<PAGE>
1933 Act Registration No. 33-96132
1940 Act Registration No. 811-9086
============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 3 [X]
____________________
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
(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:
(212) 806-3500
John E. Pelletier, President
Waterhouse Investors Cash Management Fund, Inc.
One Exchange Place, 10th Floor, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copies of communications to:
Margery K. Neale, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022-9998
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to paragraph (b), or
[X] 60 days after filing pursuant to paragraph (a), or
[ ] on (date) pursuant to paragraph (b), or
[ ] on (date) pursuant to paragraph (a),
[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously elected to register an indefinite number of
shares of its Money Market, U.S. Government and Municipal Portfolios under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. In accordance with Rule 24f-2, a registration fee in
the amount of $500.00 has previously been paid. No notice has yet been
required to be filed pursuant to Rule 24f-2.
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WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
CROSS REFERENCE SHEET
Between Items Enumerated in Part A of Form N-1A and Prospectus and Between
Items Enumerated in Part B of Form N-1A and Statement of Additional
Information
Pursuant to Rule 481(a) under the Securities Act of 1933
Item Number of
Form N-1A; Part A Location in Prospectus
----------------- ----------------------
1. Cover Page . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . A Profile of the Fund
3. Condensed Financial
Information . . . . . . . Financial Highlights Table
4. General Description of
Registrant . . . . . . . . A Profile of the Fund; The
Fund in Detail; Other
Information -- General
Information about the Fund
5. Management of the Fund . . Operating Expenses and Fees
5A Management's Discussion of
Fund Performance . . . . . Inapplicable
6. Capital Stock and Other
Securities . . . . . . . . Your Account--Dividends;
Other Information
7. Purchase of Securities Being
Offered . . . . . . . . . A Profile of the Fund; The
Fund in Detail -- Pricing
Your Shares; Your Account;
Operating Expenses and Fees
8. Redemption or Repurchase . Your Account
9. Pending Legal Proceedings Inapplicable
ii
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Item Number of Location in Statement
Form N-1A; Part B of Additional Information
----------------- -------------------------
10. Cover Page . . . . . . . . Front Cover Page
11. Table of Contents . . . . . Table of Contents
12. General Information and
History . . . . . . . . . . Not Applicable
13. Investment Objectives and
Policies . . . . . . . . . Investment Policies and
Restrictions; Annex --
Ratings of Investments
14. Management of the Fund . . Officers and Directors
15. Control Persons and
Principal Holders of
Securities . . . . . . . . Officers and Directors
16. Investment Advisory and
Other Services . . . . . . Officers and Directors; The
Investment Manager;
Investment Management,
Distribution and Other
Services
17. Brokerage Allocation and
Other Practices . . . . . . Portfolio Transactions
18. Capital Stock and Other
Securities . . . . . . . . Shareholder Rights
19. Purchase, Redemption and
Pricing of Securities Being
Offered . . . . . . . . . . Dividends and Taxes;
Additional Purchase and
Redemption Information
20. Tax Status . . . . . . . . Dividends and Taxes
21. Underwriters . . . . . . . Investment Management,
Distribution and Other
Services
22. Calculation of Performance
Data . . . . . . . . . . . Performance
23. Financial Statements . . . Financial Statement
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
iii
<PAGE>
WATERHOUSE INVESTORS
CASH MANAGEMENT FUND, INC.
TABLE OF CONTENTS
A PROFILE OF THE FUND . . . . . . . . . . . . . . . . . . . . . . 3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives of Each Portfolio . . . . . . . . . . . . . 3
Benefits and Features to Waterhouse Securities Customers . . . . . 3
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . 5
THE FUND IN DETAIL . . . . . . . . . . . . . . . . . . . . . . . . 6
Matching Your Investment Needs to the Portfolios . . . . . . . . . 6
Investment Policies and Restrictions . . . . . . . . . . . . . . . 7
Pricing Your Shares . . . . . . . . . . . . . . . . . . . . . . . 12
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OPERATING EXPENSES AND FEES . . . . . . . . . . . . . . . . . . . . . . 14
Management and Related Expenses . . . . . . . . . . . . . . . . . 14
Shareholder Servicing . . . . . . . . . . . . . . . . . . . . . . 15
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Transfer Agent and Custodian . . . . . . . . . . . . . . . . . . . 16
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 17
YOUR ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Opening a Waterhouse Securities Brokerage Account . . . . . . . . 18
How To Buy Shares . . . . . . . . . . . . . . . . . . . . . . . . 19
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . 19
How To Exchange Portfolios . . . . . . . . . . . . . . . . . . . . 20
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Telephone Transactions . . . . . . . . . . . . . . . . . . . . . . 21
Small Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . 21
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 22
General Information about the Fund . . . . . . . . . . . . . . . . 22
Statements and Reports to Shareholders . . . . . . . . . . . . . . 22
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
WATERHOUSE SECURITIES, INC.
Member New York Stock Exchange o SIPC
National Headquarters
100 Wall Street o New York, New York 10005
CUSTOMER SERVICE
(800) 934-4410
WSI #0248 Rev. 6/4/96
Waterhouse
Investors Cash
Management
Fund, Inc.
-------------------------------
Three portfolios to choose from
Money Market
U.S. Government
Municipal
___________, 1996
[LOGO] Waterhouse Investor Services
<PAGE>
WATERHOUSE INVESTORS
CASH MANAGEMENT FUND, INC.
_______________, 1996
Waterhouse Investors Cash Management Fund, Inc. (the "Fund") is an open-end,
diversified management investment company known as a money market mutual fund.
The Fund consists of three no-load money market portfolios designed for
investors who seek current income consistent with the preservation of capital,
liquidity and a stable price of $1.00 per share. The three Portfolios are the
Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio. Each Portfolio invests in high quality money market instruments and
offers you the benefits of automatic daily sweep of free credit balances and,
when linked to a Waterhouse Investors Money Management Account, checkwriting and
an ATM/VISA Check Card for easy access to your money.
This Prospectus contains information about the Fund which a prospective investor
should know before investing and should be retained for future reference. A
Statement of Additional Information relating to the Fund, ____________, 1996
("SAI"), has been filed with the Securities and Exchange Commission ("SEC") and
is incorporated herein by reference. The SAI is available upon request and
without charge by writing the Fund or Waterhouse Securities, Inc., 100 Wall
Street, New York, New York 10005, or by calling 1-800-934-4410.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that any Portfolio of the Fund
will be able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund. This Prospectus does not
constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made.
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This page is intentionally left blank.
2
<PAGE>
WATERHOUSE INVESTORS
CASH MANAGEMENT FUND, INC.
A PROFILE OF THE FUND
Who May Want to Invest
Waterhouse Investors Cash Management Fund, Inc. (the "Fund") offers a choice of
three no-load money market portfolios: the Money Market Portfolio, the U.S.
Government Portfolio and the Municipal Portfolio. Each Portfolio is designed for
investors who would like to earn income at current money market rates in a
liquid investment that preserves capital. Because of their emphasis on liquidity
and preservation of capital, each Portfolio may be used as a high quality money
market investment for an investor's short-term cash requirements.
Investment Objectives of Each Portfolio
Each of the Portfolios seeks maximum current income to the extent consistent
with liquidity and preservation of capital and a stable price of $1.00 per
share. The Money Market Portfolio has the flexibility to invest in a broad range
of high quality money market securities in pursuit of its objective. The U.S.
Government Portfolio offers an added measure of safety by investing exclusively
in obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Municipal Portfolio offers investors federally tax-exempt
income by investing primarily in municipal securities. The rates of income each
Portfolio earns will vary from day to day and generally reflect short-term
interest rates. See "The Fund in Detail--Investment Policies and
Restrictions." There can be no assurance that any Portfolio of the Fund will be
able to maintain a stable net asset value of $1.00 per share.
Benefits and Features to Waterhouse Securities Customers
If you are a customer of Waterhouse Securities, Inc. ("Waterhouse Securities"),
you will enjoy the benefits of having free credit balances in your Waterhouse
Securities brokerage account swept daily into the Portfolio that you choose as
your sweep portfolio. In addition, if you set up your account as a Waterhouse
Investors Money Management Account, you will have access to money in your sweep
account 24 hours-a-day, seven days-a-week simply by writing a check or by using
your ATM/VISA Check Card. All of your activity in the Fund will be consolidated
on your Waterhouse Securities brokerage account statement to make your
recordkeeping easy. See "Your Account".
3
<PAGE>
Expenses
Money U.S.
Market Government Municipal
Portfolio Portfolio Portfolio
--------- ---------- ---------
Shareholder Transaction Expenses None None None
Annual Operating Expenses (as a
percentage of average daily
net assets)
Management Fees
(after fee waiver)(1) .35%(1) .35%(1) .25%(1)
Shareholder Servicing
Fees (after fee waiver)(2) .20%(2) .17%(2) .11%(2)
12b-1 Fees None None None
Other Expenses(3) .39%(3) .39%(3) .39%(3)
==== ==== ====
Total Portfolio
Operating Expenses .94% .91% .75%
- - -------------
1 The annual investment management fee for each Portfolio is payable to
Waterhouse Asset Management, Inc. (the "Investment Manager") on a graduated
basis of .35 of 1% of the first $1 billion of average daily net assets of each
Portfolio, .34 of 1% of the next $1 billion, and .33 of 1% of average daily
net assets over $2 billion. The Investment Manager has agreed to waive a
portion of the annual investment management fee for the Municipal Portfolio
through October 31, 1997, so that the actual fee payable annually by the
Municipal Portfolio during such period will be .25 of 1% of average daily net
assets of such Portfolio. The investment management fee is payable monthly.
See "Operating Expenses and Fees--Management and Related Expenses" and the
SAI. In the event the change of control of the Investment Manager, which is
described under "Operating Expenses and Fees-Management and Related
Expenses," is consummated, the Investment Manager has indicated that it will
extend the waiver relating to the Municipal Portfolio until the second
anniversary of the closing of the merger (i.e., approximately August 1998).
2 The Shareholder Servicing Fee is payable pursuant to a Shareholder Servicing
Plan adopted by the Fund's Board of Directors. The Fund's Board has determined
to limit the annual fee payable through October 31, 1997 under the Shareholder
Servicing Plan so as not to exceed .20 of 1% of average daily net assets in
the case of the Money Market Portfolio, .17 of 1% of average daily net assets
in the case of the U.S. Government Portfolio and .11 of 1% of average daily
net assets in the case of the Municipal Portfolio. Absent this reduction of
fees, the Shareholder Servicing Fee as a percentage of average daily net
assets for each Portfolio would be .25 of 1%. In the event the merger is
consumated, the Fund's Board of Directors has determined to continue this
reduction of fees until the second anniversary of the closing of the merger
(i.e., approximately August 1998). Pursuant to a Shareholder Servicing
Agreement, Waterhouse Securities has agreed to provide shareholder services
for the Fund on a continuing basis in exchange for such fees. In addition, the
Fund may enter into similar agreements with other service providers. See
"Operating Expenses and Fees-DShareholder Servicing" and the SAI.
3 Other Expenses include, among other items, (a) administration fees (.10 of 1%
of average daily net assets), which are paid to the Investment Manager; and
(b) a transfer agent fee (.20 of 1% of average daily net assets) which is paid
to Waterhouse National Bank, the parent of the Investment Manager (the
"Transfer Agent"). All expenses included in this category are based upon
estimated amounts for the 1996 fiscal year. See "Operating Expenses and
Fees-Administration," "--Transfer Agent and Custodian," "--Other Expenses"
and the SAI.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Portfolio 1 year 3 years
--------- ------ -------
Money Market $10 $30
U.S. Government $ 9 $29
Municipal $ 8 $24
The purpose of the preceding table is to assist you in understanding the various
costs and expenses that an investor in a Portfolio will bear directly or
indirectly. The example should not be considered to be a representation of past
or future expenses. Actual expenses may be greater or less than those shown. The
example assumes a 5% annual rate of return pursuant to the requirements of the
SEC. This hypothetical rate of return is not intended to be representative of
past or future performance of any Portfolio. Securities dealers and other
financial service firms, other than Waterhouse Securities, may independently
charge shareholders additional fees.
See "Operating Expenses and Fees."
4
<PAGE>
An ATM/VISA Check Card cash withdrawal from a customer's Waterhouse
Investors Money Management Account may result in the automatic redemption
of Fund shares. The first five ATM/VISA Check Card cash withdrawals per
month are free; thereafter, a $1.00 fee will be imposed by Waterhouse
Securities. For a discussion of such fee, see "Your Account -- How To
Sell Shares -- Automatic Sweep Redemptions".
FINANCIAL HIGHLIGHTS (unaudited) PERIOD ENDED APRIL 30, 1996*
The table that follows is included in the Fund's Semi-Annual Report, which can
be obtained by calling Customer Service at 800-934-4410.
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for the period
indicated. This information has been derived from each Portfolios' financial
statements.
<TABLE>
<CAPTION>
Money Market U.S. Government Municipal
Portfolio Portfolio Portfolio
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning $ 1.000 $ 1.000 $ 1.000
of period
INVESTMENT OPERATIONS:
Net investment income 0.018 0.018 0.012
DISTRIBUTIONS:
Distributions from net
investment income (0.018) (0.018) (0.012)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000
Net assets, end of period $1,203,040,049 $306,851,198 $215,310,530
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets (A) .71% .61% .49%
Ratio of net investment income
to average net assets (A) 4.69% 4.70% 2.88%
Decrease reflected in above
expense ratio due to waivers/
reimbursements by the
Investment Manager and its
affiliates (A) .23% .30% .26%
</TABLE>
______________
* The Fund commenced operations on December 20, 1995.
(A) Annualized
5
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THE FUND IN DETAIL
Matching Your Investment Needs to the Portfolios
The Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio are each no-load money market mutual funds. Each Portfolio seeks
maximum current income to the extent consistent with liquidity and preservation
of capital. The Portfolios are managed by investment professionals who purchase
only high quality, short-term money market securities that they believe present
minimal credit risk.
Each Portfolio invests in money market securities of different types. The Money
Market Portfolio has the flexibility to invest broadly in U.S.
dollar-denominated securities of domestic and foreign issuers. The U.S.
Government Portfolio offers an added measure of safety and invests exclusively
in obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Municipal Portfolio offers investors federally tax-exempt
income by investing primarily in municipal securities. Each Portfolio may invest
in the types of securities described below under "Investment Policies and
Restrictions." The rates of income will vary from day to day and generally
reflect current short-term interest rates.
While no one Portfolio is a substitute for building a balanced investment plan
tailored to your investment needs, each Portfolio can be a high quality liquid
money market investment for your brokerage account cash when it is not invested
in other securities. You can set up your account so that free credit balances in
your Waterhouse Securities brokerage account will be automatically swept daily
into the Portfolio you have chosen as your sweep vehicle. If you set up your
Waterhouse Securities brokerage account as a Waterhouse Investors Money
Management Account, you will have access to your money 24 hours-a-day, seven
days-a-week through checkwriting or by using your ATM/VISA Check Card.
Although the Portfolios are managed to avoid fluctuations of principal and
maintain a stable share price of $1.00 per share, there is no guarantee that a
Portfolio will achieve its investment objective or maintain a price of $1.00 per
share.
It is important to note that none of the Portfolios, including the U.S.
Government Portfolio, is guaranteed by the U.S. government. In addition, the
Municipal Portfolio would not be an appropriate investment for retirement plans
such as IRA or Keogh accounts, as income earned by such plans is tax-deferred
until withdrawal, and amounts withdrawn are taxable as ordinary income.
Therefore, such plans would receive no incremental tax benefit by investing in
the Municipal Portfolio.
6
<PAGE>
Investment Policies and Restrictions
The following is an abbreviated discussion of the investment policies and
restrictions of each Portfolio. A more detailed listing of each Portfolio's
policies and restrictions and more detailed information about a Portfolio's
investments are contained in the appendix to this Prospectus which discusses
certain types of investments (the "Appendix") and in the SAI.
Money Market Portfolio. The Money Market Portfolio pursues its objective by
investing in high quality U.S. dollar-denominated money market instruments with
remaining maturities of 13 months or less, consisting of the securities
described below and in the section of this Prospectus entitled "All
Portfolios":
1. Certificates of deposit and time deposits of domestic banks (including their
foreign branches), domestic savings and loan associations, United States
branches and foreign branches of foreign banks, and bankers' acceptances of
each of such entities other than domestic savings and loan associations.
2. Commercial paper rated in one of the two highest rating categories by a
nationally recognized statistical rating organization ("NRSRO"), or
commercial paper or notes of issuers with a debt issue (which is comparable
in priority and security with the commercial paper or notes) rated in one of
the two highest rating categories for short-term debt obligations by an
NRSRO, or unrated commercial paper or notes of comparable quality as
determined by the Investment Manager, or commercial paper secured by a letter
of credit issued by a domestic or foreign bank rated in the highest rating
category by an NRSRs. For a description of ratings issued by Moody's
Investors Services, Inc. ("Moody's") and Standard & Poor's Ratings Group
("S&P"), two NRSR's, see "Annex Ratings of Investments" in the SAI.
3. Obligations of, or guaranteed by, the United States or Canadian governments,
their agencies or instrumentalities.
4. Repurchase agreements involving obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are discussed in
the Appendix and in the SAI.
In addition, the Money Market Portfolio limits its investments to securities
that meet the quality and diversification requirements of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). These
diversification requirements prohibit the Money Market Portfolio from investing
more than 5% of its total assets in the securities of any one issuer, except in
limited circumstances permitted by such Rule. In addition, the Portfolio may not
invest more than 5% of its total assets in securities which have not been rated
(or deemed comparable to securities rated) in the highest rating category by an
NRSRO, with investment in such "second tier securities" of any one issuer being
limited to the greater of 1% of the Portfolio's total assets or $1 million.
These issuer diversification restrictions do not apply to securities issued by
the U.S. government and its agencies. The applicable quality requirements are
described below under "All Portfolios."
7
<PAGE>
To the extent the Money Market Portfolio purchases Eurodollar certificates of
deposit issued by foreign branches of U.S. banks or by foreign banks, commercial
paper issued by foreign branches of U.S. banks or by foreign banks, or
commercial paper issued by foreign entities, consideration will be given to
their marketability and possible restrictions on international currency
transactions and to regulations imposed by the domicile country of the foreign
issuer. Eurodollar certificates of deposit may not be subject to the same
regulatory requirements as certificates of deposit issued by U.S. banks and
associated income may be subject to the imposition of foreign taxes which would
reduce the yield on such investments to the Portfolio.
The Money Market Portfolio may invest in commercial paper issued by major
corporations under the Securities Act of 1933 in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers and individual investor participation in
the commercial paper market is very limited. The Portfolio also may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration which is afforded by Section 4(2) of the Securities
Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws. In addition, the Money Market
Portfolio may invest in other securities that are not registered under the
Securities Act of 1933 but that may be resold to "qualified institutional
buyers" under Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). See "All Portfolios" for additional information about Rule 144A
Securities. For more information about Section 4(2) paper and Rule 144A
Securities, see the Appendix.
U.S. Government Portfolio. The U.S. Government Portfolio pursues its objective
by investing exclusively in U.S. Treasury bills, notes, bonds and other
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements with respect to such obligations
("Government Securities"). A U.S. government guarantee of the securities owned
by the U.S. Government Portfolio, however, does not guarantee the net asset
value of the Portfolio's shares. See "The Fund in Detail--Pricing Your Shares."
All securities purchased must have a remaining maturity of 13 months or less.
The Portfolio limits its investments to securities that meet the quality
requirements of Rule 2a-7 under the Investment Company Act, which are described
below under "All Portfolios." For more information about Government Securities
and investments made by the U.S. Government Portfolio, see "All Portfolios" and
the Appendix.
Some securities issued by U.S. government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Banks, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Federal National
Mortgage Association, Farm Credit System and Student Loan Marketing Association.
With respect to securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. government will provide support to such agencies
or instrumentalities and such securities may involve risk of loss of principal
and interest.
8
<PAGE>
Municipal Portfolio. The Municipal Portfolio seeks maximum current income that
is exempt from federal income taxes to the extent consistent with preservation
of capital and liquidity. The Portfolio pursues its objective primarily by
investing in a diversified portfolio of short-term, high quality, tax-exempt
municipal obligations. It is a fundamental policy of the Municipal Portfolio
that normally no less than 80% of its total assets will be invested in
obligations issued or guaranteed by states, territories and possessions of the
United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities ("Municipal Securities"), the income from which
is exempt from federal income tax, but may be subject to federal alternative
minimum tax liability.
Dividends representing net interest income received by the Municipal Portfolio
on Municipal Securities will be exempt from federal income tax when distributed
to the Portfolio's shareholders, except to the extent that they are subject to
alternative minimum tax. Such dividend income may be subject to state and local
taxes. See "Other Information--Taxes--Municipal Portfolio." The Portfolio's
assets will consist of Municipal Securities, temporary investments as described
below, and cash.
The Municipal Portfolio will invest only in Municipal Securities which at the
time of purchase: (a) are rated within the two highest ratings by an NRSRO for
Municipal Securities, short-term Municipal Securities or municipal commercial
paper; (b) are guaranteed or insured by the U.S. government as to the payment of
principal and interest; (c) are fully collateralized by an escrow of Government
Securities acceptable to the Investment Manager; (d) are unrated, if determined
by the Investment Manager to be at least equal in quality to one or more of the
above ratings in accordance with the requirements of Rule 2a-7 under the
Investment Company Act. In addition, the Portfolio limits its investments to
securities that meet the applicable quality and diversification requirements of
Rule 2a-7 under the Investment Company Act which are described below under "All
Portfolios." For a description of the ratings issued by Moody's and S&P, see
"Annex--Ratings of Investments" in the SAI.
Municipal Securities are generally classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. For more information about Municipal Securities, see
the Appendix and the SAI.
The Municipal Portfolio may purchase high quality Certificates of Participation
in trusts that hold Municipal Securities. A Certificate of Participation gives
the Portfolio an undivided pro rata interest in each Municipal Security equal to
the Portfolio's percentage ownership interest in the Certificate of
Participation. For more information about Certificates of Participation, see
the Appendix.
The Municipal Portfolio may purchase Municipal Securities which provide for the
right to resell them to an issuer, bank or dealer at an agreed-upon price or
yield within a specified period prior to the maturity date of such securities
subject to the requirements of Rule 2a-7 under the Investment Company Act.
Such a right to resell is referred to as a "Standby Commitment." For more
information about "Standby Commitments," see the Appendix.
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In seeking to achieve its investment objective, the Municipal Portfolio may
invest all or any part of its assets in Municipal Securities that are
Industrial Development Bonds. Moreover, although the Portfolio does not
currently intend to do so on a regular basis, it may invest more than 25%
of its assets in Municipal Securities that are repayable out of revenue
streams generated from economically related projects or facilities, if such
investment is deemed necessary or appropriate by the Portfolio's Investment
Manager. To the extent that the Portfolio's assets are concentrated in
Municipal Securities payable from revenues on economically related projects
and facilities, the Portfolio will be subject to the risks presented by
such projects to a greater extent than it would be if the Portfolio's
assets were not so concentrated. For a description of Industrial
Development Bonds, see the Appendix.
The Municipal Portfolio may invest in Municipal Lease Obligations and
participation interests therein. The Portfolio may also purchase Tender
Option Bonds. To the extent such securities may be considered "conduit
securities," as defined in Rule 2a-7 under the Investment Company Act, such
securities will also be subject to the limitations of Rule 2a-7 under the
Investment Company Act applied to conduit securities, as discussed more fully
below. For a description of each of these types of investments, see
the Appendix.
The Municipal Portfolio may deviate from its investment policies and may
adopt temporary defensive measures when significant adverse market,
economic, political or other circumstances require immediate action in order
to avoid losses. During such periods, the Portfolio may temporarily invest
its assets, without limitation, in taxable temporary investments which
include the types of money market instruments listed under "Money Market
Portfolio" above. Interest income from temporary investments is taxable to
shareholders as ordinary income. Although the Portfolio is permitted to
invest in taxable securities, it is the Portfolio's primary intention to
generate income dividends that are not subject to federal income taxes. See
"Your Account--Dividends" and "Other Information--Taxes."
All Portfolios. Each Portfolio must comply with the requirements of Rule
2a-7 under the Investment Company Act. Under the applicable quality
requirements of Rule 2a-7, the Portfolios may only purchase U.S. dollar-
denominated instruments that are determined to present minimal credit risks
and that are at the time of acquisition "Eligible Securities" as defined in
Rule 2a-7. Generally "Eligible Securities" under Rule 2a-7 include only
securities that are rated in the top two rating categories by the required
number of NRSRO's (two or, if only one such NRSRO has rated the
security, that one organization) or if unrated, are deemed to be of
comparable quality. For a description of the ratings for Eligible
Securities issued by Moody's and S&P, see "Annex -- Ratings of Investments"
in the SAI.
Each Portfolio will maintain a dollar-weighted average maturity of 90 days
or less and will limit its investments to securities that have remaining
maturities of 13 months or less or other features that shorten maturities
in a manner consistent with the requirements of Rule 2a-7 under the
Investment Company Act, such as interest rate reset and demand features.
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It is a fundamental policy of all Portfolios that, with respect to 75% of
its assets, a Portfolio may not invest in the securities of any one issuer,
other than Government Securities, if as a result, more than 5% of its total
assets would be invested in securities of that issuer or the Portfolio would
hold more than 10% of the outstanding voting securities of that issuer.
Rule 2a-7 under the Investment Company Act, imposes additional
diversification requirements on the Portfolios. Currently, as a matter of
operating policy, each of the Money Market Portfolio and the Government
Portfolio may not invest more than 5% of its total assets in securities of
any one issuer, other than Government Securities. As of October 3, 1996, as a
matter of operating policy, as to 100% of their assets, none of the Money
Market Portfolio, the U.S. Government Portfolio or the Municipal Portfolio
will invest more than 5% of its total assets in the securities of any one
issuer, other than Government Securities and certain demand features
permitted by Rule 2a-7 under the Investment Company Act, see the SAI. In
addition, effective as of October 3, 1996, the diversification requirements
of Rule 2a-7 under the Investment Company Act, limit the ability of the
Municipal Portfolio to invest in certain "conduit securities," as defined in
Rule 2a-7 under the Investment Company Act which are "second tier
securities." Generally, conduit securities are securities issued to finance
non-governmental private projects, such as retirement homes, private
hospitals, local housing projects, and industrial development projects, with
respect to which the ultimate obligor is not a government entity. The
Municipal Portfolio's investment in "second tier" conduit securities, which
may include certain Industrial Development Bonds, is limited to 5% of the
Portfolio's total assets and, with respect to second tier conduit securities
issued by a single issuer, the greater of $1 million or 1% of the Portfolio's
total assets.
A Portfolio may borrow from banks and engage in reverse repurchase
agreements. However, as a matter of fundamental policy, a Portfolio may not
borrow money except as a temporary measure for defensive or emergency
purposes, and then (together with any reverse repurchase agreements) only in
an amount up to 33 1/3% of the value of its total assets less liabilities
(other than borrowings), in order to meet redemption requests without
immediately selling any portfolio securities. No Portfolio will borrow from
banks for leverage purposes. As a matter of fundamental policy, a Portfolio
will not purchase any security, other than a security with a maturity of one
day, while reverse repurchase agreements or borrowings representing more than
5% of its total assets are outstanding. In addition, as a matter of
fundamental policy, no Portfolio will 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. For more information on reverse
repurchase agreements and loans of portfolio securities, see the Appendix and
the SAI.
A Portfolio will not purchase or hold illiquid securities, including time
deposits and repurchase agreements not entitling the holder to payment of
principal and interest within seven days if, as a result thereof, more than
10% of such Portfolio's net assets would be invested in such securities.
If otherwise consistent with its investment objective and policies, each
Portfolio may purchase securities that are not registered under the
Securities Act of 1933 but which can be sold to qualified institutional
buyers in accordance with Rule 144A thereunder. Rule 144A Securities and
Section 4(2) paper will not be considered to be illiquid so long as the
Investment Manager, acting under guidelines adopted by the Board of
Directors, determines that an adequate trading market exists for the
security. For more information on illiquid securities, see the SAI.
Each Portfolio may purchase securities issued by other investment companies,
consistent with the Portfolio's investment objectives and policies. It is
currently anticipated that such investments will be made solely in other
no-load money market funds. For more information, see the Appendix and the
SAI.
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Each Portfolio may invest in instruments having rates of interest that are
adjusted periodically ("Variable Rate Obligations") or which "float"
continuously ("Floating Rate Obligations") according to formulae intended
to minimize fluctuation in values of the instruments. For information on
Variable and Floating Rate Obligations see the Appendix and the SAI.
Rule 2a-7 under the Investment Company Act sets forth certain requirements
for determining the maturity of Variable and Floating Rate Obligations, with
which each Portfolio will comply.
Each Portfolio may purchase and sell securities on a when-issued or delayed
delivery basis. A when-issued or delayed delivery transaction arises when
securities are bought or sold for future payment and delivery to secure
what is considered to be an advantageous price and yield to the Portfolio
at the time it enters into the transaction. For more information about
when-issued or delayed delivery basis securities, see the Appendix.
Each Portfolio, other than the Municipal Portfolio, may purchase certain
Stripped Government Securities. For a discussion of Stripped Government
Securities, see the Appendix.
Each Portfolio may also invest in Zero Coupon Bonds, a description of which
appears in the Appendix.
Each Portfolio (other than the Municipal Portfolio) may trade in certain
Asset-Backed Securities, which include pools of mortgages, loans, receivables
or other assets. Payment of principal and interest may be largely dependent
upon the cash flows generated by the assets backing the securities. The U.S.
Government Portfolio will not invest in any Asset- Backed Securities which
are not Government Securities. For a discussion of Asset-Backed Securities,
see the Appendix. Rule 2a-7 under the Investment Company Act, as amended
effective October 3, 1996, sets forth certain diversification, quality and
maturity requirements for asset-backed securities with which each Portfolio
will comply.
Each portfolio may invest in securities subject to letters of credit or other
credit enhancement features. Such letters of credit or other credit
enhancements are not subject to federal deposit insurance, and changes in the
credit quality of the issuers of such letters of credit or other credit
enhancements could cause losses to a Portfolio and affect its share price.
Fundamental Investment Objectives, Policies and Restrictions. The
investment objective of each Portfolio is fundamental. The Fund has also
adopted for each Portfolio certain fundamental investment restrictions and
policies which are identified above and others which are set forth in the
SAI. Such fundamental investment objectives, restrictions and policies
cannot be changed without approval by holders of a "majority of the
outstanding voting securities" of such Portfolio, as defined in the SAI.
Pricing Your Shares
The price of each Portfolio's shares on any given day is their net asset
value ("NAV"). The Fund normally calculates the NAV of each Portfolio as of
12:00 noon and 4:00 p.m. Eastern time each day that the New York Stock
Exchange ("NYSE") and the bank which serves as the custodian of each
Portfolio's assets (the "Custodian") are open. The NAV per share for a
Portfolio is calculated by subtracting the Portfolio's liabilities from its
total assets and then dividing the remainder by the total number of its
shares outstanding. The Fund's shares are sold at the NAV next determined
after an order and payment are received in the manner described under "Your
Account." Each Portfolio seeks to maintain its NAV at $1.00 per share.
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Like most money market funds, the Fund values the securities owned by each
Portfolio at amortized cost, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or discount)
rather than at current market value. This method of valuation minimizes the
effect of changes in a security's market value and helps each Portfolio to
maintain a stable $1.00 share price. The Fund's Board of Directors has
adopted procedures pursuant to which the NAV of each Portfolio, as
determined under the amortized cost method, is monitored in relation to the
market value of the Portfolios. Additional information regarding such
procedures is contained in the SAI.
Performance
From time to time, the Fund may advertise several types of performance
information for a Portfolio. These are "yield," "effective yield" and, for
the Municipal Portfolio only, "tax equivalent yield" and "tax equivalent
effective yield." Each of these figures will be based upon historical
earnings and is not representative of the future performance of a
Portfolio. The yield of a Portfolio refers to the net investment income
generated by a hypothetical investment in the Portfolio over a specific
seven-day period (which period will be stated in any such advertisement).
This net investment income is then annualized, which means that the net
investment income generated during the seven-day period is assumed to be
generated each week over a 52-week period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be reinvested
weekly when annualized. The effective yield will be slightly higher than
the yield due to the compounding effect of this assumed reinvestment. Tax
equivalent yield is the yield that a taxable investment must generate in
order to equal the Municipal Portfolio's yield for an investor in a stated
federal income tax bracket (normally assumed to be the maximum tax rate).
Tax equivalent yield is based upon, and will be higher than, the yield on
the portion of the Municipal Portfolio that is tax-exempt. Tax equivalent
effective yield is computed in the same manner as tax equivalent yield,
except that effective yield is substituted for yield in the calculation.
The performance of the Portfolios may be compared to that of other money
market mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets. A Portfolio's performance
also may be compared to other money market funds rated by IBC/Donoghue's
Money Fund Report(Registered), a reporting service on money market funds.
Investors may want to compare a Portfolio's performance to that of various
bank products as reported by BANK RATE MONITOR(Trademark), a financial
reporting service that publishes each week average rates of bank and thrift
institution money market deposit accounts and interest bearing checking
accounts. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. The performance of a
Portfolio also may be compared to that of United States Treasury Bills and
Notes, the consumer price index, the Standard & Poor's 500 Index(Trademark),
and various other investment indices.
Each Portfolio's yield will fluctuate. Shares of the Portfolio are not
insured against reduction in NAV. Additional information concerning the
calculation of a Portfolio's performance appears in the SAI.
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OPERATING EXPENSES AND FEES
Management and Related Expenses
Responsibility for overall management of the Fund rests with its Board of
Directors in accordance with Maryland law. Professional investment
supervision is provided by the Investment Manager, Waterhouse Asset
Management, Inc., 100 Wall Street, New York, New York 10005. The
Investment Management Agreement provides that the Investment Manager will
act as the investment adviser for each Portfolio and will manage its
investments. Subject to the general supervision of the Fund's Board of
Directors and in accordance with each Portfolio's investment policies, the
Investment Manager formulates guidelines and lists of approved investments
for each Portfolio, makes decisions with respect to and places orders for
that Portfolio's purchases and sales of portfolio securities and maintains
records relating to such purchases and sales. For the investment
management services furnished to each Portfolio, such Portfolio pays the
Investment Manager an annual investment management fee, accrued daily and
payable monthly, on a graduated basis equal to .35 of 1% of the first $1
billion of average daily net assets of each Portfolio, .34 of 1% of the
next $1 billion, and .33 of 1% of average daily net assets of each
Portfolio over $2 billion. The Investment Manager has agreed to waive a
portion of its fee payable by the Municipal Portfolio through October 31,
1997, so that the actual fee payable annually by such Portfolio during such
period will be equal to .25 of 1% of its average daily net assets. In the
event the merger described below is consummated, the Investment Manager has
indicated that it will extend the waiver relating to the Municipal Portfolio
until the second anniversary of the closing of the merger (i.e.,
approximately August 1998).
In order to increase the yield to investors, the Investment Manager and its
affiliates may voluntarily, from time to time, waive or reduce its (or their)
fees on assets held by each of the Portfolios, which would have the effect
of lowering that Portfolio's overall expense ratio and increasing yield to
investors during the time such fees are waived or reduced, as the case may
be. Fee waivers or reductions, other than those set forth in the
Investment Management Agreement or otherwise described in this Prospectus,
may be rescinded at any time without further notice to investors.
The Investment Manager is a wholly-owned subsidiary of Waterhouse National
Bank (the "Bank"), which is a wholly-owned subsidiary of Waterhouse
Investor Services, Inc. ("Waterhouse"). The Bank offers various banking
products and services primarily to the customers of Waterhouse Securities,
the principal subsidiary of Waterhouse. Waterhouse Securities is currently
one of the leading nationwide providers of discount brokerage and related
financial services in the United States.
Lawrence M. Waterhouse, Jr. is the Chairman of the Board of Directors and
Chief Executive Officer of Waterhouse. Through his ownership of voting
common stock of Waterhouse and his power to vote family holdings, Mr.
Waterhouse controls over 20% of the voting common stock of Waterhouse and
therefore may be considered a control person with respect to Waterhouse.
On April 10, 1996, Waterhouse and The Toronto Dominion Bank ("TD Bank")
announced that they had signed a merger agreement, providing for TD Bank to
acquire Waterhouse through a merger of Waterhouse into a newly formed
subsidiary of TD Bank (the "Merger"). Following the Merger, Waterhouse will
join forces with TD's brokerage subsidiary to become one of the largest
discount brokerage firms in North America. The TD Bank is North America's
14th largest bank with assets of more than Can$106 billion (US$78 billion)
and equity of Can$6.2 billion (US$4.6 billion). As of January, 1996, TD Bank
was rated AA by both Moody's Investor Services and Standard and Poors and it
has the highest securities rating of any Canadian bank.
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Consummation of the Merger is subject to satisfaction of a number of
conditions, including approval of the Merger by Waterhouse's stockholders and
receipt of certain regulatory approvals. Due to such requirements, it is
currently anticipated that consummation of the Merger will occur within four
to six months.
It is anticipated that management and employees of the Investment Manager and
its affiliates will remain unchanged following the Merger. Because of the
indirect change of control of the Investment Manager, consummation of the
Merger will result in the termination of the Investment Management Agreement
between the Investment Manager and the Fund. It is anticipated that a new
Investment Management Agreement containing substantially identical terms to
the current agreement will be submitted for approval to the Fund's Board of
Directors and shareholders prior to consummation of the Merger.
Certain other agreements between the Fund and the Investment Manager or its
affiliates, including the Administration Agreement, may also be deemed to
terminate upon consummation of the Merger. It is anticipated that new
agreements, substantially identical to the current agreements, will be
submitted for approval to the Fund's Board of Directors prior to consummation
of the Merger.
Shareholder Servicing
The Fund's Shareholder Servicing Plan ("Servicing Plan") permits each
Portfolio to pay banks, broker-dealers or other financial institutions that
have entered into a shareholder services agreement with the Fund
("Servicing Agents") for shareholder support services that they provide.
Payments under the Servicing Plan are calculated daily and paid monthly
at a rate set from time to time by the Board of Directors, provided that
the annual rate may not exceed .25 of 1% of the average daily net assets of
each Portfolio. The Fund's Board has determined to limit the annual fee
payable through October 31, 1997 under the Servicing Plan so as not to
exceed .20 of 1% of average daily net assets in the case of the Money
Market Portfolio, .17 of 1% of average daily net assets in the case of the
U.S. Government Portfolio and .11 of 1% of average daily net assets in the
case of the Municipal Portfolio. In the event the Merger is consummated, the
Fund's Board of Directors has determined to continue this reduction of fees
until the second anniversary of the closing of the Merger (i.e.,
approximately August 1998). 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.
Pursuant to a Shareholder Services Agreement between the Fund and
Waterhouse Securities, Waterhouse Securities has agreed to become a
Servicing Agent with respect to each Portfolio and to be compensated in
accordance with the fees set forth above. The Fund 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 support services with respect to such clients.
The Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the various shareholder services
agreements. See the SAI for more details on the Servicing Plan and the
Shareholder Services Agreement between the Fund and Waterhouse Securities.
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Administration
The Fund and the Investment Manager have entered into an Administration
Agreement pursuant to which the Investment Manager, as Administrator,
provides administrative services to each of the Portfolios. Administrative
services furnished by the Investment Manager include, among others,
maintaining and preserving the records of the Fund, including financial and
corporate records, computing NAV, dividends, performance data and financial
information regarding the Fund, preparing reports, overseeing the
preparation and filing with 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. For its
services as administrator, the Investment Manager receives from each
Portfolio an annual fee, payable monthly, of .10 of 1% of average daily net
assets of such Portfolio. The fee is accrued daily as an expense of each
Portfolio.
The Investment Manager has entered into a Subadministration Agreement with
Funds Distributor, Inc., One Exchange Place, Tenth Floor, Boston,
Massachusetts 02109 ("FDI"), pursuant to which FDI will perform certain of
the foregoing administrative services for the Fund. Under this Agreement,
the Investment Manager pays FDI's fees for providing such services. In
addition, the Investment Manager may enter into subadministration
agreements with other persons to perform such services from time to time.
Distribution
The distributor of the Fund is FDI, which has the exclusive right to
distribute shares of the Fund pursuant to a Distribution Agreement between
the Fund and FDI. FDI may enter into dealer or selling agency agreements
with affiliates of the Investment Manager and other firms for the sale of
Fund shares. FDI has entered into such a selling agency agreement with
Waterhouse Securities. FDI receives no fee from the Fund under the
Distribution Agreement for acting as distributor to the Fund. FDI also
acts as a subadministrator for the Fund. See "Operating Expenses and Fees
Administration."
Transfer Agent and Custodian
The Bank (also referred to as the "Transfer Agent") serves as transfer
agent and dividend disbursing agent for each Portfolio. 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 .20 of 1% of the
Portfolio's average daily net assets.
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The Transfer Agent has entered into a Sub-Transfer Agency and Dividend
Disbursing Agency Agreement with Waterhouse Securities and National
Investor Services Corp. ("NISC"), affiliates of the Investment Manager,
pursuant to which they will perform certain of the foregoing transfer
agency and dividend disbursing agency services. Under this agreement, the
Transfer Agent will compensate the Sub-Transfer and Dividend Disbursing
Agent for providing such services. In addition, the Transfer Agent may
enter into sub-transfer agency and dividend disbursing agency agreements
with other persons to perform such services from time to time.
The Bank of New York serves as the custodian of the assets of each of the
Portfolios (the "Custodian").
Other Expenses
The Fund also pays other expenses that are not assumed by third parties,
such as expenses relating to preparing, printing and mailing prospectuses,
proxy materials and other information to existing shareholders, blue sky
servicing fees, pricing services, legal, audit and custodian fees.
The Fund's expenses generally are allocated among the Portfolios on the
basis of relative net assets at the time of allocation, except that
expenses directly attributable to a particular Portfolio are charged to
that Portfolio.
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YOUR ACCOUNT
You may invest in the Fund through your Waterhouse Securities brokerage
account.
Opening a Waterhouse Securities Brokerage Account
You may open a Waterhouse Securities brokerage account by calling or
visiting the Waterhouse Securities office nearest you and requesting a New
Account Application. There is no fee to open a Waterhouse Securities
brokerage account.
Setting up your account for Automatic Sweep. By setting up your Waterhouse
Securities brokerage account for automatic sweep, free credit balances in
your brokerage account will be invested or "swept" automatically each
business day into the Portfolio you have selected ("Sweep Portfolio").
This feature keeps your money working for you while it is not invested in
other securities. "Free credit balances" refers to any settled or cleared
funds in your Waterhouse Securities brokerage account that are available
for payment or investment.
To set up your Waterhouse Securities brokerage account for automatic sweep,
you should select one of the money market sweep portfolios in the
appropriate section of the Waterhouse Securities New Account Application.
If you already have a Waterhouse Securities brokerage account but it is not
set up to automatically sweep free credit balances, simply call the
Waterhouse Securities office handling your account. In most cases, an
Account Officer will set up your account for automatic sweep while you are
on the phone.
While you may purchase shares of any of the three Portfolios at any time,
only one Portfolio may be designated as your Sweep Portfolio. The sweep
feature is subject to the terms and conditions of your Waterhouse
Securities brokerage account agreement.
Setting up your Waterhouse Investors Money Management Account. For those
Waterhouse Securities customers that qualify, a Waterhouse Investors Money
Management Account provides additional services over that of a brokerage
account. In addition to having free credit balances in your brokerage
account swept automatically each business day into your Sweep Portfolio,
you can access your investment in the Portfolio by writing checks or using
an ATM/VISA Check Card. You should contact your Waterhouse Securities
Account Officer for more details.
To set up your Waterhouse Investors Money Management Account, you should
complete the appropriate section of the Waterhouse Securities New Account
Application.
SIPC Coverage. Within your Waterhouse Securities brokerage account, you have
access to other investments available at Waterhouse Securities such as
stocks, bonds, and other mutual funds. The Securities Investor Protection
Corporation (known as "SIPC") provides account protection up to $500,000 for
your securities, including shares of the Portfolios, which you hold in a
Waterhouse Securities brokerage account. However, SIPC account protection
does not protect you from any loss of principal due to market or economic
conditions.
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How To Buy Shares
You may purchase shares of a Portfolio either through the automatic sweep
feature or by way of a direct purchase as set forth below.
Automatic Sweep Purchases. Free credit balances in your Waterhouse
Securities brokerage account will be automatically invested each business
day in the Sweep Portfolio you have selected. Checks deposited to your
Waterhouse Securities brokerage account will be automatically invested in
the Sweep Portfolio after allowing three business days for clearance. Net
proceeds from securities transactions in your brokerage account will be
automatically invested on the business day following settlement. Dividends
and interest payments from investments in your brokerage account will be
automatically invested in the Sweep Portfolio on the day they are credited
to your account.
Direct Purchases. A Waterhouse Securities brokerage customer may purchase
shares of any of the Portfolios by placing an order directly with a
Waterhouse Securities Account Officer. You may buy shares by mailing or
bringing your check to any Waterhouse Securities office. Checks should be
made payable to "Waterhouse Securities, Inc." and you should write your
Waterhouse Securities account number on the check. The check will be
deposited to your Waterhouse Securities brokerage account. Waterhouse
Securities allows three business days for clearance and shares of a
Portfolio will be purchased on the third business day.
Price. Shares are purchased at the NAV next-determined after an order is
received by the Fund. There is no sales charge to buy shares in the Fund.
Each Portfolio reserves the right to suspend the offering of shares for a
period of time and to reject any specific purchase order, including certain
purchases by exchange.
How To Sell Shares
To sell shares of a Portfolio, simply call a Waterhouse Securities Account
Officer. A redemption of your shares will be made at the NAV next
determined after your redemption request is received in proper form by the
Fund. The proceeds of the sale of your Fund shares ordinarily will be
credited to your brokerage account the same business day, but not later than
seven calendar days after an order to sell shares is received. If
Waterhouse Securities issues you a redemption check, it may be mailed to
you, or you may pick it up in person at a Waterhouse Securities office.
Automatic Sweep Redemptions. Shares of your Sweep Portfolio may
automatically be sold to satisfy a debit balance in your Waterhouse
Securities brokerage account. To the extent that there are not a
sufficient number of shares of your Sweep Portfolio to satisfy any such
debit, shares that you own of any other Portfolio of the Fund may be sold.
In addition, shares will be sold to settle securities transactions in your
Waterhouse Securities brokerage account if on the day before settlement
there is insufficient cash in the account to settle the net transactions.
Your brokerage account, as of the close of business each business day, will
be scanned for debits and pending securities settlements, and after
application of any free credit balance in the account to the debits, a
sufficient number of shares will be sold the following business day to
satisfy any remaining debits. Shares may also be sold automatically to
provide the cash collateral necessary to meet your margin obligations to
Waterhouse Securities.
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If you have a Waterhouse Investors Money Management Account and you
withdraw cash from your Waterhouse Securities brokerage account by way of a
check or ATM/VISA Check Card, shares of your Sweep Portfolio will
automatically be sold to satisfy any resulting debit balance. Each month,
the first five ATM cash withdrawals, including withdrawals that result in
the redemption of Fund shares, are free; thereafter, Waterhouse Securities
charges its customers a $1.00 service fee for each ATM/VISA Check Card cash
withdrawal. Holders of the ATM/VISA Check Card will not be liable for
unauthorized withdrawals resulting in redemptions of Fund shares that occur
after Waterhouse Securities is notified of the loss, theft or unauthorized
use of the Card. Further information regarding the rights of holders of
the ATM/VISA Check Card is set forth in the Waterhouse Investors Money
Management Agreement provided to each customer who opens a Waterhouse
Investors Money Management Account.
Your Retirement Account. To sell shares and receive payment in a
Retirement Account, you should complete a Waterhouse Securities
Distribution Form. These forms can be obtained by calling or visiting a
Waterhouse Securities office.
Price. Shares are redeemed at the NAV next-determined after a redemption
request is received by the Fund. There are no withdrawal penalties or
redemption fees.
Clearance. If you are selling shares you bought within the last 10 calendar
days, payment will be credited to your brokerage account upon clearance of
the funds used to purchase shares, which may take up to 10 calendar days.
How To Exchange Portfolios
You may change your designated Sweep Portfolio to any other Portfolio at any
time without charge. You may also exchange shares of one Portfolio for
another Portfolio. To effect an exchange, call your Waterhouse Securities
Account Officer with instructions to move your money from one Portfolio to
another, or you may mail written instructions to your local Waterhouse
Securities office. Your letter should reference your Waterhouse Securities
brokerage account number, the Portfolio from which you are exchanging and
the Portfolio into which you are exchanging. This letter should be signed
by at least one registered account holder.
