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022 A000001 MORGAN STANLEY GROUP
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022 C000001 7891407
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022 A000002 PRUDENTIAL SECURITIES, INC.
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022 C000002 5420826
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<PAGE> PAGE 2
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SIGNATURE CHRISTOPHER J. KELLEY
TITLE V.P. AND SECRETARY
<PAGE>
This report is signed on behalf of Waterhouse Investors Family of Funds, Inc.
City of Boston Commonwealth of Massachusetts December 21, 1998
Waterhouse Investors Family of Funds, Inc.:
By: /s/ Christopher J. Kelley
-------------------------
Christopher J. Kelley
Vice President and Secretary
Witness: /s/ Karen Jacoppo-Wood
----------------------
Karen Jacoppo-Wood
Vice President and Assistant Secretary
<PAGE>
Exhibit 77B
[Letterhead of Ernst & Young LLP]
Report of Independent Auditors
To the Shareholders and Board of Directors of
Waterhouse Investors Family of Funds, Inc.
In planning and performing our audit of the financial statements of Waterhouse
Investors Family of Funds, Inc. (comprising, respectively, the Waterhouse
Investors Cash Management Funds and the Waterhouse Dow 30 Fund) for the period
ended October 31, 1998, we considered its internal control, including control
activities for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial statements
and to comply with the requirements of Form N-SAR, not to provide assurance on
the internal control.
The management of Waterhouse Investors Family of Funds, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess
the expected benefits and related costs of controls. Generally, controls that
are relevant to an audit pertain to the entity's objective of preparing
financial statements for external purposes that are fairly presented in
conformity with generally accepted accounting principles. Those controls include
the safeguarding of assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud may occur
and not be detected. Also, projection of any evaluation of internal control to
future periods is subject to the risk that it may become inadequate because of
changes in conditions or that the effectiveness of the design and operation may
deteriorate.
Our consideration of the internal control would not necessarily disclose all
matters in the internal control that might be material weaknesses under
standards established by the American Institute of Certified Public Accountants.
A material weakness is a condition in which the design or operation of one or
more of the internal control components does not reduce to a relatively low
level the risk that errors or fraud in amounts that would be material in
relation to the financial statements being audited may occur and not be detected
within a timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the internal control
and its operation, including controls for safeguarding securities, that we
consider to be material weaknesses as defined above at October 31, 1998.
This report is intended solely for the information and use of the board of
directors and management of Waterhouse Investors Family of Funds, Inc. and the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
December 1, 1998
<PAGE>
EXHIBIT 77Q1(a)
WATERHOUSE INVESTORS FAMILY OF FUNDS, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Waterhouse Investors Family of Funds, Inc., a Maryland corporation
having its principal Maryland office c/o The Corporation Trust Incorporated, 300
East Lombard 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 Incorporation as follows:
In each instance in which the words "Waterhouse
Investors Dow Jones Industrial Average(SM) Index Fund" appear
in the Articles of Incorporation, the words "Waterhouse
Investors Dow Jones Industrial Average(SM) Index Fund" shall
be deleted and the words "Waterhouse Dow 30 Fund" shall be
substituted therefor.
SECOND: The foregoing amendments have been effected in the
manner and by the vote required by the Corporation's charter and the laws of the
State of Maryland. The amendments were approved by a majority of the Board of
Directors of the Corporation without action of stockholders in accordance with
Section 2-605(a)(4) of the Maryland General Corporation Law, and the Corporation
is registered as an open-end company under the Investment Company Act of 1940.
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 and Secretary 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 of perjury.
1
<PAGE>
IN WITNESS WHEREOF, WATERHOUSE INVESTORS FAMILY OF FUNDS, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf by
its Vice President and Secretary, a duly authorized officer of the Corporation,
and attested by its Assistant Secretary, effective the 22nd day of July, 1998.
WATERHOUSE INVESTORS FAMILY
OF FUNDS, INC.
