As filed with the U.S. Securities and Exchange Commission on November 8, 1996
Registration Nos. 33-11125 and 811-07795
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1
JPM SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 557-0700
John E. Pelletier
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to:
Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this registration statement.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine. Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended, the Registrant hereby elects to register an indefinite number of
shares of Registrant and any series thereof hereinafter created.
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JPM SERIES TRUST
CROSS-REFERENCE SHEET
(As Required by Rule 495)
PART A ITEM NO.: Prospectus Headings.
1. COVER PAGE: Cover Page.
2. SYNOPSIS: Expense Table.
3. CONDENSED FINANCIAL INFORMATION: Not applicable.
4. GENERAL DESCRIPTION OF REGISTRANT: Cover Page; Expense Table;
Investment Objective and Policies; Additional Investment Practices
and Risks; Investment Policies and Restrictions; Organization.
5. MANAGEMENT OF THE FUND: Management of the Fund; Shareholder Servicing;
Additional Information.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not applicable.
6. CAPITAL STOCK AND OTHER SECURITIES: Net Asset Value; Purchase of Shares;
Taxes; Dividends and Distributions; Organization.
7. PURCHASE OF SECURITIES BEING OFFERED: Purchase of Shares; Exchange of
Shares (if applicable); Who May be a Suitable Investor in the Fund(s);
Dividends and Distributions; Net Asset Value.
8. REDEMPTION OR REPURCHASE: Redemption of Shares; Exchange of Shares (if
applicable); Net Asset Value.
9. PENDING LEGAL PROCEEDINGS: Not applicable.
PART B ITEM NO.: Statement of Additional Information Headings.
10. COVER PAGE: Cover Page.
11. TABLE OF CONTENTS: Table of Contents.
12. GENERAL INFORMATION AND HISTORY: General.
13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies;
Investment Restrictions; Appendices A and B.
14. MANAGEMENT OF THE FUND: Trustees and Officers.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of
Shares.
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16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Distributor;
Co-Administrator; Services Agent; Custodian and Transfer Agent; Independent
Accountants; Expenses.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.
18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares.
20. TAX STATUS: Taxes.
21. UNDERWRITERS: Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Data.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C
Information required to be included in Part C is set forth under the
appropriately numbered items included in Part C of this registration statement.
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PROSPECTUS
JPM SERIES TRUST
JPM PIERPONT SHARES: TAX AWARE EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE DISCIPLINED EQUITY FUND
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
FOR INFORMATION CALL (800) 521-5411
Tax Aware Equity Fund and Tax Aware Disciplined Equity Fund (the "Funds") each
seek to provide high total return, while being sensitive to the impact of
capital gains taxes on investors' returns. The Funds are designed for long-term
investors. Each Fund invests primarily in common stocks and other equity
securities of large and medium-sized U.S. companies.
The Funds are series of JPM Series Trust (the "Trust") and are advised by Morgan
Guaranty Trust Company of New York ("Morgan" or the "Advisor").
This Prospectus sets forth concisely the information about the JPM Pierpont
Shares of each Fund that a prospective investor should know before investing and
should be retained for future reference. Additional information has been filed
with the Securities and Exchange Commission in a Statement of Additional
Information dated November 18, 1996, as amended or supplemented from time to
time. This information is incorporated herein by reference and is available
without charge upon written request from the Funds' Distributor or by calling
(800) 221-7930. The Funds' Distributor is Funds Distributor, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: JPM Pierpont Tax
Aware Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES
OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THE VALUE
OF AN INVESTMENT IN EITHER FUND MAY FLUCTUATE AND MAY, AT THE TIME IT IS
REDEEMED, BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
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.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 18, 1996
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TABLE OF CONTENTS
Page
Expense Table 1
Investment Objective and Policies 2
Additional Investment Practices and Risks 3
Management of the Funds 6
Shareholder Inquiries and Services 8
Purchase of Shares 8
Redemption of Shares 10
Dividends and Distributions 11
Net Asset Value 12
Taxes 12
Additional Information 13
Organization 13
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EXPENSE TABLE
JPM PIERPONT JPM PIERPONT
SHARES: TAX SHARES: TAX
AWARE EQUITY AWARE DISCIPLINED
FUND EQUITY FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases(1) . . . . . . . . . . . . . None None
Sales Charge Imposed on
Reinvested Distributions . . . . . . . None None
Deferred Sales Load . . . . . . . . . . None None
Redemption Fees(2):
Shares held less than 1 year . . . . . . 2% 2%
Shares held at least 1 year
but less than 5 years . . . . . . . . . 1% 1%
Shares held 5 years or more . . . . . . None None
ANNUAL OPERATING EXPENSES(3)
Advisory Fees . . . . . . . . . . . . . .45% .35%
Rule 12b-1 Fees . . . . . . . . . . . . None None
Other Expenses (after expense
reimbursement) . . . . . . . . . . . . .40% .20%
---- ----
Total Operating Expenses (after
expense reimbursement) . . . . . . . . .85% .55%
1 Certain Eligible Institutions may charge customers fees of varying amounts in
connection with the purchase of shares of a Fund through such Eligible
Institutions.
2 Redemption fees are retained by the Fund and are not paid to any other entity.
The fee will be prorated if the shares redeemed have been held for time periods
subject to differing fees. Each Fund intends, whenever feasible, to pay
redemptions in excess of $250,000 in the Tax Aware Equity Fund and $500,000 in
the Tax Aware Disciplined Equity Fund by an in-kind distribution of portfolio
securities. There will be no redemption fee charged on in-kind redemptions.
3 These expenses are based on the estimated expenses and estimated average net
assets for each Fund's first fiscal year and through February 28, 1998, after
any applicable expense reimbursement. Without such expense reimbursement, the
estimated Other Expenses and Total Operating Expenses for the first fiscal year
would be equal on an annual basis to .92% and 1.37% of the average daily net
assets of Tax Aware Equity Fund, respectively, and .63% and .98% of Tax Aware
Disciplined Equity Fund, respectively.
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EXAMPLE
An investor would pay the following expenses on a hypothetical $1,000
investment, assuming a 5% annual return with and without redemption at the end
of each time period. (However, each Fund's minimum initial investment is greater
than $1,000.)
JPM PIERPONT JPM PIERPONT
SHARES: TAX SHARES: TAX
AWARE EQUITY AWARE DISCIPLINED
FUND EQUITY FUND
Assuming No Redemption
1 Year . . . . . . . . . . . . . . $ 9 $ 6
3 Years . . . . . . . . . . . . . $27 $18
Assuming Redemption
at the End of Each Period
1 Year . . . . . . . . . . . . . . $29 $26
3 Years . . . . . . . . . . . . . $37 $28
The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in JPM
Pierpont Shares of each Fund bear. For a complete description of contractual
arrangements and other expenses applicable to the Funds, see Management of the
Funds and Shareholder Inquiries and Services -- Shareholder Servicing. THE
EXAMPLE IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE OR EXPENSES. ACTUAL EXPENSES
MAY BE MORE OR LESS THAN THOSE SHOWN.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of Tax Aware Equity Fund (the "Equity Fund") and Tax
Aware Disciplined Equity Fund (the "Disciplined Equity Fund") is to provide high
total return while being sensitive to the impact of capital gains taxes on
investors' returns. Each Fund invests primarily in common stocks of large and
medium-sized U.S. companies.
WHO MAY BE A SUITABLE INVESTOR IN THE FUNDS. The Funds are designed for
long-term taxable investors who are interested in minimizing the receipt of
taxable distributions. The Funds are not suitable vehicles for short-term
trading or "market timing." The Funds may not be suitable for tax-deferred or
tax-exempt retirement or pension plans, including Individual Retirement Accounts
(IRAs), 401(k) plans and 403(b) plans. Whenever feasible, the Equity Fund
intends to satisfy redemption requests exceeding $250,000 by an in-kind
distribution of portfolio securities and the Disciplined Equity Fund intends to
satisfy redemption requests exceeding $500,000 in-kind. See Redemption of Shares
- -- Redemption In-Kind. Neither Fund is a complete investment program and there
is no assurance that a Fund will achieve its investment objective.
PRIMARY INVESTMENTS. Each Fund is required, under normal market conditions, to
invest at least 65% of its total assets in equity securities. However, each Fund
intends, under normal market conditions and to the extent practicable, to be
fully invested in the common stocks and other equity securities of large and
medium-sized U.S. companies and, to a lesser extent, foreign companies. Equity
securities consist of exchange-traded, over-the-counter ("OTC") and unlisted
common and preferred stocks, warrants, rights, convertible securities, trust
certificates, limited partnership interests and equity participations.
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HOW INVESTMENTS ARE SELECTED. Morgan uses fundamental analysis, systematic stock
valuation and a disciplined portfolio construction process to select equity
investments for each Fund. Using a dividend discount model and based on
analysts' industry expertise, Morgan ranks companies within industry sectors
according to their relative values and then separates them into quintiles by
sector. From those securities identified by the model as undervalued, Morgan
selects securities based on several criteria, including a company's managerial
strength, prospects for growth and competitive position. The Equity Fund
generally invests in stocks ranked in the top two quintiles. The Disciplined
Equity Fund generally invests in stocks ranked in the top three quintiles. The
Equity Fund's industry sector weightings may be modestly overweighted or
underweighted relative to the sector weightings in the Standard & Poor's 500
Index (the "S&P 500"). The Disciplined Equity Fund's industry sector weightings
(but not necessarily the individual securities in its portfolio) are expected,
under normal market conditions, to be comparable to those of the S&P 500. The
Equity Fund's portfolio typically consists of between 50 and 100 stocks. The
Disciplined Equity Fund's portfolio typically consists of between 250 and 300
stocks.
The following chart summarizes the principal differences between the investment
policies of the Equity Fund and the Disciplined Equity Fund:
MORGAN SECTOR NUMBER OF
RANKING WEIGHTINGS SECURITY POSITIONS
Equity Concentrated May modestly over- 50-100
Fund in Top 2 or underweight
Quintiles vs. S&P 500
Disciplined Concentrated Generally, seeks to 250-300
Equity in Top 3 maintain weightings
Fund Quintiles comparable to S&P 500
TAX MANAGEMENT TECHNIQUES. The Funds use Morgan's proprietary tax sensitive
optimization model, which is designed to reduce, but not eliminate, the impact
of capital gains taxes on shareholders' after tax total returns. Each Fund will
try to minimize the realization of net short-term and long-term capital gains by
matching securities sold at a gain with those sold at a loss to the extent
practicable. In addition, when selling a portfolio security, each Fund will
generally select the highest cost basis shares of the security to reduce the
amount of realized capital gains. Because the gain on securities that have been
held for more than one year is subject to a lower federal income tax rate, these
securities will generally be sold before securities held less than one year.
The use of these tax management techniques will not necessarily
reduce a Fund's portfolio turnover rate or prevent the Funds from selling
securities to the extent warranted by shareholder transactions, actual or
anticipated economic, market or issuer-specific developments or other investment
considerations. However, the annual portfolio turnover rate of each Fund is
generally not expected to exceed 100%.
In addition, the policy of making substantial redemptions in-kind when feasible
may also reduce the impact of capital gains taxes on shareholders' after tax
total return. See Redemption In-Kind.
ADDITIONAL INVESTMENT PRACTICES AND RISKS
WARRANTS AND CONVERTIBLE SECURITIES. Warrants acquired by a Fund will entitle it
to buy common stock at a specified price and time. Warrants are subject to the
same market risks as stocks, but may be more volatile in price. A Fund's
investment in warrants will not entitle it to receive dividends or exercise
voting rights and will become worthless if the warrants cannot be profitably
exercised before their expiration dates. Convertible debt securities and
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preferred stock entitle the Fund to acquire the issuer's stock by exchange or
purchase at a predetermined rate. Convertible securities are subject both to the
credit and interest rate risks associated with debt obligations and to the stock
market risk associated with equity securities.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net
assets in illiquid securities, including certain restricted and private
placement securities. The price a Fund pays for illiquid securities or receives
upon resale may be lower than the price paid or received for similar securities
with a more liquid market. Accordingly, the valuation of these securities will
reflect any limitations on their liquidity. The Funds may also purchase Rule
144A securities eligible for resale to institutional investors without
registration under the Securities Act of 1933. These securities may be
determined to be liquid in accordance with guidelines established by Morgan and
approved by the Trustees. The Trustees will monitor Morgan's implementation of
these guidelines on a periodic basis.
MONEY MARKET INSTRUMENTS. Although the Funds intend, under normal circumstances
and to the extent practicable, to be fully invested in equity securities, the
Funds may invest in money market instruments to invest temporary cash balances,
to maintain liquidity to meet redemptions or as a defensive measure during, or
in anticipation of, adverse market conditions. These money market instruments
include obligations issued or guaranteed by the U.S. Government or any of its
agencies and instrumentalities, commercial paper, bank obligations, repurchase
agreements and other debt obligations. If a repurchase agreement counterparty
defaults on its obligations, a Fund may, under some circumstances, be limited or
delayed in disposing of the repurchase agreement collateral to recover its
investment.
FOREIGN INVESTMENTS. Each Fund may invest up to 5% of its total assets at the
time of purchase in the equity securities of foreign companies that are included
in the S&P 500 or are listed on a U.S. stock exchange. These investments may be
in the form of American Depositary Receipts ("ADRs") or similar securities
representing interests in an underlying foreign security. ADRs are not
necessarily denominated in the same currency as the underlying foreign
securities. If an ADR is not sponsored by the issuer of the underlying foreign
security, the institution issuing the ADR may have reduced access to information
about the issuer.
Investments in foreign securities involve risks in addition to those associated
with investments in the securities of U.S. issuers. These risks may include less
publicly available financial and other information about foreign companies; less
rigorous securities regulation; the potential imposition of currency controls,
foreign withholding and other taxes; and war, expropriation or other adverse
governmental actions. In addition, the prices of unsponsored ADRs may be more
volatile than if they were sponsored by the issuers of the underlying
securities.
WHEN-ISSUED AND FORWARD COMMITMENT TRANSACTIONS. The Funds may purchase
when-issued securities and enter into other forward commitments to purchase or
sell securities. The value of securities purchased on a when-issued or forward
commitment basis may decline between the purchase date and the settlement date.
FUTURES AND OPTIONS TRANSACTIONS. Each Fund may enter into derivative contracts
to hedge against fluctuations in securities prices or as a substitute for the
purchase or sale of securities. Each Fund may also use derivative contracts for
risk management purposes. See Risk Management in the Statement of Additional
Information. The Funds may purchase and sell (write) exchange traded and OTC put
and call options on securities and securities indexes, purchase and sell futures
contracts on securities and securities indexes and purchase and sell (write) put
and call options on futures contracts on securities and securities indexes. Some
options and futures strategies, including selling futures contracts, buying puts
and writing calls, tend to hedge a Fund's investments against price
4
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fluctuations. Other strategies, including buying futures contracts, writing puts
and buying calls, tend to increase market exposure. Options and futures
contracts may be combined with each other in order to adjust the risk and return
characteristics of the Fund's overall strategy in a manner consistent with the
Fund's objective and policies.
Transactions in derivative contracts often involve a risk of loss or
depreciation due to unanticipated adverse changes in securities prices. A Fund
incurs liability to a counterparty in connection with transactions in futures
contracts and the writing of options. As a result, the loss on these derivative
contracts may exceed a Fund's initial investment. A Fund may also lose the
entire premium paid for purchased options that expire before they can be
profitably exercised by the Fund. In addition, a Fund incurs transaction costs
in opening and closing positions in derivative contracts.
Derivative contracts may sometimes increase or leverage a Fund's exposure to a
particular market risk. Leverage magnifies the price volatility of derivative
contracts held by a Fund. The Funds are required to offset the leverage inherent
in derivative contracts by maintaining a segregated account consisting of cash
or liquid securities, by holding offsetting portfolio securities or contracts or
by covering written options.
A Fund's success in using derivative contracts to hedge portfolio assets or as a
substitute for the purchase or sale of assets depends on the degree of price
correlation between the derivative contract and the hedged or simulated asset.
Imperfect correlation may be caused by several factors, including temporary
price disparities among the trading markets for the derivative contract, the
assets underlying the derivative contract and the Fund's portfolio assets.
During periods of extreme market volatility, a commodity or options exchange may
suspend or limit trading in an exchange-traded derivative contract, which may
make the contract temporarily illiquid and difficult to price. The staff of the
Securities and Exchange Commission (the "SEC") takes the position that certain
OTC options are subject to each Fund's 15% limit on illiquid investments. The
Funds' ability to terminate OTC derivative contracts may depend on the
cooperation of the counterparties to such contracts. For thinly traded
derivative contracts, the only source of price quotations may be the selling
dealer or counterparty. In addition, derivative securities and OTC derivative
contracts involve a risk that the issuer or counterparty will fail to perform
its contractual obligations.
Neither Fund will engage in a transaction in futures or options on futures for
risk management purposes if, immediately thereafter, the sum of initial margin
deposits and premiums required to establish risk management positions in futures
contracts and options on futures would exceed 5% of the Fund's net assets.
PORTFOLIO SECURITIES LOANS. Each Fund may lend portfolio securities with a value
up to one-third of its total assets. Each loan must be fully collateralized by
cash or other eligible assets. The Funds may pay reasonable fees in connection
with securities loans. The Advisor will evaluate the creditworthiness of
prospective institutional borrowers and monitor the adequacy of the collateral
to reduce the risk of default by borrowers.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. A Fund may (1) borrow money from
banks solely for temporary or emergency (but not for leverage) purposes and (2)
may enter into reverse repurchase agreements for any purpose. The aggregate
amount of such borrowings and reverse repurchase agreements may not exceed
one-third of the Fund's total assets less liabilities (other than borrowings).
For the purposes of the Investment Company Act of 1940 (the "1940 Act"), reverse
repurchase agreements are considered a form of borrowing by a Fund and,
therefore, a form of leverage. Leverage may cause any gains or losses of the
Fund to be magnified.
5
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INVESTMENT POLICIES AND RESTRICTIONS. Except as otherwise stated in this
Prospectus or the Funds' Statement of Additional Information, the Funds'
investment objective, policies and restrictions are not fundamental and may be
changed without shareholder approval. Each Fund is diversified and therefore may
not, with respect to 75% of its total assets, (1) invest more than 5% of its
total assets in the securities of any one issuer, other than U.S. Government
securities, or (2) acquire more than 10% of the outstanding voting securities of
any one issuer. Neither Fund will concentrate (invest 25% or more of its total
assets) in the securities of issuers in any one industry.
MANAGEMENT OF THE FUNDS
TRUSTEES. The Funds are series of the Trust. The Trustees of the Trust decide
upon matters of general policy and review the actions of the Advisor and other
service providers. The Trustees of the Trust are identified below.
Frederick S. Addy . . . . Former Executive Vice President and Chief Financia
Officer, Amoco Corporation
William G. Burns . . . . . Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer . . . Former Senior Vice President, Morgan Guaranty Trust
Company of New York
Matthew Healey . . . . . . Chairman and Chief Executive Officer of the Trust;
Chairman, Pierpont Group, Inc.
Michael P. Mallardi . . . . Former Senior Vice President, Capital Cities/ABC,
Inc. and President, Broadcast Group
ADVISOR. The Trust has retained Morgan as Investment Advisor to provide
investment advice and portfolio management services to the Funds. Subject to the
supervision of the Trustees, Morgan makes the Funds' day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Funds' investments.
Morgan, with principal offices at 60 Wall Street, New York, New York 10260, is a
New York trust company that conducts a general banking and trust business.
Morgan is a wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P.
Morgan"), a bank holding company organized under the laws of Delaware. Through
offices in New York City and abroad, J.P. Morgan, through the Advisor and other
subsidiaries, offers a wide range of services to governmental, institutional,
corporate and individual customers and acts as investment advisor to individual
and institutional clients with combined assets under management of over $197
billion (of which the Advisor advises over $30 billion).
Morgan uses a sophisticated, disciplined, collaborative process for managing all
asset classes. For equity portfolios, this process utilizes fundamental
research, systematic stock selection and disciplined portfolio construction.
Morgan has managed portfolios of U.S. equity securities on behalf of its clients
for over 40 years. The portfolio managers making investments in U.S. equity
securities work in conjunction with Morgan's domestic equity analysts, as well
as capital market, credit and economic research analysts, traders and
administrative officers. The U.S. equity analysts each cover a different
industry, monitoring a universe of approximately 700 predominantly large and
medium-sized U.S. companies.
6
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The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's processes for the Funds (the inception date of
each person's responsibility for a Fund and his or her business experience for
the past five years is indicated parenthetically): Equity Fund: Terry E. Banet,
Vice President (since November, 1996, employed by Morgan since prior to 1991)
and Gordon B. Fowler, Managing Director (since November, 1996, employed by
Morgan since prior to 1991); Disciplined Equity Fund: Robin B. Chance, Vice
President (since November, 1996, employed by Morgan since prior to 1991) and
Frederic A. Nelson, Managing Director (since November, 1996, employed by Morgan
since May, 1994, previously portfolio manager, Bankers Trust Company).
As compensation for the services rendered and related expenses borne by Morgan
under its investment advisory agreement with the Trust, the Equity Fund and the
Disciplined Equity Fund have each agreed to pay Morgan a fee which is calculated
daily and may be paid monthly at the annual rate of 0.45% and 0.35%,
respectively, of average daily net assets.
INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with the Trust,
Funds Distributor, Inc. ("FDI") serves as the Co-Administrator for the Funds.
FDI (i) provides office space, equipment and clerical personnel for maintaining
the organization and books and records of the Funds; (ii) provides officers for
the Trust; (iii) prepares and files documents required for notification of state
securities administrators; (iv) reviews and files marketing and sales
literature; and (v) maintains related books and records.
For its services under the Co-Administration Agreement, each Fund has agreed to
pay FDI fees equal to its allocable share of an annual complex-wide charge of
$425,000 plus FDI's out-of-pocket expenses. The amount allocable to each Fund is
based on the ratio of the Fund's net assets to the aggregate net assets of the
Funds, the other fund in the Trust and certain other registered investment
companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to an Administrative Services Agreement
with the Trust, Morgan provides administrative and related services to each
Fund, including services related to tax compliance, preparation of financial
statements, calculation of performance data, oversight of service providers and
certain regulatory and Board of Trustees matters.
Under the Administrative Services Agreement, each Fund has agreed to pay Morgan
fees equal to its allocable share of an annual complex-wide charge. This charge
is calculated daily based on the aggregate net assets of the Funds, the other
fund in the Trust and certain other registered investment companies managed by
the Advisor in accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion, less the
complex-wide fees payable to FDI.
DISTRIBUTOR. FDI, a registered broker-dealer, also serves as the Distributor of
shares of the Funds. FDI is a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. FDI's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
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FUND SERVICES AGREEMENT. Pursuant to a Fund Services Agreement with the Trust,
Pierpont Group, Inc. ("PGI"), 461 Fifth Avenue, New York, New York 10017,
assists the Trustees in exercising their overall supervisory responsibilities
for the affairs of the Trust and other funds for which the Trustees serve a
trustees. PGI provides these services for a fee approximating its reasonable
cost.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Funds' custodian and fund
accounting, transfer and dividend disbursing agent.
EXPENSES. In addition to the fees payable to the service providers identified
above, each Fund is responsible for usual and customary expenses associated with
its operation. These include, among other things, organization expenses, legal
fees, audit and accounting expenses, insurance costs, the compensation and
expenses of the Trustees, the expenses of printing and mailing reports, notices
and proxy statements to Fund shareholders, registration fees under federal and
state securities laws, brokerage commissions, interest, taxes and extraordinary
expenses (such as for litigation).
Morgan has agreed that it will reimburse each Fund through at least the date
listed below to the extent necessary to maintain the Fund's operating expenses
for JPM Pierpont Shares at the following annual percentage of average daily
net assets.
JPM PIERPONT SHARES EXPENSE CAP DATE
Equity Fund .85% February 28, 1998
Disciplined Equity Fund .55% February 28, 1998
This expense reimbursement does not apply to taxes, interest, brokerage
commissions, litigation costs and other extraordinary expenses.
SHAREHOLDER INQUIRIES AND SERVICES
Shareholders may call J.P. Morgan Funds Services at (800) 521-5411 for
information about the Funds and assistance with shareholder transactions.
SHAREHOLDER SERVICING. Under a shareholder servicing agreement with the Trust,
Morgan, acting directly or through an agent (designated as an Eligible
Institution), provides account administration and personal and account
maintenance services to Fund shareholders. These services include assisting in
the maintenance of accurate account records; processing orders to purchase and
redeem shares of a Fund, and responding to shareholder inquiries. Each Fund has
agreed to pay Morgan a fee for these services at an annual rate of 0.25% of the
average daily net assets of JPM Pierpont Shares.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with a Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and a Fund is authorized to accept any
instructions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Funds'
Distributor. Investors must be customers of Morgan or an Eligible Institution.
Investors may also be employer-sponsored retirement plans that have designated a
Fund as an investment option for the plans. Prospective investors who are not
already customers of Morgan may apply to
8
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become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Funds
reserve the right to determine the purchase orders that they will accept.
MINIMUM INVESTMENT REQUIREMENTS. Each Fund requires a minimum initial investment
in JPM Pierpont Shares of $100,000. The minimum subsequent investment for all
investors is $5,000. For investors who were shareholders of a fund in The JPM
Pierpont Funds as of September 29, 1995, the minimum initial investment in JPM
Pierpont Shares or any JPM Pierpont Fund is $10,000. These minimum investment
requirements may be waived for certain investors, including investors for whom
the Advisor is a fiduciary, who are employees of the Advisor, who maintain
related accounts with the Funds, The JPM Pierpont Funds or the Advisor, who make
investments for a group of clients, such as financial advisors, trust companies
and investment advisors, or who maintain retirement accounts with the Funds.
PURCHASE PRICE AND SETTLEMENT. Each Fund's shares are sold on a continuous basis
without a sales charge at the net asset value next determined after receipt of
an order. Prospective investors may purchase shares with the assistance of an
Eligible Institution that may establish its own terms, conditions and charges.
To purchase JPM Pierpont Shares, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
Any shareholder may also call J.P. Morgan Funds Services at (800) 521-5411 for
assistance in placing an order for shares. If the Fund or its agent receives a
purchase order prior to 4:00 P.M. New York time on any business day, the
purchase of Fund shares is effective and is made at the net asset value
determined that day, and the purchaser becomes a holder of record on the next
business day upon the Fund's receipt of payment in immediately available funds.
If the Fund or its agent receives a purchase order after 4:00 P.M. New York
time, the purchase is effective and is made at the net asset value determined on
the next business day, and the purchase becomes a holder of record on the
following business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. Shares may be sold to or through Eligible Institutions,
including financial institutions and broker-dealers, that may be paid fees by
Morgan or its affiliates for services provided to their clients that invest in a
Fund. Organizations that provide recordkeeping or other services to certain
employee benefit or retirement plans that include a Fund as an investment
alternative may also be paid a fee.
The services provided by Eligible Institutions may include establishing and
maintaining shareholder accounts, processing purchase and redemption
transactions, arranging for bank wires, performing shareholder subaccounting,
answering client inquiries regarding the Trust, assisting clients in changing
dividend options, account designations and addresses, providing periodic
statements showing the client's account balance and integrating these statements
with those of other transactions and balances in the client's other accounts
serviced by the Eligible Institution, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and, with
respect to meetings of shareholders, collecting, tabulating and forwarding
executed proxies and obtaining such other information and performing such other
services as Morgan or the Eligible Institution's clients may reasonably request
and agree upon with the Eligible Institution.
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Although there is no sales charge levied directly by the Funds, Eligible
Institutions may establish their own terms and conditions for providing their
services and may charge investors a transaction-based or other fee for their
services. Such charges may vary among Eligible Institutions but in all cases
will be retained by the Eligible Institution and not remitted to the Funds or
Morgan.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem JPM Pierpont Shares, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund or may telephone J.P. Morgan Funds Services
directly at (800) 521-5411 and give the Shareholder Service Representative a
preassigned shareholder Personal Identification Number and the amount of the
redemption. The Funds execute effective redemption requests at the next
determined net asset value per share. See Net Asset Value.
A redemption request received by a Fund or its agent prior to 4:00 P.M. New York
time is effective on that day. A redemption request received after that time
becomes effective on the next business day. Cash proceeds of an effective
redemption are generally deposited the next business day in immediately
available funds to the shareholder's account at Morgan or at his Eligible
Institution or, in the case of certain Morgan customers, are mailed by check or
wire transferred in accordance with the customer's instructions, and, subject to
Further Redemption Information below, in any event are paid within seven days.
The cash proceeds of any redemption will be reduced by the applicable 2% or 1%
redemption fee for shares held less than five years.
REDEMPTION FEE. A redemption fee will be imposed by and paid to each Fund on the
gross dollar amount of shares redeemed for cash in accordance with the following
schedule.
REDEMPTION FEE RATE
AS A PERCENTAGE OF GROSS
YEAR SINCE PURCHASE REDEMPTION PROCEEDS
SHARES HELD LESS THAN 1 YEAR 2%
SHARES HELD AT LEAST 1 YEAR
BUT LESS THAN 5 YEARS 1%
SHARES HELD 5 YEARS OR MORE NONE
The redemption fees help cover transaction costs and the tax costs long-term
investors may bear when a Fund realizes capital gains as a result of selling
securities to meet redemptions. by being paid directly to the Funds, the fees
tend to be more advantageous to long-term investors and less advantageous to
short-term investors.
There will be no redemption fee charged on the cash redemption of i) shares
acquired through reinvested dividends and distributions, ii) shares redeemed in
connection with the settlement of an estate, or iii) shares subject to a
mandatory redemption.
For federal income tax purposes, the redemption fee will reduce the proceeds
paid to the shareholder upon the redemption of shares.
REDEMPTION IN-KIND. Each Fund intends whenever feasible to pay redemption
proceeds by an in-kind distribution of portfolio securities to the extent that
the amount of the redemption exceeds, for the Equity Fund $250,000 and for the
Disciplined Equity Fund, $500,000. Although the Funds generally intend to pay
redemptions equal to or less than these respective amounts in cash, they reserve
the right to pay such redemptions in-kind. The Funds are not permitted to make
in-kind distributions of redemption proceeds to shareholders who hold more than
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5% of the outstanding shares of the Fund in the absence of an exemptive order
from the SEC. Each Fund intends to apply to the SEC for such an order, but there
can be no assurance that the order will be granted. In general, a Fund will
attempt to select securities for in-kind redemptions that approximate the
overall characteristics of the Fund's portfolio. A Fund will not distribute
illiquid securities to satisfy in-kind redemptions. For purposes of effecting
in-kind redemptions, securities will be valued in the manner regularly used to
value a Fund's portfolio securities. The Fund will not redeem its shares in-kind
in a manner that after giving effect to the redemption would cause it to violate
its investment restrictions or policies. A shareholder who receives an in-kind
distribution of redemption proceeds may incur brokerage or other transaction
costs in liquidating the distributed securities. There is also a risk that the
securities distributed in-kind may decline in value before they can be sold by
the redeeming shareholder. Although an in-kind redemption will not cause a Fund
to realize capital gains or losses redeeming shareholders may realize taxable
capital gains or losses based on the difference between the cost basis and
redemption price of their shares. NO REDEMPTION FEE WILL BE IMPOSED ON THE
AMOUNT OF ANY SHARES REDEEMED IN-KIND.
OTHER REDEMPTION PROCESSING INFORMATION. Redemption requests may not be
processed if the redemption request is not submitted in proper form. A
redemption request is not in proper form unless the Fund has received the
shareholder's certified taxpayer identification number and address. In addition,
if shares were paid for by check and the check has not yet cleared, redemption
proceeds will not be transmitted until the check has cleared, which may take up
to 15 days. Each Fund reserves the right to suspend the right of redemption or
postpone the payment of redemption proceeds to the extent permitted by the SEC.
Shareholders may realize taxable capital gains upon redeeming shares.
MANDATORY REDEMPTION. If a redemption of JPM Pierpont Shares reduces the value
of a shareholder's account balance below the required initial minimum
investment, the Fund may redeem the remaining shares in the account 60 days
after providing written notice to the shareholder of the mandatory redemption.
An account will not be subject to mandatory redemption if the shareholder
purchases sufficient shares during the 60-day period to increase the account
balance to the required minimum investment amount. NO REDEMPTION FEE WILL BE
IMPOSED ON THE AMOUNT OF ANY MANDATORY REDEMPTION.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's net investment income and realized net capital gains, if any, will
be distributed at least annually. Dividends and distributions will be payable to
shareholders of record on the record date. If investors purchase JPM Pierpont
Shares shortly before the record date of a dividend or distribution, they may be
subject to adverse tax consequences as described under Taxes.
A Fund's dividends and distributions are paid in additional JPM Pierpont Shares
unless the shareholder elects to have them paid in cash. The tax effects of
dividends and distributions are the same whether they are paid in shares or
cash. Cash dividends and distributions either (1) are credited to the
shareholder's account at Morgan or the shareholder's Eligible Institution or (2)
in the case of certain Morgan clients, are paid by a check mailed in accordance
with the client's instructions.
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NET ASSET VALUE
Each Fund computes the net asset value per share ("NAV") of the JPM Pierpont
Shares at 4:15 p.m. New York time on each weekday that is not a holiday listed
in the Statement of Additional Information (a "business day"). The NAV of JPM
Pierpont Shares is calculated by dividing the net assets attributable to JPM
Pierpont Shares by the number of JPM Pierpont Shares outstanding.
TAXES
Each Fund is treated as a separate entity for tax purposes. Each Fund intends to
elect to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code (the "Code"). To qualify as such, each Fund must satisfy
certain requirements relating to the sources of its income, diversification of
its assets and distribution of its income to shareholders. As a regulated
investment company, each Fund will not be subject to federal income or excise
tax on any net investment income and net realized capital gains that are
distributed to shareholders in accordance with certain timing requirements of
the Code.
