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2000
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Annual Report
October 31, 2000
TD Waterhouse
Dow 30
Fund
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TD WATERHOUSE TRUST
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
<S> <C> <C>
TRUSTEES EXECUTIVE OFFICERS
George F. Staudter Carolyn B. Lewis George A. Rio*
Director of Koger Equity, Inc. President of President, Treasurer
Independent Financial Consultant The CBL Group and Chief Financial Officer
Richard W. Dalrymple Lawrence J. Toal Christopher J. Kelley*
President of Teamwork President and CEO of Vice President and Secretary
Management, Inc. Dime Bancorp, Inc.
*Affiliated person of the Distributor
TD WATERHOUSE ASSET MANAGEMENT, INC.
BOARD OF DIRECTORS AND SENIOR OFFICERS
DIRECTORS
Lawrence M. Waterhouse, Jr. Frank J. Petrilli Richard H. Neiman
Chairman Chairman, President and Executive Vice President,
TD Waterhouse Holdings, Inc. Chief Executive Officer General Counsel and Secretary
Senior Officers
David A. Hartman B. Kevin Sterns Michele R. Teichner
Senior Vice President Executive Vice President Senior Vice President
Chief Investment Officer Chief Financial Officer &Treasurer Compliance, Administration
& Operations
SERVICE PROVIDERS
INVESTMENT MANAGER TRANSFER AGENT INDEPENDENT AUDITORS
TD Waterhouse Asset Management, Inc. National Investor Services Corp. Ernst &Young LLP
100 Wall Street 55 Water Street 787 Seventh Avenue
New York, NY 10005 New York, NY 10041 New York, NY 10019
ADMINISTRATOR & CUSTODIAN LEGAL COUNSEL
Shareholder Servicing The Bank of New York Swidler Berlin Shereff
TD Waterhouse Investor Services, Inc. 100 Church Street Friedman, LLP
100 Wall Street New York, NY 10286 405 Lexington Avenue
New York, NY 10005 New York, NY 10174
Customer Service Department DISTRIBUTOR
1-800-934-4448 Funds Distributor, Inc. INDEPENDENT TRUSTEES COUNSEL
60 State Street Willkie Farr & Gallagher
Boston, MA 02109 153 East 53rd Street
New York, NY 10022
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TD WATERHOUSE DOW 30 FUND
DEAR SHAREHOLDER:
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We are pleased to provide you with the annual report for the TD Waterhouse Dow
30 Fund (the "Fund") for the fiscal year ended October 31, 2000. Total net
assets for the Fund were approximately $160.7 million as of October 31, 2000.
The Dow Jones Industrial AverageSM ("DJIA"SM) ended the period up 2.25%,
starting at 10,729.86 on October 31, 1999 and finishing at 10,971.14 on October
31, 2000. Over the Fund's past fiscal year, the DJIA has largely remained in a
wide range between a low of about 10,000 and a high of about 11,500. On a total
return basis, which includes reinvested dividends, the annual return for the
DJIA was +3.78%.
Your Fund had a total return for the same period of +3.56%, after expenses.
Since the investment objective of the Fund is to match the performance of the
DJIA before Fund expenses, we are pleased with these results. As with any
investment, past performance is no guarantee of future results and there is no
guarantee that the Fund's investment objective will be achieved in the future.
We will continue to work diligently, seeking to achieve the objective of the
Fund and to provide our shareholders with an investment vehicle designed to
closely emulate the performance of the DJIA.
Performance: Dow 30 Fund
vs. DJIA Index
(returns based on an initial investment of $10,000)
DIJA Index - $13,011
DOW 30 Fund - $12,957
[GRAPHIC OMITTED]
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Dow 30 Fund Average Annual Return as of 10/31/00:
One Year: 3.56%
Since Inception (3/31/98): 10.54%
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Note: Performance data quoted represents past performance. As with all
investments, past performance is no guarantee of future results. The
return is based on a constant investment throughout the period,
includes reinvestment of dividends and reflects a net return to the
shareholders after all expenses, inclusive of fee waivers. Without
this waiver, the Fund's total return would have been lower. The
returns shown for the DJIA reflect the reinvestment of dividends but
do not include any expenses, since an index has none. It is not
possible to invest in an index.
