianship or the legal control of any other person as regards the charge or
management of such Share, he or she may vote by his or her guardian or such
other person appointed or having such control, and such vote may be given in
person or by proxy. At all meetings of the Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualifications of voters,
the validity of proxies, and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. Except as otherwise provided herein or
in the Declaration of Trust or the Delaware Act, all matters relating to the
giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to
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<PAGE>
proxies, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Shareholders were shareholders of a Delaware
corporation.
Inspection of Books. The Trustees shall from time to time determine
whether and to what extent, and at what times and places, and under what
conditions and regulations the accounts and books of the Trust or any of them
shall be open to the inspection of the Shareholders; and no Shareholder shall
have any right to inspect any account or book or document of the Trust except as
conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
Action Without Meeting. Any action that may be taken at any meeting of
Shareholders may be taken without a meeting and without prior notice if a
consent in writing setting forth the action so taken is signed by the holders of
outstanding Shares having not less than the minimum number of votes that would
be necessary to authorize or take that action at a meeting at which all Shares
entitled to vote on that action were present and voted. All such consents shall
be filed with the records of Shareholder meetings. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
Application of this Article. Meetings of Shareholders shall consist of
Shareholders of any Series (or Class thereof) or of all Shareholders, as
determined pursuant to the Declaration of Trust, and this Article shall be
construed accordingly.
Trustees
Meetings of the Trustees. The Trustees may in their discretion provide
for regular or stated meetings of the Trustees. Notice of regular or stated
meetings need not be given. Meetings of the Trustees other than regular or
stated meetings shall be held whenever called by the Chairman, the President, or
by any two of the Trustees, at the time being in office. Notice of the time and
place of each meeting other than regular or stated meetings shall be given by
the Secretary or an Assistant Secretary or by the officer or Trustees calling
the meeting and shall be delivered or mailed, postage prepaid, to each Trustee
at least two days before the meeting, or shall be telegraphed, cabled, or wired
to each Trustee at his or her business address, or personally delivered to him
or her, at least one day before the meeting. Such notice may, however, be waived
by any Trustee. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. A notice or waiver of notice need not specify the purpose of any
meeting. The Trustees may meet by means of a telephone conference circuit or
similar communications equipment by means of which all persons participating in
the meeting are connected, which meeting shall be deemed to have been held at a
place designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if a majority of the Trustees then
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<PAGE>
in office (or such higher number of Trustees as would be required to act on the
matter under the Declaration of Trust, these By-Laws or applicable law if a
meeting were held) consent to the action in writing and the written consents are
filed with the records of the Trustees' meetings. Such consents shall be treated
for all purposes as a vote taken at a meeting of the Trustees. Notwithstanding
the foregoing, all actions of the Trustees shall be taken in compliance with the
provisions of the Investment Company Act of 1940, as amended.
Quorum and Manner of Acting. A majority of the Trustees then in office
shall constitute a quorum for the transaction of business. If at any meeting of
the Trustees there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum shall be
obtained. Notice of an adjourned meeting need not be given. The act of the
majority of the Trustees present at any meeting at which there is a quorum shall
be the act of the Trustees, except as may be otherwise specifically provided by
law or by the Declaration of Trust or by these By-Laws.
Removal of Trustees. Any Trustee may be removed with or without cause
by the holders by a vote of a majority of the outstanding Shares then entitled
to be cast in the election of Trustees. This Section 3 of Article IV of the
By-Laws is not subject to alteration or repeal by the Board of Trustees, subject
to the requirements of the Investment Company Act of 1940, as amended.
Committees
Executive Committee. The Trustees by vote of a majority of all the
Trustees may elect from their own number an Executive Committee to consist of
two (2) or more Trustees to hold office at the pleasure of the Trustees, which
shall have the power to conduct the current and ordinary business of the Trust
while the Trustees are not in session, including the purchase and sale of
securities and the designation of securities to be delivered upon redemption of
Shares of the Trust, and such other powers of the Trustees as the Trustees may,
from time to time, delegate to them except those powers by law, the Declaration
of Trust or these By-Laws they are prohibited from delegating.