Dividends paid by a Fund from net investment income and the excess of short-term
capital gain over net long term capital loss will be taxable to its shareholders
as ordinary income. Distributions paid by a Fund from the excess of net
long-term capital gain over net short-term capital loss will be taxable as
long-term capital gains regardless of how long shareholders have held their
shares. These tax consequences will apply whether distributions are received in
additional shares or in cash. A Fund's dividends that are paid to its corporate
shareholders and are attributable to qualifying dividends received by the Fund
from U.S. domestic corporations may be eligible, in the hands of these corporate
shareholders, for the corporate dividends-received deduction, subject to certain
holding period requirements and debt financing limitations under the Code.
Shareholders will be informed annually about the amount and character, for
federal income tax purposes, of distributions received from the Funds.
The Funds are managed to minimize the amount of capital gains realized and
distributed during a particular year. Nevertheless, the realization of capital
gains may be affected by shareholder redemption transactions, economic, market
or issuer-specific developments or other investment considerations.
Investors should consider the adverse tax implications of buying shares
immediately before a distribution. Investors who purchase shares shortly before
the record date for a distribution will pay a per share price that includes the
value of the anticipated distribution and will be taxed on the distribution even
though the distribution represents a return of a portion of the purchase price.
Redemptions of shares, whether for cash or in-kind, are taxable events on which
a shareholder may recognize a gain or loss. Individuals and certain other
shareholders may be subject to 31% backup withholding of federal income tax on
distributions and redemptions if they fail to furnish their correct taxpayer
identification number and certain certifications or if they are otherwise
subject to backup withholding.
In addition to federal taxes, a shareholder may be subject to state or local
taxes on income and gains derived with respect to shares in the Funds.
Shareholders are urged to consult their own tax advisors concerning specific
questions about federal, state and local taxes.
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<PAGE>
ADDITIONAL INFORMATION
SHAREHOLDER REPORTS AND CONFIRMATIONS. Each Fund sends to its shareholders
annual and semiannual reports. The financial statements appearing in annual
reports are audited by independent accountants. Shareholders will also be sent
confirmations of each purchase and redemption transaction and monthly statements
reflecting all account activity.
TELEPHONE TRANSACTIONS. All shareholders are entitled to initiate redemptions
and other transactions by telephone. However, a transaction authorized by
telephone and reasonably believed by a Fund, Morgan, an Eligible Institution or
the Distributor to be genuine may result in a loss to the investor if the
transaction is not in fact genuine. The Funds will employ reasonable procedures
to confirm that investor instructions communicated by telephone are genuine.
These include requiring investors to give their personal identification numbers
and tape recording telephone instructions. If these procedures are not followed,
the Fund, Morgan, the investor's Eligible Institution or the Distributor may be
liable for any losses resulting from unauthorized or fraudulent instructions.
PERFORMANCE ADVERTISING. Each Fund may advertise historical performance
information and compare its performance to other investments or relevant
indexes. An advertisement may also include data supplied by Lipper Analytical
Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson Associates and other
industry publications.
The Funds may advertise average annual total return and other forms of total
return data. Average annual total return is determined by computing the average
annual percentage change in value of $1,000 invested at NAV for specified
periods ending with the most recent calendar quarter. The total return
calculation assumes a complete redemption of the investment at the end of the
relevant period and reflects the deduction of any applicable redemption fee.
Each Fund may also advertise total return on a cumulative, average, year-by-year
or other basis for specified periods. The investment results of JPM Pierpont
Shares will fluctuate over time and should not be considered a representation of
performance in the future.
In addition, the Funds may advertise their yield. Yield reflects a Fund's rate
of income on portfolio investments as a percentage of its NAV. The yield on JPM
Pierpont Shares is computed by annualizing the result of dividing the net
investment income per share over a 30-day period by the NAV on the last day of
that period. Yield is calculated by accounting methods that are standardized for
all stock and bond funds and differ from the methods used for other accounting
purposes. Therefore, the yield on JPM Pierpont Shares may not equal the income
paid on these shares or the income reported in a Fund's financial statements.
Performance information may be obtained by calling Morgan at (800) 521-5411.
ORGANIZATION
The Trust was organized on August 15, 1996 as a Massachusetts business trust.
The Trust currently has three series of shares, including the two Funds
described in this Prospectus. The Trustees have authorized one class of shares
of each Fund: the JPM Pierpont Shares offered by this Prospectus. Other future
classes of shares of the Funds will be subject to different expenses, which may
affect the performance of each class. The Trustees reserve the right to
authorize and issue additional series and classes of shares.
Shareholders of each Fund are entitled to one full or fractional vote for each
dollar or fraction of a dollar invested in JPM Pierpont Shares. There is no
cumulative voting and shares have no preemption or conversion rights. The Trust
does not intend to hold meetings of shareholders annually. The Trustees will
call special meetings of shareholders to the extent required by the Trust's
Declaration of Trust or the 1940 Act. The 1940 Act requires the Trustees, under
certain circumstances, to call a meeting to allow shareholders to vote on the
removal of a Trustee and to assist shareholders in communicating with each
other.
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<PAGE>
JPM PIERPONT SHARES:
TAX AWARE EQUITY FUND
TAX AWARE DISCIPLINED EQUITY FUND
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE TRUST OR THE
DISTRIBUTOR TO MAKE SUCH AN OFFER IN SUCH JURISDICTION.
PROSPECTUS
NOVEMBER 18, 1996
236/237PRO1196
<PAGE>
PROSPECTUS
JPM SERIES TRUST
JPM INSTITUTIONAL SHARES: CALIFORNIA BOND FUND
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
FOR INFORMATION CALL (800) 766-7722
California Bond Fund (the "Fund") seeks to provide a high after tax total return
for California residents consistent with moderate risk of capital. The Fund is
designed for investors subject to federal and California personal income taxes
who are seeking a high after tax total return that may include some taxable
income and gains.
The Fund is a series of JPM Series Trust (the "Trust") and is advised by Morgan
Guaranty Trust Company of New York ("Morgan" or the "Advisor").
This Prospectus sets forth concisely the information about the JPM Institutional
Shares of the Fund that a prospective investor should know before investing and
should be retained for future reference. Additional information has been filed
with the Securities and Exchange Commission in a Statement of Additional
Information dated November 18, 1996, as amended or supplemented from time to
time. This information is incorporated herein by reference and is available
without charge upon written request from the Fund's Distributor or by calling
(800) 221-7930. The Fund's Distributor is Funds Distributor, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: JPM Series Trust -
California Bond Fund.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES OF THE
FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THE VALUE OF AN INVESTMENT
IN THE FUND MAY FLUCTUATE AND MAY, AT THE TIME IT IS REDEEMED, BE HIGHER OR
LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
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.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 18, 1996
<PAGE>
TABLE OF CONTENTS
Page
Expense Table 1
Investment Objective and Policies 2
Additional Investment Practices and Risks 3
Management of the Fund 6
Shareholder Inquiries and Services 8
Purchase of Shares 8
Redemption of Shares 9
Exchange of Shares 10
Dividends and Distributions 10
Net Asset Value 10
Taxes 11
Additional Information 12
Organization 13
<PAGE>
JPM Institutional Shares: California Bond Fund
EXPENSE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases(1) . . . . . . . . . . . . . None
Sales Charge Imposed on
Reinvested Distributions . . . . . . . None
Deferred Sales Load . . . . . . . . . . None
Redemption Fee . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . None
ANNUAL OPERATING EXPENSES(2)
Advisory Fees . . . . . . . . . . . . . .30%
Rule 12b-1 Fees . . . . . . . . . . . . None
Other Expenses (after expense
reimbursement) . . . . . . . . . . . . .15%
----
Total Operating Expenses (after
expense reimbursement) . . . . . . . . .45%
1 Certain Eligible Institutions may charge customers fees of varying amounts in
connection with the purchase of shares of the Fund through such Eligible
Institutions.
2 These expenses are based on the estimated expenses and estimated average net
assets for the Fund's first fiscal year and through July 31, 1997, after any
applicable expense reimbursement. Without such expense reimbursement, the
estimated Other Expenses and Total Operating Expenses for its first fiscal year
would be equal on an annual basis to 0.49% and 0.79%, respectively, of average
daily net assets of the Fund's JPM Institutional Shares.
EXAMPLE
An investor would pay the following expenses on a hypothetical $1,000
investment, assuming a 5% annual return and redemption at the end of each time
period. (However, the Fund's minimum initial investment is greater than $1,000.)
1 Year . . . . . . . . . . . . . . . . . . . . . . $ 7
3 Years . . . . . . . . . . . . . . . . . . . . . $22
The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in JPM
Institutional Shares of the Fund bear. For a complete description of contractual
arrangements and other expenses applicable to the Fund, see Management of the
Fund and Shareholder Inquiries and Services -- Shareholder Servicing. THE
EXAMPLE IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE OR EXPENSES. ACTUAL EXPENSES
MAY BE MORE OR LESS THAN THOSE SHOWN.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of California Bond Fund is to provide a high after tax
total return for California residents consistent with moderate risk of capital.
The Fund invests primarily in California Municipal Securities (defined below)
the income from which is exempt from federal and California personal income
taxes. It may also invest in other municipal securities that generate income
exempt from federal income tax but not from California income tax. In addition,
in order to maximize after tax total return, the Fund may invest in taxable debt
obligations to the extent consistent with its objective.
WHO MAY BE A SUITABLE INVESTOR IN THE FUND. The Fund is designed for investors
subject to federal and California personal income taxes who are seeking high
after tax return but are not adverse to receiving some taxable income and gains.
The Fund is not suitable for tax-deferred retirement or pension plans, including
Individual Retirement Accounts (IRAs), 401(k) plans and 403(b) plans. The Fund
is not a complete investment program and there is no assurance that the Fund
will achieve its investment objective.
PRIMARY INVESTMENTS. Under normal circumstances, the Fund invests at least 65%
of its total assets in California municipal bonds. For purposes of this policy,
"California municipal bonds" has the same meaning as "California Municipal
Securities," which are obligations of any duration (or maturity) issued by
California, its political subdivisions and their agencies, authorities and
instrumentalities and any other obligations, the interest from which is exempt
from California personal income tax. The interest from many but not all
California Municipal Securities is also exempt from federal income tax. The Fund
may also invest in debt obligations of state and municipal issuers outside of
California. In general, the interest on such securities is exempt from federal
income tax but subject to California income tax. A portion of the Fund's
distributions from interest on California Municipal Securities and other
municipal securities in which the Fund invests may under certain circumstances
be subject to federal alternative minimum tax. See Taxes.
MUNICIPAL SECURITIES. The Fund may invest in municipal securities of any
maturity and type. These include both general obligation bonds secured by the
issuer's pledge of its full faith, credit and taxing authority and revenue bonds
payable from specific revenue sources, but generally not backed by the issuer's
taxing authority. In addition, the Fund may invest in all types of municipal
notes, including tax, revenue and grant anticipation notes, municipal commercial
paper, and municipal demand obligations such as variable rate demand notes and
master demand obligations. There is no specific percentage limitation on these
investments.
NON-MUNICIPAL SECURITIES. The Fund may invest in U.S. Government, bank and
corporate debt obligations, as well as asset- and mortgage-backed securities and
repurchase agreements. The Fund will purchase such securities only when Morgan
believes that they would enhance the after tax total return of a shareholder of
the Fund in the highest federal and California income tax brackets. Under normal
circumstances, the Fund's holdings of non-municipal securities and securities of
municipal issuers outside California will not exceed 35% of its total assets.
CREDIT QUALITY. The Fund will invest primarily in investment grade securities,
which are obligations rated at the time of purchase at least Baa by Moody's
Investors Service, Inc. or BBB by Standard & Poor's Ratings Group. Securities
rated Baa or BBB are considered to have certain speculative characteristics.
The Fund may also invest up to 10% of its total assets in below investment grade
municipal and taxable securities rated at least B. Such securities are sometimes
referred to as "junk bonds." Below investment grade securities typically are
subject to greater fluctuations in price and yield resulting in a greater
volatility of total return than investment grade bonds. These fluctuations may
be sharp and unanticipated. Issuers of below investment grade securities
typically are weak in financial health and their ability to repay interest or
principal is uncertain. Compared to issuers of investment grade bonds, they are
more likely to encounter financial difficulties and to be materially affected by
those difficulties when they
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do encounter them. As a result, markets for below investment grade securities
may react strongly to adverse news about an issuer or the economy or to the
perception or expectation of adverse news. If a security purchased by the Fund
is later downgraded below B, the Fund may continue to hold the security.
HOW THE FUND IS MANAGED. Morgan actively manages the Fund's duration, the
allocation of securities across market sectors and the selection of securities
to maximize after tax total return. Morgan adjusts the Fund's duration based
upon fundamental economic and capital markets research and Morgan's interest
rate outlook.
Under normal market conditions, the Fund will have a duration of three to ten
years, although the maturities of individual portfolio securities may vary
widely. Duration measures the price sensitivity of the Fund's portfolio,
including expected cash flow under a wide range of interest rate scenarios. A
longer duration generally results in greater price volatility. As a result, when
interest rates increase, the prices of longer duration securities decrease more
than the prices of comparable quality securities with a shorter duration. When
interest rates decrease, the prices of longer duration securities increase more
than the prices of comparable quality securities with a shorter duration.
Morgan also seeks to enhance after tax total return by allocating the Fund's
assets among market sectors. Specific securities which Morgan believes are
undervalued are selected for purchase using advanced quantitative tools,
analysis of credit risk, the expertise of a dedicated trading desk and the
judgment of fixed income portfolio managers and analysts.
The Fund may engage in short-term trading to the extent consistent with its
objective. The annual portfolio turnover rate of the Fund is generally not
expected to exceed 100%. Portfolio transactions may generate taxable capital
gains and result in increased transaction costs.
TAX MANAGEMENT TECHNIQUES. In seeking to achieve the Fund's investment
objective, Morgan attempts to consider the tax consequences to investors of all
portfolio transactions. The success of this strategy depends on Morgan's ability
to forecast accurately changes in interest rates and assess the value of fixed
income securities.
ADDITIONAL INVESTMENT PRACTICES AND RISKS
NON-DIVERSIFICATION. Because the Fund is a non-diversified investment company,
the Investment Company Act of 1940 (the "1940 Act") does not limit the
percentage of the Fund's assets that may be invested in the securities of a
single issuer. To the extent that the Fund invests a greater percentage of its
assets in a smaller number of issuers, its portfolio will be subject to more
concentrated credit and liquidity risk than a more diversified portfolio. The
Fund must still comply with the quarterly diversification requirements under the
Internal Revenue Code of 1986 (the "Code") under which, with respect to 50% of
its total assets, the Fund generally may not invest more than 5% of its assets
in any one issuer. With respect to the other 50% of total assets, the Fund may
invest up to 25% of its assets in the securities of each of any two issuers.
LIQUIDITY. The secondary market for municipal securities is generally less
liquid than for taxable fixed income securities. These risks are accentuated to
the extent that the Fund, by itself or together with other accounts managed by
Morgan or its affiliates, owns all or a substantial portion of an issue of
municipal securities. In addition, if the issuer of certain types of municipal
securities such as industrial revenue bonds defaults, the Fund could be required
to seize and manage, or dispose of under adverse market conditions, collateral,
which could increase the Fund's operating expenses, lower the Fund's net asset
value and generate taxable income.
CONCENTRATION. The Fund will not invest more than 25% of its total assets in any
one industry. Governmental issuers of municipal securities are not considered
part of any industry for this purpose. However, taxable municipal securities
3
<PAGE>
backed only by the assets or revenues of nongovernmental users may be deemed to
be issued by such nongovernmental users, and the 25% limitation would apply to
obligations backed by the assets or revenues of nongovernmental users in the
same industry.
The Fund may invest more than 25% of its assets in certain sectors of the
municipal securities market, such as revenue obligations of hospitals and other
health care facilities, housing agency obligations, transportation related
obligations and utilities related obligations. The Fund will concentrate in a
particular market sector only if Morgan determines that the returns available
from issuers in the sector justify the additional risks. To the extent that the
Fund concentrates in a particular market sector, its portfolio will be more
exposed to adverse economic, business, political and other developments
affecting issuers or users within that sector.
CALL RISK. The Fund may invest in municipal securities that permit the issuer to
"call" or redeem the securities. If the issuer calls these securities when
interest rates are falling, the Fund may not be able to reinvest the proceeds in
securities providing a comparable return.
ZERO COUPON BONDS. The Fund may invest in zero coupon bonds that pay interest
only upon maturity. Zero coupon bonds may present a greater risk of price
volatility and credit problems than other bonds and involve certain special tax
considerations. See Taxes.
CALIFORNIA MUNICIPAL SECURITIES. Since the Fund invests primarily in California
Municipal Securities, its performance and the ability of California issuers to
meet their obligations may be affected by economic, political, demographic or
other conditions in California. As a result, the value of the Fund's shares may
fluctuate more widely than the value of shares of a fund investing in securities
of issuers in multiple states. The ability of state, county or local governments
to meet their obligations will depend primarily on the availability of tax and
other revenues to those governments and on their general fiscal conditions.
Constitutional or statutory restrictions may limit a municipal issuer's power to
raise revenues or increase taxes. The availability of federal, state and local
aid to issuers of California Municipal Securities may also affect their ability
to meet their obligations. Payments of principal and interest on revenue bonds
will depend on the economic condition of the facility or specific revenue source
from whose revenues the payments will be made. Any reduction in the actual or
perceived ability of an issuer of California Municipal Securities to meet its
obligations (including a reduction in the rating of its outstanding securities)
would probably reduce the market value and marketability of the Fund's portfolio
securities.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND WHEN-ISSUED AND DELAYED DELIVERY
SECURITIES. The Fund may lend portfolio securities with a value up to one third
of its total assets and may enter into repurchase agreements. These transactions
must be fully collateralized at all times. The Fund may also purchase securities
on a when-issued or delayed delivery basis, which may increase its overall
investment exposure and involves a risk of loss if the value of the securities
declines prior to the settlement date. Lending, repurchase agreement and
when-issued transactions involve the risk that the other party may default on
its obligation and the Fund could be delayed in or prevented from recovering the
collateral or completing the transaction.
PUTS. The Fund may purchase municipal securities together with a right to resell
or "put" the securities back to the seller on agreed upon terms. The Fund may
pay a premium to purchase securities with a put feature. A put involves the risk
that the counterparty will default on its obligations to repurchase the
underlying securities.
STRUCTURED DEBT SECURITIES. The Fund may invest in structured debt securities
which may include various types of derivative securities such as tender option
bonds, floating rate securities that are subject to a maximum interest rate
(capped floaters), leveraged floating rate securities (super floaters) and
leveraged inverse floating rate securities (inverse floaters). The interest rate
or, in some cases, the principal payable at the maturity of a structured debt
security may change positively or inversely in relation to one or more interest
rates, financial indices or other financial indicators. In
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addition, the yield on a structured security may fail to track the yield on
conventional securities of comparable maturity. A structured debt security may
be leveraged to the extent that the magnitude of any change in the interest rate
or principal payable on an indexed security is a multiple of the change in the
underlying interest rate or index. Thus, leveraged structured securities may
experience greater price volatility than conventional debt securities in
response to changes in interest rates or other reference prices.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in illiquid securities, including certain restricted and private
placement securities. The price the Fund pays for illiquid securities or
receives upon resale may be lower than the price paid or received for similar
securities with a more liquid market. Accordingly, the valuation of these
securities will reflect any limitations on their liquidity. The Fund may also
purchase Rule 144A securities eligible for resale to institutional investors
without registration under the Securities Act of 1933. These securities may be
determined to be liquid in accordance with guidelines established by Morgan and
approved by the Trustees. The Trustees will monitor Morgan's implementation of
these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Fund may enter into derivative contracts
to hedge against fluctuations in securities prices or as a substitute for the
purchase or sale of securities. The Fund may also use derivative contracts for
risk management purposes. See Risk Management in the Statement of Additional
Information. The Fund may purchase and sell (write) exchange traded and
over-the-counter ("OTC") put and call options on securities and securities
indexes, purchase and sell futures contracts on securities and securities
indexes and purchase and sell (write) put and call options on futures contracts
on securities and securities indexes. Some options and futures strategies,
including selling futures contracts, buying puts and writing calls, tend to
hedge the Fund's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and buying calls, tend to
increase market exposure. Options and futures contracts may be combined with
each other in order to adjust the risk and return characteristics of the Fund's
overall strategy in a manner consistent with the Fund's objective and policies.
Because transactions in derivative instruments result in taxable gains or losses
it is expected that the Fund will utilize derivative contracts infrequently.
Transactions in derivative contracts often involve a risk of loss or
depreciation due to unanticipated adverse changes in securities prices. The Fund
incurs liability to a counterparty in connection with transactions in futures
contracts and the writing of options. As a result, the loss on these derivative
contracts may exceed the Fund's initial investment. The Fund may also lose the
entire premium paid for purchased options that expire before they can be
profitably exercised by the Fund. In addition, the Fund incurs transaction costs
in opening and closing positions in derivative contracts.
Derivative contracts may sometimes increase or leverage the Fund's exposure to a
particular market risk. Leverage magnifies the price volatility of derivative
contracts held by the Fund. The Fund is required to offset the leverage inherent
in derivative contracts by maintaining a segregated account consisting of cash
or liquid securities, by holding offsetting portfolio securities or contracts or
by covering written options.
The Fund's success in using derivative contracts to hedge portfolio assets or as
a substitute for the purchase or sale of assets depends on the degree of price
correlation between the derivative contract and the hedged or simulated asset.
Imperfect correlation may be caused by several factors, including temporary
price disparities among the trading markets for the derivative contract, the
assets underlying the derivative contract and the Fund's portfolio assets.
During periods of extreme market volatility, a commodity or options exchange may
suspend or limit trading in an exchange-traded derivative contract, which may
make the contract temporarily illiquid and difficult to price. The staff of the
Securities and Exchange Commission (the "SEC") takes the position that certain
OTC options are subject to the Fund's 15% limit on illiquid investments. The
Fund's ability to terminate OTC derivative contracts may depend on the
cooperation of the counterparties to such contracts. For thinly traded
derivative contracts, the only source of price
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quotations may be the selling dealer or counterparty. In addition, derivative
securities and OTC derivative contracts involve a risk that the issuer or
counterparty will fail to perform its contractual obligations.
The Fund will not engage in a transaction in futures or options on futures for
risk management purposes if, immediately thereafter, the sum of initial margin
deposits and premiums required to establish risk management positions in futures
contracts and options on futures would exceed 5% of the Fund's net assets.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Fund may (1) borrow money from
banks solely for temporary or emergency (but not for leverage) purposes and (2)
may enter into reverse repurchase agreements for any purpose. The aggregate
amount of such borrowings and reverse repurchase agreements may not exceed
one-third of the Fund's total assets less liabilities (other than borrowings).
For the purposes of the 1940 Act, reverse repurchase agreements are considered a
form of borrowing by the Fund and, therefore, a form of leverage. Leverage may
cause any gains or losses of the Fund to be magnified.
INVESTMENT POLICIES AND RESTRICTIONS. Except as otherwise stated in this
Prospectus or the Fund's Statement of Additional Information, the Fund's
investment objective, policies and restrictions are not fundamental and may be
changed without shareholder approval.
MANAGEMENT OF THE FUND
TRUSTEES. The Fund is a series of the Trust. The Trustees of the Trust decide
upon matters of general policy and review the actions of the Advisor and other
service providers. The Trustees of the Trust are identified below.
Frederick S. Addy . . . . Former Executive Vice President and Chief Financial
Officer, Amoco Corporation
William G. Burns . . . . Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer . . Former Senior Vice President, Morgan Guaranty Trust
Company of New York
Matthew Healey . . . . . Chairman and Chief Executive Officer of the Trust;
Chairman, Pierpont Group, Inc.
Michael P. Mallardi . . . Former Senior Vice President, Capital Cities/ABC,
Inc. and President, Broadcast Group
ADVISOR. The Fund has retained Morgan as Investment Advisor to provide
investment advice and portfolio management services to the Fund. Subject to the
supervision of the Trustees, Morgan makes the Fund's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Fund's investments.
Morgan, with principal offices at 60 Wall Street, New York, New York 10260, is a
New York trust company that conducts a general banking and trust business.
Morgan is a wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P.
Morgan"), a bank holding company organized under the laws of Delaware. Through
offices in New York City and abroad, J.P. Morgan, through the Advisor and other
subsidiaries, offers a wide range of services to governmental, institutional,
corporate and individual customers and acts as investment advisor to individual
and institutional clients with combined assets under management of over $197
billion (of which the Advisor advises over $30 billion).
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Morgan uses a sophisticated, disciplined, collaborative process for managing all
asset classes. For fixed-income portfolios, this process focuses on the
systematic analysis of real interest rates, sector diversification and
quantitative and credit analysis. Morgan has managed portfolios of domestic
fixed-income securities on behalf of its clients for over 50 years. The
portfolio managers making investments in domestic fixed-income securities work
in conjunction with fixed-income, credit, capital market and economic research
analysts, as well as traders and administrative officers.
Elizabeth A. Augustin and Robert W. Meiselas have been primarily responsible for
the day-to-day management and implementation of Morgan's processes for the Fund
since its November, 1996 inception (they are Vice Presidents of Morgan and have
been employed by Morgan since prior to 1991).
As compensation for the services rendered and related expenses borne by Morgan
under its investment advisory agreement with the Trust, the Fund has agreed to
pay Morgan a fee which is calculated daily and may be paid monthly at the annual
rate of 0.30% of the Fund's average daily net assets.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with the Trust,
Funds Distributor, Inc. ("FDI") serves as the Co-Administrator for the Fund. FDI
(i) provides office space, equipment and clerical personnel for maintaining the
organization and books and records of the Fund; (ii) provides officers for the
Trust; (iii) prepares and files documents required for notification of state
securities administrators; (iv) reviews and files marketing and sales
literature; and (v) maintains related books and records.
For its services under the Co-Administration Agreement, the Fund has agreed to
pay FDI fees equal to its allocable share of an annual complex-wide charge of
$425,000 plus FDI's out-of-pocket expenses. The amount allocable to the Fund is
based on the ratio of the Fund's net assets to the aggregate net assets of the
Fund, the other funds in the Trust and certain other registered investment
companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to an Administrative Services Agreement
with the Trust, Morgan provides administrative and related services to the Fund,
including services related to tax compliance, preparation of financial
statements, calculation of performance data, oversight of service providers and
certain regulatory and Board of Trustees matters.
Under the Administrative Services Agreement, the Fund has agreed to pay Morgan
fees equal to its allocable share of an annual complex-wide charge. This charge
is calculated daily based on the aggregate net assets of the Fund, the other
funds in the Trust and certain other registered investment companies managed by
the Advisor in accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion, less the
complex-wide fees payable to FDI.
DISTRIBUTOR. FDI, a registered broker-dealer, also serves as the Distributor of
shares of the Fund. FDI is a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. FDI's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
FUND SERVICES AGREEMENT. Pursuant to a Fund Services Agreement with the Trust,
Pierpont Group, Inc. ("PGI"), 461 Fifth Avenue, New York, New York 10017,
assists the Trustees in exercising their overall supervisory responsibilities
for the affairs of the Trust and other funds for which the Trustees serve as
trustees. PGI provides these services for a fee approximating its reasonable
cost.
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CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Fund's custodian and fund
accounting, transfer and dividend disbursing agent.
EXPENSES. In addition to the fees payable to the service providers identified
above, the Fund is responsible for usual and customary expenses associated with
its operation. These include, among other things, organization expenses, legal
fees, audit and accounting expenses, insurance costs, the compensation and
expenses of the Trustees, the expenses of printing and mailing reports, notices
and proxy statements to Fund shareholders, registration fees under federal and
state securities laws, interest, taxes and extraordinary expenses (such as for
litigation).
Morgan has agreed that it will reimburse the Fund through at least July 31, 1997
to the extent necessary to maintain the Fund's operating expenses for JPM
Institutional Shares at the annual rate of 0.45% of the average daily net assets
of the Fund's JPM Institutional Shares. This expense reimbursement does not
apply to taxes, interest, litigation costs and other extraordinary expenses.
SHAREHOLDER INQUIRIES AND SERVICES
Shareholders may call J.P. Morgan Funds Services at (800) 766-7722 for
information about the Fund and assistance with shareholder transactions.
SHAREHOLDER SERVICING. Under a shareholder servicing agreement with the Trust,
Morgan, acting directly or through an agent (designated as an Eligible
Institution) provides account administration and personal and account
maintenance services to Fund shareholders. These services include assisting in
the maintenance of accurate account records, processing orders to purchase and
redeem shares of the Fund, and responding to shareholder inquiries. The Fund has
agreed to pay Morgan a fee for these services at an annual rate of 0.05% of the
average daily net assets of JPM Institutional Shares.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept instructions
relating to a Fund account from Morgan as shareholder servicing agent for the
customer. All purchase orders must be accepted by the Fund's Distributor.
Investors must be customers of Morgan or an Eligible Institution. Investors may
also be employer-sponsored retirement plans that have designated the Fund as an
investment option for the plans. Prospective investors who are not already
customers of Morgan may apply to become customers of Morgan for the purpose of
Fund transactions. There are no charges associated with becoming a Morgan
customer for this purpose. Morgan reserves the right to determine the customers
that it will accept, and the Fund reserves the right to determine the purchase
orders that it will accept.
MINIMUM INVESTMENT REQUIREMENTS. The Fund requires a minimum initial investment
in JPM Institutional Shares of $5,000,000. The minimum subsequent investment is
$25,000. These minimum investment requirements may be waived for certain
investors, including investors for whom the Advisor is a fiduciary, who maintain
related accounts with the Fund, The JPM Institutional Funds or the Advisor, who
make investments for a group of clients, such as financial advisors, trust
companies and investment advisors, or who maintain retirement accounts with the
Fund.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value next determined after receipt of
an order. Prospective investors may purchase shares with the assistance of an
Eligible Institution that may establish its own terms, conditions and charges.
To purchase JPM Institutional Shares, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately
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available funds to the Fund's Distributor on the settlement date. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for
assistance in placing an order for shares. If the Fund or its agent receives a
purchase order prior to 4:00 P.M. New York time on any business day, the
purchase of Fund shares is effective and is made at the net asset value
determined that day, and the purchaser becomes a holder of record on the
following business day upon the Fund's receipt of payment in immediately
available funds. If the Fund or its agent receives a purchase order after 4:00
P.M. New York time, the purchase is effective and is made at the net asset value
determined on the next business day. The settlement date is generally the
business day after the purchase is effective. The purchaser will begin to
receive the daily dividends on the settlement date. See Dividends and
Distributions.
ELIGIBLE INSTITUTIONS. Shares may be sold to or through Eligible Institutions,
including financial institutions and broker-dealers, that may be paid fees by
Morgan or its affiliates for services provided to their clients that invest in
the Fund. Organizations that provide recordkeeping or other services to certain
employee benefit or retirement plans that include the Fund as an investment
alternative may also be paid a fee.
The services provided by Eligible Institutions may include establishing and
maintaining shareholder accounts, processing purchase and redemption
transactions, arranging for bank wires, performing shareholder subaccounting,
answering client inquiries regarding the Trust, assisting clients in changing
dividend options, account designations and addresses, providing periodic
statements showing the client's account balance and integrating these statements
with those of other transactions and balances in the client's other accounts
serviced by the Eligible Institution, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and, with
respect to meetings of shareholders, collecting, tabulating and forwarding
executed proxies and obtaining such other information and performing such other
services as Morgan or the Eligible Institution's clients may reasonably request
and agree upon with the Eligible Institution.
Although there is no sales charge levied directly by the Fund, Eligible
Institutions may establish their own terms and conditions for providing their
services and may charge investors a transaction-based or other fee for their
services. Such charges may vary among Eligible Institutions but in all cases
will be retained by the Eligible Institution and not remitted to the Fund or
Morgan.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem JPM Institutional Shares, an investor may
instruct Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund or may telephone J.P. Morgan Funds Services
directly at (800) 766-7722 and give the Shareholder Service Representative a
preassigned shareholder Personal Identification Number and the amount of the
redemption. The Fund executes effective redemption requests at the next
determined net asset value per share. See Net Asset Value.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective
redemption are deposited on the settlement date in immediately available funds
to the shareholder's account at Morgan or at his Eligible Institution or, in
the case of certain Morgan customers, are mailed by check or wire transferred in
accordance with the customer's instructions. The redeemer will continue to
receive dividends on these shares through the day before the settlement date.
The settlement date is generally the next business day after a redemption is
effective and, subject to Further Redemption Information below, in any even is
within seven days. See Dividends and Distributions.
OTHER REDEMPTION PROCESSING INFORMATION. Redemption requests may not be
processed if the redemption request is not submitted in proper form. A
redemption request is not in proper form unless the Fund has received the
shareholder's certified taxpayer identification number and address. In addition,
if shares were paid for by check and the check has not
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yet cleared, redemption proceeds will not be transmitted until the check has
cleared, which may take up to 15 days. The Fund reserves the right to suspend
the right of redemption or postpone the payment of redemption proceeds to the
extent permitted by the SEC. Shareholders may be required to recognize taxable
gains or losses upon redeeming shares.
MANDATORY REDEMPTION. If a redemption of JPM Institutional Shares reduces the
value of a shareholder's account balance below the required initial minimum
investment, the Fund may redeem the remaining shares in the account 60 days
after providing written notice to the shareholder of the mandatory redemption.
An account will not be subject to mandatory redemption if the shareholder
purchases sufficient shares during the 60-day period to increase the account
balance to the required minimum investment amount.
