<PAGE>
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1998
-----------------------
ANNUAL REPORT
-----------------------
October 31, 1998
WATERHOUSE
INVESTORS CASH
MANAGEMENT
FUNDS
........................................
Three money market portfolios to choose from:
Money Market * U.S. Government * Municipal
[LOGO] WATERHOUSE
Securities, Inc.
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
GEORGE F. STAUDTER
Director of Koger Equity, Inc.
Independent Financial Consultant
RICHARD W. DALRYMPLE
President of Teamwork Mgmt., Inc.
CAROLYN B. LEWIS
President of
The CBL Group
LAWRENCE J. TOAL
Chairman/President/CEO of
Dime Bancorp, Inc.
EXECUTIVE OFFICERS
GEORGE A. RIO
President, Treasurer
and Chief Financial Officer
CHRISTOPHER J. KELLEY*
Vice President and Secretary
*Affiliated person of the Distributor
WATERHOUSE ASSET MANAGEMENT, INC.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
LAWRENCE M. WATERHOUSE, JR.
Chairman
Waterhouse Investor Services, Inc.
FRANK J. PETRILLI
President and
Chief Executive Officer
Waterhouse Investor Services, Inc.
RICHARD H. NEIMAN
Executive Vice President
General Counsel and Secretary
Waterhouse Investor Services, Inc.
SENIOR OFFICERS
DAVID A. HARTMAN
Senior Vice President
Chief Investment Officer
B. KEVIN STERNS
Executive Vice President
Chief Financial Officer & Treasurer
MICHELE R. TEICHNER
Senior Vice President
Operations & Compliance
SERVICE PROVIDERS
INVESTMENT MANAGER TRANSFER AGENT INDEPENDENT AUDITORS
Waterhouse Asset Waterhouse National Bank Ernst & Young LLP
Management, Inc. 525 Washington Blvd. 787 Seventh Avenue
100 Wall Street Jersey City, NJ 07310 New York, NY 10019
New York, New York 10005
ADMINISTRATOR & CUSTODIAN LEGAL COUNSEL
SHAREHOLDER SERVICING The Bank of New York Swidler Berlin Shereff
Waterhouse Securities, 90 Washington Street Friedman, LLP
Inc. New York, NY 10286 919 Third Avenue
100 Wall Street New York, NY 10022
New York, NY 10005 DISTRIBUTOR
Customer Service Funds Distributor, Inc.
Department 60 State Street
(800) 934-4410 Boston, MA 02109
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2
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WATERHOUSE INVESTORS FAMILY OF FUNDS, INC.(A)
DEAR SHAREHOLDER:
--------------------------------------------------------
I am pleased to provide you with the Waterhouse Investors Cash Management Funds
(the "Fund") annual report for the fiscal year ended October 31, 1998.
During the year, each of the Money Market, U.S. Government and Municipal
Portfolios attempted to provide maximum current income from high quality money
market securities while maintaining a conservative investment portfolio to
ensure safety of principal. By October 31, 1998, assets in the three
Portfolios increased to a total of $3.9 billion.
PORTFOLIO RESULTS *
For the fiscal year ended October 31, 1998, the three money market Portfolios
had the following annualized returns.**
O The Money Market Portfolio had an annualized return of 5.04% and a
current yield of 4.92%.
O The U.S. Government Portfolio had an annualized return of 4.91% and a
current yield of 4.80%.
O The Municipal Portfolio had an annualized return of 2.98%, a taxable
equivalent return of 4.66%(1), a current yield of 2.93% and a
taxable equivalent yield of 4.58%(1).
The volatility in both the stock and bond markets over the last six months has
been at historical highs. Economic problems in Asia migrated to world wide
financial markets, causing the domestic markets to swing widely. The bond
market saw long-term bond rates decline to a forty year low and concerns about
corporate profits forced the stock market into a major correction. The
financial markets have since recovered, spawned by the Federal Reserve Bank
intervening through Federal Funds Rate reductions totaling three quarters of
one percent. Currently, the average maturities of the portfolios are
structured at market neutral levels which approximate industry averages.
Thank you for investing in the Fund and for your confidence in us. For the
second consecutive year, Waterhouse Securities was ranked #1 discount broker
by SmartMoney Magazine.(2) According to the SmartMoney article "we set out to
identify the single best discount broker--that is the one firm with the best
mix of price, product, service and reputation."
We look forward to continuing to meet your expanding investment needs in the
years to come.
Sincerely,
/s/ Lawrence M. Waterhouse, Jr.
Lawrence M. Waterhouse, Jr.
Chairman
Waterhouse Investor Services, Inc.
December 4, 1998
(A) As of December 18, 1997, Waterhouse Investors Cash Management Fund, Inc.
changed its name to Waterhouse Investors Family of Funds, Inc.
* An investment in the Portfolio is neither FDlC-insured nor guaranteed by the
U.S. Government and is not a deposit or obligation of, or guaranteed by, any
bank. There can be no assurance that a Portfolio will be able to maintain a
stable net asset value of $1 per share.
** These returns are based on a constant investment throughout the period,
include reinvestment of dividends and reflect a net return to the shareholder
after all expenses, inclusive of fee waivers. For the fiscal year ended
October 31, 1998, the Investment Manager and its affiliates waived a portion
of their fee for the Money Market, U.S. Government and Municipal Portfolios.
Without these fee waivers in effect, the annualized returns and current yields
would have been 4.89% and 4.77% for the Money Market Portfolio, 4.80% and
4.69% for the U.S. Government Portfolio and 2.85% and 2.80% for the Municipal
Portfolio. The annualized taxable equivalent return and yield for the
Municipal Portfolio would have been 4.45% and 4.39%, respectively. The yield
more closely reflects the current earnings of the Portfolios than the total
return.
(1) Taxable equivalent return and yield at 36% marginal federal income tax
rate.
(2) As compared to 22 discount brokerage firms in the SmartMoney Magazine,
July 1998 issue.
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TABLE OF CONTENTS
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Statements of Assets and Liabilities.................5
Statements of Operations.............................6
Statements of Changes in Net Assets..................7
Financial Highlights.................................8
Notes to Financial Statements........................9
Money Market Portfolio
Schedule of Investments..........................11
U.S. Government Portfolio
Schedule of Investments..........................15
Municipal Portfolio
Schedule of Investments..........................17
Notes to
Schedules of Investments.........................22
Report of
Independent Auditors.............................23
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4
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<CAPTION>
Money Market U.S. Government Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(including repurchase agreements of
$65,952,000, $74,963,000, and $0,
respectively) (Note 2) $ 2,942,826,302 $ 533,328,781 $ 374,351,019
Cash 4,925 814 324,512
Interest receivable 17,601,325 4,575,063 1,329,025
Receivable for securities sold -- -- 5,415,000
Other assets 4,134 927 618
---------------- --------------- ----------------
TOTAL ASSETS 2,960,436,686 537,905,585 381,420,174
LIABILITIES
Dividends payable to shareholders 754,118 128,547 52,855
Payable to Investment Manager and its
affiliates (Note 3) 1,675,885 309,323 204,366
Accrued expenses and other liabilities 280,789 63,947 72,507
---------------- --------------- ----------------
TOTAL LIABILITIES 2,710,792 501,817 329,728
---------------- --------------- ----------------
NET ASSETS $ 2,957,725,894 $ 537,403,768 $ 381,090,446
---------------- --------------- ----------------
---------------- --------------- ----------------
Net assets consist of:
Paid-in capital $ 2,957,728,677 $ 537,407,469 $ 381,091,287
Accumulated net realized losses from
security transactions (2,783) (3,701) (841)
---------------- --------------- ----------------
Net assets, at value $ 2,957,725,894 $ 537,403,768 $ 381,090,446
================ =============== ================
Shares outstanding ($.0001 par value
common stock, 60 billion, 20 billion,
and 10 billion shares authorized,
respectively) 2,957,728,677 537,407,469 381,091,287
================ =============== ================
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.
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5
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1998
<TABLE>
<CAPTION>
Money Market U.S. Government Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income $ 130,577,539 $ 25,521,161 $ 11,384,511
---------------- ---------------- ----------------
EXPENSES
Investment management fees (Note 3) 7,895,374 1,602,146 1,092,409
Shareholder servicing fees (Note 3) 4,668,165 796,798 366,257
Transfer agent fees (Note 3) 4,605,109 915,512 624,221
Administration fees (Note 3) 2,302,554 457,756 312,090
Shareholder reports and mailing 423,111 84,622 56,415
Registration fees 393,962 59,312 45,215
Custody fees (Note 2) 171,428 52,103 34,414
Professional fees 110,331 27,940 20,359
Directors' fees 17,560 17,560 17,560
Other expenses 49,437 47,816 77,717
---------------- ---------------- ----------------
TOTAL EXPENSES 20,637,031 4,061,565 2,646,657
Fees waived/expenses reimbursed by the
Investment Manager and its affiliates
(Note 3) (3,359,692) (508,238) (411,748)
---------------- ---------------- ----------------
NET EXPENSES 17,277,339 3,553,327 2,234,909
---------------- ---------------- ----------------
NET INVESTMENT INCOME 113,300,200 21,967,834 9,149,602
---------------- ---------------- ----------------
NET REALIZED GAINS (LOSSES) FROM SECURITY
TRANSACTIONS 36 (3,939) 2,572
---------------- ---------------- ----------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 113,300,236 $ 21,963,895 $ 9,152,174
================ ================ =================
</TABLE>
Please see accompanying notes to financial statements.