The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
The price performance of each of the DJIA stocks during the 12 months ended
October 31, 2000 is shown in the chart below. As can be seen in the chart, there
was an unusually wide disparity in performance among the individual stocks.
During the period, several companies executed stock splits, including Home Depot
Inc. (3-for-2), General Electric Co. (3-for-1), American Express Co. (3-for-1),
Alcoa Inc. (2-for-1), Intel Corp. (2-for-1), Citigroup Inc. (4-for-3), and
Hewlett-Packard Co. (2-for-1). In addition, Hewlett-Packard Co. spun off its
Agilent Technologies Inc. subsidiary.
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Price Price
Appreciation* DJIA Component Appreciation* DJIA Component
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<S> <C>
60.7% Hewlett-Packard Co. 0.1% Int'l Business Machines Corp.
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47.2% The Boeing Co. -5.5% Honeywell International
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45.4% Philip Morris Cos. Inc. -5.6% Alcoa Inc.
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35.8% The Walt Disney Co. -11.6% General Motors Corp.
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29.6% Citigroup Inc. -12.1% Johnson & Johnson
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26.5% J.P. Morgan & Co., Inc. -14.6% Home Depot Inc.
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21.3% General Electric Co. -20.0% Wal-Mart Stores, Inc.
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20.4% Exxon Mobil Corp. -24.9% McDonald's Corp.
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16.9% American Express Co. -25.6% Microsoft Corp.
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16.2% Intel Corp. -29.6% E.I. du Pont de Nemours and Co.
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15.4% United Technologies Corp. -30.4% International Paper Co.
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13.3% SBC Communications Inc. -31.9% The Proctor & Gamble Co.
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13.0% Merck & Co., Inc. -34.9% Eastman Kodak Co.
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2.3% The Coca-Cola Company -36.5% Caterpillar Inc.
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1.6% Minnesota Mining & Mfg. Co. -50.4% AT&T Corp.
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(C) 2000 Dow Jones & Company
</TABLE>
Notes: *Percentages reflect each stock's price appreciation only. They do not
include reinvested dividends. The stocks are listed from the best
performer to the worst over the most recent 12-month period.
Performance quoted represents past performance and is not a guarantee
of future results.
The U.S. stock market's performance over the Fund's most recent fiscal year was
marked by significant volatility. Most recently, investor sentiment has been
primarily influenced by valuation concerns, as surging oil prices and a falling
European currency - the "Euro" pressured the earnings of several companies.
Combined with several interest rate increases engineered by the Federal Reserve
Open Market Committee ("Federal Reserve"), investors were forced to consider
lowering their expectations for the economy's future growth rate and corporate
profits. While the U.S. economy expanded at a strong pace over the last four
calendar quarters, growing at an average annualized rate of over 5.0%, there are
signs that the growth rate could be adjusting to a slower, more sustainable
pace. This is largely due to the Federal Reserve's six interest rate increases
since June 1999. The ultimate impact of these rate adjustments on corporate
earnings, stock prices, economic growth and inflation are uncertain at this
point in time.
Looking forward to the next six months, the market's direction will likely be
primarily affected by how quickly and by how much the economy slows, as well as
by the impact of this slowing on corporate earnings, interest rates,
inflationary trends, and money investment flows. In light of today's economic
and market environments, we believe the overall quality and underlying financial
strength of the companies comprising the DJIA can provide a solid investment
foundation for our shareholders' investments in the Fund.
We welcome additional investments into the Fund, and provide a number of
attractive ways to invest or add to current positions. The minimum initial
investment is $1,000 and $100 for subsequent purchases, although these minimums
may be waived for existing customers of TD Waterhouse Investor Services, Inc.
("TD Waterhouse"). For TD Waterhouse IRA accounts, there are no minimum or
subsequent investment requirements. A periodic investment plan is also available
which requires a minimum investment of $100 monthly or $300 quarterly. Keep in
mind, however, that periodic investing neither guarantees a profit nor protects
against a loss in a declining market. You may contact TD Waterhouse's mutual
funds service department at 1-800-934-4448 and press option number 4 or your
local branch office for more information.
Sincerely,
Frank J. Petrilli
President and Chief Operating Officer
TD Waterhouse Group, Inc.