EXCHANGE OF SHARES
An investor may exchange JPM Institutional Shares for shares of any fund in The
JPM Pierpont Funds or The JPM Institutional Funds without charge subject to the
same minimum investment requirements as are applicable to purchases of
shares of such funds. An exchange is in effect a redemption from one fund
followed by a purchase of another fund and is therefore subject to the
requirements applicable to share purchases and redemptions. Exchanges may result
in the recognition of taxable gains or losses. The Fund reserves the right to
terminate or alter the terms of the exchange privilege at any time.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income.
The net investment income of the Fund is declared as a dividend daily for each
class of shares outstanding immediately prior to the determination of the net
asset value per share ("NAV") of each class on that day and paid monthly. If an
investor's shares are redeemed during a month, accrued but unpaid dividends are
paid with the redemption proceeds. Net investment income for dividend purposes
consists of the income of the Fund less certain of the Fund's expenses and other
expenses directly attributable to such class. Fund expenses, including the fees
payable to Morgan, are accrued daily. Shares will accrue dividends as long as
they are issued and outstanding. Shares are issued and outstanding as of the
settlement date of a purchase order to the settlement date of a redemption
order.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.
The Fund's dividends and distributions are paid in additional shares unless the
shareholder elects to have them paid in cash. The tax effects of dividends and
distributions are the same whether they are paid in shares or cash. Cash
dividends and distributions either (1) are credited to the shareholder's account
at Morgan or the shareholder's Eligible Institution or (2) in the case of
certain Morgan clients, are paid by a check mailed in accordance with the
client's instructions.
NET ASSET VALUE
The Fund computes the NAV of the JPM Institutional Shares at 4:15 p.m. New York
time on each weekday that is not a holiday listed in the Statement of Additional
Information (a "business day"). The NAV of JPM Institutional Shares is
calculated by dividing the net assets attributable to JPM Institutional Shares
by the number of JPM Institutional Shares outstanding.
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TAXES
The Fund is treated as a separate entity for tax purposes. The Fund intends
to elect to be treated and qualify each year as a regulated investment company
under Subchapter M of the Code. To qualify as such, the Fund must, in addition
to other requirements, limit its investments so that at the close of
each quarter of its taxable year (a) no more than 25% of its total assets are
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies), and (b)
with regard to 50% of its total assets, no more than 5% of its total assets are
invested in the securities of a single issuer. As a regulated investment
company, the Fund will not be subject to federal income or excise tax on any net
investment income and net realized capital gains that are distributed to
shareholders in accordance with certain timing requirements of the Code.
The Fund intends to qualify to pay exempt-interest dividends to its shareholders
by having, at the close of each quarter of its taxable year, at least 50% of the
value of its total assets consist of tax exempt securities. An exempt-interest
dividend is that part of dividend distributions made by the Fund which consists
of interest received by the Fund on tax exempt securities. Exempt-interest
dividends received from the Fund will be treated for federal income tax purposes
as tax exempt interest income. However, an investor receiving Social Security or
railroad retirement benefits should consult his tax adviser to determine if an
investment in the Fund may affect the federal taxation of these benefits.
California does not tax any portion of such benefits. To the extent that
exempt-interest dividends are derived from interest on California Municipal
Securities, such distributions will also be exempt from California personal
income tax. However, these exempt-interest dividends may result in liability for
state and local taxes for individual shareholders subject to taxation by other
states and municipalities outside of California.
For federal income tax purposes, dividends other than exempt interest dividends
paid by the Fund from net investment income and the excess of net short-term
capital gain over net long-term capital loss will be taxable to its shareholders
as ordinary income. Dividends paid by the Fund from the excess of net long-term
capital gain over net short-term capital loss and designated by the Fund as
"capital gain dividends" will be taxable as long-term capital gains regardless
of how long shareholders have held their shares. These tax consequences will
apply whether distributions are received in additional shares or in cash.
Shareholders will be informed annually about the amount and character, for
federal and California personal income tax purposes, of distributions received
from the Fund.
For California personal income tax purposes, distributions derived from
investments other than California Municipal Securities and U.S. Government
securities that pay interest exempt from state personal income taxation, as well
as distributions from any net realized capital gains, will be taxable whether
taken in cash or reinvested in additional shares.
Interest on certain tax exempt municipal obligations issued after August 7, 1986
is a preference item for purposes of the alternative minimum tax applicable to
individuals and corporations. Under tax regulations to be issued, the portion of
the exempt-interest dividend of a regulated investment company that is allocable
to these obligations will be treated as a preference item for purposes of the
alternative minimum tax. To the extent that the Fund invests in California
Municipal Securities or other municipal securities the interest from which is
subject to federal alternative minimum tax, individual shareholders, depending
on their own tax status, may be subject to federal but not California
alternative minimum tax on that portion of the Fund's distributions attributable
to such income. An investment in the Fund may cause corporate investors to be
subject to (or increase their liability under) California corporate taxation.
Corporations should also be aware that interest on all municipal securities will
be included in calculating (i) adjusted current earnings for purposes of the
alternative minimum tax applicable to them, (ii) the additional tax imposed on
certain corporations by the Superfund Revenue Act of 1986, and (iii) the foreign
branch profits tax imposed on certain effectively connected earnings and profits
of U.S. branches of foreign corporations. Furthermore, special tax provisions
may apply to certain financial institutions and property and casualty insurance
companies, and they should consult their tax advisors before purchasing shares
of the Fund.
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Interest on indebtedness incurred or continued by a shareholder (whether a
corporation or an individual) to purchase or carry shares of the Fund is
generally not deductible. Investors who are, or are related to, "substantial
users" of bond-financed facilities should consult their tax advisors prior to
purchasing shares of the Fund.
The Fund generally will be required to recognize accrued income on its
investments in zero coupon bonds each taxable year, even though no corresponding
amount of cash may be received during that year, and may have to obtain cash
from other sources to enable it to satisfy certain income distribution
requirements applicable to the Fund under the Code.
Redemptions or exchanges of shares, whether for cash or in-kind, are taxable
events on which a shareholder may recognize a gain or loss. Any gain or loss
realized by a shareholder who is not a dealer in securities will be
treated as long-term capital gain or loss if the shares have been held for more
than one year and otherwise a short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in the Fund
held for six months or less will be treated as long-term capital loss to the
extent of any long-term capital gain distributions received by the shareholder
with respect to such shares. In addition, any loss realized by a shareholder
upon the redemption or exchange of shares in the Fund held six months or less
will be disallowed to the extent of any exempt-interest dividends received by
the shareholder with respect to these shares.
Individuals and certain other shareholders may be subject to 31% backup
withholding of federal income tax on taxable distributions and the proceeds of
redemptions if they fail to furnish their correct taxpayer identification number
and certain certifications or if they are otherwise subject to backup
withholding.
The foregoing summarizes certain federal and California income tax consequences
of investing in the Fund. Shareholders are urged to consult their own tax
advisors concerning specific questions about federal, state and local taxes.
ADDITIONAL INFORMATION
SHAREHOLDER REPORTS AND CONFIRMATIONS. The Fund sends to its shareholders annual
and semiannual reports. The financial statements appearing in annual reports are
audited by independent accountants. Shareholders will also be sent confirmations
of each purchase and redemption transaction and monthly statements reflecting
all account activity.
TELEPHONE TRANSACTIONS. All shareholders are entitled to initiate redemptions
and other transactions by telephone. However, a transaction authorized by
telephone and reasonably believed by the Fund, Morgan, an Eligible Institution
or the Distributor to be genuine may result in a loss to the investor if the
transaction is not in fact genuine. The Fund will employ reasonable procedures
to confirm that investor instructions communicated by telephone are genuine.
These include requiring investors to give their personal identification numbers
and tape recording telephone instructions. If these procedures are not followed,
the Fund, Morgan, the investor's Eligible Institution or the Distributor may be
liable for any losses resulting from unauthorized or fraudulent instructions.
PERFORMANCE ADVERTISING. The Fund may advertise historical performance
information and compare its performance to other investments or relevant
indexes. An advertisement may also include data supplied by Lipper Analytical
Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson Associates and other
industry publications.
The Fund may advertise average annual total return and other forms of total
return data. Average annual total return is determined by computing the average
annual percentage change in value of $1,000 invested at NAV for specified
periods ending with the most recent calendar quarter. The total return
calculation assumes a complete redemption of the investment at the end of the
relevant period. The Fund may also advertise total return on a cumulative,
average, year-by-year or other basis for specified periods. The investment
results of JPM Institutional Shares will fluctuate over time and should not be
considered a representation of performance in the future.
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In addition, the Fund may advertise yield and "tax-equivalent yield." Yield
reflects the Fund's rate of income on portfolio investments as a percentage of
its NAV. The yield on JPM Institutional Shares is computed by annualizing the
result of dividing the net investment income per share over a 30-day period by
the NAV on the last day of that period. Yield is calculated by accounting
methods that are standardized for all stock and bond funds and differ from the
methods used for other accounting purposes. Therefore, the yield on JPM
Institutional Shares may not equal the income paid on these shares or the income
reported in the Fund's financial statements. Tax-equivalent yield shows the
effect on performance of the tax-exempt status of distributions received by the
Fund. It reflects the approximate yield that a taxable investment must earn for
shareholders at stated income levels to produce an after tax yield equivalent to
the Fund's tax-exempt yield.
Performance information may be obtained by calling Morgan at (800) 766-7722.
ORGANIZATION
The Trust was organized on August 15, 1996 as a Massachusetts business trust.
The Trust currently has three series of shares, including the Fund described in
this Prospectus. The Trustees have authorized one class of shares of the Fund:
the JPM Institutional Shares offered by this Prospectus. Other future classes of
shares of the Fund will be subject to different expenses, which may affect the
performance of each class. The Trustees reserve the right to authorize and issue
additional series and classes of shares.
Shareholders of the Fund are entitled to one full or fractional vote for each
dollar or fraction of a dollar invested in JPM Institutional Shares. There is no
cumulative voting and shares have no preemption or conversion rights. The Trust
does not intend to hold meetings of shareholders annually. The Trustees will
call special meetings of shareholders to the extent required by the Trust's
Declaration of Trust or the 1940 Act. The 1940 Act requires the Trustees, under
certain circumstances, to call a meeting to allow shareholders to vote on the
removal of a Trustee and to assist shareholders in communicating with each
other.
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JPM INSTITUTIONAL SHARES:
CALIFORNIA BOND FUND
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE TRUST OR THE
DISTRIBUTOR TO MAKE SUCH AN OFFER IN SUCH JURISDICTION.
PROSPECTUS
NOVEMBER 18, 1996
332PRO1196
<PAGE>
SAI5.WPF
JPM SERIES TRUST
TAX AWARE EQUITY FUND
TAX AWARE DISCIPLINED EQUITY FUND
CALIFORNIA BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 18, 1996
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
FOR THE FUND OR FUNDS DATED NOVEMBER 11, 1996 AS SUPPLEMENTED FROM TIME TO TIME,
WHICH MAY BE OBTAINED UPON REQUEST FROM FUNDS DISTRIBUTOR, INC., 60 STATE
STREET, SUITE 1300, BOSTON, MASSACHUSETTS 02109, ATTENTION: JPM SERIES TRUST
(800) 221-7930.
<PAGE>
Table of Contents
PAGE
General................................. 1
Investment Objectives and Policies...... 1
Investment Restrictions................. 11
Trustees and Officers................... 13
Investment Advisor...................... 16
Distributor............................. 18
Co-Administrator........................ 18
Services Agent.......................... 18
Custodian and Transfer Agent............ 19
Shareholder Servicing................... 19
Independent Accountants................. 19
Expenses................................ 19
Purchase of Shares...................... 20
Redemption of Shares.................... 20
Exchange of Shares...................... 21
Net Asset Value......................... 21
Performance Data........................ 22
Portfolio Transactions.................. 23
Massachusetts Trust..................... 24
Description of Shares................... 25
Taxes................................... 25
Additional Information.................. 28
Financial Statements.................... 28
Appendix A - Description of Securities
Ratings................................. A-1
Appendix B - Additional Information
Concerning California Municipal
Securities.............................. B-1
<PAGE>
GENERAL
Each of Tax Aware Equity Fund (the "Equity Fund"), Tax Aware
Disciplined Equity Fund (the " Disciplined Equity Fund," and together with the
Equity Fund, the "Equity Funds") and California Bond Fund (the "California
Fund") is a series of JPM Series Trust, an open-end management investment
company organized as a Massachusetts business trust (the "Trust"). The Equity
Funds and California Fund are referred to collectively as the "Funds." The
Trustees of the Trust have authorized the issuance and sale of shares of one
class of each Equity Fund (JPM Pierpont Shares) and shares of one class of the
California Fund (JPM Institutional Shares).
This Statement of Additional Information provides additional
information with respect to the Funds and should be read in conjunction with the
applicable current prospectus (the "Prospectus"). Capitalized terms not
otherwise defined herein have the meanings assigned to them in the Prospectus.
The Trust's executive offices are located at 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are described in
the Prospectus. The following discussion supplements the information in the
Prospectus regarding the investment policies of the Funds.
MONEY MARKET INSTRUMENTS
Each Fund may invest in money market instruments to the extent consistent
with its investment objective and policies. A description of the various types
of money market instruments that may be purchased by the Funds appears below.
See "Quality and Diversification Requirements."
U.S. TREASURY SECURITIES. Each of the Funds may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, all
of which are backed as to principal and interest payments by the full faith and
credit of the United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each of the Funds may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, a Fund must look principally to the
federal agency issuing or guaranteeing the obligation for ultimate repayment and
may not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitments. Securities in which
each Fund may invest that are not backed by the full faith and credit of the
United States include, but are not limited to, obligations of the Tennessee
Valley Authority, the Federal Home Loan Mortgage Corporation and the U.S. Postal
Service, each of which has the right to borrow from the U.S. Treasury to meet
its obligations, and obligations of the Federal Farm Credit System and the
Federal Home Loan Banks, whose obligations may be satisfied only by the
individual credits of each issuing agency. Securities which are backed by the
full faith and credit of the United States include obligations of the Government
National Mortgage Association, the Farmers Home Administration, and the
Export-Import Bank.
BANK OBLIGATIONS. Unless otherwise noted below, each of the Funds may
invest in negotiable certificates of deposit, time deposits and bankers'
acceptances of (i) banks, savings and loan associations and savings banks which
have more than $2 billion in total assets and are organized under the laws of
the
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United States or any state, (ii) foreign branches of these banks or of
foreign banks of equivalent size (Euros) and (iii) U.S. branches of foreign
banks of equivalent size (Yankees). The California Fund may not invest in
obligations of foreign branches of foreign banks. See "Foreign Investments." The
Funds will not invest in obligations for which Morgan Guaranty Trust Company of
New York, the Funds' investment advisor ("Morgan" or the "Advisor"), or any of
its affiliated persons, is the ultimate obligor or accepting bank. Each of the
Equity Funds may also invest in obligations of international banking
institutions designated or supported by national governments to promote economic
reconstruction, development or trade between nations (e.g., the European
Investment Bank, the Inter-American Development Bank, or the World Bank).
COMMERCIAL PAPER. Each of the Funds may invest in commercial paper,
including master demand obligations. Master demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no additional fee,
in its capacity as investment advisor to the Funds and as fiduciary for other
clients for whom it exercises investment discretion. The monies loaned to the
borrower come from accounts managed by Morgan or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. Morgan, acting as a fiduciary on behalf of its clients, has the
right to increase or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty all or any part of
the principal amount then outstanding on an obligation together with interest to
the date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change.
Repayment of a master demand obligation to participating accounts
depends on the ability of the borrower to pay the accrued interest and principal
of the obligation on demand, which is continuously monitored by Morgan. Since
master demand obligations typically are not rated by credit rating agencies, the
Funds may invest in such unrated obligations only if, at the time of investment,
the obligation is determined by Morgan to have a credit quality which satisfies
the Fund's quality restrictions. See "Quality and Diversification Requirements."
Although there is no secondary market for master demand obligations, such
obligations are considered by the Funds to be liquid because they are payable
upon demand. The Funds do not have any specific percentage limitation on
investments in master demand obligations. It is possible that the issuer
of a master demand obligation could be a client of Morgan to whom Morgan, in its
capacity as a commercial bank, has made a loan.
REPURCHASE AGREEMENTS. Each of the Funds may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Trust's Trustees. In a repurchase agreement, a Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The resale price normally is in excess of
the purchase price, reflecting an agreed upon interest rate. This interest rate
is effective for the period of time the agreement is in effect and is not
related to the coupon rate on the underlying security. A repurchase agreement
may also be viewed as a fully collateralized loan of money by a Fund to the
seller. The period of these repurchase agreements will usually be short, from
overnight to one week, and at no time will the Funds invest in repurchase
agreements for more than thirteen months. The securities which are subject to
repurchase agreements, however, may have maturity dates in excess of thirteen
months from the effective date of the repurchase agreement. The Funds will
always receive securities as collateral whose market value is, and during the
entire term of the agreement remains, at least equal to 100% of the dollar
amount invested by the Funds in each agreement plus accrued interest, and the
Funds will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the seller
defaults, a Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the collateral.
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In addition, if bankruptcy proceedings are commenced with respect to the
seller of the security, realization upon disposal of the collateral by a Fund
may be delayed or limited.
OTHER DEBT SECURITIES. Each of the Funds may invest in other debt
securities with remaining effective maturities of not more than thirteen months,
including without limitation corporate bonds, asset-backed securities and other
obligations described in the Prospectus or this Statement of Additional
Information.
CORPORATE BONDS AND OTHER DEBT SECURITIES
As discussed in the Prospectus, the California Fund may invest in bonds
and other debt securities of U.S. issuers to the extent consistent with its
investment objective and policies. A description of these investments appears in
the Prospectus and below. See "Quality and Diversification Requirements." For
information on short-term investments in these securities, see "Money Market
Instruments."
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Payments of principal and interest may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the entities issuing the securities.
The asset-backed securities in which a Fund may invest are subject to the Fund's
overall credit requirements. However, asset-backed securities, in general, are
subject to certain risks. For example, credit card debt receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts on credit card debt, thereby reducing the
balance due. Additionally, if the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments or losses if the
full amounts due on the underlying debt are not realized. Because asset-backed
securities are relatively new, the market experience in these securities is
limited and the market's ability to sustain liquidity through all phases of the
market cycle has not been tested.
TAX EXEMPT OBLIGATIONS
As discussed in the Prospectus, the California Fund may invest in
California Municipal Securities and other obligations exempt from federal income
taxes to the extent consistent with the Fund's investment objective and
policies. A description of the various types of tax exempt obligations which may
be purchased by the Fund appears in the Prospectus and below. See "Quality and
Diversification Requirements."
MUNICIPAL BONDS. Municipal bonds are debt obligations issued by the
states, territories and possessions of the United States and the District of
Columbia, by their political subdivisions and by duly constituted authorities
and corporations. For example, states, territories, possessions and
municipalities may issue municipal bonds to raise funds for various public
purposes such as airports, housing, hospitals, mass transportation, schools,
water and sewer works. They may also issue municipal bonds to refund outstanding
obligations and to meet general operating expenses. Public authorities issue
municipal bonds to obtain funding for privately operated facilities, such as
housing and pollution control facilities, for industrial facilities or for water
supply, gas, electricity or waste disposal facilities.
Municipal bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
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payable from revenues derived from particular facilities, from the proceeds of a
special excise tax or from other specific revenue sources. They are not
generally payable from the general taxing power of a municipality.
MUNICIPAL NOTES. Municipal notes are subdivided into three categories
of short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.
Municipal notes are short-term obligations with a maturity at the time
of issuance ranging from six months to five years. The principal types of
municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.
Municipal commercial paper typically consists of very short-term
unsecured negotiable promissory notes that are sold to meet seasonal working
capital or interim construction financing needs of a municipality or agency.
While these obligations are intended to be paid from general revenues or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or financial institutions.
Municipal demand obligations are subdivided into two types: variable rate
demand notes and master demand obligations.
Variable rate demand notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to demand payment of the notes or
to demand purchase of the notes at a purchase price equal to the unpaid
principal balance, plus accrued interest either directly by the issuer or by
drawing on a bank letter of credit or guaranty issued with respect to such note.
The issuer of the municipal obligation may have a corresponding right to prepay
at its discretion the outstanding principal of the note plus accrued interest
upon notice comparable to that required for the holder to demand payment. The
variable rate demand notes in which the Fund may invest are payable, or are
subject to purchase, on demand usually upon notice of seven calendar days or
less. The terms of the notes provide that interest rates are adjustable at
intervals ranging from daily to six months, and the adjustments are based upon
the prime rate of a bank or other appropriate interest rate index specified in
the respective notes. Variable rate demand notes are valued at amortized cost;
no value is assigned to the right of the Fund to receive the par value of the
obligation upon demand or notice.
Master demand obligations are tax exempt municipal obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. For a description of the attributes of master
demand obligations, see "Money Market Instruments" above. Although there is no
secondary market for master demand obligations, such obligations are considered
by the Fund to be liquid because they are payable upon demand. The Fund has no
specific percentage limitations on investments in master demand obligations.
The interest on many such obligations is, in the opinion of counsel for
the borrower, exempt from federal income tax. However, the interest received
with respect to certain tax exempt notes that are issued on or after August 13,
1996 and provide for interest payments that are periodically adjusted may be
taxable as capital gain.
PREMIUM SECURITIES. During a period of declining interest rates, many
municipal securities in which the California Fund invests likely will bear
coupon rates higher than current market rates, regardless of whether the
securities were initially purchased at a premium. In general, such securities
have market values
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greater than the principal amounts payable on maturity, which would be
reflected in the net asset value of the Fund's shares. The values of such
"premium" securities tend to approach the principal amount as they near
maturity.
PUTS. The California Fund may purchase without limit municipal bonds or
notes together with the right to resell the bonds or notes to the seller at an
agreed price or yield within a specified period prior to the maturity date of
the bonds or notes. Such a right to resell is commonly known as a "put." The
aggregate price for bonds or notes with puts may be higher than the price for
bonds or notes without puts. Consistent with the Fund's investment objective and
subject to the supervision of the Trustees, the purpose of this practice is to
permit the Fund to be fully invested in tax exempt securities while preserving
the necessary liquidity to purchase securities on a when-issued basis, to meet
unusually large redemptions, and to purchase at a later date securities other
than those subject to the put. The principal risk of puts is that the writer of
the put may default on its obligation to repurchase. Morgan will monitor each
writer's ability to meet its obligations under puts.
Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests. These
obligations may arise during periods in which proceeds from sales of Fund shares
and from recent sales of portfolio securities are insufficient to meet
obligations or when the funds available are otherwise allocated for investment.
In addition, puts may be exercised prior to the expiration date in order to take
advantage of alternative investment opportunities or in the event Morgan revises
its evaluation of the creditworthiness of the issuer of the underlying security.
In determining whether to exercise puts prior to their expiration date and in
selecting which puts to exercise, Morgan considers the amount of cash available
to the Fund, the expiration dates of the available puts, any future commitments
for securities purchases, alternative investment opportunities, the desirability
of retaining the underlying securities in the Fund's portfolio and the yield,
quality and maturity dates of the underlying securities.
The Fund values any municipal bonds and notes subject to puts with
remaining maturities of less than 60 days by the amortized cost method. If the
Fund were to invest in municipal bonds and notes with maturities of 60 days or
more that are subject to puts separate from the underlying securities, the puts
and the underlying securities would be valued at fair value as determined in
accordance with procedures established by the Board of Trustees. In connection
with determining the value of a put, the factors to be considered would include,
among other factors, the creditworthiness of the writer of the put, the duration
of the put, the dates on which or the periods during which the put may be
exercised and the applicable rules and regulations of the SEC.
Since the value of the put is partly dependent on the ability of the put
writer to meet its obligation to repurchase, the Fund's policy is to enter into
put transactions only with municipal securities dealers who are approved by
Morgan. Each dealer will be approved on its own merits, and it is the Fund's
general policy to enter into put transactions only with those dealers which are
determined to present minimal credit risks. Commercial bank dealers normally
will be members of the Federal Reserve System, and other dealers will be members
of the National Association of Securities Dealers, Inc. or members of a national
securities exchange. Other put writers will have outstanding debt rated Aa or
better by Moody's Investors Service, Inc. ("Moody's") or AA or better by
Standard & Poor's Corporation ("Standard & Poor's"), will be of comparable
quality in Morgan's opinion or such put writers' obligations will be
collateralized and of comparable quality in Morgan's opinion. In the event that
a dealer defaults on its obligation to repurchase an underlying security, the
Fund may not be able to recover all or any portion of any loss from such dealer.
Entering into a put with respect to a tax exempt security may be
treated, depending upon the terms of the put, as a taxable sale of the tax
exempt security
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by the Fund with the result that, while the put is outstanding, the Fund
will no longer be treated as the owner of the security and the interest income
derived with respect to the security will be treated as taxable income to the
Fund.
EQUITY INVESTMENTS
As discussed in the Prospectus, the Equity Funds invest primarily in
equity securities consisting of exchange-traded, OTC and unlisted common and
preferred stocks, warrants, rights, convertible securities, trust certificates,
limited partnership interests and equity participations of U.S. companies and,
to a lesser extent, foreign companies ("Equity Securities"). A discussion of the
various types of equity investments which may be purchased by the Equity Funds
appears in the Prospectus and below. See "Quality and Diversification
Requirements."
EQUITY SECURITIES. The Equity Securities in which the Equity Funds may
invest may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
The convertible securities in which the Equity Funds may invest include
any debt securities or preferred stock which may be converted into common stock
or which carry the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time.
The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors and are senior to the claims of preferred and common shareholders. In
the case of convertible preferred stock, the holders' claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.
COMMON STOCK WARRANTS
The Equity Funds may invest in common stock warrants that entitle the
holder to buy common stock from the issuer at a specific price (the strike
price) for a specific period of time. The market price of warrants may be
substantially lower than the current market price of the underlying common
stock, yet warrants are subject to similar price fluctuations. As a result,
warrants may be more volatile investments than the underlying common stock.
Warrants generally do not entitle the holder to dividends or voting
rights with respect to the underlying common stock and do not represent any
rights in the assets of the issuer company. A warrant will expire worthless if
it is not exercised prior to the expiration date.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each of the Funds may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and no interest accrues to a Fund until
settlement takes place. At the time a Fund makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction, reflect the value each day of such securities in determining its
net asset value and, if applicable, calculate the maturity for the purposes of
average maturity from that date. At the time of settlement a when-issued
security may be valued at less
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than the purchase price. To facilitate such acquisitions, each Fund will
maintain with the Custodian a segregated account with liquid assets, consisting
of cash or other liquid assets, in an amount at least equal to such commitments.
If a Fund chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation.
REVERSE REPURCHASE AGREEMENTS. Each of the Funds may enter into reverse
repurchase agreements. In a reverse repurchase agreement, a Fund sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, a reverse repurchase agreement may
be deemed to be a borrowing of money by the Fund and, therefore, a form of
leverage. The Funds will invest the proceeds of borrowings under reverse
repurchase agreements. In addition, a Fund will enter into a reverse repurchase
agreement only when the expected return to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. A Fund may not
enter into reverse repurchase agreements exceeding in the aggregate one-third of
the market value of its total assets less liabilities (other than reverse
repurchase agreements and other borrowings). See "Investment Restrictions."
LOANS OF PORTFOLIO SECURITIES. Each of the Funds may lend its securities if
such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Fund at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Fund any income accruing
thereon. Loans will be subject to termination by the Funds in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to a Fund and its respective
shareholders. The Funds may pay reasonable finders' and custodial fees in
connection with a loan. In addition, a Fund will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and no Fund will make any loans in excess of one year. The Funds
will not lend their securities to any officer, Trustee, Director, employee or
other affiliate of the Funds, Morgan or the Funds' distributor, unless otherwise
permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Funds may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus. These restricted securities are
subject to the risk that the Fund will not be able to sell them at a price the
Fund deems representative of their value. If a restricted security must be
registered under the Securities Act of 1933, as amended (the "1933 Act"), before
it may be sold, a Fund may be obligated to pay all or part of the registration
expenses. Also, a considerable period may elapse between the time of the
decision to sell and the time the Fund is permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to sell.
QUALITY AND DIVERSIFICATION REQUIREMENTS
For purposes of diversification under the Code and concentration under
the 1940 Act as described in the California Fund's Prospectus, identification of
the issuer of municipal bonds or notes in which the Fund invests depends on the
terms and conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate
from those of the government creating the subdivision and the obligation is
backed only by the assets and revenues of the subdivision, such subdivision is
regarded as the sole issuer. Similarly, in the case of an industrial development
revenue bond or pollution control revenue bond, if the bond is backed only by
the assets and revenues of the nongovernmental user, the nongovernmental user is
regarded as the
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sole issuer. If in either case the creating government or another entity
guarantees an obligation, the guaranty is regarded as a separate security and
treated as an issue of such guarantor.
As described in the Prospectus, the California Fund invests
principally in investment grade municipal securities and may also invest up to
10% of its total assets in below investment grade municipal and taxable
securities rated at least B by Moody's or by Standard & Poor's. In addition, the
California Fund may invest in debt securities which are not rated or other debt
securities to which these ratings are not applicable, if in the opinion of
Morgan, such securities are of comparable quality to rated securities in the
applicable category.
At the time any of the Funds invest in any taxable commercial paper,
master demand obligations, bank obligation or repurchase agreement, the issuer
must have outstanding debt rated A or higher by Moody's or Standard & Poor's,
the issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no such ratings are
available, the investment must be of comparable quality in Morgan's opinion.
In determining suitability of investment in a particular unrated
security, Morgan takes into consideration asset and debt service coverage, the
purpose of the financing, history of the issuer, existence of other rated
securities of the issuer, and other relevant conditions, such as comparability
to other issuers. A Fund may only invest in unrated master demand obligations
that Morgan has determined are comparable in credit quality to obligations rated
A or higher by Moody's or Standard & Poor's.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OTC OPTIONS. All options purchased or sold by the
Funds will be traded on a securities exchange or will be purchased or sold by
securities dealers ( OTC options) that meet the Funds' credit standards.
Exchange-traded options are obligations of the Options Clearing Corporation.
However, when a Fund purchases an OTC option, it relies on the dealer from which
it purchased the option to make or take delivery of the underlying securities.
Failure by the dealer to do so would result in the loss of the premium paid by
the Fund as well as loss of the expected benefit of the transaction.
The staff of the SEC has taken the position that certain purchased OTC
options and the underlying securities used to cover certain written OTC options
are illiquid securities. However, a Fund may treat as liquid purchased OTC
options and underlying securities used to cover written OTC options determined
by Morgan to be liquid on a case-by-case basis pursuant to procedures approved
by the Trustees of the Trust.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Funds may
purchase or sell (write) futures contracts and purchase put and call options,
including put and call options on futures contracts. In addition, the Funds may
sell (write) put and call options, including options on futures. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index. Currently, futures contracts are
available on various types of fixed-income securities, including but not limited
to U.S. Treasury bonds, notes and bills, Eurodollar certificates of deposit and
on indices of fixed income securities (including municipal securities) and
indices composed of equity securities.
A futures contract requires the parties to buy and sell a security or
make a cash settlement payment based on changes in a financial instrument or
securities index on an agreed date. Each party to an open futures contract makes
daily payments of "variation" margin to the other party in an amount equal to
the
8
<PAGE>
decrease. In contrast, an option on a futures contract entitles its holder
to decide on or before the expiration date whether to enter into such a
contract. If the holder decides not to exercise its option, the holder may close
out the option position by entering into an offsetting transaction or may decide
to let the option expire and forfeit the premium thereon. The purchaser of an
option on a futures contract pays a premium for the option but makes no initial
margin payments or daily cash payments of "variation" margin to reflect the
change in the value of the underlying contract.
The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by a Fund are paid by the Fund into a segregated account
maintained by the Fund's custodian in the name of the futures commission
merchant. In connection with such transactions, a Fund will also segregate
cash or other liquid assets in a separate account in accordance with
applicable SEC requirements.
COMBINED POSITIONS. The Funds may engage in options transactions in
combination with other options, futures or forward contracts. For example, a
Fund may purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower strike price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match a Fund's
current or anticipated investments exactly. A Fund may enter into options and
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests. This
practice involves a risk that the options or futures position will not track the
performance of the Fund's other investments in securities.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments correlate
well with the Fund's investments. Options and futures contracts prices are
affected by such factors as current and anticipated interest rates, changes in
the price volatility of the underlying instrument, and the time remaining until
expiration of the contract, which may not affect security prices the same way.
Imperfect correlation may also result from differing levels of demand in the
options and futures markets and the securities markets, from structural
differences in how options and futures and securities are traded, or from the
imposition of daily price fluctuation limits or trading halts. A Fund may
purchase or sell options and futures contracts with a greater or lesser value
than the securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in a Fund's options or futures positions are poorly correlated with its other
investments, the positions may fail to produce anticipated gains or result in
losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance that
a liquid market will exist for any particular option or futures contract at
any particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
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<PAGE>
limit is reached or a trading halt is imposed, it may be impossible for a Fund
to enter into new positions or close out existing positions. If the market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and could potentially
require a Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, the Fund's access to other
assets held to cover its options or futures positions could also be impaired.
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, a Fund or Morgan may be required to
reduce the size of its futures and options positions or may not be able to trade
a certain futures or options contract in order to avoid exceeding such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Funds
intend to comply with Rule 4.5 under the Commodity Exchange Act, which limits
the extent to which a Fund can commit assets to initial margin deposits and
option premiums. In addition, the Funds will comply with guidelines established
by the SEC with respect to coverage of options and futures contracts by mutual
funds. If the guidelines so require, a Fund will set aside appropriate liquid
assets in a segregated custodial account in the amount prescribed. Securities
held in a segregated account cannot be sold while the futures contract or option
is outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
Fund's assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
RISK MANAGEMENT. The Funds may employ non-hedging risk management
techniques. Examples of such strategies include using futures and options to
alter the duration or beta of a Fund's portfolio or the mix of securities in a
Fund's portfolio. For example, if Morgan wishes to extend maturities in the
California Fund's portfolio in order to take advantage of an anticipated decline
in interest rates, but does not wish to purchase the underlying long-term
securities, it might cause the Fund to purchase futures contracts on long-term
debt securities. Similarly, if Morgan wishes to reduce a Fund's exposure to
fixed income securities and purchase equities, it could cause the Fund to sell
futures contracts on debt securities and purchase futures contracts on a stock
index. Such non-hedging risk management techniques are not speculative, but
may involve leverage. Leverage magnifies the gains and losses experienced by
the Fund as a result of market fluctuations.