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6
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money Market U.S. Government Municipal
Portfolio Portfolio Portfolio
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 113,300,200 $ 76,296,290 $ 21,967,834 $ 18,691,230 $ 9,149,602 $ 7,492,691
Net realized gains (losses)
from security
transactions 36 21,960 (3,939) 449 2,572 (2,642)
-------------- -------------- -------------- -------------- ------------ ------------
Net increase in net assets
from operations 113,300,236 76,318,250 21,963,895 18,691,679 9,152,174 7,490,049
-------------- -------------- -------------- -------------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (113,300,200) (76,296,290) (21,967,834) (18,691,230) (9,149,602) (7,492,691)
From net realized gains -- (23,984) -- -- -- --
-------------- -------------- -------------- -------------- ------------ ------------
Decrease in net assets from
distributions to
shareholders (113,300,200) (76,320,274) (21,967,834) (18,691,230) (9,149,602) (7,492,691)
-------------- -------------- -------------- -------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS
($1.00 PER SHARE):
Proceeds from shares sold 9,765,915,572 5,645,355,075 1,534,515,923 1,215,495,738 1,073,142,210 742,968,364
Shares issued in
reinvestment of
dividends 112,790,339 78,797,634 21,892,239 19,383,642 9,118,338 7,760,110
Payments for shares
redeemed (8,708,766,830) (5,278,973,994) (1,421,685,766) (1,203,241,288) (966,796,370) (711,355,530)
-------------- -------------- -------------- -------------- ------------ ------------
Net increase in net assets
from capital share
transactions 1,169,939,081 445,178,715 134,722,396 31,638,092 115,464,178 39,372,944
-------------- -------------- -------------- -------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS 1,169,939,117 445,176,691 134,718,457 31,638,541 115,466,750 39,370,302
NET ASSETS:
Beginning of year 1,787,786,777 1,342,610,086 402,685,311 371,046,770 265,623,696 226,253,394
-------------- -------------- -------------- -------------- ------------ ------------
End of year $2,957,725,894 $1,787,786,777 $ 537,403,768 $ 402,685,311 $381,090,446 $265,623,696
============== ============== ============== ============== ============ ============
</TABLE>
Please see accompanying notes to financial statements.
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7
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
FINANCIAL HIGHLIGHTS
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
each period indicated. This information has been derived from
each Portfolio's financial statements.
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO
Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1996* 1998 1997 1996*
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------- -------------- -------------- -------------- -------------- --------------
Net investment income....... 0.049 0.048 0.041 0.048 0.047 0.041
-------------- -------------- -------------- -------------- -------------- --------------
Distributions from net
investment income......... (0.049) (0.048) (0.041) (0.048) (0.047) (0.041)
-------------- -------------- -------------- -------------- -------------- --------------
Net asset value, end of
period.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============== ============== ============== ============== ============== ==============
RATIOS
Ratio of expenses to average
net assets**.............. 0.75% 0.83% 0.79%(A) 0.78% 0.81% 0.73%(A)
Ratio of net investment
income to average net
assets**.................. 4.92% 4.79% 4.64%(A) 4.80% 4.69% 4.64%(A)
Decrease reflected in above
net expense ratio due to
waivers/reimbursements by
the Investment Manager and
its affiliates (Note 3)... 0.15% 0.08% 0.13%(A) 0.11% 0.07% 0.18%(A)
SUPPLEMENTAL DATA
Total investment return
(B)....................... 5.04% 4.89% 4.82%(A) 4.91% 4.79% 4.82%(A)
Net assets, end of period... $2,957,725,894 $1,787,786,777 $1,342,610,086 $ 537,403,768 $ 402,685,311 $ 371,046,770
============== ============== ============== ============== ============== ==============
<CAPTION>
MUNICIPAL
PORTFOLIO
Year Year Period
Ended Ended Ended
October 31, October 31, October 31,
1998 1997 1996*
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period................. $ 1.000 $ 1.000 $ 1.000
-------------- -------------- --------------
Net investment income....... 0.029 0.030 0.026
-------------- -------------- --------------
Distributions from net
investment income......... (0.029) (0.030) (0.026)
-------------- -------------- --------------
Net asset value, end of
period.................... $ 1.000 $ 1.000 $ 1.000
============== ============== ==============
RATIOS
Ratio of expenses to average
net assets**.............. 0.72% 0.74% 0.62%(A)
Ratio of net investment
income to average net
assets**.................. 2.93% 2.97% 2.90%(A)
Decrease reflected in above
net expense ratio due to
waivers/ reimbursements by
the Investment Manager and
its affiliates (Note 3)... 0.13% 0.10% 0.23%(A)
SUPPLEMENTAL DATA
Total investment return
(B)....................... 2.98% 3.01% 3.05%(A)
Net assets, end of period... $ 381,090,446 $ 265,623,696 $ 226,253,394
============== ============== ==============
</TABLE>
* The Portfolio commenced operations on December 20, 1995.
** The average net assets for the periods ended October 31, 1998, October 31,
1997 and October 31, 1996, were $2,302,804,288, $1,592,722,254 and
$1,104,558,438 for the Money Market Portfolio; $457,821,528, $398,635,777
and $293,708,330 for the U.S. Government Portfolio; and $312,133,086,
$252,444,536 and $196,592,413 for the Municipal Portfolio.
(A) Annualized.
(B) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of the period reported and includes
reinvestment of dividends.
Please see accompanying notes to financial statements.
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8
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1998
NOTE 1 -- ORGANIZATION
Waterhouse Investors Family of Funds, Inc. (the "Fund") was organized as a
Maryland corporation on August 16, 1995. On December 18, 1997, Waterhouse
Investors Cash Management Fund, Inc. changed its name to Waterhouse Investors
Family of Funds, Inc. The Fund is registered as an open-end, management
investment company with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "Act"), and the Securities Act
of 1933, as amended and currently has four investment portfolios. These
financial statements relate to three money market portfolios of the Fund (each
a "Portfolio" and collectively the "Portfolios"), each of which is a
diversified investment portfolio. The investment objective of each of the
Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio is to seek maximum current income to the extent consistent with
liquidity and preservation of capital. 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 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.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Fund's significant accounting policies:
COMPUTATION OF NET ASSET VALUE -- It is each Portfolio's policy to maintain a
continuous net asset value of $1.00 per share. Each Portfolio has adopted
certain investment, portfolio valuation and 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 -- Each Portfolio's securities are valued using the
amortized cost method, which approximates market value. The amortized cost
method involves initially valuing a security at its original cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. At October 31, 1998, the cost of investments of each Portfolio for
Federal income tax purposes was substantially the same as the cost for
financial reporting purposes.
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. Under
the terms of the custody agreement, each Portfolio receives net earnings
credits based on available cash balances left on deposit. Income earned under
this arrangement is included in interest income.
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. Realized gain and loss from securities transactions are recorded
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.
USE OF ESTIMATES -- The Fund's financial statements are prepared in accordance
with generally accepted accounting principles, which may require the use of
management estimates and assumptions. Actual results could differ from these
estimates.
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9
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1998 (CONTINUED)
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 (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.
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"), an indirect wholly owned
subsidiary of The Toronto-Dominion Bank, 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
agreed to waive a portion of its fee payable by the Municipal Portfolio
through October 15, 1998, so that the actual fee payable annually by the
Portfolio during the period will be equal to .25 of 1% of its average daily
net assets. For the year ended October 31, 1998, the Investment Manager
voluntarily waived $312,133 of its investment management fee for the Municipal
Portfolio.
Waterhouse Securities, Inc. ("Waterhouse Securities") an affiliate of the
Investment Manager, has been retained under an Administration Agreement to
perform certain administrative services for the Fund. For the administrative
services rendered to the Fund, each Portfolio pays Waterhouse Securities a
monthly fee at an annual rate of .10 of 1% of each Portfolio's average daily
net assets. For the year ended October 31, 1998, the Investment Manager
voluntarily waived $1,788 of its adminstration fee for the Municipal
Portfolio.
Waterhouse Securities has been retained under a Shareholder Services Agreement
to perform certain shareholder services necessary for the operation of the
Fund. The shareholder service plan adopted by the Fund provides that 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 of Directors
determined to limit the annual fee payable through October 15, 1998 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 year
ended October 31, 1998, Waterhouse Securities voluntarily waived $3,308,557,
$502,792, and $74,948 of its shareholder servicing fee for the Money Market
Portfolio, the U.S. Government Portfolio, and the Municipal Portfolio,
respectively.
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 year ended
October 31, 1998, the Bank voluntarily waived $51,135, $5,446, and $22,879 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 "interested person" ("disinterested Director") as
defined in the Act receives from the Fund a base annual retainer of $12,000,
payable quarterly. Each disinterested Director who serves on the Board of
Directors of a "Fund Complex" (which includes the Fund and National Investors
Cash Management Fund, Inc.), receives a supplemental annual retainer of
$5,000, payable quarterly.
Additionally, each disinterested Director of the Fund Complex receives from
the Fund Complex a fee of $2,000 for each meeting attended. In the event that
meetings of the Fund Complex are held on the same day or concurrently, such
meeting is considered a single meeting and the meeting fee is allocated
between the funds in the Fund Complex.
NOTE 4 -- FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with Federal tax requirements, the Municipal Portfolio
designates substantially all the dividends paid from net investment income
during the year ended October 31, 1998 as "exempt-interest dividends." As
required by Federal regulations, shareholders will receive notification of
their portion of the Fund's taxable ordinary dividends and capital gains
distributions paid (if any) for the 1998 calendar year early in 1999.