December 12, 2000
An investment in the Fund is neither FDIC-Insured nor guaranteed by the U. S.
Government and is not a deposit or obligation guaranteed by any bank and is
subject to investment risk, including possible loss of the principal amount
invested.
Distributor: Funds Distributor, Inc.
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TABLE OF CONTENTS
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Schedule of Investments ................................................... 6
Statement of Assets and Liabilities ....................................... 7
Statement of Operations ................................................... 8
Statement of Changes in Net Assets ........................................ 9
Financial Highlights ...................................................... 10
Notes to Financial Statements ............................................. 11
Report of Independent Auditors ............................................ 15
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TD WATERHOUSE DOW 30 FUND
SCHEDULE OF INVESTMENTS
October 31, 2000
NUMBER OF
SHARES VALUE
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<S> <C> <C>
COMMON STOCKS
Alcoa Inc. 87,925 $ 2,522,348
American Express Co. 87,925 5,275,500
AT&T Corp. 87,925 2,038,761
The Boeing Co. 87,925 5,962,414
Caterpillar Inc. 87,925 3,082,870
Citigroup Inc. 87,925 4,627,053
The Coca-Cola Company 87,925 5,308,472
E.I. du Pont de Nemours and Co. 87,925 3,989,597
Eastman Kodak Co. 87,925 3,945,634
Exxon Mobil Corp. 87,925 7,841,811
General Electric Co. 87,925 4,819,389
General Motors Corp. 87,925 5,462,341
Hewlett-Packard Co. 87,925 4,083,017
Home Depot Inc. 87,925 3,780,775
Honeywell International 87,925 4,731,464
Intel Corp. 87,925 3,956,625
International Business Machines Corp. 87,925 8,660,613
International Paper Co. 87,925 3,220,253
J.P. Morgan & Co., Inc. 87,925 14,551,588
Johnson & Johnson 87,925 8,100,091
McDonald's Corp. 87,925 2,725,675
Merck & Co., Inc. 87,925 7,907,755
Microsoft Corp.(A) 87,925 6,055,834
Minnesota Mining & Manufacturing Co. 87,925 8,495,753
Philip Morris Cos., Inc. 87,925 3,220,253
The Proctor & Gamble Co. 87,925 6,281,142
SBC Communications Inc. 87,925 5,072,173
United Technologies Corp. 87,925 6,138,264
Wal-Mart Stores, Inc. 87,925 3,989,597
The Walt Disney Co. 87,925 3,148,814
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TOTAL COMMON STOCKS (cost $152,905,986)--98.9% 158,995,876
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OTHER (cost $361,813)--0.2%
Diamonds(SM) Trust, Series 1 3,485 381,281
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REPURCHASE AGREEMENT--0.6%
ABN AMRO Inc. (Par Value & Cost $900,000)
~dated 10/31/00, due 11/1/00, 6.61%, in the amount of $900,165
~fully collateralized by $890,000 U.S. Government Securities, 7.12%, 11/15/01,
value $922,736 900,000
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U.S. GOVERNMENT OBLIGATIONS (cost $99,392)--0.1%
United States Treasury Bill, dated 12/9/00, matures 12/7/00,
par value $100,000, yield at time of purchase 6.18%(B) 99,390
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TOTAL INVESTMENTS (cost $154,267,191)--99.8% 160,376,547
OTHER ASSETS AND LIABILITIES, NET--0.2% 327,639
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NET ASSETS--100.0% $160,704,186
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(A) Non-income producing security
(B) Security pledged as collateral on open futures contracts
Please see accompanying notes to financial statements.
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TD WATERHOUSE DOW 30 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<S> <C>
ASSETS
Investments in securities, at value (cost $154,267,191) $ 160,376,547
Dividend and interest receivable 107,341
Receivable for capital shares sold 361,878
Receivable for investment securities sold 4,109,148
Receivable from broker 155,589
Variation margin receivable 22,500
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TOTAL ASSETS 165,133,003
LIABILITIES
Bank overdraft 90,762
Payable for capital shares redeemed 127,892
Payable for investment securities purchased 4,140,923
Payable to Investment Manager and its affiliates (Note 3) 11,619
Other accrued expenses 57,621
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Total Liabilities 4,428,817
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NET ASSETS $160,704,186
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Net assets consist of:
Paid-in-capital 140,026,169
Accumulated net realized gains from security transactions 14,642,193
Net unrealized appreciation on investments and futures contracts 6,035,824
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Net assets, at value $160,704,186
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Shares of beneficial interest outstanding 14,653,522
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Net asset value, redemption price and offering price per share (Note 2) $ 10.97
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Please see accompanying notes to financial statements.