SPECIAL FACTORS AFFECTING THE CALIFORNIA FUND
The California Fund intends to invest a high proportion of its assets
in municipal obligations in California Municipal Securities. As discussed in the
Prospectus, payment of interest and preservation of principal is dependent upon
the continuing ability of California issuers and/or obligors of California
Municipal Securities to meet their obligations thereunder.
The fiscal stability of California is related, at least in part, to the
fiscal stability of its localities and authorities. Various California agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by California through lease-purchase arrangements, other
contractual arrangements or moral obligation provisions. While debt service is
normally paid out of revenues generated by projects of such California agencies,
authorities and localities, the State has occasionally had to provide special
assistance , in some cases of a recurring nature, to enable such agencies,
authorities and localities to meet their financial obligations and, in some
cases, to prevent or cure defaults. To the extent that California agencies and
local governments require State assistance to meet their financial obligations,
the ability of California to meet its own obligations as they become due or to
obtain additional financing could be adversely affected.
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<PAGE>
For further information concerning California Municipal Obligations,
see Appendix B to this Statement of Additional Information. The summary set
forth above and in Appendix B is based on information from an official statement
of California general obligation municipal obligations and does not purport to
be complete.
PORTFOLIO TURNOVER
The Fund's expected portfolio turnover rates are set forth in the
Prospectus. A rate of 100% indicates that the equivalent of all of a Fund's
assets have been sold and reinvested in a year. High portfolio turnover may
result in the realization of substantial net capital gains or losses. To the
extent that net short term capital gains are realized, any distributions
resulting from such gains are considered ordinary income for federal income tax
purposes. See "Taxes" below.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been otherwise noted,
these investment restrictions are "fundamental" policies which, under the 1940
Act, may not be changed without the vote of a majority of the outstanding voting
securities of the Fund. A "majority of the outstanding voting securities" is
defined in the 1940 Act as the lesser of (a) 67% or more of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy, or (b) more
than 50% of the outstanding voting securities. The percentage limitations
contained in the restrictions below apply at the time of purchasing securities
to the market value of a Fund's assets.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof are amended or modified, each Fund may not:
1. Purchase any security if, as a result, more than
25% of its total assets would be invested in the
securities of issuers in any single industry.
This limitation shall not apply to securities issued or
guaranteed as to principal or interest by the U.S.
Government, its agencies or instrumentalities.
2. Issue senior securities. For purposes of this
restriction, borrowing money in accordance with
paragraph 3 below, making loans in accordance with
paragraph 8 below, the issuance of shares of beneficial
interest in multiple classes or series, the purchase
or sale of options, futures contracts, forward
commitments, swaps and transactions in repurchase
agreements are not deemed to be senior securities.
3. Borrow money, except in amounts not to exceed one third
of the Fund's total assets (including the amount
borrowed) (i) from banks for temporary or short-term
purposes or for the clearance of transactions, (ii) in
connection with the redemption of Fund shares or to
finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other
assets, (iii) in order to fulfill commitments or plans
to purchase additional securities pending the
anticipated sale of other portfolio securities or
assets and (iv) pursuant to reverse repurchase
agreements entered into by the Fund.
4. Underwrite the securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter under
the 1933 Act.
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<PAGE>
5. Purchase or sell real estate except that the Fund may
(i) acquire or lease office space for its own use, (ii)
invest in securities of issuers that invest in real estate or
interests therein, (iii) invest in securities that are secured
by real estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate
acquired by the Fund as a result of the ownership of
securities.
6. Purchase securities on margin (except that the Fund may
obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities).
7. Purchase or sell commodities or commodity contracts, except
the Fund may purchase and sell financial futures contracts,
options on financial futures contracts and warrants and may
enter into swap and forward commitment transactions.
8. Make loans, except that the Fund (1) may lend portfolio
securities with a value not exceeding one-third of the
Fund's total assets, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an
issue of debt securities (including privately issued
debt securities), bank loan participation interests,
bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the
purchase is made upon the original issuance of the
securities.
9. In the case of each Equity Fund, with respect to 75% of its
total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities or repurchase agreements
collateralized by U.S. Government securities), if:
a. such purchase would cause more than 5% of the
Fund's total assets to be invested in the
securities of such issuer; or
b. such purchase would cause the Fund to hold more
than 10% of the outstanding voting securities of
such issuer.
For purposes of fundamental investment restriction (1) regarding
industry concentration, Morgan may classify issuers by industry in accordance
with classifications set forth in the DIRECTORY OF COMPANIES FILING ANNUAL
REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION or other sources. In the
absence of such classification or if Morgan determines in good faith based on
its own information that the economic characteristics affecting a particular
issuer make it more appropriately considered to be engaged in a different
industry, Morgan may classify an issuer accordingly. For instance, personal
credit finance companies and business credit finance companies are deemed to
be separate industries and wholly owned finance companies are considered
to be in the industry of their parents if their activities are primarily related
to financing the activities of their parents.
As a matter of non-fundamental policy, which may be changed by the
Trustees without shareholder approval, each Fund may not:
A. Make short sales of securities unless either (a) after
giving effect to any such short sale, the total market
value of all securities sold short would not exceed 25%
of the Fund's net assets or (b) at all times during
which a short position is open the Fund owns (or has
the right to obtain through the conversion or exchange
of other securities) an equal amount of such
securities.
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<PAGE>
B. Acquire securities of other investment companies, except as
permitted by the 1940 Act or any rule, order or interpretation
thereunder, or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange.
C. Acquire any illiquid securities, such as repurchase
agreements with more than seven days to maturity or fixed time
deposits with a duration of over seven calendar days, if as a
result thereof, more than 15% of the market value of the
Fund's total assets would be in investments that are illiquid.
Notwithstanding any other fundamental or non-fundamental investment
restriction or policy, each Fund reserves the right, without the approval of
shareholders, to invest all of its assets in another open-end registered
investment company with substantially the same fundamental investment objective,
restrictions and policies as the Fund.
If any percentage restriction described above is adhered to at the time
of investment, a subsequent increase or decrease in the percentage resulting
from a change in the value of a Fund's assets will not constitute a violation of
the restriction.
TRUSTEES AND OFFICERS
Trustees
The Trustees of the Trust, their principal occupations during the past
five years, business addresses and dates of birth are set forth below.
FREDERICK S. ADDY Trustee; Retired; Executive Vice President and Chief
Financial Officer from January 1990 to April 1994, Amoco Corporation. His
address is 5300 Arbutus Cove, Austin, Texas 78746, and his date of birth is
January 1, 1932.
WILLIAM G. BURNS Trustee; Retired, Former Vice Chairman and Chief Financial
Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, Florida 32779, and
his date of birth is November 2, 1932.
ARTHUR C. ESCHENLAUER Trustee; Retired; Senior Vice President, Morgan
Guaranty Trust Company of New York until 1987. His address is 14 Alta Vista
Drive, RD #2, Princeton, New Jersey 08540, and his date of birth is May 23,
1934.
MATTHEW HEALEY (*) Trustee, Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc., since 1989. His address is Pine Tree Club
Estates, 10286 Saint Andrews Road, Boynton Beach, Florida 33436, and his date of
birth is August 23, 1937.
MICHAEL P. MALLARDI Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group prior to April 1996. His address
is 10 Charnwood Drive, Suffern, New York 10910, and his date of birth is March
17, 1934.
- ------------------------
(*) Mr. Healey is an "interested person" of the Trust as that term is
defined in the 1940 Act.
Each Trustee is paid an annual fee as follows for serving as Trustee of the
Trust, The JPM Pierpont Funds, The JPM Institutional Funds and each of the
Master Portfolios (as defined below) and is reimbursed for expenses incurred in
connection with service as a Trustee. The compensation paid to the Trustees for
the calendar year ended December 31, 1995 is set forth below. The Trustees may
hold various other directorships unrelated to these funds.
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<TABLE>
TOTAL COMPENSATION FROM
THE JPM PIERPONT FUNDS,
AGGREGATE PENSION OR THE JPM INSTITUTIONAL
COMPENSATION RETIREMENT BENEFITS ESTIMATED ANNUAL FUNDS AND MASTER
FROM THE TRUST ACCRUED AS PART BENEFITS PORTFOLIOS(**) PAID
NAME OF TRUSTEE DURING 1995 OF FUND EXPENSES UPON RETIREMENT TO TRUSTTES DURING 1995
----------- ---------------- --------------- -----------------------
<S> <C> <C> <C> <C>
Frederick S. Addy, Trustee $0 None None $62,500
William G. Burns, Trustee $0 None None $62,500
Arthur C. Eschenlauer, Trustee $0 None None $62,500
Matthew Healey, Trustee(*), $0 None None $62,500
Chairman and Chief Executive
Officer
Michael P. Mallardi, Trustee $0 None None $62,500
</TABLE>
(*) During 1995, Pierpont Group, Inc. paid Mr. Healey, in his role as
Chairman of Pierpont Group, Inc., compensation in the amount of $140,000,
contributed $21,000 to a defined contribution plan on his behalf and paid
$20,000 in insurance premiums for his benefit.
(**) The JPM Pierpont Funds and The JPM Institutional Funds are each
multi-series registered investment companies that are part of a two-tier
(master-feeder) investment fund structure. Each series of The JPM Pierpont Funds
and The JPM Institutional Funds is a feeder fund that invests all of its
investable assets in one of 16 separate master portfolios (collectively the
"Master Portfolios"), 13 of which are registered investment companies and 3 of
which are series of a registered investment company.
As of April 1, 1995 the annual fee paid to each Trustee was adjusted to
$65,000. As of the date of this Statement of Additional Information there were
17 investment companies (the Trust, The JPM Pierpont Funds, The JPM
Institutional Funds and the 14 investment companies comprising the Master
Portfolios) in the fund complex.
The Trustees, in addition to reviewing actions of the Trust's various
service providers, decide upon matters of general policy. The Trust has entered
into a Fund Services Agreement with Pierpont Group, Inc. to assist the Trustees
in exercising their overall supervisory responsibilities over the affairs of the
Trust. Pierpont Group, Inc. was organized in July 1989 to provide services for
The Pierpont Family of Funds, and the Trustees are the equal and sole
shareholders of Pierpont Group, Inc. The Trust has agreed to pay Pierpont Group,
Inc. a fee in an amount representing its reasonable costs in performing these
services. These costs are periodically reviewed by the Trustees.
Officers
The Trust's executive officers (listed below), other than the Chief
Executive Officer, are provided and compensated by Funds Distributor, Inc.
("FDI"), a wholly owned indirect subsidiary of Boston Institutional Group, Inc.
The Chief Executive Officer receives no compensation in his capacity as an
officer of the Trust. The officers conduct and supervise the business operations
of the Trust. The Trust has no employees.
The officers of the Trust, their principal occupations during the past
five years and dates of birth are set forth below. The business address of each
of the officers unless otherwise noted is Funds Distributor, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
Inc., since 1989. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, Florida 33436. His date of birth is August 23, 1937.
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<PAGE>
ELIZABETH A. BACHMAN; Vice President and Assistant Secretary. Counsel, FDI
and Premier Mutual Fund Services, Inc. ("Premier Mutual") and an officer of RCM
Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by the Dreyfus Corporation ("Dreyfus"). Prior to September 1995, Ms. Bachman was
enrolled at Fordham University School of Law and received her JD in May 1995.
Prior to September 1992, Ms. Bachman was an assistant at the National
Association for Public Interest Law. Address: FDI, 200 Park Avenue, New York,
New York 10166. Her date of birth is September 14, 1969.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President and
Chief Executive Officer and Director of FDI, Premier Mutual and an officer of
RCM Capital Funds, Inc., RCM Equity Funds, Inc. and certain investment companies
advised or administered by Dreyfus. From December 1991 to July 1994, she was
President and Chief Compliance Officer of FDI. Prior to December 1991, she
served as Vice President and Controller, and later as Senior Vice President of
The Boston Company Advisors, Inc. ("TBCA"). Her date of birth is August 1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Supervisor of
Treasury Services and Administration of FDI and an officer of certain investment
companies advised or administered by Dreyfus. From April 1993 to January 1995,
Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust Company.
Prior to March 1993, Mr. Conroy was employed as a fund accountant at The Boston
Company. His date of birth is March 31, 1969.
RICHARD W. INGRAM; President and Treasurer. Senior Vice President and
Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. From March 1994 to
November 1995, Mr. Ingram was Vice President and Division Manager of First Data
Investor Services Group, Inc. From 1989 to 1994, Mr. Ingram was Vice President,
Assistant Treasurer and Tax Director - Mutual Funds of The Boston Company. His
date of birth is September 15, 1955.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant Vice
President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity Funds,
Inc. From June 1994 to January 1996, Ms. Jacoppo was a Manager, SEC
Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994, Ms. Jacoppo
was a senior paralegal at TBCA. Her date of birth is December 29, 1966.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI. From April 1994 to July 1996,
Mr. Kelley was Assistant Counsel at Forum Financial Group. From 1992 to 1994,
Mr. Kelley was employed by Putnam Investments in legal and compliance
capacities. Prior to September 1992, Mr. Kelley was enrolled at Boston College
Law School and received his JD in May 1992. His date of birth is December 24,
1964.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI, an officer of RCM
Capital Funds, Inc., RCM Equity Funds, Inc. and certain investment companies
advised or administered by Dreyfus. From 1989 to 1994, Ms. Nelson as an
Assistant Vice President and client manager for The Boston Company. Her date of
birth is April 22, 1964.
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President and
General Counsel of FDI and Premier Mutual and an officer of RCM Capital Funds,
Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc.
and certain investment companies advised or administered by Dreyfus. From
February 1992 to April 1994, Mr. Pelletier served as Counsel for TBCA. From
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<PAGE>
August 1990 to February 1992, Mr. Pelletier was employed as an Associate at
Ropes & Gray. His date of birth is June 24, 1964.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of FDI and Premier Mutual and
an officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. From July 1988 to
November 1993, Mr. Tower was Financial Manager of The Boston Company. His date
of birth is June 13, 1962.
INVESTMENT ADVISOR
The investment advisor to the Funds is Morgan (Morgan Guaranty Trust
Company of New York), a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated ("J.P. Morgan"), a bank holding company organized under the laws of
the State of Delaware. Morgan, whose principal offices are at 60 Wall Street,
New York, New York 10260, is a New York trust company which conducts a general
banking and trust business. The Advisor is subject to regulation by the New York
State Banking Department and is a member bank of the Federal Reserve System.
Through offices in New York City and abroad, Morgan offers a wide range of
services, primarily to governmental, institutional, corporate and high net worth
individual customers in the United States and throughout the world.
J.P. Morgan, through Morgan and other subsidiaries, acts as investment
advisor to individuals, governments, corporations, employee benefit plans,
mutual funds and other institutional investors with combined assets under
management of $197 billion (of which Morgan advises over $30 billion).
J.P. Morgan has a long history of service as an advisor, underwriter
and lender to an extensive roster of major companies and as a financial advisor
to national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
The basis of Morgan's investment process is fundamental investment
research because the firm believes that fundamentals should determine an asset's
value over the long term. Morgan currently employs over 100 full time research
analysts, among the largest research staffs in the money management industry, in
its investment management divisions located in New York, London, Tokyo,
Frankfurt, Melbourne and Singapore to cover companies, industries and countries
on site. In addition, the investment management divisions employ approximately
300 capital market researchers, portfolio managers and traders. The conclusions
of the equity analysts' fundamental research is quantified into a set of
projected returns for individual companies through the use of a dividend
discount model. These returns are projected for 2 to 5 years to enable analysts
to take a longer term view. These returns, or normalized earnings, are used to
establish relative values among stocks in each industrial sector. These values
may not be the same as the markets' current valuations of these companies. This
provides the basis for ranking the attractiveness of the companies in an
industry according to five distinct quintiles or rankings. This ranking is one
of the factors considered in determining the stocks purchased and sold in each
sector. Morgan's fixed income investment process is based on analysis of real
rates, sector diversification and quantitative and credit analysis.
The investment advisory services Morgan provides to the Funds are not
exclusive under the terms of the Investment Advisory Agreement. Morgan is free
to and does render similar investment advisory services to others. Morgan serves
as investment advisor to personal investors and other investment companies and
acts as fiduciary for trusts, estates and employee benefit plans. Certain of the
assets of trusts and estates under management are invested in common trust funds
for which Morgan serves as trustee. The accounts which are managed or advised by
Morgan have varying investment objectives and Morgan invests assets of such
accounts in investments substantially similar to, or the same as, those which
are
16
<PAGE>
expected to constitute the principal investments of the Funds. Such accounts
are supervised by officers and employees of Morgan who may also be acting in
similar capacities for the Funds. See "Portfolio Transactions."
Sector weightings are generally similar to a benchmark with the
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmarks for the Funds are currently: Equity
Fund -- S&P 500; Disciplined Equity Fund -- S&P 500; and California Fund --
Lehman Brothers 1- to 16-Year Municipal Bond Index.
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary
of J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940 and manages employee benefit funds of corporations, labor unions and
state and local governments and the accounts of other institutional investors,
including investment companies. Certain of the assets of employee benefit
accounts under its management are invested in commingled pension trust funds for
which Morgan serves as trustee. J.P. Morgan Investment Management Inc. advises
Morgan on investment of the commingled pension trust funds.
The Funds are managed by officers of Morgan who, in acting for their
clients, including the Funds, do not discuss their investment decisions with any
personnel of J.P. Morgan or any personnel of other divisions of Morgan or with
any of its affiliated persons, with the exception of J.P. Morgan Investment
Management Inc.
The Investment Advisory Agreement between Morgan and the Trust, on
behalf of each Fund, provides that it will continue in effect for a period of
two years after execution only if specifically approved thereafter annually in
the same manner as the Distribution Agreement. See "Distributor" below. The
Investment Advisory Agreement will terminate automatically if assigned and is
terminable at any time with respect to a Fund without penalty by a vote of a
majority of the Trust's Trustees or by a vote of the holders of a majority of
the Fund's outstanding voting securities on 60 days' written notice to Morgan
and by Morgan on 90 days' written notice to the Fund. See "Additional
Information."
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as Morgan from engaging in the business of underwriting or
distributing securities. The Board of Governors of the Federal Reserve System
has issued an interpretation to the effect that under these laws a bank holding
company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company that continuously issues shares, such as the Trust. The
interpretation does not prohibit a holding company or a subsidiary thereof from
acting as investment advisor, administrator, shareholder servicing agent or
custodian to such an investment company. Morgan believes that it may perform the
services for the Funds contemplated by the Investment Advisory Agreement without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the interpretation of
relevant federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. However, it is possible
that future changes in either federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further judicial or administrative decisions and interpretations of present and
future statutes and regulations, might prevent Morgan from continuing to perform
such services for the Funds.
If Morgan were prohibited from acting as investment advisor to any
Fund, it is expected that the Trustees of the Trust would recommend to
shareholders that they approve the Fund's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
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Under separate agreements, Morgan also provides certain financial, fund
accounting, administrative and shareholder services to the Trust. See "Services
Agent" and "Shareholder Servicing" below.
DISTRIBUTOR
FDI serves as the Trust's exclusive distributor and holds itself
available to receive purchase orders for each Fund's shares. In that capacity,
FDI has been granted the right, as agent of the Trust, to solicit and accept
orders for the purchase of each Fund's shares in accordance with the terms of
the Distribution Agreement between the Trust and FDI. Under the terms of the
Distribution Agreement between FDI and the Trust, FDI receives no compensation
in its capacity as the Funds' distributor.
The Distribution Agreement will continue in effect with respect to each
Fund for a period of two years after execution only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding voting securities or by its Trustees and (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval (see
"Trustees and Officers"). The Distribution Agreement will terminate
automatically if assigned by either party. The Distribution Agreement is also
terminable with respect to a Fund at any time without penalty by a vote of a
majority of the Trustees of the Trust, a vote of a majority of the Trustees who
are not "interested persons" of the Trust, or by a vote of (i) 67% or more of
the Fund's outstanding voting securities present at a meeting if the holders of
more than 50% of the Fund's outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding voting
securities, whichever is less. The principal offices of FDI are located at 60
State Street, Suite 1300, Boston, Massachusetts 02109.
CO-ADMINISTRATOR
Under a Co-Administration Agreement with the Trust, FDI also serves as
the Trust's Co-Administrator. The Co-Administration Agreement may be renewed or
amended by the Trustees without a shareholder vote. The Co-Administration
Agreement is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust on not more than 60 days' written notice nor less than
30 days' written notice to the other party. The Co-Administrator may subcontract
for the performance of its obligations, provided, however, that unless the Trust
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and omissions of any subcontractor as it would for its own acts or
omissions. See "Services Agent" below.
For its services under the Co-Administration Agreement, each Fund has
agreed to pay FDI fees equal to its allocable share of an annual complex-wide
charge of $425,000 plus FDI's out-of-pocket expenses. The amount allocable to
each Fund is based on the ratio of the Fund's net assets to the aggregate net
assets of the Funds and the Master Portfolios.
SERVICES AGENT
The Trust, on behalf of each Fund, has entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan pursuant to which
Morgan is responsible for certain administrative and related services provided
to each Fund. The Services Agreement may be terminated at any time, without
penalty, by the Trustees or Morgan, in each case on not more than 60 days' nor
less than 30 days' written notice to the other party.
Under the Services Agreement, each Fund has agreed to pay Morgan fees
equal to its allocable share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Funds and the
Master
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Portfolios in accordance with the following annual schedule: 0.09% of the
first $7 billion of their aggregate average daily net assets, and 0.04% of
their aggregate average daily net assets in excess of $7 billion, less the
complex-wide fees payable to FDI. The portion of this charge payable by
each Fund is determined by the proportionate share that its net assets bear
to the total net assets of The JPM Pierpont Funds, The JPM Institutional
Funds, the Master Portfolios, the other investors in the Master Portfolios
for which Morgan provides similar services and the Trust.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, serves as the Trust's custodian and fund
accounting, transfer and dividend disbursing agent. Pursuant to the Custodian
Contract with the Trust, State Street is responsible for maintaining the books
and records of each Fund's portfolio transactions and holding portfolio
securities and cash. The Custodian maintains portfolio transaction records. As
transfer agent and dividend disbursing agent, State Street is responsible for
maintaining account records detailing the ownership of Fund shares and for
crediting income, capital gains and other changes in share ownership to
shareholder accounts.
SHAREHOLDER SERVICING
The Trust on behalf of each of the Funds has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for Fund shareholders. Under this agreement, Morgan is
responsible for performing, directly or through an agent, shareholder account
administrative and servicing functions, which include but are not limited to
answering inquiries regarding account status and history, the manner in which
purchases and redemptions of Fund shares may be effected, and certain other
matters pertaining to a Fund; assisting customers in designating and changing
dividend options, account designations and addresses; providing necessary
personnel and facilities to coordinate the establishment and maintenance of
shareholder accounts and records with the Funds' transfer agent; transmitting
purchase and redemption orders to the Funds' transfer agent and arranging for
the wiring or other transfer of funds to and from customer accounts in
connection with orders to purchase or redeem Fund shares; verifying purchase and
redemption orders, transfers among and changes in accounts; informing FDI of the
gross amount of purchase orders for Fund shares; and providing other related
services.
As discussed under "Investment Advisor," the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
and for providing administrative services to the Funds under the Services
Agreement, may raise issues under these laws. However, Morgan believes that it
may properly perform these services and the other activities described in the
Prospectus without violating the Glass-Steagall Act or other applicable banking
laws or regulations.
If Morgan were prohibited from providing any of the services under the
Shareholder Servicing Agreement and the Services Agreement, the Trustees would
seek an alternative provider of such services. In such event, changes in the
operation of the Funds might occur and a shareholder might no longer be able to
avail himself or herself of any services then being provided to shareholders by
Morgan.
INDEPENDENT ACCOUNTANTS
The independent accountants of the Trust are Price Waterhouse LLP, 1177
Avenue of the Americas, New York, New York 10036. Price Waterhouse LLP conducts
an annual audit of the financial statements of each of the Funds, assists in the
preparation and/or review of each of the Fund's federal and state income tax
returns and consults with the Funds as to matters of accounting and federal and
state income taxation.
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EXPENSES
In addition to the fees payable to Pierpont Group, Inc., Morgan and FDI
under various agreements discussed under "Trustees and Officers," "Investment
Advisor," "Co-Administrator" "Services Agent" and "Shareholder Servicing" above,
the Funds are responsible for usual and customary expenses associated with the
Trust's operations. Such expenses include organization expenses, legal fees,
accounting and audit expenses, insurance costs, the compensation and expenses of
the Trustees, registration fees under federal securities laws, extraordinary
expenses, transfer, registrar and dividend disbursing costs, the expenses of
printing and mailing reports, notices and proxy statements to Fund shareholders,
fees under state securities laws, custodian fees and brokerage expenses.
Morgan has agreed that if in any fiscal year the sum of any Fund's
expenses exceeds the limits set by applicable regulations of state securities
commissions, the fees payable by the Fund to Morgan for that year will be
reduced as specified by agreement with the Trust on behalf of the Fund.
Currently, Morgan believes that the most restrictive expense limitation of state
securities commissions limits expenses to 2.5% of the first $30 million of
average net assets, 2% of the next $70 million of such net assets and 1.5% of
such net assets in excess of $100 million for any fiscal year.
PURCHASE OF SHARES
Investors may open Fund accounts and purchase JPM Pierpont Shares of
the Equity Funds and JPM Institutional Shares of the California Fund as
described in the Prospectus under "Purchase of Shares."
Each Fund may, at its own option, accept securities in payment for
shares. The securities so delivered are valued by the method described under
"Net Asset Value" as of the day the Fund receives the securities. This is a
taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of Morgan, appropriate investments
for the Fund. In addition, securities accepted in payment for shares must: (i)
meet the investment objective and policies of the acquiring Fund; (ii) be
acquired by the applicable Fund for investment and not for resale; (iii) be
liquid securities which are not restricted as to transfer; and (iv) if stock,
have a value which is readily ascertainable as evidenced by a listing on a stock
exchange, OTC market or by readily available market quotations from a dealer in
such securities. Each Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.
Prospective investors may purchase shares with the assistance of an
Eligible Institution, and the Eligible Institution may charge the investor a fee
for this service and other services it provides to its customers.
REDEMPTION OF SHARES
Investors may redeem JPM Pierpont Shares of the Equity Funds and JPM
Institutional Shares of the California Fund as described in the Prospectus under
"Redemption of Shares."
The Trust, on behalf of each Fund, reserves the right to suspend the
right of redemption and to postpone the date of payment upon redemption as
follows: (i) for up to seven days, (ii) during periods when the New York Stock
Exchange is closed for other than weekends and holidays or when trading thereon
is restricted as determined by the SEC by rule or regulation, (iii) during
periods in which an emergency, as determined by the SEC, exists that causes
disposal by the Fund of, or evaluation of the net asset value of, its portfolio
securities to be unreasonable or impracticable, or (iv) for such other periods
as the SEC may permit.
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If the Trust determines that it would be detrimental to the best
interest of the remaining shareholders of the California Fund to make payment
wholly or partly in cash, payment of the redemption price may be made in whole
or in part by a distribution in kind of securities from the Fund, in lieu of
cash. If shares are redeemed in kind, the redeeming shareholder might incur
costs in converting the assets into cash. The method of valuing portfolio
securities is described under "Net Asset Value," and such valuation will be made
as of the same time the redemption price is determined. See the Prospectus for
information on redemptions in kind for the Equity Funds.
EXCHANGE OF SHARES
An investor may exchange JPM Institutional Shares of the California
Fund for shares of any fund in The JPM Pierpont Funds or The JPM Institutional
Funds, as described under "Exchange of Shares" in the Prospectus. For complete
information, the Prospectus as it relates to the fund into which a transfer is
being made should be read prior to the transfer. Orders for the purchases of
shares to be acquired and orders for shares to be redeemed are timed to settle
on the same day. In the case of investors in certain states, state securities
laws may restrict the availability of the exchange privilege.
NET ASSET VALUE
Each of the Funds computes its net asset value once daily at 4:15 P.M.
New York time on Monday through Friday as described under "Net Asset Value" in
the Prospectus. The net asset value will not be computed on the day the
following legal holidays are observed: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. On days when U.S. trading markets close early in observance of
these holidays, the Funds will close for purchases and redemptions at the same
time. The days on which net asset value is determined are the Funds' business
days.
California Fund. Portfolio securities with a maturity of more than 60
days, including securities that are listed on an exchange or traded over the
counter, are valued using prices supplied daily by an independent pricing
service or services that (i) are based on the last sale price on a national
securities exchange or, in the absence of recorded sales, at the readily
available closing bid price on such exchange or at the quoted bid price in the
OTC market, if such exchange or market constitutes the broadest and most
representative market for the security and (ii) in other cases, take into
account various factors affecting market value, including yields and prices of
comparable securities, indications as to value from dealers and general market
conditions. If such prices are not supplied by the Fund's independent pricing
service, such securities are priced in accordance with procedures adopted by the
Trustees. All portfolio securities with a remaining maturity of 60 days or less
are valued by the amortized cost method. Because of the large number of
municipal bond issues outstanding and the varying maturity dates, coupons and
risk factors applicable to each issuer's books, no readily available market
quotations exist for most municipal securities.
Equity Funds. The value of investments listed on a domestic securities
exchange, other than options on stock indices, is based on the last sale prices
at the close of regular trading on the New York Stock Exchange (normally 4:00
P.M., New York time) or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on such exchange. Unlisted
securities are valued at the average of the quoted bid and asked prices in the
OTC market. The value of each security for which readily available market
quotations exist is based on a decision as to the broadest and most
representative market for such security. For purposes of calculating net asset
value all assets and liabilities initially expressed in foreign currencies will
be converted into U.S. dollars at the prevailing market rates available at the
time of valuation.
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Options on stock indexes traded on national securities exchanges are
valued at the close of options trading on such exchanges which is currently 4:10
P.M., New York time. Stock index futures and related options, which are traded
on commodities exchanges, are valued at their last sales price as of the close
of such commodities exchanges which is currently 4:15 P.M., New York time.
Securities or other assets for which market quotations are not readily available
are valued at fair value in accordance with procedures established by and under
the general supervision and responsibility of the Trustees. Such procedures
include the use of independent pricing services which use prices based upon
yields or prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Short-term
investments which mature in 60 days or less are valued at amortized cost if
their original maturity was 60 days or less, or by amortizing their value on the
61st day prior to maturity, if their original maturity when acquired by the Fund
was more than 60 days, unless this is determined not to represent fair value by
the Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of yield,
tax equivalent yield (in the case of the California Fund), actual distributions,
total return or capital appreciation for the various Fund classes in reports,
sales literature and advertisements published by the Trust. Current performance
information may be obtained by calling Morgan at (800) 766-7722. See "Additional
Information" in the Prospectus.
The classes of shares of each Fund may bear different shareholder
servicing fees and other expenses, which may cause the performance of a class to
differ from the performance of another class. Performance quotations will be
computed separately for each class of a Fund's shares. Any fees charged by an
institution directly to its customers' accounts in connection with investments
in the Funds will not be included in calculations of total return or yield.
Yield Quotations. The annualized yield for the California Fund is
computed by dividing net investment income per share earned during a 30-day
period by the net asset value on the last day of the period. The average daily
number of shares outstanding during the period that are eligible to receive
dividends is used in determining the net investment income per share. Income is
computed by totaling the interest earned on all debt obligations during the
period and subtracting from that amount the total of all recurring expenses
incurred during the period. The 30-day yield is then annualized on a
bond-equivalent basis assuming semi-annual reinvestment and compounding of net
investment income. Annualized tax-equivalent yield reflects the approximate
annualized yield that a taxable investment must earn for shareholders at
specified federal and California income tax levels to produce an after-tax yield
equivalent to the annualized tax-exempt yield.
Total Return Quotations. The average annual total return of each Fund's
class(es) for a period is computed by assuming a hypothetical initial payment of
$1,000. It is then assumed that all of the dividends and distributions by the
Fund over the period are reinvested. It is then assumed that at the end of the
period, the entire amount is redeemed. The average annual total return is then
calculated by determining the annual rate required for the initial payment to
grow to the amount which would have been received upon redemption.
Aggregate total returns, reflecting the cumulative percentage change
over a measuring period, may also be calculated.
General. Fund performance will vary from time to time depending upon
market conditions, the composition of the portfolio, and operating expenses.
Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
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In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in a Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.
Comparative performance information may be used from time to time in
advertising shares of the Funds, including data from Lipper Analytical Services,
Inc., Micropal, Inc., Ibbotson Associates, Morningstar Inc., the S&P 500, Lehman
Brothers 1- to 16-Year Municipal Bond Index, the Dow Jones Industrial Average,
the Frank Russell Indexes and other industry publications.
PORTFOLIO TRANSACTIONS
Morgan places orders for all Funds for all purchases and sales of
portfolio securities, enters into repurchase agreements and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of all the Funds. See "Investment Objectives and Policies."
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On occasion,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
In connection with portfolio transactions for the California Fund,
Morgan intends to seek best price and execution on a competitive basis for both
purchases and sales of securities.
In connection with portfolio transactions for the Equity Funds, the
overriding objective is to obtain the best possible execution of purchase and
sale orders.
In selecting a broker, Morgan considers a number of factors including:
the price per unit of the security; the broker's reliability for prompt,
accurate confirmations and on-time delivery of securities; the broker's
financial condition; and the commissions charged. A broker may be paid a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction if, after considering the foregoing factors,
Morgan decides that the broker chosen will provide the best possible execution.