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10
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MONEY MARKET PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS
ASSET-BACKED COMMERICAL PAPER--5.4%
$ 32,000,000 Asset-Backed Securities Investment Trust Ser. 1997F, Variable Rate Notes,
5.37%, due 11/15/98
(Insured: MBIA) (Note A) 5.37 $ 32,000,000
30,000,000 Bavaria TRR Corp., due 11/13/98 (LOC: Bayerische Vereinsbank AG) 5.40 29,948,983
50,000,000 Corporate Asset Funding Co., Inc., due 1/27/99 5.38 49,359,583
50,000,000 Eureka Securitization, Inc., due 2/9/99 5.23 49,284,722
--------------
160,593,288
--------------
BROKER / DEALER OBLIGATIONS--14.8%
49,000,000 Bear Stearns Cos., Inc., Variable Rate Notes, 5.36%, due 11/1/98 (Note A) 5.36 49,000,000
7,000,000 Bear Stearns Cos., Inc., Variable Rate Notes, 5.38%, due 11/1/98 (Note A) 5.38 7,000,000
40,000,000 Bear Stearns Cos., Inc., Variable Rate Notes, 5.31%, due 11/2/98 (Note A) 5.31 40,000,000
20,000,000 Bear Stearns Cos., Inc., Variable Rate Notes, 5.63%, due 11/9/98 (Note A) 5.63 20,000,000
7,000,000 Bear Stearns Cos., Inc., Zero Coupon Bond, due 11/12/98 5.70 6,988,226
30,000,000 Goldman Sachs Group, L.P., Variable Rate Notes, 5.69%, due 12/28/98 (Note A) 5.69 30,000,000
80,000,000 Goldman Sachs Group, L.P., Variable Rate Notes, 5.35%, due 1/15/99 (Notes A,B) 5.35 80,000,000
40,000,000 Merrill Lynch & Co., Inc., due 1/13/99 5.42 39,568,489
15,000,000 Merrill Lynch & Co., Inc., Variable Rate Notes, 5.45%, due 11/1/98 (Note A) 5.35 15,008,978
5,000,000 Merrill Lynch & Co., Inc., Variable Rate Notes, 5.86%, due 11/25/98 (Note A) 5.86 5,001,850
40,000,000 Morgan Stanley, Dean Witter, Discover & Co., due 1/19/99 5.29 39,543,556
25,000,000 Morgan Stanley, Dean Witter, Discover & Co., due 4/21/99 4.97 24,424,063
40,000,000 Morgan Stanley, Dean Witter, Discover & Co., Variable Rate Notes, 5.44%, due
11/1/98 (Note A) 5.44 40,000,000
6,000,000 Salomon Inc., 6.70%, due 12/1/98 5.60 6,004,435
4,500,000 Salomon Smith Barney Holdings, Inc., 5.63%, due 11/15/98 5.65 4,499,633
30,000,000 Salomon Smith Barney Holdings, Inc., due 1/25/99 5.20 29,637,333
--------------
436,676,563
--------------
FINANCE & INSURANCE OBLIGATIONS--4.3%
10,000,000 Associates Corp. of N.A., 7.56%, due 6/15/99 5.00 10,151,884
16,500,000 General Motors Acceptance Corp., 6.20%, due 12/7/98 5.96 16,504,250
25,000,000 General Motors Acceptance Corp., Variable Rate Notes, 5.18%, due 1/28/99 (Note A) 5.77 24,972,193
20,000,000 Household Finance Corp., Variable Rate Notes, 5.56%, due 11/1/98 (Note A) 5.35 20,023,015
10,000,000 Household Finance Corp., Variable Rate Notes, 5.69%, due 12/4/98 (Note A) 5.54 10,008,809
40,000,000 Household Finance Corp., Variable Rate Notes, 5.19%, due 12/30/98 (Note A) 5.25 39,989,824
5,875,000 International Lease Finance Corp., 5.75%, due 1/15/99 5.67 5,874,967
--------------
127,524,942
--------------
INDUSTRIAL & OTHER COMMERCIAL PAPER--0.3%
10,000,000 Frontenac Properties, Inc., Variable Rate Notes, 5.24%, due 11/9/98
(GTY: Sisters of Mercy Health System, Inc.) (Note A) 5.24 10,000,000
--------------
TOTAL CORPORATE OBLIGATIONS--24.8% 734,794,793
--------------
BANK OBLIGATIONS
BANK COMMERCIAL PAPER--0.5%
14,203,000 Banque National de Paris (Canada), due 11/2/98 5.37 14,200,889
--------------
BANK NOTES--10.8%
2,000,000 Abbey National Treasury Services, Variable Rate Notes, 5.53%, due 12/8/98 (GTY:
Abbey National PLC) (Note A) 5.58 1,999,622
20,000,000 Abbey National Treasury Services, Variable Rate Notes, 5.07%, due 1/20/99 (GTY:
Abbey National PLC) (Note A) 5.14 19,989,417
20,000,000 Abbey National Treasury Services, 5.72%, due 6/11/99 (GTY: Abbey National PLC) 5.80 19,990,681
89,000,000 Bankers Trust Co., New York, Variable Rate Notes, 5.39%, due 11/1/98 (Note A) 5.40 88,993,221
25,000,000 Comerica Bank, N.A., Variable Rate Notes, 5.089%, due 11/23/98 (Note A) 5.17 24,985,715
5,000,000 Commonwealth Bank of Australia, Variable Rate Notes, 5.63%, due 2/26/99 (Note A) 5.65 4,998,968
25,000,000 CoreStates Capital, Variable Rate Notes, 5.25%, due 11/18/98 (GTY: First Union
Corp.) (Note A) 5.22 25,000,675
11,533,000 FCC National Bank, 5.95%, due 11/13/98 5.62 11,533,563
87,050,000 J.P. Morgan & Co., Inc., Variable Rate Notes, 5.27%, due 11/9/98 (Note A) 5.32 87,018,364
25,000,000 Morgan Guaranty Trust Co. of NY, Variable Rate Notes, 5.25%, due 11/30/98 (Note A) 5.26 24,997,478
10,000,000 Wells Fargo & Co., 5.37%, due 12/9/98 5.42 9,999,315
--------------
319,507,019
--------------
</TABLE>
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11
<PAGE>
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MONEY MARKET PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK TIME DEPOSITS--1.4%
$ 40,000,000 Canadian Imperial Bank of Commerce, 5.46%, due 11/18/98 5.46 $ 40,000,000
--------------
DOMESTIC BANK SUPPORTED OBLIGATIONS--8.1%
7,635,000 701 Green Valley Association LLC Ser. 1997 VRDN, 5.25%, due 11/9/98 5.18 7,635,000
(LOC: First Union National Bank) (Note C)
6,540,000 Adult Communities Total Services, Inc. Series 1996 VRDN, 5.33%, due 11/9/98 5.26 6,540,000
(LOC: LaSalle National Bank) (Note C)
10,000,000 Assisted Living Funding, LLC Ser. 1997 VRDN, 5.45%, due 11/9/98 (LOC: First Union 5.45 10,000,000
National Bank) (Note C)
3,021,000 Benedictine Health System, due 11/4/98 (LOC: LaSalle National Bank) 5.49 3,019,625
4,800,000 Campus Crusade for Christ, Inc. Incremental Ser. 1997 VRDN, 5.25%, due 11/9/98 5.18 4,800,000
(LOC: First Union National Bank) (Note C)
9,600,000 Edward Obligated Grp. Ser. 1997B VRDN, 5.15%, due 11/9/98 5.15 9,600,000
(Insured: AMBAC; LIQ: Harris Bank & Trust) (Note C)
31,500,000 Florens Container, Inc., due 11/10/98 (LOC: Bank of America NT & SA) 5.68 31,456,451
5,000,000 Long Lane Master Trust I Ser. 1998A, Variable Rate Notes, 5.24%, due 1/20/99 5.24 5,000,000
(Counter Party: BankBoston, N.A.) (Notes A,B)
15,840,000 Long Lane Master Trust II Ser. 1998C, Variable Rate Notes, 5.45%, due 12/28/98 5.45 15,840,000
(Counter Party: BankBoston, N.A.) (Notes A,B)
20,000,000 Long Lane Master Trust III Ser. 1997C, Variable Rate Notes, 5.72%, due 11/2/98 5.72 20,000,000
(Counter Party: BankBoston, N.A.) (Notes A,B)
4,000,000 Lowndes Corporation Ser. 1997 VRDN, 5.25%, due 11/9/98 (LOC: First Union National 5.18 4,000,000
Bank) (Note C)
31,550,000 Metrocrest Hospital Authority, Ser. 1989A, due 11/4/98 (LOC: Bank of New York) 5.65 31,535,356
45,000,000 Provena Health, due 12/9/98 (LIQ: First National Bank of Chicago, Bank of America 5.66 44,737,325
NT & SA)
3,855,000 Rockland Industries, Inc. Taxable Ser. 1997 VRDN, 5.25%, due 11/9/98 5.18 3,855,000
(LOC: First Union National Bank) (Note C)
7,105,000 Roosevelt Paper Co. Ser. 1997 VRDN, 5.30%, due 11/9/98 (LOC: CoreStates Bank, 5.23 7,105,000
N.A.) (Note C)
4,050,000 Senior Systems Technology LLC VRDN, 5.45%, due 11/9/98 (LOC: Comerica Bank - 5.45 4,050,000
California) (Note C)
13,994,000 The Society of New York Hospital Fund, Inc., due 12/9/98 (LOC: Chase Manhattan 5.24 13,917,189
Bank, N.A.)
3,100,000 Trap Rock Industries, Inc. Ser. 1997 VRDN, 5.30%, due 11/9/98 (LOC: CoreStates 5.23 3,100,000
Bank, N.A.) (Note C)
8,900,000 Triad Group, Inc. Ser. 1997 VRDN, 5.25%, due 11/9/98 (LOC: First Union National 5.18 8,900,000
Bank) (Note C)
4,155,000 William Thies & Sons, Inc. Ser. 1997 VRDN, 5.25%, due 11/9/98 (LOC: First Union 5.18 4,155,000
National Bank) (Note C)
--------------
239,245,946
--------------
DOMESTIC CERTIFICATES OF DEPOSIT--1.8%
4,550,000 Bank of New York, 5.70%, due 5/26/99 5.15 4,561,260
25,000,000 Bankers Trust Co., NY, Variable Rate Notes, 5.36%, due 11/1/98 (Note A) 5.36 25,000,000
25,000,000 PNC Bank, N.A., Variable Rate Notes, 5.09%, due 11/27/98 (Note A) 5.17 24,986,233
--------------
54,547,493
--------------
FOREIGN BANK SUPPORTED OBLIGATIONS--14.8%
40,000,000 Banco Bozano Simonsen, S.A., due 6/18/99 (LOC: Banco Santander, S.A.) 5.43 38,674,344
25,000,000 Banco Bradesco S.A., due 11/18/98 (LOC: Barclays Bank PLC) 5.24 24,938,375
15,000,000 Banco de Galicia y Buenos Aires, S.A., due 2/25/99 (LOC: Bayerische Vereinsbank 5.26 14,751,083
AG)
30,000,000 Banco Itau S.A., due 3/12/99 (LOC: Barclays Bank PLC) 5.43 29,423,600
15,000,000 Banco Itau S.A., due 3/16/99 (LOC: Barclays Bank PLC) 5.71 14,690,625
25,000,000 Banco Rio de la Plata S.A., due 12/7/98 (LOC: Bayerische Hypo und Vereinsbank, 5.67 24,863,750
Banco Santander, S.A.)