An exchange involves the redemption of Portfolio shares and the purchase of
shares of another Portfolio at their respective NAVs after receipt of an
exchange request in proper form. Each Portfolio reserves the right to
reject specific exchange orders and, on 60 days' prior written notice, to
suspend, modify or terminate exchange privileges.
Dividends
On each day that the NAV of a Portfolio is determined, such Portfolio's net
investment income will be declared at 4:00 p.m. (Eastern time) as a daily
dividend to shareholders of record as of such day's last calculation of
NAV. All expenses are accrued daily and are deducted before declaration of
dividends to investors. Shareholders who buy shares of a Portfolio by 4:00
p.m. (Eastern time) will begin to earn dividends that business day.
Shareholders who buy shares of a Portfolio after 4:00 p.m. (Eastern time)
will begin earning dividends the following business day. Shareholders will
not earn dividends on the date of redemption for shares redeemed prior to
4:00 p.m. (Eastern time), but will earn dividends on such day for shares
redeemed after 4:00 p.m. (Eastern time). Each Portfolio's earnings for
Saturdays, Sundays and holidays are declared as dividends on the previous
business day.
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Dividends and distributions from a Portfolio will be reinvested in additional
full and fractional shares of the same Portfolio at the NAV next determined
after their payable date. Dividends are declared daily and are reinvested
monthly. A shareholder may elect to receive any monthly dividend in cash by
submitting a written election to Waterhouse Securities, Inc. by the tenth day
of the specific month to which the election to receive cash relates.
Telephone Transactions
As a customer of Waterhouse Securities, you will automatically have the
privilege of purchasing, redeeming or exchanging your Portfolio shares by
telephone. Waterhouse Securities will employ reasonable procedures to
verify the genuineness of telephone redemption or exchange 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 a 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 redemptions may be difficult to
implement. The Fund reserves the right to terminate or modify this
privilege at any time.
Small Accounts
There is currently no minimum requirement for initial and subsequent
purchases of Fund shares; however, the Fund may establish such minimum
requirements in the future. Because of the relatively high cost of
servicing small customer accounts, if your investment in the Fund drops
below such minimum, the Fund reserves the right to charge your account
maintenance fee (which would be payable to the Transfer Agent) or to
close your account by redeeming all of your Fund shares and sending the
proceeds to you. However, you will receive 30 days' prior written notice
from the Fund of its election to pursue either of these remedies, during
which time you will have the opportunity to restore the applicable minimum
account balance. All shareholders of the Fund will be notified prior to
the effective date of the implementation of any such minimum requirement.
Shareholder Inquiries
Shareholder inquiries may be made by writing to the Fund or Waterhouse
Securities, Customer Service at 100 Wall Street, New York, New York 10005,
or by calling your Waterhouse Securities Account Officer.
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OTHER INFORMATION
General Information about the Fund
The Fund was organized under Maryland law on August 16, 1995 and is
registered under the Investment Company Act as an open-end diversified
management investment company. The Fund is authorized to issue 100 billion
shares in one or more series ("Portfolios") subject to approval of the
Board of Directors. Because the Fund offers multiple Portfolios, it is
known as a "series company." Shares are fully paid and nonassessable when
issued, are transferable without restriction, and have no preemptive or
conversion rights (other than the exchange privileges described in this
Prospectus and the SAI). The Board of Directors may increase the number of
authorized shares or create additional series or classes of Fund or
Portfolio shares without shareholder approval.
Unless otherwise required by the Investment Company Act, ordinarily it will
not be necessary for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of
directors or the appointment of auditors. However, pursuant to the Fund's
By-Laws, the holders of at least 10% of the shares outstanding and entitled
to vote may require the Fund to hold a special meeting of shareholders for
any purpose, including the removal of directors from office. Fund
shareholders may remove a director by the affirmative vote of a majority of
the outstanding shares of stock entitled to be cast for the election of
directors. In addition, the Board of Directors will call meetings of
shareholders for the purpose of electing directors if, at any time, less
than a majority of the directors then holding office has been elected by
shareholders. In addition, the Fund will hold special meetings as required
by or deemed desirable by the Board of Directors for other purposes, such as
changing fundamental investment policies or approving an investment advisory
agreement. Shareholders will vote by Portfolio and not in the aggregate
except when voting in the aggregate is required under the Investment
Company Act, such as for the election of directors, or as required by
Maryland law.
Statements and Reports to Shareholders
The Fund will not issue share certificates but will record your holdings in
noncertificated form. Your Fund activity will be reflected in your
Waterhouse Securities brokerage account statement. The Fund will also
provide you with annual audited and semi-annual unaudited financial
statements. To reduce expenses, only one copy of most financial reports
will be mailed to your household, even if you have more than one account in
the Fund. If you would like to receive copies of financial reports or
historical account information, you may call your Waterhouse Securities
Account Officer.
The Fund may charge a fee for special services, such as providing
historical account documents that are beyond the normal scope of its
services.
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Taxes
Money Market and U.S. Government Portfolios. The Money Market Portfolio
and the U.S. Government Portfolio each intends to qualify under subchapter
M of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") as a regulated investment company and, if so qualified, will not be
subject to federal income taxes to the extent its earnings are distributed
in accordance with applicable provisions of the Internal Revenue Code.
Dividends derived from interest and short-term capital gains are taxable to
a shareholder as ordinary income even though they are reinvested in
additional Fund shares. Dividends paid to foreign investors generally will
be subject to a 30% (or lower treaty rate) withholding tax. Dividends from
these Portfolios do not qualify for the dividends received deduction
allowable to certain U.S. corporate shareholders. All or some of the
dividends received from the U.S. Government Portfolio may be exempt from
individual state and/or local income taxes. You should consult with your tax
adviser in this regard.
Municipal Portfolio. The Municipal Portfolio intends to qualify under the
Internal Revenue Code as a regulated investment company and, if so
qualified, will not be liable for federal income taxes to the extent its
earnings are distributed in accordance with applicable provisions of the
Internal Revenue Code. The Portfolio intends to declare and distribute
tax-exempt interest dividends. Shareholders of the Municipal Portfolio
will not be required to include the "exempt-interest" portion of dividends
paid by the Portfolio in their gross income for federal income tax
purposes. However, shareholders will be required to report the receipt of
exempt-interest dividends and other tax-exempt interest on their federal
income tax returns. Moreover, as described below and in the SAI, exempt-
interest dividends may be subject to state income taxes, may give rise to a
federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the
deductibility of interest on certain indebtedness of the shareholder and
may have other collateral federal income tax consequences. The Municipal
Portfolio may purchase without limitation Municipal Securities, the
interest on which constitutes an item of tax preference and which may
therefore give rise to a federal alternative minimum tax liability for
individual shareholders.
Dividends representing taxable net investment income (such as net interest
income from temporary investments in obligations of the U.S. government)
and net short-term capital gains, if any, are taxable to shareholders as
ordinary income. Market discount recognized on taxable and tax-exempt
securities is also taxable as ordinary income and is not treated as
excludable income. Dividends representing taxable net investment income
which are paid to foreign investors generally will be subject to a 30% (or
lower treaty rate) withholding tax.
To the extent that exempt-interest dividends are derived from certain
"private activity bonds" (some of which were formerly referred to as
"industrial development bonds") issued on or after August 8, 1986, they
will be treated as an item of tax preference and may, therefore, be subject
to both the individual and corporate alternative minimum tax. All exempt-
interest dividends will be included in determining a corporate
shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate
shareholder's alternative minimum taxable income, with certain adjustments,
will be an upward adjustment for purposes of the corporate alternative
minimum tax. The percentage of dividends which constitutes exempt-interest
dividends, and the percentage thereof (if any) which constitutes an item of
tax preference, will be determined annually and will be applied uniformly
to all dividends of the Municipal Portfolio declared during that year.
These percentages
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may differ from the actual percentages for any particular day. Shareholders
are advised to consult their tax advisers with respect to alternative
minimum tax consequences of an investment in the Municipal Portfolio. For
additional information concerning the alternative minimum tax and certain
collateral tax consequences of the receipt of exempt-interest dividends,
see the SAI.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to one-half (85% if modified income exceeds a
modified base amount) of their Social Security benefits. Modified income
includes tax-exempt interest, including exempt-interest dividends from the
Municipal Portfolio.
The tax exemption of dividends from the Municipal Portfolio for federal
income tax purposes does not necessarily result in exemption under the
income or other tax laws of any state or local taxing authority. The laws
of the several states and local taxing authorities vary with respect to the
taxation of such income and you are advised to consult your own tax adviser
as to the status of your dividends under state and local tax laws.
All Portfolios. Dividends declared in 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.
Each Portfolio will be subject to a non-deductible 4% excise tax if it does
not distribute sufficient amounts of taxable investment income and capital
gains annually. Each Portfolio intends to distribute sufficient income to
avoid the application of this excise tax. It is not anticipated that the
Portfolios will realize long-term capital gains and therefore the Fund does
not contemplate making distributions taxable to shareholders as long-term
capital gain.
Each Portfolio 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.
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.
You should consult your tax adviser regarding specific questions as to
federal, state and local taxes.
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APPENDIX
The following describes in greater detail the types of investments
discussed elsewhere in the Prospectus:
Asset-Backed Securities. Each Portfolio, other than the Municipal
Portfolio, may invest in securities backed by pools of mortgages, loans,
receivables or other assets. Payment of principal and interest may be
largely dependent upon the cash flows generated by the assets backing the
securities, and, in certain cases, supported by letters of credit, surety
bonds, or other credit enhancements. The value of asset-backed securities
may also be affected by the creditworthiness of the servicing agent for the
pool, the originator of the loans or receivables, or the financial
institution(s) providing the credit support. The U.S. Government Portfolio
will invest in asset-backed securities only to the extent that such
securities are considered "Government Securities."
Certificates of Participation. The Municipal Portfolio may invest in
Certificates of Participation. Certificates of Participation may be
variable rate or fixed rate with remaining maturities of one year or less.
A Certificate of Participation may be backed by an irrevocable letter of
credit or guarantee of a financial institution that satisfies rating
agencies as to the credit quality of the Municipal Security supporting the
payment of principal and interest on the Certificate of Participation.
Payments of principal and interest would be dependent upon the underlying
Municipal Security and may be guaranteed under a letter of credit to the
extent of such credit. The quality rating by a rating service of an issuer
of Certificates of Participation is based primarily upon the rating of the
Municipal Security held by the trust and the credit rating of the issuer of
any letter of credit and of any other guarantor providing credit support to
the issue. The Investment Manager considers these factors as well as
others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a Certificate
of Participation and in determining whether the Certificate of
Participation is appropriate for investment by the Portfolio. It is
anticipated by the Investment Manager that for most publicly offered
Certificates of Participation, there will be a liquid secondary market or
there may be demand features enabling the Portfolio to readily sell its
Certificates of Participation prior to maturity to the issuer or third
party. As to those instruments with demand features, the Portfolio intends
to exercise its right to demand payment from the issuer of the demand
feature only upon a default under the terms of the Municipal Security, as
needed to provide liquidity to meet redemptions, or to maintain a high
quality investment portfolio.
Government Securities. Each Portfolio may invest in Government
Securities. Government Securities consist of marketable securities and
instruments issued or guaranteed by the U.S. government or by its agencies
or instrumentalities, and repurchase agreements with respect to such
obligations. Direct obligations are issued by the U.S. Treasury and
include bills, certificates of indebtedness, notes and bonds. Obligations
of U.S. government agencies and instrumentalities ("Agencies") are issued
by government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies and instrumentalities
are not debts of the U.S. Treasury, in some cases payment of interest and
principal on such obligations is guaranteed by the U.S. government,
including, but not limited to, obligations of the Federal Housing
Administration, the Export-Import Bank of the United States, the Small
Business Administration, the Government National Mortgage Association, the
General Services Administration and the Maritime Administration. In other
cases, payment of interest and principal is not guaranteed, e.g.,
obligations of the Student Loan Marketing Association, Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, Tennessee
Valley Authority, Federal Home Loan Bank, and the Federal Farm Credit Bank.
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Investments in Other Investment Companies. A Portfolio may invest in
securities issued by other investment companies to the extent that such
investments are consistent with the Portfolio's investment objectives and
policies and are permissible under the Investment Company Act. Under the
Investment Company Act, the Portfolios may not acquire collectively more than
3% of the outstanding securities of any one investment company. In addition,
each Portfolio will limit its investments in other investment companies in
accordance with the diversification and quality requirements of such
Portfolio. As a shareholder of another investment company, a Portfolio would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that a Portfolio bears
directly in connection with its own operations. It is currently anticipated
that such investments will be made solely in other no-load money market
funds.
Loans of Portfolio Securities. Each Portfolio may lend portfolio
securities in amounts up to 33 1/3% of its respective total assets to
brokers, dealers and other financial institutions, provided such loans are
callable at any time by the Portfolio and are at all times secured by cash
or by equivalent collateral. By lending its portfolio securities, a
Portfolio 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.
Municipal Securities. The Municipal Portfolio will invest in Municipal
Securities. Municipal Securities are issued to raise money for a variety
of public purposes, including general financing for state and local
governments, or financing for specific projects or public facilities.
Municipal securities may be issued in anticipation of future revenues and
may be backed by the full taxing power of a municipality, the revenues from
a specific project, or the credit of a private organization. A security
credit may be enhanced by a bank, insurance company, or other financial
institution. The securities may carry fixed, variable, or floating
interest rates. A Portfolio may own a municipal security directly or
through a participation interest. Industrial Development Bonds are a type
of Municipal Security that may be held by the Municipal Portfolio. These
are in most cases revenue bonds and are not payable from the unrestricted
revenues of the issuer. Among other types of instruments, the Portfolio
may purchase tax-exempt commercial paper and short-term municipal notes
such as tax anticipation notes, bond anticipation notes, revenue
anticipation notes, construction loan notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of
the receipt of tax payments, the proceeds of bond placements, or other
revenues.
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Municipal Lease Obligations. The Municipal Portfolio may invest a portion
of its assets in municipal leases and participation interests therein.
These obligations, which may take the form of a lease, an installment
purchase, or a conditional sale contract, are issued by state and local
governments and authorities to acquire land and a wide variety of equipment
and facilities. Generally, the Portfolio will not hold such obligations
directly as a lessor of the property, but will purchase a participation
interest in a municipal obligation from a bank or other third party.
A participation interest gives the Portfolio a specified, undivided
interest in the obligation in proportion to its purchased interest in the
total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations. The Portfolio's
ability to recover under such a lease in the event of non-appropriation or
default will be limited solely to the repossession of the leased property
in the event foreclosure proves difficult. In addition to the "non-
appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with more conventional bonds.
Put Features. Put features entitle the holder to sell a security (including a
repurchase agreement) back to the issuer or a third party at any time or at
specific intervals. They are subject to the risk that the put provider is
unable to honor the put feature (purchase the security). Put providers often
support their ability to buy securities on demand by obtaining letters of
credit or other guarantees from domestic or foreign banks. The Investment
Manager may rely on its evaluation of a bank's credit in determining whether
to purchase a security supported by a letter of credit. In evaluating a
foreign bank's credit, the Investment Manager will consider whether adequate
public information about the bank is available and whether the bank may be
subject to unfavorable political or economic developments, currency controls,
or other government restrictions that might affect the bank's ability to
honor its credit commitment. Demand features, standby commitments, and tender
options are types of put features.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements,
which are instruments under which a Portfolio 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 purchase price), thereby determining the yield during the
Portfolio's holding period. Repurchase agreements are, in effect, loans
collateralized by the underlying securities. Maturity of the securities
subject to repurchase may exceed one year. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, a Portfolio might have
expenses in enforcing its rights, and could experience losses, including a
decline in the value of the underlying security and loss of income.
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Reverse Repurchase Agreements. Each Portfolio may enter into reverse
repurchase agreements, which are instruments under which a Portfolio sells
a portfolio instrument to another party, such as a bank or broker-dealer,
in return for cash and agrees to repurchase the instrument at a particular
price and time. While a reverse repurchase agreement is outstanding, a
Portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its obligation under the agreement. Each Portfolio will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by the Investment Manager.
Such transactions may increase fluctuations in the market value of a
Portfolio's assets and may be viewed as a form of leverage.
Rule 144A Securities. If otherwise consistent with its investment
objectives and policies, each Portfolio, other than the Government
Portfolio, may invest in Rule 144A Securities. Rule 144A Securities are
securities which are not registered under the Securities Act of 1933 but
which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the Securities Act of 1933. Any such security will not be
considered illiquid so long as it is determined by the Fund's Board of
Directors or the Investment Manager, acting under guidelines approved and
monitored by the Fund's Board, that an adequate trading market exists for
that security. This investment practice could have the effect of
increasing the level of illiquidity in a Portfolio during any period that
qualified institutional buyers become uninterested in purchasing these
restricted securities.
Section 4(2) paper. The Money Market Portfolio may invest in Section 4(2)
paper. Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional investors
such as the Money Market Portfolio who agree that they are purchasing the
paper for investment and not with a view to public distribution. Any
resale by the purchaser must be in an exempt transaction. Section 4(2)
paper normally is resold to other institutional investors like the
Portfolio through or with the assistance of the issuer or investment
dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The Portfolio's Investment Manager considers the legally
restricted but readily saleable Section 4(2) paper to be liquid. However,
pursuant to procedures adopted by the Fund's Board of Directors, if an
investment in Section 4(2) paper is not determined by the Investment
Manager to be liquid, that investment will be included within the 10%
limitation on illiquid securities discussed under "All Portfolios" in this
Prospectus. The Fund's Investment Manager will monitor the liquidity of
the Portfolio's investments in Section 4(2) paper on a continuous basis.
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Standby Commitments. The Municipal Portfolio may acquire Standby
Commitments. Standby Commitments are put options that entitle holders to
same day settlement at an exercise price equal to the amortized cost of the
underlying security plus accrued interest, if any, at the time of exercise.
The Municipal Portfolio may acquire standby commitments to enhance the
liquidity of portfolio securities, but only when the issuers of the
commitments present minimal risk of default. Ordinarily, the Municipal
Portfolio may not transfer a standby commitment to a third party, although
it could sell the underlying municipal security to a third party at any
time. The Portfolio may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments.
In the latter case, the Portfolio would pay a higher price for the
securities acquired, thus reducing their yield to maturity. Standby
commitments will not affect the dollar-weighted average maturity of the
Portfolio, or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. The
Investment Manager may rely upon its evaluation of a bank's credit in
determining whether to support an instrument supported by a letter of
credit. Standby commitments are subject to certain risks, including the
ability of issuers of standby commitments to pay for securities at the time
the commitments are exercised; the fact that standby commitments are not
marketable by the Portfolios; and the possibility that the maturities of
the underlying securities may be different from those of the commitments.
Stripped Government Securities. Each of the Portfolios, except the
Municipal Portfolio, may purchase U.S. Treasury STRIPS (Separate Trading of
Registered Interest and Principal of Securities), that are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury bond by the Federal Reserve Bank. These instruments are issued at
a discount to their "face value" and may exhibit greater price volatility
than ordinary debt securities because of the manner in which their principal
and interest are returned to investors. Bonds issued by the Resolution
Funding Corporation (REFCORP) can also be stripped in this fashion. REFCORP
Strips are eligible investments for the Money Market Portfolio and the U.S.
Government Portfolio. The Money Market Portfolio can purchase privately
stripped government securities, which are created when a dealer deposits a
Treasury security or federal agency security with a custodian for
safekeeping and then sells the coupon payments and principal payment that
will be generated by this security. Proprietary receipts, such as
Certificates of Accrual on Treasury Securities (CATS), Treasury Investment
Growth Receipts (TIGRS), and generic Treasury Receipts (TRs), are stripped
U.S. Treasury securities that are separated into their component parts
through trusts created by their broker sponsors. Bonds issued by the
Financing Corporation (FICO) can also be stripped in this fashion. Because
of the view of the SEC on privately stripped government securities, the
Money Market Portfolio must evaluate them as it would non-government
securities pursuant to regulatory guidelines applicable to all money market
funds.
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Tender Option Bonds. The Municipal Portfolio may purchase Tender Option
Bonds. Tender Option Bonds are created by coupling an intermediate- or
long-term, fixed-rate, tax-exempt bond (generally held pursuant to a
custodial arrangement) with a tender agreement that gives the holder the
option to tender the bond at its face value. As consideration for
providing the tender option, the sponsor (usually a bank, broker-dealer, or
other financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the Portfolio effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the Municipal
Portfolio may buy tender option bonds if the agreement gives the Portfolio
the right to tender the bond to its sponsor no less frequently than once
every 13 months. In selecting tender option bonds for the Portfolio, the
Investment Manager will consider the creditworthiness of the issuer of the
underlying bond, the custodian, and the third party provider of the tender
option. In certain instances, a sponsor may terminate a tender option if,
for example, the issuer of the underlying bond defaults on an interest
payment.
Variable or Floating Rate Obligations. Each Portfolio may invest in
Variable Rate or Floating Rate Obligations. Floating rate instruments have
interest rates that change whenever there is a change in a designated base
rate while variable rate instruments provide for a specified periodic
adjustment in the interest rate. The interest rate of Variable Rate
Obligations ordinarily is determined by reference to or is a percentage of
an objective standard such as a bank's prime rate, the 90-day U.S. Treasury
Bill rate, or the rate of return on commercial paper or bank certificates
of deposit. Generally, the changes in the interest rate on Variable Rate
Obligations reduce the fluctuation in the market value of such securities.
Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less than for fixed-rate obligations.
Some Variable Rate Obligations ("Variable Rate Demand Securities") have a
demand feature entitling the purchaser to resell the securities at an amount
approximately equal to amortized cost or the principal amount thereof plus
accrued interest. As is the case for other Variable Rate Obligations, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Portfolio determines the maturity of Variable Rate
Obligations and Floating Rate Obligations in accordance with Rule 2a-7 under
the Investment Company Act which allows the Portfolio to consider certain of
such instruments as having maturities shorter than the maturity date on the
face of the instrument.
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When-Issued and Delayed Delivery Basis Securities. Each Portfolio may
invest in when-issued and delayed delivery basis securities. A security
purchased on a when-issued basis is subject to changes in market value
based upon changes in the level of interest rates and investors'
perceptions of the creditworthiness of the issuer. Generally such
securities will appreciate in value when interest rates decline and
decrease in value when interest rates rise. In determining the maturity of
portfolio securities purchased on a when-issued or delayed delivery basis,
the Portfolio will consider them to have been purchased on the date when it
committed itself to the purchase. The Portfolio's Custodian will maintain,
in a segregated account of the Portfolio, cash, U.S. government securities
or other liquid high-grade debt obligations having a value equal to or
greater than the Portfolio's purchase commitments; the Custodian will
likewise segregate securities sold on a delayed delivery basis. The
securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during the period between purchase and settlement.
At the time of delivery of the securities, the value may be more or less
than the purchase price and an increase in the percentage of the
Portfolio's assets committed to the purchase of securities on a when-issued
or delayed delivery basis may increase the volatility of the Portfolio's
net asset value. A Portfolio will only make commitments to purchase
securities on a when-issued or delayed delivery basis with the intention of
actually acquiring or disposing of the securities, but the Portfolio
reserves the right to sell these securities before the settlement date if
deemed advisable. The sale of such securities by the Municipal Portfolio
may result in the realization of gains that are not exempt from federal
income tax.
Zero Coupon Bonds. Each Portfolio may invest in Zero Coupon Bonds. Zero
Coupon Bonds do not make regular interest payments. Instead, they are sold
at a discount from their face value and are redeemed at face value when
they mature. Because Zero Coupon Bonds do not pay current income, their
prices can be very volatile when interest rates change. In calculating its
daily dividend, a Portfolio takes into account as income a portion of the
difference between a Zero Coupon Bond's purchase price and its face value.
------------------
Future Developments. Each Portfolio may invest in securities and in other
instruments which do not presently exist but may be developed in the
future, provided that each such investment is consistent with such
Portfolio's investment objectives, policies and restrictions and is
otherwise legally permissible under federal and state laws. The Prospectus
will be amended or supplemented as appropriate to discuss any such new
investments.
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WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
100 Wall Street, New York, New York 10005
Waterhouse Securities, Customer Service-1-800-934-4410
STATEMENT OF ADDITIONAL INFORMATION
------------------, 1996
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the prospectus dated ----------- , 1996 (the
"Prospectus") for Waterhouse Investors Cash Management Fund, Inc. To
obtain a copy of the Prospectus please write to the Fund or Waterhouse
Securities, Inc. at 100 Wall Street, New York, New York 10005, or call
1-800-934-4410.
TABLE OF CONTENTS
Page
----
INVESTMENT POLICIES AND RESTRICTIONS . . . . . . . . . . . . . . . . . 3
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . 11
THE INVESTMENT MANAGER . . . . . . . . . . . . . . . . . . . . . . . . 13
INVESTMENT MANAGEMENT,
DISTRIBUTION AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . 16
DIVIDENDS AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SHARE PRICE CALCULATION . . . . . . . . . . . . . . . . . . . . . . . . 21
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 22
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
FINANCIAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ANNEX -- RATINGS OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . 26
REPORT OF
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENT, Dated December 5, 1995 . . . . . . . . . . . . . . 29
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WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
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INVESTMENT POLICIES AND RESTRICTIONS
Waterhouse Investors Cash Management Fund, Inc. (the "Fund") has adopted
for each of its three investment portfolios (the Money Market Portfolio,
the U.S. Government Portfolio and the Municipal Portfolio) (the
"Portfolios") certain fundamental investment limitations which cannot be
changed for a Portfolio without approval by holders of a majority of the
outstanding voting securities of that Portfolio. However, except for each
Portfolio's investment objectives and the fundamental investment
limitations set forth below, the investment policies and restrictions
described in the Prospectus and this Statement of Additional Information
are not fundamental and may be changed without shareholder approval. As
defined in the Investment Company Act of 1940 (the "Investment Company
Act"), and as used herein and in the Prospectus of the Fund, the term
"majority of the outstanding voting securities" of the Fund, or of a
particular Portfolio means, respectively, the vote of the holders of the
lesser of (i) 67% of the shares of the Fund or such Portfolio present or
represented by proxy at a meeting where more than 50% of the outstanding
shares of the Fund or such Portfolio are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund or such
Portfolio.
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 a Portfolio'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 Portfolio'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 Portfolio's investment
policies and restrictions.
Investment Restrictions. The following are the fundamental investment
restrictions of each Portfolio of the Fund. Each Portfolio may not (unless
noted otherwise):
(1) with respect to 75% of its total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S.
government, or any of its agencies or instrumentalities) if, as a result
thereof, (a) more than 5% of the Portfolio's total assets would be invested
in the securities of that issuer, or (b) the Portfolio would hold more than
10% of the outstanding voting securities of that issuer;
(2) with respect to the Municipal Portfolio, normally invest less than
80% of its total assets in obligations issued or guaranteed by states,
territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities
("Municipal Securities"), the income from which is exempt from federal
income tax, but may be subject to federal alternative minimum tax
liability;
(3) issue senior securities, except as permitted under the Investment
Company Act;
(4) make short sales of securities or purchase securities on margin (but
a Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities);
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(5) borrow money, except that each Portfolio may: (i) borrow money for
temporary defensive or emergency purposes (not for leveraging or
investment), (ii) engage in reverse repurchase agreements for any purpose,
and (iii) pledge its assets in connection with such borrowing to the extent
necessary; provided that (i) and (ii) in combination do not exceed 33 1/3%
of the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed this amount
will be reduced within three days (not including Sundays and holidays) to
the extent necessary to comply with the 33 1/3% limitation. A Portfolio
will not purchase any security, other than a security with a maturity of
one day, while reverse repurchase agreements or borrowings representing
more than 5% of its total assets are outstanding;
(6) act as an underwriter (except as it may be deemed such in a sale of
restricted securities);
(7) purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities; or, in the case of the Municipal Portfolio, tax-exempt
obligations issued or guaranteed by a U.S. territory or possession or a
state or local government, or a political subdivision, agency or
instrumentality of any of the foregoing) if, as a result, more than 25% of
the Portfolio's total assets would be invested in the securities of
companies whose principal business activities are in the same industry,
except that the Money Market Portfolio may invest more than 25% of its total
assets in the financial services industry and the Municipal Portfolio may
invest more than 25% of its total assets in industrial development bonds
related to a single industry. The Money Market Portfolio specifically
reserves the right to invest up to 100% of its assets in certificates of
deposit or bankers' acceptances issued by U.S. banks including their foreign
branches, and U.S. branches of foreign banks, in accordance with its
investment objectives and policies;
(8) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Portfolio from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business);
(9) buy or sell commodities or commodity (futures) contracts, except for
financial futures and options thereon. This limitation does not apply to
options attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts;
(10) 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;
or
(11) purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or to the extent otherwise permitted by the Investment Company Act;
however, a Portfolio 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
Portfolio.
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The following investment restrictions are not fundamental, and may be
changed without shareholder approval. Each Portfolio does not currently
intend:
(i) until October 2, 1996 in the case of the Money Market Portfolio
and the U.S. Government Portfolio, to purchase a security (other than a
security issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 5% of its total
assets would be invested in the securities of a single issuer; provided
that a Portfolio may invest up to 10% of its total assets in the first
tier securities of a single issuer for up to three business days; from
and after October 3, 1996, in the case of each Portfolio, to purchase a
security (other than a security issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or a security
subject to an "unconditional demand feature issued by a non-controlled
person," as defined in Rule 2a-7 under the Investment Company Act) if,
as a result, more than 5% of its total assets would be invested in the
securities of a single issuer, provided that a Portfolio may invest up to
25% of its total assets in the first tier securities of a single issuer
for up to three business days;
(ii) to purchase the securities of any issuer (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof) if, as a result, more than 5% of its total assets
would be invested in the securities of business enterprises that, including
predecessors, have a record of less than three years of continuous
operations ("unseasoned issuers");
(iii) to purchase or hold any security if, as a result, more than 10% 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 and securities restricted as to disposition under
federal securities laws ("securities restricted as to disposition"), 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
("Section 4(2) paper") and securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 ("144A securities"), which are
determined to be liquid pursuant to procedures adopted by the Fund's Board
of Directors (the "10% limitation on illiquid securities");
(iv) to purchase the securities of any issuer if those officers and
directors of the Fund and of the Investment Manager who individually own
more than 1/2 of 1% of the securities of such issuer together own more than
5% of such issuer's securities;
(v) to invest in oil, gas, or other mineral exploration or development
programs;
(vi) to invest in companies for the purpose of exercising control or
management; or
(vii) to invest in financial futures and options thereon.
For the Fund's policies on quality and maturity, see the subsection
entitled "Quality and Maturity" below.
Each Portfolio's investments must be consistent with its investment
objective and policies. Accordingly, not all of the security types and
investment techniques discussed below are eligible investments for each of
the Portfolios.
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Investment Policies of All Portfolios:
Quality and Maturity. Pursuant to procedures adopted by the Board of
Directors, a Portfolio may purchase only high quality securities that the
Investment Manager believes present minimal credit risks. To be considered
high quality, a security must be rated in accordance with applicable rules
in one of the two highest categories for short-term securities by at least
two nationally recognized statistical rating organizations (or by one, if
only one such rating organization has rated the security); or, if unrated,
judged to be of equivalent quality by the Investment Manager.
High quality securities are divided into "first tier" and "second tier"
securities. First tier securities are generally those deemed to be in the
highest rating category (e.g., Standard & Poor's Ratings Group's ("S&P's"
A-1) and effective as of October 3, 1996, Government Securities and
securities issued by other money market funds. Second tier securities are
generally those deemed to be in the second highest rating category
(e.g., S&P's A-2). See "Annex -- Ratings of Investments."
The Money Market Portfolio may not invest more than 5% of its total assets
in second tier securities. In addition, the Money Market Portfolio may not
invest more than 1% of its total assets or $1 million (whichever is greater)
in the second tier securities of a single issuer. Effective October 3,
1996, the Municipal Portfolio may not invest more than 5% of its total
assets in second tier securities that are "conduit securities," as that
term is defined in Rule 2a-7 under the Investment Company Act. In addition,
as of such date, the Municipal Portfolio may not invest more than 1% of its
assets or $1 million (whichever is greater) in second tier conduit
securities of a single issue.
Each Portfolio will limit its investments to securities with remaining
maturities of 13 months or less, and maintain a dollar-weighted average
maturity of 90 days or less. When determining the maturity of a security,
a Portfolio may rely upon an interest rate reset or demand feature.
When-Issued and Delayed Delivery Transactions. Each Portfolio may buy and
sell securities on a when-issued or delayed delivery basis. These
transactions involve a commitment by a Portfolio to purchase or sell
specific securities at a predetermined price or yield, with payment and
delivery taking place after the customary settlement period for that type
of security (and more than seven days in the future). Typically, no
interest accrues to the purchaser until the security is delivered.
When purchasing securities on a when-issued or delayed delivery basis, a
Portfolio assumes the rights and risks of ownership, including the risk of
price and yield fluctuations. Because a Portfolio is not required to pay
for securities until the delivery date, these risks are in addition to the
risks associated with each Portfolio's other investments. If a Portfolio
remains substantially fully invested at a time when when-issued or delayed
delivery purchases are outstanding, the purchases may result in a form of
leverage. When when-issued or delayed delivery purchases are outstanding,
a Portfolio will set aside appropriate liquid assets in a segregated
custodial account to cover its purchase obligations. When a Portfolio has
sold a security on a delayed delivery basis, the Portfolio does not
participate in further gains or losses with respect to the security. If
the other party to a delayed delivery transaction fails to deliver or pay
for the securities, a Portfolio could miss a favorable price or yield
opportunity, or could suffer a loss.
Each Portfolio may renegotiate when-issued or delayed delivery transactions
after they are entered into, and may sell underlying securities before they
are delivered, which may result in capital gains or losses.
Variable or Floating Rate Obligations. Variable or Floating Rate
Obligations bear variable or floating interest rates and carry rights that
permit holders to demand payment of the unpaid principal balance plus
accrued interest from the issuers or certain financial intermediaries.
Floating rate instruments have interest rates that change whenever there is
a change in a designated base rate while variable rate instruments provide
for a specified periodic adjustment in the interest rate. These formulas
are designed
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to result in a market value for the instrument that approximates its
amortized cost. A demand instrument with a conditional demand feature must
have received both a short-term and a long-term high quality rating or, if
unrated, have been determined to be of comparable quality pursuant to
procedures adopted by the Board of Directors. In addition, the Board must
make certain findings to insure, pursuant to Rule 2a-7 under the Investment
Company Act, the appropriateness of the conditional demand feature for
money fund investment. A demand instrument with an unconditional demand
feature may be acquired solely in reliance upon a short-term high quality
rating or, if unrated, upon a finding of comparable short-term quality
pursuant to procedures adopted by the Board of Directors.
Repurchase Agreements. In a repurchase agreement, a Portfolio purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. It is each
Portfolio's current policy to engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found
satisfactory by the Investment Manager pursuant to procedures
approved by the Board of Directors, however, it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility that the value of the underlying security will be less than the
resale price, as well as delays and costs to a Portfolio in connection with
a seller's bankruptcy proceedings).
Reverse Repurchase Agreements. In a reverse repurchase agreement, a
Portfolio sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a Portfolio will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
Each Portfolio will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by the
Investment Manager.
Illiquid Investments. Illiquid investments are investments that cannot be
sold or disposed of in the ordinary course of business within seven days at
approximately the prices at which they are valued. Under the supervision
of the Board of Directors, the Investment Manager determines the liquidity
of a Portfolio's investments and, through reports from the Investment
Manager, the Board monitors investments in illiquid instruments. In
determining the liquidity of a Portfolio's investments, the Investment
Manager may consider various factors, including (i) the frequency of trades
and quotations, (ii) the number of dealers and prospective purchasers in
the marketplace, (iii) dealer undertakings to make a market, (iv) the
nature of the security (including any demand or tender features), and (v)
the nature of the marketplace for trades (including the ability to assign
or offset the Portfolio's rights and obligations relating to the
investment).
Investments currently considered by the Portfolios to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days. Also, with regard to the Money Market
Portfolio, the Investment Manager may determine some time deposits to be
illiquid. In the absence of market quotations, illiquid investments are
valued for purposes of monitoring amortized cost valuation at fair value as
determined in good faith by or under the direction of the Board of
Directors. If through a change in values, net assets, or other
circumstances, a Portfolio were in a position where more than 10% of its
net assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
For purposes of the 10% limit on illiquid securities, 144A securities will
not be considered to be illiquid so long as the Investment Manager
determines, in accordance with procedures adopted by the Board of
Directors, that such securities have a readily available market. The
Investment Manager will monitor the liquidity of such securities subject to
the supervision of the Board of Directors. For purposes of the 15%
limitation, however, all restricted securities shall be considered
illiquid, regardless of any determination of liquidity pursuant to such
procedures.
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Municipal lease obligations will not be considered illiquid for purposes of
the Municipal Portfolio's 10% limitation on illiquid securities, provided
the Investment Manager determines that there is a readily available market
for such securities. With respect to municipal lease obligations, the
Investment Manager will consider, pursuant to procedures adopted by the
Board of Directors, the following: (1) the willingness of the municipality
to continue, annually or biannually, to appropriate funds for payment
of the lease; (2) the general credit quality of the municipality and
the essentiality to the municipality of the property covered by the
lease; (3) in the case of unrated municipal lease obligations, an
analysis of factors similar to that performed by nationally recognized
statistical rating organizations in evaluating the credit quality
of a municipal lease obligation, including (i) whether the lease can be
cancelled; (ii) if applicable, what assurance there is that the assets
represented by the lease can be sold; (iii) the strength of the lessee's
general credit (e.g., its debt, administrative, economic and financial
characteristics); (iv) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no
longer deemed essential to the operations of the municipality (e.g., the
potential for an event of nonappropriation); (v) the legal recourse in the
event of failure to appropriate; and (4) any other factors unique to
municipal lease obligations as determined by the Investment Manager.
Investment Policies of Money Market Portfolio Only:
Domestic and Foreign Issuers: Investments may be made in U.S. dollar-
denominated time deposits, certificates of deposit, and bankers'
acceptances of U.S. banks and their branches located outside of the United
States, U.S. savings and loan institutions, U.S. branches of foreign banks,
and foreign branches of foreign banks. The Fund may also invest in U.S.
dollar-denominated securities issued or guaranteed by other U.S. or foreign
issuers, including U.S. and foreign corporations or other business
organizations, foreign governments, foreign government agencies or
instrumentalities, and U.S. and foreign financial institutions, including
savings and loan institutions, insurance companies, mortgage bankers, and
real estate investment trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental
regulation. Payment of interest and principal on these obligations may
also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidence of
ownership of portfolio securities may be held outside of the United States
and the Fund may be subject to the risks associated with the holding of
such property overseas. Various provisions of federal law governing the
establishment and operation of U.S. branches do not apply to foreign
branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
Obligations of foreign issuers involve certain additional risks. These
risks may include future unfavorable political and economic developments,
withholding taxes, seizures of foreign deposits, currency controls,
interest limitations, or other governmental restrictions that might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign banks and their branches. Foreign
issuers may be subject to less governmental regulation and supervision than
U.S. issuers. Foreign issuers also generally are not bound by uniform
accounting, auditing, and financial reporting requirements comparable to
those applicable to U.S. issuers.
Credit Enhancement Features. Each portfolio may invest in securities subject
to letters of credit or other credit enhancement features. Such letters of
credit or other credit enhancements are not subject to federal deposit
insurance, and changes in the credit quality of the issuers of such letters
of credit or other credit enhancements could cause losses to a Portfolio and
affect its share price.
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Put Features. Put features entitle the holder to sell a security
(including a repurchase agreement) back to the issuer or a third party at
any time or at specified intervals. They are subject to the risk that the
put provider is unable to honor the put feature (purchase the security).
Put providers often support their ability to buy securities on demand by
obtaining letters of credit or other guarantees from domestic or foreign
banks. The Investment Manager may rely on its evaluation of a bank's credit
in determining whether to purchase a security supported by a letter of
credit. In evaluating a foreign bank's credit, the Investment Manager will
consider whether adequate public information about the bank is available
and whether the bank may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect the bank's ability to honor its credit commitment. Demand
features, standby commitments, and tender options are types of put
features.
Investment Policies of the Municipal Portfolio Only:
Municipal Securities. Municipal Securities which the Municipal Portfolio
may purchase include, without limitation, debt obligations issued to obtain
funds for various public purposes, including the construction of a wide
range of public facilities such as airports, bridges, highways, housing,
hospitals, mass transportation, public utilities, schools, streets, and
water and sewer works. Other public purposes for which Municipal
Securities may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses and obtaining funds to loan
to other public institutions and facilities.
Municipal Securities, such as private activity bonds ("industrial
development bonds" under prior law), are issued by or on behalf of public
authorities to obtain funds for purposes including privately operated
airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity,
or sewage and solid waste disposal. Such obligations, which may include
lease arrangements, are included within the term Municipal Securities if
the interest paid thereon qualifies as exempt from federal income tax.
Other types of industrial development bonds, the proceeds of which are used
for the construction, equipment, repair or improvement of privately
operated industrial or commercial facilities, may constitute Municipal
Securities, although current federal tax laws place substantial limitations
on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue notes are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Industrial development
bonds which are Municipal Securities are in most cases revenue bonds and
generally do not constitute the pledge of the credit of the issuer of such
bonds.
Examples of Municipal Securities that are issued with original maturities
of 13 months or less are short-term tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes,
pre-refunded municipal bonds and tax-free commercial paper. Tax
anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future
date. Bond anticipation notes are sold on an interim basis in anticipation
of a municipality issuing a longer term bond in the future. Revenue
anticipation notes are issued in expectation of receipt of other types of
revenue such as those available under the Federal Revenue Sharing Program.
Construction loan notes are instruments insured by the Federal Housing
Administration with permanent financing by "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National
Mortgage Association) at the end of the project construction period. Pre-
refunded municipal bonds are bonds which are not yet refundable, but for
which securities have been placed in escrow to refund an original municipal
bond issue when it becomes refundable. Tax-free commercial paper is an
unsecured promissory obligation issued or guaranteed by a municipal issuer.
The Municipal Portfolio may purchase other Municipal Securities similar to
the foregoing, which are or may become available, including securities
issued to pre-refund other outstanding obligations of municipal issuers.
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The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States
provide that, in certain circumstances, such subdivisions or authorities
may be authorized to initiate bankruptcy proceedings without prior notice
to or consent of creditors, which proceedings could result in material
adverse changes in the rights of holders of obligations issued by such
subdivisions or authorities.
Litigation challenging the validity under the state constitutions of
present systems of financing public education has been initiated or
adjudicated in a number of states, and legislation has been introduced to
effect changes in public school finances in some states. In other
instances there has been litigation challenging the issuance of pollution
control revenue bonds or the validity of their issuance under state or
federal law which ultimately could affect the validity of those Municipal
Securities or the tax-free nature of the interest thereon.
Federally Taxable Obligations. From time to time, the Municipal Portfolio
may invest a portion of its assets on a temporary basis in fixed-income
obligations whose interest is subject to federal income tax. For example,
the Portfolio may invest in obligations whose interest is federally taxable
pending the investment or reinvestment in Municipal Securities of proceeds
from the sale of its shares or sales of portfolio securities. Should the
Portfolio invest in federally taxable obligations, it would purchase
securities that in the Investment Manager's judgment are of high quality.
These would include obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. In addition, the Municipal Portfolio may deviate
from its investment policies and may adopt temporary defensive measures when
significant adverse market, economic, political or other circumstances
require immediate action in order to avoid losses. During such periods, the
Portfolio may temporarily invest its assets, without limitation, in taxable
temporary investments. The Municipal Portfolio will purchase taxable
obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the Portfolio's distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the Portfolio's holdings would be affected and the directors
would reevaluate the Portfolio's investment objective and policies.
The Municipal Portfolio anticipates being as fully invested as practicable
in Municipal Securities; however, there may be occasions when, as a result
of maturities of portfolio securities, sales of Portfolio shares, or in
order to meet redemption requests, the Portfolio may hold cash that is not
earning income. In addition, there may be occasions when, in order to
raise cash to meet redemptions, the Portfolio may be required to sell
securities at a loss.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the objective
of each Portfolio in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. This may increase or decrease the yield of a Portfolio depending
upon the Investment Manager's ability to correctly time and execute such
transactions. Each Portfolio normally intends to hold its portfolio
securities to maturity. The Portfolios do not intend to trade portfolio
securities although they may do so to take advantage of short-term market
movements.
In effecting purchases and sales of portfolio securities for the account of
each Portfolio, the Investment Manager will implement the Fund's policy of
seeking the best execution of orders, which includes best net prices.
Consistent with this policy, 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
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believed to meet the criteria for handling a particular transaction,
the Investment Manager may give consideration to those firms which
provide market, statistical and other research information to the Fund
and the Investment Manager, although the Investment Manager is not authorized
to pay higher prices to firms that provide such services. 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. The Fund expects that purchases and sales of
portfolio securities usually will be principal transactions. Portfolio
securities will normally be purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from
underwriters may include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers will
include the spread between the bid and asked prices. To carry out a
Portfolio's transactions, the Investment Manager may, from time to time,
subject to the Investment Company Act and the rules thereunder as well as
other applicable federal securities laws, utilize the services of
Waterhouse Securities, Inc. and other firms that sell Fund
shares, consistent with its obligation to seek best execution.
The investment decisions for each Portfolio will be reached independently
from those for each other and 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
Portfolios as well as other 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, which shall be approved by the Fund's Board of
Directors. In some cases this procedure may affect the size or price of
the position obtainable for a Portfolio.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Fund, 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 as follows:
RICHARD W. DALRYMPLE, Director. Mr. Dalrymple has served as a Director of
Waterhouse Investors Cash Management Fund, Inc. since December 12, 1995.
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 53 years old.
ANTHONY J. PACE*, Director. Mr. Pace has served as a Director of
Waterhouse Investors Cash Management Fund, Inc. since December 12, 1995.
Since January 1988, Mr. Pace has served as the President and Chief
Executive Officer of A. J. Pace & Co. Inc., an investment management firm.
From December 1979 through December 1987, Mr. Pace was an Associate
Director of Bear Stearns & Co. Inc. He is 59 years old.
THEODORE ROSEN, Director. Mr. Rosen has served as a Director of Waterhouse
Investors Cash Management Fund, Inc. since December 12, 1995. Since 1993,
Mr. Rosen has been a Managing Director of Burnham Securities Inc. Mr.
Rosen has held senior management positions in retail sales, investment
management, and corporate finance. From 1991 to 1993, Mr. Rosen was a
Senior Vice President at Oppenheimer & Co., and from 1989 to 1991 was a
Vice President-Sales at Smith Barney. Prior to 1989, Mr. Rosen held senior
management positions at D.H. Blair & Co., Morgan Stanley & Co., Ladenburg
Thalman, and Burnham & Co. Mr. Rosen is the founder and President of
Summit Capital Group, a money management and investment banking firm. He
is 72 years old.
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GEORGE F. STAUDTER*, Director. Mr. Staudter has served as Chairman of the
Board of Directors of Waterhouse Investors Cash Management Fund, Inc. since
December 12, 1995. Mr. Staudter is also a Director of Waterhouse Investor
Services, an affiliate of the Investment Manager, and Koger Equity, Inc.
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. He
is 64 years old.
LAWRENCE J. TOAL, Director. Mr. Toal has served as a Director of
Waterhouse Investors Cash Management Fund, Inc. since December 12, 1995.
Mr. Toal was appointed President and Chief Operating Officer of The Dime
Savings Bank of New York, FSB in January, 1991 and continued in that
position following the merger of The Dime and Anchor Savings Bank, FSB.
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 59 years old.
JOHN E. PELLETIER, President. Senior Vice President and General Counsel of
Funds Distributor, Inc. and an officer of certain investment companies
advised or administered by the Dreyfus Corporation. From February 1992 to
April 1994, he served as Counsel for the Boston Company Advisors, Inc.
From August 1990 to February 1992, he was employed as an Associate at Ropes
& Gray. He is 32 years old.
ERIC B. FISCHMAN, Vice President and Secretary. Associate General Counsel
of Funds Distributor, Inc. and officer of certain investment companies
advised or administered by the Dreyfus Corporation. From September 1992 to
August 1994, he was an attorney with the Board of Governors of the Federal
Reserve System. He is 31 years old.
RICHARD W. INGRAM, Vice President, Treasurer and Chief Financial Officer.
Senior Vice President and Director of Client Services and Treasury
Administration of Funds Distributor, Inc. From March 1994 to November
1995, Mr. Ingram was Vice President and Division Manager of First Data
Investor Services Group. From 1989 to 1994, Mr. Ingram was Vice President,
Assistant Treasurer and Tax Director-Mutual Funds of The Boston Company.