Morgan monitors the reasonableness of the brokerage commissions paid in light of
the execution received. The Trust's Trustees review regularly the reasonableness
of commissions and other transaction costs incurred by the Funds in light of
facts and circumstances deemed relevant from time to time and, in that
connection, will receive reports from Morgan and published data concerning
transaction costs incurred by institutional investors generally.
Research services provided by brokers to which Morgan has allocated
brokerage business in the past include economic statistics and forecasting
services, industry and company analyses, portfolio strategy services,
quantitative data, and consulting services from economists and political
analysts. Research services furnished by brokers are used for the benefit of all
of Morgan's clients and not solely or necessarily for the benefit of an
individual Fund. Morgan believes that the value of research services received is
not determinable and does not significantly reduce its expenses. The Funds do
not reduce their fee to Morgan by any amount that might be attributable to the
value of such services.
Subject to the overriding objective of obtaining the best possible
execution of orders, Morgan may allocate a portion of a Fund's brokerage
transactions to affiliates of Morgan. In order for affiliates of Morgan to
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effect any portfolio transactions for a Fund, the commissions, fees or other
remuneration received by such affiliates must be reasonable and fair compared to
the commissions, fees, or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. Furthermore,
the Trust's Trustees, including a majority of the Trustees who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees, or other remuneration paid to such
affiliates are consistent with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to
or through Morgan or FDI or any "affiliated person" (as defined in the 1940 Act)
thereof when such entities are acting as principals, except to the extent
permitted by law. In addition, the Funds will not purchase securities from any
underwriting group of which Morgan or an affiliate of Morgan is a member, except
to the extent permitted by law.
Investment decisions made by Morgan are the product of many factors in
addition to basic suitability for the particular Fund or other client in
question. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the same security. The Funds may only
sell a security to each other or to other accounts managed by Morgan or its
affiliates in accordance with procedures adopted by the Trustees.
It also sometimes happens that two or more clients simultaneously
purchase or sell the same security. On those occasions when Morgan deems the
purchase or sale of a security to be in the best interests of a Fund, as well as
other clients including other Funds, Morgan to the extent permitted by
applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for other clients in order to obtain best execution, including lower brokerage
commissions if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction will be
made by Morgan in the manner it considers to be most equitable and consistent
with Morgan's fiduciary obligations to a Fund. In some instances, this procedure
might adversely affect a Fund.
MASSACHUSETTS TRUST
The Trust is a "Massachusetts business trust" of which each Fund is a
separate and distinct series. A copy of the Declaration of Trust for the Trust
is on file in the office of the Secretary of The Commonwealth of Massachusetts.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. However, the Trust's Declaration of Trust provides that the shareholders
will not be subject to any personal liability for the acts or obligations of any
Fund and that every written agreement, obligation, instrument or undertaking
made on behalf of any Fund will contain a provision to the effect that the
shareholders are not personally liable thereunder.
The Trust's Declaration of Trust further provides that no Trustee,
officer, employee, or agent of the Trust is liable to a Fund or to a
shareholder, and that no Trustee, officer, employee, or agent is liable to any
third persons in connection with the affairs of a Fund, except as such liability
may arise from his or its own bad faith, willful misfeasance, gross negligence
or reckless disregard of his or its duties to such third persons ("disabling
conduct"). It also provides that all third persons must look solely to Fund
property for satisfaction of claims arising in connection with the affairs of a
Fund. The Trust's Declaration of Trust provides that a Trustee, officer,
employee, or agent
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is entitled to be indemnified against all liability in connection with th
affairs of a Fund, except liabilities arising from disabling conduct.
DESCRIPTION OF SHARES
Each Fund represents a separate series of shares of beneficial
interest of the Trust. Fund shares are further divided into separate classes.
See "Massachusetts Trust."
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares of any series
without changing the proportionate beneficial interest of each shareholder in a
Fund. To date, JPM Pierpont Shares of each Equity Fund and JPM Institutional
Shares of the California Fund described in this Statement of Additional
Information have been authorized and are currently available for sale to the
public.
Each share represents an equal proportional interest in a Fund with
each other share of the same class. Upon liquidation of a Fund, holders are
entitled to share pro rata in the net assets of a Fund available for
distribution to such shareholders. Shares of a Fund have no preemptive or
conversion rights.
The shareholders of the Trust are entitled to one full or fractional
vote for each dollar or fraction of a dollar invested in shares. Subject to the
1940 Act, the Trustees have the power to alter the number and the terms of
office of the Trustees, to lengthen their own terms, or to make their terms of
unlimited duration, subject to certain removal procedures, and to appoint their
own successors. However, immediately after such appointment, the requisite
majority of the Trustees must have been elected by the shareholders of the
Trust. The voting rights of shareholders are not cumulative. The Trust does not
intend to hold annual meetings of shareholders. The Trustees may call meetings
of shareholders for action by shareholder vote if required by either the 1940
Act or the Trust's Declaration of Trust.
Shareholders of the Trust have the right, upon the declaration in
writing or vote of shareholders whose shares represent two-thirds of the net
asset value of the Trust, to remove a Trustee. The Trustees will call a meeting
of shareholders to vote on removal of a Trustee upon the written request of the
shareholders whose shares represent 10% of the net asset value of the Trust. The
Trustees are also required, under certain circumstances, to assist shareholders
in communicating with other shareholders.
TAXES
Each Fund intends to qualify and remain qualified as a regulated
investment company under Subchapter M of the Code. As a regulated investment
company, a Fund must, among other things, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of stock and
securities, gains from the sale or other disposition of stock, securities or
foreign currency and other income (including but not limited to gains from
options, futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months, or foreign
currencies (or options, futures or forward contracts on foreign currencies) held
less than three months, but only if such currencies (or options, futures or
forward contracts on foreign currencies) are not directly related to a Fund's
principal business of investing in stocks or securities (or options and
futures with respect to stocks or securities); and (c) diversify its holdings
so that, at the end of each fiscal quarter, (i) at least 50% of the value of the
Fund's total assets is represented by cash, U.S. Government
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securities, investments in other regulated investment companies and other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets, and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies). As a
regulated investment company, a Fund (as opposed to its shareholders) will not
be subject to federal income taxes on the net investment income and capital
gains that it distributes to its shareholders, provided that at least 90% of its
net investment income and realized net short-term capital gains in excess of net
long-term capital losses for the taxable year is distributed.
Under the Code, a Fund will be subject to a 4% excise tax on a portion
of its undistributed income if it fails to meet certain distribution
requirements by the end of the calendar year. Each Fund intends to make
distributions in a timely manner and accordingly does not expect to be subject
to the excise tax.
For federal income tax purposes, dividends that are declared by a Fund
in October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
The California Fund intends to qualify to pay exempt-interest dividends
to its shareholders by having, at the close of each quarter of its taxable year,
at least 50% of the value of its total assets consist of tax exempt securities.
An exempt-interest dividend is that part of dividend distributions made by the
Fund which consists of interest received by the Funds on tax exempt securities.
Shareholders will not incur any federal income tax on the amount of
exempt-interest dividends received by them from the Fund. In view of the Fund's
investment policies, it is expected that a substantial portion of all dividends
will be exempt-interest dividends, although the Fund may from time to time
realize and distribute net short-term capital gains and may invest limited
amounts in taxable securities under certain circumstances.
Distributions of net investment income (other than exempt-interest
dividends) and realized net short-term capital gains in excess of net long-term
capital losses are generally taxable to shareholders of the Funds as ordinary
income whether such distributions are taken in cash or reinvested in additional
shares. Distributions of net long-term capital gains (i.e., net long-term
capital gains in excess of net short-term capital losses) are taxable to
shareholders of a Fund as long-term capital gains, regardless of whether such
distributions are taken in cash or reinvested in additional shares and
regardless of how long a shareholder has held shares in the Fund. See "Taxes" in
the Prospectus for a discussion of the federal income tax treatment of any gain
or loss realized on the redemption or exchange of a Fund's shares. Additionally,
any loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent the shares disposed of are replaced within a period of
61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend in shares of the Fund.
Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more
than one year except in certain cases where, if applicable, a put is acquired or
a call option is written thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by a Fund
lapses or is terminated through a closing transaction, such as a repurchase by
the Fund of the option from its holder, the Fund will realize a short-term
capital gain or loss, depending on whether the premium income is greater or
less than the amount paid by the Fund in the closing transaction. If securities
are purchased by a Fund
26
<PAGE>
pursuant to the exercise of a put option written by it, the Fund will
subtract the premium received from its cost basis in the securities purchased.
Options and futures contracts entered into by a Fund may create
"straddles" for U.S. federal income tax purposes and this may affect the
character and timing of gains or losses realized by the Fund on options and
futures contracts or on the underlying securities. Straddles may also result in
the loss of the holding period of underlying securities for purposes of the 30%
of gross income test described above, and therefore, a Fund's ability to enter
into options and futures contracts may be limited.
Certain options and futures held by a Fund at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes
- -- i.e., treated as having been sold at market value. For options and futures
contracts, 60% of any gain or loss recognized on these deemed sales and on
actual dispositions will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss regardless of how
long the Fund has held such options or futures. Any gain or loss recognized on
foreign currency contracts will be treated as ordinary income.
The Equity Funds may invest in Equity Securities of foreign issuers. If
a Fund purchases shares in certain foreign investment funds (referred to as
passive foreign investment companies ("PFICs") under the Code), the Fund may be
subject to federal income tax on a portion of an "excess distribution" from such
foreign investment fund or gain from the disposition of such shares, even though
such income may have to be distributed as a taxable dividend by the Fund to its
shareholders. In addition, certain interest charges may be imposed on a Fund or
its shareholders in respect of unpaid taxes arising from such distributions or
gains. Alternatively, a Fund may in certain circumstances include each year in
its income and distribute to shareholders a pro rata portion of the PFIC's
income, whether or not distributed to the Fund.
Foreign Shareholders. Dividends of net investment income and
distributions of realized net short-term gains in excess of net long-term losses
to a shareholder who, as to the United States, is a nonresident alien
individual, fiduciary of a foreign trust or estate, foreign corporation or
foreign partnership (a "foreign shareholder") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) unless the dividends
are effectively connected with a U.S. trade or business of the shareholder, in
which case the dividends will be subject to tax on a net income basis at the
graduated rates applicable to U.S. individuals or domestic corporations.
Distributions of net long term capital gains to foreign shareholders will not be
subject to U.S. tax unless the distributions are effectively connected with the
shareholder's trade or business in the United States or, in the case of a
shareholder who is a nonresident alien individual, the shareholder was present
in the United States for more than 182 days during the taxable year and certain
other conditions are met.
In the case of a foreign shareholder who is a nonresident alien
individual and who is not otherwise subject to withholding as described above, a
Fund may be required to withhold U.S. federal income tax at the rate of 31%
unless IRS Form W-8 is provided. Transfers by gift of shares of a Fund by a
foreign shareholder who is a nonresident alien individual will not be subject to
U.S. federal gift tax, but the value of shares of the Fund held by such a
shareholder at his or her death will be includible in his or her gross estate
for U.S. federal estate tax purposes.
State and Local Taxes. Each Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business. In addition,
the treatment of a Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
27
<PAGE>
Shareholders should consult their own tax advisors with respect to any state or
local taxes.
Other Taxation. Under current law, neither the Trust nor any Fund is
liable for any income or franchise tax in The Commonwealth of Massachusetts,
provided that each Fund continues to qualify as a regulated investment company
under Subchapter M of the Code.
ADDITIONAL INFORMATION
Telephone calls to the Funds, Morgan or State Street may be tape
recorded. With respect to the securities offered hereby, this Statement of
Additional Information and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act and the Trust's registration statement filed under the 1940 Act. Pursuant to
the rules and regulations of the SEC, certain portions have been omitted. The
registration statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectus and this Statement of Additional Information, in connection with the
offer contained therein and, if given or made, such other information or
representations must not be relied upon as having been authorized by any of the
Trust, the Funds or FDI. The Prospectus and this Statement of Additional
Information do not constitute an offer by any Fund or by FDI to sell or solicit
any offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful for the Fund or FDI to make such offer in such
jurisdictions.
FINANCIAL STATEMENTS
Attached are the audited statement of assets and liabilities and the
reports thereon of Price Waterhouse LLP for the Equity Fund, the Disciplined
Equity Fund and the California Fund as of November 4, 1996.
28
<PAGE>
TAX AWARE EQUITY FUND
Statement of Assets and Liabilities
November 4, 1996
- ------------------------------------------------------------------------------
ASSETS
Cash $25,000
Deferred Organization Expenses 47,567
-------
Total Assets 72,567
------
LIABILITIES
Organization Expenses Payable 47,567
-------
Total Liabilities 47,567
-------
NET ASSETS $25,000
=======
Shares Outstanding (par value $0.001, unlimited
shares authorized for each class):
JPM Pierpont Shares 2,500
=======
Net Asset Value, Offering and Redemption Price
Per Share $ 10.00
========
The Accompanying Notes are an Integral Part of the Financial Statement.
29
<PAGE>
TAX AWARE EQUITY FUND
Notes to Financial Statement
November 4, 1996
- ------------------------------------------------------------------------------
1. ORGANIZATION
Tax Aware Equity Fund (the "Fund") is a series of JPM Series Trust, a
Massachusetts business trust (the "Trust"). The investment objective of the Fund
is to provide high total return while being sensitive to the impact of capital
gains taxes on investors' returns. The Trustees of the Trust have divided the
beneficial interests in the Fund into two classes of shares (JPM Institutional
Shares and JPM Pierpont Shares, respectively). The Trust was organized on August
15, 1996, and has been inactive since that date except for matters relating to
its organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 2,500 JPM Pierpont Shares (the
"initial shares") of the Fund to FDI Distribution Services, Inc. ("FDSI"), a
wholly owned indirect subsidiary of Boston Institutional Group, Inc.
The Fund has incurred $47,567 in organization expenses based on its allocable
pro rata share of total organization expenses for the Fund and the other two
initial series in the Trust. These costs are being deferred and will be
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Fund. FDSI agrees that if
it or any direct or indirect transferee of any of the initial shares redeems any
of such shares prior to the fifth anniversary of the date the Fund commenced
operations, FDSI will pay to the Fund 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 FDSI or such transferee and the denominator of which is equal to the
number of such shares held by FDSI 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.
2. SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan") to provide investment advice and portfolio
management services to the Fund and the other series of the Trust. The Trust has
also entered into (i) an Administrative Services Agreement with Morgan to
provide administrative and related services to the Trust and (ii) a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan will provide
shareholder servicing to shareholders of each class of the Fund. The Trust is a
party to a Co-Administration Agreement and Distribution Agreement with Funds
Distributor, Inc. ("FDI"), a wholly owned subsidiary of FDSI, pursuant to which
FDI provides co-administration and distribution services, respectively, for the
Trust. The officers of the Trust are employees of FDI. The Trust has entered
into a Fund Services Agreement with Pierpont Group, Inc. to assist the Trustees
in exercising their overall responsibilities for the affairs of the Trust. The
Trustees of the Trust represent all the existing shareholders of Pierpont Group,
Inc.
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
Tax Aware Equity Fund
In our opinion, the accompanying statement of assets and liabilities present
fairly, in all material respects, the financial position of Tax Aware Equity
Fund, (one of three funds comprising JPM Series Trust, hereafter referred to as
the "Fund") at November 4, 1996, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Fund's management; our responsibility is to express an opinion on the financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 4, 1996
31
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
Statement of Assets and Liabilities
November 4, 1996
- ------------------------------------------------------------------------------
ASSETS
Cash $50,000
Deferred Organization Expenses 47,567
--------
Total Assets 97,567
-------
LIABILITIES
Organization Expenses Payable 47,567
-------
Total Liabilities 47,567
-------
NET ASSETS $50,000
=======
Shares Outstanding (par value $0.001, unlimited
shares authorized for each class):
JPM Pierpont Shares 5,000
=======
Net Asset Value, Offering and Redemption Price
Per Share $ 10.00
=======
The Accompanying Notes are an Integral Part of the Financial Statement.
32
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
Notes to Financial Statement
November 4, 1996
- ------------------------------------------------------------------------------
1. ORGANIZATION
Tax Aware Disciplined Equity Fund (the "Fund") is a series of JPM Series Trust,
a Massachusetts business trust (the "Trust"). The investment objective of the
Fund is to provide high total return while being sensitive to the impact of
capital gains taxes on investors' returns. The Trustees of the Trust have
divided the beneficial interests in the Fund into two classes of shares (JPM
Institutional Shares and JPM Pierpont Shares, respectively). The Trust was
organized on August 15, 1996, and has been inactive since that date except for
matters relating to its organization and registration as an investment company
under the Investment Company Act of 1940, as amended, and the sale of 5,000 JPM
Pierpont Shares (the "initial shares") of the Fund to FDI Distribution Services,
Inc. ("FDSI"), a wholly owned indirect subsidiary of Boston Institutional Group,
Inc.
The Fund has incurred $47,567 in organization expenses based on its allocable
pro rata share of total organization expenses for the Fund and the other two
initial series in the Trust. These costs are being deferred and will be
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Fund. FDSI agrees that if
it or any direct or indirect transferee of any of the initial shares redeems any
of such shares prior to the fifth anniversary of the date the Fund commenced
operations, FDSI will pay to the Fund 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 FDSI or such transferee and the denominator of which is equal to the
number of such shares held by FDSI 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.
2. SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan") to provide investment advice and portfolio
management services to the Fund and the other series of the Trust. The Trust has
also entered into (i) an Administrative Services Agreement with Morgan to
provide administrative and related services to the Trust and (ii) a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan will provide
shareholder servicing to shareholders of each class of the Fund. The Trust is a
party to a Co-Administration Agreement and Distribution Agreement with Funds
Distributor, Inc. ("FDI"), a wholly owned subsidiary of FDSI, pursuant to which
FDI provides co-administration and distribution services, respectively, for the
Trust. The officers of the Trust are employees of FDI. The Trust has entered
into a Fund Services Agreement with Pierpont Group, Inc. to assist the Trustees
in exercising their overall responsibilities for the affairs of the Trust. The
Trustees of the Trust represent all the existing shareholders of Pierpont Group,
Inc.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
Tax Aware Disciplined Equity Fund
In our opinion, the accompanying statement of assets and liabilities present
fairly, in all material respects, the financial position of Tax Aware
Disciplined Equity Fund, (one of three funds comprising JPM Series Trust,
hereafter referred to as the "Fund") at November 4, 1996, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on the financial statement based on our audit. We conducted our audit of
this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 4, 1996
<PAGE>
CALIFORNIA BOND FUND
Statement of Assets and Liabilities
November 4, 1996
- ------------------------------------------------------------------------------
ASSETS
Cash $25,000
Deferred Organization Expenses 47,567
--------
Total Assets 72,567
-------
LIABILITIES
Organization Expenses Payable 47,567
-------
Total Liabilities 47,567
-------
NET ASSETS $25,000
=======
Shares Outstanding (par value $0.001, unlimited
shares authorized for each class):
JPM Institutional Shares 2,500
=======
Net Asset Value, Offering and Redemption Price
Per Share $ 10.00
=======
The Accompanying Notes are an Integral Part of the Financial Statement.
35
<PAGE>
CALIFORNIA BOND FUND
Notes to Financial Statement
November 4, 1996
- ------------------------------------------------------------------------------
1. ORGANIZATION
California Bond Fund (the "Fund") is a series of JPM Series Trust, a
Massachusetts business trust (the "Trust"). The investment objective of the Fund
is to provide a high after tax total return to investors subject to California
personal income taxes consistent with moderate risk of capital. The Trustees of
the Trust have divided the beneficial interests in the Fund into two classes of
shares (JPM Institutional Shares and JPM Pierpont Shares, respectively). The
Trust was organized on August 15, 1996, and has been inactive since that date
except for matters relating to its organization and registration as an
investment company under the Investment Company Act of 1940, as amended, and the
sale of 2,500 JPM Institutional Shares (the "initial shares") of the Fund to FDI
Distribution Services, Inc. ("FDSI"), a wholly owned indirect subsidiary of
Boston Institutional Group, Inc.
The Fund has incurred $47,567 in organization expenses based on its allocable
pro rata share of total organization expenses for the Fund and the other two
initial series in the Trust. These costs are being deferred and will be
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Fund. FDSI agrees that if
it or any direct or indirect transferee of any of the initial shares redeems any
of such shares prior to the fifth anniversary of the date the Fund commenced
operations, FDSI will pay to the Fund 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 FDSI or such transferee and the denominator of which is equal to the
number of such shares held by FDSI 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.
2. SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan") to provide investment advice and portfolio
management services to the Fund and the other series of the Trust. The Trust has
also entered into (i) an Administrative Services Agreement with Morgan to
provide administrative and related services to the Trust and (ii) a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan will provide
shareholder servicing to shareholders of each class of the Fund. The Trust is a
party to a Co-Administration Agreement and Distribution Agreement with Funds
Distributor, Inc. ("FDI"), a wholly owned subsidiary of FDSI, pursuant to which
FDI provides co-administration and distribution services, respectively, for the
Trust. The officers of the Trust are employees of FDI. The Trust has entered
into a Fund Services Agreement with Pierpont Group, Inc. to assist the Trustees
in exercising their overall responsibilities for the affairs of the Trust. The
Trustees of the Trust represent all the existing shareholders of Pierpont Group,
Inc.
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
California Bond Fund
In our opinion, the accompanying statement of assets and liabilities present
fairly, in all material respects, the financial position of California Bond
Fund, (one of three funds comprising JPM Series Trust, hereafter referred to as
the "Fund") at November 4, 1996, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Fund's management; our responsibility is to express an opinion on the financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 4, 1996
37
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB-B - Debt rated BB and B is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest rating
assigned by Standard & Poor's and has a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory capacity
to pay principal and interest.
MOODY'S
CORPORATE AND MUNICIPAL BONDS
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.
A-1
<PAGE>
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 Aa 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.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection. - Broad margins in earnings coverage of fixed financial
charges and high internal cash generation. - Well established access to a range
of financial markets and assured sources of alternate liquidity.
SHORT-TERM TAX EXEMPT NOTES
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes with this
rating enjoy 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.
MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.
A-2
<PAGE>
APPENDIX B
ADDITIONAL INFORMATION CONCERNING CALIFORNIA MUNICIPAL SECURITIES
The following information is a summary of special factors affecting
investments in California Municipal Securities. The sources of payment for such
obligations and the marketability thereof may be affected by financial or other
difficulties experienced by the State of California and certain of its
municipalities and public authorities. It does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of California issuers.
ECONOMIC FACTORS
FISCAL YEARS PRIOR TO 1996-97. By the close of the 1989-90 fiscal year,
California's revenues had fallen below projections so that the state's budget
reserve, the Special Fund for Economic Uncertainties (the "Special Fund"), was
fully depleted by June 30, 1990. A recession which had begun in mid-1990,
combined with higher health and welfare costs driven by the state's rapid
population growth, adversely affected General Fund revenues and raised
expenditures above initial budget appropriations .
As a result of these factors and others, the state confronted a period
of budget imbalance. Beginning with the 1990-91 fiscal year and for several
years thereafter, the budget required multi-billion dollar actions to bring
projected revenues and expenditures into balance. During this period,
expenditures exceeded revenues in four out of six years, and the state
accumulated and sustained a budget deficit in the Special Fund - approaching
$2.8 billion at its peak on June 30, 1993.
By the 1993-94 fiscal year, the accumulated deficit was too large to be
prudently retired in one year, and a two-year program was implemented. This
program used revenue anticipation warrants to carry a portion of the deficit
over to the end of the fiscal year.
The 1994-95 Budget Act projected General Fund revenues and transfers of
$41.9 billion. Expenditures were projected to be $40.9 billion - an increase of
$1.6 billion over the prior year. As a result of the improving economy, however,
the fiscal year ultimately produced revenues and transfers of $42.7 billion,
which more than offset expenditures of $42.0 billion and thereby reduced the
accumulated budget deficit.
With strengthening revenues and reduced caseload growth driven by an
improving economy, the state entered the 1995-96 fiscal year budget negotiations
with the smallest nominal "budget gap" to be closed in many years. The 1995-96
Budget Act projected General Fund revenues and transfers of $44.1 billion, a 3.5
percent increase from the prior year, and expenditures were budgeted at $43.4
billion. In addition, the Department of Finance projected that after repaying
the last of the carry over budget deficit, there would be a positive balance of
$28 million in the budget reserve as of June 30, 1996.
1996-97 FISCAL YEAR. Reflecting the belief shared by many analysts that
the California economy would remain strong, the 1996-1997 Budget Act established
a state budget of some $63 billion. Relying on the optimistic revenue
projections released by the Department of Finance, the Budget Act granted a $230
million tax cut to corporations while simultaneously providing an increase in
funding for education and prisons. However, only a relatively modest amount,
$287 million, was allocated to the reserve fund available for emergencies such
as earthquakes. The ultimate impact of these and other budgetary allocations is
impossible to predict. Indeed, constant fluctuations in other factors affecting
the state - including changes in welfare
B-1
<PAGE>
caseloads, property tax receipts and federal funding - will undoubtedly create
new budget challenges.
THE ORANGE COUNTY BANKRUPTCY. On December 6, 1994, Orange County,
California and its Investment Pool (the "Pool") filed for bankruptcy under
Chapter 9 of the United States Bankruptcy Code. The subsequent restructuring led
to the sale of substantially all of the Pool's portfolio and resulted in losses
estimated to be approximately $1.7 billion (or approximately 22% of amounts
deposited by the Pool investors). Approximately 187 California public entities
substantially all of which are public agencies within the county - had various
bonds, notes or other forms of indebtedness outstanding. In some instances the
proceeds of such indebtedness were outstanding. In some instances the proceeds
of such indebtedness were invested in the Pool.
In April 1996, the county emerged from bankruptcy after closing on a
$900 million recovery bond deal. At that time, the county and its financial
advisors stated that the county had emerged from the bankruptcy without any
structural fiscal problems and assured that the county would not slip back into
bankruptcy. However, for many of the cities, schools and special districts that
lost money in the county portfolio, repayment remains contingent on the outcome
of litigation which is pending against investment firms and other finance
professionals. Thus, it is impossible to determine the ultimate impact of the
bankruptcy and its after math of these various agencies and their claims.
CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could produce
the adverse effects described below, among others.
REVENUE DISTRIBUTION. Certain California Municipal Securities held by
the California Fund may be obligations of issuers which rely in whole or in part
on California state revenues for payment of these obligations. Property tax
revenues and a portion of the State's General Fund surplus are distributed to
counties, cities and their various taxing entities, and the state assumes
certain obligations therefore paid out of local funds. Whether and to what
extent a portion of the state's General Fund will be distributed in the future
to counties, cities and their various entities is unclear.
HEALTH CARE LEGISLATION. Certain California Municipal Securities held
by the California Fund may be obligations which are payable solely from the
revenues of health care institutions. Certain provisions under California law
may adversely affect these revenues and, consequently, payment on those
California Municipal Securities.
The federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment of services rendered to Medi-Cal beneficiaries in the future.
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Under this approach, in most geographical areas of California, only
those hospitals which enter into a Medi-Cal contract with the State of
California will be paid for non-emergency acute inpatient services rendered to
Medi-Cal beneficiaries. The state may also terminate these contracts without
notice under certain circumstances and is obligated to make contractual payments
only to the extent the California legislature appropriates adequate funding
therefor.
California enacted legislation in 1982 that authorizes private health
plans and insurers to contract directly with hospitals for services to
beneficiaries on negotiated terms. Some insurers have introduced plans known as
"preferred provider organizations" ("PPOs"), which offer financial incentives
for subscribers who use only the hospitals which contract with the plan. Under
an exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost, and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduce payment and lower the income to the contracting hospitals.
These California Municipal Securities may also be insured by the State
of California pursuant to an insurance program implemented by the Office of
Statewide Health Planning and Development for health facility construction
loans. If a default occurs on insured California Municipal Securities, the state
treasurer will issue debentures payable out of a reserve fund established under
the insurance program or will pay principal and interest on an unaccelerated
basis from unappropriated state funds. At the request of the Office of Statewide
Health Planning and Development, Arthur D. Little, Inc. prepared a study in
December 1983, to evaluate the adequacy of the reserve fund established under
the insurance program and, based on certain formulations and assumptions, found
the reserve fund substantially underfunded. In September of 1986, Arthur D.
Little, Inc. prepared an update of the study and concluded that an additional
10% reserve be established for "multi-level" facilities. For the balance of the
reserve fund, the update recommended maintaining the current reserve calculation
method. In March 1990, Arthur D. Little, Inc. prepared a further review of the
study and recommended that separate reserves continue to be established for
"multi-level" facilities at a reserve level consistent with those that would be
required by an insurance company.
MORTGAGES AND DEEDS. Certain California Municipal Securities held by
the California Fund may be obligations which are secured in whole or in part by
a mortgage or deed of trust on real property. California has five principal
statutory provisions which limit the remedies of a creditor secured by a
mortgage or deed of trust. Two statutes limit the creditor's right to obtain a
deficiency judgment, one limitation being based on the method of foreclosure and
the other on the type of debt secured. Under the former, a deficiency judgment
is barred when the foreclosed mortgage or deed of trust secures certain purchase
money obligations. Another California statute, commonly known as the "one form
of action" rule, requires creditors secured by real property to exhaust their
real property security by foreclosure before bringing a personal action against
the debtor. The fourth statutory provision limits any deficiency judgment
obtained by a creditor secured by real property following a judicial sale of
such property to the excess of the outstanding debt over the fair value of the
property at the time of the sale, thus preventing the creditor from obtaining a
large deficiency judgment against the
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debtor as the result of low bids at a judicial sale. The fifth statutory
provision gives the debtor the right to redeem the real property from any
judicial foreclosure sale as to which a deficiency judgment may be
ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights under
the power of sale contained in the mortgage or deed of trust are subject to the
constraints imposed by California law upon transfers of title to real property
by private power of sale. During the three-month period beginning with the
filing of a formal notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard loan servicing
procedures, the filing of the formal notice of default does not occur unless at
least three full monthly payments have become due and remain unpaid. The power
of sale is exercised by posting and publishing a notice of sale for at least 20
days after expiration of the three-month reinstatement period. The debtor may
reinstate the mortgage, in the manner described above, up to five business days
prior to the scheduled sale date. Therefore, the effective minimum period for
foreclosing on a mortgage could be in excess of seven months after the initial
default. Such time delays in collections could disrupt the flow of revenues
available to an issuer for the payment of debt service on the outstanding
obligations if such defaults occur with respect to a substantial number of
mortgages or deeds of trust securing an issuer's obligations.
In addition, a court could not find that there is sufficient
involvement of the issuer in the nonjudicial sale of property securing a
mortgage for such private sale to constitute "state action," and could hold that
the private-right-of-sale proceedings violate the due process requirements of
the federal or state constitutions, consequently preventing an issuer from using
the nonjudicial foreclosure remedy described above.
Certain California Municipal Securities held by the California Fund may
be obligations which finance the acquisition of single family home mortgages for
low and moderate income mortgagors. These obligations may be payable solely from
revenues derived from the home mortgages and are subject to California's
statutory limitations described above applicable to obligations secured by real
property. Under California antideficiency legislation, there is no personal
recourse against a mortgagor of a single-family residence purchased with the
loan secured by the mortgage, regardless of whether the creditor chooses
judicial or nonjudicial foreclosure.
Under California law, mortgage loans secured by single-family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on such
mortgage loans may be imposed only with respect to voluntary prepayments made
during the first five years during the term of the mortgage loan and then only
if the borrower prepays in amount in excess of 20% of the original principal
amount of the mortgage loan in a 12-month period. A prepayment charge cannot in
any event exceed six months' advance interest on the amount prepaid during the
12-month period in excess of 20% of the original principal amount of the loan.
This limitation could affect the flow of revenues available to an issuer for
debt services on the outstanding debt obligations which financed such home
mortgages.
PROPOSITION 13. Certain California Municipal Securities held by the
California Fund may be obligations of issuers who rely in whole or in part on ad
valorem real property taxes as a source of revenue. On June 6, 1978, California
voters approved an amendment to the California Constitution known as Proposition
13, which added Article XIIIA to the California Constitution. The effect of
Article XIIIA was to limit ad valorem taxes on real property and to restrict the
ability of taxing entities to increase real property tax revenues.
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Section 1 of Article XIIIA, as amended, limits the maximum ad valorem
tax on real property to 1% of full cash value to be collected by the counties
and apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on (a)
any indebtedness approved by the voters prior to July 1, 1978 or (b) any bonded
indebtedness for the acquisition or improvement of real property approved on or
after July 1, 1978 by two-thirds of the votes cast by the voters on the
proposition. Section 2 of Article XIIIA defines "full cash value" to mean "the
County Assessor's valuation of real property as shown on the 1975/76 tax bill
under 'full cash value' or, thereafter, the appraised value of real property
when purchased, newly constructed, or a change in ownership has occurred after
the 1975 assessment." The full cash value may be adjusted annually to reflect
inflation at a rate not to exceed 2% per year, or reduction in the consumer
price index or comparable local data, or reduced in the event of declining
property value caused by damage, destruction or other factors.
Legislation enacted by the California legislature to implement Article
XIIIA provides that notwithstanding any other law, local agencies may not levy
any ad valorem property tax except to pay debt service on indebtedness approved
by the voters prior to July 1, 1978 and that each county will levy the maximum
tax permitted by Article XIIIA.