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TD WATERHOUSE DOW 30 FUND
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2000
INVESTMENT INCOME
Dividend income $ 2,682,335
Interest income 12,179
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TOTAL INVESTMENT INCOME 2,694,514
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EXPENSES
Shareholder servicing fees (Note 3) 439,598
Investment management fees (Note 3) 351,678
Custody fees (Note 2) 91,928
Transfer agent fees (Note 3) 87,920
Professional fees 78,831
Registration fees 55,675
Shareholder reports and mailing 49,355
Trustees' fees 22,589
Other expenses 13,021
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TOTAL EXPENSES 1,190,595
Fees waived/expenses reimbursed by the Investment Manager
and its affiliates (Note 3) (751,009)
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NET EXPENSES 439,586
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NET INVESTMENT INCOME 2,254,928
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 15,234,788
Net change in unrealized depreciation on investments (11,035,243)
Net change in unrealized depreciation on futures contracts (73,532)
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 4,126,013
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,380,941
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Please see accompanying notes to financial statements.
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TD WATERHOUSE DOW 30 FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Year
Ended Ended
October 31, October 31,
2000 1999
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<S> <C> <C>
OPERATIONS:
Net investment income $ 2,254,928 $ 1,622,456
Net realized gains from security transactions 15,234,788 2,545,555
Net change in unrealized appreciation/depreciation on investments (11,108,775) 17,310,316
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Net increase in net assets from operations 6,380,941 21,478,327
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2,264,934) (1,622,456)
In excess of net investment income -- (2,724)
From net realized gains on security transactions (3,057,262) --
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Total distributions to shareholders (5,322,196) (1,625,180)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 88,503,495 155,677,326
Reinvestment of dividends 5,322,196 1,625,180
Payments for shares redeemed (109,491,695) (64,055,262)
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Net increase (decrease) in net assets from capital share transactions (15,666,004) 93,247,244
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TOTAL INCREASE (DECREASE) IN NET ASSETS (14,607,259) 113,100,391
NET ASSETS:
Beginning of period 175,311,445 62,211,054
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End of period $160,704,186 $175,311,445
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CAPITAL STOCK TRANSACTIONS:
Shares sold 8,195,894 15,233,177
Shares issued for dividends reinvested 492,427 159,759
Shares redeemed (10,094,133) (6,294,226)
Effect of reverse stock split (281,516) --
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Net increase (decrease) in shares outstanding (1,687,328) 9,098,710
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Please see accompanying notes to financial statements.
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TD WATERHOUSE DOW 30 FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average net
assets and other supplemental data for the periods indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Year Year Period
Ended Ended Ended
October 31, October 31, October 31,
2000 1999+ 1998*+
--------------- --------------- --------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.91 $ 8.74 $ 8.93
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INVESTMENT OPERATIONS
Net investment income 0.13 0.14 0.08
Net realized and unrealized gains (losses) on
investments 0.25 2.17 (0.19)
--------------- --------------- --------------
Total From Investment Operations 0.38 2.31 (0.11)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income (0.13) (0.14) (0.08)
Distributions from realized gains on investments (0.19) -- --
--------------- --------------- --------------
TOTAL DISTRIBUTIONS (0.32) (0.14) (0.08)
Net asset value, end of period $ 10.97 $ 10.91 $ 8.74
=============== =============== ==============
RATIOS
Ratio of net expenses to average net assets 0.25% 0.25% 0.25%(A)
Ratio of net investment income to average net assets 1.28% 1.37% 1.48%(A)
Decrease reflected in above expense ratio due to
waivers/reimbursements by the Investment Manager
and its affiliates (Note 3) 0.43% 0.43% 0.55%(A)
Supplemental Data
Portfolio turnover rate 38% 47% 8%(A)
Total investment return (B) 3.56% 26.72% (1.19%)
Net assets, end of period $ 160,704,186 $ 175,311,445 $ 62,211,054
=============== =============== ==============
Average net assets $ 175,715,409 $ 118,399,466 $ 28,460,853
=============== =============== ==============
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* The Fund commenced operations on March 31, 1998.