Prior to joining the Boston Company in 1989, Mr. Ingram was associated with
Arthur Anderson & Co. for eight years. He is 40 years old.
* Each of these directors is an "interested person" of the Fund.
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Officers and directors who are interested persons of the Investment Manager
or FDI will receive no compensation from the Fund. The Fund expects to pay
or accrue total directors' fees of approximately $66,000 per year to those
directors who are not designated above as "interested persons." Directors
who are interested persons of the Fund may be compensated by the Investment
Manager for their services to the Fund. On April 30, 1996, the officers
and directors of the Fund, as a group, owned less than 1% of the then
outstanding shares of each Portfolio.
The Fund expects to pay its directors an annual retainer and a per meeting
fee and reimburse them for their expenses. The amounts of compensation
that the Fund estimates it will pay to each director for the fiscal year
ending October 31, 1996, are as follows:
Pension or
Retirement Total
Benefits Estimated Compensation
Accrued as Annual from
Aggregate Part of Benefits Fund Complex
Name of Board Compensation Fund's Upon Paid to Board
Member from Fund Expenses Retirement Members (4)
------------- ------------ ---------- ---------- -------------
Richard W. Dalrymple $ 22,000(1) $ 0(2) $ 0(2) $ 22,000(1)
Anthony J. Pace(3) $ 0(3) $ 0(2) $ 0(2) $ 0(3)
Theodore Rosen $ 22,000(1) $ 0(2) $ 0(2) $ 22,000(1)
George F. Staudter(3) $ 0(3) $ 0(2) $ 0(2) $ 0(3)
Laurence J. Toal $ 22,000(1) $ 0(2) $ 0(2) $ 22,000(1)
- - ---------------
(1) Amounts do not include reimbursed expenses for attending Board meetings.
(2) It is not anticipated that any pension or retirement benefits will be
granted to directors of the Fund.
(3) Interested director of the Fund.
(4) As of the date of this Statement of Additional Information, neither the
Investment Manager nor any of its affiliates serves as an investment
adviser to any investment company other than the Fund.
Lawrence M. Waterhouse, Jr. is the Chairman of the Board of Directors and
Chief Executive Officer of Waterhouse Investor Services, Inc. Through his
ownership of voting common stock of Waterhouse and his power to vote family
holdings, Mr. Waterhouse controls over 20% of the voting common stock of
Waterhouse, and therefore may be considered a control person with respect
to Waterhouse Investor Services, Inc.
THE INVESTMENT MANAGER
Waterhouse Asset Management, Inc., a Delaware corporation, is the
Investment Manager of the Fund. The Investment Manager is a wholly-owned
subsidiary of Waterhouse National Bank (the "Bank"), which is a wholly-
owned subsidiary of Waterhouse Investor Services, Inc. ("Waterhouse"), a
publicly-held bank holding company whose shares are listed on the New York
Stock Exchange (the "NYSE"). The Bank received its national bank charter
from the Office of the Comptroller of the Currency in 1994. The Bank
offers various low-cost cash management services and other financial and
loan products primarily to the customers of Waterhouse Securities. The
Bank does not offer commercial business loans.
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Waterhouse, through its principal subsidiary, Waterhouse Securities, Inc.
("Waterhouse Securities"), is currently one of the leading providers of
nationwide discount brokerage and related financial services in the United
States. Waterhouse Securities, which began operations in 1979, has
experienced rapid growth in customer accounts and trade processing
activity, and currently services over 400,000 customer accounts, and in
excess of $9 billion in customer assets held at over 70 branch offices.
Waterhouse Securities offers convenient access to financial information
services and provides third-party research and investment information that
assists its investors to make their own investment decisions.
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 Fund, establishes procedures for
personal investing and restricts certain transactions. In addition,
restrictions on the timing of personal investing relative to trades by the
Fund and on short-term trading have been adopted.
Certain officers and directors of the Investment Manager are also officers
and/or directors of the Fund. In addition, the following persons are
senior officers and directors of the Investment Manager, each of whom will
have substantial responsibilities in connection with the management of the
Portfolios:
DENNIS C. BORECKI, Director, President and Chief Operating Officer of
Waterhouse Asset Management, Inc. Mr. Borecki has been serving as a
Director, President and Chief Operating Officer of Waterhouse Asset
Management, Inc. since July 1995. From 1990 to July 1995, Mr. Borecki
served as Executive Vice President in charge of operations, systems,
administration and customer service of Reich & Tang. In 1984, Mr. Borecki,
together with Mr. Ebbitt, formed Cortland Financial Group ("CFG"), the
manager of the Cortland Trust Mutual Funds. At CFG, Mr. Borecki was
directly responsible for operations, systems, administration and customer
service until its merger with Reich & Tang in 1990. He is 49 years old.
KENNETH C. EBBITT, Chairman and Chief Executive Officer of Waterhouse Asset
Management, Inc. Mr. Ebbitt has been serving as Chairman and Chief
Executive Officer of Waterhouse Asset Management, Inc. since July 1995.
From 1990 to July 1995, Mr. Ebbitt served as Executive Vice President of
Reich & Tang and Chairman of Reich & Tang's Cortland Funds. In 1984, Mr.
Ebbitt, together with Mr. Borecki, formed Cortland Financial Group ("CFG"),
the manager of the Cortland Trust Mutual Funds. Mr. Ebbitt served as
Chairman and Chief Executive Officer of both Cortland entities, with direct
responsibility for compliance, marketing, sales and administration until
its merger with Reich & Tang in 1990. He is 54 years old.
DAVID HARTMAN, Senior Vice President and Chief Investment Officer of
Waterhouse Asset Management, Inc. Mr. Hartman has been serving as Senior
Vice President and Chief Investment Officer of Waterhouse Asset Management,
Inc. since October 1995. From February 1995 through August 1995, Mr.
Hartman served as Senior Vice President and Senior Portfolio Manager in
charge of Fixed Income Separate Accounts at Mitchell Hutchins - Paine
Webber. From 1983 to 1995, Mr. Hartman was a Senior Vice President of
Kidder Peabody & Co. In this capacity, Mr. Hartman served as the Chief
Investment Officer for Fixed Income accounts and both taxable and municipal
money market funds. From 1976 to 1983, Mr. Hartman served as Vice
President of Federated Investors Inc. and was responsible for managing $5
billion in mutual funds. From 1967 to 1976, Mr. Hartman was a Senior
Auditor at Arthur Anderson & Co. where he was a small business consultant.
Mr. Hartman is 49 years old.
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INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES
Investment Management
Pursuant to the Investment Management Agreement with the Fund on behalf of
each Portfolio, the Investment Manager manages each Portfolio's investments
in accordance with its stated policies and restrictions, subject to
oversight by the Fund's Board of Directors. Each Portfolio 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 Portfolio and its shares for distribution under
federal and state securities laws. In addition, each Portfolio pays for
typesetting, printing and mailing proxy material, prospectuses, statements
of additional information, notices and reports to existing shareholders,
and the fees of the directors who are not "interested persons" of the Fund
within the meaning of such term as defined under the Investment Company Act
("Disinterested Directors"). Each Portfolio is also liable for such
nonrecurring expenses as may arise, including costs of any litigation to
which the Fund may be a party, and any obligation it may have to indemnify
the Fund's officers and directors with respect to any litigation. The
Fund's expenses generally are allocated among the Portfolios on the basis
of relative net assets at the time of allocation, except that expenses
directly attributable to a particular Portfolio are charged to that
Portfolio.
The Investment Management Agreement continues in effect for each Portfolio
from the date of its execution for two years and thereafter from year to
year so long as its continuation is approved at least annually by (i) a
majority vote of the directors who are not parties to such agreement or
interested persons of any such party except in their capacity as directors
of the Fund, cast in person at a meeting called for such purpose, and
(ii) by the vote of a majority (as defined in the Investment Company Act)
of the outstanding voting securities of each Portfolio, or by the Fund's
Board of Directors. The agreement may be terminated as to any Portfolio at
any time upon 60 days prior written notice, without penalty, by either
party, or by a majority vote of the outstanding shares of a Portfolio with
respect to that Portfolio, will terminate automatically upon assignment.
The Investment Management Agreement was approved by the Board of Directors
of the Fund, including a majority of the Disinterested Directors who have
no direct or indirect financial interest in the Agreement, and by the
initial shareholder of each Portfolio.
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 a Portfolio 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 Portfolios 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 each Portfolio, such
Portfolio pays the Investment Manager an annual investment management fee,
accrued daily and payable monthly, on a graduated basis equal to .35 of 1%
of the first $1 billion of average daily net assets of each such Portfolio,
.34 of 1% of the next $1 billion, and .33 of 1% of average daily net assets
of each Portfolio over $2 billion. The Investment Manager has agreed to
waive a portion of its fee payable by the Municipal Portfolio through
October 31, 1997, so that the actual fee payable annually by such Portfolio
during such period will be equal to .25 of 1% of its average daily net
assets. In the event the merger described below is consummated, the
Investment Manager has indicated that it will extend this waiver relating
to the Municipal Portfolio until the second anniversary of the closing of
the Merger (i.e., approximately August 1998).
The Investment Manager and its affiliates may, from time to time,
voluntarily waive or reimburse all or a part of each Portfolio's operating
expenses. Expense reimbursements by the Investment Manager or its affiliates
will increase each Portfolio's total returns and yield.
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The Investment Manager has agreed to reimburse each Portfolio consistent
with the most restrictive applicable state limitations then in effect. As
of the date hereof, the most restrictive expense limitation is 2 1/2% of
the first $30 million, 2% of the next $70 million and 1 1/2% of average net
assets in excess of $100 million of a Portfolio for any fiscal year. When
calculating each Portfolio's expenses for purposes of this regulation, each
Portfolio may exclude interest, taxes, brokerage commissions and
extraordinary expenses, as well as a portion of its custodian fees
attributable to investments in foreign securities.
On April 10, 1996, Waterhouse and The Toronto Dominion Bank ("TD Bank")
announced that they had signed a merger agreement, providing for TD Bank to
acquire Waterhouse through a merger of Waterhouse into a newly formed
subsidiary of TD Bank (the "Merger"). Following the Merger, Waterhouse
will join forces with TD's brokerage subsidiary to become one of the
largest discount brokerage firms in North America. The TD Bank is North
America's 14th largest bank with assets of more than Can$106 billion
(US$78 billion) and equity of Can$6.2 billion (US$4.6 billion). As of
January 1996, TD Bank was rated AA by both Moody's Investor Services and
Standard and Poors and it has the highest securities rating of any Canadian
bank.
Consummation of the Merger is subject to satisfaction of a number of
conditions, including approval of the Merger by Waterhouse's stockholders and
receipt of certain approvals. Due to such requirements, it is currently
anticipated that consummation of the Merger will occur within four to six
months.
It is anticipated that management and employees of the Investment Manager and
its affiliates will remain unchanged following the Merger. Because of the
indirect change of control of the Investment Manager, consummation of the
Merger will result in the termination of the Investment Management Agreement
between the Investment Manager and the Fund. It is anticipated that a new
Investment Management Agreement containing substantially identical terms to
the current agreement will be submitted for approval to the Fund's Board of
Directors and shareholders prior to consummation of the Merger.
Certain other agreements between the Fund and the Investment Manager or its
affiliates, including the Administration Agreement, may also be deemed to
terminate upon consummation of the Merger. It is anticipated that new
agreements, substantially identical to the current agreements, will be
submitted for approval to the Fund's Board of Directors prior to consummation
of the Merger.
Distribution
The distributor of the Fund is Funds Distributor, Inc. ("FDI"), One
Exchange Place, Tenth Floor, Boston, Massachusetts 02109. Pursuant to a
Distribution Agreement between the Fund 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 Fund under the
Distribution Agreement for acting as distributor to the Fund. FDI also
acts as a subadministrator for the Fund.
The Distribution Agreement has an initial term of two years from the date
of its execution, and is renewable thereafter for periods of one year, so
long as such continuance is approved at least annually by a vote of the
Board of Directors of the Fund, including a majority of Disinterested
Directors who have no direct or indirect financial interest in the
Agreement. The Agreement was approved by the Board of Directors of the
Fund, including a majority of Disinterested Directors who have no direct or
indirect financial interest in the Agreement. Each Portfolio may terminate
the Distribution Agreement on 60 days' prior written notice without
penalty. Termination by a Portfolio may be by vote of a majority of the
Fund's Board of Directors, or a majority of the Disinterested Directors, or
by a "majority of the outstanding voting securities" of such Portfolio as
defined under the Investment Company Act. The Agreement terminates
automatically in the event of its "assignment" as defined in the Investment
Company Act.
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Shareholder Servicing
The Board of Directors of the Fund has approved a Shareholder Servicing
Plan ("Servicing Plan") pursuant to which each Portfolio may pay banks,
broker-dealers or other financial institutions that have entered into a
shareholder services agreement with the Fund ("Servicing Agents") in
connection with shareholder support services that they provide. Payments
under the Servicing Plan will be calculated daily and paid monthly at a
rate set from time to time by the Board of Directors, provided that the
annual rate may not exceed .25 of 1% of the average daily net assets of
each Portfolio. The Fund's Board has determined to limit the annual fee
payable through October 31, 1997 under the Servicing Plan so as not to
exceed .20 of 1% of average daily net assets in the case of the Money
Market Portfolio, .17 of 1% of average daily net assets in the case of the
U.S. Government Portfolio and .11 of 1% of average daily net assets in the
case of the Municipal Portfolio. In the event the Merger is consummated,
the Fund's Board of Directors had determined to continue this reduction of
fees until the second anniversary of the closing of the Merger (i.e.,
approximately August 1998). 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 Directors, including a
majority of the Disinterested Directors 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 Fund with respect to any Portfolio by a vote of a
majority of the Disinterested Directors who have no direct or indirect
financial interest in the Plan or any agreements relating thereto.
Pursuant to a Shareholder Services Agreement between the Fund and
Waterhouse Securities, Waterhouse Securities has agreed to provide
shareholder services to each Portfolio pursuant to the Shareholder Servicing
Plan. The Fund 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.
The Shareholder Services Agreement with Waterhouse Securities has an
initial term of two years from the date of its execution, and is renewable
thereafter for periods of one year, so long as such continuance is approved
at least annually by a vote of the Board of Directors of the Fund,
including a majority of the Disinterested Directors who have no direct or
indirect financial interest in the Agreement. The Agreement was approved
by the Board of Directors of the Fund, including a majority of the
Disinterested Directors who have no direct or indirect financial interest
in the Agreement. Each Portfolio or Waterhouse Securities may terminate
the Shareholder Services Agreement on 60 days' prior written notice without
penalty. Termination by a Portfolio may be by vote of the Fund's Board of
Directors, or a majority of the Disinterested Directors 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.
Conflict of interest restrictions may apply to the receipt by Servicing
Agents of compensation from the Fund 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.
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Administration
The Fund and the Investment Manager have also entered into an
Administration Agreement pursuant to which the Investment Manager, as
Administrator, provides administrative services to each of the Portfolios.
Administrative services furnished by the Investment Manager 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 ("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. For its services
as administrator, the Investment Manager receives from each Portfolio an
annual fee, payable monthly, of .10 of 1% of average daily net assets of
such Portfolio. The fee is accrued daily as an expense of each Portfolio.
The Investment Manager has entered into a Subadministration Agreement with
FDI pursuant to which FDI will perform certain of the foregoing
administrative services for the Fund. Under this Agreement, the Investment
Manager will pay FDI's fees for providing such services. In addition, the
Investment Manager may enter into subadministration agreements with other
persons to perform such services from time to time.
The Administration Agreement has an initial term of two years from the date
of its execution, and is renewable thereafter for periods of one year, so
long as such continuance is approved at least annually by a vote of the
Board of Directors of the Fund, including a majority of Disinterested
Directors of the Fund who have no direct or indirect financial interest in
the Agreement. The Agreement was approved by the Board of Directors of the
Fund, including a majority of the Disinterested Directors of the Fund who
have no direct or indirect financial interest in the Agreement. Each
Portfolio or the Investment Manager may terminate the Administration
Agreement on 60 days' prior written notice without penalty. Termination by
a Portfolio may be by vote of the Fund's Board of Directors, or a majority
of the Disinterested Directors of the Fund who have no direct or indirect
financial interest in the Agreement, or by a "majority of the outstanding
voting securities" of such Portfolio as defined under the Investment
Company Act. The Agreement terminates automatically in the event of its
"assignment" as defined in the Investment Company Act.
The Administration Agreement provides that the Investment Manager will not
be liable for any error of judgment or of law, or for any loss suffered by
a Portfolio 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 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, the Investment Manager believes that such laws should not
preclude the Investment Manager from acting as administrator and investment
manager to the Fund. Accordingly, the Investment Manager under the
Administration Agreement and the Investment Management Agreement will only
perform administrative and investment management servicing functions.
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 the Investment Manager from continuing to perform all or a
part of its administration or investment management activities. If the
Investment Manager were prohibited from so acting, alternative means of
continuing such services would be sought by the Board of Directors of the
Fund.
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Transfer Agent and Custodian
The Bank (also referred to as the "Transfer Agent") serves as transfer and
dividend disbursing agent for each Portfolio. 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 .20 of 1% of the Portfolio's average daily net assets.
The Transfer Agent has entered into a Sub-Transfer Agency and Dividend
Disbursing Agency Agreement with Waterhouse Securities and National
Investor Services Corp. ("NISC"), affiliates of the Investment Manager,
pursuant to which they will perform certain of the foregoing transfer and
dividend disbursing agency services for the Fund. Under this agreement,
the Transfer Agent will compensate the Sub-Transfer and Dividend Disbursing
Agent for providing such services. In addition, the Transfer Agent may
enter into sub-transfer agency and dividend disbursing agency agreements
with other persons to perform such services from time to time.
Custodian. Pursuant to a Custodian Agreement, The Bank of New York acts as
the custodian of each of the Portfolio's assets.
DIVIDENDS AND TAXES
Dividends. On each day that the net asset value ("NAV") of a Portfolio is
determined, such Portfolio's net investment income will be declared at 4:00
p.m. (Eastern time) as a daily dividend to shareholders of record as of
such day's last calculation of NAV.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of a Portfolio
consists of accrued interest income plus or minus amortized discount or
premium minus accrued expenses. Expenses of each Portfolio are accrued
each day.
Because each Portfolio's income is entirely derived from interest, or gains
from the sale of debt instruments, dividends from a Portfolio will not
qualify for the dividends received deduction available to corporate
shareholders.
Distributions of income realized with respect to market discount will be
made, at least annually, as determined by the Board of Directors, to
maintain each Portfolio's net asset value at $1.00 per share.
Capital Gains Distribution. If a Portfolio realizes any net capital gains,
such gains will be distributed at least once during the year as determined
by the Board of Directors, to maintain its net asset value at $1.00 per
share. Short-term capital gains distributed by a Portfolio are taxable to
shareholders as ordinary income, not as capital gains. Any realized
short-term capital losses to the extent not offset by realized capital
gains will be carried forward. It is not anticipated that a Portfolio will
realize any long-term capital gains, but if it does so, these gains will be
distributed annually.
Tax Status of the Fund. Each Portfolio intends 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
gains, if applicable, to shareholders. Therefore, it is not anticipated that
any of the Portfolios will be subject to the 4% excise tax applicable to
regulated investment companies that fail to satisfy certain distribution
requirements.
Each Portfolio is treated as a separate entity from the other Portfolios
for tax purposes.
19
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State and Local Tax Issues. Shareholders are urged to consult with their
tax advisers as to whether any of the dividends paid by the U.S. Government
Portfolio are exempt from state and local taxation. The exemption from
state and local income taxation does not preclude states from assessing
other taxes on the ownership of U.S. government securities whether such
securities are held directly or through the Fund.
Federal Tax Issues - Municipal Portfolio. Distributions from the
Municipal Portfolio will constitute exempt-interest dividends to the extent
of the Portfolio's tax-exempt interest income (net of expenses and
amortized bond premium). Exempt-interest dividends distributed to
shareholders of the Municipal Portfolio are excluded from gross income for
federal income tax purposes. However, shareholders required to file a
federal income tax return will be required to report the receipt of exempt-
interest dividends on their returns. Moreover, while exempt-interest
dividends are excluded from gross income for federal income tax purposes,
they may be subject to alternative minimum tax ("AMT") in certain
circumstances and may have other collateral tax consequences as discussed
below. Distributions by the Municipal Portfolio of any investment company
taxable income or of any short-term capital gains or market discount will
be taxable to shareholders.
Dividend distributions resulting from a recharacterization of gain from the
sale of bonds purchased with market discount are not considered income for
purposes of the Municipal Portfolio's policy of investing so that at least
80% of its income is free from federal income tax.
AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum marginal rate of 28% for
noncorporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. Exempt-interest dividends derived from certain "private activity"
municipal obligations issued after August 7, 1986 will generally constitute
an item of tax preference includable in AMTI for both corporate and
noncorporate taxpayers. Corporate investors should note that 75% of the
amount by which adjusted current earnings (which includes all tax-exempt
interest) exceeds the AMTI of the corporation constitutes an upward
adjustment for purposes of the corporate AMT.
Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that
must be included in an individual shareholder's gross income and subject to
federal income tax. Receipt of exempt-interest dividends may result in
other collateral federal income tax consequences to certain taxpayers.
Prospective investors should consult their own tax advisers as to such
consequences.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund portfolio which distributes exempt-interest dividends during
the year is not deductible for federal income tax purposes. Further, the
Municipal Portfolio may not be an appropriate investment for (i) persons
who are "substantial users" of facilities financed by industrial
development bonds held by the Municipal Portfolio or are "related persons"
to such users; or (ii) persons who are investing through a tax-exempt
retirement plan, IRA or Keogh Account.
The "Superfund Amendments and Reauthorization Act of 1986" ("SARA") imposes
a separate tax on corporations at a rate of 0.12 percent of the excess of
such corporation's "modified" AMTI over $2,000,000. A portion of tax-
exempt interest, including exempt-interest dividends from the Municipal
Portfolio, may be includable in modified AMTI. Corporate shareholders are
advised to consult with their tax advisers with respect to the consequences
of SARA.
The Municipal Portfolio purchases municipal obligations based on opinions
of bond counsel regarding the federal income tax status of the obligations.
These opinions generally will be based on covenants by the issuers
regarding continuing compliance with federal tax requirements. If the
issuer of an obligation fails to comply with its covenant at any time,
interest on the obligation could become federally taxable either
prospectively or retroactively to the date the obligation was issued.
20
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Each of the Portfolios may invest in obligations such as zero coupon bonds,
issued with original issue discount ("OID") for federal incoome tax
purposes. Accrued OID constitutes income subject to the distribution
requirements applicable to regulated investment companies, although such
income may not be represented by any cash payment. Accordingly, it may be
necessary for a Portfolio to dispose of other assets in order to satisfy such
distribution requirements.
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.
The information above, together with the information set forth in the
Prospectus, is only a summary of some of the tax consequences generally
affecting each Portfolio and its shareholders, and no attempt has been made
to present a detailed explanation of the tax treatment of each Portfolio or
to discuss individual tax consequences. In addition to federal income
taxes, shareholders may be subject to state and local taxes on Fund
distributions, and shares may be subject to state and local personal
property taxes. Investors should consult their tax advisers to determine
whether a Portfolio is suitable to their particular tax situation.
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 Fund's independent
auditors, Ernst & Young LLP, whose address is 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 Fund. Shareholders will
receive annual audited financial statements and semi-annual unaudited
financial statements.
SHARE PRICE CALCULATION
Each Portfolio values its portfolio instruments at amortized cost, which
means that they are valued at their acquisition cost, as adjusted for
amortization of premium or accretion of discount, rather than at current
market value. The amortized cost value of an instrument may be higher or
lower than the price each Portfolio would receive if it sold the
instrument.
Valuing a Portfolio's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act. Each Portfolio must adhere to certain conditions
under Rule 2a-7.
The Board of Directors of the Fund oversees the Investment Manager's
adherence to SEC rules concerning money market funds, and has established
procedures designed to stabilize each Portfolio's NAV per share at $1.00.
At such intervals as they deem appropriate, the Board of Directors
considers the extent to which NAV calculated by using market valuations
would deviate from $1.00 per share. Market valuations are obtained by
using actual quotations provided by market makers, estimates of current
market value, or values obtained from yield data relating to classes of
money market instruments published by reputable sources at the mean between
the bid and asked prices of the instruments. If a deviation were to occur
between the net asset value per share calculated by reference to market
values and a Portfolio's $1.00 per share net asset value, which the Board
of Directors of the Fund believed may result in material dilution or other
unfair results to shareholders, the directors have agreed promptly to
consider what corrective action they deem appropriate to eliminate or
reduce, to the extent reasonably practicable, the dilution or unfair
results. Such corrective action could include selling portfolio securities
prior to maturity; withholding dividends; redeeming shares in kind;
establishing NAV by using available market quotations; and such other
measures as the directors may deem appropriate.
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During periods of declining interest rates, each Portfolio's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder of any Portfolio would be able to
retain a somewhat higher yield than would result if each Portfolio utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
Net asset value is calculated by the Fund as to each Portfolio on each day
that the NYSE and the Custodian are open. Currently, the NYSE is closed on
weekends and New Year's 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 Martin
Luther King, Jr. Day, Veteran's Day and Columbus Day.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each Portfolio does not currently impose a minimum for initial or
subsequent investments. However, minimum requirements may be imposed or
changed at any time. Each Portfolio may waive minimum investment
requirements for purchases by directors, officers or employees of the Fund,
Waterhouse or any of its subsidiaries.
The Fund normally calculates the net asset value of each Portfolio as of
12:00 noon and 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, a Portfolio'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 a Portfolio's portfolio securities may not
occur on days when the Fund is open for business.
If the Board of Directors 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 a Portfolio's NAV. 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.
The Fund 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.
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PERFORMANCE
As reflected in the prospectus, the historical performance calculation for
a Portfolio may be shown in the form of "yield," "effective yield" and, for
the Municipal Portfolio only, "tax equivalent yield" and "tax equivalent
effective yield." These various measures of performance are described
below.
Each Portfolio's yield is computed in accordance with a standardized method
prescribed by rules of the SEC. Under that method, the yield quotation is
based on a seven-day period and is computed for each Portfolio as follows:
the first calculation is net investment income per share for the period,
which is accrued interest on portfolio securities, plus or minus amortized
discount or premium (excluding market discount for the Municipal
Portfolio), less accrued expenses. This number is then divided by the
price per share (expected to remain constant at $1.00) at the beginning of
the period ("base period return"). The result is then divided by 7 and
multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and
unrealized appreciation or depreciation of investments are not included in
the calculation.
Each Portfolio's effective yield is determined by taking the base period
return (computed as described above) and calculating the effect of assumed
compounding. The formula for effective yield is:
[(base period return + 1)365/7] - 1.
The tax equivalent yield of the shares of the Municipal Portfolio is
computed by dividing that portion of the yield of the Portfolio (computed
as described above) that is tax-exempt by an amount equal to one minus the
stated federal income tax rate (normally assumed to be the maximum
applicable marginal tax bracket rate) and adding the result to that
portion, if any, of the yield of the Portfolio that is not tax-exempt.
Tax equivalent effective yield is computed in the same manner as tax
equivalent yield, except that effective yield is substituted for yield in
the calculation.
Each Portfolio's yield fluctuates, and the publication of an annualized
yield quotation is not a representation as to what an investment in that
Portfolio will actually yield for any given future period. Actual yields
will depend not only on changes in interest rates on money market
instruments during the period in which the investment in the Portfolio is
held, but also on such matters as expenses of that Portfolio.
As indicated in the Prospectus (see "Performance"), the performance of the
Fund's Portfolios may be compared to that of other money market mutual
funds tracked by Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm that ranks mutual funds by overall performance,
investment objectives and assets. Lipper performance calculations include
the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. A Portfolio's performance also may be
compared to other money market funds as reported by IBC/Donoghue's Money
Fund Report(Registered), a reporting service on money market funds.
As reported by Money Fund Report, all investment results represent total
return (annualized results for the period net of management fees and
expenses) and one year investment results are effective annual yields
assuming reinvestment of dividends.
BANK RATE MONITOR(Trademark), N. Palm Beach, Florida 33408, a financial
reporting service which each week publishes average rates of bank and
thrift institution money market deposit accounts and interest bearing
checking accounts, reports results for the BANK RATE MONITOR National
Index. The rates published by the BANK RATE MONITOR National Index are
averages of the personal account rates offered on the Wednesday prior to
the date of publication by 100 of the leading bank and thrift institutions
in the ten largest Consolidated Metropolitan Statistical Areas. Account
minimums range upward from $2,000 in each institution and compounding
methods vary. Interest bearing checking accounts generally offer unlimited
checking while money market deposit accounts generally restrict the
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number of checks that may be written. If more than one rate is offered,
the lowest rate is used. Rates are determined by the financial institution
and are subject to change at any time specified by the institution. Bank
products represent a taxable alternative income producing product. Bank
and thrift institution account deposits may be insured. Shareholder
accounts in the Fund are not insured. Bank savings accounts compete with
money market mutual fund products with respect to certain liquidity features
but may not offer all of the features available from a money market mutual
fund, such as check writing. Bank checking accounts normally do not pay
interest but compete with money market mutual fund products with respect to
certain liquidity features (e.g., the ability to write checks against the
account). Bank certificates of deposit may offer fixed or variable rates
for a set term. (Normally, a variety of terms are available.) Withdrawal
of these deposits prior to maturity will normally be subject to a penalty.
In contrast, shares of a Portfolio are redeemable at the net asset value
next determined (normally, $1.00 per share) after a request is received
without charge.
Investors may also want to compare a Portfolio's performance to that of
United States Treasury Bills or Notes because such instruments represent
alternative income producing products. Treasury obligations are issued in
selected denominations. Rates of Treasury obligations are fixed at the
time of issuance and payment of principal and interest is backed by the
full faith and credit of the United States Treasury. The market value of
such instruments will generally fluctuate inversely with interest rates
prior to maturity and will equal par value at maturity. Generally, the
values of obligations with shorter maturities will fluctuate less than
those with longer maturities. A Portfolio's yield will fluctuate.
Tax-Exempt versus Taxable Yield. Investors may want to determine which
investment--tax exempt or taxable--will provide a higher after-tax return.
To determine the tax equivalent yield, simply divide the yield from the
tax-exempt investment by an amount equal to 1 minus the investor's marginal
federal income tax rate. The table below is provided for investors'
convenience in making this calculation for selected tax-exempt yields and
taxable income levels. These yields are presented for purposes of
illustration only and are not representative of any yield that the
Municipal Portfolio may generate. This table is based upon current law as
to the 1995 tax rate schedules.
<TABLE>
<CAPTION>
Single Taxpayer Married Filing Investor's A Tax-Exempt Yield of:
Joint Return Marginal
Federal 2% 3% 4% 5% 6% 7%
Tax Rate
Taxable Income Taxable Income Is Equivalent to
a Taxable Yield of:
------------------- ------------------- -------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 23,350 - $ 56,550 $ 39,000 - $ 94,250 28.0% 2.8 4.2 5.6 6.9 8.3 9.7
$ 56,551 - $117,950 $ 94,251 - $143,600 31.0% 2.9 4.3 5.8 7.2 8.7 10.1
$117,951 - $256,500 $143,601 - $256,500 36.0% 3.1 4.7 6.3 7.8 9.4 10.9
$256,501 or greater $256,501 or greater 39.6% 3.3 5.0 6.6 8.3 9.9 11.6
</TABLE>
SHAREHOLDER RIGHTS
The shares of the Fund are divided into three Portfolios (or series)
constituting separate portfolios of investments, with various investment
objectives and policies.
Each Portfolio issues shares of common stock in the Fund. Shares of the
Fund have equal rights with respect to voting, except that the holders of
shares of a particular Portfolio will have the exclusive right to vote on
matters affecting only the rights of the holders of such Portfolio. For
example, holders of a particular Portfolio will have the exclusive right to
vote on any investment advisory agreement or
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investment restriction that relates only to such Portfolio. Shareholders
of the Portfolios do not have cumulative voting rights, and therefore the
holders of more than 50% of the outstanding shares of the Fund voting
together for the election of directors may elect all of the members of the
Board of Directors. In such event, the remaining holders cannot elect any
members of the Board of Directors.
The Board of Directors may authorize the issuance of additional shares, and
may, from time to time, classify or reclassify issued or any unissued
shares to create one or more new classes or series in addition to those
already authorized by setting or changing in any one or more respects the
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares; provided, however, that any such
classification or reclassification shall not substantially adversely affect
the rights of holders of issued shares. Any such classification or
reclassification will comply with the provisions of the Investment Company
Act.
The Articles of Incorporation permit the directors to issue the following
number of full and fractional shares, par value $.0001, of the Portfolios:
60 billion shares of the Money Market Portfolio; 20 billion shares of the
U.S. Government Portfolio; and 20 billion shares of the Municipal Portfolio.
Each Portfolio share is entitled to participate pro rata in the dividends
and distributions from that Portfolio.
As described in each Prospectus, the Fund will not normally hold annual
shareholders' meetings. Under Maryland law and the Fund's By-Laws, an
annual meeting is not required to be held in any year in which the election
of directors is not required to be acted upon under the Investment Company
Act. The Fund's By-Laws provide that special meetings of shareholders,
unless otherwise provided by law or by the Articles of Incorporation, may
be called for any purpose or purposes by, a majority of the Board of
Directors, the Chairman of the Board, the President, or the written request
of the holders of at least 10% of the outstanding shares of capital stock
of the corporation entitled to be voted at such meeting to the extent
permitted by Maryland law.
Each director serves until the next election of directors and until the
election and qualification of his successor or until such director sooner
dies, resigns, retires or is removed by the affirmative vote of a majority
of the outstanding voting securities of the Fund. In accordance with the
Investment Company Act (i) the Fund will hold a shareholder meeting for the
election of directors at such time as less than a majority of the directors
have been elected by shareholders, and (ii) if, as a result of a vacancy in
the Board of Directors, less than two-thirds of the directors have been
elected by the shareholders, that vacancy will be filled only by a vote of
the shareholders.
FINANCIAL STATEMENTS
The Fund's financial statements and financial highlights for the period from
the commencement of operations, December 20, 1995, through April 30, 1996 are
included in the Fund's Semi-Annual Report, which is a separate report
supplied with this Statement of Additional Information. The Fund's financial
statements and financial highlights are incorporated herein by reference.
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<PAGE>
ANNEX -- RATINGS OF INVESTMENTS
STANDARD AND POOR'S RATINGS GROUP AND MOODY'S INVESTOR SERVICE, INC.
COMMERCIAL PAPER RATINGS
Commercial paper rated by Standard & Poor's Ratings Group has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow
have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a
strong position within the industry. The reliability and quality of
management are unquestioned. Relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2
or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper
ratings assigned by Moody's Investors Service, Inc. Among the factors
considered by them in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's
industry or industries and an appraisal of speculative-type risks which may
be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount
and quality of long-term debt; (6) trend of earnings over a period of ten
years; (7) financial strength of a parent company and the relationships
which exist with the issuer; and (8) recognition by the management of
obligations which may be present or may arise as a result of a public
interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
MIG-1 AND MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes
and other short-term loans will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between
short-term credit risk and long-term risk. Factors affecting the liquidity
of the borrower are uppermost in importance in short-term borrowing, while
various factors of the first importance in bond risk are of lesser
importance in the short run. Loans designated MIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the
market for refinancing, or both. Loans designated MIG-2 are of high
quality, with margins of protection ample although not so large as in the
preceding group.
STANDARD & POOR'S RATINGS GROUP BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Ratings
Group to a debt obligation and indicates an extremely strong capacity to
pay principal and interest.
AA. Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
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Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
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Report of Independent Auditors
Shareholder and Board of Directors
Waterhouse Investors Cash Management Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Waterhouse Investors Cash Management Fund, Inc. (comprising, respectively,
the Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio) as of December 5, 1995. This statement of assets and
liabilities is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall statement of assets and liabilities
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of each
of the respective Portfolios constituting Waterhouse Investors Cash
Management Fund, Inc. at December 5, 1995 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
----------------------
ERNST & YOUNG LLP
New York, New York
December 7, 1995
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WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES-December 5, 1995
Money U.S.
Market Government Municipal
Portfolio Portfolio Portfolio
--------- ---------- ---------
ASSETS
Cash $ 60,000 $ 20,000 $ 20,000
Prepaid Expenses 208,800 69,600 69,600
Deferred Organizational Costs 55,000 55,000 55,000
-------- -------- --------
323,800 144,600 144,600
LIABILITIES
Accrued Expenses 263,800 124,600 124,600
-------- -------- --------
NET ASSETS $ 60,000 $ 20,000 $ 20,000
======== ======== ========
Outstanding shares of
$.0001 par value Common
Stock, equivalent to a net
asset value of $1.00 for
each series (60 billion
shares of the Money
Market, 20 billion shares
each of the U.S.
Government and Municipal
Portfolios authorized,
respectively.)
60,000 20,000 20,000
======== ======== ========
See notes to statement of assets and liabilities.
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Waterhouse Investors Cash Management Fund, Inc.
Notes to Statement of Assets and Liabilities-December 5, 1995
Note A - Organization
Waterhouse Investors Cash Management Fund, Inc. (the "Fund") was
incorporated on August 16, 1995 and has had no operations since that date
other than matters relating to its organization as an open-end, diversified
management investment company under the Investment Company Act of 1940 and
the registration of its securities under the Securities Act of 1933 and the
sale and issuance of 60,000 shares of common stock of the Money Market
Portfolio, 20,000 shares of common stock of the U.S. Government Portfolio
and 20,000 shares of common stock of the Municipal Portfolio ("Initial
Shares") to FDI Distribution Services, Inc., an affiliate of Funds
Distributor, Inc., the distributor of the Fund (the "Distributor"). The
Fund is a series company and currently consists of three portfolios (the
"Portfolios"): the Money Market Portfolio, the U.S. Government Portfolio
and the Municipal Portfolio. Organizational costs payable by the Fund have
been deferred and will be amortized from the date operations commence over
a period which it is expected that a benefit will be realized, not to
exceed five years. If any of the Initial Shares are redeemed during the
amortization period by any holder thereof, the redemption proceeds will be
reduced by any unamortized organizational costs of that Portfolio in the
same proportion as the number of Initial Shares being redeemed bears to the
number of Initial Shares outstanding of that Portfolio at the time of
redemption.
Note B - Agreements
Under the terms of an Investment Management Agreement with Waterhouse Asset
Management, Inc. (the "Investment Manager"), for the investment management
services furnished to each Portfolio, such Portfolio pays the Investment
Manager an annual investment management fee, on a graduated basis, equal to
.35 of 1% of the first $1 billion of average daily net assets of each such
Portfolio, .34 of 1% of the next $1 billion, and .33 of 1% of average daily
net assets of each such Portfolio over $2 billion. The Investment Manager
has agreed to waive a portion of its fee payable by the Municipal Portfolio
through October 31, 1997, so that the actual fee payable annually by such
Portfolio during such period will be equal to .25 of 1% of its average
daily net assets.
The Investment Manager has agreed to reimburse each Portfolio to the extent
that the aggregate expenses of such Portfolio (exclusive of interest,
taxes, brokerage and extraordinary expenses, all to the extent permitted by
applicable state law and regulation) exceed the limits prescribed by any
state in which the Portfolio's shares are qualified for sale. The Fund
believes that the most restrictive expense ratio limitation imposed by any
state is 2 1/2% of the first $30 million, 2% of the next $70 million and
1 1/2% of average net assets in excess of $100 million of a Portfolio for
any fiscal year. Expense reimbursements, if any, will be accrued daily and
paid monthly.
The Investment Manager has also been retained under an Administration
Agreement to perform certain administrative services for the Fund. For the
administrative services rendered to the Fund, each Portfolio will pay the
Investment Manager a monthly fee at an annual rate of .10 of 1% of each
Portfolio's average net assets.
30
<PAGE>
Waterhouse Securities, Inc., ("Waterhouse Securities"), an affiliate of the
Investment Manager has been retained under a Shareholder Services
Agreement to perform shareholder servicing services necessary for the
operation of the Fund. For the shareholder services rendered, each
Portfolio will pay Waterhouse Securities a monthly fee at an annual rate of
up to .25 of 1% of average daily net assets. The Fund's Board has
determined to limit the annual fee payable through October 31, 1997 under
the Shareholder Servicing Plan so as not to exceed .20 of 1% of average
daily net assets in the case of the Money Market Portfolio, .17 of 1% of
average daily net assets in the case of the U.S. Government Portfolio and
.11 of 1% of average daily net assets in the case of the Municipal
Portfolio.
The Fund has entered into a Transfer Agency and Dividend Disbursing Agency
Agreement with Waterhouse National Bank (the "Bank") an affiliate of the
Investment Manager, to perform transfer and dividend disbursing agency-
related services. For such services each Portfolio will pay the Bank a
monthly fee at an annual rate of .20 of 1% of average daily net assets.
31
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
<S> <C> <C>
CORPORATE OBLIGATIONS:
ASSET BACKED COMMERCIAL PAPER -- 12.2%
$ 30,000,000 Corporate Receivables Corp., due 5/13/96 (Note A) 5.36 $ 29,946,700
10,000,000 Corporate Receivables Corp., due 5/21/96 (Note A) 5.31 9,970,611
20,000,000 CXC, Inc., due 5/7/96 5.40 19,982,100
17,300,000 CXC, Inc., due 5/10/96 5.39 17,276,861
10,000,000 Eureka Securitization, due 5/17/96 (Note A) 5.37 9,976,356
15,000,000 Eureka Securitization, due 5/23/96 (Note A) 5.34 14,951,233
15,000,000 Eureka Securitization, due 6/21/96 (Note A) 5.35 14,887,800
30,000,000 McKenna Triangle National Corp., due 6/7/96 (Note A) 5.38 29,835,658
-----------
146,827,319
-----------
BROKER/DEALER COMMERCIAL PAPER -- 4.1%
15,000,000 Merrill Lynch & Co., Inc., due 5/16/96 5.35 14,966,688
25,000,000 Morgan Stanley Group, Inc., due 5/7/96 5.33 24,977,875
10,000,000 Morgan Stanley Group, Inc., due 11/14/96 5.48 9,710,520
-----------
49,655,083
-----------
CORPORATE NOTES AND BONDS -- 7.2%
6,000,000 Bankers Trust New York Corp., 7.25%, due 11/1/96 5.31 6,056,268
30,000,000 CIT Group Holdings, Inc. Variable Rate Notes, 5.38%, due 5/19/97 (Note B) 5.43 29,985,240
10,000,000 Ford Motor Credit Corp. Variable Rate Notes, 5.40%, due 2/18/97 (Note B) 5.22 10,011,823
5,000,000 Ford Motor Credit Corp. Variable Rate Notes, 5.43%, due 5/5/97 (Note B) 5.40 5,001,440
20,000,000 Goldman Sachs Group, L.P. Variable Rate Note, 5.44%, due 11/27/96 (Notes B,C) 5.44 20,000,000
5,750,000 Household Finance Corp., 10.125%, due 6/15/96 5.51 5,781,151
10,000,000 Morgan Stanley Group, Inc., Variable Rate Notes, 5.73%, due 3/10/97 (Note B) 5.48 10,020,834
-----------
86,856,756
-----------
FINANCE AND INSURANCE COMPANY COMMERCIAL PAPER -- 12.7%
20,000,000 Bell South Capital Funding Corp., due 5/7/96 5.06 19,983,333
25,000,000 General Electric Capital Corp., due 5/3/96 5.36 24,992,667
30,000,000 Household Finance Corp., due 5/14/96 5.37 29,942,800
25,000,000 Swedish Export Credit Corp., due 5/15/96 5.35 24,948,861
15,500,000 Transamerica Finance Corp., due 5/10/96 5.35 15,479,346
5,000,000 Transamerica Finance Corp., due 6/17/96 5.29 4,965,925
18,500,000 USAA Capital Corp., due 5/14/96 5.12 18,466,263
14,200,000 Xerox Credit Corp., due 5/13/96 5.33 14,174,866
-----------
152,954,061
-----------
INDUSTRIAL AND OTHER COMMERCIAL PAPER -- 8.5%
10,000,000 Eli Lilly & Co., due 7/24/96 5.32 9,878,200
10,000,000 Eli Lilly & Co., due 7/31/96 5.32 9,868,050
11,975,000 Hanson Finance (UK) PLC, due 5/3/96 5.41 11,971,421
15,000,000 Hanson Finance (UK) PLC, due 5/20/96 5.40 14,957,408
13,000,000 Hanson Finance (UK) PLC, due 7/25/96 5.48 12,834,250
19,750,000 Metro Crest Hosp. Auth. (Letter of Credit - Bank of New York), due 6/13/96 (Note D) 5.40 19,624,309
23,281,000 Southern California Gas Co., due 8/20/96 5.11 22,923,520
-----------
102,057,158
-----------
TOTAL CORPORATE OBLIGATIONS -- 44.7% 538,350,377
-----------
BANK OBLIGATIONS:
BANKERS' ACCEPTANCE -- 2.0%
24,400,000 Republic Bank of New York, due 6/03/96 5.05 24,288,614
-----------
BANK NOTES -- 4.7%
16,000,000 Comerica Bank Variable Rate Notes, 5.43%, due 5/19/97 (Note B) 5.39 16,006,020
40,000,000 First Bank, FSB Variable Rate Notes, 5.47%, due 9/18/96 (Note B) 5.47 40,000,000
-----------
56,006,020
BANK HOLDING COMPANY COMMERCIAL PAPER -- 8.2%
15,000,000 BankAmerica Corp., due 5/24/96 5.30 14,949,400
25,000,000 BankAmerica Corp., due 6/14/96 5.29 24,840,500
20,000,000 Bankers Trust Co. NY, due 8/28/96 5.08 19,672,750
40,000,000 JP Morgan & Co., Inc., due 9/3/96 5.10 39,309,723
-----------
98,772,373
-----------
CERTIFICATES OF DEPOSIT -- 10.4%
40,000,000 Deutsche Bank (Eurodollar), 5.34%, due 5/17/96 5.34 40,000,000
25,000,000 Rabobank Nederland (Yankee), 5.31%, due 7/18/96 5.29 25,001,055
40,000,000 Societe Generale (Eurodollar), 5.37%, due 6/07/96 5.35 40,000,816
20,000,000 Toronto Dominion (Eurodollar), 5.10%, due 5/20/96 5.10 20,000,000
-----------
125,001,871
-----------
YANKEE BANK COMMERCIAL PAPER -- 10.3%
25,000,000 Abbey National North America, due 6/17/96 5.06 24,837,785
15,000,000 Abbey National North America, due 6/20/96 5.08 14,895,833
15,000,000 ABN AMRO N.A., due 6/10/96 5.07 14,917,000
20,000,000 ABN AMRO N.A., due 8/22/96 5.10 19,687,994
15,000,000 National Australia Funding Delaware, Inc., due 5/9/96 5.35 14,982,233
20,000,000 Svenska Handelsbanken NY, due 5/10/96 5.15 19,974,550
15,000,000 Svenska Handelsbanken NY, due 8/9/96 5.03 14,795,417
-----------
124,090,812
-----------
TOTAL BANK OBLIGATIONS -- 35.6% 428,159,690
-----------
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS:
U.S. TREASURY BILLS -- 1.6%
20,000,000 U.S. Treasury Bills, due 2/6/97 5.08 19,243,642
-----------
FEDERAL FARM CREDIT BANK -- .8%
10,000,000 Discount Notes, due 1/27/97 4.95 9,643,936
-----------
FEDERAL HOME LOAN BANK -- 3.3%
40,000,000 Notes, 5.29%, due 3/5/97 5.30 39,996,597
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 2.9%
35,000,000 Variable Rate Notes, 5.24%, due 4/11/97 (Note B) 5.29 34,985,668
-----------
STUDENT LOAN MARKETING ASSOC. -- 4.1%
6,000,000 Variable Rate Notes, 5.48%, due 1/21/98 (Note B) 5.43 6,005,343
20,000,000 Variable Rate Notes, 5.32%, due 11/10/98 (Note B) 5.46 19,933,828
23,000,000 Variable Rate Notes, 5.33%, due 2/22/99 (Note B) 5.47 22,917,932
-----------
48,857,103
-----------
TOTAL U.S. GOVERNMENT AND AGENCIES OBLIGATIONS -- 12.7% 152,726,946
-----------
REPURCHASE AGREEMENTS -- 7.4%
89,130,000 Smith Barney Securities, Inc.,
dated 4/30/96, due 5/1/96 in the amount of $89,143,246 fully collateralized
by $138,763,940 U.S. Government Securities, value $90,412,258 5.35 89,130,000
-------------
TOTAL INVESTMENTS -- 100.4% 1,208,367,013
OTHER ASSETS AND LIABILITIES, NET -- (.4%) (5,326,964)
-------------
NET ASSETS -- 100.0% $ 1,203,040,049
=============
</TABLE>
Please see accompanying notes to the schedules of investments and financial
statements.