13,000,000 Banco Rio de la Plata S.A., due 12/8/98 (LOC: Bayerische Hypo und Vereinsbank, 5.24 12,930,522
Banco Santander, S.A.)
21,500,000 Banco Rio de la Plata S.A., due 12/8/98 (LOC: Bayerische Hypo und Vereinsbank, 5.68 21,379,570
Banco Santander, S.A.)
15,000,000 Bancomer, S.A., due 5/12/99 (LOC: Bank of Montreal) 5.17 14,598,400
3,000,000 Bayliss Group Partnership Ser. 1992 VRDN, 5.30%, due 11/9/98 (LOC: Kredietbank NV) 5.23 3,000,000
(Note C)
25,400,000 COSCO (Cayman) Co. Ltd., due 11/19/98 (LINE: Credit Suisse First Boston) 5.35 25,332,563
20,000,000 Garanti Funding Corp. II, due 4/29/99 (LOC: Bayerische Vereinsbank AG) 5.38 19,482,889
24,000,000 Hong Kong Bank of Canada, due 11/24/98 (GTY: HSBC Holdings PLC) 5.42 23,917,507
25,000,000 Hong Kong Bank of Canada, due 11/24/98 (GTY: HSBC Holdings PLC) 5.36 24,915,028
25,000,000 Hong Kong Bank of Canada, due 11/24/98 (GTY: HSBC Holdings PLC) 5.61 24,911,674
</TABLE>
- ------------------------------------------------------------------------------
12
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MONEY MARKET PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 15,000,000 Johnson City, TN Medical Center Hosp., Inc. VRDN, 5.25%, due 11/7/98
(Insured: MBIA; LIQ: Credit Suisse First Boston) (Note C) 5.18 $ 15,000,000
20,000,000 KOC Funding Corp., due 2/8/99 (LOC: Credit Suisse First Boston) 5.77 19,695,850
29,000,000 Nacional Financiera S.N.C., due 11/18/98 (LOC: Barclays Bank PLC) 5.66 28,924,407
25,000,000 Pemex Capital, Inc., due 11/19/98 (LOC: Societe Generale) 5.34 24,933,750
850,000 Synectic Partnership VRDN, 5.18%, due 11/9/98 (LOC: LaSalle National Bank)
(Note C) 5.11 850,000
25,000,000 Unibanco-Uniao de Banco Brasileiros S.A., Ser. A & B, due 6/28/99 (LOC:
Westdeutsche Landesbank) 5.75 24,095,451
5,000,000 Unibanco-Uniao de Banco Brasileiros S.A., Ser. C & D, due 11/30/98 (LOC:
Bayerische Vereinsbank AG) 5.74 4,977,646
--------------
436,287,034
--------------
YANKEE BANK CERTIFICATES OF DEPOSIT--18.0%
52,500,000 Abbey National Treasury Services, 5.64%, due 7/15/99 (GTY: Abbey National PLC) 5.07 52,682,560
30,000,000 Banque Nationale de Paris, 5.84%, due 5/5/99 5.89 29,992,726
50,000,000 Bayerische Landesbank GZ, Variable Rate Notes, 5.09%, due 11/25/98 (Note A) 5.20 49,987,042
25,000,000 Commerzbank AG, 5.43%, due 1/25/99 5.43 25,000,000
20,000,000 Credit Agricole Indosuez S.A., 5.66%, due 2/26/99 5.70 19,997,235
30,000,000 Credit Agricole Indosuez S.A., 5.66%, due 3/23/99 5.71 29,994,407
20,000,000 Credit Agricole Indosuez S.A., 5.74%, due 4/26/99 5.80 19,994,437
50,000,000 Den Danske Bank A/S, Variable Rate Notes, 5.25%, due 11/4/98 (Note A) 5.32 49,979,831
30,000,000 Deutsche Bank AG, 5.70%, due 3/30/99 5.76 29,992,407
60,000,000 Societe Generale, Variable Rate Notes, 5.254%, due 11/2/98 (Note A) 5.33 59,986,800
15,000,000 Societe Generale, 5.64%, due 12/31/98 5.64 15,000,000
35,000,000 Societe Generale, 5.75%, due 4/19/99 5.80 34,992,243
90,000,000 Svenska Handelsbanken AB, Variable Rate Notes, 5.26%, due 11/2/98 (Note A) 5.32 89,963,633
25,000,000 Svenska Handelsbanken AB, 5.75%, due 5/4/99 4.90 25,088,805
--------------
532,652,126
--------------
TOTAL BANK OBLIGATIONS--55.4% 1,636,440,507
--------------
MUNICIPAL OBLIGATIONS
TAXABLE OBLIGATIONS--17.1%
5,000,000 Bergen Cty. (NJ) Improvement Auth., Cty. Gtd. Proj. Notes (Bergen Pines Cty. Hosp.
Proj.) Ser. 1998, 5.74%, due 2/17/99 5.66 5,000,000
2,925,000 Bergen Cty. (NJ) Improvement Auth., Cty. Gtd. Proj. Notes (Bergen Pines Cty. Hosp.
Proj.) Ser. 1998B, 5.88%, due 2/17/99 5.75 2,925,000
2,255,000 Berks Cty. IDA Ser 1996B VRDN, 5.30%, due 11/9/98 (LOC: CoreStates Bank, N.A.)
(Note C) 5.30 2,255,000
25,000,000 Broward Cty., FL Prof. Sports Fac. Tax & Rev. Bonds (Broward Cty. Civic Arena
Proj.) Ser. 1996B (TTR 14), 5.38%, due 11/2/98 (Insured: MBIA; LIQ: Citibank)
(Note A) 5.38 25,000,000
10,000,000 Calif. HFA Rev. Bonds, Ser. P, Variable Rate Notes, 5.13%, due 11/9/98 (Insured:
FSA; LIQ: Bank of America, NT & SA) (Note A) 5.13 10,000,000
18,000,000 Calif. Pollution Control Fin. Auth. Env. Imp. Rev. Bonds (Atlantic Richfield Co.
Proj.) Ser. 1997, 5.40%, due 1/13/99 (GTY: Atlantic Richfield Co.) 5.40 18,000,000
20,000,000 Calif. Pollution Control Fin. Auth. Env. Imp. Rev. Bonds (Atlantic Richfield Co.
Proj.) Ser. 1997, 5.51%, due 1/13/99 (GTY: Atlantic Richfield Co.) 5.51 20,000,000
50,000,000 Calif. Pollution Control Fin. Auth. Env. Imp. Rev. Bonds (Atlantic Richfield Co.
Proj.) Ser. 1997, 5.28%, due 2/10/99 (GTY: Atlantic Richfield Co.) 5.28 50,000,000
25,000,000 Calif. Pollution Control Fin. Auth. Rev. Bonds (Browning Ferris Proj.) Ser. 1997,
5.55%, due 12/15/98 (LOC: Texas Commerce Bank (Chase)) 5.55 25,000,000
4,735,000 Gaithersburg (MD) Econ. Dev. Rev. (Asbury Methodist Village, Inc. Fac.) Ser. 1997B
VRDN, 5.33%, due 11/9/98 (Insured: MBIA; LIQ: Nationsbank, N.A.) (Note C) 5.26 4,735,000
24,000,000 Gulf Coast IDA Env. Fac. Rev. Bonds (CITGO Petroleum Corp. Proj.) Tax. Ser. 1998A,
due 12/16/98 (LOC: Royal Bank of Canada) 5.38 24,000,000
17,400,000 Gulf Coast Waste Disp. Auth. Waste Disp. Rev. Bonds (Valero Energy Corp. Proj.)
Ser. 1998 VRDN, 5.25%, due 11/9/98 (LOC: Bank of Montreal) (Note C) 5.18 17,400,000
23,900,000 Ill. Dev. Auth. Rev. Bonds Ser. 1996 VRDN, 5.35%, due 11/9/98 (LOC: Northern Trust
Co.) (Note C) 5.28 23,900,000
6,225,000 Ill. Health Facs. Auth. Ser. 1996F VRDN, 5.33%, due 11/9/98 (LOC: LaSalle National
Bank) (Note C) 5.26 6,225,000
</TABLE>
- ------------------------------------------------------------------------------
13
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MONEY MARKET PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 20,000,000 Ill. Student Asst. Comm. Student Loan Rev. Bonds Ser. 1997B VRDN, 5.15%, due
11/9/98 (LOC: First National Bank of Chicago) (Note C) 5.15 $ 20,000,000
13,300,000 Ill. Student Asst. Comm. Student Loan Rev. Bonds Ser. 1998B VRDN, 5.13%, due
11/9/98 (Insured: MBIA; LIQ: Bank of America, NT & SA) (Note C) 5.13 13,300,000
5,000,000 Maryland Health & Higher Educational Facs. Auth. Rev. Bonds Ser. 1998B VRDN,
5.35%, due 11/9/98 (LOC: First Union National Bank) (Note C) 5.35 5,000,000
11,000,000 Miss. Bus. Fin. Corp. Indus. Dev. Bonds (GE Plastics Finishing Inc. Proj.) Ser.