Other Committees. The Trustees by vote of a majority of all the
Trustees may elect from their own number other Committees from time to time to
consist of one or more Trustees to hold office at the pleasure of the Trustees,
which shall have such power and duties as the Board of Trustees may, by
resolution, prescribe, subject to the same limitations as with respect to the
Executive Committee. The terms of membership on such Committees and the
termination or circumstances giving rise to the termination of such Committees
shall be determined by the Trustees. The Trustees may designate a chairman of
any such Committee. In the absence of such designation the Committee may elect
its own chairman.
4
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Meetings, Quorum and Manner of Acting. The Trustees may (1) provide for
stated meetings of any Committees, (2) specify the manner of calling and notice
required for special meetings of any Committee, (3) specify the number of
members of a Committee required to constitute a quorum and the number of members
of a Committee required to exercise specified powers delegated to such
Committee, (4) authorize the making of decisions to exercise specified powers by
written assent of the requisite number of members of a Committee without a
meeting, and (5) authorize the members of a Committee to meet by means of a
telephone conference circuit. Each Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept at the principal
executive offices of the Trust.
Officers
General Provisions. The officers of the Trust shall be a President, a
Treasurer and a Secretary, who shall be elected by the Trustees. The Trustees
may elect such other officers or agents as the business of the Trust may
require, including a Chairman of the Board ("Chairman"), one or more Vice
Presidents, one or more Assistant Secretaries, and one or more Assistant
Treasurers. The Trustees may delegate to any officer or Committee the power to
appoint any subordinate officers or agents.
Term of Office and Qualifications. Except as otherwise provided by law,
the Declaration of Trust or these By-Laws, the President, the Treasurer and the
Secretary, and all other officers shall hold office at the pleasure of the
Trustees. The Secretary and Treasurer may be the same person. A Vice President
and the Treasurer or a Vice President and the Secretary may be the same person,
but the offices of Vice President, Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office, but may be a Trustee
of the Trust. Except as above provided, any two offices may be held by the same
person. The Chairman, if there be one, shall be a Trustee and may but need not
be a Shareholder. Any other officer may be but none need be a Trustee or
Shareholder.
Removal. The Trustees may remove any officer with or without cause. The
Trustees, at any regular or special meeting of the Trustees, may remove any
officer with or without cause, by a vote of a majority of the Trustees then in
office. Any officer or agent appointed by an officer or committee may be removed
with or without cause by such appointing officer or committee.
Powers and Duties of the Chairman. The Chairman, if such an officer is
elected, shall if present preside at meetings of the Shareholders and the
Trustees, shall be the chief executive officer of the Trust and shall, subject
to the control of the Trustees, have general supervision, direction and control
of the business and the officers of the Trust and exercise and perform such
other powers and duties as may be from time to time assigned to him by the
Trustees or prescribed by the Declaration of Trust or these By-Laws.
5
<PAGE>
Powers and Duties of the President. Subject to the powers of the
Chairman, if there be such an officer, the President shall be the principal
executive officer of the Trust. He or she may call meetings of the Trustees and
of any Committee thereof when he or she deems it necessary and, in the absence
of the Chairman, shall preside at all meetings of the Shareholders and the
Trustees. Subject to the control of the Trustees, the Chairman and any
Committees of the Trustees, within their respective spheres, as provided by the
Trustees, the President shall at all times exercise a general supervision and
direction over the affairs of the Trust. The President shall have the power to
employ attorneys, accountants and other advisers and agents for the Trust and to
employ such subordinate officers, agents, clerks and employees as he or she may
find necessary to transact the business of the Trust. He or she shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him or her by the
Trustees.
Powers and Duties of the Vice President. In the absence or disability
of the President, the Vice President or, if there be more than one Vice
President, any Vice President designated by the Trustees shall perform all the
duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him or her from time to time by the Trustees or the
President.
Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his or her hands to such
Custodian as the Trustees may employ pursuant to Article X of these By-Laws. He
or she shall render a statement of condition of the finances of the Trust to the
Trustees as often as the Trustees shall require the same and he or she shall in
general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him or her by the Trustees.
The Treasurer shall give a bond for the faithful discharge of his or her duties,
if required so to do by the Trustees, in such sum and with such surety or
sureties as the Trustees shall require.
Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he or she shall have custody of the seal of the
Trust; he or she shall have charge of the Share transfer books, lists and
records unless the same are in the charge of the Transfer Agent. The Secretary
shall attend to the giving and serving of all notices by the Trust in accordance
with the provisions of these By-Laws and as required by law; and subject to
these By-Laws, he or she shall in general perform all duties incident to the
office of the Secretary and such other duties as from time to time may be
assigned to him or her by the Trustees.
Powers and Duties of Assistant Treasurers. In the absence or disability
of the Treasurer, any Assistant Treasurer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each Assistant Treasurer shall perform such other duties as from time to time
may be assigned to him or her by the Trustees. Each Assistant Treasurer shall
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give a bond for the faithful discharge of his or her duties, if required so to
do by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him or her by the Trustees.
Compensation of Officers and the Trustees. Subject to any applicable
provisions of the Declaration of Trust, the compensation of the officers and
Trustees shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he or she is also a Trustee.
Fiscal Year
The fiscal year of the Trust shall end on such date as the Trustees
shall from time to time determine.
Seal
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
Waivers of Notice
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-Laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been telegraphed, cabled or wired for the purposes of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wire company
with instructions that it be telegraphed, cabled or wired.
Custody of Securities
Employment of a Custodian. The Trust shall place and at all times
maintain in the custody of a Custodian (including any sub-custodian for the
Custodian) all funds, securities and similar investments included in the Trust
Property. The Custodian (and any sub-custodian) shall
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be a bank having not less than $20,000,000 aggregate capital, surplus and
undivided profits and shall be appointed from time to time by the Trustees, who
shall fix its remuneration.
Action upon Termination of Custodian Agreement. Upon termination of a
Custodian Agreement or inability of the Custodian to continue to serve, the
Trustees shall promptly appoint a successor custodian, but in the event that no
successor custodian can be found who has the required qualifications and is
willing to serve, the Trustees shall call as promptly as possible a special
meeting of the Shareholders to determine whether the Trust shall function
without a custodian or shall be liquidated. If so directed by a vote of holders
of the majority of the outstanding Shares entitled to vote, the Custodian shall
deliver and pay over all Trust Property held by it as specified in such vote.
Provisions of Custodian Contract. The following provisions shall apply
to the employment of a Custodian and to any contract entered into with the
Custodian so employed: The Trustees shall cause to be delivered to the Custodian
all securities included in the Trust Property or to which the Trust may become
entitled, and shall order the same to be delivered by the Custodian only in
completion of a sale, exchange, transfer, pledge, loan of portfolio securities
to another person, or other disposition thereof, all as the Trustees may
generally or from time to time require or approve or to a successor Custodian;
and the Trustees shall cause all funds included in the Trust Property or to
which it may become entitled to be paid to the Custodian, and shall order the
same disbursed only for investment against delivery of the securities acquired
(including securities acquired under a repurchase agreement), or the return of
cash held as collateral for loans of portfolio securities, or in payment of
expenses, including management compensation, and liabilities of the Trust,
including distributions to Shareholders, or to a successor Custodian.
Notwithstanding anything to the contrary to these By-Laws, upon receipt of
proper instructions, which may be standing instructions, the Custodian may
deliver funds in the following cases: In connection with repurchase agreements,
the Custodian shall transmit prior to receipt on behalf of the Trust of any
securities or other property, funds from the Trust's custodian account to a
special custodian approved by the Trustees of the Trust, which funds shall be
used to pay for securities to be purchased by the Trust subject to the Trust's
obligation to sell and the seller's obligation to repurchase such securities (in
such case, the securities shall be held in the custody of the special
custodian); in connection with the Trust's purchase or sale of financial futures
contracts, the Custodian shall transmit, prior to receipt on behalf of the Trust
of any securities or other property, funds from the Trust's custodian account in
order to furnish and to maintain funds with brokers as margin to guarantee the
performance of the Trust's futures obligations in accordance with the applicable
requirements of commodities exchanges and brokers.
Central Certificate System. Subject to applicable rules, regulations
and orders adopted by the Commission, the Trustees may direct the Custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and
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may be transferred or pledged by bookkeeping entry without physical delivery of
such securities, provided that all such deposits shall be subject to withdrawal
only upon the order of the Trust.