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
U.S. GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
<S> <C> <C>
U.S. TREASURY BILLS -- 1.6%
$ 5,000,000 U.S. Treasury Bills, due 2/6/97 5.08 $ 4,810,910
------------
FEDERAL FARM CREDIT BANK -- 19.1%
12,000,000 Discount Notes, due 5/2/96 5.26 11,998,257
10,025,000 Discount Notes, due 5/6/96 5.19 10,017,829
6,190,000 Discount Notes, due 5/9/96 5.19 6,182,916
10,000,000 Discount Notes, due 5/22/96 5.26 9,969,550
6,000,000 Discount Notes, due 6/14/96 5.26 5,961,940
4,500,000 Discount Notes, due 1/27/97 4.95 4,339,771
10,000,000 Variable Rate Notes, 5.33%, due 4/1/97 (Note B) 5.36 9,996,070
------------
58,466,333
------------
FEDERAL HOME LOAN BANK -- 27.7%
25,000,000 Discount Notes, due 5/14/96 5.23 24,953,597
10,000,000 Discount Notes, due 5/20/96 5.20 9,972,661
10,315,000 Discount Notes, due 6/4/96 4.94 10,267,557
10,000,000 Discount Notes, due 6/10/96 4.94 9,946,000
10,000,000 Discount Notes, due 8/5/96 5.23 9,863,200
10,000,000 Discount Notes, due 8/15/96 5.25 9,848,950
10,000,000 Notes, 5.29%, due 3/5/97 5.30 9,999,149
------------
84,851,114
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 10.4%
9,750,000 Discount Notes, due 5/6/96 5.04 9,743,257
7,432,000 Discount Notes, due 5/13/96 5.04 7,419,663
10,000,000 Discount Notes, due 6/17/96 5.25 9,932,372
5,000,000 Discount Notes, due 6/18/96 5.25 4,965,467
------------
32,060,759
------------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 18.7%
10,000,000 Discount Notes, due 5/14/96 5.04 9,982,017
7,500,000 Discount Notes, due 5/17/96 5.06 7,483,333
5,000,000 Discount Notes, due 6/7/96 4.99 4,974,768
10,000,000 Discount Notes, due 7/10/96 4.91 9,906,472
15,000,000 Variable Rate Notes, 5.24%, due 4/11/97 (Note B) 5.29 14,993,858
10,000,000 Variable Rate Notes, 5.30%, due 5/2/97 (Note B) 5.37 9,993,186
------------
57,333,634
------------
STUDENT LOAN MARKETING ASSOC. -- 12.4%
2,750,000 Variable Rate Notes, 5.48%, due 1/21/98 (Note B) 5.43 2,752,212
25,500,000 Variable Rate Notes, 5.32%, due 11/10/98 (Note B) 5.46 25,415,631
10,000,000 Variable Rate Notes, 5.33%, due 2/22/99 (Note B) 5.47 9,964,318
------------
38,132,161
------------
TENNESSEE VALLEY AUTHORITY -- 1.6%
5,000,000 Discount Notes, due 5/9/96 5.26 4,994,200
------------
REPURCHASE AGREEMENTS -- 8.6%
26,363,000 Smith Barney Securities, Inc.,
dated 4/30/96, due 5/1/96 in the amount of $26,366,918, fully collateralized
by $99,927,686 U.S. Government Securities, value $26,843,872 5.35 26,363,000
------------
TOTAL INVESTMENTS -- 100.1% 307,012,111
OTHER ASSETS AND LIABILITIES, NET -- (.1%) (160,913)
------------
NET ASSETS -- 100.0% $ 306,851,198
==================
Please see accompanying notes to the schedules of investments and financial statements.
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
MUNICIPAL PORTFOLIO
SCHEDULE OF INVESTMENTS
April 30, 1996 (Unaudited)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT MUNICIPAL OBLIGATIONS YIELD (%) VALUE
<S> <C> <C>
ALASKA -- 2.9%
$ 6,300,000 Valdez Marine Term., Ser. 1994A (ARCO Transp.), 3.45%, due 6/17/96 3.45 $6,300,000
----------
ARKANSAS -- 3.0%
6,400,000 Pulaski Co. VRDN (Chenel Park Apt. Proj.), 4.35% (Notes B,D) 4.35 6,400,000
----------
CALIFORNIA -- .4%
300,000 California Alternative Energy Source Fin. Auth. VRDN, Ser. 1986, 3.70% (Notes B,D) 3.70 300,000
465,000 No. California Power Agency Public Power Rev., 6.40%, due 8/15/96 (Note D) 3.80 468,401
100,000 San Dimas, Redev. Agency VRDN, Ser. 1983 (Comm. Dev.), 3.35% (Notes B,D) 3.35 100,000
----------
868,401
----------
COLORADO -- 3.5%
300,000 Adams Co. IDR VRDN (City View Park Part.), Ser. 85, 4.15% (Notes B,D)) 4.15 300,000
7,200,000 Pueblo Co. IDR VRDN (Kaiser Aero Space Select Proj.), 4.30% (Notes B,D) 4.30 7,200,000
----------
7,500,000
----------
CONNECTICUT -- .9%
2,000,000 Mashantucket (Western Pequot Tribe), Ser. 96, 3.35%, due 7/25/96 (Note D) 3.35 2,000,000
----------
DISTRICT OF COLUMBIA -- .1%
300,000 Dist. of Columbia, General Fund Recovery VRDN, Ser. B, 4.30% (Notes B,D) 4.30 300,000
----------
FLORIDA -- 5.4%
100,000 Clearwater Water & Sewer Rev., Ser. A, Prerefunded @ 102 , 7.10%, due 12/1/96 (Note E) 3.85 103,808
250,000 Dade Co. Educ. Fac. Auth. Rev. (Florida Int'l. Univ. Proj.), 3.50%, due 10/1/96 (Note D) 3.42 250,077
100,000 Florida Board of Educ. GO, Ser. A, Prerefunded @ 102, 7.50%, due 6/1/96 (Note E) 3.95 102,281
100,000 Florida HFA , Prerefunded @ 100, 5.50%, due 11/1/96 (Note E) 3.75 100,852
160,000 Florida HFA MFH VRDN, Ser. EEE (Carlton Arms II Proj.), 4.30% (Notes B,D) 4.30 160,000
100,000 Florida HFA VRDN, Ser. 1984 (Lakes of Northdale), 3.50% (Notes B,D) 3.50 100,000
1,700,000 Jacksonville Elec. Auth. Rev., 3.30%, due 5/17/96 (Note D) 3.30 1,700,000
4,000,000 Orange Co. Hlth. Facs. Auth. VRDN (Adventist Health Sys./Sunbelt Oblig.), 4.10% (Notes B,D) 4.10 4,000,000
40,000 Orlando & Orange Co. Expressway Auth. Rev., Prerefunded @ 102, 7.50%, due 7/1/96 (Note E) 4.00 41,023
5,000,000 Sunshine State Gov't. Fin. Comm. Rev. (Gov't Fin. Program), 3.50%, due 6/21/96 3.50 5,000,000
----------
11,558,041
----------
GEORGIA -- .9%
2,000,000 Fulco Hosp. Auth. Rev. (St. Joseph's Hosp. Proj.), 3.45%, due 5/31/96 (Note D) 3.45 2,000,000
----------
HAWAII -- 0%
100,000 Hawaii Dept. of Budget VRDN, Ser. 1988 (Wilcox Memorial Hosp. Proj.), 4.90% (Notes B,D) 4.90 100,000
----------
ILLINOIS -- 14.6%
1,000,000 Arcola IDR VRDN (Herff Jones, Inc. Proj.), 4.30% (Notes B,D) 4.30 1,000,000
2,900,000 Chicago VRDN, Ser. AZ (Muni. Sec. Trust Receipts), 4.20% (Notes B,D) 4.20 2,900,000
6,000,000 Chicago O'Hare Int'l Airport VRDN, Ser. A (Northwest Airlines, Inc.), 4.45% (Notes B,D) 4.45 6,000,000
50,000 Cook Co. GO, 6.75%, due 11/1/96 (Note D) 3.65 50,757
100,000 Cook Co. GO, 3.80%, due 11/15/96 (Note D) 3.65 100,076
500,000 Illinois GO, 4.50%, due 8/1/96 3.60 501,089
2,900,000 Illinois Dev. Fin. Auth. VRDN, Ser. 85 (CPL/Downer's Grove Partnership Ltd. Proj.),
4.10% (Notes B,D) 4.10 2,900,000
100,000 Illinois Dev. Fin. Auth. VRDN (Tempco Elec.), 4.25% (Notes B,D) 4.25 100,000
800,000 Illinois Hlth. Fac. Auth., Ser. A (Servant Corp. Proj.), 4.70%, due 8/15/96 (Note D) 3.80 801,988
3,500,000 Illinois Hlth. Fac. Auth. Rev. (Rush Presbyterian-St. Luke's Med. Ctr.), 3.45%,
due 6/7/96 (Note D) 3.45 3,500,000
4,000,000 Illinois Hlth. Fac. Auth. Rev. (Rush Presbyterian-St. Luke's Med. Ctr.), 3.40%,
due 8/15/96 (Note D) 3.40 4,000,000
7,000,000 Illinois Stud. Assist. Comm. Stud. Loan VRDN, Ser. A, 4.30% (Notes B,D) 4.30 7,000,000
2,600,000 Oak Lawn IDR VRDN (Lavergne Partners Proj.), 4.30% (Notes B,D) 4.30 2,600,000
----------
31,453,910
----------
INDIANA -- 5.2%
10,000 Auburn VRDN, Ser. 88 (RJ Tower Corp. Proj.), 4.45% (Notes B,D) 4.45 10,000
2,235,000 Indiana Hlth. Fac. Fin. VRDN (Comm. Hlth. & Rehab.), 4.70% (Notes B,D) 4.70 2,235,000
2,000,000 Mt. Vernon Poll. Control & Solid Waste Rev., Ser. 89A (General Electric Co. Proj.),
3.20%, due 6/14/96 3.20 2,000,000
7,000,000 Sullivan (Hoosier Energy Rural Elec. Coop.), 3.45%, due 6/20/96 (Note D) 3.45 7,000,000
----------
11,245,000
----------
IOWA -- 0%
100,000 Dubuque IDR VRDN (Swiss Farms Proj.), 4.55% (Notes B,D) 4.55 100,000
----------
KENTUCKY -- 4.0%
200,000 Boone Co. VRDN, Ser. 85A (Cincinnati Gas & Elec.), 3.50% (Notes B,D) 3.50 200,000
6,900,000 Daviess Co. - Kimberly Clark VRDN, Ser. 93A (Scott Paper), 4.30% (Notes B,D) 4.30 6,900,000
1,500,000 Daviess Co. - Kimberly Clark VRDN, Ser. 94B (Scott Paper), 4.30% (Notes B,D) 4.30 1,500,000
100,000 Warsaw IDR VRDN (SDI Operating Partners), 4.30% (Notes B,D) 4.30 100,000
----------
8,700,000
----------
LOUISIANA -- .3%
195,000 East Baton Rouge Parish New Public Hsg. Auth. Rev., 4.88%, due 8/1/96 (Note D) 3.60 195,603
75,000 Louisiana GO, Ser. B, Prerefunded @ 102, 8.00%, due 5/1/97 (Note E) 4.10 79,274
250,000 Louisiana Recovery Dist. Sales Tax Rev., 7.38%, due 7/1/96 (Note D) 3.55 251,576
100,000 New Orleans Exhib. Hall Auth. Hotel Occupancy Tax Rev., 5.13%, due 7/15/96 (Note D) 3.60 100,304
----------
626,757
----------
MAINE -- .1%
300,000 Maine Tax Anticipation Notes, 4.50%, due 6/28/96 3.50 300,429
----------
MARYLAND -- 3.0%
6,000,000 Maryland CDA Hsg. & Comm. Dev. Rev., 2nd Ser. 96, 3.55%, due 10/1/96 3.55 6,000,000
350,000 Montgomery Co. Pub. Improvement GO, Ser. B, 6.80%, due 10/1/96 3.50 354,736
----------
6,354,736
----------
MASSACHUSETTS -- 2.3%
5,000,000 Massachusetts Bay Transp. Auth. Rev., Ser. C, 3.40%, due 5/30/96 (Note D) 3.40 5,000,000
----------
MICHIGAN -- 4.2%
7,000,000 Greater Detroit Res. Rec. Auth. Rev., Ser. A, 4.50%, due 12/13/96 3.75 7,031,274
2,000,000 Michigan Bldg. Auth. Rev., 3.50%, due 5/7/96 (Note D) 3.50 2,000,000
----------
9,031,274
----------
MISSOURI -- .1%
110,000 Missouri GO., Prerefunded @ 102, 7.05%, due 8/1/96 (Note E) 3.50 113,147
----------
MONTANA -- 6.3%
6,000,000 Montana Board of Investments VRDN (Payroll Tax Workers' Comp.), 4.05% (Note B) 4.05 6,000,000
7,500,000 Montana Tax & Revenue Anticipation Notes, 4.50%, due 6/30/96 3.25 7,514,801
----------
13,514,801
----------
NEBRASKA -- .1%
250,000 Lincoln Waterworks Rev., 4.60%, due 8/15/96 4.60 250,511
----------
NEVADA -- 4.5%
300,000 Nevada Director IDR VRDN, Ser. 91A (Pilot Co. Proj.), 4.40% (Notes B,D) 4.40 300,000
3,500,000 Nevada Hsg. SFM Rev., 3.55%, due 10/1/96 (Note D) 3.55 3,500,000
2,050,000 Washoe Co. Ser. 90 (Sierra Pacific Power Co. Proj.), 3.35%, due 5/22/96 (Note D) 3.35 2,050,000
2,800,000 Washoe Co. Ser. 90 (Sierra Pacific Power Co. Proj.), 3.50%, due 6/19/96 (Note D) 3.50 2,800,000
1,000,000 Washoe Co. Ser. 92 (Sierra Pacific Power Co. Proj.), 3.35%, due 8/8/96 (Note D) 3.35 1,000,000
----------
9,650,000
----------
NEW HAMPSHIRE -- 0%
100,000 New Hampshire Bus. Fin. Auth. PCR VRDN, Ser. 92D (Public Service of NH), 4.25% (Notes B,D) 4.25 100,000
----------
NEW JERSEY -- 2.1%
250,000 Burlington Co. General Impt. GO, 8.40%, due 10/1/96 3.70 254,795
50,000 Middlesex Co. Utils. Auth. Sewer Rev., Prerefunded @ 102, 7.50%, due 8/15/96 (Note E) 3.75 51,525
4,300,000 Wildwood GO Bond Anticipation Notes, 4.20%, due 9/20/96 3.65 4,308,957
----------
4,615,277
----------
NEW YORK -- .9%
50,000 Metropolitan Transp. Auth. Rev., Ser. G, Prerefunded @ 102, 8.00%, due 7/1/96 (Note E) 3.70 51,347
100,000 New York City Rev., Ser. B, Prerefunded @ 102, 7.38%, due 8/15/96 (Note E) 3.90 102,955
100,000 New York City Rev., Ser. D, Prerefunded @ 102, 8.13%, due 8/1/96 (Note E) 3.75 103,052
85,000 New York City Rev., Ser. D, Prerefunded @ 102, 8.50%, due 8/1/96 (Note E) 3.75 87,673
175,000 New York City Rev., Ser. D, Prerefunded @ 102, 8.50%, due 8/1/96 (Note E) 3.75 180,503
150,000 New York Dorm. Auth. Rev. (NY Univ.), Prerefunded @ 102, 6.63%, due 7/1/96 (Note E) 3.50 153,754
1,000,000 New York HFA Rev., Ser. A, 5.60%, due 5/1/96 (Note D) 3.50 1,000,000
100,000 New York Med. Care Fac. Hosp. & Nursing Home Rev., 4.50%, due 8/15/96 (Note D) 3.85 100,177
165,000 Wallkill GO, Ser. B, 6.63%, due 9/15/96 (Note D) 3.50 166,885
----------
1,946,346
----------
NORTH CAROLINA -- .3%
700,000 North Carolina Muni. Power Agency Rev. (Catawba Proj.), 3.45%, due 6/18/96 (Note D) 3.45 700,000
----------
OHIO -- 3.5%
100,000 Ohio GO, 5.10%, due 8/1/96 3.50 100,391
100,000 Ohio GO, Prerefunded @ 102, 6.85%, due 9/1/96 (Note E) 3.85 102,952
305,000 Ohio Air Quality, Ser. A (Ohio Edison Proj.), 4.25%, due 8/1/96 (Note D) 4.25 305,163
2,000,000 Toledo-Lucas Co. Port Auth. Rev. (CSX Transp. Inc.), 3.30%, due 6/4/96 (Note D) 3.30 2,000,000
5,000,000 Twinsburg Local School Dist. GO Bond Anticipation Notes, 4.50%, due 6/6/96 3.80 5,003,406
----------
7,511,912
----------
OREGON -- .7%
355,000 Columbia River Rev. (Peoples Gas & Elec.), Prerefunded @ 100, 6.70%, due 5/1/96 (Note E) 3.40 355,000
225,000 Columbia River Rev. (Peoples Gas & Elec.), Prerefunded @ 100, 6.95%, due 5/1/96 (Note E) 3.40 225,000
850,000 Columbia River Rev. (Peoples Gas & Elec.), Prerefunded @ 100, 7.10%, due 5/1/96 (Note E) 3.55 850,000
----------
1,430,000
----------
PENNSYLVANIA -- 6.4%
2,700,000 Carbon Co. IDA, Ser. 90B (Panther Creek Proj.), 3.35%, due 5/23/96 (Note D) 3.35 2,700,000
1,545,000 Carbon Co. IDA, Ser. 91C (Panther Creek Proj.), 3.35%, due 5/23/96 (Note D) 3.35 1,545,000
6,600,000 Pennsylvania Tax Anticipation Notes, 4.50%, due 6/28/96 3.25 6,612,558
200,000 Venango IDA , Ser. 82A VRDN (Penzoil Proj.), 4.80% (Notes B,D) 4.80 200,000
2,750,000 Venango IDA, Ser. 90A (Scrubgrass Proj.), 3.35%, due 5/21/96 (Note D) 3.35 2,750,000
----------
13,807,558
----------
SOUTH CAROLINA -- 2.6%
5,500,000 South Carolina Public Service Auth. Rev., 3.20%, due 5/29/96 (Note D) 3.20 5,500,000
----------
SOUTH DAKOTA -- 0%
100,000 South Dakota Bldg. Auth. Rev., 5.85%, due 9/1/96 (Note D) 3.60 100,739
----------
TENNESSEE -- 2.4%
1,700,000 Memphis Rev. (Shelby Co., Airport Auth.), 3.50%, due 6/18/96 (Note D) 3.50 1,700,000
3,500,000 Metro Gov't of Nashville & Davidson Ctys., Ser. 92 (Tennessee Hlth. & Educ. Board),
3.25%, due 5/16/96 (Note D) 3.25 3,500,000
----------
5,200,000
----------
TEXAS -- 10.8%
3,100,000 Austin Ser. A (Travis & Williamson Ctys), 3.20%, due 6/14/96 (Note D) 3.20 3,100,000
5,670,000 Brazos River Auth. Ser. 94A (Texas Util.), 3.45%, due 5/15/96 (Note D) 3.45 5,670,000
100,000 Houston, Water & Sewer Rev., Ser. A, Prerefunded @ 102, 7.00%, due 12/1/96 (Note E) 3.75 103,810
1,600,000 San Antonio Water Sys., Ser. 95, 3.25%, due 6/13/96 (Note D) 3.25 1,600,000
660,000 Texas Dept. of Hsg. & Comm. Affairs SFM Rev. Ref., Ser. A, 3.65%, due 5/30/96 (Note D) 3.65 659,426
500,000 Texas Public Fin. Auth. Rev., Ser. A, 4.70%, due 10/1/96 3.50 502,453
6,070,000 Texas Tax and Rev. Anticipation Notes., Ser. A, 4.75%, due 8/30/96 3.25 6,098,440
2,100,000 Tyler Hlth. Fac. Dev. Corp. Ser. 93C (East Texas Med. Ctr. Regional Healthcare),
3.45%, due 6/11/96 (Note D) 3.45 2,100,000
3,409,000 Univ. of Texas Board of Regents, Ser. A, 3.20%, due 6/13/96 3.20 3,409,000
----------
23,243,129
----------
UTAH -- 2.2%
1,470,000 Intermountain Power Agency Ser. C, Prerefunded @ 100, 6.00%, due 5/28/96 (Note E) 3.65 1,472,424
1,265,000 Intermountain Power Agency Ser. H, Prerefunded @ 100, 6.00%, due 5/28/96 (Note E) 3.65 1,267,153
1,880,000 Intermountain Power Agency Ser. I, Prerefunded @ 100, 6.00%, due 5/28/96 (Note E) 3.65 1,883,095
75,000 Intermountain Power Agency Ser. 85C, Prerefunded @ 100, 6.00%, due 5/28/96 (Note E) 3.65 75,120
----------
4,697,792
----------
VERMONT -- 2.6%
5,500,000 Vermont GO Bond Anticipation Notes, Ser. G, 3.30%, due 6/12/96 (Note D) 3.30 5,500,000
----------
VIRGINIA -- .3%
350,000 Fairfax Co. GO, Ser. B, Prerefunded @ 100.50, 6.40%, due 11/1/96 (Note E) 3.60 356,489
100,000 Virginia Beach GO, 6.60%, due 5/1/96 3.50 100,000
100,000 Virginia Pub. Facs. GO, Ser. A, 4.50%, due 6/1/96 3.95 100,073
----------
556,562
----------
WASHINGTON -- .1%
125,000 Washington Motor Vehicle Fuel Tax Rev., Prerefunded @ 100, 10.00%, due 9/1/96 (Note E) 3.90 127,483
----------
WEST VIRGINIA -- 2.2%
150,000 West Virginia Hsg. Dev. Rev., 5.75%, due 7/1/96 (Note D) 4.00 150,418
4,500,000 West Virginia Pub. Energy Rev. (Morgantown Assoc. Proj.), 3.60%, due 6/10/96 (Note D) 3.60 4,500,000
----------
4,650,418
----------
WISCONSIN -- .1%
250,000 Wisconsin, GO, Ser. A, 6.50%, due 5/1/96 3.45 250,000
----------
WYOMING -- .4%
800,000 Sweetwater Co. Rev., Ser. 88A (Pacificorp Proj.), 3.30%, due 6/4/96 (Note D) 3.30 800,000
----------
TOTAL MUNICIPAL OBLIGATIONS -- 99.4% 214,104,223
OTHER ASSETS AND LIABILITIES, NET -- .6% 1,206,307
----------
NET ASSETS -- 100.0% $215,310,530
============
Please see accompanying notes to the schedules of investments and financial statements.
</TABLE>
Description of Abbreviations:
CDA Commercial Development Authority
GO General Obligation
HFA Housing Finance Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue Bond
MFH Multi Family Housing
PCR Pollution Control Revenue Bond
SFM Single Family Mortgage
VRDN Variable Rate Demand Note
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
NOTES TO SCHEDULES OF INVESTMENTS
April 30, 1996 (Unaudited)
(A) Rule 144 A securities are exempt from registration and are restricted
as to resale to qualified institutional buyers under the Securities Act of
1933. Total value of these securities in the Money Market Portfolio is
$109,568,258, which represents 9.11% of net assets.
(B) Variable rate securities. The rates shown are the current rates on April
30, 1996. Securities in the Municipal Portfolio shown without a maturity
date are payable within 5 business days.
(C) These securities are deemed illiquid as to resale. Total value of these
securities in the Money Market Portfolio is $20,000,000, which represents
1.66% of net assets.
(D) Securities backed by credit support agreements from banks or insurance
institutions.
(E) Bonds which are prerefunded are collateralized by U.S. Government Securities
which are held in escrow and are used to pay principal and interest on the
municipal issue and to retire the bonds in full at the earliest refunding
date.
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Money U.S.
Market Government Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (including repurchase
agreements of $89,130,000, $26,363,000, and $0,
respectively) (Note 2) $ 1,208,367,013 $ 307,012,111 $ 214,104,223
Cash 816 531 54,626
Interest receivable 2,928,339 616,420 1,561,846
----------------- ------------------ ------------------
TOTAL ASSETS 1,211,296,168 307,629,062 215,720,695
----------------- ------------------ ------------------
LIABILITIES
Dividends payable to shareholders 2,241,026 577,501 268,589
Payable for securities purchased 5,065,172 --- ---
Payable to Investment Manager and its affiliates (Note 3) 663,741 127,479 83,439
Accrued expenses and other liabilities 286,180 72,884 58,137
----------------- ------------------ ------------------
TOTAL LIABILITIES 8,256,119 777,864 410,165
----------------- ------------------ ------------------
NET ASSETS $ 1,203,040,049 $ 306,851,198 $ 215,310,530
================= ================== ==================
Net assets consist of:
Paid-in capital $ 1,203,039,863 $ 306,851,000 $ 215,310,378
Accumulated net realized gains from security transactions 186 198 152
----------------- ------------------ ------------------
Net assets, at value $ 1,203,040,049 $ 306,851,198 $ 215,310,530
================= ================== ==================
Shares outstanding ($.001 par value common stock,
60 billion, 20 billion, and 20 billion shares
authorized, respectively) 1,203,039,863 306,851,000 215,310,378
================= ================== ==================
Net asset value, redemption price and offering price per
share (Note 2) $ 1.00 $ 1.00 $ 1.00
================= ================== ==================
</TABLE>
Please see accompanying notes to financial statements.
32
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
STATEMENTS OF OPERATIONS
For the Period Ended April 30, 1996* (Unaudited)
Money U.S.
Market Government Municipal
Portfolio Portfolio Portfolio
------------ ----------- ----------
INVESTMENT INCOME
Interest income $17,917,525 $4,444,814 $2,061,060
----------- ---------- ----------
Total Income 17,917,525 4,444,814 2,061,060
----------- ---------- ----------
EXPENSES
Investment management fees 1,157,590 292,767 152,651
Administration fees 331,939 83,648 61,060
Transfer agent fees 663,098 167,295 123,070
Shareholder servicing fees 663,879 142,203 66,867
Other expenses 286,180 72,884 58,137
----------- ---------- ----------
Total Expenses 3,102,686 758,797 461,785
Fees waived / expenses reimbursed
by the Investment Manager
and its affiliates (Note 3) (751,648) (245,456) (160,948)
----------- ---------- ----------
Net Expenses 2,351,038 513,341 300,837
----------- ---------- ----------
Net Investment Income 15,566,487 3,931,473 1,760,223
----------- ---------- ----------
NET REALIZED GAIN FROM SECURITY
TRANSACTIONS 186 198 152
----------- ---------- ----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $15,566,673 $3,931,671 $1,760,375
=========== ========== ==========
* The Fund commenced operations on December 20, 1995.
Please see accompanying notes to financial statements.
33
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended April 30, 1996* (Unaudited)
<TABLE>
<CAPTION>
Money U.S.
Market Government Municipal
Portfolio Portfolio Portfolio
--------- ----------- ---------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 15,566,487 $ 3,931,473 $ 1,760,223
Net realized gain from security
transactions 186 198 152
--------------- ------------- ------------
Net increase in net assets from
operations 15,566,673 3,931,671 1,760,375
--------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME (15,566,487) (3,931,473) (1,760,223)
--------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS
($1.00 per share):
Proceeds from shares sold 2,312,402,381 590,082,682 409,639,603
Shares issued in reinvestment
of dividends 13,325,461 3,353,972 1,491,634
Payments for shares redeemed (1,122,747,979) (286,605,654) (195,840,859)
--------------- ------------- ------------
Net increase in net assets from
capital share transactions 1,202,979,863 306,831,000 215,290,378
--------------- ------------- ------------
TOTAL INCREASE IN NET ASSETS 1,202,980,049 306,831,198 215,290,530
NET ASSETS:
Beginning of period 60,000 20,000 20,000
--------------- ------------- -------------
End of period $ 1,203,040,049 $ 306,851,198 $ 215,310,530
=============== ============= =============
</TABLE>
* The Fund commenced operations on December 20, 1995.
Please see accompanying notes to financial statements.
34
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS (Unaudited)
- - ---------------------------------------------------------------------------
Period Ended April 30, 1996*
- - ---------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for the period indicated. This information has been
derived from the Portfolio's financial statements.
PER SHARE DATA:
Net asset value, beginning of period $ 1.000
--------------
INVESTMENT OPERATIONS:
Net investment income 0.018
--------------
DISTRIBUTIONS:
Distributions from net investment income (0.018)
--------------
Net asset value, end of period $ 1.000
--------------
--------------
Total investment return 4.92% (A)
--------------
--------------
Net assets, end of period $1,203,040,049
--------------
--------------
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 0.71% (A)
Ratio of net investment income to average net assets 4.69% (A)
Decrease reflected in above expense ratio due to
waivers / reimbursements by the Investment Manager
and its affiliates (Note 3) 0.23% (A)
* The Fund commenced operations on December 20, 1995.
(A) Annualized.
Please see accompanying notes to financial statements.
35
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS (Unaudited)
Period Ended April 30, 1996*
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for the period indicated. This information has been
derived from the Portfolio's financial statements.
<TABLE>
<CAPTION>
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 1.000
-------------
INVESTMENT OPERATIONS:
Net investment income 0.018
-------------
DISTRIBUTIONS:
Distributions from net investment income (0.018)
-------------
Net asset value, end of period $ 1.000
=============
Total investment return 4.93% (A)
=============
Net assets, end of period $ 306,851,198
=============
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 0.61% (A)
Ratio of net investment income to average net assets 4.70% (A)
Decrease reflected in above expense ratio due to waivers /
reimbursements by the Investment Manager and its affiliates
(Note 3) 0.30% (A)
</TABLE>
* The Fund commenced operations on December 20, 1995.
(A) Annualized.
Please see accompanying notes to financial statements.
36
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
MUNICIPAL PORTFOLIO
FINANCIAL HIGHLIGHTS (Unaudited)
Period Ended April 30, 1996*
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for the period indicated. This information has been
derived from the Portfolio's financial statements.
<TABLE>
<CAPTION>
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 1.000
-------------
INVESTMENT OPERATIONS:
Net investment income 0.012
-------------
DISTRIBUTIONS:
Distributions from net investment income (0.012)
-------------
Net asset value, end of period $ 1.000
=============
Total investment return 3.19% (A)
=============
Net assets, end of period $ 215,310,530
=============
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 0.49% (A)
Ratio of net investment income to average net assets 2.88% (A)
Decrease reflected in above expense ratio due to waivers /
reimbursements by the Investment Manager and its affiliates
(Note 3) 0.26% (A)
</TABLE>
* The Fund commenced operations on December 20, 1995.
(A) Annualized.
Please see accompanying notes to financial statements.
37
<PAGE>
Waterhouse Investors Cash Management Fund, Inc.
Notes to Financial Statements - April 30, 1996 (Unaudited)
Note 1 - Organization
Waterhouse Investors Cash Management Fund, Inc. (the "Fund") was
organized as a Maryland corporation on August 16, 1995. The Fund is
registered as an open-end, diversified management investment company
with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended (the "Act") and the Securities Act of 1933.
The Fund had no operations until December 20, 1995 (when operations
commenced for all Portfolios) other than matters relating to its
organization and the sale and issuance of 60,000 shares of the Money
Market Portfolio and 20,000 shares each of the U.S. Government Portfolio
and the Municipal Portfolio ("Initial Shares").
Waterhouse Securities, Inc. absorbed all organizational expenses other
than securities registration fees. These fees have been deferred and
will be amortized from the date operations commenced, December 20, 1995,
over a period which it is expected that a benefit will be realized, not
to exceed five years. If any of the Initial Shares are redeemed during
the amortization period by any holder thereof, the redemption proceeds
will be reduced by any unamortized organizational costs of that
Portfolio in the same proportion as the number of Initial Shares being
redeemed bears to the number of Initial Shares outstanding of that
Portfolio at the time of redemption.
Note 2 - Significant Accounting Policies
The following is a summary of the Fund's significant accounting policies:
Computation of Net Asset Value -- It is the Fund's policy to maintain a
continuous net asset value of $1.00 per share for each Portfolio. The
Fund has adopted certain investment portfolio valuation, dividend and
distribution policies to enable it to do so. There is no assurance,
however, that each Portfolio will be able to maintain a stable net asset
value of $1.00 per share.
Securities valuation -- The Fund's securities are valued on the
amortized cost basis, which approximates market value. This involves
initially valuing a security at its original cost and thereafter
assuming a constant amortization to maturity of any discount or premium.
This method of valuation is expected to enable each Portfolio to
maintain a constant net asset value of $1.00 per share.
38
<PAGE>
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.
Investment income -- Interest income is accrued as earned. Discounts
and premiums on securities purchased are amortized in accordance with
income tax regulations which approximate generally accepted accounting
principles.
Distributions to shareholders -- Dividends arising from net investment
income are declared daily and paid monthly. With respect to each
Portfolio, 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. Securities sold are valued on a specific identification
basis.
Expenses -- Expenses directly attributable to each Portfolio are charged
to that Portfolio's operations. Expenses which are applicable to all
Portfolios are allocated on a pro rata basis.
Federal income taxes -- It is each Portfolio'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
a Portfolio so qualifies, and distributes at least 90% of its taxable
net income, the Portfolio (but 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 each Portfolio'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.
39
<PAGE>
Note 3 - Investment Management Fees and Other Transactions with
Affiliates of the Investment Manager
Under the terms of an Investment Management Agreement with Waterhouse
Asset Management, Inc. (the "Investment Manager"), for the investment
management services furnished to each Portfolio, such Portfolio pays the
Investment Manager an annual investment management fee, on a graduated
basis, equal to .35 of 1% of the first $1 billion of average daily net
assets of each such Portfolio, .34 of 1% of the next $1 billion, and .33
of 1% of average daily net assets of each such Portfolio over $2
billion. The Investment Manager has agreed to waive a portion of its
fee payable by the Municipal Portfolio through October 31, 1997, so that
the actual fee payable annually by such Portfolio during such period
will be equal to .25 of 1% of its average daily net assets.
The Investment Manager has agreed to reimburse each Portfolio to the
extent that the aggregate expenses of such Portfolio (exclusive of
interest, taxes, brokerage and extraordinary expenses, all to the extent
permitted by applicable state law and regulation) exceed the limits
prescribed by any state in which the Portfolio's shares are qualified
for sale. The Fund believes that the most restrictive expense ratio
limitation imposed by any state is 2 1/2% of the first $30 million, 2% of
the next $70 million and 1 1/2% of average net assets in excess of $100
million of a Portfolio for any fiscal year. Expense reimbursements, if
any, will be accrued daily and paid monthly.
For the period ended April 30, 1996, the Investment Manager voluntarily
waived $1,191, $852 and $1,643 of its investment management fee for the
Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio, respectively.
The Investment Manager has also been retained under an Administration
Agreement to perform certain administrative services for the Fund. For
the administrative services rendered to the Fund, each Portfolio pays
the Investment Manager a monthly fee at an annual rate of .10 of 1% of
each Portfolio's average net assets. For the period ended April 30,
1996, the Investment Manager voluntarily waived or reimbursed expenses
of $340, $1,206 and $14,097 of its administration fee for the Money
Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio, respectively.
Waterhouse Securities, Inc. ("Waterhouse Securities"), an affiliate of
the Investment Manager has been retained under a Shareholder Services
Agreement to perform shareholder servicing necessary for the operation
of the Fund. The shareholder service plan adopted by the Fund provides
that each Portfolio pays Waterhouse Securities a monthly fee at an
annual rate of up to .25 of 1% of average daily net assets. The Fund's
Board has determined to limit the annual fee payable through October 31,
1997 under the Shareholder Servicing Plan so as not to exceed .20 of 1%
of average daily net assets in the case of the Money Market Portfolio,
.17 of 1% of average daily net assets in the case of the U.S. Government
Portfolio and .11 of 1% of average daily net assets in the case of the
Municipal Portfolio. For the period ended April 30, 1996, Waterhouse
Securities voluntarily waived $598,879, $139,996 and $65,799 of its
shareholder servicing fee for the Money Market Portfolio, the U.S.
Government Portfolio and the Municipal Portfolio, respectively.
40
<PAGE>
The Fund has entered into a Transfer Agency and Dividend Disbursing
Agency Agreement with Waterhouse National Bank (the "Bank") an affiliate
of the Investment Manager, to perform transfer and dividend disbursing
agency-related services. For such services each Portfolio pays the Bank
a monthly fee at an annual rate of .20 of 1% of average daily net
assets. For the period ended April 30, 1996, the Bank voluntarily
waived $151,238, $103,402 and $79,409 of its transfer agent fee for the
Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio, respectively.
Each Director who is not an "affiliated person" as defined in the Act
receives from the Fund $3,000 per quarter and $2,000 for each meeting
attended.
Note 4 - Other
On April 10, 1996, Waterhouse Investor Services, Inc. ("Waterhouse") and
The Toronto Dominion Bank (the "TD Bank") announced that they had
signed a merger agreement, providing for TD Bank to acquire Waterhouse
through a merger of Waterhouse into a newly formed subsidiary of TD
Bank.
Consummation of the merger is subject to satisfaction of a number of
conditions, including approval of the merger by Waterhouse's
stockholders and receipt of certain regulatory approvals. Due to such
requirements, it is currently anticipated that consummation of the
merger will occur within four to six months.
It is anticipated that management and employees of the Investment
Manager and its affiliates will remain unchanged following the merger.
Because of the indirect change of control of the Investment Manager,
consummation of the merger will result in the termination of the
Investment Management Agreement between the Investment Manager and the
Fund. It is anticipated that a new Investment Management Agreement
containing substantially identical terms to the current agreement will
be submitted for approval to the Fund's Board of Directors and
shareholders prior to consummation of the merger.
Certain other agreements between the Fund and the Investment Manager or
its affiliates, including the Administration Agreement, may also be
deemed to terminate upon consummation of the merger. It is anticipated
that new agreements, substantially identical to the current agreements,
will be submitted for approval to the Fund's Board of Directors prior to
consummation of the merger.
41
<PAGE>
PART C
OTHER INFORMATION
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
Item 24. Financial Statements and Exhibits.
(a) Included in Part A of this Registration Statement:
Financial Highlights from December 20, 1995 (commencement of operations)
through April 30, 1996 (unaudited)
Included in Part B of this Registration Statement:
Schedule of Investments, April 30, 1996 (unaudited)
Statement of Assets and Liabilities, April 30, 1996 (unaudited)
Statement of Operations, April 30, 1996 (unaudited)
Statement of Changes in Net Assets, April 30, 1996 (unaudited)
Financial Highlights from December 20, 1995 (commencement of operations)
through April 30, 1996 (unaudited)
Notes to Financial Statement--April 30, 1995 (unaudited)
Report of Independent Auditors
Statement of Assets and Liabilities, December 5, 1995 (audited)
Notes to Statement of Assets and Liabilities, December 5, 1995
(audited)
(b) Exhibits
(1)--Articles of Incorporation, as amended to date***
(2)--By-Laws, as amended to date*
(3)--Inapplicable
(4)--Instruments Defining Shareholder Rights
Incorporated by Reference to Exhibits 1 and 2 above.
(5)--Investment Management Agreement between Registrant and Waterhouse
Asset Management, Inc dated December 12, 1995***
(6) (a)--Distribution Agreement between Registrant and Funds
Distributor, Inc. dated December 15, 1995***
(b)(i)--Form of Agency Selling Agreement*
(b)(ii)--Agency Selling Agreement for Waterhouse Securities,
Inc. dated February 15, 1996***
(7)--Inapplicable
(8)--Custody Agreement between Registrant and The Bank of New York
dated December 19, 1995***
(9) (a)--Transfer Agency and Dividend Disbursing Agency
Agreement between Registrant and Waterhouse National Bank
dated December***
(b)--Sub-Transfer Agency and Dividend Disbursing Agency
Agreement between Waterhouse National Bank, National Investor
Services Corp. and Waterhouse Securities, Inc. on behalf
of Registrant dated December 12, 1995***
(c)--Form of Shareholder Servicing Plan*
(d)(i) --Form of Shareholder Services Agreement*
(d)(ii)--Shareholder Services Agreement for Waterhouse Securities
Inc. dated December 12, 1995***
(e)--Administration Agreement between Registrant and Waterhouse
Asset Management, dated December 12, 1995***
(f)--Subadministration Agreement between Waterhouse
Asset Management, Inc, and Funds on behalf of
Registrant dated December 12, 1995***
(g)--Accounting Services Agreement between Waterhouse Asset
Management, Inc and MGF Service Corp. on behalf of Registrant
dated December 20, 1995***
(h)--State Registration Services Agreement between Registrant
and Clear Sky Corporation dated November 27, 1995***
C-1
<PAGE>
(11)--Consent of Independent Auditors***
(12)--Inapplicable
(13)--Subscription Agreement between Registrant and FDI
Distribution Services, Inc. dated December 12, 1995***
(14)--Model Waterhouse Securities, Inc. Individual Retirement Plan*
(15)--Inapplicable
(16)(a)--Schedule for computation of each performance quotation
for Money Market Portfolio
(16)(b)--Schedule for computation of each performance quotation
for the U.S. Government Portfolio
(16)(c)--Schedule for computation of each performance quotation
for Municipal Portfolio
(17)(a)--Financial Data Schedule meeting the requirements of Rule 483 under
the Securities Act of 1993 on behalf of the Money Market Portfolio
(17)(b)--Financial Data Schedule meeting the requirements of Rule 483 under
the Securities Act of 1993 on behalf of the U.S. Government
Portfolio
(17)(c)--Financial Data Schedule meeting the requirements oif Rule 483
under the Securities Act of 1993 on behalf of the Municipal
Portfolio
(18)--Inapplicable
- - --------------
* Previously filed and incorporated by reference herein to Pre-Effective
Amendment No. 2 to Registration Statement on Form N-1A, File Nos. 33-
96132; 811-9086, filed on December 12, 1995.
*** Filed electronically herewith; initially filed as identically numbered
Exhibit to Pre-Effective Amendment No. 2 to Registration Statement on
Form N-1A, File Nos. 33-96132; 811-9086, filed on December 12, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
C-2
<PAGE>
Item 26. Number of Holders of Securities.
As of May 17, 1996, the number of record holders of each class of
securities of the Registrant were as follows:
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
--------------- ------------------------
<S> <C>
Money Market Portfolio 168,040
U.S. Government Portfolio 28,969
Municipal Portfolio 17,167
</TABLE>
Item 27. Indemnification.
Section 2-418 of the General Corporation Law of the State of Maryland,
Article IX of the Registrant's Articles of Incorporation, filed as Exhibit
(b)(1) hereto, Article V of the Registrant's By-Laws, filed as Exhibit
(b)(2) hereto, and the Investment Management Agreement, filed as
Exhibit 5 hereto, provide for indemnification.
The Articles of Incorporation and By-Laws provide that to the fullest
extent that limitations on the liability of directors and officers are
permitted by the Maryland General Corporation Law, no director or officer
of the Registrant shall have any liability to the Registrant or to its
shareholders for damages.
The Articles of Incorporation and By-Laws further provide that the
Registrant shall indemnify and advance expenses to its currently acting and
its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law and the
Investment Company Act; that the Registrant shall indemnify and advance
expenses to its officers to the same extent as its directors and to such
further extent as is consistent with applicable law. The Board of Directors
may, through by-law, resolution or agreement, make further provisions for
indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law. However, nothing
in the Articles of Incorporation or By-Laws protects any director or
officer of the Registrant against any liability to the Registrant or to its
shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.
Section 2-418 of the General Corporation Law of the State of Maryland
provides that a corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established
that (i) the act or omission of the director was material to the matter
giving rise to the proceeding; and (a) was committed in bad faith; or (b)
was the result of active and deliberate dishonesty; or (ii) the director
actually received an improper
C-3
<PAGE>
personal benefit in money, property, or services; or (iii) in the case of any
criminal proceeding, the director had reasonable cause to believe that the
act or omission was unlawful. Section 2-418 permits indemnification to be
made against judgments, penalties, fines, settlements, and reasonable
expenses actually incurred by the director in connection with the proceeding;
however, if the proceeding was one by or in the right of the corporation,
indemnification may not be made in respect of any proceeding in which the
director shall have been adjudged to be liable to the corporation. A
director may not be indemnified under Section 2-418 in respect of any
proceeding charging improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which the director
was adjudged to be liable on the basis that personal benefit was improperly
received.
Unless limited by the Registrant's charter, a director who has been
successful, on the merits or otherwise, in the defense of any proceeding
referred to above shall be indemnified against any reasonable expenses
incurred by the director in connection with the proceeding. Reasonable
expenses incurred by a director who is a party to a proceeding may be paid
or reimbursed by the corporation in advance of the final disposition of the
proceeding upon receipt by the corporation of (i) a written affirmation by
the director of the director's good faith belief that the standard of
conduct necessary for indemnification by the corporation has been met; and
(ii) a written undertaking by or on behalf of the director to repay the
amount if it shall ultimately be determined that the standard of conduct
has not been met.
The indemnification and advancement of expenses provided or authorized by
Section 2-418 may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of stockholders or directors, an
agreement or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.
Under Section 2-418, a corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent that it
may indemnify directors and a corporation, in addition, may indemnify and
advance expenses to an officer, employee, or agent who is not a director to
such further extent, consistent with law, as may be provided by its
charter, bylaws, general or specific action of its board of directors or
contract.
Under Section 2-418, a corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent
of the corporation, or who, while a director, officer, employee, or agent
of the corporation, is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust, other
enterprise, or employee benefit plan against any liability asserted against
and incurred by such person in any such capacity or arising out of such
person's position, whether or not the corporation would have the power to
indemnify against liability under the provisions of such Section. A
corporation also may provide similar protection, including a trust fund,
letter of credit, or surety bond, not inconsistent with the
C-4
<PAGE>
foregoing. The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, 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 SEC, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
The following persons are the directors and officers of the Investment
Manager:
DENNIS C. BORECKI, Director, President and Chief Operating Officer. Mr.
Borecki served as Executive Vice President in charge of operations,
systems, administration and customer service of Reich & Tang from 1990 to
July 1995. He is 49 years old.
KENNETH C. EBBITT, Chairman and Chief Executive Officer. Mr. Ebbitt served
as Executive Vice President of Reich & Tang and Chairman of Reich and
Tang's Cortland Funds from 1990 to July 1995. He is 54 years old.
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. Prior to that, Mr.
Hartman served as Vice President at Federated Investors Inc. from 1976 to
1983, and as a Senior Auditor at Arthur Anderson & Co. from 1967 to 1976.
He is 49 years old.
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 since July 1994. Prior to that, Mr. Neiman served as Director of
Price Waterhouse's Regulatory Advisory Practice from January 1990 to June
1994. He is 45 years old.
C-5
<PAGE>
FRANK J. PETRILLI, Director. Mr. Petrilli has served as President, Chief
Operating Officer and a Director of Waterhouse Investor Services, Inc.
since February 1995. Mr. Petrilli has served as a Director of Waterhouse
National Bank since March 1995. Prior to that, Mr. Petrilli served as
President and Chief Operating Officer of American Express Centurion Bank
from May 1993 to January 1995 and Chief Financial Officer from January 1991
to May 1993. He is 45 years old.
KENNETH I. COCO, Senior Vice President, Chief Financial Officer and
Treasurer. Mr. Coco has served as Executive Vice President--Administration
of Waterhouse Securities, Inc. since September 1979. Mr. Coco is 48 years
old.
CHRISTINE A. WATERHOUSE, Senior Vice President. Ms. Waterhouse served as
President, Chief Executive Officer and a Director of Washington Discount
Brokerage Corp., a discount brokerage firm, from June 1993 to August 1995.
She is 34 years old.
LAWRENCE M. WATERHOUSE, Jr., Director. Mr. Waterhouse has served as Chief
Executive Officer and Chairman of Waterhouse Investor Services, Inc. since
its inception in 1987. Mr. Waterhouse is the founder of Waterhouse
Securities, Inc. and has served as Chief Executive Officer since its
inception in March 1979. Mr. Waterhouse has also served as the Chairman of
the Board and Chief Executive Officer of Waterhouse Nicoll & Associates,
Inc. and L.M. Waterhouse & Co. since April 1987. Mr. Waterhouse also
serves as Chairman of Waterhouse National Bank since July 1994. He is 59
years old.
Item 29. Principal Underwriters.
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter and distributor of the Registrant's shares. The Distributor
currently acts as a principal underwriter, depositor or investment adviser
for the following other investment companies:
Fremont Mutual Funds, Inc.