1998 VRDN, 5.36%, due 11/2/98 (GTY: General Electric Company) (Note C) 5.36 11,000,000
5,675,000 Miss. Bus. Fin. Corp. Rev. Bonds (ABT Co. Inc. Proj.) Ser. B VRDN, 5.25%, due
11/9/98 (LOC: First Union National Bank) (Note C) 5.25 5,675,000
6,920,000 Miss. Bus. Fin. Corp. Rev. Bonds (Dollar Tree Proj.) Ser. 1998 VRDN, 5.25%, due
11/9/98 (LOC: First Union National Bank) (Note C) 5.25 6,920,000
2,000,000 New Hampshire Bus. Fin. Auth. (Foundation for Seacoast Health) Ser. 1998 B VRDN,
5.25%, due 11/9/98 (LOC: Fleet Bank, NH) (Note C) 5.25 2,000,000
3,600,000 NJ EDA (The Morey Organization, Inc. Proj) Ser. 1997 VRDN, 5.30%, due 11/9/98
(LOC: CoreStates Bank, N.A.) (Note C) 5.30 3,600,000
6,000,000 NJ EDA State Pension Fdg. Bonds Ser. 1997A, Variable Rate Notes, 5.38%, Optional
Put 11/2/98 (Insured: MBIA; LIQ: Citibank, N.A.) (Note A) 5.38 6,000,000
5,000,000 NY State HFA, Tribeca Landing Housing Rev. Bond, Ser. 1997B VRDN, 5.22%, due
11/9/98 (LOC: Fleet Bank NA) (Note C) 5.15 5,000,000
9,200,000 NY State Housing Fin. Agy. Svc. Contract Obligation Rev. Ser. 1997B VRDN, 5.22%,
due 11/9/98 (LOC: Commerzbank AG) (Note C) 5.15 9,200,000
13,500,000 Ohio G.O. Bonds, Taxable Dev. Asst. Ser. 1996, 5.38%, Optional Put 11/2/98
(Insured: AMBAC ; LIQ: Citibank, N.A.) 5.38 13,500,000
20,000,000 Ohio G.O. Bonds, Taxable Dev. Asst. Ser. CR16T, 5.38%, Optional Put 11/2/98
(Insured: AMBAC ; LIQ: Citibank, N.A.) 5.38 20,000,000
3,905,000 PA Econ. Dev. Fin. Auth. Taxable Dev. Rev. Bonds (Country Meadows of Allentown
Proj.) Ser. 1996B VRDN, 5.40%, due 11/7/98 (LOC: Mellon Bank, N.A.) (Note C) 5.40 3,905,000
5,500,000 Portsmouth IDA (VA) (PortCentre I Proj.) Ser. 1997B VRDN, 5.45%, due 11/2/98
(LOC: NationsBank, N.A.) (Note C) 5.45 5,500,000
15,000,000 St. Paul, MN, GO Notes, 5.72%, due 12/17/98 (LIQ: Norwest Bank Minnesota, N.A.) 5.64 15,000,000
4,665,000 Special Care Fac. Auth. of the City of Birmingham, AL - Eye Foundation Hosp. Tax.
Ser. 1998B VRDN, 5.65%, due 11/4/98 (LOC: Credit Local de France) (Note C) 5.57 4,665,000
45,300,000 VA Housing Dev. Auth. Commonwealth Mtg. Bonds 1998 Ser. F Tax. SubSer. FStem I,
5.25%, due 12/17/98 5.33 45,289,582
35,650,000 VA Housing Dev. Auth. Commonwealth Mtg. Bonds 1998 Ser. F Tax. SubSer. FStem III,
5.25%, due 12/29/98 5.35 35,644,420
27,000,000 VA Housing Dev. Auth. Commonwealth Mtg. Bonds 1998 Ser. F Tax. SubSer. FStem IV,
5.20%, due 3/16/99 5.16 27,000,000
4,000,000 Westchester Cty. NY IDA (BWP Distributors Inc. Proj.) Ser. 1997 VRDN, 5.25%, due
11/7/98 (LOC: First Union National Bank) (Note C) 5.25 4,000,000
9,000,000 Will Cty., Ill. Multi-Family Hsg. Redev. Rev. Bonds (Woodlands of Crest Hill
Proj.) Ser. 1998B VRDN, 5.30%, due 11/4/98 (LOC: La Salle National Bank) (Note C) 5.22 9,000,000
--------------
TOTAL MUNICIPAL OBLIGATIONS--17.1% 505,639,002
--------------
REPURCHASE AGREEMENTS--2.2%
65,952,000 ABN Amro, Inc.,
-dated 10/30/98, due 11/2/98, in the amount of $65,982,777,
-fully collateralized by $70,693,394 U.S. Government Agency Securities,
value $67,271,041 5.60 65,952,000
--------------
TOTAL INVESTMENTS -- 99.5% 2,942,826,302
OTHER ASSETS AND LIABILITIES, NET -- 0.5% 14,899,592
--------------
NET ASSETS -- 100.0% $2,957,725,894
--------------
--------------
</TABLE>
Please see accompanying notes to the schedules of investments and financial
statements.
- ------------------------------------------------------------------------------
14
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
U.S. GOVERNMENT PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL FARM CREDIT BANK--0.5%
$ 50,000 Notes, 5.50%, due 11/2/98 5.50 $ 50,000
100,000 Notes, 5.51%, due 11/2/98 5.50 100,000
1,000,000 Notes, 5.70%, due 11/3/98 5.55 1,000,006
1,000,000 Notes, 5.90%, due 12/21/98 5.56 1,000,286
150,000 Notes, 5.54%, due 1/4/99 5.00 150,075
175,000 Notes, 5.50%, due 2/1/99 5.00 175,123
100,000 Notes, 5.48%, due 3/1/99 5.00 100,131
100,000 Notes, 5.16%, due 4/1/99 5.00 100,034
--------------
2,675,655
--------------
FEDERAL HOME LOAN BANK--30.8%
10,000,000 Discount Notes, due 4/14/99 4.73 9,789,533
15,000,000 Notes, 4.60%, due 11/4/98 (Note A) 4.61 14,995,966
9,000,000 Notes, 5.28%, due 11/4/98 (Note A) 5.24 9,001,742
15,000,000 Notes, 5.28%, due 11/4/98 (Note A) 5.26 14,993,164
50,000,000 Notes, 4.64%, due 11/6/98 (Note A) 4.61 49,999,801
7,075,000 Notes, 5.31%, due 11/23/98 5.20 7,074,841
5,000,000 Notes, 5.00%, due 11/25/98 (Note A) 5.05 4,999,014
1,000,000 Notes, 5.37%, due 1/14/99 5.15 1,000,048
1,000,000 Notes, 5.92%, due 2/1/99 5.62 1,000,564
8,000,000 Notes, 5.53%, due 2/26/99 (Note E) 5.22 8,000,000
9,000,000 Notes, 5.61%, due 3/2/99 (Note E) 5.55 8,996,301
5,000,000 Notes, 5.88%, due 3/19/99 4.79 5,019,151
1,805,000 Notes, 5.55%, due 3/23/99 5.72 1,803,849
10,000,000 Notes, 5.56%, due 3/25/99 5.55 9,998,469
1,000,000 Notes, 6.31%, due 4/6/99 5.55 1,002,845
1,000,000 Notes, 5.57%, due 4/7/99 5.55 999,618
5,000,000 Notes, 5.57%, due 4/7/99 5.63 4,998,089
2,655,000 Notes, 5.70%, due 5/5/99 5.57 2,656,285
9,190,000 Notes, 5.68%, due 8/4/99 (Note E) 5.63 9,187,915
--------------
165,517,195
--------------
FEDERAL HOME LOAN MORTGAGE CORP.--4.9%
5,500,000 Discount Notes, due 1/11/99 5.00 5,446,415
1,260,208 Mortgage Pool MG50133, 6.00%, due 11/1/98 5.74 1,260,207
5,000,000 Notes, 13.00%, due 11/4/98 5.61 5,002,809
2,000,000 Notes, 5.18%, due 11/18/98 (Note E) 5.56 1,999,650
5,000,000 Notes, 5.60%, due 3/12/99 5.57 5,000,584
7,500,000 Notes, 5.60%, due 4/21/99 5.03 7,517,904
--------------
26,227,569
--------------
FEDERAL NATIONAL MORTGAGE ASSOC.--34.3%
20,000,000 Mortgage-backed Discount Notes, due 2/1/99 5.14 19,739,790
10,000,000 Mortgage-backed Discount Notes, due 2/2/99 5.13 9,869,542
10,000,000 Notes, 5.18%, due 11/2/98 (Note A) 5.26 9,995,544
10,000,000 Notes, 4.56%, due 11/3/98 (Note A) 4.65 9,994,889
4,000,000 Notes, 4.58%, due 11/3/98 (Note A) 4.63 3,996,628
10,000,000 Notes, 4.65%, due 11/3/98 (Note A) 4.61 9,999,901
30,000,000 Notes, 4.67%, due 11/3/98 (Note A) 4.66 29,992,685
15,000,000 Notes, 4.17%, due 11/4/98 (Note A) 4.15 14,999,958
1,000,000 Notes, 7.00%, due 11/13/98 5.21 1,000,496
15,000,000 Notes, 5.00%, due 11/28/98 (Note A) 5.09 14,990,714
10,000,000 Notes, 5.30%, due 12/10/98 (Note E) 5.84 9,999,056
1,000,000 Notes, 7.05%, due 12/10/98 5.15 1,001,797
10,000,000 Notes, 5.56%, due 12/15/98 5.38 10,000,419
22,500,000 Notes, 5.32%, due 12/17/98 (Note A) 5.38 22,493,143
6,000,000 Notes, 6.00%, due 3/26/99 5.72 6,006,412
5,500,000 Notes, 6.43%, due 4/11/99 4.70 5,538,858
5,000,000 Notes, zero coupon, due 3/24/99 5.82 4,890,323
--------------
184,510,155
--------------
</TABLE>
- ------------------------------------------------------------------------------
15
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
U.S. GOVERNMENT PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STUDENT LOAN MARKETING ASSOC.--14.8%
$ 25,000,000 Notes, 5.19%, due 11/2/98 (Note A) 5.27 $ 24,982,857
23,000,000 Notes, 4.37%, due 11/3/98 (Note A) 4.45 22,990,323
15,000,000 Notes, 4.66%, due 11/3/98 (Note A) 4.65 14,996,657
1,000,000 Notes, 7.72%, due 1/25/99 5.57 1,004,622
5,000,000 Notes, 7.72%, due 1/25/99 5.59 5,023,113
1,000,000 Notes, 5.58%, due 3/11/99 5.56 999,875
5,000,000 Notes, 5.63%, due 6/2/99 4.60 5,027,582
4,447,000 Notes, 4.50%, due 8/2/99 5.65 4,410,178
--------------
79,435,207
--------------
REPURCHASE AGREEMENTS--13.9%
34,963,000 ABN Amro, Inc.,
-dated 10/30/98, due 11/2/98, in the amount of $34,979,316
-fully collateralized by $42,273,325 U.S. Government Securities, value $35,662,260 5.60 34,963,000
40,000,000 ABN Amro, Inc.,
-dated 10/14/98, due 11/17/98, in the amount of $40,197,200
-fully collateralized by $42,610,165 U.S. Government Securities, value $41,375,695 5.22 40,000,000
--------------
74,963,000
--------------
TOTAL INVESTMENTS -- 99.2% 533,328,781
OTHER ASSETS AND LIABILITIES, NET -- 0.8% 4,074,987
--------------
NET ASSETS -- 100.0% $ 537,403,768
--------------
--------------
</TABLE>
Please see accompanying notes to the schedules of investments and financial
statements.