+ Adjusted for a .983262 to 1 reverse stock split paid to shareholders of
record on December 2, 1999. (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.
(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.
Please see accompanying notes to financial statements.
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TD WATERHOUSE DOW 30 FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 2000
NOTE 1 -- ORGANIZATION
TD Waterhouse Trust (the "Trust") was organized as a Delaware business trust on
August 6, 1999. The Trust is registered as an open-end management investment
company with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended (the "Act") and currently consists of eight funds
including the TDWaterhouse Dow 30 Fund (the "Fund"). Shares of beneficial
interest of the Trust are registered under the Securities Act of 1933, as
amended. The investment objective of the Fund is to seek to track the total
return of the Dow Jones Industrial AverageSM before Fund expenses. The Fund
commenced operations on March 31, 1998 and became part of the Trust on November
5, 1999. It is a non-diversified portfolio.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Fund's significant accounting policies:
Share Valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per share
are equal to the net asset value per share.
Securities Valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(normally 4:00 p.m., Eastern Time). Securities which are traded over-the-counter
are valued at the last sales price, if available, otherwise, at the last quoted
bid price. Securities traded on a national stock exchange are valued based upon
the closing price on the principal exchange where the security is traded.
Repurchase Agreements -- The Fund may enter into repurchase agreements with
financial institutions deemed to be creditworthy by the Fund's Investment
Manager, subject to the seller's agreement to repurchase and the Fund's
agreement to resell such securities at a mutually agreed upon price. Securities
purchased subject to repurchase agreements are deposited with the Fund's
custodian and, pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the value of the underlying securities falls
below the value of the repurchase price plus accrued interest, the Fund will
require the seller to deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller.
Futures Contracts -- The Fund may invest in stock index futures contracts. The
Fund is required to deposit with the broker an amount of cash equivalents equal
to a certain percentage of the contract amount. This is known as the "initial
margin." The "variation margin" represents the daily fluctuation in the value of
the contract. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the time it was closed. 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 of October 31, 2000, the Fund had the following open futures contracts: 18
DJIA Index Futures contracts expiring in December 2000, market value covered by
the contracts of $1,983,960, and unrealized depreciation of $73,532.
Investment Income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Under the terms of the custody agreement, the
Fund receives net earnings credits based on available cash balances left on
deposit. Income earned under this arrangement is included in interest income.
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TD WATERHOUSE DOW 30 FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 2000
(CONTINUED)
Distributions to Shareholders -- Dividends arising from net investment income,
if any, are declared daily and paid monthly. Net realized short-term capital
gains, if any, may be distributed during the year and net realized long-term
capital gains, if any, are distributed at least once each year. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations.
Securities Transactions -- Securities transactions are accounted for on the
trade date. Realized gain and loss from securities transactions are recorded on
a specific identification basis.
Expenses -- Expenses directly attributable to the Fund are charged to the Fund's
operations. Expenses which are applicable to all funds in the Trust are
allocated on a pro rata basis.
Use of Estimates -- The Fund's financial statements are prepared in accordance
with accounting principles generally accepted in the United States, which may
require the use of management estimates and assumptions. Actual results could
differ from these estimates.
Federal Income Taxes -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which the Fund so
qualifies, and distributes at least 90% of its taxable net income, the Fund (not
the shareholders) will be relieved of Federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
Reclassification of Capital Components -- As of October 31, 2000, to reflect
permanent book to tax differences, the Fund reclassified $10,006 from
accumulated net realized gains from security transactions to undistributed net
investment income. This reclassification had no effect on net assets or net
asset value per share.
NOTE 3-- INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES OF
THE INVESTMENT MANAGER
Under the terms of an Investment Management Agreement with TD Waterhouse Asset
Management, Inc. (the "Investment Manager"), a majority-owned subsidiary of The
Toronto-Dominion Bank, for the investment management services furnished to the
Fund, the Fund pays the Investment Manager an annual investment management fee,
equal to .20 of 1% of the average daily net assets of the Fund. The Investment
Manager will limit the Fund's overall expense ratio to no more than 0.45% on an
annual basis; however, for the fiscal year ended October 31, 2000, the
investment manager limited expenses to 0.25%. All expense limitations are
voluntary. For the year ended October 31, 2000, the Investment Manager
voluntarily waived $300,404 of its investment management fee.