HT Insight Funds, Inc., d/b/a Harris Insight Funds
Harris Insight Funds Trust, d/b/a/ Harris Insight Funds
The Munder Funds Trust
The Munder Funds, Inc.
The Panagora Institutional Funds
BJB Investment Funds
Skyline Fund
Foreign Fund Inc.
(b) The following information is furnished with respect to each officer and
director of the Distributor. Unless otherwise indicated, the principal
business address of each such individual is One Exchange Place, 10th Floor,
Boston, Massachusetts 02109:
C-6
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address Funds Distributor, Inc. with Registrant
------------------- ------------------------- --------------------
<S> <C> <C>
Marie E. Connolly Director, President, None
Chief Executive Officer
and Compliance Officer
John E. Pelletier Senior Vice President, President
General Counsel,
Secretary and Clerk
Richard W. Ingram Senior Vice President Vice President
and Treasurer
Donald R. Roberson Senior Vice President None
Joseph F. Tower, III Senior Vice President, Assistant
Treasurer and Chief Treasurer
Financial Officer
Rui M. Moura First Vice President None
Bernard A. Whalen First Vice President None
Paula R. David Vice President None
Federick C. Dey Vice President None
Eric B. Fischman* Vice President and Vice President
Associate General and Secretary
Counsel
Hannah S. Grove Vice President None
Richard S. Joseph Vice President None
Dale F. Lampe Vice President None
Mary A. Nelson Vice President None
Paul M. Prescott Vice President None
Linda C. Raftery Vice President None
Joseph A. Vignone Vice President None
Maureen F. Walsh Vice President None
John J. Pyburn* Assistant Treasurer Vice President
and Assistant
Treasurer
Elizabeth A. Bachman* Assistant Vice Vice President
President and Assistant
and Counsel Secretary
William J. Nutt Director None
John W. Gomez Director None
</TABLE>
- - -------------
* Principal business address is 200 Park Avenue, 6th Floor, New York, New
York 10166.
(c) Not applicable.
C-7
<PAGE>
Item 30. 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, Waterhouse Asset
Management, Inc., 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, Waterhouse
National Bank, 50 Main Street, White Plains, New York 10606, or Sub-
Transfer and Dividend Disbursing Agent, Waterhouse Securities or National
Investor Services Corp., 44 Wall Street, New York, New York 10005; (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., One Exchange Place, 10th Floor,
Boston, Massachusetts 02109; and (iv) in the case of records concerning
fund accounting functions, at the offices of the Fund's fund accountant,
MGF Service Corp., 312 Walnut Street, Cincinnati, Ohio 45202.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Registrant hereby undertakes to file a post-effective amendment, using
reasonably current financial statements which need not be certified, within
four to six months from the effective date of Registrant's Registration
Statement under the Securities Act of 1933, as amended.
(c) Not applicable.
(d) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director or directors
and to assist in communications with other shareholders, if requested to do
so by the holders of at least 10% of Registrant's then-outstanding shares.
C-8
<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 Post
Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New
York, County of New York, and State of New York the 19th day of June
1996.
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
Registrant
By: /s/ John E. Pelletier
--------------------------------
John E. Pelletier,
President (Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment No. 1 to Registration Statement has been signed below
on June 19, 1996 on behalf of the following persons in the capacities
indicated.
Signature Title Date
--------- ----- ----
/s/ John E. Pelletier President (Principal June 19, 1996
John E. Pelletier Executive Officer)
/s/ Richard W. Ingram Vice President, June 19, 1996
Richard W. Ingram Treasurer (Principal
Financial and
Accounting Officer)
/s/ Richard W. Dalrymple Director June 19, 1996
Richard W. Dalrymple
/s/ Anthony J. Pace Director June 19, 1996
Anthony J. Pace
/s/ Theodore Rosen Director June 19, 1996
Theodore Rosen
/s/ Lawrence J. Toal Director June 19, 1996
Lawrence J. Toal
/s/ George F. Staudter Director June 19, 1996
George F. Staudter
C-9
<PAGE>
INDEX TO EXHIBITS
(b)(1) --Articles of Incorporation, as amended to date
(b)(5) --Investment Management Agreement
(b)(6) (a)--Distribution Agreement
(b)(ii)--Selling Agency Agreement for Waterhouse Securities, Inc.
(b)(8) --Custody Agreement
(b)(9) (a)--Transfer Agency and Dividend Disbursing Agency Agreement
(b)--Sub Transfer Agency and Dividend Disbursing Agency Agreement
(d)(iii)--Shareholder Services Agreement for Waterhouse
Securities, Inc.
(e)--Administration Agreement
(f)--Subadministration Agreement
(g)--Accounting Services Agreement
(h)--State Registration Services Agreement
(b)(11)--Consent of Independent Auditors
(b)(13)--Subscription Agreement
(b)(16)(a)--Schedule for Computation of Performance Quotations for the
Money Market Portfolio
(b)--Schedule for Computation of Performance Quotations for the
U.S. Government Portfolio
(c)--Schedule for Computation of Performance Quotations for the
Municipal Portfolio
(b)(17)(a)--Financial Data Schedule for the Money Market Portfolio
(b)--Financial Data Schedule for the U.S. Government Portfolio
(c)--Financial Data Schedule for the Municipal Portfolio
C-10
ARTICLES OF INCORPORATION
OF
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
ARTICLE I
THE UNDERSIGNED, Carla N. Barone, whose address is 230 Park Avenue, New
York, New York 10169, being at least eighteen years of age, does hereby act as
an incorporator, under and by virtue of the General Laws of the State of
Maryland authorizing the formation of corporations and with the intention of
forming a corporation.
ARTICLE II
NAME
The name of the corporation is Waterhouse Investors Cash Management Fund,
Inc. (herein called the "Corporation").
ARTICLE III
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed, the powers,
rights and privileges that the Corporation shall be authorized to exercise and
enjoy, and the business or objects to be transacted, carried on and promoted by
it are as follows:
1
<PAGE>
(1) To conduct and carry on the business of an investment company of the
management type.
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts and
on such terms and conditions for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.
(4) To exchange, classify, reclassify, change the designation of, convert,
rename, redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its issued or unissued capital stock of any class
or series, as its Board of Directors may determine, in any manner and to the
extent now or hereafter permitted by the Investment Company Act of 1940, as
amended (the "Investment Company Act"), the General Laws of the State of
Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
2
<PAGE>
The Corporation shall be authorized to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the General
Laws of the State of Maryland now or hereafter in force, and the enumeration of
the foregoing purposes, powers, rights and privileges shall not be deemed to
exclude any powers, rights or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation within
the State of Maryland is 32 South Street, Baltimore, Maryland 21202. The
resident agent of the Corporation within the State of Maryland is The
Corporation Trust Incorporated, whose address is 32 South Street, Baltimore,
Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares which the Corporation has authority to issue
is one hundred billion (100,000,000,000) shares of common stock (par value
$0.0001 per share), amounting in aggregate par value to ten million dollars
($10,000,000.00). All of such shares of common stock are initially classified
into three separate series to be known as "Money Market Portfolio," "U.S.
Government Portfolio," and "Tax-Exempt Portfolio". Each such series shall be
divided initially as follows: The Prime Portfolio shall consist of sixty billion
(60,000,000,000) shares; the U.S. Government Portfolio shall consist of twenty
3
<PAGE>
billion (20,000,000,000) shares and the Tax-Exempt Portfolio shall consist of
twenty billion (20,000,000,000) shares. All of the shares of each such series
are initially classified as a single class, to be known as the "Waterhouse
Class".
(2) The Board of Directors may classify and reclassify any unissued shares
of stock (whether or not such shares have been previously classified or
reclassified) into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of or rights to require redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series.
(3) The Board of Directors may classify and reclassify any issued shares
of stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of or rights to require redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series; provided, however, that any
such classification or reclassification shall not substantially adversely affect
the rights of holders of such issued shares.
(4) Each series of stock of the Corporation shall relate to a separate
portfolio of investments. All shares of stock within each series shall be
identical except that
4
<PAGE>
there may be variations among the different series, including, without
limitation, as to the purchase price, determination of net asset value,
designations, preferences, conversion or other rights, voting powers,
restrictions, allocations of expenses, special and relative rights and
limitations as to dividends and on liquidation, qualifications or terms or
conditions of or rights to require redemption of such shares of stock.
(5) Except as the Board of Directors otherwise may provide when
classifying or reclassifying any shares of stock into separate series, all
consideration received by the Corporation for the issue or sale of shares of
stock of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds received thereon, including any proceeds derived from the sale,
exchange or liquidation of such assets, any funds or payments derived from any
reinvestment of such proceeds, and any assets, income, earnings, profits, and
proceeds thereof, funds or payments that are not readily identifiable as
belonging to any particular series ("General Assets") allocated to a series,
shall constitute assets of that series, in contrast to other series (subject
only to the rights of creditors) and are herein referred to as assets "belonging
to" that series. Except as herein expressly provided, any General Assets shall
be allocated by or under the supervision of the Board of Directors to and among
any one or more of the series established and designated from time to time, in
such manner and on such basis as the Board of Directors, in its sole discretion,
deems fair and equitable. Such decisions by the Board of Directors shall be
final and conclusive.
(6) The assets belonging to each series of stock shall be charged with the
liabilities of the Corporation in respect of that series and with all expenses,
costs, charges,
5
<PAGE>
and reserves attributable to that series. Such liabilities, expenses, costs,
charges, and reserves, together with any liabilities, expenses, costs, charges,
or reserves of the Corporation that are not readily identifiable as belonging to
any particular series ("General Liabilities") allocated to that series, shall
constitute the liabilities of that series, in contrast to other series, and are
herein referred to as "belonging to" that series. Except as herein expressly
provided, any General Liabilities shall be allocated by or under the supervision
of the Board of Directors to and among any one or more of the series established
and designated from time to time, in such manner and on such basis as the Board
of Directors, in its sole discretion, deems fair and equitable. Such decisions
by the Board of Directors shall be final and conclusive.
(7) Expenses related to the distribution of, and other identified expenses
that should properly be allocated to, the shares of a particular class of stock
of any series may be charged to and borne solely by such class and the bearing
of expenses solely by a class of stock of any series may be appropriately
reflected (in a manner determined by the Board of Directors) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the shares of each class of stock of the series.
(8) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary thereto, the holders of each class or
series of stock shall be entitled to dividends and distributions in such amounts
and at such times as may be determined by the Board of Directors, and the
dividends and distributions paid with respect to the various classes or series
of stock may vary among such classes and series. Dividends
6
<PAGE>
and distributions with respect to a series may be declared or paid only out of
the net assets belonging to that series.
(9) Unless otherwise expressly provided in the charter of the Corporation,
including those matters set forth in Article III, Section 4 hereof and including
any Articles Supplementary thereto, on each matter submitted to a vote of
stockholders, each holder of a share of stock of the Corporation shall be
entitled to one vote for each share standing in such holder's name on the books
of the Corporation, irrespective of the class or series thereof, and all shares
of all classes and series shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of any
class or series is required by the Investment Company Act, or any rules,
regulations or orders issued thereunder, or by the Maryland General Corporation
Law, such requirement as to a separate vote by that class or series shall apply
in lieu of a general vote of all classes and series as described above, (b) in
the event that the separate vote requirements referred to in (a) above apply
with respect to one or more classes or series, then, subject to paragraph (c)
below, the shares of all other classes and series not entitled to a separate
class vote shall vote as a single class, and (c) as to any matter which does not
affect the interest of a particular class or series, such class or series shall
not be entitled to any vote and only the holders of shares of the affected
classes and series, if any, shall be entitled to vote.
(10) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary thereto, subject to compliance with the
requirements of the Investment Company Act, the Board of Directors shall have
the authority to provide that holders of shares of any class or series shall
have the right to convert or exchange said
7
<PAGE>
shares into shares of one or more other classes or series of shares in
accordance with such requirements and procedures as may be established by the
Board of Directors.
(11) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary thereto, in the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of all classes and series of stock of the Corporation shall be
entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation, to share ratably in the remaining net assets of
the Corporation; provided, however, that so long as the stock of the Corporation
shall be classified or reclassified into series, holders of any shares of stock
within such series shall be entitled to share ratably (after taking into account
any expenses attributable to any separate classes of such series) out of the
assets belonging to such series.
(12) Any reference to "shares," "stock" or "shares of stock" in these
Articles of Incorporation shall be deemed to refer, unless the context otherwise
requires, to the shares of each separate class and/or series. As used in the
charter of the Corporation, the terms "charter" and "Articles of Incorporation"
shall mean and include these Articles of Incorporation as amended, supplemented
and restated from time to time whether by Articles of Amendment, Articles
Supplementary, Articles of Restatement or otherwise.
ARTICLE VI
REDEMPTION
(1) Each holder of shares of stock of the Corporation shall be entitled to
require the Corporation to redeem all or any part of the shares of stock of the
Corporation
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standing in the name of such holder on the books of the Corporation, and all
shares of stock issued by the Corporation shall be subject to redemption by the
Corporation, at the redemption price of such shares as in effect from time to
time as may be determined by the Board of Directors of the Corporation in
accordance with the provisions hereof, subject to the right of the Board of
Directors of the Corporation to suspend the right of redemption of shares of
stock of the Corporation or postpone the date of payment of such redemption
price in accordance with the provisions of applicable law.
(2) All shares of stock of the Corporation shall be redeemable at the
option of the Corporation. The Board of Directors may by resolution from time
to time authorize the Corporation to require the redemption of all or any part
of the outstanding shares of any class or series upon such terms and conditions
as the Board of Directors, in its discretion, shall deem advisable, and upon the
sending of written notice thereof to each holder whose shares are to be
redeemed.
(3) The redemption price of shares of stock of the Corporation shall be
the net asset value thereof as determined by the Board of Directors of the
Corporation or under its direction from time to time in accordance with the
provisions of applicable law, less such redemption or other charge, if any, as
may be fixed by the Board of Directors of the Corporation. Payment of the
redemption price shall be made by the Corporation at such time and in such
manner as may be determined from time to time by the Board of Directors of the
Corporation in accordance with the provisions of applicable law.
9
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ARTICLE VII
DETERMINATION BINDING
Any determination made in good faith and, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of the assets, debts,
obligations or liabilities of the Corporation (or of any class or series
thereof), as to the amount of net income from dividends and interest for any
period or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating such reserves or charges, as to the use,
alteration or cancellation of any reserves or charges (whether or not any
obligation or liability for which such reserves or charges shall have been
created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the price of any security or other
asset owned or held by the Corporation (or any series thereof), as to the number
of shares of the Corporation (or any class or series thereof) outstanding, as to
the estimated expense to the Corporation (or any class or series thereof) in
connection with purchases of its shares, as to the ability to liquidate
securities in an orderly fashion, or as to any other matters, including, but not
limited to those relating to the issue, sale, purchase and/or other acquisition
or disposition of securities or shares of the Corporation (or any class or
series thereof) shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its shares, past, present and future, and shares
of the Corporation (and any class or series thereof) are issued and sold on the
condition and understanding, evidenced by acceptance of certificates for such
shares by, or confirmation of such shares being held for
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the account of, any shareholder, that any and all determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation shall be
effective to require a waiver of compliance with any provision of the Securities
Act of 1933, as amended, or the Investment Company Act, or any valid rule,
regulation or order of the Securities and Exchange Commission thereunder.
ARTICLE VIII
PROVISIONS FOR DEFINING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF
THE DIRECTORS AND STOCKHOLDERS
In furtherance and not in limitation of the powers conferred by the
laws of the State of Maryland the following provisions are hereby adopted for
the purpose of defining and regulating the powers of the Corporation and of the
directors and shareholders.
(1) The Board of Directors of the Corporation is hereby empowered to
authorize, without shareholder approval, the issuance and sale from time to time
of shares of stock of the Corporation of any class or series, whether now or
hereafter authorized, in each case upon such terms and conditions and for such
consideration as such Board of Directors may deem advisable, subject to such
limitations as are contained in these Articles of Incorporation, the by-laws of
the Corporation, the laws of the State of Maryland, and the Investment Company
Act.
(2) The Corporation may issue fractional shares of stock, which shall
carry proportionately to the respective fractions represented thereby all the
rights of a whole share, including, without limitation, the right to vote and
the right to receive dividends, provided,
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however, that the Corporation shall not be required to issue share certificates
for such fractional shares.
(3) No holder of stock of the Corporation shall, as such holder, have any
preemptive right to purchase or subscribe for any shares of the stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by the Articles of
Incorporation, or out of any shares of the stock of the Corporation of any class
or series acquired by it after the issue thereof, or otherwise) other than such
right, if any, as the Board of Directors, in its discretion, may determine.
(4) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the charter and by-laws of the
Corporation.
(5) Except as required by law, the holders of stock of the Corporation
shall have only such right to inspect the records, documents, accounts and books
of the Corporation as may be granted by the Board of Directors of the
Corporation.
(6) Notwithstanding any provisions of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of stock of the Corporation (or any class or series entitled to vote
thereon as a separate class or series) to take or authorize any action, the
Corporation is hereby authorized (subject to the requirements of the Investment
Company Act, or any rules, regulations and orders issued thereunder) to take
such action upon the concurrence of a majority of the aggregate number of shares
of stock of the Corporation entitled to vote thereon (or a majority of the
aggregate number of shares of a class or series entitled to vote thereon as a
separate class or series).
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(7) The presence in person or by proxy of the holders of shares entitled
to cast one-third of the votes entitled to be cast shall constitute a quorum at
any meeting of stockholders, except with respect to any matter which requires
approval by a separate vote of one or more classes or series of stock, in which
case the presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast by each class or series entitled
to vote as a separate class or series shall constitute a quorum.
(8) The Corporation reserves the right from time to time to amend, alter
or repeal any provision of these Articles of Incorporation, including, without
limitation, in any manner now or hereafter prescribed by statute, including any
amendment which alters the contract rights, as expressly set forth in the
charter, of any outstanding stock and substantially adversely affects the
stockholder's rights, and all rights conferred upon stockholders herein are
granted subject to this reservation.
(9) The Board of Directors may make, alter and repeal the by-laws of the
Corporation, except as such power may otherwise be limited in the by-laws.
ARTICLE IX
INDEMNIFICATION AND LIMITATION OF LIABILITY
(1) Subject to any limitations imposed by the Investment Company Act, and
to the maximum extent permitted by the General Laws of the State of Maryland
from time to time in effect, the Corporation shall indemnify its currently
acting and its former directors and officers, whether serving the Corporation or
at its request any other entity, including the advance of expenses under the
procedures and to the full extent permitted by
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law. The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The Board
of Directors may take such action as is necessary to carry out these
indemnification provisions, and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. Neither the amendment nor repeal of this Article IX, nor the adoption or
amendment of any other provision of these Articles of Incorporation or the
by-laws of the Corporation inconsistent with this Article, shall apply to or
affect in any respect the rights of indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment, repeal or
adoption.
(2) Subject to any limitation imposed by the Investment Company Act, to
the maximum extent permitted by the General Laws of the State of Maryland from
time to time in effect, no director or officer of the Corporation shall be
liable to the Corporation or its stockholders for money damages. Neither the
amendment of these Articles of Incorporation nor the repeal of any provision
hereof, shall limit or eliminate the benefits provided to directors and officers
under this provision in connection with any act or omission that occurred prior
to such amendment or repeal.
(3) Nothing in these Articles of Incorporation shall be construed to
protect any director or officer of the Corporation against any liability to the
Corporation or its shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
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ARTICLE X
DIRECTORS
The number of directors of the Corporation shall be three (3), which number
may be increased or decreased pursuant to the by-laws of the Corporation, but
shall never be less than the number prescribed by the Maryland General
Corporation Law. The names of the persons who shall act as directors of the
Corporation until the first annual meeting of shareholders or until their
successors are duly elected and qualify are:
John E. Pelletier
Eric B. Fischman
John J. Pyburn
ARTICLE XII
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, the undersigned incorporator of Waterhouse Investors
Cash Management Fund, Inc. hereby executes the foregoing Articles of
Incorporation, acknowledges the same to be her act and that to the best of her
knowledge, the matters and facts set forth herein are true in all material
respects and that this statement is made under the penalties of perjury.
Dated: August 16, 1995
/s/ Carla Barone
--------------------------
Carla N. Barone
<PAGE>
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Waterhouse Investors Cash Management Fund, Inc., a Maryland corporation
having its principal Maryland office c/o The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The charter of the Corporation is hereby amended by these
Articles of Amendment as follows:
In each instance in which the words "Tax-Exempt Portfolio" appear in
Article V of the Articles of Incorporation, the words "Tax-Exempt
Portfolio" shall be deleted and the words "Municipal Portfolio" shall be
substituted therefor.
SECOND: The foregoing amendment has been effected in the manner and by
the vote required by the Corporation's charter and the laws of the State of
Maryland. The amendment was approved by the unanimous written consent of the
Board of Directors of the Corporation, and at the time of approval by the Board
of Directors there were no shares of stock of the Corporation entitled to vote
on the matter either outstanding or subscribed for.
THIRD: Except as amended hereby, the Corporation's charter shall
remain in full force and effect.
FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.
The Vice President acknowledges these Articles of Amendment to be the
corporate act of the Corporation and states that to the best of his knowledge,
information and belief, the matters set forth in these Articles of Amendment
with respect to the authorization and approval of the amendment of the
Corporation's charter are true in all material respects, and that this statement
is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf by
its Vice President, a duly authorized officer of the Corporation, and attested
by its Secretary effective the 18th day of August, 1995.
WATERHOUSE INVESTORS CASH
MANAGEMENT FUND, INC.
By:/s/ John J. Pyburn
---------------------
John J. Pyburn
Vice President
ATTEST:
/s/ Eric B. Fischman
- - ------------------------
Eric B. Fischman
Assistant Secretary
Waterhouse Investors Cash Management Fund, Inc.
CERTIFICATE OF CORRECTION
Pursuant to Section 1-207 of the Maryland Corporations and
Associations Code, Waterhouse Investors Cash Management Fund, Inc., a Maryland
corporation having its principal office in Baltimore, Maryland (hereinafter
called the "Corporation"), hereby files this Certificate of Correction and
certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The title of the document being corrected hereby is
Articles of Incorporation (hereinafter referred to as the "Articles").
SECOND: The name of the party to which the Articles apply is
Waterhouse Investors Cash Management Fund, Inc.
THIRD: The Articles were filed with the State Department of
Assessments and Taxation of Maryland on August 16, 1995.
FOURTH: Article V, Section I of the Articles, as originally
filed, contained a typographical error and included the word "Prime" which
should now be replaced with the words "Money Market."
FIFTH: This Certificate of Correction does not change the
effective date of the Articles.
SIXTH: This Certificate of Correction does not affect any
right or liability accrued or incurred before its filing, except that any
right or liability accrued or incurred by reason of the error or defect being
corrected shall be extinguished by this filing if the person having the right
has not detrimentally relied on the original Articles.
IN WITNESS WHEREOF, the undersigned incorporated of
Waterhouse Investors Cash Management Fund, Inc. hereby executes the foregoing
Certificate of Correction, acknowledges the same to be her act and that to the
best of her knowledge, the matters and facts set forth herein are true in all
materials respects and that this statement is made under the penalties of
perjury on this 13th day of March, 1996.
/s/ Carla N. Barone
Carla N. Barone
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 12th day of December, 1995, by and
between WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC., a Maryland
corporation, whose address is 100 Wall Street, New York, New York
10005 (the "Fund") and WATERHOUSE ASSET MANAGEMENT, INC., a Delaware
corporation, whose address is 100 Wall Street, New York, New York
10005 (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund is an open-end, diversified management
investment company, registered under the Investment Company Act of
1940, as amended (the "1940 Act"), with distinct series of shares
each having its own investment objectives, policies and restrictions,
including the Fund's Money Market Portfolio, U.S. Government Portfolio
and Municipal Portfolio (each, a "Portfolio"), and including such
other Portfolios as may hereafter be offered by the Fund, all as more
fully described in the Fund's Registration Statement on Form N-lA
under the 1940 Act and the Securities Act of 1933, as amended (the
"Registration Statement"), as filed with the Securities and Exchange
Commission (the "Commission") relating to the Fund and shares of the
Fund's capital stock, and all amendments thereto;
WHEREAS, the Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Fund and the Investment Manager desire to
enter into an agreement to provide for comprehensive management and
investment advisory services to each Portfolio upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is hereby agreed by and between
the parties hereto as follows:
1. Duties of Investment Manager. (a) The Fund hereby
employs the Investment Manager to act as the investment adviser for
each of the Portfolios and to manage the investment and reinvestment
of the assets of each Portfolio in accordance with the investment
objectives, policies and restrictions of each such Portfolio as the
same are set forth in the Registration Statement, and in accordance
with the requirements of the 1940 Act and all other applicable state
and federal laws, rules and regulations, subject to the supervision of
the Board of Directors of the Fund for the period and upon the terms
herein set forth. The investment of funds shall also be subject to
all applicable restrictions of the Articles of Incorporation and By-
laws of the Fund as may from time to time be in force. Without
limiting the generality of the foregoing, the Investment Manger
shall:
<PAGE>
(i) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial
data, domestic, foreign or otherwise, whether affecting the economy
generally or a Portfolio specifically, and whether concerning the
individual issuers whose securities are included in a Portfolio or
the activities in which such issuers engage, or with respect to
securities which the Investment Manager considers desirable for
inclusion in a Portfolio;
(ii) determine which issuers and securities shall be
represented in a Portfolio and regularly report thereon to the Fund's
Board of Directors;
(iii) formulate and implement continuing programs for the
purchases and sales of securities of such issuers and lists of
approved investments for each Portfolio and regularly report thereon
to the Fund's Board of Directors;
(iv) make decisions with respect to and take, on behalf
of each Portfolio, all actions which appear necessary to carry into
effect such purchase and sale programs and supervisory functions
aforesaid, including the placing of orders for the purchase and sale
of securities for such Portfolio.
(b) The Investment Manager accepts such employment and
agrees during such period to render such services and to assume the
obligations herein set forth for the compensation herein provided.
The Investment Manager shall give each Portfolio the benefit of its
best judgment, efforts and facilities in rendering its services as an
investment manager. The Investment Manager shall for all purposes
herein provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund. It is understood and agreed that the Investment
Manager, by separate agreements with the Fund, may also serve the
Fund in other capacities. It is further agreed that the Investment
Manager and its officers and directors are not prohibited from
engaging in any other business activity or from rendering services to
any other person, or from serving as partners, officers or directors
of any other firm or corporation, including other investment
companies, so long as its or their services hereunder are not
impaired thereby. It is further agreed that 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 Fund, establishes procedures for
personal investing and restricts certain transactions.
(c) The Investment Manager shall keep any books and records
relevant to the provision of its investment advisory services to each
Portfolio and shall specifically maintain all books and records with
respect to each Portfolio's securities and portfolio transactions and
shall render to the Fund's Board of Directors such periodic and
special reports as the Board may reasonably request. The Investment
Manager agrees that all records which it maintains for the Fund are
the property of the Fund and it will surrender promptly to the Fund
any such records upon the Fund's request, provided however that the
Investment Manager may retain a copy of
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such records. The Investment Manager further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such
records kept by the Investment Manager in connection with investment
advisory services provided pursuant hereto.
(d) The Fund has delivered to the Investment Manager copies of
each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:
(i) The Registration Statement; and
(ii) The Prospectus of the Fund (such Prospectus and the
related Statement of Additional Information of the Fund, as currently
in effect and as amended or supplemented from time to time, being
herein collectively called the "Prospectus").
(e) The Fund shall at all times keep the Investment Manager
fully informed with regard to the securities owned by each Portfolio,
its funds available or to become available for investment, and
generally as to the condition of its affairs. The Fund shall furnish
the Investment Manager with a copy of all financial statements and
each report prepared by certified public accountants with respect to
it, and with such other information with regard to its affairs as
the Investment Manager may from time to time reasonably request.
(f) Any investment program undertaken by the Investment
Manager pursuant to this Agreement, as well as any other activities
undertaken by the Investment Manager on behalf of any Portfolio
pursuant thereto, shall at all times be subject to any directives of
the Board of Directors.
2. Expenses. The Investment Manager shall pay all of its
expenses arising from the performance of its obligations under
Section 1 of this Agreement and shall pay any salaries, fees and
expenses of Fund directors or officers who are employees, officers or
directors of the Investment Manager.
The Investment Manager shall not be required to pay any other
expenses of the Fund or the Portfolios, including (a) the fees and
expenses of directors who are not "interested persons" of the Fund,
as defined by the 1940 Act, and travel and related expenses of the
directors for attendance at meetings; (b) the fees and expenses of the
custodian and transfer agent of the Fund or any pricing service,
including but not limited to fees and expenses relating to Fund
accounting, pricing of portfolio shares, and computation of net asset
value; (c) the fees and expenses of calculating yield and/or
performance of the Portfolios; (d) the charges and expenses of legal
counsel and independent accountants; (e) taxes and corporate fees
payable to governmental agencies; (f) the costs of share certificates
and of membership dues of any trade association of which the Fund is
a member; (g) reimbursement of each Portfolio's share of the
organization expenses of the Fund; (h) the fees and expenses involved
in registering and maintaining registration of the Fund and the
Portfolios shares with the Commission, blue sky
3
<PAGE>
service providers, registering the Fund as a broker or dealer and
qualifying the shares of the Portfolios (or applying for applicable
exemptions, as the case may be) under state securities laws
including the preparation and printing of the registration statements
and prospectuses for such purposes; (i) allocable communications
expenses with respect to investor services, expenses of shareholders'
and Board of Directors' meetings and preparing, printing and mailing
proxies, prospectuses and reports to shareholders; (j) costs of
acquiring and disposing of portfolio securities, including but not
limited to brokers' commissions, dealers' mark-ups and any issue or
transfer taxes chargeable in connection with the Portfolios'
transactions; (k) the cost of stock certificates representing shares
of the Portfolios, if any; (l) insurance expenses, including, but not
limited to, the cost of a fidelity bond, directors and officers
insurance and errors and omissions insurance; and (m) litigation and
indemnification expenses, expenses incurred in connection with
mergers, and other extraordinary expenses not incurred in the ordinary
course of the Portfolios' business.
3. Compensation. (a) For the services described in Section
1 hereof, the Fund, on behalf of each Portfolio, will pay to the
Investment Manager promptly after the end of each calendar month, an
investment management fee computed at the annual rate applicable to
such Portfolio set forth on Schedule A hereto. The fee as computed in
accordance with Schedule A shall be based upon the net assets of
each Portfolio as to which this Agreement is then effective. The
value of the net assets for each Portfolio shall be calculated in
accordance with the provisions of the Fund's Prospectus. For purposes
of this Agreement, on each day when net asset value is not
calculated, the net assets of any Portfolio shall be deemed to be the
net assets of such Portfolio as of the close of business on the last
day on which net asset value was determined. Except as hereinafter
set forth, compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid
monthly in arrears (i.e., the applicable annual fee rate divided by
365 as applied to each prior day's net assets in order to calculate
the daily accrual). If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a
month, compensation for that part of the month this Agreement is in
effect shall be prorated in a manner consistent with the calculation
of the fees as set forth above.
(b) In the event the operating expenses of a Portfolio
including all management fees, for any fiscal year ending on a date
on which this Agreement is in effect exceed the expense limitation
applicable to such Portfolio imposed by the securities laws or
regulations thereunder of any state or jurisdiction in which the
Portfolio's shares are qualified for sale, as such limitations may be
raised or lowered from time to time, the Investment Manager shall
reduce its management fee to the extent of such excess and, if
required, pursuant to any such laws or regulations, will reimburse
the Portfolio for any annual operating expenses (after reductions of
all management fees) in excess of any expense limitation that may be
applicable; provided, however, there shall be excluded from such
expenses the amount of any interest, taxes, brokerage commission and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund and attributable to the
Portfolio. Such reduction, if any, shall be computed and accrued
4
<PAGE>
daily, shall be settled on a monthly basis and shall be based upon the
expense limitation applicable to the Portfolio as at the end of the
last business day of the month. Should two or more such expense
limitations be applicable as at the end of the last business day of
the month, that expense limitation which results in the largest
reduction in the Investment Manager's fee shall be applicable.
4. Brokerage. In managing the assets of each Portfolio,
the Investment Manager shall purchase securities from or through and
sell securities to or through such persons, brokers or dealers as the
Investment Manager shall deem appropriate in conformity with
applicable law and with the terms of the Registration Statement, and
as the Fund's Board of Directors may direct from time to time.
Without limiting the generality of the foregoing, the Investment
Manager will implement the Fund's policy of seeking the best execution
of orders, which includes best net prices, in effecting purchases and
sales of portfolio securities for the account of each Portfolio.
On occasions when the Investment Manager deems the purchase or
sale of securities to be in the best interest of one or more
Portfolios as well as other 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, which has been
approved by the Fund's Board of Directors.
5. Interested Persons. No director, officer or employee of
the Fund shall receive from the Fund any salary or other compensation
as such director, officer or employee while he or she is at the same
time a director, officer or employee of the Investment Manager or any
affiliated person (as defined in the 1940 Act) thereof. The Investment
Manager shall authorize and permit any of its directors, officers and
employees who may be elected as directors or officers of the Fund to
serve in the capacities in which they are elected, subject to their
individual consent and to any limitations imposed by law. All services
to be furnished by the Investment Manager under this Agreement may be
furnished through the medium of any such directors, officers or
employees of the Investment Manager.
6. Limitation of Liability. Subject to Section 36 of the
1940 Act, the Investment Manager shall not be liable for any error of
judgment or mistake of law or for any loss suffered by any Portfolio
in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the performance
of its obligations and duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
5
<PAGE>
7. Non-Exclusive Use of the Name "Waterhouse". The Fund
acknowledges that it adopted its name through the permission of the
Investment Manager. The Investment Manager hereby consents to the
non-exclusive use by the Fund of the name "Waterhouse" only so long
as the Investment Manager serves as the investment manager to one or
more Portfolios. The Fund covenants and agrees to protect, exonerate,
defend, indemnify and hold harmless the Investment Manager, its
officers, agents and employees from and against any and all costs,
losses, claims, damages or liabilities, joint or several, including
all legal expenses which may arise or have arisen out of the Fund's
use or misuse of the name "Waterhouse" or out of any breach of or
failure to comply with this paragraph.
Neither the Fund nor any Portfolio shall distribute or
circulate any prospectus, proxy statement, sales literature,
promotional material or other printed matter required to be filed with
the Securities and Exchange Commission under Section 24(b) of the 1940
Act which contains any reference to the Investment Manager or using
the name "Waterhouse" without the approval of the Investment Manager
and shall submit all such materials requiring approval of the
Investment Manager in draft form, allowing sufficient time for review
by the Investment Manager and its counsel prior to any deadline for
printing. If the Investment Manager or any successor to its business
shall cease to furnish services to all Portfolios under this Agreement
or similar contractual arrangement, the Fund:
(a) as promptly as practicable, will take all necessary
action to cause its Articles of Incorporation to be amended to
accomplish a change of name; and
(b) within 90 days after the termination of this Agreement
or such similar contractual arrangement, shall cease to use in any
other manner, including but not limited to use in any prospectus,
sales literature or promotional material, the name "Waterhouse" or any
name, mark or logotype derived from it or similar to it or indicating
that the Fund or any Portfolio is managed by or otherwise associated
with the Investment Manager.
8. Term of Agreement. This Agreement shall become effective
upon its execution by an authorized officer of the respective parties
hereto. This Agreement shall continue in effect with respect to each
Portfolio for a period of two (2) years from the date hereof, and
thereafter from year to year so long as such continuation is
specifically approved at least annually in conformity with the
requirements of the 1940 Act with regard to investment advisory
contracts; provided, however, that this Agreement may be terminated at
any time without the payment of any penalty, on behalf of any or all
of the Portfolios, by the Fund, by the Board or, with respect to any
Portfolio, by "vote of a majority of the outstanding voting
securities" (as defined in the 1940 Act) of that Portfolio, or by the
Investment Manager on not less than 60 days' written notice to the
other party. This Agreement shall terminate automatically in the
event of its "assignment" (as defined in the 1940 Act).
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Termination of this Agreement shall not affect the right of
the Investment Manager to receive payments on any unpaid balance of
the compensation described in Section 3 hereof earned prior to such
termination.
9. Amendments; Partial Invalidity. This Agreement may be
amended by mutual consent, but the consent of the Fund must be
obtained in conformity with the requirements of the 1940 Act. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be
thereby affected.
10. Notices. All notices or other communications hereunder
to either party shall be in writing and shall be deemed to be
received on the earlier of the date actually received or on the
fourth day after postmark if such notice is mailed first class postage
prepaid. Notice shall be addressed: (a) if to the Fund, to:
President, Waterhouse Investors Cash Management Fund, Inc., 100 Wall
Street, New York, New York 10005; or (b) if to the Investment Manager,
to: President, Waterhouse Asset Management, Inc., 100 Wall Street, New
York, New York 10005, or at such other address as either party may
designate by written notice to the other. Notice shall also be deemed
sufficient if given by telex, telecopier, telegram or similar means
of same day delivery (with a confirming copy by mail as provided
herein).
11. Separate Portfolios. This Agreement shall be construed
to be made by the Fund as a separate agreement with respect to each
Portfolio, and under no circumstances shall the rights, obligations
or remedies with respect to a particular Portfolio be deemed to
constitute a right, obligation or remedy applicable to any other
Portfolio.
12. Entire Agreement: Governing Law. This Agreement
contains the entire agreement between the parties hereto and
supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof. This Agreement shall be
construed in accordance with applicable federal law and the laws of
the State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon, either of the parties to do anything in
violation of any applicable laws or regulations.
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IN WITNESS WHEREOF, the Fund and the Investment Manager have caused
this Agreement to be executed as of the day and year first above written.
WATERHOUSE INVESTORS CASH
MANAGEMENT FUND, INC.
ATTEST: By: /s/ Arnold Feist
Vice President, Assistant Secretary
/s/ John Chapel
___________________________
WATERHOUSE ASSET MANAGEMENT, INC.
ATTEST: By: /s/ Christine Waterhouse
Senior Vice President
/s/ John Chapel
___________________________
8
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SCHEDULE A
Fees
For the services provided by the Investment Manager under the foregoing
agreement to each of the following Portfolios, the Investment Manager will
receive the following fees:
In the case of each of the Money Market Portfolio, the U.S. Government Portfolio
and the Municipal Portfolio an annual investment management fee, payable
monthly, on a graduated basis equal to .35 of 1% of the first $1 billion of
average daily net assets of each Portfolio, .34 of 1% of the next $1 billion,
and .33 of 1% of average daily net assets of each Portfolio over $2 billion.
9
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DISTRIBUTION AGREEMENT
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
100 WALL STREET
NEW YORK, NY 10005
December 15, 1995
Funds Distributor, Inc.
One Exchange Place
Tenth Floor
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this agreement, the distributor of (a) shares of
each Series of the Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series are set forth
on such Exhibit, shares of the Fund. For purposes of this agreement, the term
"Shares" shall mean the authorized shares of the relevant Series, if any, and
otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered
by, and in accordance with, the registration statement and prospectus of the
Fund then in effect under the Securities Act of 1933, as amended, and will
transmit promptly any orders received by you for purchase or redemption of
Shares to the Transfer and Dividend Disbursing Agent for the Fund of which the
Fund has notified you in writing.
1.2 You agree to use your best efforts to solicit orders for the
sale of Shares in accordance with the terms and conditions of the aforementioned
prospectus. It is contemplated that you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended (the "1940 Act"), by the Securities and Exchange Commission or any
securities association registered under the Securities Exchange Act of 1934, as
amended, and the Glass-Steagall Act to the extent applicable.
1.4 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind deemed by the parties hereto to
1
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render sales of a Fund's Shares not in the best interest of the Fund, the
parties hereto may decline to accept any orders for, or make any sales of, any
Shares until such time as those parties deem it advisable to accept such orders
and to make such sales; and each party shall advise promptly the other party of
any such determination.
1.5 The Fund agrees to pay all costs and expenses in connection
with the registration of Shares under the Securities Act of 1933, as amended,
and all expenses in connection with maintaining facilities for the issue and
transfer of Shares and for supplying information, prices and other data to be
furnished by the Fund hereunder, and all expenses in connection with the
preparation and printing of the Fund's prospectuses and statements of additional
information for regulatory purposes and for distribution to shareholders;
provided however, that the Fund shall not pay any of the costs of advertising or
promotion for the sale of Shares.
1.6 The Fund agrees to execute any and all documents and to furnish
any and all information and otherwise use its best efforts to take all actions
that may be reasonably necessary in the discretion of the Fund's officers in
connection with the qualification of Shares for sale in such states as you may
designate to the Fund and the Fund may approve, and the Fund agrees to pay all
expenses that may be incurred in connection with such qualification; provided,
however that the Fund shall not be required to qualify to do business as a
foreign corporation in any jurisdiction. You shall pay all expenses connected
with your own qualification as a dealer under state or Federal laws and, except
as otherwise specifically provided in this agreement, all other expenses
incurred by you in connection with the sale of Shares as contemplated in this
agreement.
1.7 The Fund shall furnish you from time to time, for use in
connection with the sale of Shares, such information with respect to the Fund or
any relevant Series and the Shares as you may reasonably request, all of which
shall be signed by one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such information, when so
signed by the Fund's officers, shall be true and correct. The Fund also shall
furnish you upon request with: (a) semi-annual reports and annual audited
reports of the Fund's books and accounts made by independent public accountants
regularly retained by the Fund, (b) quarterly earnings statements prepared by
the Fund, (c) a monthly itemized list of the securities in the Fund's or, if
applicable, each Series' portfolio, (d) monthly balance sheets as soon as
practicable after the end of each month, and (e) from time to time such
additional information regarding the Fund's financial condition as you may
reasonably request.
1.8 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the 1940 Act, as amended, with
respect to the Shares have been carefully prepared in conformity with the
then-current requirements of said Acts and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto that at any time shall
have been filed with said Commission. The Fund represents and warrants to you
that any registration statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be stated therein in
conformity with said Acts and the rules
2
<PAGE>
and regulations of said Commission; that all statements of fact contained in any
such registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The Fund may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any prospectus as, in the light of future developments, may, in
the opinion of the Fund's counsel, be necessary or advisable. If the Fund shall
not propose such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Fund of a written request from you to do so,
you may, at your option, terminate this agreement or decline to make offers of
the Fund's securities until such amendments are made. The Fund shall not file
any amendment to any registration statement or supplement to any prospectus
without giving you reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit the Fund's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
1.9 The Fund authorizes you and any dealers with whom you have
entered into dealer agreements to use any prospectus in the then-current form
furnished by the Fund in connection with the sale of Shares. The Fund agrees to
indemnify, defend and hold you, your several officers and directors, and any
person who controls you within the meaning of Section 15 of the Securities Act
of 1933, as amended, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the Securities Act of 1933, as amended, the
1940 Act, as amended, or common law or otherwise, arising out of or on the basis
of any untrue statement, or alleged untrue statement, of a material fact
required to be stated in either any registration statement or any prospectus or
any statement of additional information, or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
any registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any of them, in the light of
the circumstances under which they were made, not misleading, except that the
Fund's agreement to indemnify you, your officers or directors, and any such
controlling person will not be deemed to cover any such claim, demand, liability
or expense to the extent that it arises out of or is based upon any such untrue
statement, alleged untrue statement, omission or alleged omission made in any
registration statement, any prospectus or any statement of additional
information in reliance upon information furnished by you, your officers,
directors or any such controlling person to the Fund or its representatives for
use in the preparation thereof, and except that the Fund's agreement to
indemnify you and the Fund's representations and warranties set out in paragraph
1.8 of this Agreement will not be deemed to cover any liability to the Fund or
its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties under this
Agreement ("Disqualifying Conduct"). The Fund's agreement to indemnify you,
your officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund being notified of any action brought against
you, your
3
<PAGE>
officers or directors, or any such controlling person, such notification to be
given by letter, by facsimile or by telegram addressed to the Fund at its
address set forth above within a reasonable period of time after the summons or
other first legal process shall have been served. The failure so to notify the
Fund of any such action shall not relieve the Fund from any liability that the
Fund may have to the person against whom such action is brought by reason of any
such untrue, or alleged untrue, statement or omission, or alleged omission, (i)
except to the extent the Fund's ability to defend such action has been
materially adversely affected by such failure, or (ii) otherwise than on account
of the Fund's indemnity agreement contained in this paragraph 1.9. The Fund will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Fund and approved by you. In the event
the Fund elects to assume the defense of any such suit and retain counsel of
good standing approved by you, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the Fund does not elect to assume the defense of any such suit, the
Fund will reimburse you, your officers and directors, or the controlling person
or persons named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by you or them, subject to the right of the
Fund to assume the defense of such suit with counsel of good standing at any
time prior to the settlement or final determination thereof. The Fund's
indemnification agreement contained in this paragraph 1.9 and the Fund's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
you, your officers and directors, or any controlling person, and shall survive
the delivery of any Shares. This agreement of indemnity will inure exclusively
to your benefit, to the benefit of your several officers and directors, and
their respective estates, and to the benefit of any controlling persons and
their successors. The Fund agrees promptly to notify you of the commencement of
any litigation or proceedings against the Fund or any of its officers or Board
members in connection with the issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Fund, its officers or Board members, or any such controlling person, may incur
under the Securities Act of 1933, as amended, the 1940 Act, as amended, or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Board members, or such controlling person
resulting from such claims or demands, (a) shall arise out of or be based upon
any unauthorized sales literature, advertisements, information, statements or
representations or any Disqualifying Conduct in connection with the offering and
sale of any Shares, or (b) shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by you to the Fund specifically for use in the Fund's registration
statement and used in the answers to any of the items of the registration
statement or in the corresponding statements made in the prospectus or statement
of additional information, or shall arise out of or be based upon any omission,
or alleged omission, to state a material fact in connection with such
information furnished in writing by you to the Fund and required to be stated in
such answers or necessary to make such information, in the light of the
circumstances under which it was made, not misleading. Your agreement to
indemnify the Fund, its officers and Board members, and any such controlling
person, as aforesaid, is expressly conditioned upon
4
<PAGE>
your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to you at your address set forth
above within a reasonable period of time after the summons or other first legal
process shall have been served. You shall have the right to control the defense
of such action, with counsel of your own choosing, satisfactory to the Fund, if
such action is based solely upon such alleged misstatement or omission on your
part, and in any other event the Fund, its officers or Board members, or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify you of
any such action shall not relieve you from any liability that you may have to
the Fund, its officers or Board members, or to such controlling person by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission, (i) except to the extent your ability to defend such action has been
materially adversely affected by such failure, or (ii) otherwise than on account
of your indemnity agreement contained in this paragraph 1.10. This agreement of
indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors. You agree promptly to
notify the Fund of the commencement of any litigation or proceedings against you
or any of your officers or directors in connection with the issue and sale of
Shares.
1.11 No Shares shall be offered by either you or the Fund under any
of the provisions of this agreement and no orders for the purchase or sale of
such Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
1.12. The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange Commission
for amendments to the registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that in the judgment of the
Fund's Board of Directors makes untrue any statement of a material fact made in
the registration statement or prospectus then in effect or that requires the
making of a change in such registration statement or prospectus in order to make
the statements therein not misleading in any material respect; and
(d) of all declarations of effectiveness and other actions of
the Securities and Exchange Commission with respect to any amendments to the
registration statement or
5
<PAGE>
prospectus that may from time to time be filed with the Securities and Exchange
Commission.
2. Offering Price
Shares of any class or series of the Fund offered for sale by you shall
be offered at a price per share (the "offering price") equal to (a) the net
asset value (determined in the manner set forth in the Fund's charter documents)
plus (b) a sales charge, if any, and except to those persons set forth in the
then-current prospectus, which shall be the percentage of the offering price of
such Shares as set forth in the Fund's then-current prospectus. The offering
price, if not an exact multiple of one cent, shall be adjusted to the nearest
cent. In addition, Shares of any class of the Fund offered for sale by you may
be subject to a contingent deferred sales charge, to the extent set forth in the
Fund's then-current prospectus. You shall be entitled to receive any sales
charge or contingent deferred sales charge in respect of the Shares. Any
payments to dealers shall be governed by a separate agreement between you and
such dealer and the Fund's then-current prospectus.
3. Term
This Agreement shall become effective with respect to the Fund as of
the date hereof and will continue for an initial two-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority (as defined in
the 1940 Act) of the Shares of the Fund or the relevant Series, as the case may
be, provided that in either event its continuance also is approved by a majority
of the Board members who are not "interested persons" (as defined in said Act)
of any party to this Agreement and who have no direct or indirect financial
interest in this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This agreement is terminable with respect
to any Series or any Fund, without penalty, on not less than sixty days notice,
by the Fund's Board of Directors, by vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of such Fund, or by you. This
Agreement shall terminate automatically in the event of its "assignment" (as
defined in the 1940 Act).