- ------------------------------------------------------------------------------
16
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MUNICIPAL PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL OBLIGATIONS
ALABAMA--3.67%
$ 5,000,000 Huntsville IDB Rev. Bonds (Central CPVC Corp. Proj.) Ser.1998 VRDN, 3.40%
(LOC: First Union National Bank) (Note C) 3.40 $ 5,000,000
9,000,000 Montgomery PCR Rev. Bonds (General Electric Co. Proj.), 3.25%, due 11/4/98 3.25 9,000,000
--------------
14,000,000
--------------
ALASKA--0.26%
1,000,000 Valdez Marine Term. (ARCO Transp. Alaska, Inc. Proj.) Ser. 1994A, 3.05%, due
2/16/99 3.05 1,000,000
--------------
ARIZONA--0.52%
2,000,000 Pima Cty. IDA (Tucson Elec. Co. Proj.) VRDN, 3.20% (LOC: Societe Generale)
(Note C) 3.20 2,000,000
--------------
CALIFORNIA--1.17%
300,000 California Alternative Energy Source Fin. Auth., Ser. 1986 VRDN, 3.25%
(LOC: Banque Nationale de Paris) (Note C) 3.25 300,000
155,000 California HFA Rev. Bond, Ser. 1994B1, 5.30%, due 2/1/99 (Insured: FHA) 4.00 155,491
4,000,000 California School Cash Reserve Prog. Auth., Ser. A, 4.50%, due 7/2/99 3.74 4,019,493
--------------
4,474,984
--------------
COLORADO--3.36%
265,000 Colorado HFA Rev. Bonds, Ser. A4, 4.55%, due 10/1/99 (Insured: FHA) 3.55 267,356
6,780,000 Commerce City Rev. Bonds (Golf Enterprise) Ser. 1994, VRDN, 3.20% (LOC: U.S. Bank)
(Note C) 3.20 6,780,000
4,000,000 Denver City & Cty. Airport Rev. Bonds, Ser. 1997A, 3.30%, due 12/1/98 (LOC:
Bayerische Landesbank) 3.30 4,000,000
1,750,000 Denver City & Cty. Airport Rev. Bonds, Ser. 1997B VRDN, 3.15% (LOC: Bayerische
Landesbank) (Note C) 3.15 1,750,000
--------------
12,797,356
--------------
CONNECTICUT--0.03%
105,000 Hebron GO Bonds, 6.10%, due 11/15/98 (Insured: MBIA) 4.00 105,082
--------------
DELAWARE--2.56%
8,600,000 Delaware EDA (Del. Clean Pwr. Proj.) VRDN Ser. 1997C, 3.20%
(LOC: Canadian Imperial Bank of Commerce) (Note C) 3.20 8,600,000
1,160,000 Wilmington Community Rev. Bond, VRDN Program A, 3.35% (LOC: CoreStates Bank)
(Note C) 3.35 1,160,000
--------------
9,760,000
--------------
DISTRICT OF COLUMBIA--0.03%
110,000 Washington D.C. HFA Ser. F-1, 5.00%, due 12/1/98 (GNMA Collateralized) 4.00 110,086
--------------
FLORIDA--11.33%
2,000,000 Florida Board of Ed. (ABN-AMRO Munitops 1998) VRDN, 3.33% (LIQ: ABN-AMRO Bank)
(Note C) 3.33 2,000,000
1,600,000 Florida Gulf Coast Univ. COP VRDN, 3.10% (LOC: First Union National Bank) (Note C) 3.10 1,600,000
4,210,000 Florida Muni. Power Agy. CP Notes Ser. A, 3.35%, due 12/2/98 (LOC: First Union
National Bank) 3.35 4,210,000
3,698,000 Gainesville Utility System CP Ser. C, 3.25%, due 12/16/98 (LIQ: Bank of America &
Sun Trust Bank) 3.25 3,698,000
2,500,000 Jacksonville PCR Bonds (Florida Power & Light Co. Proj.), 3.30%, due 12/4/98 3.30 2,500,000
4,700,000 Lee Cty. Hosp. Board of Dir. (Lee Memorial Hosp. Proj.) Ser. 1992B, 3.45%, due
12/7/98 (LINE: SunBank) 3.45 4,700,000
6,000,000 Lee Cty. Hosp. Board of Dir. (Lee Memorial Hosp. Proj.) Ser. 1995A, 3.45%, due
12/7/98 (LINE: SunBank) 3.45 6,000,000
4,000,000 Lee Cty. Hosp. Board of Dir. (Lee Memorial Hosp. Proj.) Ser. 1997B, 3.25%, due
2/12/99 (LINE: SunBank) 3.25 4,000,000
2,500,000 Orange Cty. IDA (Sutherland Printing Proj.) Ser. 1998A VRDN, 3.25% (LOC: First
Union National Bank) (Note C) 3.25 2,500,000
2,600,000 Pinellas Cty. IDR Bonds (Pozin Enterprises Inc. Proj.) Ser. 1997, VRDN 3.30% (LOC:
Nationsbank) (Note C) 3.30 2,600,000
1,200,000 St. Lucie Cty. PCR (Florida Power & Light Co. Proj.) VRDN, 3.85% (Note C) 3.85 1,200,000
8,165,000 Sunrise Utility Sys. Rev. Bonds Ser. PCR17 VRDN, 3.26% (LIQ: Citibank) (Note C) 3.26 8,165,000
--------------
43,173,000
--------------
GEORGIA--2.97%
7,537,000 Dekalb Cty. Hsg. Auth. SFM Ser. 1997A VRDN, 3.35% (LIQ: Bank of New York) (Note C) 3.35 7,537,000
1,800,000 Talbot Cty. Dev. Auth. IDR (Douglas Asphalt Co. Proj.) VRDN, 3.25% (LOC: First
Union National Bank) (Note C) 3.25 1,800,000
2,000,000 Valdosta Lowndes Cty. IDR (Reames Cos. Proj.) Ser.1998 VRDN, 3.25% (LOC:
Nationsbank) (Note C) 3.25 2,000,000
--------------
11,337,000
--------------
</TABLE>
- ------------------------------------------------------------------------------
17
<PAGE>
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MUNICIPAL PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ILLINOIS--7.99%
$ 2,500,000 Arcola IDR (Herff Jones, Inc. Proj.) VRDN, 3.20% (LOC: Wachovia Bank & Trust Co.)
(Note C) 3.20 $ 2,500,000
2,900,000 Chicago (Muni. Sec. Trust Receipts) Ser. A2 VRDN, 3.32% (Insured: AMBAC; LIQ:
Credit Suisse) (Note C) 3.32 2,900,000
2,625,000 Chicago Sales Tax Rev. Bond, VRDN, 3.26% (LIQ: Citibank) (Note C) 3.26 2,625,000
100,000 DuPage Cty. Water & Sewer Rev. Bonds, 8.125%, due 12/1/98 (Insured: AMBAC) 4.00 100,329
3,000,000 Illinois Dev. Fin. Auth. (Citizens Util. Co. Proj.) VRDN, 3.20% (Note C) 3.20 3,000,000
575,000 Illinois Dev. Fin. Auth. (D.E. Akin Seed Proj.) VRDN, 3.30% (LOC: Bank One)
(Note C) 3.30 575,000
1,750,000 Illinois Dev. Fin. Auth. (Emtech Machining & Grinding Inc. Proj.) VRDN, 3.20%
(LOC: LaSalle National Bank) (Note C) 3.20 1,750,000
8,000,000 Illinois Dev. Fin. Auth. (Waste Management Inc. Proj.) VRDN, 3.15% (LOC: Chase
Manhattan Bank) (Note C) 3.15 8,000,000
1,550,000 Illinois Health Fac. Auth. Rev. Bonds (Rush Presbyterian-St. Luke's Med. Ctr.