PROPOSITION 9. On November 6, 1979, an initiative known as "Proposition
0" or the "Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, state and
local governmental entities have an annual "appropriations limit" and are not
allowed to spend certain moneys called "appropriations subject to limitation" in
an amount higher than the "appropriations limit." Article XIIIB does not affect
the appropriation of moneys which are excluded form the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979 or bonded indebtedness subsequently
approved by the voters. In general terms, the "appropriations limit" is required
to be based on certain 1978/79 expenditures and is to be adjusted annually to
reflect changes in consumer prices, population, and certain services provided by
these entities. Article XIIIB also provides that if these entities' revenues in
any year exceed the amounts permitted to be spent, the excess is to be returned
by revising tax rates or fee schedules over the subsequent two years.
PROPOSITION 98. On November 8, 1988, the California voters approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act."
Proposition 98 changed state funding of public education below the university
level and the operation of the state appropriations limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (modified by Proposition 111 as discussed below), K-14 schools
are guaranteed the greater of (a) in general, a fixed percent of General Fund
revenues ("Test 1"), (b) the amount appropriated to K-14 schools in the prior
year, adjusted for changes in the cost of living (measured as in Article XIIIB
by reference to state per capita personal income) and enrollment ("Test 2"), or
(c) a third test, which would replace Test 2 in any year when the percentage
growth in per capita General Fund revenues from the prior year plus one half of
one percent is less than the percentage growth in state per capital personal
income ("Test 3"). Under Test 3, schools would receive the amount appropriated
in the prior year adjusted for changes in enrollment and per capital General
Fund revenues, plus an additional small adjustment factor. If Test 3 is used in
any year, the difference between Test 3 and Test 2 would become a "credit" to
schools which would be the basis of payments in future years when per capita
general fund revenue growth exceeds per capital personal income growth.
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Proposition 98 permits the legislature - by two-thirds vote of both
houses, with the Governor's concurrence - to suspend the K-14 schools' minimum
funding formula for a one-year period. Proposition 98 also contains provisions
transferring certain state tax revenues in excess of the Article XIIIB limit to
K-14 schools.
During the recession years of the early 1990s, General Fund revenues
for several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. In 1992, a lawsuit was filed, California Teachers'
Association v. Gould, which challenged the validity of these off-budget loans.
During the course of this litigation, a trial court determined that almost $2
billion in "loans" which had been provided to school districts during the
recession violated the constitutional protection of support for public
education. A settlement was reached on April 12, 1996 which ensures that future
school finding will not be in jeopardy over repayment of these so-called loans.
PROPOSITION 111. On June 30, 1989, the California legislature enacted
Senate Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 - on the June 5, 1990 ballot
as Proposition 111 - was approved by the voters and took effect on July 1, 1990.
Among a number of important provisions, Proposition 111 recalculated spending
limits for the state and for local governments, allowed greater annual increases
in the limits, allowed the averaging of two years' tax revenues before requiring
action regarding excess tax revenues, reduced the amount of the funding
guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of state General Fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of state school districts and community
college districts in the base calculation for the next year, limited the amount
of state tax revenue over the limit which would be transferred to school
districts and community college districts, and exempted increased gasoline taxes
and truck weight fees from the state appropriations limit. Additionally,
Proposition 111 exempted from the state appropriations limit funding for capital
outlays.
PROPOSITION 62. On November 4, 1986, California voters approved an
initiative statute known a Proposition 62. This initiative provided the
following:
1. Requires that any tax for general governmental purposes imposed
by local governments be approved by resolution or ordinance adopted by a
two-thirds vote of the governmental entity's legislative body and by a majority
vote of the electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other
than general governmental purposes) imposed by a local governmental entity be
approved by a two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes
or for the service for which the special tax was imposed.
4. Prohibits the imposition of ad valorem taxes on real property by
local governmental entities except as permitted by Article XIIA;
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5. Prohibits the imposition of transaction taxes and sales taxes on
the sale of real property by local governments;
6. Requires that any tax imposed by a local government on or after
August 1, 1985 be ratified by a majority vote of the electorate within two years
of the adoption of the initiative;
7. Requires that, in the event a local government fails to comply with
the provision of this measure, a reduction in the amount of property tax revenue
allocated to such local government occurs in an amount equal to the revenues
received by such entity attributable to the tax levied in violation of the
initiative; and
8. Permits these provisions to be amended exclusively by the voters
of the State of California.
In September 1988, the California Court of Appeal in City of
WESTMINSTER V. COUNTY OF ORANGE, 204 Cal.App. 3d 623, 215 Cal.Rptr. 511
(Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the extent
that it requires a general tax by a general law city, enacted on or after August
1, 1985 and prior to the effective date of Proposition 62, to be subject to
approval by a majority of voters. The court held that the California
Constitution prohibits the imposition of a requirement that local tax measures
be submitted to the electorate by either referendum or initiative. It is
impossible to predict the impact of this decision on charter cities, on special
taxes or on new taxes imposed after the effective date of Proposition 62. The
California Court of Appeal in CITY OF WOODLAKE V. LOGAN, (1991) 230 Cal.App.3d
1058, subsequently held that Proposition 62's popular vote requirements for
future local taxes also provided for an unconstitutional referenda. The
California Supreme Court declined to review bote the City of Westminster and the
City of Woodlake decisions.
In SANTA CLARA LOCAL TRANSPORTATION AUTHORITY V. GUARDINO, (Sept. 28,
1995) Cal.4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal.4th 344e, the
California Supreme Court upheld the constitutionality of Proposition 62's
popular vote requirements for future taxes and specifically disapproved of the
City of Woodlake decision as erroneous. The court did not determine the
correctness of the CITY OF WESTMINSTER decision, because that case appeared
distinguishable, was not relied on by the parties in GUARDINO, and involved
taxes not likely to still be at issue. It is impossible to predict the impact of
the court's decision on charter cities or on taxes imposed in reliance on the
CITY OF WOODLAKE case.
Senate Bill 1590 (O'Connell), introduced February 16, 1996, would make
the GUARDINO decision inapplicable to any tax first imposed or increased by an
ordinance or resolution adopted before December 14, 1995. The California Senate
passed the bill on May 16, 1996, and it is currently pending in the California
State Assembly. It is not clear whether the bill, if enacted would be
constitutional as a non-voted amendment to Proposition 62 or as a non-voted
change to Proposition 62's operative date.
The voters will be presented with a new initiative constitutional
amendment on the November 1996 ballot. The Right to Vote on Taxes Act, sponsored
by the Howard Jarvis Taxpayers Association, seeks to strengthen Proposition 62
by requiring majority voter approval for general taxes, two-thirds voter
approval for special taxes (including taxes imposed for specific purposes but
placed in the General Fund), voter approval of existing local taxes enacted
after January 1, 1995, and placing other restrictions on fees and assessments.
As a constitutional amendment, the provisions would clearly apply to charter
cities.
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Another initiative on the November 1996 ballot, a statutory initiative
sponsored by the California Tax Reform Association, would reimpose the temporary
10 and 11 percent tax brackets and use the revenues from the increase to replace
a portion of the property tax revenue shifted from cities, counties and special
districts to schools on an ongoing basis since 1992.
PROPOSITION 87. On November 8, 1988, California voters approved
Proposition 87. Proposition 87 amended Article XVI Section 16 of the California
Constitution by authorizing the California legislature to prohibit redevelopment
agencies from receiving any of the property tax revenue raised by increased
property tax rates levied to repay bonded indebtedness of local governments
which is approved by voters on or after January 1, 1989.
SAI5.WPF
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PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are included in Part A:
Not applicable.
The following financial statements are included in Part B:
Tax Aware Equity Fund: Statement of Assets and Liabilities at November 4,
1996
Report of Independent Accountants
Tax Aware Disciplined Equity Fund: Statement of Assets and Liabilities at
November 4, 1996
Report of Independent Accountants
California Bond Fund: Statement of Assets and Liabilities at November 4, 1996
Report of Independent Accountants
(b) Exhibits
1 Declaration of Trust.(1)
1(a) Amendment No. 1 to Declaration of Trust, Amended and Restated
Establishment and Designation of Series and Classes of Shares.(2)
2 Restated By-Laws.(2)
5 Form of Investment Advisory Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan").(2)
6 Form of Distribution Agreement between Registrant and Funds Distributor,
Inc. ("FDI").(2)
8 Form of Custodian Contract between Registrant and State Street Bank and
Trust Company ("State Street").(2)
9(a) Form of Co-Administration Agreement between Registrant and FDI.(2)
9(b) Form of Administrative Services Agreement between Registrant and
Morgan.(2)
9(c) Form of Transfer Agency and Service Agreement between Registrant and
State Street.(2)
9(d) Form of Shareholder Servicing Agreement between Registrant and
Morgan.(2)
11 Consent of independent accountants.(2)
13 Purchase agreement with respect to Registrant's initial shares.(2)
16 Schedule for computation of performance quotations.(2)
17 Financial data schedules.(2)
19 Powers of attorney.(2)
- ------------------
(1) Incorporated herein from Registrant's registration statement on
Form N-1A as filed on August 29, 1996 (Accession No. 0000912057-96-
019242).
(2) Filed herewith.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class: Shares of Beneficial Interest (par value $0.001)
As of November 4, 1996
Tax Aware Equity Fund: JPM Pierpont Shares: 1
Tax Aware Disciplined Equity Fund: JPM Pierpont Shares: 1
California Bond Fund: JPM Institutional Shares: 1
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust and
Section 5 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain expenses in
connection with the defense of claims, demands, actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
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 1933 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, trustee,
officer, or controlling person of the Registrant and the principal underwriter
in connection with the successful defense of any action, suite or proceeding) is
asserted against the Registrant by such director, trustee, officer or
controlling person or principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
<PAGE>
Morgan is a New York trust company which is a wholly owned subsidiary of
J.P. Morgan & Co. Incorporated. Morgan conducts a general banking and trust
business.
To the knowledge of the Registrant, none of the directors, except those set
forth below, or executive officers of Morgan is or has been during the past two
fiscal years engaged in any other business, profession, vocation or employment
of a substantial nature, except that certain officers and directors of Morgan
also hold various positions with, and engage in business for, J.P. Morgan & Co.
Incorporated, which owns all the outstanding stock of Morgan. Set forth below
are the names, addresses, and principal business of each director of Morgan who
is engaged in another business, profession, vocation or employment of a
substantial nature.
Riley P. Bechtel: Chairman and Chief Executive Officer, Bechtel Group,
Inc. (architectural design and construction). His address is Bechtel Group,
Inc., P.O. Box 193965, San Francisco, CA 94119-3965.
Martin Feldstein: President and Chief Executive Officer, National Bureau
of Economic Research, Inc.(national research institution). His address is
National Bureau of Economic Research, Inc., 1050 Massachusetts Avenue,
Cambridge, MA 02138-5398.
Hanna H. Gray: President Emeritus, The University of Chicago (academic
institution). Her address is Department of History, The University of Chicago,
1126 East 59th Street, Chicago, IL 60637.
James R. Houghton: Retired Chairman, Corning Incorporated (glass
products). His address is R.D.#2 Spencer Hill Road, Corning, NY 14830.
James L. Ketelsen: Retired Chairman and Chief Executive Officer, Tenneco
Inc. (oil, pipe-lines, and manufacturing). His address is Tenneco, Inc., P.O.
Box 2511, Houston, TX 77252-2511.
Lee R. Raymond: Chairman and Chief Executive Officer, Exxon Corporation
(oil, natural gas, and other petroleum products). His address is Exxon
Corporation, 5959 Las Colinas Boulevard, Irving, TX 75039-2298.
Richard D. Simmons: Former President, The Washington Post Company and
International Herald Tribune (newspapers). His address is P.O. Box 242,
Sperryville, VA 22740.
Douglas C. Yearley: Chairman, President and Chief Executive Officer,
Phelps Dodge Corporation (chemicals). His address is Phelps Dodge Corporation,
2600 N. Central Avenue, Phoenix, AZ 85004-3014.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FDI, located at 60 State Street, Suite 1300, Boston, Massachusetts 02109, is
the principal underwriter of the Registrant's shares. FDI is an indirectly
wholly owned subsidiary of Boston Institutional Group, Inc., a holding company,
all of whose outstanding shares are owned by key employees. FDI is a
broker-dealer registered under the Securities Exchange Act of 1934, as amended.
FDI acts as principal underwriter of the following investment companies other
than the Registrant:
BJB Investment Funds
Foreign Fund, Inc.
Fremont Mutual Funds
H.T. Insight Funds, Inc.
The Harris Insight Funds Trust
LKCM Fund
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
Skyline Funds
St. Clair Funds, Inc.
Waterhouse Investors Cash Management Fund, Inc.
The JPM Pierpont Funds
The JPM Institutional Funds
FDI does not act as depositor or investment adviser of any investment companies.
(b) The following is a list of officers, directors and partners of FDI. The
principal address of all officers and directors is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Name; Positions and Offices with Underwriter; Position and Offices with
Registrant:
Marie E. Connolly; Director, President and Chief Executive Officer; Vice
President and Assistant Treasurer
Richard W. Ingram; Senior Vice President; President and Treasurer
John E. Pelletier; Senior Vice President and General Counsel; Vice President
and Secretary
Donald R. Roberson; Senior Vice President; None
John F. Tower III; Senior Vice President, Chief Financial Officer and
Treasurer; Vice President and Assistant Treasurer
Rui M. Moura; First Vice President; None
<PAGE>
Bernard A. Whalen; First Vice President; None
John W. Gomez; Chairman and Director; None
William J. Nutt; Director; None
The information required by this Item 29 with respect to each director and
officer of FDI is incorporated herein by reference to Schedule A of Form BD
filed by FDI pursuant to the Securities Exchange Act of 1934 (SEC File No.
20518).
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended (the "1940 Act"), and
the Rules thereunder will be maintained at the offices of:
Morgan Guaranty Trust Company of New York: 60 Wall Street, New York, New York
10260-0060, 9 West 57th Street, New York, New York 10019 or 522 Fifth Avenue,
New York, New York 10036 (records relating to its functions as investment
advisor, shareholder servicing agent and administrative services agent).
State Street Bank and Trust Company: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 (records relating to its functions as custodian, transfer
agent and dividend disbursing agent).
Funds Distributor, Inc.: 60 State Street, Suite 1300, Boston, Massachusetts
02109 (records relating to its functions as distributor and co-administrator).
Pierpont Group, Inc.: 461 Fifth Avenue, New York, New York 10017 (records
relating to its assisting the Trustees in carrying out their duties in
supervising the Registrant's affairs).
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained in the
latest annual report to shareholders, the Registrant shall furnish each
person to whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders upon request and without charge.
(b) The Registrant undertakes to file a post-effective amendment, using
financials which need not be certified, within four to six months following
the commencement of public investment operations of each Fund. The
financial statements included in such amendment will be as of and for the
time period ended on a date reasonably close or as soon as practicable to
the date of the filing of the amendment.
<PAGE>
(c) The Registrant undertakes to comply with Section 16(c) of the 1940 Act as
though such provisions of the 1940 Act were applicable to the Registrant,
except that the request referred to in the second full paragraph thereof
may only be made by shareholders who hold in the aggregate at least 10% of
the outstanding shares of the Registrant, regardless of the net asset value
of shares held by such requesting shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration statement
on Form N-1A to be signed on its behalf by the undersigned, thereto duly
authorized in the City of Boston and Commonwealth of Massachusetts on the 7th
day of November, 1996.
JPM SERIES TRUST
By /s/RICHARD W. INGRAM
-------------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on November 7, 1996.
/s/RICHARD W. INGRAM
- --------------------------
Richard W. Ingram
President and Treasurer
(Principal Financial
and Accounting Officer)
MATTHEW HEALEY*
- --------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer
FREDERICK S. ADDY*
- --------------------------
Frederick S. Addy
Trustee
WILLIAM G. BURNS*
- --------------------------
William G. Burns
Trustee
ARTHUR C. ESCHENLAUER*
- --------------------------
Arthur C. Eschenlauer
Trustee
MICHAEL P. MALLARDI*
- --------------------------
Michael P. Mallardi
Trustee
*By /s/RICHARD W. INGRAM
--------------------------
Richard W. Ingram,
as attorney-in-fact pursuant to a power of attorney filed herewith.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
1(a) Amendment No. 1 to Declaration of Trust, Amended and
Restated Establishment and Designation of Series and
Classes of Shares.
2 Restated By-Laws.
5 Form of Investment Advisory Agreement between Registrant
and Morgan Guaranty Trust Company of New York.
6 Form of Distribution Agreement between Registrant and
Funds Distributor, Inc.
8 Form of Custodian Contract between Registrant and State
Street Bank and Trust Company.
9(a) Form of Co-Administration Agreement between Registrant and
Funds Distributor, Inc.
9(b) Form of Administrative Services Agreement between
Registrant and Morgan Guaranty Trust Company of New York.
9(c) Form of Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust Company.
9(d) Form of Shareholder Servicing Agreement with Morgan
Guaranty Trust Company of New York.
11 Consent of independent accountants.
13 Purchase agreement with respect to Registrant's initial
shares.
16 Schedule for computation of performance quotations.
17 Financial data schedules.
19 Powers of attorney.
Exhibit 1(a)
JPMSDT2.DOC
Appendix I
[RECEIVED OCT 25 1996 SECRETARY OF THE COMMONWEALTH CORPORATIONS DIVISION]
[City of Boston Office of the City Clerk Received OCT 25 1996 City Clerk]
JPM SERIES TRUST
AMENDMENT NO. 1 TO DECLARATION OF TRUST
Amended and Restated Establishment and
Designation of Series and Classes of Shares of
Beneficial Interest (par value $0.001 per share)
Pursuant to Sections 6.9 and 9.3 of the Declaration of Trust, dated as
of August 15, 1996 (the "Declaration of Trust"), of JPM Series Trust (the
"Trust"), the Trustees of the Trust hereby amend and restate the Establishment
and Designation of Series and Classes appended to the Declaration of Trust to
change the names of Tax Aware Active Equity Fund and Tax Aware Research Enhanced
Index Fund, two of the three initial series of Shares (as defined in the
Declaration of Trust) (each a "Fund" and collectively the "Funds") of the Trust.
1. The Funds shall be renamed and/or redesignated as follows:
Tax Aware Equity Fund
Tax Aware Disciplined Equity Fund
California Bond Fund
Each Fund and, as applicable, each class into which the Shares of each
Fund are divided shall have the following special and relative rights:
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933. Each Share of a Fund shall be redeemable,
shall be entitled to one vote for each dollar of net asset value (or a
proportionate fractional vote in respect of a fractional dollar amount) on
matters on which Shares of the Fund shall be entitled to vote, shall represent a
pro rata beneficial interest in the assets allocated or belonging to the Fund,
and shall be entitled to receive its pro rata share of the net assets of the
Fund upon liquidation of the Fund, all as provided in Section 6.9 of the
Declaration of Trust. The proceeds of sales of Shares of a Fund, together with
any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to that Fund, unless otherwise required by law.
3. Tax Aware Equity Fund, Tax Aware Disciplined Equity Fund and
California Bond Fund shall each be divided into two classes of Shares designated
"JPM Pierpont Shares" and "JPM Institutional Shares", respectively.
4. Shares of each class shall be entitled to all the rights and
preferences accorded to Shares under the Declaration of Trust.
5. The number of Shares of each class designated hereby shall be
unlimited.
<PAGE>
6. Shareholders of each class shall vote separately on any matter to
the extent required by, and any matter shall be deemed to have been effectively
acted upon with respect to that class as provided in, Rule 18f-2 or Rule 18f-3,
as from time to time in effect, under the Investment Company Act of 1940, as
amended (the 1940 Act ), or any successor rule, and by the Declaration of Trust.
Shareholders of any class may vote together with shareholders of any other class
on any matter for which the interests of the classes do not materially differ,
and shareholders of all classes of all Funds may vote together on Trust-wide
matters.
7. The Trust's assets and liabilities shall be allocated among the
Funds and the classes thereof as set forth in Section 6.9 of the Declaration of
Trust.
8. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund or class previously, now or hereafter
created, or otherwise to change the special and relative rights of any Fund or
class or any such other series of Shares or class thereof.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 9th day of October, 1996. This instrument may be executed by the Trustees on
separate counterparts but shall be effective only when signed by a majority of
the Trustees.
/s/ Christopher J. Kelley
Christopher J. Kelley
/s/ Richard W. Ingram
Richard W. Ingram
/s/ John E. Pelletier
John E. Pelletier
JPMSDT2.DOC
Exhibit 2
JPM345A
AMENDED AND RESTATED BY-LAWS
OF
EACH MASTER TRUST LISTED ON SCHEDULE I
AND
EACH FEEDER TRUST LISTED ON SCHEDULE II
AND
EACH STAND ALONE TRUST LISTED ON SCHEDULE III
ARTICLE I
DEFINITIONS
Each Trust listed on Schedule I is referred to in these By-Laws as a
"Master Trust". Each Trust listed on Schedule II is referred to in these By-Laws
as a "Feeder Trust". Each Trust listed on Schedule III is referred to in these
By-Laws as a "Stand Alone Trust".
In the case of each Trust, unless otherwise specified, capitalized
terms have the respective meanings given them in the Declaration of Trust of
such Trust dated as of the date set forth in Schedule I, II or III, as amended
from time to time. In the case of each Feeder Trust and each Stand Alone Trust,
the term "Holder" has the meaning given the term "Shareholder" in the respective
Declarations of Trust.
ARTICLE II
OFFICES
Section 1. Principal Office. In the case of each Master Trust, the
principal office of the Trust shall be in such place as the Trustees may
determine from time to time, provided that the principal office shall be outside
the United States of America if the Trustees determine that the Trust is
intended to be operated so that it is not engaged in United States trade or
business for United States federal income tax purposes. In the case of each
Feeder Trust and each Stand Alone Trust, until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within the state of its organization and the United
States of America as the Trustees may from time to time determine.
ARTICLE III
HOLDERS
Section 1. Meetings of Holders. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests in the case of each Master Trust or 10% of the voting securities
entitled to vote thereat in the case of each Feeder Trust and each Stand Alone
Trust, such request specifying the purpose or purposes for which such meeting is
to be called.
Any such meeting shall be held within or without the state of
organization of the Trust and within, or, if applicable, in the case of a Master
Trust only without, the United States of America on such day
<PAGE>
and at such time as
the Trustees shall designate. Holders of one third of the Interests in the case
of each Master Trust or one third of the voting securities entitled to vote
thereat in the case of each Feeder Trust and each Stand Alone Trust, present in
person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other applicable
law, the Declaration or these By-Laws. If a quorum is present at a meeting, an
affirmative vote of the Holders present in person or by proxy, holding more than
50% of the total Interests in the case of each Master Trust, or 50% of the
voting securities entitled to vote thereat in the case of each Feeder Trust and
each Stand Alone Trust, present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless a greater number of affirmative
votes is required by the 1940 Act, other applicable law, the Declaration or
these By-Laws.
All or any one or more Holders may participate in a meeting of Holders
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
In the case of The Series Portfolio or any Feeder Trust or any Stand
Alone Trust, whenever a matter is required to be voted by Holders of the Trust
in the aggregate under Section 9.1 and Section 9.2 of the Declaration of The
Series Portfolio or Section 6.8 and Section 6.9 and Section 6.9(g) of the
Declaration of the Feeder Trust and the Stand Alone Trust, the Trust may either
hold a meeting of Holders of all series, as defined in Section 1.2 of the
Declaration of The Series Portfolio or Section 6.9 of the Declaration of the
Feeder Trust and the Stand Alone Trust, to vote on such matter, or hold separate
meetings of Holders of each of the individual series to vote on such matter,
provided that (i) such separate meetings shall be held within one year of each
other, (ii) a quorum consisting of the Holders of one third of the voting
securities of the individual series entitled to vote shall be present at each
such separate meeting except as may otherwise be required by the 1940 Act, other
applicable law, the Declaration or these By-Laws and (iii) a quorum consisting
of the Holders of one third of all voting securities of the Trust entitled to
vote, except as may otherwise be required by the 1940 Act, other applicable law,
the Declaration or these By-Laws, shall be present in the aggregate at such
separate meetings, and the votes of Holders at all such separate meetings shall
be aggregated in order to determine if sufficient votes have been cast for such
matter to be voted.
Section 2. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purpose of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at least 10
days and not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Holder attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. At any meeting, any
business properly before the meeting may be considered whether or not stated in
the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
In the case of The Series Portfolio and each Feeder Trust and each
Stand Alone Trust, where separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by
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<PAGE>
Holders of the
Trust in the aggregate, as provided in Article III, Section 1 above, notice of
each such separate meeting shall be provided in the manner described above in
this Section 2.
Section 3. Record Date for Meetings. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, the Trustees
may from time to time fix a date, not more than 90 days prior to the date of any
meeting of Holders as a record date for the determination of the Persons to be
treated as Holders for such purpose.
In the case of The Series Portfolio and each Feeder Trust and each
Stand Alone Trust, where separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by Holders of the
Trust in the aggregate, as provided in Article III, Section 1 above, the record
date of each such separate meeting shall be determined in the manner described
above in this Section 3.
Section 4. Voting, Proxies, Inspectors of Election. At any meeting of
Holders, any Holder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote is
to be taken. A proxy may be revoked by a Holder at any time before it has been
exercised by placing on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, a later dated proxy or written
revocation. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of the Trust or of one or more Trustees or of one or
more officers of the Trust. No proxy shall be valid after one year from the date
of its execution, unless a longer period is expressly stated in the proxy.
In the case of each Master Trust, only Holders on the record date shall
be entitled to vote and each such Holder shall be entitled to a vote
proportionate to its Interest. In the case of each Feeder Trust, (i) only
Holders on the record date shall be entitled to vote, and (ii) each whole Share
shall be entitled to vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust shall not be voted. In the
case of each Stand Alone Trust, unless the Trustees determine that each Share
will entitle Holders to one vote per Share, on any matter submitted to a vote of
Holders of Shares of any series or class thereof, if any, each dollar of net
asset value (number of Shares owned times net asset value per Share of such
series or class, as applicable) shall be entitled to one vote on any matter on
which such shares are entitled to vote and each fractional dollar amount shall
be entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. In the case of each Feeder Trust and
each Stand Alone Trust, (i) Shares shall be voted by individual series or
classes thereof, if any, on any matter submitted to a vote of the Holders of the
Trust except as provided in Section 6.9(g) of the Declaration, and (ii) at any
meeting of Holders of the Trust or of any series or class thereof, if any, a
Shareholder Servicing Agent may vote any Shares as to which such Shareholder
Servicing Agent is the agent of record.
The Chairman of the meeting may, and upon the request of the Holders of
10% of the Interests or Shares, as the case may be, entitled to vote at such
election shall, appoint one or three inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after
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<PAGE>
the election certify the result of the vote taken. No
candidate for Trustee shall be appointed such inspector. If there are three
inspectors of election, the decision, act or certification of a majority is
effective in all respects as the decision, act or certificate of all.
At every meeting of the Holders, all proxies shall be required and
taken in charge of and all ballots shall be required and canvassed by the
Secretary of the meeting, who shall decide all questions touching the
qualification of voters, the validity of the proxies, the acceptance or
rejection of votes and any other questions related to the conduct of the vote
with fairness to all Holders, unless inspectors of election shall have been
appointed, in which event the inspectors of election shall decide all such
questions. On request of the Chairman of the meeting, or of any Holder or his
proxy, the Secretary shall make a report in writing of any question determined
and shall execute a certificate of facts found, unless inspectors of election
shall have been appointed, in which event the inspectors of election shall do
so.
When an Interest is held or Shares are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest or Shares, but if more than one of them is present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest or Shares. A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger.
Section 5. Holder Action by Written Consent. In the case of each Master
Trust, any action which may be taken by Holders may be taken without a meeting
if Holders of all Interests entitled to vote consent to the action in writing
and the written consents are filed with the records of the meetings of Holders.
In the case of each Feeder Trust and each Stand Alone Trust, any action which
may be taken by Holders may be taken without a meeting if Holders holding a
majority of Shares entitled to vote on the matter (or such larger proportion
thereof as shall be required by law, the Declaration or these By-Laws for
approval of such matter) consent to the action in writing and the written
consents are filed with the records of the meetings of Holders.
Such consents shall be treated for all purposes as a vote taken at a
meeting of Holders. Each such written consent shall be executed by or on behalf
of the Holder delivering such consent and shall bear the date of such execution.
No such written consent shall be effective to take the action referred to
therein unless, within one year of the earliest dated consent, written consents
executed by a sufficient number of Holders to take such action are filed with
the records of the meetings of Holders.
Section 6. Conduct of Meetings. The meetings of the Holders shall be
presided over by the Chairman, or if he is not present, by a Chairman to be
elected at the meeting. The Secretary of the Trust, if present, shall act as
secretary of such meetings, or if he is not present, an Assistant Secretary
shall so act; if neither the Secretary nor any Assistant Secretary is present,
then the meeting shall elect its secretary
4
<PAGE>
ARTICLE IV
TRUSTEES
Section 1. Place of Meeting, etc. The Trustees may hold their meetings,
have one or more offices, and keep the books of the Trust, inside or outside the
state of organization of the Trust or the United States of America, at any
office of the Trust or at any other place as they may from time to time
determine, or in the case of meetings, as they may from time to time determine
or as shall be specified or fixed in the respective notices or waivers of notice
thereof.
Section 2. Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman or any two Trustees. The President, the
Secretary or an Assistant Secretary may call meetings only upon the written
direction of the Chairman or two Trustees. The Trustees shall hold an annual
meeting for the election of officers and transaction of other business which may
come before such meeting. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed by resolution of the Trustees. Notice
of any other meeting shall be mailed or otherwise given not less than 24 hours
before the meeting but may be waived in writing by any Trustee either before or
after such meeting. Notice shall be given of any proposed action to be taken by
written consent. Notice of a meeting or proposed action to be taken by written
consent may be given by telegram (which term shall include a cablegram), by
telecopier or delivered personally (which term shall include by telephone), as
well as by mail. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except in the situation in which a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting was not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Trustees need be stated in the notice or waiver of notice of such meeting.
Section 3. Quorum. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in the Declaration, the 1940
Act or other applicable law, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present).
In the absence of a quorum, a majority of the Trustees present may adjourn the
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
With respect to actions of the Trustees, Trustees who are Interested
Persons of the Trust or otherwise interested in any action to be taken may be
counted for quorum purposes and shall be entitled to vote to the extent
permitted by the 1940 Act.
Section 4. Committees. The Trustees, by the majority vote of all the
Trustees then in office, may appoint from the Trustees committees which shall in
each case consist of such number of Trustees (not less than two) and shall have
and may exercise such powers as the Trustees may determine in the resolution
appointing them. Unless provided otherwise in the Declaration or by the
Trustees, a majority of all the members of any such committee may determine its
actions and fix the time and place of its meetings. With respect to actions of
any committee, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes and
shall be entitled to vote to the extent permitted by the 1940 Act. The Trustees
shall have power at any time to change the members and powers of any such
committee, to fill vacancies and to discharge any such committee. Each committee
5
<PAGE>
shall keep regular minutes of its meetings and cause them to be filed with the
minutes of the proceedings of the Trustees.
Section 5. Telephone Meetings. All or any one or more Trustees may
participate in a meeting of the Trustees or any committee thereof by means of a
conference telephone or similar communications equipment by means of which all
individuals participating in the meeting can hear each other, and participating
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting. Any conference telephone meeting shall be deemed to
have been held at a place designated by the Trustees at the meeting.
Section 6. Action without a Meeting. Any action required or permitted
to be taken at any meeting of the Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed either by all
the Trustees or all members of such committee then in office or by an 80%
majority of the Trustees or an 80% majority of members of such committee,
provided that no action by 80% majority consent shall be effective unless and
until (i) each Trustee or committee member signing such consent shall have been
advised in writing of the following information: the identity of any Trustee or
committee member not signing such consent and the reasons for his not signing;
and (ii) after receiving such information signing Trustees or committee members
who represent an 80% majority then in office indicate in writing that the
consent shall become effective by 80% majority, rather than unanimous, consent.
All such effective written consents shall be filed with the minutes of the
proceedings of the Trustees and treated as a vote for all purposes.
Section 7. Compensation. The Trustees shall be entitled to receive
such compensation from the Trust for their services as may from time to time
be voted by the Trustees.
Section 8. Chairman. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to serve until his successor
shall have been duly elected and qualified; the Chairman may serve on committees
of the Trustees. The Chairman shall not be an officer of the Trust solely by
virtue of his serving as Chairman. The Chairman shall preside at all meetings of
the Trustees at which he is present, shall serve as the liaison between the
Trustees and the officers of the Trust and between the Trustees and their staff
and shall have such other duties as from time to time may be assigned to him by
the Trustees.
Section 9. Trustees' Staff; Counsel for the Trust and Trustees, etc.
The Trustees may employ or contract with one or more Persons to serve as their
staff and to provide such services related thereto as may be determined from
time to time. The Trustees may employ attorneys as counsel for the Trust and/or
the Trustees and may engage such other experts or consultants as may be
determined from time to time.
ARTICLE V
OFFICERS
Section 1. General Provisions. The Trustees may elect or appoint such
officers or agents as the business of the Trust may require, including without
limitation a Chief Executive Officer, a President, one or more Vice Presidents,
a Treasurer, a Secretary, one or more Assistant Treasurers and one or more
Assistant Secretaries. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
6
<PAGE>
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these ByLaws, each of the principal
executive officer described in Section 4 below, the Treasurer and the Secretary
shall hold office until a successor shall have been duly elected and qualified,
and any other officers shall hold office at the pleasure of the Trustees. Any
two or more offices may be held by the same Person, provided that at least two
different individuals shall serve as officers. Any officer may be, but does not
need be, a Trustee.
Section 3. Removal. The Trustees may remove any officer with or without
cause by a vote of a majority of the Trustees. Any subordinate officer or agent
appointed by any officer or committee may be removed with or without cause by
such appointing officer or committee.
Section 4. Powers and Duties of the Chief Executive Officer; President.