4. Miscellaneous
4.1 The Fund recognizes that your directors, officers and employees
may from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies), and
that you or your affiliates may enter into distribution or other agreements with
such other corporations and trusts.
4.2 No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
4.3 This Agreement shall be governed by the internal laws of the
State of New York without giving effect to principles of conflicts of laws.
4.4 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
6
<PAGE>
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors.
4.5 Funds Distributor, Inc. ("FDI") represents and warrants that
it is a member of the National Association of Securities Dealers ("NASD") and
agrees to abide by all of the rules and regulations of the NASD, including,
without limitation, its Rules of Fair Practice. FDI agrees to comply with all
applicable federal and state laws, rules and regulations. FDI agrees to notify
the Fund immediately in the event of its expulsion or suspension by the NASD.
Expulsion of FDI by the NASD will automatically terminate this Agreement
immediately without notice. Suspension of FDI by the NASD will terminate this
Agreement effective immediately upon written notice of termination to FDI from
the Fund.
4.6 All notices or other communications hereunder to either party
shall be in writing and shall be deemed sufficient if mailed to such party at
the address of such party set forth on page 1 of this Agreement or at such other
address as such party may be designated by written notice to the other, or by
telex, telecopier, telegram or similar means of same day delivery (with a
confirming copy by mail as provided herein).
7
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Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding agreement between us.
Very truly yours,
WATERHOUSE INVESTORS CASH
MANAGEMENT FUND, INC.
By: /s/ John E. Pelletier
President
Accepted:
FUNDS DISTRIBUTOR, INC.
By: /s/ Marie E. Connolly
President
8
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EXHIBIT A
Series of Funds
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
Money Market Portfolio
U.S. Government Portfolio
Municipal Portfolio
9
Dear Sirs:
As the principal underwriter of shares of certain registered
investment companies presently or hereafter managed, advised or administered by
Waterhouse Asset Management, Inc., shares of which companies are distributed by
us at their respective net asset values plus sales charges as applicable,
pursuant to our Distribution Agreements with such companies (the "Funds"), we
invite you to participate as a non-exclusive agent in the distribution of shares
of any and all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the public offering prices
that shall be currently in effect, in accordance with the terms of the
then current prospectuses and statements of additional information of the
Funds subject in each case to the delivery prior to or at the time of
such sales of the then current prospectus. You agree to act only as
agent in such transactions and nothing in this Agreement shall constitute
either of us the agent of the other or shall constitute you or the Fund
the agent of the other. In all transactions in these shares between you
and us, we are acting as agent for the Fund and not as principal. All
orders are subject to acceptance by us and become effective only upon
confirmation by us. We reserve the right in our sole discretion to
reject any order. The minimum dollar purchase of shares of the Funds
shall be the applicable minimum amounts described in the then current
prospectuses and statements of additional information and no order for
less than such amounts will be accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as stated in each Fund's
then current prospectus.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's
then current prospectus and statement of additional information. To
obtain these reductions, we must be notified when the sale takes place
which would qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a Fund made under any cumulative purchase
privilege as set forth in a Fund's then current effective Prospectus
shall be considered an individual transaction for the purpose of
determining the concession from the public offering price to which you
are entitled as set forth in paragraph 2 hereof.
4. As an authorized agent to sell shares of the Fund, you agree to purchase
shares of the Funds only through us or from your customers. Purchases
through us shall be made only for your own investment purposes or for the
purpose of covering purchase orders already received from your customers,
and we agree that we will not place orders for the purchase of shares
from a Fund except to cover purchase orders already received by us.
Purchases from your customers shall be at a price not less than the net
asset value quoted by each such Fund at the time of such purchase.
Nothing herein contained shall prevent you from selling any
<PAGE>
shares of a Fund for the account of a record holder to us or to such Fund
at the net asset value quoted by us and charging your customer a fair
commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the Funds only (a) to your customers at the
public offering prices then in effect or (b) to us as agent for the Funds
or to each such Fund itself at the redemption price, as described in each
Fund's then current effective Prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or
at our option to resell the shares to the applicable Fund, at the then
prevailing net asset value in which latter case you agree to be
responsible for any loss resulting to such Fund or to us from your
failure to make payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are
repurchased by a Fund or by us as agent, or purchased for the account of
that Fund or tendered to that Fund for purchase at liquidating value
under the terms of the Articles of Incorporation or other document
governing such Fund within seven (7) business days after the date of
confirmation to you of your original purchase order therefor, you agree
to pay forthwith to us the full amount of the concession allowed to you
on the original sale and we agree to pay such amount to the Fund when
received by us. We shall notify you of such repurchase within ten (10)
days of the effective date of such repurchase.
9. All sales will be subject to receipt of shares by us from the Funds. We
reserve the right in our discretion, without notice to you, to suspend
sales or withdraw the offering of shares entirely, or to modify or cancel
this Agreement.
10. No person is authorized to make any representations concerning the Funds
or shares of the Funds except those contained in each Fund's then current
effective Prospectus or Statement of Additional Information and any such
information as may be released by a Fund as information supplemental to
such Prospectus or Statement of Additional Information. In purchasing
shares through us you shall rely solely on the representations contained
in each Fund's then current effective Prospectus or Statement of
Additional Information and above-mentioned supplemental information.
11. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each
such Prospectus or Statement of Additional Information will be supplied
by us to you and your selling agents in reasonable quantities upon
request.
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12. With respect to Funds offering shares subject to a front-end sales
charge, shares subject to a contingent deferred sales charge, and/or
Institutional Class shares not subject to a sales charge, you shall
conform to such written compliance standards as we have provided you in
the past or may from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be liable for any losses,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our
refusal to execute such instructions for any reason.
14. All notices or other communications hereunder to either party shall be in
writing and shall be deemed sufficient if mailed to such party at the
address of such party set forth on page 5 of this Agreement or at such
other address as such party may be designated by written notice to the
other, or by telex, telecopier, telegram or similar means of same day
delivery (with a confirming copy by mail as provided herein).
15. This Agreement may be terminated upon written notice by either party at
any time, and shall automatically terminate upon its attempted assignment
by you, whether by operation of law or otherwise, or by us otherwise than
by operation of law.
16. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National
Association of Securities Dealers, Inc., and you agree that you will
maintain such registrations, qualifications, and membership in good
standing and in full force and effect throughout the term of this
Agreement. You further agree to comply with all applicable Federal laws,
the laws of the states or other jurisdictions concerned, and the rules
and regulations promulgated thereunder and with the Constitution, By-Laws
and Rules of Fair Practice of the National Association of Securities
Dealers, Inc., and that you will not offer or sell shares of the Funds in
any state or jurisdiction where they may not lawfully be offered and/or
sold.
If you are offering and selling shares of the Funds in jurisdictions
outside the several states, territories, and possessions of the United
States and are not otherwise required to be registered, qualified, or a
member of the National Association of Securities Dealers, Inc., as set
forth above you, you nevertheless agree to observe the applicable laws of
the jurisdiction in which such offer and/or sale is made, to comply with
the full disclosure requirements of the Securities Act of 1933 and the
regulations promulgated thereunder, to conduct your business in
accordance with the spirit of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold
the Funds, their investment advisor, and us harmless from loss or damage
resulting from any failure on your part to comply with applicable laws.
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
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18. This Agreement and all amendments to this Agreement shall take effect
with respect to and on the date of any orders placed by you after the
date set forth below or, as applicable, after the date of the notice of
amendment sent to you by the undersigned.
19. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and shall be binding upon both parties
hereto when signed and accepted by you in the space provided below.
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For Funds Distributor Inc.
One Exchange Place
Boston, MA 02109
/s/ R. W. Healey 2/15/96
- - --------------------------------- ------------------
By: R. W. Healey, SVP Date
For: Waterhouse Securities Inc.
- - --------------------------------------------------------------------------------
100 Wall Street
- - --------------------------------------------------------------------------------
Address of Principal Office
New York NY 10005
- - --------------------------------------------------------------------------------
City State Zip Code
By: /s/ John H. Chapel Its: President 7/9/96
- - -------------------------------- ----------------------- --------------
Authorized Signature Title Date
John H. Chapel
- - --------------------------------
Print Name
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this 19th day of December, 1995, between
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC., a corporation
organized and existing under the laws of the State of Maryland having
its principal office and place of business at 100 Wall Street, New
York, New York 10005 (hereinafter called the "Fund"), and THE BANK OF
NEW YORK, a New York corporation authorized to do a banking business,
having its principal office and place of business at 48 Wall Street,
New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the writer
thereof the specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given
to the Custodian which is actually received by the Custodian and signed on
behalf of the Fund by any two Officers, and the term Certificate shall also
include instructions by the Fund to the Custodian communicated by a
Terminal Link.
4. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national
securities exchange
<PAGE>
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be such a
clearing member.
5. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any
Put Option guarantee letter or similar document described in paragraph 8 of
Article V herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option
entitling the holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer thereof the
specified underlying Securities (excluding Futures Contracts) which are
owned by the writer thereof and subject to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Fund's Board of Directors
specifically approving deposits therein by the Custodian.
8. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank
certificates of deposit, and Eurodollar certificates of deposit, during a
specified month at an agreed upon price.
9. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
11. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in
the name of the Fund for the benefit of a broker, dealer, futures
commission merchant, or Clearing Member, or otherwise, in accordance with
an agreement between the Fund, the Custodian and a broker, dealer, futures
commission merchant or a Clearing Member (a "Margin Account Agreement"),
separate and distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from time to time
in connection with such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or the Depository
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shall be deemed to have been deposited in, or withdrawn from, a Margin Account
upon the Custodian's effecting an appropriate entry in its books and records.
12. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued
or guaranteed as to interest and principal by the government of the United
States or agencies or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers'
acceptances, repurchase agreements with respect to the same and bank time
deposits, where the purchase and sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934,
its successor or successors, and its nominee or nominees.
14. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer of the Fund, duly
authorized by the Board of Directors of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund
and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Option, Stock
Index Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably
believed by the Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of
the specified underlying Securities, to sell such Securities to the writer
thereof for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at
a described or specified date and price.
19. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock
Index Futures Contracts, Stock Index Futures Contract Options, Financial
Futures
3
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Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
20. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account
in which certain Securities and/or other assets of the Fund specifically
allocated to such Series shall be deposited and withdrawn from time to time
in accordance with Certificates received by the Custodian in connection
with such transactions as the Fund may from time to time determine.
21. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund and listed on Appendix B hereto as amended from time to time.
22. "Shares" shall mean the shares of capital stock of the Fund, each
of which is, in the case of a Fund having Series, allocated to a particular
Series.
23. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount
of cash equal to a specified dollar amount times the difference between the
value of a particular stock index at the close of the last business day of
the contract and the price at which the futures contract is originally
struck.
24. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of cash
determined by reference to the difference between the exercise price and
the value of the index on the date of exercise.
25. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of
the Terminal Link by or on behalf of the Fund use of an authorization code
provided by the Custodian and at least two access codes established by the
Fund.
4
<PAGE>
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and moneys at any time owned by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the
Custodian all Securities and all moneys owned by it, at any time during the
period of this Agreement, and shall specify with respect to such Securities
and money the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the Series
separate and apart. The Custodian will not be responsible for any
Securities and moneys not actually received by it. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where such
credits have been previously made and moneys are not finally collected. The
Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit A hereto,
approving, authorizing and instructing the Custodian on a continuous and
ongoing basis to deposit in the Book-Entry System all Securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities and deliveries and returns of Securities
collateral. Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund, substantially
in the form of Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed to the
contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize the Depository to the extent
possible with respect to such Securities in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and deliveries and
returns of Securities collateral. Securities and moneys deposited in either
the Book-Entry System or the
5
<PAGE>
Depository will be represented in accounts which include only assets held
by the Custodian for customers, including, but not limited to, accounts in
which the Custodian acts in a fiduciary or representative capacity and will
be specifically allocated on the Custodian's books to the separate account
for the applicable Series. Prior to the Custodian's accepting, utilizing
and acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board of
Directors, substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing
basis, until instructed to the contrary by a Certificate actually received
by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each
Series all moneys received by it for the account of the Fund with respect
to such Series. Money credited to a separate account for a Series shall be
disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series
basis, of all transfers to or from the account of the Fund for a Series,
either hereunder or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series, the Custodian shall
also by book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the Custodian's account
on the books of the Book-Entry System or the Depository. At least monthly
and from time to time, the Custodian shall furnish the Fund with a detailed
statement, on a per Series basis, of the Securities and moneys held by the
Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the
6
<PAGE>
Custodian hereunder, which are issued or issuable only in bearer form, except
such Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held hereunder may be registered in
the name of the Fund, in the name of any duly appointed registered nominee of
the Custodian as the Custodian may from time to time determine, or in the name
of the Book-Entry System or the Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee or in
the name of the Book-Entry System or the Depository any Securities which it may
hold hereunder and which may from time to time be registered in the name of the
Fund. The Custodian shall hold all such Securities specifically allocated to a
Series which are not held in the Book-Entry System or in the Depository in a
separate account in the name of such Series physically segregated at all times
from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or
through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives
a written notice of such call, or (ii) notice of such call appears in one
or more of the publications listed in Appendix C annexed hereto, which may
be amended at any time by the Custodian without the prior notification or
consent of the Fund;
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive Securities;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations
of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series,
all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder.
7
<PAGE>
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository,
shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received
in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold hereunder
specifically allocated to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated
in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable upon Securities
not described in preceding paragraph 5(b) of this Article which may be
called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have
received a Certificate from the Fund stating, that any such instruments or
certificates are available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the availability of
any such instrument or certificate. Prior to such availability, the
Custodian shall comply with Section 17(f) of the Investment Company Act of
1940, as amended, in connection with the purchase, sale,
8
<PAGE>
settlement, closing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in Certificates
received by the Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer, or futures
commission merchant of a statement or confirmation reasonably believed by the
Custodian to be in the form customarily used by brokers, dealers, or future
commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account, and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than
a purchase of an Option, a Futures Contract, or a Futures Contract Option,
the Fund shall deliver to the Custodian (i) with respect to each purchase
of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c)
the number of shares or the principal amount purchased and accrued
interest, if any; (d) the date of purchase and settlement; (e) the purchase
price per unit; (f) the total amount payable upon such purchase; (g) the
name of the person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to
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<PAGE>
whom payment is to be made. The Custodian shall, upon receipt of Securities
purchased by or for the Fund, pay to the broker specified in the
Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any
Reverse Repurchase Agreement, the Fund shall deliver to the Custodian (i)
with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money
Market Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the name of the
broker through whom or the person to whom the sale was made, and the name
of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the
Certificate against payment of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to
each Option purchased: (a) the Series to which such Option is specifically
allocated; (b) the type of Option (put or call); (c) the name of the issuer
and the title and number of shares subject to such Option or, in the case
of a Stock Index Option, the stock index to which such Option relates and
the number of Stock Index Options purchased; (d) the expiration date; (e)
the exercise price; (f) the dates of purchase and settlement; (g) the total
amount payable by the Fund in connection with such purchase; (h) the name
of the Clearing Member through whom such Option was purchased; and (i) the
name of the broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the purchase of
such Option held by such Clearing Member for the account of the Custodian
(or any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the account of the Series to
which such Option is to be specifically allocated, the total amount payable
upon such
10
<PAGE>
purchase to the Clearing Member through whom the purchase was made, provided
that the same conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to
which such Option was specifically allocated; (b) the type of Option (put
or call); (c) the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement;
(g) the total amount payable to the Fund upon such sale; and (h) the name
of the Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph 1 of
this Article with respect to such Option against payment to the Custodian
of the total amount payable to the Fund, provided that the same conforms to
the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Call
Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares
subject to the Call Option; (c) the expiration date; (d) the date of
exercise and settlement; (e) the exercise price per share; (f) the total
amount to be paid by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option which was
exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable
to the Clearing Member through whom the Call Option was exercised, provided
that the same conforms to the total amount payable as set forth in such
Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the Put Option;
(c) the expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to the Fund upon
such exercise; and (g) the name of the Clearing Member through whom such
Put Option was exercised. The Custodian shall, upon receipt of the amount
payable upon the exercise of the Put Option, deliver or direct the
Depository to deliver the Securities specifically
11
<PAGE>
allocated to such Series, provided the same conforms to the amount payable
to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series to which such Stock Index Option was
specifically allocated; (b) the type of Stock Index Option (put or call);
(c) the number of Options being exercised; (d) the stock index to which
such Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Covered Call Option: (a) the Series for which such Covered Call Option
was written; (b) the name of the issuer and the title and number of shares
for which the Covered Call Option was written and which underlie the same;
(c) the expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was written;
and (g) the name of the Clearing Member through whom the premium is to be
received. The Custodian shall deliver or cause to be delivered, in exchange
for receipt of the premium specified in the Certificate with respect to
such Covered Call Option, such receipts as are required in accordance with
the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct the Depository to impose, upon the
underlying Securities specified in the Certificate specifically allocated
to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior
written notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall
promptly deliver to the Custodian a Certificate instructing the Custodian
to deliver, or to direct the Depository to deliver, the Securities subject
to such Covered Call Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing
Member to whom the underlying Securities are to be delivered; and (d) the
total amount payable to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6 of this
Article, the Custodian shall deliver, or direct the Depository to deliver,
the underlying Securities as specified
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in the Certificate against payment of the amount to be received as set
forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name
of the issuer and the title and number of shares for which the Put Option
is written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f) the date
such Put Option is written; (g) the name of the Clearing Member through
whom the premium is to be received and to whom a Put Option guarantee
letter is to be delivered; (h) the amount of cash, and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and (i) the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for
such Series. The Custodian shall, after making the deposits into the
Collateral Account specified in the Certificate, issue a Put Option
guarantee letter substantially in the form utilized by the Custodian on the
date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation
to issue any Put Option guarantee letter or similar document if it is
unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option
was written; (b) the name of the issuer and title and number of shares
subject to the Put Option; (c) the Clearing Member from whom the underlying
Securities are to be received; (d) the total amount payable by the Fund
upon such delivery; (e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be withdrawn from the
Collateral Account for such Series and (f) the amount of cash and/or the
amount and kind of Securities, specifically allocated to such Series, if
any, to be withdrawn from the Senior Security Account. Upon the return
and/or cancellation of any Put Option guarantee letter or similar document
issued by the Custodian in connection with such Put Option, the Custodian
shall pay out of the moneys held for the account of the Series to which
such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such
Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the
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Series for which such Stock Index Option was written; (b) whether such
Stock Index Option is a put or a call; (c) the number of options written;
(d) the stock index to which such Option relates; (e) the expiration date;
(f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of
cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for
such Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited
in the Collateral Account for such Series; and (k) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall, upon receipt
of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either
(1) deliver such receipts, if any, which the Custodian has specifically
agreed to issue, which are in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the deposits into the
Collateral Account specified in the Certificate, or (2) make the deposits
into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option
was written; (b) such information as may be necessary to identify the Stock
Index Option being exercised; (c) the Clearing Member through whom such
Stock Index Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to the Fund; (e)
the amount of cash and/or amount and kind of Securities, if any, to be
withdrawn from the Margin Account; and (f) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Collateral Account for such
Series. Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing
Member specified in the Certificate the total amount payable, if any, as
specified therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in
order to liquidate its position as a writer of an Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
the
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<PAGE>
Option being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c) the name
of the issuer and the title and number of shares subject to the Option, or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g) the type of
Option (put or call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from
the Collateral Account, a specified Margin Account, or the Senior Security
Account for such Series. Upon the Custodian's payment of the premium and
the return and/or cancellation of any receipt issued pursuant to paragraphs
6, 8 or 10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction, the Custodian shall remove, or
direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written by the
Fund and described in this Article, the Custodian shall delete such Option
from the statements delivered to the Fund pursuant to paragraph 3 Article
III herein, and upon the return and/or cancellation of any receipts issued
by the Custodian, shall make such withdrawals from the Collateral Account,
and the Margin Account and/or the Senior Security Account as may be
specified in a Certificate received in connection with such expiration,
exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to
such Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being
entered; (b) the category of Futures Contract (the name of the underlying
stock index or financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of the Futures
Contract(s); (e) the date the Futures Contract(s) was (were) entered into
and the maturity date; (f) whether the Fund is buying (going long) or
selling (going short) on such Futures Contract(s); (g) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker,
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<PAGE>
dealer, or futures commission merchant to whom such amount is to be paid.
The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement.
The Custodian shall make payment out of the moneys specifically allocated
to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying:
(a) the Futures Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash settlement amount
to be paid or received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or received; (c) the
broker, dealer, or futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the statements delivered
to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to
the Custodian a Certificate specifying: (a) the items of information
required in a Certificate described in paragraph 1 of this Article, and (b)
the Futures Contract being offset. The Custodian shall make payment out of
the money specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and delete the Futures Contract being
offset from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by
the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
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<PAGE>
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to
which such Option is specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the expiration date;
(e) the exercise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase; (h) the name
of the broker or futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission merchant,
to whom payment is to be made. The Custodian shall pay out of the moneys
specifically allocated to such Series, the total amount to be paid upon
such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated;
(b) the type of Future Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the date
of sale; (e) the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of the broker
of futures commission merchant through whom the sale was made. The
Custodian shall consent to the cancellation of the Futures Contract Option
being closed against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount payable as set
forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant
to paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the particular
Futures Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission merchant through
whom the Futures Contract Option is exercised; (f) the net total amount, if
any, payable by the Fund; (g) the amount, if any, to be received by the
Fund; and (h) the amount of cash and/or the amount and kind of Securities
to be deposited in the Senior Security Account for such
17
<PAGE>
Series. The Custodian shall make, out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Futures Contract Option: (a) the Series for which such Futures
Contract Option was written; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price; (f) the
premium to be received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series. The Custodian
shall, upon receipt of the premium specified in the Certificate, make out
of the moneys and Securities specifically allocated to such Series the
deposits into the Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract
Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
of cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any, specified in
such Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The deposits,
if any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option was
specifically allocated; (b) the particular Futures Contract Option
exercised;
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<PAGE>
(c) the type of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such Futures
Contract Option is exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total amount payable to
the Fund, if any, specified in the Certificate, make out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical
to a previously written Futures Contract Option described in this Article
in order to liquidate its position as a writer of such Futures Contract
Option, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a)
the Series to which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g) the name of
the broker or futures commission merchant to whom the premium is to be
paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series.
The Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian shall
(a) delete such Futures Contract Option from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein and, (b) make such
withdrawals from and/or in the case of an exercise such deposits into the
Senior Security Account as may be specified in a Certificate. The deposits
to and/or withdrawals from the Margin Account, if any, shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
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<PAGE>
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to
Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and
the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest or dividends, if any; (d) the dates of the sale
and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the
amount and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has been or is to
be established; (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Senior Security Account, and (i)
the name of the broker through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such broker confirming such sale
and that the total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue
a receipt or make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to each such closing out: (a) the Series for which such transaction
is being made; (b) the name of the issuer and the title of the Security;
(c) the number of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be delivered to
the broker; (d) the dates of closing-out and settlement; (e) the purchase
price per unit; (f) the net total amount payable to the Fund upon such
closing-out; (g) the net total amount payable to the broker upon such
closing-out; (h) the amount of cash and the amount and kind of Securities
to be withdrawn, if any, from the Margin Account; (i) the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account; and (j) the name of the broker through whom the
Fund is effecting such closing-out. The Custodian shall, upon receipt of
the net total amount payable to the Fund upon such closing-out, and the
return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the moneys held
for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the
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Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and specifically
allocated to such Series; (c) the broker or dealer through or with whom the
Reverse Repurchase Agreement is entered; (d) the amount and kind of
Securities to be delivered by the Fund to such broker or dealer; (e) the
date of such Reverse Repurchase Agreement; and (f) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian shall,
upon receipt of the total amount payable to the Fund specified in the
Certificate, Oral Instructions, or Written Instructions make the delivery
to the broker or dealer, and the deposits, if any, to the Senior Security
Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities
to be received by the Fund and specifically allocated to such Series in
connection with such termination; (d) the date of termination; (e) the name
of the broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or the amount
and kind of Securities to be withdrawn from the Senior Securities Account
for such Series. The Custodian shall, upon receipt of the amount and kind
of Securities to be received by the Fund specified in the Certificate or
Oral Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
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ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause to be delivered to the Custodian a Certificate specifying
with respect to each such loan: (a) the Series to which the loaned
Securities are specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the principal amount
loaned, (d) the date of loan and delivery, (e) the total amount to be
delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately
identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution
to which the loan was made upon receipt of the total amount designated as
to be delivered against the loan of Securities. The Custodian may accept
payment in connection with a delivery otherwise than through the Book-Entry
System or Depository only in the form of a certified or bank cashier's
check payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and
return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned, (c) the number of shares or the principal amount
to be returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institution from which
the Securities will be returned. The Custodian shall receive all Securities
returned from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out of the
moneys held for the account of the Fund, the total amount payable upon such
return of Securities as set forth in the Certificate.
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ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for
which such deposit or withdrawal is to be made and the amount of cash
and/or the amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities to be deposited
by the Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing
Member in whose name, or for whose benefit, the account was established as
specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with
in accordance with the terms and conditions of the Margin Account
Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral
Account described herein. In accordance with applicable law the Custodian
may enforce its lien and realize on any such property whenever the
Custodian has made payment or delivery pursuant to any Put Option guarantee
letter or similar document or any receipt issued hereunder by the
Custodian. In the event the Custodian should realize on any such property
net proceeds which are less than the Custodian's obligations under any Put
Option guarantee letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the scope of Article
XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities
are held specifying as of the close of business on the previous business
day: (a) the name of the Margin Account; (b) the amount and kind of
Securities held therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker, dealer, or
futures commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such Margin
Account.
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6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any
Series, the Custodian shall furnish the Fund with a statement with respect
to such Collateral Account specifying the amount of cash and/or the amount
and kind of Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the Fund shall
furnish to the Custodian a Certificate or Written Instructions specifying
the then market value of the Securities described in such statement. In the
event such then market value is indicated to be less than the Custodian's
obligation with respect to any outstanding Put Option guarantee letter or
similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral
Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Directors of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent and any sub-dividend agent
or co-dividend agent of the Fund on the payment date, or (ii) authorizing
with respect to the Series specified therein the declaration of dividends
and distributions on a daily basis and authorizing the Custodian to rely on
Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders
of record as of that date and the total amount payable to the Dividend
Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay
out of the moneys held for the account of each Series the total amount
payable to the Dividend Agent and any sub-dividend agent or co-dividend
agent of the Fund with respect to such Series.
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ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the
name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series
for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the
money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon
the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder
in connection with a redemption of any Shares, it shall furnish to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption
and that such Shares are in good form for redemption, the Custodian shall
make payment to the Transfer Agent out of the moneys held in the separate
account in the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of
any Shares, whenever any Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the Fund,
the Custodian, unless otherwise instructed by a Certificate, shall, upon
receipt of an advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such check
redemption privilege out of the moneys held in the separate account of the
Series of the Shares being redeemed.
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ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held
by the Custodian in the separate account for such Series shall be
insufficient to pay the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a Certificate or
Oral Instructions, or which results in an overdraft in the separate account
of such Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series, including any
indebtedness to The Bank of New York under the Fund's Cash Management and
Related Services Agreement, (except a borrowing for investment or for
temporary or emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand and shall
bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such
rate to be adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Custodian shall have a continuing
lien and security interest in and to any property specifically allocated to
such Series at any time held by it for the benefit of such Series or in
which the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third party acting
in the Custodian's behalf. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any balance of account standing
to such Series' credit on the Custodian's books. In addition, the Fund
hereby covenants that on each Business Day on which either it intends to
enter a Reverse Repurchase Agreement and/ or otherwise borrow from a third
party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the Series to
which the same relates, and shall not incur any indebtedness not so
specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form
currently
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employed by any such bank setting forth the amount which such bank will
loan to the Fund against delivery of a stated amount of collateral. The
Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the Series to which such borrowing
relates; (b) the name of the bank, (c) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement, (d)
the time and date, if known, on which the loan is to be entered into, (e)
the date on which the loan becomes due and payable, (f) the total amount
payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name
of the issuer, the title and the number of shares or the principal amount
of any particular Securities, and (h) a statement specifying whether such
loan is for investment purposes or for temporary or emergency purposes and
that such loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the
option of the lending bank, keep such collateral in its possession, but
such collateral shall be subject to all rights therein given the lending
bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified
in a Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral
status to be returned directly to the Custodian, and the Custodian shall
receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the
Series, the name of the issuer, the title and number of shares or the
principal amount of any particular Securities to be delivered as collateral
by the Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated
to have or utilize the Terminal Link, and the provisions of this Article
shall apply if, but only if, the Fund in its sole and absolute discretion
elects to utilize the Terminal Link to transmit Certificates to the
Custodian.
2. The Terminal Link shall be utilized by the Fund only for the
purpose of the Fund providing Certificates to the Custodian with respect to
transactions involving Securities or for the transfer of money to be
applied to the payment of
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dividends, distributions or redemptions of Fund Shares, and shall be
utilized by the Custodian only for the purpose of providing notices to the
Fund. Such use shall commence only after the Fund shall have delivered to
the Custodian a Certificate substantially in the form of Exhibit D and
shall have established access codes. Each use of the Terminal Link by the
Fund shall constitute a representation and warranty that the Terminal Link
is being used only for the purposes permitted hereby, that at least two
Officers have each utilized an access code, that such safekeeping
procedures have been established by the Fund, and that such use does not
contravene the Investment Company Act of 1940, as amended, or the rules or
regulations thereunder.
3. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications
services, necessary for it to utilize the Terminal Link, and the Custodian
shall not be responsible for the reliability or availability of any such
equipment or services.
4. The Fund acknowledges that any data bases made available as part
of, or through the Terminal Link and any proprietary data, software,
processes, information and documentation (other than any such which are or
become part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"), are the
exclusive and confidential property of the Custodian. The Fund shall, and
shall cause others to which it discloses the Information, to keep the
Information confidential by using the same care and discretion it uses with
respect to its own confidential property and trade secrets, and shall
neither make nor permit any disclosure without the express prior written
consent of the Custodian.
5. Upon termination of this Agreement for any reason, the Fund shall
return to the Custodian any and all copies of the Information which are in
the Fund's possession or under its control, or which the Fund distributed
to third parties. The provisions of this Article shall not affect the
copyright status of any of the Information which may be copyrighted and
shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from
time to time without notice to the Fund except that the Custodian shall
give the Fund notice not less than 75 days in advance of any modification
which would materially adversely affect the Fund's operation, and the Fund
agrees that the Fund shall not modify or attempt to modify the Terminal
Link without the Custodian's prior written consent. The Fund acknowledges
that any software or procedures provided the Fund as part of the Terminal
Link are the property of the Custodian and, accordingly, the Fund agrees
that any modifications to the Terminal Link, whether by the Fund, or by
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the Custodian and whether with or without the Custodian's consent, shall
become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Fund utilizes in connection with the Terminal Link makes
any warranties or representations, express or implied, in fact or in law,
including but not limited to warranties of merchantability and fitness for
a particular purpose.
8. The Fund will cause its Officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance
with and rely on Certificates received by it through the Terminal Link. The
Fund acknowledges that it is its responsibility to assure that only its
Officers use the Terminal Link on its behalf, and that a Custodian shall
not be responsible nor liable for use of the Terminal Link on the Fund's
behalf by persons other than such persons or Officers, or by only a single
Officer, nor for any alteration, omission, or failure to promptly forward.
9(a). Except as otherwise specifically provided in Section 9(b) of
this Article, the Custodian shall have no liability for any losses,
damages, injuries, claims, costs or expenses arising out of or in
connection with any failure, malfunction or other problem relating to the
Terminal Link except for money damages suffered as the direct result of the
negligence of the Custodian in an amount not exceeding for any incident
$25,000 provided, however, that the Custodian shall have no liability under
this Section 9 if the Fund fails to comply with the provisions of Section
11.
9(b). The Custodian's liability for its negligence in executing or
failing to execute in accordance with a Certificate received through
Terminal Link shall be only with respect to a transfer of funds which is
not made in accordance with such Certificate after such Certificate shall
have been duly acknowledged by the Custodian, and shall be contingent upon
the Fund complying with the provisions of Section 12 of this Article, and
shall be limited to (i) restoration of the principal amount mistransferred,
if and to the extent that the Custodian would be required to make such
restoration under applicable law, and (ii) the lesser of (A) a Fund's
actual pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred, as the case
may be, or (B) compensation for the loss of the use of the mistransferred
funds or the funds which were not transferred, as the case may be, at a
rate per annum equal to the average federal funds rate as computed from the
Federal Reserve Bank of New York's daily determination of the effective
rate for federal funds, for the period during which a Fund has lost use of
such funds. In no event shall the Custodian have any liability for failing
to execute in
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accordance with a Certificate a transfer of funds where the Certificate is
received by the Custodian through Terminal Link other than through the
applicable transfer module for the particular instructions contained in
such Certificate.
10. Without limiting the generality of the foregoing, in no event
shall the Custodian or any manufacturer or supplier of its computer
equipment, software or services relating to the Terminal Link be
responsible for any special, indirect, incidental or consequential damages
which the Fund may incur or experience by reason of its use of the Terminal
Link even if the Custodian or any manufacturer or supplier has been advised
of the possibility of such damages, nor with respect to the use of the
Terminal Link shall the Custodian or any such manufacturer or supplier be
liable for acts of God, or with respect to the following to the extent
beyond such person's reasonable control: machine or computer breakdown or
malfunction, interruption or malfunction of communication facilities, labor
difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as
promptly as practicable, and in any event within 24 hours after the
earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in
the case of any error, the date of actual receipt of the earliest notice
which reflects such error, it being agreed that discovery and receipt of
notice may only occur on a business day. The Custodian shall promptly
advise the Fund whenever the Custodian learns of any errors, omissions or
interruption in, or delay or unavailability of, the Terminal Link.
12. The Custodian shall verify to the Fund, by use of the Terminal
Link, receipt of each Certificate the Custodian receives through the
Terminal Link, and in the absence of such verification the Custodian shall
not be liable for any failure to act in accordance with such Certificate
and the Fund may not claim that such Certificate was received by the
Custodian. Such verification, which may occur after the Custodian has acted
upon such Certificate, shall be accomplished on the same day on which such
Certificate is received.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Foreign Securities (as such term is defined
in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940,
as amended) and other assets, the foreign banking institutions and foreign
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securities depositories and clearing agencies designated on Schedule I
hereto ("Foreign Sub-Custodians") to carry out their respective
responsibilities in accordance with the terms of the sub-custodian
agreement between each such Foreign Sub-Custodian and the Custodian, copies
of which have been previously delivered to the Fund and receipt of which is
hereby acknowledged (each such agreement, a "Foreign Sub-Custodian
Agreement"). Upon receipt of a Certificate, together with a certified
resolution substantially in the form attached as Exhibit E of the Fund's
Board of Directors, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to
act as the Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of
a Certificate from the Fund, the Custodian shall cease the employment of
any one or more Foreign Sub-Custodians for maintaining custody of the
Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the
form previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written
consent.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each
Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claims by
the Fund or any Series against a Foreign Sub-Custodian as a consequence of
any loss, damage, cost, expense, liability or claim sustained or incurred
by the Fund or any Series if and to the extent that the Fund or such Series
has not been made whole for any such loss, damage, cost, expense, liability
or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian Agreement, use reasonable
efforts to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any Foreign Sub-Custodian
insofar as such books and records relate to the performance of such Foreign
Sub-Custodian under its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other
assets of each Series held by Foreign Sub-Custodians, including but not
limited to, an identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or notifications of any
transfers of Foreign Securities to or from each custodial account
maintained by a Foreign Sub-Custodian for the Custodian on behalf of the
Series.
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6. The Custodian shall furnish annually to the Fund, as mutually
agreed upon, information concerning the Foreign Sub-Custodians employed by
the Custodian. Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the Fund's initial approval of
such Foreign Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength, general
reputation and standing in the countries in which they are located and
their ability to provide the custodial services required, and (ii) whether
the Foreign Sub-Custodians would provide a level of safeguards for
safekeeping and custody of securities not materially different form those
prevailing in the United States. The Custodian shall monitor the general
operating performance of each Foreign Sub-Custodian. The Custodian agrees
that it will use reasonable care in monitoring compliance by each Foreign
Sub-Custodian with the terms of the relevant Foreign Sub-Custodian
Agreement and that if it learns of any breach of such Foreign Sub-Custodian
Agreement believed by the Custodian to have a material adverse effect on
the Fund or any Series it will promptly notify the Fund of such breach. The
Custodian also agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's
Foreign Securities, including without limitation, notices of corporate
action, proxies and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any
Series and delivery of securities maintained for the account of such Series
may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivery of securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating
to any actions or omissions of any Foreign Sub-Custodian the sole
responsibility and liability of the Custodian shall be to take appropriate
action at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed that the
Custodian's sole responsibility and liability shall be limited to amounts
so recovered from the Foreign Sub-Custodian.
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ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI
neither the Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or omission to
act or otherwise, either hereunder or under any Margin Account Agreement,
except for any such loss or damage arising out of its own negligence or
willful misconduct. In no event shall the Custodian be liable to the Fund
or any third party for special, indirect or consequential damages or lost
profits or loss of business, arising under or in connection with this
Agreement, even if previously informed of the possibility of such damages
and regardless of the form of action. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement,
apply for and obtain the advice and opinion of counsel to the Fund or of
its own counsel, at the expense of the Fund, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity
with such advice or opinion. The Custodian shall be liable to the Fund for
any loss or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by the
Fund;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or
held by it at any time as a result of such loan of portfolio Securities of
the Fund is adequate collateral for the Fund against any loss it might
sustain as a result of such loan. The Custodian specifically, but not by
way of limitation, shall not be under any duty or obligation periodically
to check or notify the
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Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be
the sole responsibility of the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer or financial
institution to which portfolio Securities of the Fund are lent pursuant to
Article XIV of this Agreement makes payment to it of any dividends or
interest which are payable to or for the account of the Fund during the
period of such loan or at the termination of such loan, provided, however,
that the Custodian shall promptly notify the Fund in the event that such
dividends or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or Securities
held in any Margin Account, Senior Security Account or Collateral Account
in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment to the Fund of
any variation margin payment or similar payment which the Fund may be
entitled to receive from such broker, dealer, futures commission merchant
or Clearing Member, to see that any payment received by the Custodian from
any broker, dealer, futures commission merchant or Clearing Member is the
amount the Fund is entitled to receive, or to notify the Fund of the
Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the
Fund until the Custodian actually receives and collects such money directly
or by the final crediting of the account representing the Fund's interest
at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities
held in the Depository, unless the Custodian shall have actually received
timely notice from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to collect,
or for the late collection or late crediting by the Depository of any
amount payable upon Securities deposited in the Depository which may mature
or be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities
held in the Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be
under any obligation to appear in, prosecute or defend any action suit or
proceeding in respect to any Securities held by the Depository which in its
opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all
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expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution
by the Transfer Agent of the Fund of any amount paid by the Custodian to
the Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities upon which
such amount is payable are in default, or if payment is refused after due
demand or presentation, unless and until (i) it shall be directed to take
such action by a Certificate and (ii) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection with
any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or
Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not
limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or
by any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not involving
the Custodian, are such transactions as may properly be engaged in by the
Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund.
The Custodian may charge such compensation and any expenses with respect to
a Series incurred by the Custodian in the performance of its duties
pursuant to such agreement against any money specifically allocated to such
Series. Unless and until the Fund instructs the Custodian by a Certificate
to apportion any loss, damage, liability or expense among the Series in a
specified manner, the Custodian shall also be entitled to charge against
any money held by it for the account of a Series such Series' pro rata
share (based on such Series net asset value at the time of the charge to
the aggregate net asset value of all Series at that time) of the amount of
any loss, damage, liability or
35
<PAGE>
expense, including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. The expenses for
which the Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of sub-custodians and foreign
branches of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and
reasonably believed by the Custodian to be a Certificate. The Custodian
shall be entitled to rely upon any Oral Instructions actually received by
the Custodian hereinabove provided for. The Fund agrees to forward to the
Custodian a Certificate or facsimile thereof confirming such Oral
Instructions in such manner so that such Certificate or facsimile thereof
is received by the Custodian, whether by hand delivery, telecopier or other
similar device, or otherwise, by the close of business of the same day that
such Oral Instructions are given to the Custodian. The Fund agrees that the
fact that such confirming instructions are not received, or that contrary
instructions are received, by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the
Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by
the Custodian to be given in accordance with the terms and conditions of
any Margin Account Agreement. Without limiting the generality of the
foregoing, the Custodian shall be under no duty to inquire into, and shall
not be liable for, the accuracy of any statements or representations
contained in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a broker, dealer,
futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books
and records shall be prepared and maintained as required by the Investment
Company Act of 1940, as amended, and other applicable securities laws and
rules and regulations. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by the Custodian to the Fund or the
Fund's authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon
36
<PAGE>
reasonable request of the Fund, the Custodian shall provide in hard copy or
on micro-film, whichever the Custodian elects, any records included in any
such delivery which are maintained by the Custodian on a computer disc, or
are similarly maintained, and the Fund shall reimburse the Custodian for
its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the
Book-Entry System, the Depository or O.C.C., and with such reports on its
own systems of internal accounting control as the Fund may reasonably
request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of or in connection with this Agreement, including the Custodian's
payment or nonpayment of checks pursuant to paragraph 6 of Article XIII as
part of any check redemption privilege program of the Fund, except for any
such liability, claim, loss and demand arising out of the Custodian's own
negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may
deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payments to be made and received by the
Custodian in accordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is instructed to
deliver Securities against payment, delivery of such Securities and receipt
of payment therefor may not be completed simultaneously. The Fund assumes
all responsibility and liability for all credit risks involved in
connection with the Custodian's delivery of Securities pursuant to
instructions of the Fund, which responsibility and liability shall continue
until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date
of giving of such
37
<PAGE>
notice. In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors of the
Fund, certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. In the
event such notice is given by the Custodian, the Fund shall, on or before
the termination date, deliver to the Custodian a copy of a resolution of
the Board of Directors of the Fund, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or custodians. In
the absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. Upon the
date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as Custodian,
after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon
the date specified in the notice of termination of this Agreement and upon
the delivery by the Custodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the Fund) and moneys
then owned by the Fund be deemed to be its own custodian and the Custodian
shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement, other than the duty with respect to Securities held in the
Book Entry System which cannot be delivered to the Fund to hold such
Securities hereunder in accordance with this Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its corporate seal, setting forth the
names and the signatures of the present Officers of the Fund. The Fund
agrees to furnish to the Custodian a new Certificate in similar form in the
event any such present Officer ceases to be an Officer of the Fund, or in
the event that other or additional Officers are elected or appointed. Until
such new Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon the
signatures of the Officers as set forth in the last delivered Certificate.
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<PAGE>
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given
if addressed to the Custodian and mailed or delivered to it at its offices
at 90 Washington Street, New York, New York 10286, or at such other place
as the Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the
address for the Fund first above written, or at such other place as the
Fund may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as
this Agreement and approved by a resolution of the Board of Directors of
the Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without
the written consent of the Custodian, or by the Custodian without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of
the State of New York without giving effect to conflict of laws principles
thereof. Each party hereby consents to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any
dispute arising hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective corporate Officers, thereunto duly
authorized and their respective corporate seals to be hereunto affixed, as
of the day and year first above written.
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC.
[SEAL] By: /s/ Arnold Feist
Vice President, Assistant Secretary
Attest:
/s/ Christine Waterhouse
- - ------------------------------
THE BANK OF NEW YORK
[SEAL]
By: /s/ Stephen E. Grunston
Name: Stephen E. Grunston
Title: Vice President
Attest:
/s/ Vincent Blazewicz
- - ------------------------------
40
<PAGE>
APPENDIX A
I, , and I, , of
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC., a Maryland corporation (the
"Fund"), do hereby certify that:
The following individuals serve in the following positions with the
Fund and each has been duly elected or appointed by the Board of Directors
of the Fund to each such position and qualified therefor in conformity with
the Fund's Articles of Incorporation and By-Laws, and the signatures set
forth opposite their respective names are their true and correct
signatures:
Name Position Signature
- - ------------------ ---------------------------- -------------------
<PAGE>
APPENDIX B
I, Stephen E. Grunston, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, Arnold Feist, hereby certifies that he or she is the
duly elected and acting Vice President and Assistant Secretary of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., a Maryland corporation (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1995, at
which a quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1995, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC. as of the 19th day of
December, 1995.
/s/ Arnold Feist
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, Arnold Feist, hereby certifies that he or she is the duly
elected and acting Vice President and Assistant Secretary of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., a Maryland corporation (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1995, at
which a quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1995, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Depository, as defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Depository to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC. as of the 19th day of
December, 1995.
/s/ Arnold Feist
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, Arnold Feist, hereby certifies that he or she is the duly
elected and acting Vice Presient and Assistant Secretary of WATERHOUSE INVESTORS
CASH MANAGEMENT FUND INC., a Maryland corporation (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1995, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 1995, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as Depository,
as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Participants Trust Company
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC., as of the 19th day of
December, 1995.
/s/ Arnold Feist
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, Arnold Feist, hereby certifies that he is the duly
elected and acting Vice President and Assistant Secretary of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., a Maryland corporation (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1995, at which
a quorum was at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of ,
1995, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
WATERHOUSE INVESTORS CASH MANAGEMENT FUND INC. as of the 19th day of December,
1995.
/s/ Arnold Feist
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, Arnold Feist, hereby certifies that he or she is the duly
elected and acting Vice President and Assistant Secretary of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., a Maryland corporation (the "Fund"),
further certifies that the following resolutions were adopted by the Board of
Directors of the Fund at a meeting duly held on , 1995, at which
a quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of ,
1995 (the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to act in accordance with, and to rely on Certificates
(as defined in the Custody Agreement) given by the Fund to the Custodian by
a Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to Officers of the Fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of such access codes, shall
limit its use of the Terminal Link to those purposes permitted by the
Custody Agreement, shall require at least two such Officers to utilize
their respective access codes in connection with each such Certificate, and
shall use the Terminal Link only in a manner that does not contravene the
Investment Company Act of 1940, as amended, or the rules and regulations
thereunder.
RESOLVED, that Officers of the Fund shall, following the establishment
of such access codes and such internal safekeeping procedures, advise the
Custodian that the same have been established by delivering a Certificate,
as defined in the Custody Agreement, and the Custodian shall be entitled to
rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., as of the 19th day of December, 1995.
/s/ Arnold Feist
[SEAL]
<PAGE>
EXHIBIT E
The undersigned, Arnold Feist, hereby certifies that he or she is the duly
elected and acting Vice President and Assistant Secretary of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., a Maryland corporation (the "Fund"),
further certifies that the following resolutions were adopted by the Board of
Directors of the Fund at a meeting duly held on , 1995, at which a
quorum was at all times present and that such resolutions have not been modified
or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country
listed in Schedule I hereto be, and hereby is, approved by the Board of
Directors as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located
in the countries specified therein, and with the foreign subcustodians and
depositories listed in Schedule I located in the countries specified
therein be, and hereby is, approved by the Board of Directors as consistent
with the best interest of the Fund and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to this meeting
between the Bank and each of the foreign subcustodians and depositories
listed in Schedule I providing for the maintenance of the Fund's assets
with the applicable entity, be and hereby are, approved by the Board of
Directors as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby
authorized to place assets of the Fund with the aforementioned foreign
branches and foreign subcustodians and depositories as hereinabove
provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them,
are authorized to do any and all other acts, in the name of the Fund and on
its behalf, as they, or any of them, may determine to be necessary or
desirable and proper in connection with or in furtherance of the foregoing
resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of WATERHOUSE
INVESTORS CASH MANAGEMENT FUND INC., as of the 19th day of December, 1995.
/s/ Arnold Feist
[SEAL]
<PAGE>
TRANSFER AGENCY AND DIVIDEND
DISBURSING AGENCY AGREEMENT
AGREEMENT made as of the 12th day of December, 1995 by and between
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation (the
"Fund"), on its own behalf and on behalf of its Money Market Portfolio, U.S.
Government Portfolio and Municipal Portfolio (each, a "Portfolio"), and
WATERHOUSE NATIONAL BANK, a national banking association (the "Bank").
WITNESSETH:
WHEREAS, the Fund is an open-end, diversified management investment
company registered as such under the Investment Company Act of 1940, as amended,
currently comprised of three separate investment Portfolios; and
WHEREAS, the Fund desires to appoint the Bank to be the Transfer Agent and
Dividend Disbursing Agent for each Portfolio of the Fund upon, and subject to,
the terms and provisions of this Agreement; and
WHEREAS, the Bank desires to accept such appointment upon, and subject to,
such terms and provisions.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the Fund and the Bank agree as follows:
1. Appointment of the Bank as Transfer Agent and Dividend Disbursing
Agent.