Group) Ser. 1996B, 3.25%, due 11/16/98 (LOC: Northern Trust) 3.25 1,550,000
500,000 Illinois Health Fac. Auth. Rev. Bonds (Trinity Med. Ctr.), 4.60%, due 7/1/99
(Insured: FSA) 3.45 503,719
1,800,000 North Aurora IDR (Oberweiss Dairy Inc. Proj.) VRDN, 3.20% (LOC: LaSalle National
Bank) (Note C) 3.20 1,800,000
200,000 Northlake GO, 4.40%, due 12/1/98 (Insured: MBIA) 4.00 200,064
2,340,000 Oak Lawn IDR (Lavergne Partners Proj.) VRDN, 3.20% (LOC: LaSalle National Bank)
(Note C) 3.20 2,340,000
2,600,000 Richmond IDR (Maclean Fogg Co. Proj.) VRDN, 3.15% (LOC: Bank of America) (Note C) 3.15 2,600,000
--------------
30,444,112
--------------
INDIANA--4.46%
285,000 Anderson Option Income Tax Rev. Bonds, 4.00%, due 1/1/99 (Insured: AMBAC) 4.00 285,000
5,500,000 Indianapolis Gas Utility Sys. Rev. CP (Citizens Gas & Coke Util. Proj.), 3.10%,
due 1/22/99 (LIQ: NBD Bancorp.) 3.10 5,500,000
8,000,000 Jeffersonville Envir. Dev. Rev. Bonds (Apollo America Corp. Proj.) VRDN, 3.25%
(LOC: Chase Manhattan Bank) (Note C) 3.25 8,000,000
3,000,000 Newton Cty. IDR (Intec Group, Inc. Proj.) VRDN, 3.20% (LOC: LaSalle National Bank)
(Note C) 3.20 3,000,000
200,000 West Lafayette Rev. Bonds (Junior-Senior High School Bldg. Corp.), 5.00%, due
7/15/99 (Insured: FSA) 3.90 201,496
--------------
16,986,496
--------------
IOWA--1.47%
4,200,000 Dubuque (Jeld-Wen, Inc. Proj.) Ser. 1988 VRDN, 3.48% (LOC: ABN-AMRO Bank) (Note C) 3.48 4,200,000
980,000 Iowa Higher Ed. Loan Auth. Rev. Bonds, 5.00%, due 8/1/99 (Insured: MBIA) 3.55 990,350
100,000 Iowa Student Loan Rev. Bond Ser. C, 6.375%, due 12/1/98 (Insured: AMBAC) 4.00 100,189
300,000 Waterloo Rev. Bonds (Wheaton Franciscan Services) Ser. A, 7.10%, due 8/15/99,
Prerefunded @ 102 (Note D) 3.43 314,289
--------------
5,604,828
--------------
KANSAS--0.06%
220,000 Johnson Cty. Water Dist. #0001, 10.50%, due 12/1/98, Prerefunded @ 100 (Note D) 7.97 220,430
--------------
KENTUCKY--6.64%
1,500,000 Clark Cty. PCR Bonds (Eastern Kentucky Power Proj.) Ser. J-2, 3.10% , put 4/15/99
(GTY: CFC National Rural Util.) 3.10 1,500,000
4,960,000 Danville Multi-City Lease Rev. Bonds, 3.25%, due 1/19/99 (LOC: PNC Bank) 3.25 4,960,000
4,000,000 Jefferson Cty. PCR (Louisville Gas & Elec. Co. Proj.) Ser. 1997, 3.10%, due
2/10/99 3.10 4,000,000
1,500,000 Jefferson Cty. PCR (Louisville Gas & Elec. Co. Proj.) Ser. 1997, 3.20%, due
2/10/99 3.20 1,500,000
830,000 Kentucky EDA Med. Ctr. Rev. Bonds (Ashland Hosp. Corp.), 4.25%, due 2/1/99
(Insured: FSA) 3.65 831,208
3,900,000 Kentucky Turnpike Auth. (Trust Rec.) Ser. 17 VRDN, 3.40% (LIQ: Commerzbank)
(Note C) 3.40 3,900,000
1,200,000 Mayfield (Kentucky League of Cities Pooled Lease Fin. Prog.) Ser. 1996 VRDN, 3.25%
(LOC: PNC Bank) (Note C) 3.25 1,200,000
5,400,000 Pendleton Cty. (Kentucky Assoc. of Counties Lease Trust Prog.) Ser. 1989, 3.30%,
due 11/6/98 (LOC: Commonwealth Bank of Australia) 3.30 5,400,000
2,000,000 Pendleton Cty. (Kentucky Assoc. of Counties Lease Trust Prog.) Ser. 1989, 3.25%,
due 2/12/99 (LOC: Commonwealth Bank of Australia) 3.25 2,000,000
--------------
25,291,208
--------------
LOUISIANA--2.52%
2,600,000 Calcasieu Parish (Citgo Petroleum Corp.) Ser. 1995 VRDN, 3.85% (LOC: Banque
Nationale de Paris) (Note C) 3.85 2,600,000
6,889,000 Calcasieu Parish Pub. Trust Auth. Rev. Bonds (WPT Corp. Proj.) Ser. 1997 VRDN,
3.25% (LOC: Morgan Guaranty) (Note C) 3.25 6,889,000
100,000 Louisiana Correctional Facs. Corp. Rev. Bonds, 4.80%, due 12/15/98 (Insured: FSA) 4.00 100,094
--------------
9,589,094
--------------
</TABLE>
- ------------------------------------------------------------------------------
18
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MUNICIPAL PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARYLAND--6.30%
$ 11,600,000 Anne Arundel Cty. (Baltimore Gas & Electric Proj.) Ser. 1988, 3.20%, due 2/11/99
(SBPA: Bank of New York, Chemical Bank) 3.20 $ 11,600,000
1,500,000 Baltimore Cty. Rev. Auth. (Golf Systems) VRDN, 3.25% (LOC: First National Bank of
Maryland) (Note C) 3.25 1,500,000
2,500,000 Maryland Health & Higher Ed. (Deaton Special Hosp. & Home Proj.) VRDN, 3.25%
(LOC: First National Bank of Maryland) (Note C) 3.25 2,500,000
2,100,000 Maryland Health & Higher Ed. (Kennedy Krieger Proj.) VRDN, 3.20% (LOC: First
National Bank of Maryland) (Note C) 3.20 2,100,000
1,900,000 Maryland Health & Higher Ed. (North Arundel Hosp. Proj.) VRDN, 3.10% (LOC: Mellon
Bank) (Note C) 3.10 1,900,000
4,400,000 Maryland Health & Higher Ed. (Univ. of Maryland Med. Sys.) Ser. A VRDN, 3.25%
(LOC: First National Bank of Maryland) (Note C) 3.25 4,400,000
--------------
24,000,000
--------------
MASSACHUSETTS--0.51%
290,000 Farmington River Regional Sch. Dist. GO Bonds, 5.50%, due 11/15/98
(Insured: AMBAC) 4.00 290,162
137,000 Great Barrington GO Bonds, 6.00%, due 6/15/99 (Insured: MBIA) 3.90 138,729
760,000 Massachusetts Ed. Loan Auth. Ser. 1996B, 4.55%, due 7/1/99 (Insured: AMBAC) 4.00 762,681
650,000 Massachusetts HFA Ser. D, 3.80%, due 12/1/98 (Insured: MBIA) 3.80 650,000
110,000 Norfolk GO Bonds, 6.75%, due 11/15/98 (Insured: AMBAC) 4.00 110,113
--------------
1,951,685
--------------
MICHIGAN--2.10%
8,000,000 Michigan Hsg. Dev. Auth. Ser. 1988A, 3.10%, due 1/21/99 (LOC: Landesbank Hessen
Thueringen) 3.10 8,000,000
--------------
MINNESOTA--0.26%
1,000,000 St. Paul Hsg. & Redev. Rev. Bonds (Science Museum of Minn.) Ser. B VRDN, 3.20%
(LOC: First Bank) (Note C) 3.20 1,000,000
--------------
MISSISSIPPI--0.92%
1,500,000 Mississippi Hosp. Equip. & Facs. Auth. Rev. Bonds (No. Mississippi Hlth. Serv.)
Ser. 1, 3.45%, due 11/18/98 (SBPA: West Deutsche Landesbank) 3.45 1,500,000
2,000,000 Mississippi Hosp. Equip. & Facs. Auth. Rev. Bonds (No. Mississippi Hlth. Serv.)
Ser. 1, 3.10%, due 1/21/99 (SBPA: West Deutsche Landesbank) 3.10 2,000,000
--------------
3,500,000
--------------
MISSOURI--1.04%
1,950,000 Missouri Env. Imp. & Energy Res. Auth. (Assoc. Elec. Coop.) Ser. 1993M VRDN, 3.20%
(GTY: CFC National Rural) (Note C) 3.20 1,950,000
2,000,000 Missouri Health & Ed. Facs. Auth. (Stowers Institue for Med. Res.) Ser. 1998 VRDN,
3.15% (LIQ: Morgan Guaranty) (Note C) 3.15 2,000,000
--------------
3,950,000
--------------
NEVADA--0.58%
1,200,000 Henderson Cty. Pub. Imp. Trust Rev. Bonds (Berry Plastics Corp. Proj.) Ser. 1991
VRDN, 3.48% (LOC: Nationsbank) (Note C) 3.48 1,200,000
1,000,000 Washoe Cty. Water Fac. Rev. Bonds (Sierra Pacific Power Co. Proj.) VRDN, 3.85%
(LOC: Union Bank of Switzerland) (Note C) 3.85 1,000,000
--------------
2,200,000
--------------
NEW HAMPSHIRE--1.29%
1,415,000 Manchester Hsg. Auth. Rev. Bonds (Wall St. Tower Proj.) Ser. B VRDN, 3.35% (LOC:
PNC Bank) (Note C) 3.85 1,415,000
3,500,000 New Hampshire Business Fin. Auth. (Forty - One Northwestern LLC Proj.) Ser. 1998
VRDN, 3.50% (LOC: Bank of Boston) (Note C) 3.50 3,500,000
--------------
4,915,000
--------------
NEW JERSEY--0.18%
200,000 Hammonton GO Bonds, 4.875%, due 12/1/98 (Insured: FGIC) 4.00 200,139
500,000 Jersey City Incinerator Auth. Rev. Bonds, 6.90%, due 11/15/98 (Insured: FGIC) 4.10 500,520
--------------
700,659
--------------
NEW MEXICO--0.83%
1,500,000 Albuquerque IDR (CVI Laser Corp. Proj.) Ser. 1998 VRDN, 3.30% (LOC: Nationsbank)
(Note C) 3.30 1,500,000
1,650,000 Albuquerque IDR (Karsten Co.of New Mexico) Ser. 1997A VRDN, 3.55% (LOC: Bank One)
(Note C) 3.55 1,650,000
--------------
3,150,000
--------------
</TABLE>
- ------------------------------------------------------------------------------
19
<PAGE>
- ------------------------------------------------------------------------------
WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MUNICIPAL PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW YORK--1.81%
$ 6,880,000 New York Med. Care Facs. (Eagle Tax Exempt Trust) Ser. 1995 VRDN, 3.21% (LIQ:
Citibank) (Note C) 3.21 $ 6,880,000
--------------
OHIO--2.05%
6,000,000 Montgomery Cty. Hosp. Fac. Rev. Bonds (Miami Valley Hosp.) Ser. 1998B, 3.10%, due
11/5/98 (LIQ: Morgan Guaranty) 3.10 6,000,000
1,800,000 Ohio Air Quality Dev. Auth. Rev. Bonds (JMG Funding) Ser. B VRDN, 3.10% (LOC:
Societe Generale) (Note C) 3.10 1,800,000
--------------
7,800,000
--------------
PENNSYLVANIA--4.89%
1,500,000 Beaver Cty. IDA (Duquesne Light Co. Proj.) Ser.1993A, 3.20% due 2/18/99 (LOC:
Union Bank of Switzerland) 3.20 1,500,000
1,500,000 Bethel Township IDA (Brentwood Industries Inc. Proj.) VRDN, 3.35% (LOC: CoreStates
Bank) (Note C) 3.35 1,500,000
2,620,000 Carbon Cty. IDA Res. Rec. Rev. (Panther Creek Proj.) Ser. 1991A, 3.40%, due
12/15/98 (LOC: National Westminster Bank) 3.40 2,620,000
7,500,000 Carbon Cty. IDA Res. Rec. Rev. (Panther Creek Proj.) Ser. 1990A, 3.10%, due 2/8/99
(LOC: National Westminster Bank) 3.10 7,500,000
500,000 Pennsylvania COP Ser. A, 4.40%, due 7/1/99 (Insured: AMBAC) 3.50 502,904
5,000,000 Venango IDA (Scrubgrass Proj.) Ser. 1990A, 3.25%, due 2/19/99 (LOC: National
Westminster Bank) 3.25 5,000,000
--------------
18,622,904
--------------
RHODE ISLAND--0.52%
2,000,000 Rhode Island Ind. Fac. Corp. IDR (NFA Corp. Proj.) VRDN, 3.70% (LOC: Bank of
Boston) (Note C) 3.70 2,000,000
--------------
SOUTH CAROLINA--4.12%
4,000,000 Greenville City & Cty. IDR Bonds (Stevens Aviation Tech. Serv. Facs. Proj.) Ser.