The Chief Executive Officer, if any, shall be the principal executive officer of
the Trust. Subject to the control of the Trustees, the Chief Executive Officer
shall (i) at all times exercise general supervision and direction over the
affairs of the Trust, (ii) have the power to grant, issue, execute or sign such
documents as may be deemed advisable or necessary in the ordinary course of the
Trust's business and (iii) have such other powers and duties as from time to
time may be assigned by the Trustees.
If there is no Chief Executive Officer, the President shall be the
principal executive officer of the Trust and shall have the powers and duties
set forth above in this Section 4. If there is a Chief Executive Officer and a
President, the President shall have such powers and duties as from time to time
may be assigned by the Trustees or the Chief Executive Officer.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, any Vice President designated by the Trustees or
the President shall perform all the duties, and may exercise any of the powers,
of the President. Each Vice President shall perform such other duties as from
time to time may be assigned to him by the Trustees or the Chief Executive
Officer.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to the Trust's
custodian. The Treasurer shall render a statement of condition of the finances
of the Trust to the Trustees as often as they shall require the same and shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Holders in proper books provided for that
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust, if any; and shall have charge of the Holder
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise
7
<PAGE>
any of the powers, of the Treasurer. Each Assistant Treasurer shall perform
such other duties as from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers. Subject to any applicable law or
provision of the Declaration, any compensation of any officer may be fixed from
time to time by the Trustees. No officer shall be prevented from receiving any
such compensation as such officer by reason of the fact that he is also a
Trustee. If no such compensation is fixed for any officer, such officer shall
not be entitled to receive any compensation from the Trust.
Section 11. Bond and Surety. As provided in the Declaration, any
officer may be required by the Trustees to be bonded for the faithful
performance of his duties in the amount and with such sureties as the Trustees
may determine.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE VII
FISCAL YEAR
The Trust may have different fiscal years for its separate and distinct
series, if applicable. The fiscal year(s) of the Trust shall be determined by
the Trustees, provided that the Trustees (or the Treasurer subject to
ratification by the Trustees) may from time to time change any fiscal year.
ARTICLE VIII
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times
employ one or more banks or trust companies having a capital, surplus and
undivided profits of at least $50,000,000 as custodian with authority as the
Trust's agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Declaration, these By-Laws and
the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same upon
written order; (ii) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; (iii) to disburse such funds upon orders or
vouchers; (iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of
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<PAGE>
the
Trust and the net asset value of the Trust or, in the case of each
Feeder Trust and each Stand Alone Trust, Shares; all upon such basis of
compensation as may be agreed upon between the Trustees and the
custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
Section 2. Successor Custodian. The Trust shall upon the resignation
or inability to serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian; (ii) require that the cash and
securities owned by the Trust be delivered directly to the successor
custodian; and (iii) in the event that no successor custodian can be
found, submit to the Holders before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor custodian,
the question whether the Trust shall be liquidated or shall function
without a custodian.
ARTICLE IX
INDEMNIFICATION
In the case of each Master Trust, insofar as the conditional advancing
of indemnification monies under Section 5.4 of the Declaration for actions based
upon the 1940 Act may be concerned, such payments will be made only on the
following conditions:
(i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may
be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay the amount of the advance which exceeds the amount
to which it is ultimately determined that he is entitled to receive
from the Trust by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayment may be
obtained by the Trust without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient
of the advance, or (b) a majority of a quorum of the Trust's
disinterested, nonparty Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
9
<PAGE>
ARTICLE X
AMENDMENTS, ADDITIONAL TRUSTS, ETC.
The Trustees shall have the power to alter, amend or repeal
these By-Laws or adopt new By-Laws at any time to the extent such power is not
reserved to the Holders by the 1940 Act, other applicable law or the
Declaration. Action by the Trustees with respect to these By-Laws shall be taken
by an affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
One or more additional trusts may be added to Schedule I or Schedule II
by resolution of the trustees of such trust(s), provided that the trustees of
such trust(s) are identical to the Trustees of the Master Trusts, the Feeder
Trusts and the Stand Alone Trusts immediately prior to such addition.
In the case of each Master Trust, the Declaration refers to the
Trustees as Trustees, but not as individuals or personally; and no Trustee,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Trust. In
the case of each Feeder Trust and each Stand Alone Trust, the Declaration refers
to the Trustees not individually, but as Trustees under the Declaration, and no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Holders, in connection with Trust Property or the affairs of the Trust, save
only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust.
JPM345A
10
<PAGE>
SCHEDULE I
MASTER TRUSTS
State of Date of Date
Organiza- Declara- By-Laws
Trust tion tion Adopted
The Treasury Money Market New York 11/4/92 10/10/96
Portfolio
The Money Market Portfolio New York 1/29/93 10/10/96
The Tax Exempt Money Market New York 1/29/93 10/10/96
Portfolio
The Short Term Bond Portfolio New York 1/29/93 10/10/96
The U.S. Fixed Income Portfolio New York 1/29/93 10/10/96
The Tax Exempt Bond Portfolio New York 1/29/93 10/10/96
The Selected U.S. Equity Portfolio New York 1/29/93 10/10/96
The U.S. Small Company Portfolio New York 1/29/93 10/10/96
The Non-U.S. Equity Portfolio New York 1/29/93 10/10/96
The Diversified Portfolio New York 1/29/93 10/10/96
The Non-U.S. Fixed Income New York 6/13/93 10/10/96
Portfolio
The Emerging Markets Equity New York 6/13/93 10/10/96
Portfolio
The New York Total Return Bond New York 6/13/93 10/10/96
Portfolio
The Series Portfolio New York 6/14/94 10/10/96
11
<PAGE>
SCHEDULE II
FEEDER TRUSTS
State of Date of Date
Organization Declara- By-Laws
Trust tion Adopted
The JPM Pierpont Funds Massachusetts 11/4/92 10/10/96
The JPM Institutional
Funds Massachusetts 11/4/92 10/10/96
12
<PAGE>
SCHEDULE III
STAND ALONE TRUSTS
State of Date of Date
Organization Declara- By-Laws
Trust tion Adopted
JPM Series Trust Massachusetts 8/15/96 10/10/96
13
Exhibit 5
JPM SERIES TRUST
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 10th day of October, 1996, between JPM Series
Trust, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust") and Morgan Guaranty Trust Company of
New York, a New York trust company authorized to conduct a general banking
business (the "Advisor"),
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to render investment
advisory services to the Trust's existing separate and distinct series (each, a
"Fund") and other future Funds as agreed to from time to time between the Trust
and the Advisor, and the Advisor is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Trust hereby appoints the Advisor to act as investment
adviser to the Funds for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of the
Trust, the Advisor shall manage the investment operations of each Fund and the
composition of the Fund's holdings of securities and investments, including
cash, the purchase, retention and disposition thereof and agreements relating
thereto, in accordance with the Fund's investment objectives and policies as
stated in the Trust's registration statement on Form N-1A, as such may be
amended from time to time (the "Registration Statement"), with respect to the
Fund, under the 1940 Act, as amended and subject to the following
understandings:
(a) the Advisor shall furnish a continuous investment program
for each Fund and determine from time to time what investments or
securities will be
<PAGE>
purchased, retained, sold or
lent by the Fund, and what portion of the assets will be invested or
held uninvested as cash;
(b) the Advisor shall use the same skill and care in the
management of each Fund's investments as it uses in the administration
of other accounts for which it has investment responsibility as agent;
(c) the Advisor, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Trust's Declaration of Trust (such Declaration of Trust, as presently
in effect and as amended from time to time, is herein called the
"Declaration of Trust"), the Trust's By-Laws (such By-Laws, as
presently in effect and as amended from time to time, are herein called
the "By-Laws") and the Registration Statement and with the instructions
and directions of the Trustees of the Trust and will conform to and
comply with the requirements of the 1940 Act and all other applicable
federal and state laws and regulations;
(d) the Advisor shall determine the securities to be
purchased, sold or lent by each Fund and as agent for the Fund will
effect portfolio transactions pursuant to its determinations either
directly with the issuer or with any broker and/or dealer in such
securities; in placing orders with brokers and/or dealers the Advisor
intends to seek best price and execution for purchases and sales; the
Advisor shall also determine whether the Fund shall enter into
repurchase or reverse repurchase agreements;
On occasions when the Advisor deems the purchase or sale of a
security to be in the best interest of one of the Funds as well as
other customers of the Advisor, including any other of the Funds, the
Advisor may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to
be so sold or purchased in order to obtain best execution, including
lower brokerage commissions, if applicable. 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 Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund;
(e) the Advisor shall maintain books and records with respect
to each Fund's securities transactions and shall render to the Trust's
Trustees such periodic and special reports as the Trustees may
reasonably request; and
(f) the investment management services of the Advisor to any
of the Funds under this Agreement are not to be deemed exclusive, and
the Advisor shall be free to render similar services to others.
2
<PAGE>
3. The Trust has delivered copies of each of the following
documents to the Advisor and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) The Declaration of Trust;
(b) The By-Laws;
(c) Certified resolutions of the Trustees of the Trust
authorizing the appointment of
the Advisor and approving the form of this Agreement;
(d) The Trust's Notification of Registration on Form N-8A and
Registration Statement as filed with the Securities and Exchange
Commission (the "Commission").
4. The Advisor shall keep each Fund's books and records
required to be maintained by it pursuant to paragraph 2(e). The Advisor agrees
that all records which it maintains for any Fund are the property of the Trust
and it will promptly surrender any of such records to the Trust upon the Trust's
request. The Advisor further agrees to preserve for the periods prescribed by
Rule 31a-2 of the Commission under the 1940 Act any such records as are required
to be maintained by the Advisor with respect to any Fund by Rule 31a-1 of the
Commission under the 1940 Act.
5. During the term of this Agreement the Advisor will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased for a Fund
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, each Fund will pay to the Advisor as full compensation
therefor a fee at an annual rate set forth on Schedule A attached hereto. Such
fee will be computed daily and payable as agreed by the Trust and the Advisor,
but no more frequently than monthly.
7. The Advisor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by any Fund in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
8. This Agreement shall continue in effect with respect to
each Fund for a period of more than two years from the Fund's commencement of
investment operations only so long as such continuance is specifically approved
at least annually in
3
<PAGE>
conformity with the requirements of the
1940 Act; provided, however, that this Agreement may be terminated with respect
to each Fund at any time, without the payment of any penalty, by vote of a
majority of all the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of that Fund on 60 days' written notice to the
Advisor, or by the Advisor at any time, without the payment of any penalty, on
90 days' written notice to the Trust. This Agreement will automatically and
immediately terminate in the event of its "assignment" (as defined in the 1940
Act).
9. The Advisor shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided herein
or authorized by the Trustees of the Trust from time to time, have no authority
to act for or represent the Trust in any way or otherwise be deemed an agent of
the Funds.
10. This Agreement may be amended, with respect to any Fund,
by mutual consent, but the consent of the Trust must be approved (a) by vote of
a majority of those Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such amendment, and (b) by vote of a majority of the
outstanding voting securities of the Fund.
11. Notices of any kind to be given to the Advisor by the
Trust shall be in writing and shall be duly given if mailed or delivered to the
Advisor at 522 Fifth Avenue, New York, New York 10036, Attention: Funds
Management, or at such other address or to such other individual as shall be
specified by the Advisor to the Trust. Notices of any kind to be given to the
Trust by the Advisor shall be in writing and shall be duly given if mailed or
delivered to the Trust c/o Funds Distributor, Inc., 60 State Street, Suite 1300,
Boston, MA 02109 or at such other address or to such other individual as shall
be specified by the Trust to the Advisor.
12. The Trustees of the Trust have authorized the execution of
this Agreement in their capacity as Trustees and not individually, and the
Advisor agrees that neither the Trustees nor any officer or employee of the
Trust nor any Fund's shareholders nor any representative or agent of the Trust
or of the Fund(s) shall be personally liable upon, or shall resort be had to
their private property for the satisfaction of, obligations given, executed or
delivered on behalf of or by the Trust or the Fund(s), that such Trustees,
officers, employees, shareholders, representatives and agents shall not be
personally liable hereunder, and that it shall look solely to the trust property
for the satisfaction of any claim hereunder.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the __ day of
_______, 1996.
JPM SERIES TRUST
By:
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
Name:
Title:
JPM268B
5
<PAGE>
SCHEDULE A
JPM Series Trust
Investment Advisory Fees
California Bond Fund
.30% of the average daily net assets of the Fund
Tax Aware Equity Fund
.45% of the average daily net assets of the Fund
Tax Aware Disciplined Equity Fund
.35% of the average daily net assets of the Fund
Approved October __, 1996
Exhibit 6
JPM SERIES TRUST
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made as of this 10th day of October, 1996,
between JPM SERIES TRUST, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (the Trust ), and FUNDS DISTRIBUTOR,
INC., a Massachusetts corporation (the Distributor ).
WITNESSETH:
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act ), as an open-end management investment company;
WHEREAS, the Shares of Beneficial Interest (par value $0.001 per share)
of the Trust (the Shares ) are divided into multiple series (such series
together with any other series which may in the future be established, the
Funds) and, as applicable, classes thereof;
WHEREAS, it is in the interest of the Trust to be able to offer Shares
of each Fund for sale continuously and to appoint a broker registered under the
Securities Exchange Act of 1934 and various state broker registration statutes
for the purpose of facilitating such offers and sales;
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of Shares of the Funds;
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Trust hereby appoints
the Distributor its exclusive agent in connection with the offering and sale of
the Shares on the terms set forth in this Agreement and the Distributor hereby
accepts such appointment and agrees to act hereunder.
Section 2. Services and Duties of the Distributor.
(a) The Distributor agrees to offer and sell, as agent for the Trust,
from time to time during the term of this Agreement, Shares upon the terms
described in the Prospectus relating to such Shares. As used in this Agreement,
the term Prospectus shall mean the prospectus, including any information
incorporated by reference therein, relating to such Shares included as part of
the Trust's Registration Statement, as such prospectus may be amended or
supplemented from time to time, and the term Registration Statement shall mean
the Registration Statement most recently filed from time to time by the Trust
with the Securities and Exchange Commission
<PAGE>
and effective under the Securities Act of 1933, as amended (the 1933 Act ), and
the 1940 Act, as such Registration Statement may be amended by any amendments
thereto at the time in effect.
(b) The Distributor will hold itself available to receive orders,
satisfactory to the Distributor, for the purchase of Shares and will establish
procedures for the acceptance and transmission of orders on behalf of the Trust,
which procedures shall be reasonably acceptable to the Trust. The Distributor
shall promptly forward to the Trust's custodian funds received in respect of
purchases of Shares. Purchase orders shall be deemed effective at the time and
in the manner set forth in the Prospectus relating to such Shares.
(c) The offering price of the Shares shall be the net asset value per
Share (as defined in or pursuant to the Declaration of Trust of the Trust and
determined as set forth in the Prospectus relating to such Shares) next
determined following receipt of an order. The Trust shall furnish the
Distributor, with all possible promptness, an advice of each computation of net
asset value of Shares of each Fund or class of Shares.
(d) The Distributor shall not be obligated to sell any certain number
of Shares and nothing herein contained shall prevent the Distributor from
entering into like distribution arrangements with other investment companies.
Section 3. Duties of the Trust.
(a) The Trust agrees to sell Shares of each Fund so long as it has
Shares available for sale and to cause the Trust's transfer agent to record on
its books the ownership of (or deliver certificates, if any, for) such Shares
registered in such names and amounts as the Distributor has requested in writing
or other means of data transmission, as promptly as practicable after receipt by
the Trust of the net asset value thereof and written request of the Distributor
therefor.
(b) The Trust shall keep the Distributor fully informed with regard to
the Trust's affairs and shall furnish to the Distributor copies of all
information, financial statements and other papers which may be necessary for
use in connection with the sale of Shares of the Funds, and this shall include
one certified copy, upon request by the Distributor, of all financial statements
prepared for the Trust by independent accountants and such number of copies of
its most current Prospectuses as may be necessary to accompany confirmation of
sales and annual and interim reports and Prospectuses for delivery to existing
shareholders.
(c) The Trust shall take, from time to time, such steps, including
payment of the related filing fee, as may be necessary to register its Shares
under the 1933 Act to the end that there will be available for sale such number
of Shares as the Distributor may be expected to sell. The Trust agrees to file
from time to time such amendments, reports and other documents as may be
necessary in order that there may be no untrue statement of a material fact in a
Registration Statement or Prospectuses, or necessary in order that there may be
no omission to state a material fact in the Registration Statement or
Prospectuses which omission would make the statements therein misleading.
2
<PAGE>
(d) The Trust, through Funds Distributor, Inc. as Co-Administrator,
shall use its best efforts to qualify and maintain the qualification of any
appropriate number of the Shares of each Fund for sale under the securities laws
of such states as the Distributor and the Trust may approve, and, if necessary
or appropriate in connection therewith, to qualify and maintain the
qualification of the Trust as a broker or dealer in such states; provided that
the Trust shall not be required to amend its Declaration of Trust or By-laws to
comply with the laws of any state, to maintain an office in any state, to change
the terms of the offering of the Shares in any state from the terms set forth in
its Registration Statement and Prospectuses, to qualify as a foreign corporation
in any state or to consent to service of process in any state other than with
respect to claims arising out of the offering of the Shares. The Distributor
shall furnish such information and other material relating to its affairs and
activities as may be required by such Co-Administrator in connection with such
qualifications.
Section 4. Expenses. The Trust shall bear all costs and expenses
necessary for the continuous sale of the Shares such as: (i) fees and
disbursements of its counsel and independent accountants; (ii) the preparation,
filing and printing of any registration statements and/or prospectuses required
to be filed by and under the Federal and state securities laws; (iii) the
preparation and mailing of annual and interim reports, prospectuses and proxy
materials to shareholders; and (iv) the qualifications of Shares for sale and of
the Trust as a broker or dealer under the securities laws of such states or
other jurisdictions as shall be selected by the Trust and the Distributor
pursuant to Section 3(d) hereof and the cost and expenses payable to each such
state for continuing qualification therein in connection with such sale. Since
the Trust has not adopted a plan under Rule 12b-1 of the 1940 Act, the
Distributor is directed and agrees that it will not incur any expenses which
would require the Trust to adopt a plan under Rule 12b-1.
Section 5. Indemnification. The Trust agrees to indemnify, defend and
hold the Distributor, its officers and directors and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, 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
Distributor, its officers, directors or any such controlling person may incur
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Trust for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement, to the extent that it might
require indemnity of any person who is also an officer or Trustee of the Trust
or who controls the Trust within the meaning of Section 15 of the 1933 Act,
shall not inure to the benefit of such officer, Trustee or controlling person
unless a court of competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would not be against
public policy as expressed in the 1933 Act; and further provided that in no
event
3
<PAGE>
shall anything contained herein be so construed as to protect the Distributor
against any liability to the Trust or to its securities holders to which the
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement. The Trust's
agreement to indemnify the Distributor, its officers and directors and any such
controlling person, as aforesaid is expressly conditioned upon the Trust's being
promptly notified of any action brought against the Distributor, its officers or
directors, or any such controlling person, such notification to be given to the
Trust in accordance with Section 9, with a copy to Stephen K. West, Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004. The Trust agrees promptly
to notify the Distributor of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issue and
sale of any Shares.
The Distributor agrees to indemnify, defend and hold the Trust, its
Trustees and officers and any person who controls the Trust, if any, within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its Trustees or
officers of any such controlling person may incur under the 1933 Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its Trustees or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Trust for use in the preparation of the
Registration Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in such information or a fact
necessary to make such information not misleading, it being understood that the
Trust will rely upon the information provided by the Distributor for use in the
preparation of the Registration Statement and Prospectus. The Distributor's
agreement to indemnify the Trust, its Trustees and officers, and any such
controlling person as aforesaid is expressly conditioned upon the Distributor's
being promptly notified of any action brought against the Trust, its Trustees or
officers or any such controlling person, such notification to be given to the
Distributor in accordance with Section 9.
Section 6. Limitation of Liability. The Distributor shall not be liable
for any error of judgment or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or for reckless disregard by it of its obligations and
duties under this Agreement.
Section 7. Compliance with Securities Laws. The Trust represents that
it is registered as an open-end management investment company under the 1940
Act, and agrees that it will comply with the provisions of the 1940 Act and of
the rules and regulations thereunder. The Trust and the Distributor each agree
to comply with the applicable terms and provisions of the 1940 Act, the 1933 Act
and, subject to the provisions of Section 3(d), applicable state securities
4
<PAGE>
laws. The Distributor agrees to comply with the applicable terms and
provisions of the Securities Exchange Act of 1934.
Section 8. Term of Agreement; Termination. This Agreement shall
commence on the date first set forth above. This Agreement shall continue in
effect for a period more than two years from the date hereof only so long as
such continuance is specifically approved at least annually in conformity with
the requirements of the 1940 Act.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act). In addition, this Agreement may be
terminated by either party at any time, without penalty, on not less than sixty
(60) days' written notice to the other party.
Section 9. Notices. Any notice required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid: (1) to the Distributor at Funds Distributor, Inc., 60 State
Street, 13th Floor, Boston, Massachusetts 02109, Attention: President with a
copy to General Counsel; or (2) to the Trust at JPM Series Trust, at its address
as set forth in its Prospectuses, Attention: Treasurer, with a copy to Morgan
Guaranty Trust Company, 522 Fifth Avenue, New York, New York 10036, Attention:
Funds Management or at such other address as either party may from time to time
specify to the other party pursuant to this Section 9.
Section 10. Confidentiality. The Distributor agrees on behalf of itself
and its employees to treat confidentially and as proprietary information of the
Trust all records and other information not otherwise publicly available
relative to the Trust and its prior, present or potential shareholders and not
to use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Distributor may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.
Section 11. No Liability of Shareholders, Trustees, etc. The Trustees
have authorized the execution of this Agreement in their capacity as Trustees
and not individually and the Distributor agrees that neither the shareholders
nor the Trustees nor any officer, employee, representative or agent of the Trust
shall be personally liable upon, nor shall resort be had to their private
property for the satisfaction of, obligations given, executed or delivered on
behalf of or by the Trust, that the shareholders, Trustees, officers, employees,
representatives and agents of the Trust shall not be personally liable
hereunder, and that it shall look solely to the property of the Trust for the
satisfaction of any claim hereunder.
Section 12. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
JPM SERIES TRUST
By
Name:
Title:
FUNDS DISTRIBUTOR, INC.
By
Name:
Title:
PP272A.DOC
6
Exhibit 8
CUSTODIAN CONTRACT
Between
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be
Held By It................................................................2
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian
in the United States......................................................3
2.1 Holding Securities...................................................3
2.2 Delivery of Securities...............................................4
2.3 Registration of Securities..........................................10
2.4 Bank Accounts.......................................................11
2.5 Availability of Federal Funds.......................................12
2.6 Collection of Income................................................13
2.7 Payment of Fund Monies..............................................14
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased................................................18
2.9 Appointment of Agents...............................................19
2.10 Deposit of Fund Assets in Securities System.........................19
2.10AFund Assets Held in the Custodian's
Direct Paper System.................................................23
2.11 Segregated Account..................................................25
2.12 Ownership Certificates for Tax Purposes.............................27
2.13 Proxies.............................................................27
2.14 Communications Relating to Portfolio Securities.....................28
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States...............................29
3.1 Appointment of Foreign Sub-Custodians...............................29
3.2 Assets to be Held...................................................30
3.3 Foreign Securities Depositories.....................................30
3.4 Agreements with Foreign Banking Institutions........................31
3.5 Access of Independent Accountants of the Fund.......................32
3.6 Reports by Custodian................................................32
3.7 Transactions in Foreign Custody Account.............................33
3.8 Liability of Foreign Sub-Custodians.................................34
3.9 Liability of Custodian..............................................34
3.10 Reimbursement for Advances..........................................36
3.11 Monitoring Responsibilities.........................................37
3.13 Branches of U.S. Banks..............................................37
3.13 Tax Law.............................................................38
4. Payments for Sales or Repurchase or Redemptions of Shares of
the Fund.................................................................39
<PAGE>
5. Proper Instructions......................................................40
6. Actions Permitted Without Express Authority..............................41
7. Evidence of Authority....................................................41
8. Duties of Custodian with Respect to the Books of
Account and Calculation of Net Asset Value and Net Income................42
9. Records..................................................................42
10. Reports to Fund by Independent Public Accountants........................43
11. Compensation of Custodian................................................44
12. Responsibility of Custodian..............................................44
13. Effective Period, Termination and Amendment..............................46
14. Successor Custodian......................................................48
15. Interpretive and Additional Provisions...................................50
16. Additional Funds.........................................................50
17. Massachusetts Law to Apply...............................................51
18. Prior Contracts..........................................................51
19. Shareholder Communications Election......................................51
20. Limitation of Liability..................................................53
<PAGE>
CUSTODIAN CONTRACT
This Contract between a
business trust organized and
existing under the laws of the Commonwealth of Massachusetts, having its
principal place of business at
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund offers shares in series,
(such series together with all other series subsequently established
<PAGE>
by the Fund and made subject to this Contract in accordance with paragraph 17,
being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolio, and all payments
of income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolio ("Shares") as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property
2
<PAGE>
of a Portfolio held or received by the Portfolio and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories
designated in Schedule A hereto but only in accordance with the provisions of
Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio,
3
<PAGE>
other than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a securities depository or in
a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the
Custodian pursuant to Section 2.10A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
4
<PAGE>
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a
5
<PAGE>
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any
6
<PAGE>
deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
equivalent collateral or by a letter of credit equal at all times
to 100% of the market value of the securities loaned plus accrued
income, except that in connection with any loans for which
collateral is to be credited to
7
<PAGE>
the Custodian's account in the book-entry system authorized by
the U.S. Department of the Treasury, the Custodian will not be
held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or
8
<PAGE>
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
Futures Commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind, as
may be described from time to time in the currently effective
prospectus and statement of additional information of the
Fund, related to the Portfolio (the "Prospectus"), in satisfaction
of requests by holders of
9
<PAGE>
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of
10
<PAGE>
any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of a Portfolio under
the terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize its
best efforts only to collect timely income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian
acting pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio, other than
cash maintained by the Portfolio in a bank account
11
<PAGE>
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
PROVIDED, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio (i) invest in such instruments as may be set
forth in such instructions on the same day as received all federal
funds
12
<PAGE>
received after a time agreed upon by the Custodian and the Fund and
(ii) make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of funds received in respect of sales of securities by the
Portfolio and of funds obtained through borrowings, in each case which
are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant
to custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment
13
<PAGE>
all coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Portfolio
is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures
14
<PAGE>
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions
set forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form
15
<PAGE>
or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) From an account of the Portfolio located outside of the United
States (except as
16
<PAGE>
otherwise specified by the Fund for a particular Portfolio),
for the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) From an account of the Fund located outside of the United
States (except as otherwise specified by the Fund for a particular
Portfolio), for the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents of the
Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of
17
<PAGE>
the Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund signed by two
officers of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose and naming the
person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
18
<PAGE>
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; PROVIDED, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder. In addition, the Custodian may appoint an
affiliate of the Custodian located outside of the United States to
perform such of its duties hereunder as are required to be performed
outside of the United States.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian
may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, which acts
as a securities depository, or in the book-entry system authorized by
the U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as Securities System in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
19
<PAGE>
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the
20
<PAGE>
Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio. Copies of
all advices from the Securities System of transfers of securities
for the account of the Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account
of the Portfolio on the next
21
<PAGE>
business day;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the
22
<PAGE>
rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage; provided, that the Custodian shall,
notwithstanding such subrogation, reimburse the Portfolio for its
reasonable expenses in connection with such claim.
2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to
the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct
23
<PAGE>
Paper System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written
24
<PAGE>
advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the Securities System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and
maintain a segregated account or accounts for and on behalf of each
such Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with
the provisions of any agreement among the Fund on behalf of the
Portfolio, the Custodian and a broker-dealer registered under the
Exchange Act and a member
25
<PAGE>
of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio, (ii) for purposes of segregating
cash or government securities in connection with options purchased,
sold or written by the Portfolio or commodity futures contracts or
options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required
by Investment Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, BUT ONLY, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions from
the Fund on behalf of the applicable
26
<PAGE>
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such
27
<PAGE>
proxies, all proxy soliciting materials and all notices relating to
such securities.
2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of domestic
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to
the Portfolio all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the Portfolio shall
28
<PAGE>
notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the
Portfolio's securities and other assets maintained outside
the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined
in Section 5 of this Contract together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of a Portfolio's assets.
29
<PAGE>
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(l) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging
to the Fund, the foreign securities of the Fund held by each
foreign sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Portfolios
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking
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institution shall be substantially in the form set forth in Exhibit 1
hereto and shall provide that: (a) the assets of each Portfolio will
not be subject to any right, charge, security interest, lien or claim
of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to each
applicable Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will
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use its best efforts to arrange for the independent accountants of the
Fund to be afforded access to the books and records of any foreign
banking institution employed as a foreign sub-custodian insofar as
such books and records relate to the performance of such foreign
banking institution under its agreement with the Custodian.
3.6 REPORTS BY CUSTODIAN. 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 the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph
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(b) of this Section 3.7, the provision of Sections 2.2 and 2.7 of this
Contract shall apply, MUTATIS MUTANDIS to the foreign securities of
the Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities received for the
account of each applicable Portfolio and delivery of securities
maintained for the account of each applicable Portfolio may be
effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering 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. (c) Securities
maintained in the custody of a foreign sub-custodian may be maintained
in the name of such entity's nominee to the same extent as set forth
in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee
33
<PAGE>
harmless from any liability as a holder of record of such securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians
34
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generally in this Contract and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by
paragraph 3.12 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war
or terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the foregoing provisions
of this paragraph 3.9, in delegating custody duties to State Street
London Ltd., the Custodian shall not be relieved of any responsibility
to the Fund for any loss due to such delegation, except such loss as
may result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to acts of God, nuclear
incident or other losses under
35
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circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios assets to the extent
necessary to obtain reimbursement.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information
36
<PAGE>
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 initial approval of this Contract. In
addition, the Custodian will promptly inform the Fund
in the event that the Custodian learns of a material adverse change in
the financial condition of a foreign sub-custodian or any loss of the
assets of the Fund or in the case of any foreign sub-custodian not
the subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 BRANCHES OF U.S. BANKS.
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of a Portfolio's assets is
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment
37
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Company Act of 1940 meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract. (b)
Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject to
the direction of the Custodian, State Street London Ltd. or both.
3.13 TAX LAW.
(a) UNITED STATES TAXES. The Custodian shall have no responsibility
or liability for any obligations now or hereafter imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of
the United States of America or any state or political subdivision
thereof. The Custodian will be responsible for informing the Fund of
the income received by the Fund which is United States source income
and which is not United States source income.
(b) CLAIMING FOR EXEMPTION OR REFUND UNDER THE TAX LAWS OF NON-UNITED
STATES JURISDICTIONS. The sole responsibility of the Custodian with
regard to the tax laws of non-United States jurisdictions shall be to
identify the income of the Fund which has been subject to withholding
and other tax asessments or other governmental charges by such
jurisdictions and the amount thereof and to use reasonable efforts
to assist the Fund with respect to any claim for exemption or refund
of such charges that can be made on behalf of the Fund.
38
<PAGE>
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide notification to
the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt
by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the
Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available to an
account maintained outside of the United States (except as specified by the
Fund for a particular Portfolio) for payment to holders of Shares who have
delivered to the Transfer Agent a request for redemption or repurchase of their
Shares.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this
39
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Contract means a writing signed or initialled by one or more person or persons
as the Board of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Portfolios' assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.11.
40
<PAGE>
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of
41
<PAGE>
the Fund. The Custodian may receive and accept a certified copy of a vote
of the Board of Trustees of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall keep the books of account of each Portfolio of the Fund.
Until otherwise directed by Proper Instructions, the Custodian shall compute
the net asset value per share of the outstanding shares of each Portfolio
of the Fund. The Custodian shall also calculate daily the net income of
each Portfolio of the Fund as described in the Fund's currently effective
prospectus for such Portfolio and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer
Agent periodically of the division of such net income among its various
components. The calculation of the net asset value per share and the
daily income of each Portfolio of the Fund shall be made at the time or
times described from time to time in the Fund's currently effective
prospectus for such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereof. All such records shall be the property
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<PAGE>
of the Fund and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
10. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on
futures contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such
43
<PAGE>
inadequacies, the reports shall so state.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be
44
<PAGE>
without liability for any action reasonably taken or omitted pursuant to such
advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in the Custodian
or its nominee assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, the Fund, on behalf
of the Portfolio, as a
45
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prerequisite to requiring the Custodian to take such action, shall provide
indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) for
the benefit of a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
13. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at
46
<PAGE>
any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio and the receipt
of an annual certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by such Portfolio of such Securities
System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended, and that the Custodian shall not
with respect to a Portfolio act under Section 2.10A hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System by such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has reviewed the
use by such Portfolio of the Direct Paper System;
PROVIDED FURTHER, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
of Trustees (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this
47
<PAGE>
Contract in the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
14. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, or one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held
in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in
48
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accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $50,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to
or of the Board of Trustees to appoint a
49
<PAGE>
successor custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
15. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
16. ADDITIONAL SERIES
In the event that the Fund establishes one or more series of Shares in
addition to
50
<PAGE>
with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
17. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
18. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
19. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of
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<PAGE>
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address and share
position to requesting companies whose securities the Fund owns. If the
Fund tells the Custodian "no", the Custodian will not provide this information
to requesting companies. If the Fund tells the Custodian "yes" or does not
check either "yes" or "no" below, the Custodian is required by the rule to treat
the Fund as consenting to disclosure of this information for all securities
owned by the Portfolio or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company
from using the Fund's name and address for any purpose other
than corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
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NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
20. LIMITATION OF LIABILITY
The references herein to the Trustees of the Fund are to the Trustees of
the Fund as trustees and not individually or personally. The obligations of the
Fund entered into on behalf of the Fund by any of the Trustees are not made
individually but in their capacity as trustees and are not binding on any of the
Trustees personally. All persons dealing with the Fund must look solely to the
assets of the Fund for the enforcement of any claims against the Fund.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
day of , 1996.