TD Waterhouse Investor Services, Inc. ("TD Waterhouse"), an affiliate of the
Investment Manager, has been retained under an Administration Agreement to
perform certain administrative services for the Fund. For the administrative
services rendered to the Fund, the Investment Manager (not the Fund) pays TD
Waterhouse a monthly fee at an annual rate of .10 of 1% of the Fund's average
daily net assets.
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TD WATERHOUSE DOW 30 FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 2000
(CONTINUED)
TD Waterhouse has been retained under a Shareholder Services Agreement to
perform certain shareholder services necessary for the operation of the Fund.
The shareholder service plan adopted by the Fund provides that the Fund pay TD
Waterhouse a monthly fee at an annual rate of .25 of 1% of average daily net
assets. For the year ended October 31, 2000, TD Waterhouse voluntarily waived
$375,504 of its shareholder servicing fee for the Fund.
The Fund has entered into a Transfer Agency and Dividend Disbursing Agency
Agreement with National Investor Services Corp. (the "Transfer Agent"), an
affiliate of the Investment Manager, to perform transfer and dividend disbursing
agency-related services. For such services, the Fund pays the Transfer Agent a
monthly fee at an annual rate of .05 of 1% of average daily net assets. For the
year ended October 31, 2000, the Transfer Agent voluntarily waived $75,101 of
its transfer agent fee for the Fund.
Each Trustee who is not an "interested person" as defined in the Act, who serves
on the Board of Trustees/Directors of one or more investment companies in the
"Fund Complex" (which includes the Trust, TD Waterhouse Family of Funds, Inc.
and National Investors Cash Management Fund, Inc.) receives:
1. a base annual retainer of $15,000, payable quarterly,
2. a supplemental annual retainer of $6,000, if serving on the Board of
Trustees/Directors of more than two companies in the Fund Complex,
3. an additional supplemental annual retainer of $2,500, if serving on the
Board of Trustees/Directors of three or more companies in the Fund Complex,
and
4. a meeting fee of $3,000 for each meeting attended.
Compensation is allocated among the companies and the respective funds.
The Fund placed all of its portfolio transactions with TD Waterhouse. There were
no commissions paid to TD Waterhouse for the year ended October 31, 2000.
NOTE 4 - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities, other
than short-term investments, amounted to $66,208,252 and $82,263,317,
respectively, for the year ended October 31, 2000.
The cost of portfolio investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes as of
October 31, 2000. Accordingly, net unrealized appreciation for Federal income
tax purposes aggregated $6,109,356, consisting of $21,009,271 gross unrealized
appreciation and $14,899,915 gross unrealized depreciation.
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TD WATERHOUSE DOW 30 FUND
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000
(CONTINUED)
NOTE 5 -- SUBSEQUENT EVENT
On December 8, 2000, the Fund paid a capital gain distribution to shareholders
of record on December 7, 2000 in the amount of $1.20 per share (the short-term
capital gain distribution was $0.22 per share and the long-term capital gain
distribution was $0.98 per share). On the same day, the Fund declared a reverse
share split with a factor of 0.88674 in order to restore the Fund's net asset
value per share to at or near .001 (or 1/1000) of the closing value of the Dow
Jones Industrial Average.
NOTE 6-- FEDERAL TAX INFORMATION (UNAUDITED)
As required by Federal regulations, shareholders will receive notification of
their portion of the Fund's taxable ordinary dividends and capital gains
distributions paid, (if any), for the 2000 calendar year early in 2001.
This Report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
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Report of Independent Auditors
Shareholders and Board of Trustees
TD Waterhouse Dow 30 Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the TD Waterhouse Dow 30 Fund (one of the funds
comprising TD Waterhouse Trust) as of October 31, 2000, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2000 by correspondence with
the custodian and others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the TD
Waterhouse Dow 30 Fund at October 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the indicated
periods, in conformity with accounting principles generally accepted in the
United States.
/s/Ernst & Young
New York, New York
December 1, 2000
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