97 VRDN, 3.25% (LOC: First Union National Bank) (Note C) 3.25 4,000,000
5,000,000 South Carolina Port Auth. (ABN-AMRO Munitops #7) VRDN, 3.38% (LIQ: ABN-AMRO Bank)
(Note C) 3.38 5,000,000
6,700,000 South Carolina Jobs EDA (Zeuna Starker USA, Inc. Proj.) VRDN, 3.35% (LOC:
Bayerische Landesbank) (Note C) 3.35 6,700,000
--------------
15,700,000
--------------
SOUTH DAKOTA--0.63%
2,400,000 South Dakota Hsg. Dev. Auth. (Homeownership Mortgage Bonds) Ser. 1997E VRDN, 3.40%
(GIC: West Deutsche Landesbank Gironzentrale) (Note C) 3.40 2,400,000
--------------
TENNESSEE--0.89%
3,400,000 Franklin Cty. IDB (Franklin Ind. Inc. Proj.) VRDN, 3.25% (LOC: Nationsbank)
(Note C) 3.25 3,400,000
--------------
TEXAS--11.69%
5,000,000 Brazos River Auth. (Texas Util. Elec. Co. Proj.) Ser. 1994A, 3.15%, due 1/20/99
(LOC: Canadian Imperial Bank of Commerce) 3.15 5,000,000
1,000,000 Brazos River Auth. (Texas Util. Elec. Co. Proj.) Ser. 1995A VRDN, 3.85%, (LOC:
Morgan Guaranty) (Note C) 3.85 1,000,000
500,000 Corpus Christi IDR Bonds (CITGO Petroleum) VRDN, 3.85% (LOC: Bank One) (Note C) 3.85 500,000
2,000,000 San Antonio IDA (LGC Building LLC & KLN Steel Prod. Co. Ltd. Proj.) VRDN Ser.1998,
3.30% (LOC: Nationsbank) (Note C) 3.30 2,000,000
8,950,000 Texas Dept. of Hsg. & Comm. Affairs Ser. A, 3.30%, due 12/3/98 (Insured: FGIC,
LIQ: FGIC) 3.30 8,950,000
5,350,000 Texas Dept. of Hsg. & Comm. Affairs Ser. B, 3.20%, due 12/3/98 (Insured: FGIC,
LIQ: FGIC) 3.20 5,350,000
5,000,000 Texas Veterans Hsg. Ser. 1994A-1 VRDN, 3.15% (Note C) 3.15 5,000,000
6,500,000 Texas Tax Revenue Antic. Notes VRDN, 3.85% (Note C) 3.85 6,500,000
9,266,000 University of Texas Board of Regents Ser. A, 3.35% , due 12/7/98 3.35 9,266,000
1,000,000 West Side Calhoun Cty. (BP Chemicals) VRDN, 3.85% (Note C) 3.85 1,000,000
--------------
44,566,000
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UTAH--0.26%
1,000,000 Trementon City IDR (La-Z-Boy Chair Co. Proj.) Ser. 1990 VRDN, 3.48% (LOC: NBD
Bank) (Note C) 3.48 1,000,000
--------------
VARIOUS STATES--2.68%
10,220,956 Pitney Bowes Credit Corp. Leasetops Muni Trust Ser. 1998-2 VRDN, 3.48%, (LIQ:
Pitney Bowes Credit Corp.) (Note C) 3.48 10,220,956
--------------
</TABLE>
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20
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
MUNICIPAL PORTFOLIO o SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL ANNUALIZED
AMOUNT YIELD (%) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VIRGINIA--1.31%
$ 600,000 King George Cty. (Birchwood Power Proj.) Ser. 1995 VRDN, 3.85% (LOC: Credit
Suisse) (Note C) 3.85 $ 600,000
1,500,000 Louisa Cty. IDA (Virginia Elec. Power Co.), 3.55%, due 12/15/98 3.55 1,500,000
2,880,000 Richmond GO Bond Antic. Notes VRDN, 3.15% (SBPA: Nationsbank) (Note C) 3.15 2,880,000
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4,980,000
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WASHINGTON--1.97%
100,000 King & Snohomish Ctys. GO Bonds (Sch. Dist. #417) Ser. A, 5.75%, due 12/1/98
(Insured: FGIC) 4.00 100,139
7,420,000 Washington Hsg. Fin. Comm. (Boardwalk Apts. Proj.) VRDN, 3.40% (LOC: U.S. Bank)
(Note C) 3.40 7,420,000
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7,520,139
--------------
WEST VIRGINIA--2.36%
2,500,000 West Virginia GO Bonds Ser. 1998C VRDN, 3.26% (LIQ: Bank of Boston) (Note C) 3.26 2,500,000
3,000,000 West Virginia Public Energy Auth. (Morgantown Energy Assoc. Proj.)
Ser. 1989A, 3.40%, due 12/16/98 (LOC: Swiss Bank) 3.40 3,000,000
1,000,000 West Virginia Public Energy Auth. (Morgantown Energy Assoc. Proj.)
Ser. 1989A, 3.10%, due 2/9/99 (LOC: Swiss Bank) 3.10 1,000,000
2,500,000 West Virginia Public Energy Auth. (Morgantown Energy Assoc. Proj.)
Ser. 1989A, 3.20%, due 2/9/99 (LOC: Swiss Bank) 3.20 2,500,000
--------------
9,000,000
--------------
TOTAL MUNICIPAL OBLIGATIONS--98.23% 374,351,019
OTHER ASSETS AND LIABILITIES, NET--1.77% 6,739,427
--------------
NET ASSETS -- 100.0% $ 381,090,446
--------------
--------------
</TABLE>
Please see accompanying notes to the schedules of investments and financial
statements.
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21
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WATERHOUSE INVESTORS CASH MANAGEMENT FUNDS
NOTES TO SCHEDULES OF INVESTMENTS
October 31, 1998
(A) Variable rate securities. The rates shown are the current rates on October
31, 1998. Dates shown represent the next interest reset date.
(B) These obligations were acquired for investment, not with intent to
distribute or sell. They are restricted as to public resale. These
obligations were acquired at a cost of par. On October 31, 1998, the
aggregate value of these securities, valued at amortized cost, is
$120,840,000, representing 4.1% of net assets of the Money Market
Portfolio.
(C) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market rates.
(D) Bonds which are prerefunded or escrowed to maturity 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.
(E) Security may be redeemed prior to maturity date at the discretion of the
issuer.
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DESCRIPTION OF ABBREVIATIONS
AMBAC American Municipal Bond Assurance Corporation
CFC Cooperative Finance Corporation
COP Certificates of Participation
CP Commercial Paper
EDA Economic Development Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FSA Financial Security Assurance Inc.
GIC Guaranteed Investment Contract
GNMA Government National Mortgage Association
GO General Obligation
GTY Guarantee
HFA Housing Finance Authority
IDA Industrial Development Authority
IDB Industrial Development Bond
IDR Industrial Development Revenue Bond
LINE Line of Credit
LIQ Liquidity Agreement
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Insurance
Corporation
PCR Pollution Control Revenue Bond
SBPA Standby Bond Purchase Agreement
SFM Single Family Mortgage
VRDN Variable Rate Demand Note
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This Report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
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22
<PAGE>
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Report of Independent Auditors
Shareholders and Board of Directors
Waterhouse Investors Cash Management Funds
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of the
Waterhouse Investors Cash Management Funds, comprising,
respectively, the Money Market Portfolio, the U.S. Government
Portfolio, and the Municipal Portfolio (three of the
portfolios comprising the Waterhouse Investors Family of
Funds, Inc.) as of October 31, 1998, and the related
statements of operations for the year then ended, the
statements of changes in net assets for each of the two years
in the period then ended and the financial highlights for each
of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements and financial highlights. Our procedures
included confirmation of securities owned as of October 31,
1998, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Waterhouse Investors
Cash Management Funds at October 31, 1998, the results of
their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
December 1, 1998
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23
<PAGE>
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WATERHOUSE SECURITIES, INC.
---------------------------------------------------
WHERE INVESTORS WHO EXPECT VALUE FEEL RIGHT AT HOME
Member New York Stock Exchange o SIPC
National Headquarters o 100 Wall Street o New York, NY
Over 150 Branches Nationwide
[LOGO] Waterhouse Securities is a subsidiary of the Toronto-Dominion Bank
whose stock is listed on the New York Stock Exchange (Symbol: TD)
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