Indemnification of Trustees, Officers,
Employees and Other Agents
Agents, Proceedings, Expenses. For the purpose of this Article, "agent"
means any Person who is or was a Trustee, officer, employee or other agent of
the Trust or is or was serving at the request of the Trust as a trustee,
director, officer, employee or agent of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise; "proceeding" means any
threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including appeals); and
"expenses" includes, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and all other liabilities
whatsoever.
Indemnification. Subject to the exceptions and limitation contained in
Section 3 below, every agent shall be indemnified by the Trust to the fullest
extent permitted by law against all liabilities and against all expenses
reasonably incurred or paid by him or her in connection with any proceeding in
which he or she becomes involved as a party or otherwise by virtue of his or her
being or having been an agent.
Limitations, Settlements. No indemnification shall be provided
hereunder to an agent:
who shall have been adjudicated by the court or other body
before which the proceeding was brought to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or
with respect to any proceeding disposed of (whether by
settlement, pursuant to a consent decree or otherwise) without an adjudication
by the court or other body before which the proceeding was brought that such
agent was liable to the Trust or its Shareholders by reason of disabling
conduct, unless there has been a determination that such agent did not engage in
disabling conduct:
(i) by the court or other body before which the
proceeding was brought;
(ii) by at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are
parties to the proceeding based upon a review of
readily available facts (as opposed to a full
trial-type inquiry); or
(iii) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed
to a full trial-type inquiry); provided, however,
that indemnification shall be provided hereunder to
an agent
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with respect to any proceeding in the event of (1) a
final decision on the merits by the court or other
body before which the proceeding was brought that the
agent was not liable by reason of disabling conduct,
or (2) the dismissal of the proceeding by the court
or other body before which it was brought for
insufficiency of evidence of any disabling conduct
with which such agent has been charged.
Insurance, Rights Not Exclusive. The rights of indemnification herein
provided may be insured against by policies maintained by the Trust on behalf of
any agent, shall be severable, shall not be exclusive of or affect any other
rights to which any agent may now or hereafter be entitled and shall inure to
the benefit of the heirs, executors and administrators of any agent.
Advance of Expenses. Expenses incurred by an agent in connection with
the preparation and presentation of a defense to any proceeding may be paid by
the Trust from time to time prior to final disposition thereof upon receipt of
an undertaking by or on behalf of such agent that such amount will be paid over
by him or her to the Trust if it is ultimately determined that he or she is not
entitled to indemnification under this Article XI; provided, however, that (a)
such agent shall have provided appropriate security for such undertaking, (b)
the Trust is insured against losses arising out of any such advance payments or
(c) either a majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the proceedings, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such agent will be found entitled to indemnification under this
Article XI.
Fiduciaries of Employee Benefit Plan. This Article does not apply to
any proceeding against any Trustee, investment manager or other fiduciary of an
employee benefit plan in that person's capacity as such, even though that person
may also be an agent of this Trust as defined in Section 1 of this Article.
Nothing contained in this Article shall limit any right to indemnification to
which such Trustee, investment manager, or other fiduciary may be entitled by
contract or otherwise which shall be enforceable to the extent permitted by
applicable law other than this Article.
Certificates
If so determined by resolution of the Board of Trustees, each
Shareholder of the Trust shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board of Trustees,
representing the number of Shares of the Trust owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case.
Certificates representing Shares shall be signed by or in the name of the Trust
by the President or a Vice President or the Chairman of the Board and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
Any or all of the signatures may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before
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such certificate shall be issued, it may be issued by the Trust with the same
effect as if such officer, transfer agent or registrar were still in the office
at the date of issue.
Amendments
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be adopted by (a) a vote of holders of the majority of the
outstanding Shares entitled to vote or (b) by the Trustees, provided, however,
that no By-law may be amended, adopted or repealed by the Trustees if such
amendment, adoption or repeal is required by applicable law, the Declaration of
Trust or these By-Laws, to be submitted to a vote of the Shareholders.
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CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated December 1, 1998, which is incorporated by reference, in
this Registration Statement on Form N-1A of TD Waterhouse Trust.
/s/ Ernst & Young LLP
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ERNST & YOUNG LLP
New York, New York
August 4, 1999