(a) The Fund hereby appoints the Bank to act as Transfer Agent and
Dividend Disbursing Agent for each Portfolio of the Fund upon, and subject to,
the terms and provisions of this Agreement.
(b) The Bank hereby accepts the appointment as Transfer Agent and
Dividend Disbursing Agent for each Portfolio of the Fund, and agrees to act as
such upon, and subject to, the terms and provisions of this Agreement.
2. Definitions. In this Agreement:
1
<PAGE>
(1) The term "Act" means the Investment Company Act of 1940, as
amended, and any rule or regulation thereunder;
(2) The term "Account" means any account of a Shareholder, or, if
the shares are held in an account in the name of Waterhouse
Securities, Inc. or other broker-dealer for benefit of an identified
customer, such account, and includes any Plan Account.
(3) The term "application" means an application made by a Shareholder
or prospective Shareholder respecting the opening of an Account;
(4) The term "Instruction" means an instruction in writing given on
behalf of the Fund to the Bank, and signed on behalf of the Fund by
the President, any Vice President, the Secretary or the Treasurer of
the Fund or other authorized person;
(5) The term "Plan Account" means an account opened by a Shareholder
or prospective Shareholder in respect of a "sweep account" (in each
case by whatever name referred to in the Prospectus), and may also
include an account relating to any other plan if and when provision
is made for such plan in the Prospectus;
(6) The term "Prospectus" includes the Prospectus and the Statement
of Additional Information of the Fund as from time to time in effect;
(7) The term "Shareholder" means a holder of record of Shares;
(8) The term "Shares" means shares of stock of the Fund,
irrespective of Portfolio.
3. Duties of the Bank as Transfer Agent and Dividend Disbursing Agent.
(a) Subject to the other provisions of the Agreement, the Bank
hereby agrees to perform the following functions as Transfer Agent and Dividend
Disbursing Agent for each Portfolio: (i) processing the issuance, transfer and
redemption of Shares, and recording the same in the appropriate Accounts; (ii)
opening, maintaining, servicing and closing Accounts; (iii) acting as agent for
the Shareholders and/or customers of Waterhouse Securities, Inc. or other
broker-dealer in connection with Plan Accounts, upon the terms and subject to
the conditions contained in the Prospectus and application relating to the
specific Plan Account; (iv)
2
<PAGE>
exchanging the investment of an investor into or from the Shares of one or more
Portfolios of the Fund if and to the extent permitted by the Prospectus at the
direction of such investor; (v) examining and approving legal transfers; (vi)
replacing lost, stolen or destroyed certificates, if any, representing Shares,
in accordance with, and subject to, procedures and conditions adopted by the
Fund; (vii) furnishing confirmations of purchases and sales relating to Shares
as required by applicable law; (viii) furnishing appropriate periodic and year
end statements relating to Accounts, together with additional enclosures,
including appropriate income tax information and income tax forms duly
completed, as required by applicable law; (ix) mailing annual, semi-annual and
quarterly reports and dividend notices prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to Shareholders as required by
applicable law; (x) furnishing such periodic statements of transactions effected
by the Bank, reconciliations, balances and summaries as the Fund may reasonably
request; (xi) withholding taxes on non-resident alien Accounts, and preparing
and filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(xii) processing dividend and distribution payments, including reinvesting
dividends for full and fractional shares and disbursing cash dividends, as
applicable.
(b) The Bank agrees to act as proxy agent in connection with the
holding of annual, if any, and special meetings of Shareholders, mailing such
notices, proxies and proxy statements in connection with the holding of such
meetings as may be required by applicable law, receiving and tabulating votes
cast by proxy and communicating to the Fund the results of such tabulation
accompanied by appropriate certificates, and preparing and furnishing to the
Fund certified lists of Shareholders (of the Fund or one or more of its
Portfolios, as appropriate) as of such date, in such form and containing such
information as may be required by the Fund.
(c) The Bank agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of the Bank under this
Agreement with respect to Accounts.
(d) The Bank agrees to furnish to the Fund or its designated agent
such information at such intervals as is necessary for the Fund to comply with
the registration and/or
3
<PAGE>
the reporting requirements (including applicable escheat laws) of the Securities
and Exchange Commission, state securities or Blue Sky authorities or other
governmental authorities.
(e) The Bank agrees to provide to the Fund such information as may
reasonably be required to enable the Fund to reconcile the number of outstanding
Shares of each Portfolio between the Bank's records and the account books of the
Fund.
(f) Notwithstanding anything in the foregoing provisions of this
section 3, the Bank agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular class
of cases) as may from time to time be contained in an Instruction.
(g) In providing for any or all of the services indicated in this
section 3, and in satisfaction of its obligations to provide such services, the
Bank may enter into agreements with one or more other persons to provide such
services to the Fund, provided that any such agreement shall have been approved
by the Board of Directors of the Fund, provided further that the Bank shall be
as fully responsible to the Fund for the acts and omissions of such persons as
it would be for its own acts or omissions hereunder.
4. Compensation. For the services provided to the Fund by the Bank
pursuant to this Agreement, each Portfolio shall pay the Bank on the first
business day of each calendar month a fee for the previous month at an annual
rate equal to .20 of 1% of such Portfolio's average daily net assets. The value
of each Portfolio's net assets shall be computed at the times and in the manner
specified in the Fund's registration statement on Form N-1A, as amended from
time to time (the "Registration Statement"). Compensation by each Portfolio of
the Bank shall commence on the date of the first receipt by such Portfolio of
the proceeds of the sale of its Shares as described in the Registration
Statement, and the fee for the period from the date such Portfolio shall first
receive the proceeds of the sale of its Shares as aforesaid to the end of the
month during which such proceeds are so received, shall be pro-rated according
to the proportion that such period bears to the full monthly period. Upon
termination of this Agreement before the end of a month, the fee for such part
of that month shall be pro-rated according to the proportion that such period
bears to the full monthly period and shall be payable within seven (7) days
after the date of termination of this Agreement.
4
<PAGE>
5. Maintenance of Records, Right of Inspection. In connection with the
performance of its duties hereunder, the Bank shall maintain such books and
records relating to transactions effected by the Bank as are required by the
Act, or by any other applicable provision of law, rule or regulation, to be
maintained by the Fund or its transfer agent with respect to transactions. The
Bank shall preserve, or cause to be preserved, any such books and records for
such periods as may be required by any such law, rule or regulation and as may
be agreed upon from time to time between the Bank and the Fund. In addition,
the Bank agrees to maintain and preserve master files and historical computer
tapes on a daily basis in multiple separate locations a sufficient distance
apart to insure preservation of at least one copy of such information. The Bank
agrees that it will, in a timely manner, make available to, and permit, any
officer, accountant, attorney or authorized agent of the Fund to examine and
make transcripts and copies (including photocopies and computer or other
electronic information storage media and print-outs) of, any and all of the
books and records which are maintained pursuant to this Agreement.
6. Confidential Relationship. The Bank agrees that it will, on behalf
of itself and its officers and employees, treat all transactions contemplated by
this Agreement, and all information germane thereto, as confidential and not to
be disclosed to any person (other than the Shareholder concerned, or the Fund,
or as may be disclosed in the examination of any books or records by any person
lawfully entitled to examine the same) except as may be authorized by the Fund
by way of an Instruction.
7. Indemnification.
(a) The Bank shall not be liable to the Fund or any Portfolio for
any error of judgment or mistake of law or for any loss arising out of any act
or omission by the Bank in the performance of its duties hereunder. Nothing
herein contained shall be construed to protect the Bank against any liability to
the Fund, a Portfolio, Shareholders or any investment adviser to the Fund to
which the Bank shall otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reckless
disregard of its obligations and duties hereunder.
(b) The Fund, on behalf of each Portfolio, agrees to indemnify and
hold harmless the Bank and each Sub-Agent from and against all charges, claims,
expenses (including
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<PAGE>
legal fees) and liabilities reasonably incurred by the Bank and each Sub-Agent
in connection with the performance of its duties hereunder, except such as may
arise from the Bank's or Sub-Agent's willful misfeasance, bad faith, gross
negligence in the performance of its duties or by reckless disregard of its
obligations and duties hereunder. Subject to the requirements of the Act, such
expenses shall be paid by the Fund in advance of the final disposition of any
matter upon invoice by the Bank or a Sub-Agent and receipt by the Fund of an
undertaking from the Bank or such Sub-Agent to repay such amounts if it shall
ultimately be established that the Bank is not entitled to payment of such
expenses hereunder.
(c) As used in this section 7, the term "Bank" and "Sub-Agent" shall
include any affiliates of the Bank and each Sub-Agent performing services for
the Fund contemplated hereby and directors, officers, agents and employees of
the Bank, each such Sub-Agent and such affiliates.
8. Regarding the Bank.
(a) The Bank warrants and represents that its officers and
supervisory personnel or agents (including any sub-transfer agents or
sub-dividend disbursing agents) charged with carrying out its functions as
Transfer Agent and Dividend Disbursing Agent for the Fund possess the special
skill and technical knowledge appropriate for that purpose. The Bank shall at
all times exercise due care and diligence in the performance of its functions as
Transfer Agent and Dividend Disbursing Agent for the Fund. The Bank agrees
that, in determining whether it has exercised due care and diligence, its
conduct shall be measured by the standard applicable to persons possessing such
special skill and technical knowledge.
(b) The Bank warrants and represents that it is duly authorized and
permitted to act as Transfer Agent and Dividend Disbursing Agent under all
applicable laws and that it will immediately notify the Fund of any revocation
of such authority or permission or of the commencement of any proceeding or
other action which may lead to such revocation.
9. Termination.
(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or the Bank (without penalty to the Fund or the Bank)
provided that the terminating party gives
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<PAGE>
the other party written notice of such termination at least sixty (60) days in
advance, except that the Fund may terminate this Agreement immediately upon
written notice to the Bank if the authority or permission of the Bank to act as
Transfer Agent and Dividend Disbursing Agent has been revoked or if any
proceeding or other action which the Fund reasonably believes will lead to such
revocation has been commenced.
(b) Upon termination of this Agreement, the Bank shall deliver all
unissued and canceled stock certificates representing Shares, if any, remaining
in its possession, and all Shareholder records, books, stock ledgers,
instruments and other documents (including computer or other electronically
stored information) made or accumulated in the performance of its duties as
Transfer Agent and Dividend Disbursing Agent for the Fund along with a certified
locator document clearly indicating the complete contents therein, to such
successor as may be specified in a notice of termination or Instruction. The
Fund assumes all responsibility for failure thereafter to produce any paper,
record or document so delivered and identified in the locator document, if and
when required to be produced.
10. Amendment. Except to the extent that the performance by the Bank
of its functions under this Agreement may from time to time be modified by an
Instruction, this Agreement may be amended or modified by the parties hereto
only if such amendment is specifically approved by the Board of Directors of the
Fund, including a majority of the of the Fund who are not "interested persons"
of the Fund within the meaning of the Act and who have no direct or indirect
interest in this Agreement, and such amendment is set forth in a written
instrument executed by each of the parties hereto.
11. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect and the applicable provisions of the Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
12. Counterparts. This Agreement may be executed by the parties hereto in
counterparts and if executed in more than one counterpart the separate
instruments shall constitute one agreement.
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<PAGE>
13. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed to be received on the earlier of
the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid. Notice shall be addressed: (a) if
to the Bank, to: President, Waterhouse National Bank, 50 Main Street, White
Plains, New York 10606; or (b) if to the Fund, to: President, Waterhouse
Investors Cash Management Fund, Inc., 100 Wall Street, New York, New York 10005
or at such other address as either party may designate by written notice to the
other. Notice also shall be deemed sufficient if given by telex, telecopier,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein).
14. Separate Portfolios. This Agreement shall be construed to be made by
the Fund as a separate agreement with respect to each Portfolio, and under no
circumstances shall the rights, obligations or remedies with respect to a
particular Portfolio be deemed to constitute a right, obligation or remedy
applicable to any other Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the day and year above
written.
WATERHOUSE INVESTORS CASH
MANAGEMENT FUND, INC.
By: /s/ Robert F.X. Bohrer
Vice President, Assistant Treasurer
WATERHOUSE NATIONAL BANK
By: /s/ Richard Powers
President
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<PAGE>
SUB-TRANSFER AGENCY AND DIVIDEND
DISBURSING AGENCY AGREEMENT
AGREEMENT made as of the 12th day of December, 1995 by and among
WATERHOUSE NATIONAL BANK, a national banking association (the "Bank"), NATIONAL
INVESTOR SERVICES CORP., a Delaware ("NISC"), and WATERHOUSE SECURITIES,
INC., a Delaware corporation ("Waterhouse Securities") (NISC and Waterhouse
Securities each may be referred to separately herein as a "Sub Agent" and
together as the "Sub-Agents").
WITNESSETH:
WHEREAS, the Bank serves as Transfer Agent and Dividend Disbursing Agent
for each of the three separate investment portfolios (each, a "Portfolio") of
Waterhouse Investors Cash Management Fund, Inc., a Maryland corporation and an
open-end diversified management investment company registered as such under the
Investment Company Act of 1940, as amended (the "Fund"), pursuant to a Transfer
Agency and Dividend Disbursing Agency Agreement dated as of December 12, 1995
(the "Transfer Agency Agreement"); and
WHEREAS, the Bank is authorized pursuant to the Transfer Agency Agreement
to delegate any or all of the services thereunder; and
WHEREAS, the Bank and the Sub-Agents contemplate that, pursuant to the
terms and provisions of this Agreement, following its organization and
qualification to perform the duties prescribed in this Agreement, NISC may
perform certain services as Sub-Transfer and Sub-Dividend Disbursing Agent for
the Fund on an ongoing basis, and that during the period prior to the
organization and qualification of NISC to act in such capacity, Waterhouse
Securities shall act as Sub-Transfer and Sub-Dividend Disbursing Agent for the
Fund; and
WHEREAS, the Bank desires to appoint each Sub-Agent to act as Sub-Transfer
Agent and Sub-Dividend Disbursing Agent for each Portfolio of the Fund upon, and
subject to, the terms and provisions of this Agreement; and
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<PAGE>
WHEREAS, each Sub-Agent desires to accept such appointment upon, and
subject to, such terms and provisions.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the Bank and the Sub-Agents agree as follows:
1. Appointment of each Sub-Agent as Sub-Transfer Agent and Sub-Dividend
Disbursing Agent.
(a) The Bank hereby appoints NISC to act as Sub-Transfer Agent and
Sub-Dividend Disbursing Agent for each Portfolio of the Fund upon, and subject
to, the terms and provisions of this Agreement, provided that during the period
prior to the organization and qualification of NISC to perform its services
hereunder, Waterhouse Securities shall act as Sub-Transfer and Sub-Dividend
Disbursing Agent for each Portfolio upon, and subject to, the terms and
provisions of this Agreement.
(b) Each Sub-Agent hereby accepts the appointment as Sub-Transfer Agent
and Sub-Dividend Disbursing Agent for each Portfolio of the Fund, and agrees to
act as such upon, and subject to, the terms and provisions of this Agreement.
2. Definitions. In this Agreement:
(1) The term "Act" means the Investment Company Act of 1940, as
amended, and any rule or regulation thereunder;
(2) The term "Account" means any account of a Shareholder, or, if the
shares are held in an account in the name of Waterhouse Securities, Inc. or
other broker-dealer for benefit of an identified customer, such account, and
includes any Plan Account.
(3) The term "application" means an application made by a Shareholder
or prospective Shareholder respecting the opening of an Account;
(4) The term "Instruction" means an instruction in writing given on
behalf of the Fund to the Bank, and signed on behalf of the Fund by the
President, any Vice President, the Secretary or the Treasurer of the Fund or
other authorized person, and transmitted by the Bank to a Sub-Agent;
2
<PAGE>
(5) The term "Plan Account" means an account opened by a Shareholder or
prospective Shareholder in respect of a "sweep account" (in each case by
whatever name referred to in the Prospectus), and may also include an
account relating to any other plan if and when provision is made for such
plan in the Prospectus;
(6) The term "Prospectus" includes the Prospectus and the Statement of
Additional Information of the Fund as from time to time in effect;
(7) The term "Shareholder" means a holder of record of Shares;
(8) The term "Shares" means shares of stock of the Fund, irrespective
of Portfolio.
3. Duties of each Sub-Agent as Sub-Transfer Agent and Sub-Dividend
Disbursing Agent.
(a) Subject to the other provisions of the Agreement, each Sub-Agent
hereby agrees to perform any or all of the following functions as Sub-Transfer
Agent and Sub-Dividend Disbursing Agent for each Portfolio as requested by the
Bank: (i) processing the issuance, transfer and redemption of Shares, and
recording the same in the appropriate Accounts; (ii) opening, maintaining,
servicing and closing Accounts; (iii) acting as agent for the Shareholders
and/or customers of Waterhouse Securities or other broker-dealer in connection
with Plan Accounts, upon the terms and subject to the conditions contained in
the Prospectus and application relating to the specific Plan Account; (iv)
exchanging the investment of an investor into or from the Shares of one or more
Portfolios of the Fund if and to the extent permitted by the Prospectus at the
direction of such investor; (v) examining and approving legal transfers; (vi)
replacing lost, stolen or destroyed certificates, if any, representing Shares,
in accordance with, and subject to, procedures and conditions adopted by the
Fund; (vii) furnishing confirmations of purchases and sales relating to Shares
as required by applicable law; (viii) furnishing appropriate periodic and year
end statements relating to Accounts, together with additional enclosures,
including appropriate income tax information and income tax forms duly
completed, as required by applicable law; (ix) mailing annual, semi-annual and
quarterly reports and dividend notices prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to
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<PAGE>
Shareholders as required by applicable law; (x) furnishing such periodic
statements of transactions effected by the Bank or a Sub-Agent on behalf of the
Bank, reconciliations, balances and summaries as the Fund may reasonably
request; (xi) withholding taxes on non-resident alien Accounts, and preparing
and filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(xii) processing dividend and distribution payments, including reinvesting
dividends for full and fractional shares and disbursing cash dividends, as
applicable.
(b) At the request of the Bank, each Sub-Agent shall act as proxy agent in
connection with the holding of annual, if any, and special meetings of
Shareholders, mailing such notices, proxies and proxy statements in connection
with the holding of such meetings as may be required by applicable law,
receiving and tabulating votes cast by proxy and communicating to the Fund the
results of such tabulation accompanied by appropriate certificates, and
preparing and furnishing to the Fund certified lists of Shareholders (of the
Fund or one or more of its Portfolios, as appropriate) as of such date, in such
form and containing such information as may be required by the Fund.
(c) Each Sub-Agent agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of the Sub-Agent under
this Agreement with respect to Accounts.
(d) Each Sub-Agent agrees to furnish to the Fund or the Bank such
information at such intervals as is necessary for the Fund to comply with the
registration and/or the reporting requirements (including applicable escheat
laws) of the Securities and Exchange Commission, state securities or Blue Sky
authorities or other governmental authorities.
(e) Each Sub-Agent agrees to provide to the Fund and the Bank such
information as may reasonably be required to enable the Fund to reconcile the
number of outstanding Shares of each Portfolio among the Sub-Agent's records,
the records of the Bank and the account books of the Fund.
(f) Notwithstanding anything in the foregoing provisions of this section
3, each Sub-Agent agrees to perform its functions thereunder subject to such
modification (whether
4
<PAGE>
in respect of particular cases or in any particular class of cases) as may from
time to time be contained in an Instruction.
4. Compensation. For the services provided by the Sub-Agents pursuant to
this Agreement, the Bank, and not the Fund or any Portfolio, shall pay the
Sub-Agents such compensation as shall be mutually agreed upon from time to time.
5. Maintenance of Records, Right of Inspection. In connection with the
performance of its duties hereunder, each Sub-Agent shall maintain such books
and records relating to transactions effected by such Sub-Agent as are required
by the Act, or by any other applicable provision of law, rule or regulation, to
be maintained by the Fund or its transfer agent with respect to transactions.
Each Sub-Agent shall preserve, or cause to be preserved, any such books and
records for such periods as may be required by any such law, rule or regulation
and as may be agreed upon from time to time between such Sub-Agent and the
Bank. In addition, each Sub-Agent agrees to maintain and preserve master files
and historical computer tapes on a daily basis in multiple separate locations a
sufficient distance apart to insure preservation of at least one copy of such
information. Each Sub-Agent agrees that it will, in a timely manner, make
available to, and permit, any officer, accountant, attorney or authorized agent
of the Fund or the Bank to examine and make transcripts and copies (including
photocopies and computer or other electronic information storage media and
print-outs) of, any and all of the books and records which are maintained
pursuant to this Agreement.
6. Confidential Relationship. Each Sub-Agent agrees that it will, on
behalf of itself and its officers and employees, treat all transactions
contemplated by this Agreement, and all information germane thereto, as
confidential and not to be disclosed to any person (other than the Shareholder
concerned, or the Fund or the Bank, or as may be disclosed in the examination of
any books or records by any person lawfully entitled to examine the same) except
as may be authorized by the Fund by way of an Instruction.
7. Indemnification.
(a) Neither Sub-Agent shall be liable to the Fund or any Portfolio for any
error of judgment or mistake of law or for any loss arising out of any act or
omission by such Sub-Agent in the performance of its duties hereunder. Nothing
herein contained shall be
5
<PAGE>
construed to protect the Sub-Agents against any liability to the Fund, a
Portfolio, Shareholders or any investment adviser to the Fund to which the
respective Sub-Agent shall otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reckless disregard of its obligations and duties hereunder.
(b) To the extent provided in the Transfer Agency Agreement, the Fund has
agreed to indemnify and hold harmless the Bank, each Sub-Agent and each person,
if any, who controls a Sub-Agent within the meaning of the Act against all
charges, claims, expenses (including legal fees) and liabilities reasonably
incurred by the Bank and each Sub-Agent in connection with the performance of
its duties hereunder, except such as may arise from the Bank's or such
Sub-Agent's willful misfeasance, bad faith, gross negligence in the performance
of its duties or by reckless disregard of its obligations and duties hereunder;
and the Bank agrees to indemnify and hold harmless each Sub-Agent and each
person, if any, who controls such Sub-Agent within the meaning of the Act
against any and all such charges, claims, expenses and liabilities to the extent
indemnification by the Fund is not provided by reason of the foregoing
exception. Notwithstanding the above, however, a Sub-Agent shall not be
indemnified for any charges, claims, expenses and liabilities arising from or
out of such Sub-Agent's willful misfeasance, bad faith, gross negligence in the
performance of its duties or by reckless disregard of its obligations and duties
hereunder. Subject to the requirements of the Act, such expenses shall be paid
by the Fund or the Bank, as applicable, in advance of the final disposition of
any matter upon invoice by the Sub-Agent and receipt by the Fund or the Bank, as
applicable, of an undertaking from the Sub-Agent to repay such amounts if it
shall ultimately be established that the Sub-Agent is not entitled to payment of
such expenses hereunder.
(c) As used in this section 7, the term "Sub-Agent" shall include
directors, officers, agents and employees of each Sub-Agent.
8. Regarding the Sub-Agents.
(a) Each Sub-Agent warrants and represents that its officers and
supervisory personnel charged with carrying out its functions as Sub-Transfer
Agent and Dividend Disbursing Agent for the Fund possess the special skill and
technical knowledge appropriate for that purpose. Each Sub-Agent shall at all
times exercise due care and diligence in the
6
<PAGE>
performance of its functions as Sub-Transfer Agent and Dividend Disbursing Agent
for the Fund. Each Sub-Agent agrees that, in determining whether it has
exercised due care and diligence, its conduct shall be measured by the standard
applicable to persons possessing such special skill and technical knowledge.
(b) Each Sub-Agent warrants and represents that it is duly authorized and
permitted to act as Sub-Transfer Agent and Sub-Dividend Disbursing Agent under
all applicable laws and that it will immediately notify the Bank of any
revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.
9. Termination.
(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Bank with respect to a Sub-Agent or by a Sub-Agent (without
penalty to the Bank or such Sub-Agent) provided that the terminating party gives
the other party written notice of such termination at least sixty (60) days in
advance, except that the Bank may terminate this Agreement immediately upon
written notice to a Sub-Agent if the authority or permission of the Sub-Agent to
act as Sub-Transfer Agent and Sub-Dividend Disbursing Agent has been revoked or
if any proceeding or other action which the Bank reasonably believes will lead
to such revocation has been commenced.
(b) Upon termination of this Agreement with respect to either Sub-Agent,
such Sub-Agent shall deliver all unissued and canceled stock certificates
representing Shares, if any, remaining in its possession, and all Shareholder
records, books, stock ledgers, instruments and other documents (including
computer or other electronically stored information) made or accumulated in the
performance of its duties as Sub-Transfer Agent and Sub-Dividend Disbursing
Agent for the Fund along with a certified locator document clearly indicating
the complete contents therein, to such successor as may be specified in a notice
of termination or Instruction. Thereafter, the Sub-Agent shall bear no
responsibility for failure thereafter to produce any paper, record or document
so delivered and identified in the locator document, if and when required to be
produced.
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<PAGE>
10. Amendment. Except to the extent that the performance by a
Sub-Agent of its functions under this Agreement may from time to time be
modified by an Instruction, this Agreement may be amended or modified by the
parties hereto only if such amendment is specifically approved by the Board of
Directors of the Fund, including a majority of the directors of the Fund who are
not "interested persons" of the Fund within the meaning of the Act, and such
amendment is set forth in a written instrument executed by each of the parties
hereto.
11. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect and the applicable provisions of the Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
12. Counterparts. This Agreement may be executed by the parties hereto in
counterparts and if executed in more than one counterpart the separate
instruments shall constitute one agreement.
13. Notices. All notices or other communications hereunder to any party
shall be in writing and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid. Notice shall be addressed: (a) if to the
Bank, to: President, Waterhouse National Bank, 50 Main Street, White Plains,
New York 10606; (b) if to Waterhouse Securities, to: ; or (c) if
to NISC, to ; or to such other address as such party may designate
by written notice to the other. Notice also may be given by telex, telecopier,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein).
14. Separate Portfolios. This Agreement shall be construed to be made
with respect to the Fund as a separate agreement with respect to each Portfolio,
and under no circumstances shall the rights, obligations or remedies with
respect to a particular Portfolio be deemed to constitute a right, obligation or
remedy applicable to any other Portfolio.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the day and year above
written.
WATERHOUSE NATIONAL BANK
By: /s/ Richard Powers
President
WATERHOUSE SECURITIES, INC.
By: /s/ John H. Chapel
President
NATIONAL INVESTORS SERVICES CORP.
By: /s/ Peter Wigger
President
9
<PAGE>
FORM OF SHAREHOLDER SERVICES AGREEMENT
FOR WATERHOUSE AFFILIATED BROKER/DEALERS
Dear Sirs:
You wish to enter into an Agreement with Waterhouse Investors Cash
Management Fund, Inc., a registered investment company, as defined in
the Investment Company Act of 1940, as amended (the "Act"),
(hereinafter referred to as the "Fund") with certain portfolios (each
a "Portfolio", collectively the "Portfolios"), for servicing
shareholders of, and administering shareholder accounts in the Fund.
The terms and conditions of this Agreement are as follows:
1. You agree to provide shareholder and administrative services for
your clients who own shares of the Fund ("clients"), which services
may include, without limitation: providing general shareholder
liaison services, including responding to shareholder inquiries;
assisting to the extent necessary with the transmission of semi-annual
and annual reports and annual tax reporting information to
shareholders; assisting clients in changing dividend options, account
designations and addresses; performing sub-accounting; establishing
and maintaining shareholder accounts and records; providing periodic
statements and/or reports showing a client's account balance and
integrating such statements with those of other transactions and
balances in the client' s other accounts serviced by you; arranging
for bank wires; and providing such other information and services as
the Fund reasonably may request, to the extent you are permitted by
applicable statute, rule or regulation. You represent and warrant to,
and agree with the Fund that the compensation payable to you
hereunder, together with any other compensation payable to you by
clients in connection with the investment of their assets in shares
of the Fund, will be properly disclosed by you to your clients, will
be authorized by your clients and will not result in an excessive or
unauthorized fee to you. You will act solely as agent for, upon the
order of, and for the account of, your clients.
2. You shall provide such office space and equipment, telephone
facilities and personnel (which may be all or any part of the space,
equipment and facilities currently used in your business, or all or
any personnel employed by you) as is necessary or beneficial for
providing information and services to the Fund's shareholders, and to
assist the Fund in servicing accounts of clients. You shall transmit
promptly to clients all communications sent to you for transmittal to
clients by or on behalf of the Fund, or the Fund's investment
adviser, distributor, custodian or transfer or dividend disbursing
agent.
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<PAGE>
3. You agree that neither you nor any of your employees or agents
are authorized to make any representation concerning the Fund, the
Portfolios or the shares of the Fund, except those contained in the
then current Prospectus or Statement of Additional Information
("SAI") for such Fund, copies of which will be supplied by the Fund to
vou in reasonable quantities upon request. You shall have no
authority to act as agent for the Fund.
4. This agreement may be amended only by written instruments signed
by both parties.
5. You acknowledge that this Agreement shall become effective for a
Fund only following approval by a vote of a majority of (i) the
Fund's Board of Directors, and (ii) Directors who are not "interested
persons" (as defined in the l 940 Act) of the Fund and have no direct
or indirect financial interest in this Agreement.
6. This Agreement shall continue for an initial two year term
commencing on the date hereof, and thereafter shall continue
automatically for successive annual periods ending on the last day of
each calendar year. Such continuance must be approved specifically at
least annually by a vote of a majority of (i) the Fund's Board of
Directors and (ii) Directors who are not "interested persons" (as
defined in the Act) of the Fund and have no direct or indirect
financial interest in this Agreement. This Agreement is terminable
without penalty, at any time, by a majority of the Fund's Directors
who are not "interested persons" (as defined in the Act) and have no
direct or indirect financial interest in this Agreement. This
Agreement is terminable without penalty upon l5 days notice by either
party. In addition, the Fund may terminate this Agreement as to any or
all Portfolios immediately, without penalty, if the present investment
adviser of such Portfolio(s) ceases to serve the Portfolio(s) in such
capacity. Notwithstanding anything contained herein, if you fail to
perform the shareholder servicing and administrative functions
contemplated herein by the Fund, this Agreement shall be terminable
effective upon receipt of notice thereof by you. This Agreement also
shall terminate automatically in the event of its assignment (as
defined in the Act).
7. In consideration of the services and facilities described
herein, you shall be entitled to receive from the Fund, and the Fund
agrees to pay to you, the fees described as payable to you in the
Fund's Shareholder Services Plan and Prospectus and related Statement
of Additional Information. You understand that any payments pursuant
to this Agreement shall be paid only so long as this Agreement and
such Plan are in effect. You agree that no Director, officer or
shareholder of the Fund shall be liable individually for the
performance of the obligations hereunder or for any such payments.
8. You agree to comply with and to provide to the Fund such
information relating to your services hereunder as may be required to
be maintained by the Fund under, applicable federal or state laws,
and the rules, regulations, requirements or conditions of applicable
regulatory, and self-regulatory agencies or authorities.
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<PAGE>
9. This Agreement shall not constitute either party the legal
representative of the other, nor shall either party have the right or
authority to assume, create or incur any liability or any obligation
of any kind, express or implied, against or in the name of or in the
name of or on behalf of the other party.
10. All notices or other communications hereunder to either party
shall be in writing and shall be deemed sufficient if mailed to such
party at the address of such party set forth on page four of this
Agreement or at such other address as such party may be designated by
written notice to the other or by telex, telecopier, telegram or
similar means of same day delivery (with a confirming copy by mail as
provided herein).
11. This Agreement shall be construed in accordance with the
internal laws of the State of New York, without giving effect to
principles of conflict of laws.
3
<PAGE>
For Waterhouse Investors Cash Management, Inc.
One Exchange Place
Tenth Floor
Boston, MA 02109
/s/ Robert F.X. Bohrer December 12, 1995
- - --------------------------------- ------------------
By: Robert F.X. Bohrer, V.P., Assistant Treasurer Date
For: Waterhouse Securities Inc.
- - --------------------------------------------------------------------------------
Address of Principal Office
- - --------------------------------------------------------------------------------
City State Zip Code
By: /s/ John H. Chapel Its: President December 12, 1995
---------------------------- ------------------ -----------------
Authorized Signature Title Date
John H. Chapel
- - --------------------------------
Print Name
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ADMINISTRATION AGREEMENT
AGREEMENT made as of the 12th day of December, 1995 by and between
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation (the
"Fund"), on its own behalf and on behalf of its Money Market Portfolio, U.S.
Government Portfolio and Municipal Portfolio (each, a "Portfolio"), and
WATERHOUSE ASSET MANAGEMENT, INC., a Delaware corporation (the "Administrator").
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment company
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"), currently comprised of three separate investment Portfolios; and
WHEREAS, the Fund, on behalf of each of its Portfolios, and Waterhouse
Asset Management, Inc. are also parties to an Investment Management Agreement
(the "Investment Management Agreement") pursuant to which Waterhouse Asset
Management, Inc. will serve as investment manager (the "Investment Manager") to
each Portfolio; and
WHEREAS, the Fund desires to retain the Administrator to render or
otherwise provide for administrative services in the manner and on the terms and
conditions hereafter set forth; and
WHEREAS, the Administrator desires to be so retained on said terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and the Administrator agree as follows:
1. Duties of the Administrator.
(a) The Fund hereby retains the Administrator to act as
administrator of the Fund and its Portfolios (each reference herein to the Fund
shall also be understood to refer to the separate Portfolios, as appropriate),
subject to the supervision and direction of the Board of Directors of the Fund,
as hereinafter set forth. The Administrator shall perform or
<PAGE>
arrange for the performance of the following administrative and clerical
services: (i) maintain and preserve the books and records, including financial
and corporate records, of the Fund as required by law or otherwise for the
proper operation of the Fund; (ii) prepare and, subject to approval by the Fund,
file registration statements, notices, reports and other documents required by
U.S. Federal, state and other applicable laws and regulations (other than state
"blue sky" laws), including proxy materials and periodic reports to Fund
shareholders, oversee the preparation and filing of registration statements,
notices, reports and other documents required by state "blue sky" laws, and
oversee the monitoring of sales of shares of the Fund for compliance with state
securities laws; (iii) calculate and publish, or arrange for the calculation and
publication of, the net asset value of the Fund's shares; (iv) calculate, or
arrange for the calculation of, dividends and distributions and performance
data, and prepare other financial information regarding the Fund; (v) oversee
and assist in the coordination of, and, as the Board may reasonably request or
deem appropriate, make reports and recommendations to the Board on, the
performance of administrative and professional services rendered to the Fund by
others, including the custodian, registrar, transfer agent and dividend
disbursing agent, shareholder servicing agents, accountants, attorneys,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
such other persons in any such other capacity deemed to be necessary or
desirable; (vi) furnish secretarial services to the Fund, including, without
limitation, preparation of materials necessary in connection with meetings of
the Fund's Board of Directors, including minutes, notices of meetings, agendas
and other Board materials; (vii) provide the Fund with the services of an
adequate number of persons competent to perform the administrative and clerical
functions described herein; (viii) provide the Fund with administrative office
and data processing facilities; (ix) arrange for payment of the Fund's expenses;
(x) provide routine accounting services to the Fund, and consult with the Fund's
officers, independent accountants, legal counsel, custodian, accounting agent
and transfer and dividend disbursing agent in establishing the accounting
policies of the Fund; (xi) prepare such financial information and reports as may
be required by any banks from which the Fund borrows funds; (xii) develop and
implement procedures to monitor the Fund's compliance with regulatory
requirements and with the Fund's
2
<PAGE>
investment policies and restrictions as set forth in the Fund's currently
effective Prospectus and Statement of Additional Information filed under the
Securities Act of 1933, as amended; (xiii) arrange for the services of persons
who may be appointed as officers of the Fund, including the President, Vice
Presidents, Treasurer, Secretary and one or more assistant officers; and (xiv)
provide such assistance to the Investment Manager, the custodian, other Fund
service providers and the Fund's counsel and auditors as generally may be
required to carry on properly the business and operations of the Fund. The Fund
agrees to cause the Investment Manager to deliver to the Administrator, on a
timely basis, such information as may be necessary or appropriate for the
Administrator's performance of its duties and responsibilities hereunder,
including but not limited to, shareholder reports, records of transactions,
valuations of investments (which may be based on information provided by a
pricing service) and records of expenses borne by the Fund, and the
Administrator shall be entitled to rely on the accuracy and completeness of such
information in performing its duties hereunder. Notwithstanding anything to the
contrary herein contained, the Fund, and not the Administrator, shall be
responsible for and bear the cost of any third party pricing services and any
third party blue sky services.
(b) In providing for any or all of the services indicated in section
1(a) hereof, and in satisfaction of its obligations to provide such services,
the Administrator may enter into agreements with one or more other persons to
provide such services to the Fund, provided that any such agreement shall have
been approved by the Board of Directors of the Fund, and provided further that
the Administrator shall be as fully responsible to the Fund for the acts and
omissions of any such service providers as it would be for its own acts or
omissions hereunder.
2. Expenses of the Administrator. The Administrator assumes the
expenses of and shall pay for maintaining the staff and personnel necessary to
perform its obligations under this Agreement, and shall at its own expense
provide office space, facilities, equipment and the necessary personnel which it
is obligated to provide under section 1 hereof, except that the Fund shall pay
the expenses of legal counsel and accountants as provided in section 4(b) of
this Agreement. In addition, the Administrator shall be responsible for the
payment of
3
<PAGE>
any persons engaged pursuant to section 1(b) hereof. The Fund shall assume and
pay or cause to be paid all other expenses of the Fund.
3. Compensation of the Administrator. For the services provided to the
Fund and each Portfolio by the Administrator pursuant to this Agreement, each
Portfolio shall pay the Administrator on the first business day of each calendar
month a fee for the previous month at an annual rate equal to .10 of 1% of such
Portfolio's average daily net assets. The value of each Portfolio's net assets
shall be computed at the times and in the manner specified in the Fund's
registration statement on Form N-1A, as amended from time to time (the
"Registration Statement"). Compensation by each Portfolio of the Administrator
shall commence on the date of the first receipt by such Portfolio of the
proceeds of the sale of its shares as described in the Registration Statement,
and the fee for the period from the date such Portfolio shall first receive the
proceeds of the sale of its shares as aforesaid to the end of the month during
which such proceeds are so received, shall be pro-rated according to the
proportion that such period bears to the full monthly period. Upon termination
of this Agreement before the end of a month, the fee for such part of that month
shall be pro-rated according to the proportion that such period bears to the
full monthly period and shall be payable within seven (7) days after the date of
termination of this Agreement.
4. Limitation of Liability of the Administrator; Indemnification.
(a) The Administrator shall not be liable to the Fund or any
Portfolio for any error of judgment or mistake of law or for any loss arising
out of any act or omission by the Administrator in the performance of its duties
hereunder. Nothing herein contained shall be construed to protect the
Administrator against any liability to the Fund, a Portfolio, or shareholders to
which the Administrator shall otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties hereunder.
(b) The Administrator may, at the expense of the Fund, (i) with
respect to questions of law, apply for and obtain the advice and opinion of
counsel to the Fund, and (ii) with respect to the application of generally
accepted accounting principles or Federal tax accounting principles, apply for
and obtain the advice and opinion of the independent
4
<PAGE>
auditors of the Fund. The Administrator shall be fully protected with respect to
any action taken or omitted by it in good faith in conformity with such advice
or opinion.
(c) The Fund, on behalf of each Portfolio, agrees to indemnify and
hold harmless the Administrator from and against all charges, claims, expenses
(including legal fees) and liabilities reasonably incurred by the Administrator
in connection with the performance of its duties hereunder, except such as may
arise from the Administrator's willful misfeasance, bad faith, gross negligence
in the performance of its duties or reckless disregard of its obligations and
duties hereunder. Subject to requirements of applicable laws, such expenses
shall be paid by the Fund in advance of the final disposition of any matter upon
invoice by the Administrator and receipt by the Fund of an undertaking from the
Administrator to repay such amounts if it shall ultimately be established that
the Administrator is not entitled to payment of such expenses hereunder.
(d) As used in this section 4, the term "Administrator" shall include
any affiliates of the Administrator performing services for the Fund
contemplated hereby and directors, officers, agents and employees of the
Administrator and such affiliates.
5. Activities of the Administrator. The services of the Administrator
under this Agreement are not to be deemed exclusive, and the Administrator and
any person controlled by or under common control with the Administrator shall be
free to render similar services to others and services to the Fund in other
capacities.
6. Duration and Termination of this Agreement.
(a) This Agreement shall become effective as of the date first above
written and shall continue in effect with respect to each Portfolio for a period
of two (2) years from the date hereof, and thereafter from year to year so long
as such continuation is specifically approved at least annually by the Board of
Directors of the Fund, including a majority of the directors who are not
"interested persons" of the Fund within the meaning of the 1940 Act and who have
no direct or indirect interest in this Agreement; provided, however, that this
Agreement may be terminated at any time without the payment of any penalty, on
behalf of any or all of the Portfolios, by the Fund, by the Board or, with
respect to any Portfolio, by "vote of a majority of the outstanding voting
securities" (as defined in the 1940 Act) of that
5
<PAGE>
Portfolio, or by the Administrator on not less than 60 days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its "assignment" as defined in the 1940 Act.
(b) The Administrator hereby agrees that the books and records
prepared hereunder with respect to the Fund are the property of the Fund and
further agrees that upon the termination of this Agreement or otherwise upon
request the Administrator will surrender promptly to the Fund copies of the
books and records maintained hereunder.
7. Amendments of this Agreement. This Agreement may be amended by the
parties hereto only if such amendment is specifically approved by the Board of
Directors of the Fund and such amendment is set forth in a written instrument
executed by each of the parties hereto.
8. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect and the applicable provisions of the 1940 Act. To the extent
that the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
9. Counterparts. This Agreement may be executed by the parties hereto
in counterparts and if executed in more than one counterpart the separate
instruments shall constitute one agreement.
10. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed to be received on the earlier of
the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid. Notice shall be addressed: (a)
if to the Administrator, to: President, Waterhouse Asset Management, Inc., 100
Wall Street, New York, New York 10005; or (b) if to the Fund, to: President,
Waterhouse Investors Cash Management Fund, Inc., 100 Wall Street, New York, New
York 10005 or at such other address as either party may designate by written
notice to the other. Notice shall also be deemed sufficient if given by telex,
telecopier, telegram or similar means of same day delivery (with a confirming
copy by mail as provided herein).
6
<PAGE>
11. Separate Portfolios. This Agreement shall be construed to be made
by the Fund as a separate agreement with respect to each Portfolio, and under
no circumstances shall the rights, obligations or remedies with respect to a
particular Portfolio be deemed to constitute a right, obligation or remedy
applicable to any other Portfolio.
12. Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and supersedes any
prior arrangements, agreements or understandings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
By: Arnold Feist
--------------------------------------
Title: Vice President, Assistant Secretary
WATERHOUSE ASSET MANAGEMENT, INC.
By: Christine Waterhouse
------------------------------------
Title: Senior Vice President
<PAGE>
SUB-ADMINISTRATION AGREEMENT
SUB-ADMINISTRATION AGREEMENT made this 12th day of December, 1995 between
Waterhouse Asset Management, Inc. ("Waterhouse"), a Delaware corporation, and
Funds Distributor, Inc. ("FDI"), a Massachusetts corporation.
WHEREAS, Waterhouse serves as investment adviser to and provides certain
administrative services for certain open-end management investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
(the "Funds"), and to certain portfolios of the Funds (each a "Portfolio",
collectively, the "Portfolios") as listed on Schedule A, as such Schedule shall
be automatically amended from time to time, subject to Board of Director
approval;
WHEREAS, Waterhouse serves as administrator for the Funds pursuant to an
Administration Agreement dated as of December 12, 1995, as amended from time to
time;
WHEREAS, the Funds have entered into a distribution agreement with FDI (the
"Distribution Agreement") for the distribution by FDI of shares of common stock
(the "Shares") in the Fund or in a series of the Fund; and
WHEREAS, Waterhouse desires to retain FDI to assist it in performing
administrative services with respect to the shares of the Fund and FDI is
willing to perform such services on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the mutual agreements herein contained, the
parties agree as follows:
1. Services Provided by FDI. FDI will assist Waterhouse by providing
services to the Portfolios of the Fund, as listed in Exhibit A.
2. Services Provided by Waterhouse. In furtherance of the
responsibilities under this Agreement Waterhouse will:
(a) cause the Fund's service providers to furnish any and all information
and assist FDI in taking any other actions that may be reasonably necessary
in connection with FDI providing those services listed in Exhibit A;
(b) cause the Fund's blue sky administrator to monitor sales of the
Shares to assure compliance with applicable state securities and Blue Sky
laws;
(c) cause the Fund's transfer agent to give necessary information for the
preparation of quarterly reports in a form satisfactory to FDI regarding
Rule 12b-1 fees, front-end sales loads, back-end sales loads, if
applicable, and other data regarding sales and sales loads as required by
the 1940 Act or as requested by the Board of Directors of the Fund;
1
<PAGE>
(d) cause the Fund's transfer agent to provide FDI with all necessary
historical information so that FDI can calculate the maximum sales charges
payable by the Fund pursuant to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") and the actual sales
charges paid by the Fund, if applicable; cause the Fund's transfer agent to
provide FDI with all of the necessary information so that FDI can calculate
the maximum sales charges payable by the Fund pursuant to the Rules of Fair
Practice of the NASD and the actual sales charges paid by the Fund, if
applicable; and cause the Fund's transfer agent to provide such information
in a form satisfactory to FDI no less often than monthly for every Fund and
on a daily basis for any Fund where FDI determines that the remaining limit
is approaching zero, if applicable; and
(e) provide FDI with copies of, or access to, any documents that FDI may
reasonably request and will notify FDI as soon as possible of any matter
materially affecting FDI's performance of its services under this
Agreement.
3. Compensation; Reimbursement of Expenses. Waterhouse shall pay FDI the
following fee for the services provided under this Agreement:
(a) an annual fee of $250,000 for Routine Administrative Services, as
defined in Exhibit A, payable in equal monthly installments on the second
business day of each month; and
(b) for Extraordinary Administrative Services, as defined in Exhibit A:
(i) a flat fee to be negotiated after the scope of the project has
been accurately and completely defined; or
(ii) a fee for a particular project based on a blended hourly rate of
$75.00 per person. Only personnel with an Assistant Vice President title or
higher with FDI would bill on an hourly basis.
Except as hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly in arrears. If this Agreement becomes effective subsequent to the first
day of a month or shall terminate before the last day of a month, compensation
for that part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. In
addition, Waterhouse agrees to reimburse FDI for FDI's reasonable out-of-pocket
expenses as mutually agreed to by the parties from time to time.
4. Effective Date and Term. This Agreement shall become effective with respect
to a Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date Funds Distributor, Inc. becomes
sub-administrator to the Fund; Schedule A to this Agreement shall be deemed
amended to include such Fund from and after such date).
This Agreement shall become effective as of the date hereof and will continue
for an initial two-year term and will continue thereafter so long as such
continuance is specifically approved at least annually (i) by the Fund's Board
or (ii) by a vote of a majority (as defined in the 1940 Act) of the Shares of
the Fund or the relevant Portfolio, as the case may be, provided that in either
2
<PAGE>
event its continuance also is approved by a majority of the Board members who
are not "interested persons" (as defined in said Act) of any party to this
Agreement and who have no direct or indirect financial interest in this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable with respect to any Portfolio or
any Fund, without penalty, on not less than sixty days' notice, by the Fund's
Board of Directors, by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such Fund, or by you. This Agreement shall
terminate automatically in the event of its "assignment" (as defined in the 1940
Act). This Agreement may be terminated by either party, on not less than 60 days
written notice, upon any material breach of this Agreement by the other party.
If FDI ceases to be the Sub-Administrator of any Fund before the fifth
anniversary of the date the Fund began its investment activities, Waterhouse
shall reimburse FDI an amount equal to the number resulting from multiplying the
Fund's total unamortized organizational expenses by a fraction, the numerator of
which is equal to the number of initial shares redeemed by FDI or its affiliate
and the denominator of which is equal to the number of initial shares still
outstanding as of the date of such redemption, as long as the administrative
position of the staff of the Securities and Exchange Commission requires FDI to
reimburse the Fund such amount. (Initial shares shall mean the shares purchased
by FDI or an affiliate to provide the initial seed capital to a Fund pursuant to
Section 14 of the 1940 Act.)