/s/ Christopher J. Kelley
-------------------------
Christopher J. Kelley
Vice President and Secretary
ATTEST:
/s/ Karen Jacoppo-Wood
- ----------------------
Karen Jacoppo-Wood
Assistant Secretary
2
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Waterhouse Investors Family of Funds, Inc. Annual Report for the period ended
October 31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
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<S> <C>
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<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 2,942,826,302
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Waterhouse Investors Family of Funds, Inc. Annual Report for the period ended
October 31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> U.S. GOVERNMENT PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 533,328,781
<INVESTMENTS-AT-VALUE> 533,328,781
<RECEIVABLES> 4,575,063
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,701)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 537,403,768
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,521,161
<OTHER-INCOME> 0
<EXPENSES-NET> 3,553,327
<NET-INVESTMENT-INCOME> 21,967,834
<REALIZED-GAINS-CURRENT> (3,939)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21,963,895
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 21,967,834
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,534,515,923
<NUMBER-OF-SHARES-REDEEMED> 1,421,685,766
<SHARES-REINVESTED> 21,892,239
<NET-CHANGE-IN-ASSETS> 134,718,457
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 238
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,602,146
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,061,565
<AVERAGE-NET-ASSETS> 457,821,528
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.048
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.048
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.78
<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 Family of Funds, Inc. Annual Report for the period ended
October 31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> MUNICIPAL PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 374,351,019
<INVESTMENTS-AT-VALUE> 374,351,019
<RECEIVABLES> 6,744,025
<ASSETS-OTHER> 618
<OTHER-ITEMS-ASSETS> 324,512
<TOTAL-ASSETS> 381,420,174
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329,728
<TOTAL-LIABILITIES> 329,728
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 381,091,287
<SHARES-COMMON-STOCK> 381,091,287
<SHARES-COMMON-PRIOR> 265,627,109
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (841)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 381,090,446
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,384,511
<OTHER-INCOME> 0
<EXPENSES-NET> 2,234,909
<NET-INVESTMENT-INCOME> 9,149,602
<REALIZED-GAINS-CURRENT> 2,572
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,152,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,149,602
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,073,142,210
<NUMBER-OF-SHARES-REDEEMED> 966,796,370
<SHARES-REINVESTED> 9,118,338
<NET-CHANGE-IN-ASSETS> 115,466,750
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,413)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,092,409
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,646,657
<AVERAGE-NET-ASSETS> 312,133,086
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.029
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.72
<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 Family of Funds, Inc. Annual Report for the period ended
October 31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> WATERHOUSE DOW 30 FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAR-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 62,728,813
<INVESTMENTS-AT-VALUE> 62,563,096
<RECEIVABLES> 303,717
<ASSETS-OTHER> 283
<OTHER-ITEMS-ASSETS> 948
<TOTAL-ASSETS> 62,868,044
<PAYABLE-FOR-SECURITIES> 399,341
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257,649
<TOTAL-LIABILITIES> 656,990
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,445,668
<SHARES-COMMON-STOCK> 7,242,140
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (739)
<ACCUMULATED-NET-GAINS> (68,158)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (165,717)
<NET-ASSETS> 62,211,054
<DIVIDEND-INCOME> 262,185
<INTEREST-INCOME> 27,154
<OTHER-INCOME> 0
<EXPENSES-NET> 41,735
<NET-INVESTMENT-INCOME> 247,604
<REALIZED-GAINS-CURRENT> (68,158)
<APPREC-INCREASE-CURRENT> (165,717)
<NET-CHANGE-FROM-OPS> 13,729
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 247,604
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 739
<NUMBER-OF-SHARES-SOLD> 8,264,395
<NUMBER-OF-SHARES-REDEEMED> 1,052,301
<SHARES-REINVESTED> 30,046
<NET-CHANGE-IN-ASSETS> 62,211,054
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,188
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 134,365
<AVERAGE-NET-ASSETS> 28,460,853
<PER-SHARE-NAV-BEGIN> 8.78
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> (0.19)
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.59
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