5. Standard of Care and Indemnification.
(a) Waterhouse will indemnify and hold harmless FDI, its officers,
employees and agents and any persons who control FDI (together "FDI and its
employees") and hold each of them harmless from any losses, claims, damages
or liabilities, or actions in respect thereof, to which FDI and its
employees may become subject, including amounts paid in settlement with the
prior written consent of Waterhouse, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof, arise out of or
result from the failure of Waterhouse to comply with the terms of this
Agreement;
(b) FDI will indemnify and hold harmless Waterhouse, its officers,
employees and agents and any persons who control Waterhouse (together
"Waterhouse and its employees") and hold each of them harmless from any
losses, claims, damages or liabilities, or actions in respect thereof, to
which Waterhouse and its employees may become subject, including amounts
paid in settlement with the prior written consent of FDI, insofar as such
losses, claims, damages or liabilities, or actions in respect thereof,
arise out of or result from the failure of FDI to comply with the terms of
this Agreement;
Waterhouse will reimburse FDI and its employees for reasonable legal or
other expenses reasonably incurred by FDI and its employees in connection
with investigating or defending against any such loss, claim, damage,
liability or action. Waterhouse shall not be liable to FDI for any action
taken or omitted by FDI in bad faith, with willful misfeasance or gross
negligence, or with reckless disregard by FDI of its obligations and duties
hereunder. The indemnities in this Section shall, upon the same terms and
conditions, extend to and inure to the benefit of each of the employees of
FDI that serve as officers or directors of the Fund and to each of the
directors and officers of FDI and any person controlling FDI within the
3
<PAGE>
meaning of Section 15 of the Securities Act of 1933 ("1933 Act") or Section
20 of the Securities Exchange Act of 1934 ("1934 Act").
FDI will reimburse Waterhouse for reasonable legal or other expenses
reasonably incurred by Waterhouse in connection with investigating or
defending against any such loss, claim, damage, liability or action. FDI
shall not be liable to Waterhouse for any action taken or omitted by
Waterhouse in bad faith, with willful misfeasance or gross negligence, or
with reckless disregard by Waterhouse of its obligations and duties
hereunder. The indemnities in this Section shall, upon the same terms and
conditions, extend to and inure to the benefit of each of the directors and
officers of Waterhouse and any person controlling Waterhouse within the
meaning of Section 15 for the 1933 Act or Section 20 of the 1934 Act.
(c) (i) Promptly after an indemnified party (or, if such indemnified party
is not a natural person, a responsible officer of such indemnified party)
receives notice or otherwise becomes aware of the commencement of any
action or other assertion of any losses, claims, damages or liabilities by
any third party, such indemnified party shall, if a claim in respect
thereof is to be made pursuant to this Section 5, notify the indemnitor of
the same in writing (such notice, a "claim notice"); but the omission so to
notify the indemnitor will not relieve the indemnitor from any liability
that it may have to such indemnified party otherwise than under this
Section 5. In the event that the indemnified party notifies the indemnitor
in writing of its waiver of any right to indemnification pursuant to this
Section 5 in respect of any losses, claims, damages or liabilities or
portion thereof, the provisions of clause (ii) of this Section 5(c) shall
not apply.
(ii) Promptly following receipt of a claim notice, the indemnitor, upon
request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
and any others the indemnitor may designate in contesting such losses,
claims, damages or liabilities and shall pay the reasonable fees and
disbursements of such counsel related to such contest. In any such contest,
any indemnified party shall have the right to retain its own counsel, but
the reasonable fees and expenses of such counsel shall be at the expense of
such indemnified party unless (A) the indemnitor and the indemnified party
shall have mutually agreed to the retention of such counsel or (B) the
named parties to any such contest (including any impleaded parties) include
both the indemnitor and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnitor shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one firm for all such indemnified parties. The
indemnitor may, at its option, at any time upon written notice to the
indemnified party, assume the responsibility for contesting any losses,
claims, damages or liabilities and may designate counsel satisfactory to
the indemnitor in connection therewith provided that the counsel so
designated would have no actual or potential conflict of interest in
connection with such representation. Unless it shall assume the
responsibility for contesting any losses, claims, damages or liabilities,
the indemnitor shall not be liable for any settlement or compromise of such
losses, claims, damages or liabilities or portion thereof which settlement
or compromise is effected without its written consent, but if settled or
compromised with such consent or if there be a final
4
<PAGE>
judgment for the plaintiff asserting such losses, claims or liabilities,
the indemnitor agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement, compromise or judgment.
If the indemnitor assumes responsibility for contesting any losses, claims,
damages or liabilities, it shall be entitled to settle or compromise such
losses, claims, damages or liabilities or portion thereof with the consent
of the indemnified party or, if such settlement or compromise provides for
release of the indemnified party in connection with all matters relating to
such losses, claims, damages or liabilities, or, with respect to the
settlement or compromise of a portion of such losses, claims, damages or
liabilities, all matters relating to such portion of such losses, claims,
damages or liabilities, that have been asserted against the indemnified
party by the other parties to such settlement or compromise, without the
consent of the indemnified party. In the event that any expense paid by the
indemnitor pursuant to this Section 6(c) is subsequently determined to not
be required to be borne by the indemnitor, the indemnified party that
received such payment shall promptly refund the amount so paid to the
indemnitor. If the indemnitor assumes responsibility for contesting any
losses, claims, damages or liabilities, the indemnitor shall keep the
indemnified party apprised, on a current basis, of matters concerning such
contest, including without limitation (i) providing the indemnified party
with reasonable notice of and opportunity to be present in person and/or by
counsel at proceedings or discussions of settlement or compromise; (ii)
providing the indemnified party with copies of and opportunity to comment
on filings, papers or settlement agreements proposed to be filed or served
by or on behalf of the indemnitor; and (iii) providing the indemnified
party with copies of filings, papers and proposed settlement agreements
received by the indemnitor from or on behalf of persons asserting such
losses, claims, damages or liabilities.
(d) The obligation to indemnify and provide contribution pursuant to this
Section 6 shall survive the termination of this Agreement.
7. Record Retention and Confidentiality. FDI shall keep and maintain on behalf
of the Fund all books and records which the Fund and FDI are, or may be,
required to keep and maintain in connection with the services to be provided
hereunder pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the 1940 Act. FDI further agrees
that all such books and records shall be the property of the Fund and to make
such books and records available for inspection by the Fund, by Waterhouse, or
by the Securities and Exchange Commission at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
Fund and its shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
8. Rights of Ownership. All computer programs and procedures developed to
perform the services to be provided by FDI under this Agreement are the property
of FDI.
9. Return of Records. FDI may at its option at any time, and shall promptly upon
the demand of Waterhouse and/or the Fund, turn over to Waterhouse and/or the
Fund and cease to retain FDI's files, records and documents created and
maintained by FDI pursuant to this Agreement so long as FDI shall be able to
retain photocopies of such documents to the extent needed by FDI in the
performance of its services or for its legal protection. If not so turned over
to Waterhouse and/or the Fund, such documents and records will be retained by
FDI for six years
5
<PAGE>
from the end of the fiscal year of the Fund for which they were created. At the
end of such six-year period, such records and documents will be turned over to
Waterhouse and/or the Fund unless the Fund authorizes in writing the destruction
of such records and documents.
10. Representations of Waterhouse. Waterhouse represents and warrants to FDI
that this Agreement has been duly authorized by Waterhouse and, when executed
and delivered by Waterhouse, will constitute a legal, valid and binding
obligation of Waterhouse, enforceable against Waterhouse in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
secured parties.
11. Representations of FDI. FDI represents and warrants that this Agreement has
been duly authorized by FDI and, when executed and delivered by FDI, will
constitute a legal, valid and binding obligation of FDI, enforceable against FDI
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties.
12. Notices. All notices or other communications hereunder to either party shall
be in writing and shall be deemed sufficient if mailed to Waterhouse at the
following address: Waterhouse Asset Management, Inc., 100 Wall Street, New York,
New York 10005, Attention: President; and to FDI at the following address: One
Exchange Place, Tenth Floor, Boston, MA 02109, Attention: President with a copy
to General Counsel or at such other address as such party may designate by
written notice to the other, or in either case if sent by telex, telecopier,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein).
13. Headings. Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
14. Assignment. This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party.
15. Governing Law. This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of New York.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
WATERHOUSE ASSET MANAGEMENT, INC.
By: /s/ Christine Waterhouse
Title: Senior Vice President
FUNDS DISTRIBUTOR, INC.
By: /s/ Marie E. Connolly
Title: President
7
<PAGE>
Dated: December 12, 1995
SCHEDULE A
TO THE AGREEMENT
BETWEEN
WATERHOUSE ASSET MANAGEMENT, INC.
AND
FUNDS DISTRIBUTOR, INC.
NAME OF FUND
WATERHOUSE INVESTORS CASH MANAGEMENT FUND, INC.
Money Market Portfolio
U.S. Government Portfolio
Municipal Portfolio
WATERHOUSE ASSET MANAGEMENT, INC.
By: Christine Waterhouse
Title: Senior Vice President
FUNDS DISTRIBUTOR, INC.
By: /s/ Marie E. Connolly
Title: President
8
<PAGE>
EXHIBIT A
Administrative Services
Funds Distributor will provide the following routine administrative services
("Routine Administrative Services"):
Corporate and Secretarial Services
o Provide Secretary and the necessary complement of Assistant
Secretaries for the fund. These services will be provided
consistent with the procedures listed in Exhibit B.
o Maintain general corporate calendar. Track all legal and
compliance requirements through annual cycles.
o Four quarterly board meetings per year:
o Prepare agenda and background materials for legal approval
o Make presentations
o Monitor annual approval requirements
o Prepare extensive background material for annual review of
advisory fees
o Prepare minutes
o Follow-up on matters raised at meetings
o Maintain Articles of Incorporation and By-Laws of the Corporation
o Prepare organizational board meeting materials
o Draft contracts, assisting in negotiation and planning, as
appropriate. For example negotiate, draft and keep current the
following contracts: (i) investment advisory and sub-advisory
contracts; (ii) Distribution Agreement; (iii) Bank Agreements;
(iv) Broker Dealer Agreements; (v) Transfer Agency Agreement; (vi)
Custody Agreement; (vii) Administration Agreement and
Sub-Administration Agreement; (viii) 12b-1 Plans and related
agreements; (ix) Shareholder Servicing Plans and Related
Agreements; (x) IRA Custodian Agreements; (xi) Bi-Party Repurchase
Agreements; (xii) Tri-Party Repurchase Agreements; (xiii) Futures
Account Agreement and Procedural Safekeeping Agreement; (xiv) loan
agreements; and (xv) various other agreements and amendments.
9
<PAGE>
SEC and Public Disclosure Assistance
o Prepare and file one annual amendment to the Fund's registration
statement, including updating prospectuses and SAIs.
o Coordinate/monitor, with assistance from the fund administrator
and fund accountant and any other relevant fund service providers,
EDGAR (Electronic Data Gathering Analysis and Retrieval System)
on-line filings related to post-effective amendments, N-SARs,
24f-2, annual and semi-annual shareholders reports.
o Review annual and semi-annual Shareholder Reports.
o Provide legal assistance for shareholder communications.
Legal Consulting and Planning
o Provide general legal advice on matters relating to portfolio
management, fund operations, mutual fund sales, development of
advertising materials, changing or improving prospectus
disclosure, and any potential changes in the fund's investment
policies, operations, or structure.
o Maintain a continuing awareness of significant emerging regulatory
and legislative developments which may affect the fund, update the
advisor on those developments, and provide related planning
assistance.
o Develop or assist in developing guidelines and procedures to
improve overall compliance by the fund and its various agents.
o Provide advice with regard to fund litigation matters, routine
fund examinations and investigations by regulatory agencies.
o Provide advice regarding long term planning for the Waterhouse
Funds including the creation of new funds or portfolios, corporate
structural changes, mergers, acquisitions, and other asset
gathering plans including new distribution methods.
o Maintain effective communications with fund counsel, counsel to
the "non-interested" board members and to the fund's local
counsel.
o Create and implement timing and responsibility system for outside
legal counsel when necessary to implement major projects and the
legal management of such projects.
10
<PAGE>
o Monitor activities and billing practices of outside counsel
performing services for the fund or in connection with related
fund activities.
Compliance
o Review of all testing that is done by fund accountant to assist
the advisor in complying with fund prospectus guidelines and
limitations, 1940 Act requirements, and Internal Revenue Code
requirements.
o Review of monthly testing and compliance report created by fund
accountant including:
o Tax compliance testing for gross income, short three,
diversification, and single issuer,
o 5% diversification testing for tax and 1940 Act compliance
based on current market value and acquisition cost testing, if
required,
o Income available for distribution report, which includes capital
gains and interest income,
o Net investment income calculated on per-share basis each month,
and
o Prospectus and 1940 Act compliance testing-tests are tailored
to each individual fund's prospectus and tests against the type
and amount of securities held.
o Jointly create Compliance Manuals and workshops for
advisory personnel with the fund accountant.
o Consultation and advice for resolution of compliance questions
along with the investment advisor, the fund administrator, the
fund counsel and the fund accountant.
o Be actively involved with the management of SEC and other
regulatory examinations.
o Review with the investment advisor and fund administrator summary
reports created by the fund accountant of all compliance issues to
assure immediate compliance adjustments.
o Assist portfolio managers with compliance matters including
reviewing the Compliance Manual on a regular basis and attending
compliance meetings with the portfolio managers.
o Assist in developing guidelines and procedures to improve overall
compliance by the fund and its various agents.
11
<PAGE>
o Maintain legal liaison with and provide legal advice and counsel
to fund regarding its relationships, contractual or otherwise,
with the various fund agents, such as the adviser, custodian,
transfer agents, and auditors with respect to their activities on
behalf of the fund.
o Advice regarding all fund distribution arrangements for compliance
with applicable banking and broker-dealer regulations.
o Provide other fund officers as requested (e.g. President and Vice
President).
o Maintaining the fund's code of ethics.
Treasury Services
o Providing the Fund's Treasurer and the appropriate complement of
Assistant Treasurers to assume certain specified responsibilities
(these functions will be based upon the day to day work completed
by knowledgeable staff assembled by Waterhouse including the fund
accountant).
o Determining properly chargeable expenses and authorizing payment
of bills for each fund.
o Monitoring and recommending changes to expense accrual rates.
o Coordinate/monitor, with assistance from the investment adviser,
the fund accountant and any other relevant fund service provider,
all required financial materials for review by the board (for
example, items required by SEC Rule 2a-7, 10f-3, 17a-7, and 17e-1
reports, repurchase agreements, dealer lists, securities
transactions).
o Recommending dividends to be voted by the board
o Reviewing and monitoring mark-to-market comparisons for money
market funds that are generated by the fund accountant.
o Reviewing, signing off and filing all fund tax returns after such
returns have been prepared and signed by the fund's independent
auditors.
o Assisting (along with the fund accountant) the fund's advisor in
valuing securities which are not readily salable.
12
<PAGE>
o Function as a liaison with the fund's custodian, fund accountant,
outside auditors and regulators, including managing the planning
and conducting of audits and examinations.
13
<PAGE>
Funds Distributor is willing to provide any extraordinary administration
services ("Extraordinary Administrative Services") to the Waterhouse Fund
Family. All of the extraordinary legal functions set forth below may be
accomplished wholly or partially by Funds Distributor depending upon the
circumstances surrounding each request. Extraordinary Administrative Services
may, depending upon the circumstances, include the following:
o Shareholder Meetings
o Draft Proxies
o Organize, attend and keep minutes
o Work with the Transfer Agent on Solicitations and Vote
Tabulation
o Provide legal presence at meetings
o Draft Proxy/Solicitation Documents on Form N-14 (Fund Mergers).
o An Annual Post-Effective Amendment that involves major prospectus
revisions or the addition of new investment portfolios.
o Board Meeting Materials for significant corporate restructuring or
other major changes as well as more than four board meetings
during a twelve month period.
o More than one Post-Effective Amendment in any twelve month period.
o Advice regarding conversion of pooled funds and certain other
bank specific advice.
o Monitor and participate in the preparation of documents for
Exemptive Orders (e.g., Joint Repurchase Account), Revenue Rulings
(e.g., Multi-Class) and other state specific regulatory orders
(e.g., Florida Request for Technical Assistance).
o Filing advertising and sales literature with the appropriate
regulatory entities and providing all compliance review of such
materials.
14
<PAGE>
EXHIBIT B
1
SIGNATURE/OVERSIGHT PROCEDURES
RULE 24e(2)/24f(2) SHARE REGISTRATION
Documents pertaining to filing of fund share registration statements pursuant to
Rule 24e(2) or 24f(2) will be prepared by the fund accountant. The fund
accountant will provide FDI with certain financial information contained in such
filing. After the filing documents have been prepared and reviewed by
Waterhouse, the following will occur:
o Filing documents, accompanied by a completed signature request form
(see copy attached), will be forwarded to appropriate fund officer for
signature.*
o Financial statements providing the basis for the financial information
contained in the filing documents will be provided in "blueprint" form
to Funds Distributor by the fund accountant.
o Documents will be reviewed by Funds Distributor utilizing the
financial statements.
o Completed signature request form will be reviewed by Funds Distributor
for proper authorization.
o Any questions that may arise during review will be directed to
Waterhouse or the fund accountant as appropriate.
o If not in order, Funds Distributor will contact the appropriate
entities or persons with an explanation and, if necessary, documents
will be returned to Waterhouse and/or the fund accountant, as
appropriate, with explanation.
o If in order, documents will be signed by fund officer and returned to
the Waterhouse Legal Department by the request date specified in the
completed signature request form.
o To the extent that Funds Distributor must provide an opinion letter to
which another Fund service provider is the source of knowledge, that
service provider must provide Funds Distributor with an opinion letter
supporting the data that it provides Funds Distributor.
*Contact Persons:
15
<PAGE>
2
SIGNATURE/OVERSIGHT PROCEDURES
FORM N-SAR SEMI-ANNUAL REPORT
Semi-annual report on form N-SAR will be prepared for filing by the fund
accountant. The fund accountant will provide Waterhouse and Funds Distributor
with certain financial information required on Form N-SAR. After form has been
completed, the following will occur:
o Form N-SAR, accompanied by completed signature request form (see copy
attached), will be forwarded to Funds Distributor for fund officer
signature.*
o Form will be reviewed by Funds Distributor.
o Completed Signature Request form will be reviewed for proper
authorization.
o Any questions that may arise during review will be directed to
Waterhouse or the fund accountant appropriate.
o If not in order, Funds Distributor will contact the appropriate
entities or persons with an explanation and, if necessary, form will be
returned to Waterhouse and/or the fund accountant, as appropriate, with
explanation.
o If in order, form will be signed by fund officer and returned to
Waterhouse by the request date specified in the completed signature
request form.
*Contact Person:
16
<PAGE>
3
SIGNATURE/OVERSIGHT PROCEDURES
TAX RETURNS
All tax and information returns will be prepared and reviewed by the fund's
auditor. When returns are completed and reviewed, the following will occur:
o Tax and information returns, signed by independent auditors and
accompanied by a completed signature request form (see copy attached),
will be forwarded to Funds Distributor for fund officer signature.*
o All returns will be reviewed by Funds Distributor.
o Completed signature request form will be reviewed for proper
authorization.
o Any questions that arise during review will be directed to the funds
auditor.
o In not in order, returns will be returned to the funds auditor with
explanation.
o If in order, returns will be signed by fund officer and returned to
the fund auditor.
*Contact Persons:
17
<PAGE>
4
SIGNATURE/OVERSIGHT PROCEDURES
SEC EXAMINATION/INQUIRIES
When the Securities and Exchange Commission conducts a periodic examination of
the Funds or makes written inquiries for specific information, the following
will occur:
o Waterhouse* will promptly inform Funds Distributor* of such
examination or written inquiry.
o Waterhouse will inform Funds Distributor of the specific nature of the
information requested for examination or by inquiry.
o Funds Distributor will be actively involved with any SEC examinations.
o Waterhouse will submit to Funds Distributor the response to
SEC-written inquiries.
o Waterhouse will forward to Funds Distributor and each fund officer a
copy of the comment letter received from the SEC upon completion of
examination.
o Waterhouse will forward to Funds Distributor and each fund officer a
copy of the response to the comment letter.
*Contact Person:
18
<PAGE>
5
SIGNATURE/OVERSIGHT PROCEDURES
AUDIT REPRESENTATION LETTER
The process of examining financial statements of the Funds by independent
auditors includes the receipt of a letter from the Funds in which various
representations are made. This letter will be prepared by the independent
auditors. Upon completion of this letter, the following will occur:
o Letter will be reviewed and signed by Waterhouse authorized signatory.
o Letter will be sent to Funds Distributor for review and fund officer
signature.*
o Letter will be reviewed by Funds Distributor.
o To the extent that Funds Distributor must provide an audit
representation letter to which another Fund service provider is the
source of knowledge (i.e. the fund auditor), that service provider must
provide Funds Distributor with an opinion letter supporting the audit
representation letter or any other data that it provides Funds
Distributor.
o If not in order, letter will be returned to Waterhouse or the fund
auditor with explanation.
o If in order, letter will be signed by fund officer and returned to
independent auditors.
*Contact Persons:
19
<PAGE>
6
SIGNATURE/OVERSIGHT PROCEDURES
VALUATION OF MUTUAL FUND PORTFOLIO SECURITIES
In connection with the valuation of mutual fund portfolio securities, it is
sometimes necessary to convene a meeting of the Fund's Portfolio Securities
Pricing Committee to place a value on a portfolio security for the purpose of
calculating NAV per share.
o Funds Distributor and a fund officer will be present at meeting,
either in person or by conference call.
o Meeting minutes or memo of Pricing Committee decisions will be sent to
Funds Distributor.
In addition, because of the complexities or large universe of various portfolio
securities (i.e., GNMA and Tax-Exempt Securities), an independent pricing
service is utilized to price such securities.
o Waterhouse will inform Funds Distributor of any change of independent
pricing service.
In connection with money market funds, it is necessary to monitor any deviation
of a fund's net asset value per share calculated using market values from the
fund's net asset value per share calculated using amortized cost prices.
o Waterhouse or the fund accountant will send Funds Distributor,* on a
daily basis, a schedule that indicates each money market fund's net
asset value per share calculated at amortized cost and market value.
o Waterhouse or the fund accountant will send Funds Distributor,* on a
monthly basis, a schedule for each fund, indicating the fund's total
net assets, dividend per share and net asset value per share calculated
at amortized cost and market value.
o Waterhouse will notify Funds Distributor* when Waterhouse intends to
apprise a fund's Board of Directors of information concerning the
fund's net asset value per share.
*Contact Persons:
20
<PAGE>
7
SIGNATURE/OVERSIGHT PROCEDURES
CHANGE IN NET ASSET VALUE PER SHARE
If a fund's net asset value per share changes after the day of calculation and
shareholder account processing, the following will occur:
o Waterhouse or the fund accountant will send Funds Distributor* a
schedule that will indicate the fund and change in net asset value per
share.
o Waterhouse or the fund accountant will document the change in net
asset value per share and forward the documentation to Funds
Distributor* accompanied by completed signature request form (see copy
attached).
*Contact Persons:
21
<PAGE>
CHANGE IN NET ASSET VALUE PER SHARE
SIGNATURE REQUEST FORM
To:
----------------------------
From:
--------------------------
Tel. #: Fax #
--------------- ----------------
Date:
---------------------------
RIC/Fund Name:
-------------------------------------------
Restated NAV Per Share:
---------------------------------
Documentation of Change in NAV:
----------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
Waterhouse Approval:
Signature: Date:
------------------------------ ---------------
Name:
Title:
Funds Distributor Approval:
Signature: Date:
------------------------------ ---------------
Fund Officer
Waterhouse Authorized Signatories Funds Distributor Contact Persons
22
<PAGE>
8
SIGNATURE/OVERSIGHT PROCEDURES
RECLAIM OF TAXES WITHHELD FROM
DIVIDENDS ON FOREIGN SECURITIES
Forms necessary to reclaim taxes withheld from dividends paid on foreign
securities are coordinated by the fund's auditor. When these forms require the
signature of a fund officer, the following will occur:
o Completed forms, accompanied by completed signature request form (see
copy attached), will be forwarded to Funds Distributor for fund officer
signature.*
o Funds Distributor will review the form.
o Funds Distributor will review the completed form for proper
authorization.
o Any questions that arise during review will be directed to the fund's
auditor.
o If not in order, form will be returned to the fund's auditor with
explanation.
o If in order, form will be signed by fund officer and returned to the
fund's auditor.
*Contact Persons:
ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated as of December 20, 1995 between Waterhouse
Asset Management, Inc. ("WAM"), a Delaware corporation, and MGF Service Corp.
("MGF"), an Ohio corporation.
WHEREAS, Waterhouse Investors Cash Management Fund (the
"Fund") is an investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), currently comprised of three separate
investment portfolios (the "Portfolios"); and
WHEREAS, the WAM wishes to employ the services of MGF to
provide the Fund with certain accounting and pricing services; and
WHEREAS, MGF wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained in this Agreement, WAM and MGF agree as follows:
1. APPOINTMENT.
WAM hereby appoints and employs MGF as agent to perform those
services described in this Agreement for the Fund. MGF shall act under such
appointment and perform the obligations thereof upon the terms and conditions
hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
MGF will calculate the net asset value of each Portfolio of
the Fund and the per share net asset value of each Portfolio of the Fund, in
accordance with the Fund's current prospectus and statement of additional
information, twice daily as of the times selected by the Fund's Board of
Directors. MGF will prepare and maintain a valuation of all securities and
other assets of the Fund in accordance with instructions from a designated
officer of the Fund or WAM and in the manner set forth in the Fund's prospectus
and statement of additional information as in effect from time to time. In
valuing securities of the Fund, MGF may contract with, and rely upon market
quotations provided by, outside services.
3. BOOKS AND RECORDS.
MGF will maintain and keep current the general ledger for each
Portfolio of the Fund, recording all income and expenses, capital share activity
and security transactions of the Fund. MGF will maintain such further books and
records as are necessary to enable it to perform its duties under this
Agreement, and will periodically provide reports to the Fund and its authorized
agents regarding share purchases and redemptions and trial balances of each
Portfolio of the Fund. MGF will prepare and maintain complete, accurate and
current records with respect to the Fund required to be maintained by the Fund
pursuant to applicable statues, rules and regulations, including without
limitation, under the Internal Revenue Code of 1986, as amended, and under the
rules and regulations of the 1940 Act, and will preserve said records in the
manner and for the periods prescribed therein. The retention of such records
shall be at the expense of the Fund.
All of the records prepared and maintained by MGF pursuant to
this Section 3 which are required to be maintained by the Fund under the Code
and the 1940 Act will be the property of WAM, on behalf of the Fund, and MGF
agrees to make such records available for inspection by the Fund, by any
designated affiliate or agent of the Fund, and by the Securities and Exchange
Commission, at reasonable times, and otherwise to keep confidential all records
and other information relative to the Fund, except when requested to divulge
such information by duly constituted authorities and court process. In the
event this Agreement is terminated, all such records shall be delivered to WAM
at WAM's expense, and MGF shall be relieved of responsibility for the
preparation and maintenance of any such records delivered to the Fund. In the
event this Agreement is terminated by reason of MGF's failure to comply with any
provision hereof, WAM shall not pay expenses of MGF in connection with its
duties in this paragraph.
4. PAYMENT OF FUND EXPENSES.
MGF shall process each request received from the Fund or WAM
for payment of the Fund's expenses. Upon receipt of written instructions signed
by an officer or other authorized agent of the Fund or WAM, MGF shall prepare
checks in the appropriate amounts which shall be signed by an authorized officer
of MGF and mailed to the appropriate party.
5. FORM N-SAR.
MGF shall maintain such records within its control and shall
be requested to assist the Fund in fulfilling the requirements of Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
MGF shall cooperate with the Fund's independent auditors and
shall take all reasonable action in the performance of its obligations under
this Agreement to assure that the necessary information is made available to
such auditors for the expression of their unqualified opinion where required for
any document for the Fund.
- 2 -
7. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
8. FEES.
For the performance of the services under this Agreement, WAM
shall pay MGF a monthly fee in accordance with the schedule attached hereto as
Schedule A. The fees with respect to any month shall be paid to MGF on the last
business day of such month. WAM shall also promptly reimburse MGF for the cost
of external pricing services utilized by MGF. If this Agreement becomes
effective subsequent to the first day of a month, or is terminated before the
last day of a month, fees for the part of the month is Agreement is in effect
shall be pro rated accordingly.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any services for
the Fund which services could cause MGF to be deemed an "investment adviser" of
the Fund within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Fund's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy and completeness of
information furnished to it by MGF, the Fund assumes full responsibility for
complying with all applicable requirements of the 1940 Act, the Securities Act
of 1933, as amended, and any other laws, rules and regulations of governmental
authorities having jurisdiction over the Fund.
10. INDEMNIFICATION OF MGF.
A. MGF may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be required by the 1940
Act and the rules thereunder, neither MGF nor its officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Fund or
WAM in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or
negligence on the part of any such persons in the performance of the duties of
MGF under this Agreement or by reason of reckless disregard by any of such
persons of the obligations and duties of MGF under this Agreement.
- 3 -
B. Any person, even though also a director, officer, employee, or
agent of MGF, or any of its affiliates, who may be or become an officer,
director, employee or agent of the Fund, shall be deemed, when rendering
services to the Fund or acting on any business of the Fund, to be rendering such
services to or acting solely as an officer, director, employee or agent of the
Fund and not as a director, officer, employee, shareholder or agent of or one
under the control or direction of MGF or any of its affiliates, even though paid
by one of those entities.
C. WAM shall indemnify and hold harmless MGF, its directors,
officers, employees, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities of any and every nature
which MGF may sustain or incur or which may be asserted against MGF by any
person by reason of, or as a result of: (i) any action taken or omitted to be
taken by MGF in good faith in reliance upon any certificate, instrument, order
or share certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Fund or WAM
or upon the opinion of legal counsel for the Fund or WAM or its own counsel; or
(ii) any action taken or omitted to be taken by MGF in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of MGF or its directors,
officers, employees, shareholders or agents in cases of its or their own
negligence, willful misconduct, bad faith, or reckless disregard of its or their
own duties hereunder.
11. INDEMNIFICATION OF FUND AND WAM.
MGF shall indemnify and hold harmless the Fund and WAM, and
their respective directors, officers, employees, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities of any and every nature which the Fund or WAM or such persons may
sustain or incur by reason of, or as a result of MGF's negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
12. TERMINATION.
A. The provisions of this Agreement shall be effective
on the date first above written, shall continue in effect for two years from
that date and shall continue in force from year to year thereafter, but only so
long as such continuance is approved (1) by MGF, (2) by vote, cast in person
- 4 -
at a meeting called for the purpose, of a majority of the Fund's directors who
are not parties to this Agreement or interested persons (as defined in the 1940
Act) of any such party, and (3) by vote of a majority of the Fund's Board of
Directors or a majority of the Fund's outstanding voting securities.
B. Either party may terminate this Agreement on any date
by giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefore. Upon termination of this
Agreement, WAM shall pay to MGF such compensation as may be due as of the date
of such termination, and shall likewise reimburse MGF for any out-of- pocket
expenses and disbursements reasonably incurred by MGF to such date.
C. In the event that in connection with the termination
of this Agreement a successor to any of MGF's duties or responsibilities under
this Agreement is designated by WAM by written notice to MGF, MGF shall,
promptly upon such termination and at the expense of WAM, transfer to the Fund
or its successor, as indicated by such notice, all records maintained by MGF
under this Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from MGF's cognizant
personnel in the establishment of books, records and other data by such
successor. In the event this Agreement is terminated by reason of MGF's failure
to comply with any provision hereof, WAM shall not pay any expenses of MGF in
connection with its duties in this paragraph.
13. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent MGF or any affiliated
person (as defined in the 1940 Act) of MGF from providing services for any other
person, firm or corporation (including other investment companies); provided,
however, that MGF expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to WAM under this Agreement.
14. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
15. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
New York. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise
- 5 -
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States Courts or in the absence of any controlling decision
of any such court, by rules, regulations or orders of the Securities and
Exchange Commission issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
16. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To WAM and the Fund: Waterhouse Asset Management, Inc.
100 Wall Street
New York, NY 10005
Attention: Christine Waterhouse
To MGF: MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert H. Leshner
or to such other address as any party may designate by notice complying with the
terms of this Section 16. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
17. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties and approved by the Fund's Board of
Directors.
- 6 -
18. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
20. FORCE MAJEURE.
If MGF shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non- performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
21. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
WATERHOUSE ASSET MANAGEMENT, INC.
By: /s/ Dennis C. Borecki
Its: President
MGF SERVICE CORP.
By: /s/ Robert Dorsey
Its: President
- 7 -
Schedule A
COMPENSATION
MGF will receive a monthly fee from each Portfolio, based upon the average net
assets of such Portfolio during such month, in accordance with the following
schedule:
Portfolio's Average Net Assets Monthly Fee
Less than $250,000,000 $3,000
$250,000,000 - $400,000,000 4,000
$400,000,000 - $500,000,000 4,500
$500,000,000 - $600,000,000 5,000
Over $600,000,000 6,000
- 8 -
STATE REGISTRATION SERVICES AGREEMENT
THIS AGREEMENT is made as of the 27th day of November,
1995 by and between Waterhouse Investors Cash Management Fund, Inc.
(the "Fund"), and Clear Sky Corporation, a Massachusetts corporation
("Clear Sky").
W I T N E S S E T H :
WHEREAS, the Fund is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and,
WHEREAS, the Fund wishes to retain Clear Sky to provide certain
administration services, and Clear Sky is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Appointment. The Fund hereby appoints Clear Sky to provide
certain administration services for the period and on the terms set forth in
this Agreement. Clear Sky accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in
Paragraph 4 of this Agreement. In the event that the Fund decides to add one
or more new portfolio series or class, with respect to which it wishes to
retain Clear Sky to provide services hereunder, the Fund or its Administrator,
Waterhouse Asset Management, Inc. ("Waterhouse") on its behalf, shall notify
Clear Sky in writing. If Clear Sky is willing to render such services, it
shall notify the Fund in writing of any terms and compensation that
differ from the provisions of this Agreement, and upon acceptance by the
Fund, such portfolio or class shall become a Fund hereunder.
2. Delivery of Documents. The Fund or Waterhouse will
furnish Clear Sky with copies properly certified or authenticated of each
of the following:
(a) Resolutions of the Board of Directors of the Fund
authorizing the appointment of Clear Sky to provide certain administration
services to the Fund;
(b) The Articles of Incorporation of the Fund and all amendments
thereto;
(c) The By-Laws of the Fund and all amendments thereto (the
"By-Laws");
(d) The Funds' Investment Advisory Agreement;
(e) A listing of all jurisdictions in which the Fund is registered
and lawfully available for sale as of the date of this Agreement and in which
the Fund desires Clear Sky to effect such registration;
(f) The Distribution Agreement between the Fund and its Distributor;
(g) The Fund's most recent Post-Effective Amendment under the
Securities Act of 1933 and under the 1940 Act as filed with the Securities and
Exchange Commission (the "SEC") and all amendments thereto; and
(h) The Fund's most recent prospectus and statement of additional
information and all amendments and supplements thereto (the "Prospectus").
The Fund or Waterhouse will furnish Clear Sky from time to time
with copies, properly certified or authenticated, of all amendments of or
supplements to the foregoing, if any.
3. Services and Duties. Subject to the supervision and control
of the Fund or Waterhouse, Clear Sky undertakes to perform the following
specific services:
(a) Effecting and maintaining, as the case may be, the
registration or qualification of shares of the Fund for sale under the
securities laws of the jurisdictions indicated for the Fund on the list
furnished to Clear Sky pursuant to Paragraph 2(e) of this Agreement;
(b) Filing with each appropriate jurisdiction the appropriate
materials relating to the Fund, such filings to be made promptly after
receiving such materials from the Fund or Waterhouse: Post Effective
Amendments to the Fund's Registration Statement; Annual and Semi-Annual
Reports to Shareholders; Notices pursuant to Rule 24f-2 under the 1940 Act;
definitive copies of the Fund's Prospectus and Statement of Additional
Information and any Supplements thereto; Amendments to Articles of
Incorporation, By-Laws, or Distribution Agreements; and Notices of Annual
or Special Meetings of Shareholders and related Proxy materials which
propose the merger, reorganization or liquidation of the Fund;
(c) Conveying to the Fund or Waterhouse any comments received on
such filings and, if desired by the Fund, responding to such comments in such
manner as authorized by the Fund or Waterhouse; and
(d) In connection with the foregoing, providing the services of
certain persons who may be appointed as officers of the Fund by the Fund's
Board of Directors for the purpose of executing documents in connections
with such filings.
Subject to the Fund's payment of such amount to Clear Sky in
advance, remittance to the respective jurisdictions of registration fees
for the shares of the Fund, and any fees for qualifying or continuing the
qualification of the Fund. The Fund will, from time to time as specifically
agreed between the parties, wire transfer funds to Clear Sky for the payment
of said fees paid pursuant to this provision promptly upon request by Clear
Sky. Clear Sky will request the funds necessary for the payment of fees
in advance of the date when the fees become due. Upon receipt of the funds by
Clear Sky, it will issue checks for the payment of fees.
In performing its duties under this Agreement, Clear Sky will act in
accordance with the instructions and directions of the Fund.
The Fund or Waterhouse will provide Clear Sky with the appropriate
number of copies of each document which must be filed pursuant to this
provision.
4. Compensation. For the services provided by Clear Sky under
this Agreement, the Fund will pay to Clear Sky a monthly fee based upon the
number of state securities registrations. The fee shall be based upon the
rate of $125.00 per state securities registration per year and billed
monthly. When the number of state securities registrations ("permits")
reaches 300, the fee will be based upon the rate of $100.00 per state
securities registration per year and billed monthly. There will be no
retroactive credit for permits which were previously maintained at $125.00.
5. Limitations of Liability and Indemnification. Clear Sky
shall not be liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which this
Agreement relates, so long as it acts in good faith and with due diligence and
is not grossly negligent or guilty of any willful misconduct. Without in any
way limiting the foregoing, Clear Sky shall have no liability for failing
to file on a timely basis any material to be provided by the Fund or
Waterhouse that it has not received on a timely basis from the Fund or
Waterhouse; Clear Sky shall have no responsibility to review the accuracy or
adequacy of materials it receives from the Fund or Waterhouse for filing or
bear any liability arising out of the timely filing of such materials.
The Fund agrees and acknowledges that Clear Sky has not prior to the
date hereof assumed, and will not assume, any obligations or liabilities
arising out of the conduct of the Fund prior to the date hereof of those duties
which Clear Sky has agreed to perform pursuant to this Agreement. The Fund
further agrees to indemnify Clear Sky against any losses, claims, damages
or liabilities to which Clear Sky may become subject in connection with the
conduct by the Fund of such duties prior to the date hereof.
The Fund represents and warrants to Clear Sky that as of the date
hereof each it is duly registered and lawfully eligible for sale in each
jurisdiction indicated on the list furnished to Clear Sky pursuant to
Paragraph 2(e) of this Agreement.
6. Service to Other Companies or Accounts. The Fund
understands that the persons employed by Clear Sky to assist in the
performance of Clear Sky's duties hereunder will not devote their full time
to such service and nothing contained herein shall be deemed to limit or
restrict the right of Clear Sky or any affiliate of Clear Sky to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
7. Notices. Any notice or other instrument or materials
authorized or required by this Agreement to be given in writing to the Fund or
to Clear Sky shall be sufficiently given if addressed to such party
and received by it at its office set forth below or at such other place as
it may from time to time designate in writing.
TO the Fund:
Waterhouse Investors Cash Management Fund, Inc.
100 Wall Street
New York, NY 10005
Attention: Christine Waterhouse
TO Clear Sky:
Clear Sky Corporation
One Bromfield Street, Fifth Floor
Boston, MA 02108
Attention: Elizabeth A. Nystedt
8. Duration and Termination. This Agreement shall continue
until termination by the Fund or Clear Sky on 60 days written notice.
Promptly upon termination of this Agreement, Clear Sky shall deliver all
records made or accumulated in the performance of its duties to the Fund,
including originals of correspondence with, applications to, and
registrations, permits and notices issued by any jurisdiction relating to the
registration or exemption of any of the funds therein, to Waterhouse or to
such a successor as may be specified in any notice of termination.
9. Amendment to this Agreement. No provision of this
Agreement may be changed, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, discharge or termination is sought.
10. Governing Law. This Agreement shall be governed by the laws of
the State of New York.
11. Terms and Conditions. The terms of this Agreement are
binding upon the parties herein stated subject to the approval of the Board
of Directors at their December 12, 1995 meeting.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their constructions or effect. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Clear Sky agrees to maintain all information about the Fund that
Clear Sky acquires pursuant to this Agreement in confidence, and Clear Sky
agrees not to use, or permit the use of, any such information for any
purpose except that set forth herein, or to disclose any such information to
any person, without the prior written consent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the date
and year first above written.
Attest: Waterhouse Investors Cash Management
Fund, Inc.
/s/ Christine Waterhouse
___________________________ /s/ Arnold Feist
Vice President, Assistant Secretary
Attest: Clear Sky Corporation
/s/ Elissa Kaye Grebber
___________________________ /s/ Elizabeth A. Nystedt
Elizabeth A. Nystedt
President
SCHEDULE A
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors
and Reports to Shareholders" and to the use of our report dated December 7, 1995
in this Registration Statement (Form N-1A No. 33-96132) of Waterhouse Investors
Cash Management Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
June 17, 1996
<PAGE>
SUBSCRIPTION AGREEMENT
Waterhouse Investors Cash Management Fund, Inc. (the "Company"), a Maryland
Corporation, and FDI Distribution Services, Inc. ("FDI"), a Delaware
corporation, hereby agree with each other as follows:
1. The Company hereby offers FDI and FDI hereby purchases 60,000 shares
(par value $.0001 per share) of the Money Market Portfolio, 20,000 shares (par
value $.0001 per share) of the U.S. Government Portfolio, and 20,000 shares (par
value $.0001 per share) of the Municipal Portfolio of the Company (collectively
known as "Shares") at a price of $1.00 per Share.
2. FDI represents and warrants to the Company that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
3. FDI agrees that if it or any direct or indirect transferee of any of
the Shares redeems any of the Shares prior to the fifth anniversary of the date
the Company begins its investment activities, FDI will pay to the Company an
amount equal to the number resulting from multiplying the Company's total
unamortized organizational expenses by a fraction, the numerator of which is
equal to the number of Shares redeemed by FDI or such transferee and the
denominator of which is equal to the number of Shares outstanding as of the date
of such redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
4. FDI is authorized and otherwise duly qualified to purchase and hold
Shares and to enter into this Subscription Agreement.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 12th day of December, 1995.
(SEAL) Waterhouse Investors Cash
Management Fund, Inc.
ATTEST:
_________________________ By: /s/ John Pelletier
John Pelletier, President
(SEAL) FDI Distribution Services, Inc.
ATTEST:
_________________________ By: /s/ Joseph F. Tower, III
2
EXHIBIT 16(a)
Schedule for Computation of Performance Quotation
Money Market Portfolio
All Performance Data as of April 30, 1996
7-Day Current Yield
The current yield is computed by: (a) determining the net change in the value of
a hypothetical investment in the Portfolio over a specific seven-day period; (b)
dividing the net change by the value of the investment at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7).
Money Market Portfolio 4.61%
7-Day Effective Yield
The effective yield is calculated in a similar fashion to yield, except that the
base period return is compounded by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting from the result, according to the following
formula:
365/7
[(Base Period Return + 1) ] - 1
Money Market Portfolio 4.71%
EXHIBIT 16(b)
Schedule for Computation of Performance Quotation
U.S. Government Portfolio
All Performance Data as of April 30, 1996
7-Day Current Yield
The current yield is computed by: (a) determining the net change in the value of
a hypothetical investment in the Portfolio over a specific seven-day period; (b)
dividing the net change by the value of the investment at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7).
U.S. Government Portfolio 4.65%
7-Day Effective Yield
The effective yield is calculated in a similar fashion to yield, except that the
base period return is compounded by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting from the result, according to the following
formula:
365/7
[(Base Period Return + 1) ] - 1
U.S. Government Portfolio 4.76%
EXHIBIT 16(c)
Schedule for Computation of Performance Quotation
Municipal Portfolio
All Performance Data as of April 30, 1996
7-Day Current Yield
The current yield is computed by: (a) determining the net change in the value of
a hypothetical investment in the Portfolio over a specific seven-day period; (b)
dividing the net change by the value of the investment at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7).
Municipal Portfolio 3.13%
7-Day Effective Yield
The effective yield is calculated in a similar fashion to yield, except that the
base period return is compounded by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting from the result, according to the following
formula:
365/7
[(Base Period Return + 1) ] - 1
Municipal Portfolio 3.18%
7-Day Tax Equivalent Yield
The tax equivalent yield is calculated by (a) dividing that portion of the yield
of the Portfolio (computed as described above) that is exempt from federal
income tax by one minus a stated federal income tax rate (normally assumed to be
the maximum applicable marginal tax bracket rate) and (b) adding the figure
resulting from (a) above to that portion, if any, of the yield of the Portfolio
that is not exempt from federal income tax.
Municipal Portfolio 5.18%
7-Day Tax Equivalent Effective Yield
The tax equivalent effective yield is calculated in the same manner as the tax
equivalent yield, except that effective yield is substituted for yield in the
calculation.
Municipal Portfolio 5.26%
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Waterhouse Investors Cash Management Fund, Inc. Semiannual Report for the period
ended April 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000949881
<NAME> WATERHOUSE INVESTORS CASH
MANAGEMENT FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-20-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 1208367013
<INVESTMENTS-AT-VALUE> 1208367013
<RECEIVABLES> 2928339
<ASSETS-OTHER> 816
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1211296168
<PAYABLE-FOR-SECURITIES> 5065172
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3190947
<TOTAL-LIABILITIES> 8256119
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1203039863
<SHARES-COMMON-STOCK> 1203039863
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 186
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1203040049
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17917525
<OTHER-INCOME> 0
<EXPENSES-NET> 2351038
<NET-INVESTMENT-INCOME> 15566487
<REALIZED-GAINS-CURRENT> 186
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15566673
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15566487
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2312402381
<NUMBER-OF-SHARES-REDEEMED> 1122747979
<SHARES-REINVESTED> 13325461
<NET-CHANGE-IN-ASSETS> 1202980049
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1157590
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3102686
<AVERAGE-NET-ASSETS> 913369196
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.018
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.018
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Waterhouse Investors Cash Management Fund, Inc. Semiannual Report for the period
ended April 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000949881
<NAME> WATERHOUSE INVESTORS
CASH MANAGEMENT FUND, INC.
<SERIES>
<NUMBER> 2
<NAME> U.S. GOVERNMENT PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-20-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 307012111
<INVESTMENTS-AT-VALUE> 307012111
<RECEIVABLES> 616420
<ASSETS-OTHER> 531
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 307629062
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 777864
<TOTAL-LIABILITIES> 777864
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 306851000
<SHARES-COMMON-STOCK> 306851000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 198
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 306851198
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4444814
<OTHER-INCOME> 0
<EXPENSES-NET> 513341
<NET-INVESTMENT-INCOME> 3931473
<REALIZED-GAINS-CURRENT> 198
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3931671
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3931473
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 590082682
<NUMBER-OF-SHARES-REDEEMED> 286605654
<SHARES-REINVESTED> 3353972
<NET-CHANGE-IN-ASSETS> 306831198
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 292767
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 758797
<AVERAGE-NET-ASSETS> 230169102
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.018
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.018
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Waterhouse Investors Cash Management Fund, Inc. Semiannual Report for the period
ended April 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000949881
<NAME> WATERHOUSE INVESTORS
CASH MANAGEMENT FUND, INC.
<SERIES>
<NUMBER> 3
<NAME> MUNICIPAL PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-20-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 214104223
<INVESTMENTS-AT-VALUE> 214104223
<RECEIVABLES> 1561846
<ASSETS-OTHER> 54626
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 215720695
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 410165
<TOTAL-LIABILITIES> 410165
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 215310378
<SHARES-COMMON-STOCK> 215310378
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 152
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 215310530
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2061060
<OTHER-INCOME> 0
<EXPENSES-NET> 300837
<NET-INVESTMENT-INCOME> 1760223
<REALIZED-GAINS-CURRENT> 152
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1760375
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1760223
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 409639603
<NUMBER-OF-SHARES-REDEEMED> 195840859
<SHARES-REINVESTED> 1491634
<NET-CHANGE-IN-ASSETS> 215290530
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 152651
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461,785
<AVERAGE-NET-ASSETS> 168007247
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.012
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.012
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