STATE STREET BANK AND TRUST COMPANY
By
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[insert fee schedule]
Exhibit 9(a)
JPM SERIES TRUST
CO-ADMINISTRATION AGREEMENT
CO-ADMINISTRATION AGREEMENT, dated as of October 10, 1996, by and
between JPM Series Trust, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), and Funds Distributor,
Inc., a Massachusetts corporation (the "Co-Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Shares of Beneficial Interest (par value $0.001 per share)
of the Trust (the "Shares") are divided into multiple series (together with any
series which may in the future be established, the "Series" or the "Fund"); and
WHEREAS, the Trust wishes to engage the Co-Administrator to provide
certain administrative and management services, and the Co-Administrator is
willing to provide such administrative and management services to the Trust and
each Series, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Co-Administrator. Subject to the general direction and
control of the Board of Trustees of the Trust, the Co-Administrator shall
perform the following administrative and management services: (a) providing or
obtaining office space, equipment and clerical personnel necessary for
maintaining the organization of the Trust, including a principal office in
Massachusetts, and for performing the administrative and management functions
herein set forth; (b) arranging for Directors, officers and employees of the
Co-Administrator or its agents, reasonably acceptable to the Trustees, to serve
as Trustees, officers or agents of the Trust and perform the duties incident to
their office, if duly elected or appointed to such positions and subject to
their individual consent and to any limitations imposed by law; (c) preparing
such reports, applications and documents (including reports regarding the sale
and redemption of Shares as reported by the Trust's transfer agent as may be
required in order to comply with state securities laws) as may be necessary or
desirable to register Shares with state securities authorities, monitoring the
sale of Shares as reported by the Trust's transfer agent for compliance with
state securities laws, and filing with the appropriate state securities
authorities the registration statements and reports for the Trust and the Shares
and all amendments thereto, as may be necessary or convenient to register and
keep effective the Trust and the Shares with
<PAGE>
state
securities authorities to enable the Trust to make a continuous offering of
Shares; (d) filing documents with regulatory authorities or mailing documents to
investors in or Trustees of the Trust to the extent requested by the Trust; (e)
reviewing and filing with the National Association of Securities Dealers all
marketing and sales literature provided to the Co-Administrator on behalf of the
Trust; and (f) maintaining books and records of the Trust related to the
foregoing. In the performance of its duties under this Agreement, the
Co-Administrator will comply with the provisions of the Declaration of Trust and
By-Laws of the Trust and the Trust's stated investment objectives, policies and
restrictions and will use its best efforts to safeguard and promote the welfare
of the Trust and to comply with other policies which the Board of Trustees may
from time to time determine. Notwithstanding the foregoing, the Co-Administrator
shall not be deemed to have assumed any duties with respect to this Agreement,
including, without limitation, any responsibility for the management of the
Trust's assets or the rendering of investment advice and supervision with
respect thereto, nor shall the Co-Administrator be deemed to have assumed or
have any responsibility with respect to functions specifically assumed by any
transfer agent, custodian or other administrative service provider of the Trust.
The Co-Administrator undertakes to comply with all applicable requirements of
the U.S. federal securities laws and any other laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to be
performed by it hereunder.
2. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Co-Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request.
3. Allocation of Charges and Expenses. The Co-Administrator shall pay
the entire salaries and wages of all of the Trust's Trustees, officers and
agents who devote part or all of their time to the affairs of the
Co-Administrator or its affiliates, and the wages and salaries of such persons
shall not be deemed to be expenses incurred by the Trust for purposes of this
Section 3. Except as provided in the foregoing sentence, the Co-Administrator
shall not pay other expenses relating to the Trust including, without
limitation, compensation of Trustees not affiliated with the Co-Administrator;
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Trust; fees and expenses of the Trust's
independent auditors, of legal counsel and of any transfer agent, distributor,
shareholder servicing agent, registrar or dividend disbursing agent of the
Trust; expenses of distributing and redeeming Shares and servicing shareholder
accounts; expenses of preparing, printing and mailing prospectuses and
statements of additional information, reports, notices, proxy statements and
reports to shareholders and governmental officers and commissions; expenses of
preparing and mailing agendas and supporting documents for meetings of Trustees
and committees of Trustees; expenses connected with the execution, recording and
settlement of portfolio security transactions; insurance premiums; fees and
expenses of the Trust's custodian for all services to the Trust, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of calculating the net asset value of the Shares; expenses of
shareholder meetings; and expenses relating to the issuance, registration and
qualification of Shares.
4. Compensation of Co-Administrator. For the services to be
rendered and the facilities to be provided by the Co-Administrator hereunder,
the Co-Administrator shall receive a fee from
2
<PAGE>
each such Series of the Trust as
agreed by the Trust and the Co-Administrator from time to time as set forth on
Schedule A attached hereto. This fee will be payable as agreed by the Trust and
the Co-Administrator, but no more frequently than monthly.
5. Limitation of Liability of the Co-Administrator. The
Co-Administrator shall not be liable for any error of judgment or mistake of law
or for any act or omission in the administration or management of the Trust or
the performance of its duties hereunder, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder. As used in this
Section 5, the term "Co-Administrator" shall include Funds Distributor, Inc.
and/or any of its affiliates and the Directors, officers and employees of Funds
Distributor, Inc. and/or of its affiliates.
6. Activities of the Co-Administrator. The services of the
Co-Administrator to the Trust are not to be deemed to be exclusive, the
Co-Administrator being free to render administrative and/or other services to
other parties. It is understood that Trustees, officers, and shareholders of the
Trust are or may become interested in the Co-Administrator and/or any of its
affiliates, as Directors, officers, employees, or otherwise, and that Directors,
officers and employees of the Co-Administrator and/or any of its affiliates are
or may become similarly interested in the Trust and that the Co-Administrator
and/or any of its affiliates may be or become interested in the Trust as a
shareholder or otherwise.
7. Termination. This Agreement may be terminated as to any Series at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by the Co-Administrator, in each case on not more than 60 days' nor
less than 30 days' written notice to the other party.
8. Subcontracting by the Co-Administrator. The Co-Administrator may
subcontract for the performance of its obligations hereunder with any one or
more persons; provided, however, that the Co-Administrator may subcontract
hereunder only with the prior consent of the Trustees of the Trust; and
provided, further, that, unless the Trust otherwise expressly agrees in writing,
the Co-Administrator shall be as fully responsible to the Trust for the acts and
omissions of any subcontractor as it would be for its own acts or omissions.
9. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
10. Amendments. This Agreement may be amended by only mutual written
consent.
11. Confidentiality. The Co-Administrator agrees on behalf of itself
and its employees to treat confidentially and as proprietary information of the
Trust all records and other information not otherwise publicly available
relative to the Trust and its prior, present or potential shareholders and not
to use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Co-Administrator may be exposed to
civil or criminal contempt
3
<PAGE>
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
12. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. 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 construction or
effect. Should any part of this Agreement 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 and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law.
13. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Co-Administrator at 60 State
Street, 13th Floor, Boston, Massachusetts 02109, Attention: President with a
copy to General Counsel; or (2) to the Trust at 60 State Street, Suite 1300,
Boston, Massachusetts 02109, Attention: Treasurer, or at such other address as
either party may from time to time specify to the other party pursuant to this
section, with a copy to Morgan Guaranty Trust Company of New York, 522 Fifth
Avenue, New York, New York 10036, Attention: Funds Management.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Trust has executed this Agreement not individually,
but as an officer of the Trust under the Trust's Declaration of Trust, dated
August 15, 1996, and the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of the Trust individually, but bind only the
Trust estate.
JPM SERIES TRUST
By
Name:
Title:
FUNDS DISTRIBUTOR, INC.
By
Name:
Title:
PPADMI4
4
<PAGE>
Schedule A
The Co-Administrator's annual fee charged to and payable by each
Covered Entity as defined below is its share of an annual complex-wide charge.
The annual complex-wide charge is:
(a) $425,000 for all Covered Entities, provided that such charge shall be
increased by $5,000 for each Covered Entity in excess of 100, plus
(b) out-of-pocket charges for any services subcontracted pursuant to
co-administration agreements with Covered Entities.
The portion of this charge payable by each Covered Entity is (i) in the case of
any charges described in paragraph (b) directly attributable to a particular
Covered Entity, the amount attributable to such Covered Entity, plus (ii) in the
case of all other amounts, the amount determined by the proportionate share that
such Covered Entity's net assets bear to the total net assets of the Covered
Entities.
A Covered Entity is any series of The JPM Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds, the Portfolios in which any series of the
foregoing invest, any series of JPM Series Trust and each other current or
future mutual fund (or series thereof) for which both (1) a tax return is filed
with the Internal Revenue Service under United States tax law and (2) Morgan
Guaranty Trust Company of New York provides investment advice and/or
administrative services and the Co-Administrator provides administration
services.
Approved: _______ __, 1996
Effective _______ __, 1996
PPADMI4
Exhibit 9(b)
JPM SERIES TRUST
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of October 10, 1996, by
and between JPM Series Trust, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (the "Trust"), and Morgan Guaranty
Trust Company of New York, a New York trust company ("Morgan").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Shares of Beneficial Interest (par value $0.001 per share)
of the Trust (the "Shares") are divided into multiple series (such series
together with any other series which may in the future be established, the
"Funds"); and
WHEREAS, the Trust wishes to engage Morgan to provide certain
administrative services for the Funds, and Morgan is willing to provide such
services for each Fund, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of Morgan.
1.1. Subject to the general direction and control of the Board of
Trustees of the Trust, Morgan shall perform such administrative and related
services as may from time to time be reasonably requested by the Trust, which
shall include without limitation: a) arranging for the preparation and filing of
the Trust's tax returns and preparing financial statements and other financial
reports for review by the Trust's independent auditors; b) coordinating the
Trust's annual audits; c) developing the budget and establishing the rate of
expense accrual for each Fund; d) overseeing the preparation by the Trust's
transfer agent (the "Transfer Agent") of tax information for shareholders; e)
overseeing the Trust's custodian (the "Custodian") and the Transfer Agent and
other service providers, including expense disbursement; verifying the
calculation of performance data for the Trust and its reporting to the
appropriate tracking services; monitoring the pricing of portfolio securities
and compliance with amortized cost procedures, if applicable; computing the
amount and monitoring the frequency of distributing each Fund's dividends and
capital gains distributions and confirming that they have been properly
distributed to the shareholders of record; and monitoring calculation of net
asset value
<PAGE>
of Shares by the
Custodian; f) taking responsibility for compliance with all applicable federal
securities and other regulatory requirements (other than state securities
registration and filing requirements); g) taking responsibility for monitoring
each Fund's status as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the Code ); h) arranging for preparation of agendas
and supporting documents for and minutes of meetings of Trustees, committees of
Trustees, and shareholders; i) maintaining books and records relating to such
services; and j) providing such other related services as the Trust may
reasonably request, to the extent permitted by applicable law. Morgan shall
provide all personnel and facilities necessary in order for it to provide the
services contemplated by this paragraph.
Morgan assumes no responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and conditions provided
herein. In the performance of its duties under this Agreement, Morgan will
comply with the provisions of the Declaration of Trust and By-Laws of the Trust
and the stated investment objective, policies and restrictions of each Fund, and
will use its best efforts to safeguard and promote the welfare of the Trust, and
to comply with other policies which the Board of Trustees may from time to time
determine.
2. Books and Records. Morgan shall with respect to each Fund create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Trust under the
1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Trust and shall
at all times during the regular business hours of Morgan be open for inspection
by duly authorized officers, employees or agents of the Securities and Exchange
Commission. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Morgan hereby agrees that all records which it maintains for the Funds are
the property of the Trust and further agrees to surrender promptly to the Trust
any such records upon the Trust's request.
3. Opinion of the Trust's Independent Public Accountants. Morgan shall
take all reasonable action with respect to each Fund, as the Trust may from time
to time request, to obtain from year to year favorable opinions from the Trust's
independent public accountants with respect to its activities hereunder in
connection with the preparation of the Trust's registration statement on Form
N-1A, reports on Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
4. Liaison with Independent Public Accountants. Morgan shall act as
liaison with the Trust's independent public accountants and shall provide, upon
request, account analyses, fiscal year summaries and other audit-related
schedules. Morgan 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 accountants for the expression of their opinion as such
may be required by the Trust from time to time.
5. Allocation of Charges and Expenses. Morgan shall bear all of
the expenses incurred in connection with carrying out its duties hereunder.
Each Fund shall pay the usual, customary or extraordinary expenses
incurred by the Fund or, as appropriate, the Trust and allocable to the
Fund, including without limitation compensation of Trustees; federal and
state governmental
2
<PAGE>
fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Trust; fees and expenses of any
provider other than Morgan of services to the Trust under a co-administration
agreement (the Co-Administrator ), Morgan pursuant to the Shareholder Servicing
Agreement and this Agreement, Pierpont Group Inc. pursuant to the Fund Services
Agreement, independent auditors, legal counsel and of any transfer agent,
registrar or dividend disbursing agent of the Trust; expenses of preparing,
printing and mailing prospectuses and statements of additional information,
reports, notices, proxy statements and reports to shareholders and governmental
offices and commissions; expenses of preparing, printing and mailing agendas and
supporting documents for meetings of Trustees and committees of Trustees;
insurance premiums; fees and expenses of the Custodian for all services to the
Trust, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of Shares;
expenses of shareholder meetings; expenses relating to the issuance,
registration and qualification of Shares of the Trust; and litigation and
indemnification expenses.
6. Compensation of Morgan. For the services to be rendered and the
expenses to be borne by Morgan hereunder, the Trust shall pay Morgan a fee at an
annual rate as set forth on Schedule A attached hereto from each Fund. This fee
will be computed daily and will be payable as agreed by the Trust and Morgan,
but no more frequently than monthly.
7. Limitation of Liability of Morgan. Morgan shall not be liable for
any error of judgment or mistake of law or for any act or omission in the
performance of its duties hereunder, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder.
8. Activities of Morgan. The services of Morgan to the Trust are not to
be deemed to be exclusive, Morgan being free to engage in any other business or
to render services of any kind to any other corporation, firm, individual or
association.
9. Termination. This Agreement may be terminated as to any Fund at any
time, without the payment of any penalty, by the Board of Trustees of the Trust
or by Morgan, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party.
10. Subcontracting by Morgan. Morgan may subcontract for the
performance of its obligations hereunder with any one or more persons; provided,
however, that, unless the Trust otherwise expressly agrees in writing, Morgan
shall be as fully responsible to the Trust for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
11. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
12. Amendments. This Agreement may be amended only by mutual written
consent.
13. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements,
terminations, extensions or other
3
<PAGE>
understandings relating to Morgan's
provision of financial, fund accounting or administrative services for the
Funds. 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 construction or effect. Should any part of this Agreement 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
and shall inure to the benefit of the parties hereto and their respective
successors, to the extent permitted by law.
14. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid (1) to Morgan at Morgan Guaranty
Trust Company of New York, 522 Fifth Avenue, New York, New York 10036,
Attention: Funds Management, or (2) to the Trust at JPM Series Trust at 60
State Street, Suite 1300, Boston, Massachusetts 10009, Attention: Treasurer.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Trust has executed this Agreement not individually,
but as an officer of the Trust under the Trust's Declaration of Trust, dated
August 15, 1996, and the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of the Trust individually, but bind only the
Trust estate.
JPM SERIES TRUST
By___________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By___________________________
Name:
Title:
FFASKPP5.DOC
4
<PAGE>
SCHEDULE A
ADMINISTRATIVE SERVICES FEES
JPM SERIES TRUST (THE "TRUST")
The annual administrative services fee charged to and payable by each
Fund is equal to its proportionate share of an annual complex-wide charge. This
charge is calculated daily based on the aggregate net assets of the registered
investment companies listed on Exhibit I, as amended from time to time
(collectively the "Master Portfolios"), and in accordance with the following
annual schedule:
0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets; and 0.04% of the Master
Portfolios' aggregate average daily net assets in excess of $7
billion LESS the complex-wide charge of the Co-Administrator
The portion of this charge payable by each Fund is determined by the
proportionate share that its net assets bear to the total of the net assets of
the Trust, The JPM Institutional Funds, The JPM Advisor Funds, The JPM Pierpont
Funds, the Master Portfolios and other investors in the Master Portfolios for
which Morgan provides similar services.
Approved: _______ __, 1996
Effective _______ __, 1996
FFASKPP5.DOC
<PAGE>
EXHIBIT I
DATE OF EFFECTIVE
PORTFOLIO DECLARATION OF TRUST DATE
The Treasury Money Market Portfolio 11/4/92 8/1/96
The Money Market Portfolio 1/29/93 8/1/96
The Tax Exempt Money Market Portfolio 1/29/93 8/1/96
The Short Term Bond Portfolio 1/29/93 8/1/96
The U.S. Fixed Income Portfolio 1/29/93 8/1/96
The Tax Exempt Bond Portfolio 1/29/93 8/1/96
The Selected U.S. Equity Portfolio 1/29/93 8/1/96
The U.S. Small Company Portfolio 1/29/93 8/1/96
The Non-U.S. Equity Portfolio 1/29/93 8/1/96
The Diversified Portfolio 1/29/93 8/1/96
The Non-U.S. Fixed Income Portfolio 6/16/93 8/1/96
The Emerging Markets Equity Portfolio 6/16/93 8/1/96
The New York Total Return Bond Portfolio 6/16/93 8/1/96
The Series Portfolio* 6/24/94
The Asia Growth Portfolio 8/1/96
The Japan Equity Portfolio 8/1/96
The European Equity Portfolio 8/1/96
The Disciplined Equity Portfolio __/__/96
The Global Strategic Income Portfolio __/__/96
The International Opportunities Portfolio __/__/96
JPM Series Trust* 8/15/96
Tax Aware Equity Fund __/__/96
Tax Aware Disciplined Equity Fund __/__/96
California Bond Fund __/__/96
*In the cases of The Series Portfolio and JPM Series Trust, references to
"Portfolio" or "Fund" refer to their respective individual series as the context
requires.
<PAGE>
Exhibit 9(c)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
and
STATE STREET BANK AND TRUST COMPANY
JPM259D
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 Terms of Appointment; Duties of the Bank........................ 2
Article 2 Fees and Expenses .............................................. 5
Article 3 Representations and Warranties of the Bank...................... 6
Article 4 Representations and Warranties of the Fund...................... 7
Article 5 Data Access and Proprietary Information ........................ 8
Article 6 Indemnification ................................................ 10
Article 7 Standard of Care................................................ 14
Article 8 Covenants of the Fund and the Bank.............................. 14
Article 9 Termination of Agreement ....................................... 16
Article 10 Additional Funds .............................................. 16
Article 11 Assignment .................................................... 17
Article 12 Amendment ..................................................... 17
Article 13 Massachusetts Law to Apply..................................... 18
Article 14 Merger of Agreement............................................ 18
Article 15 Limitations of Liability of the Trustees and the
Shareholders .................................................. 18
Article 16 Counterparts .................................................. 18
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1996, by and
between , a Massachusetts business trust,
having its principal office and place of business at
(the "Fund"), and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund has established and will offer and continue to offer
shares in series initially,
(such series, together with all other series subsequently established by the
Fund and made subject to this Agreement in accordance with Article 10, being
herein referred to as a "Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank
as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with
<PAGE>
certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund, on behalf of the Portfolios, hereby employs and appoints
the Bank to act as, and the Bank agrees to act as its transfer agent for the
authorized and issued shares of beneficial interest of the Fund representing
interests in each of the respective Portfolios ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of each
of the respective Portfolios of the Fund ("Shareholders") and set out in the
currently effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio, including
without limitation any periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation thereof to the
Custodian of the Fund
-2-
<PAGE>
authorized pursuant to the Declaration of Trust of the Fund
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive redemption requests and redemption directions and
deliver the appropriate documentation thereof to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Report abandoned property to the various states as
authorized by the Fund per policies and principles agreed
upon by the Fund and the Bank;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares which are authorized,
-3-
<PAGE>
based upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of Shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i) perform
the customary services of a transfer agent, dividend disbursing agent, custodian
of certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and
-4-
<PAGE>
other confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor the
total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to providing the system referred to
above, the initial establishment of transactions subject to blue sky compliance
by the Fund and the reporting of such transactions to the Fund as provided
above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the Fund
on behalf of each Portfolio and the Bank per the attached service responsibility
schedule. The Bank may at times perform only a portion of these services and
the Fund or its agent may perform these services on the Fund's behalf.
Article 2 FEES AND EXPENSES
2.01 For performance by the Bank pursuant to this Agreement, the
Fund agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees
-5-
<PAGE>
and out-of-pocket expenses and advances identified under Section 2.02 below may
be changed from time to time subject to mutual written agreement between the
Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees on behalf of each of the Portfolios to reimburse the Bank for out-
of-pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies, records
storage or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the Bank
at the request or with the consent of the Fund, will be reimbursed by the Fund
on behalf of the applicable Portfolio.
2.03 The Fund agrees on behalf of each of the Portfolios to pay
all fees and reimbursable expenses promptly following the receipt of the
respective billing notice. Procedures applicable to advance payment by the Fund
to the Bank of postage for mailing dividends, proxies, Fund reports and other
mailings to Shareholder accounts may be established from time to time by
agreement between the Fund and the Bank.
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
-6-
<PAGE>
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and the Fund will use its best efforts to continue to make such filings with
respect to all Shares of the Fund being offered for sale.
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Article 5 DATA ACCESS AND PROPRIETARY INFORMATION
5.01 The Fund acknowledges that the data bases, computer
programs, screen format, report formats, interactive design techniques, and
documentation manuals (collectively, "Proprietary Information") furnished to the
Fund by the Bank as part of the Fund's ability to access certain Fund-related
data ("Customer Data") maintained by the Bank on data bases under the control
and ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to the Bank and further agrees that it
shall not divulge any Proprietary Information to any person or organization
except as may be provided hereunder. Without limiting the foregoing, the Fund
agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such
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information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data
required hereunder from being retransmitted to any other
computer facility or other location, except with the prior
written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal
copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall use its best efforts to
promptly correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND
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ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the
ability to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions are known as "Customer
Originated Electronic Financial Instructions" or "COEFI"), then in such event
the Bank shall be entitled to rely on the validity and authenticity of such
instruction without undertaking any further inquiry as long as such instruction
is undertaken in conformity with security procedures established by the Bank
from time to time.
Article 6 INDEMNIFICATION
6.01 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to any claim,
demand, action or suit in connection with:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
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(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state unless any such violation results from failure of the system provided by
the Bank to Section 1.02 (b) to operate properly.
6.02 The Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to any action or
failure or omission to act by the Bank as a result of the Bank's lack of good
faith, negligence or willful misconduct.
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6.03 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund on behalf of the applicable Portfolio for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a co-
transfer agent or co-registrar.
6.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage
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reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes, provided
that the Bank shall use its best efforts to minimize the likelihood of all
damage, loss of data, delays and errors resulting from uncontrollable events,
and if such damage, loss of data, delays or errors occur, the Bank shall use its
best efforts to mitigate the effects of such occurrence.
6.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
6.06 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
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Article 7 STANDARD OF CARE
7.01 The Bank shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees.
Article 8 COVENANTS OF THE FUND AND THE BANK
8.01 The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the
Fund authorizing the appointment of the Bank and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund
and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices. The forms and documents used for the Fund or its
Shareholders shall be acceptable to the Fund.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as may
be reasonably acceptable to the Fund. To the
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extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law. Notice shall be given to
the other party a reasonable time in advance of any such disclosure. In
addition, in the case of any request or demand for the inspection of the
Shareholder records of the Fund, the Bank will notify the Fund promptly of
receipt of such request or demand and request instructions from an authorized
officer of the Fund as to such inspection. The Fund will, within two business
days, furnish instructions to the Bank. Pending receipt of such instructions,
the Bank will not disclose such Shareholder records and upon receipt the Bank
will abide by such instructions. Notwithstanding any other provision of this
Agreement, in the event that (i) the Fund instructs the Bank not to disclose
such Shareholder records and the Bank has furnished the Fund with an opinion of
counsel that the Bank may be held liable for the failure to disclose such
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Shareholder records, the Fund will indemnify the Bank for any such liability, or
(ii) the Bank discloses such Shareholder records without proper instructions
from the Fund, the Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to such
disclosure. The provision of Section 6.06 shall govern such indemnification.
Article 9 TERMINATION OF AGREEMENT
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally, the
Bank reserves the right to charge for any other reasonable expenses associated
with such termination.
Article 10 ADDITIONAL FUNDS
10.01 In the event that the Fund establishes one or more series of
Shares in addition to
with respect to which it desires to have the Bank render services as
transfer agent under the terms hereof, it shall so
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<PAGE>
notify the Bank in writing, and if the Bank agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
Article 11 ASSIGNMENT
11.01 Except as provided in Section 11.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
Article 12 AMENDMENT
12.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Trustees of the Fund.
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<PAGE>
Article 13 MASSACHUSETTS LAW TO APPLY
13.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 14 MERGER OF AGREEMENT
14.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 15 LIMITATIONS OF LIABILITY OF THE TRUSTEES AND THE
SHAREHOLDERS
15.01 A copy of the Declaration of Trust of the Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or Shareholders individually but are
binding only upon the assets and property of the Fund. Article 16 COUNTERPARTS
16.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
STATE STREET BANK AND TRUST COMPANY
BY:
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STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
RESPONSIBILITY
SERVICE PERFORMED BANK FUND
- - ----------------- ---- ----
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with broker-dealers. N/A
5. Pay over monies to redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control book
for each issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and non-resident alien
accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation statements for
Shareholders. X
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RESPONSIBILITY
SERVICE PERFORMED BANK FUND
- - ----------------- ---- ----
18. Provide Shareholder account information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a), (b) and (c) of
the Agreement.
STATE STREET BANK AND TRUST COMPANY
BY:
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[insert fee schedule]
Exhibit 9(d)
JPM SERIES TRUST
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT made as of the 10th day of October, 1996 between JPM
SERIES TRUST, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, a New York trust company ("Morgan").
W I T N E S S E T H:
WHEREAS, the Trust is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, transactions in shares of the Trust ("Shares") may be made by
investors who are using the services of a financial institution which is acting
as shareholder servicing agent pursuant to an agreement with the Trust; and
WHEREAS, Morgan wishes to act as the shareholder servicing agent for
its customers and for other investors in the Trust who are customers of an
Eligible Institution as contemplated by the currently effective prospectus of
the respective Series of the Trust (the "Customers") in performing certain
administrative functions in connection with purchases and redemptions of Shares
from time to time upon the order and for the account of Customers and to provide
related services to Customers in connection with their investments in the Trust;
and
WHEREAS, it is in the interest of the Trust to make the shareholder
services of Morgan available to Customers who are or may become shareholders of
the Trust; and
NOW, THEREFORE, the Trust and Morgan hereby agree as follows:
1. Appointment. Morgan hereby agrees to perform certain shareholder
services as agent for Customers with respect to each Fund (as defined in the
next sentence) as hereinafter set forth. As used herein, a "Fund" means the
assets and liabilities of the Trust attributable to any series of Shares as may
be created from time to time by the Trustees of the Trust and to which the Trust
and Morgan agree this Agreement shall apply.
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2. Services to be Performed.
2.1. Shareholder Services. Morgan shall be responsible for
performing shareholder account administrative and servicing functions,
which shall include without limitation:
(a) answering Customer inquiries regarding account status and history,
the manner in which purchases and redemptions of the Shares may be effected, and
certain other matters pertaining to the Trust; (b) assisting Customers in
designating and changing dividend options, account designations and addresses;
(c) providing necessary personnel and facilities to coordinate the establishment
and maintenance of shareholder accounts and records with the Trust's transfer
agent; (d) receiving Customers' purchase and redemption orders on behalf of, and
transmitting such orders to the Trust's transfer agent; (e) arranging for the
wiring or other transfer of funds to and from Customer accounts in connection
with Customer orders to purchase or redeem Shares; (f) verifying purchase and
redemption orders, transfers among and changes in Customer-designated accounts;
(g) informing the distributor of the Trust of the gross amount of purchase and
redemption orders for Shares; (h) monitoring the activities of the Trust's
transfer agent related to Customers' accounts, and to statements, confirmations
or other reports furnished to Customers by the Trust's transfer agent; and (i)
providing such other related services as the Trust or a Customer may reasonably
request, to the extent permitted by applicable law. Morgan shall provide all
personnel and facilities necessary in order for it to perform the functions
contemplated by this paragraph with respect to Customers.
2.2 Standard of Services. All services to be rendered by Morgan
hereunder shall be performed in a professional, competent and timely manner
subject to the supervision of the Trustees of the Trust. The details of the
operating standards and procedures to be followed by Morgan in the performance
of the services described above shall be determined from time to time by
agreement between Morgan and the Trust.
3. Fees. As full compensation for the services described in Section 2
hereof and expenses incurred by Morgan, the Trust shall pay Morgan a fee at an
annual rate of the daily net asset values of each Fund's shares owned by or for
Customers and attributable to the Trust as set forth on Schedule A attached
hereto. This fee will be computed daily and will be payable as agreed by the
Trust and Morgan, but no more frequently than monthly.
4. Information Pertaining to the Shares; Etc. Morgan and its officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares except to communicate to Customers accurately factual
information contained in the Fund's Prospectus and Statement of Additional
Information and objective historical performance information. Morgan shall act
as agent for Customers only in furnishing information regarding the Trust or the
Shares and shall have no authority to act as agent for the Trust in its capacity
as shareholder servicing agent hereunder.
During the term of this Agreement, the Trust agrees to furnish Morgan
all prospectuses, statements of additional information, proxy statements,
reports to shareholders, sales literature, or other material the Trust will
distribute to shareholders of each Fund or the public, which refer in any way to
Morgan, and Morgan agrees to furnish the Trust all material prepared for
Customers, in each case prior to use thereof,
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<PAGE>
and not to use such material if the other party reasonably objects in writing
within five business days (or such other time as may be mutually agreed in
writing) after receipt thereof. In the event of termination of this
Agreement, the Trust will continue to furnish to Morgan copies of any of the
above-mentioned materials which refer in any way to Morgan. The Trust shall
furnish or otherwise make available to Morgan such other information relating to
the business affairs of the Trust as Morgan at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use of any information about the Trust which is disseminated by Morgan.
5. Use of Morgan's Name. The Trust shall not use the name of Morgan in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by Morgan prior thereto in writing; provided, however, that
the approval of Morgan shall not be required for any use of its name which
merely refers in accurate and factual terms to its appointment hereunder or as
investment advisor to the Trust or which is required by the Securities and
Exchange Commission or any state securities authority or any other appropriate
regulatory, governmental or judicial authority; provided, further, that in no
event shall such approval be unreasonably withheld or delayed.
6. Use of the Fund's Name. Morgan shall not use the name of the Trust
on any checks, bank drafts, bank statements or forms for other than internal use
in a manner not approved by the Trust prior thereto in writing; provided,
however, that the approval of the Trust shall not be required for the use of the
Trust's name in connection with communications permitted by Sections 2 and 4
hereof or for any use of the Trust's name which merely refers in accurate and
factual terms to Morgan's role hereunder or as investment advisor to the Trust
or which is required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory, governmental or
judicial authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
7. Security. Morgan represents and warrants that the various procedures
and systems which it has implemented with regard to safeguarding from loss or
damage attributable to fire, theft or any other cause any Trust records and
other data and Morgan's records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as in its judgment are required
for the secure performance of its obligations hereunder. The parties shall
review such systems and procedures on a periodic basis, and the Trust shall from
time to time specify the types of records and other data of the Trust to be
safeguarded in accordance with this Section 7.
8. Compliance with Laws; etc. Morgan assumes no responsibilities under
this Agreement other than to render the services called for hereunder, on the
terms and conditions provided herein. Morgan shall comply with all applicable
federal and state
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laws and regulations. Morgan represents and warrants to the
Trust that the performance of all its obligations hereunder will comply with all
applicable laws and regulations, the provisions of its charter documents and
by-laws and all material contractual obligations binding upon Morgan. Morgan
furthermore undertakes that it will promptly inform the Trust of any change in
applicable laws or regulations (or interpretations thereof) which would prevent
or impair full performance of any of its obligations hereunder.
9. Force Majeure. Morgan shall not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including, but not
limited to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
10. Indemnification.
10.1. Indemnification of Morgan. The Trust will indemnify and hold
Morgan harmless, from all losses, claims, damages, liabilities or expenses
(including reasonable fees and disbursements of counsel) from any claim, demand,
action or suit (collectively, "Claims") (a) arising in connection with
misstatements or omissions in each Fund's Prospectus, actions or inactions by
the Trust or any of its agents or contractors or the performance of Morgan's
obligations hereunder and (b) not resulting from the willful misfeasance, bad
faith, or gross negligence of Morgan, its officers, employees or agents, in the
performance of Morgan's duties or from reckless disregard by Morgan, its
officers, employees or agents of Morgan's obligations and duties under this
Agreement. Notwithstanding anything herein to the contrary, the Trust will
indemnify and hold Morgan harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any Claim as a result of Morgan's acting in accordance with any
written instructions reasonably believed by Morgan to have been executed by any
person duly authorized by the Trust, or as a result of acting in reliance upon
any instrument or stock certificate reasonably believed by Morgan to have been
genuine and signed, countersigned or executed by a person duly authorized by the
Trust, excepting only the gross negligence or bad faith of Morgan.
In any case in which the Trust may be asked to indemnify or hold Morgan
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and Morgan shall use reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Trust. The Trust shall
have the option to defend Morgan against any Claim which may be the subject of
indemnification under this Section 10.1. In the event that the Trust elects to
defend against such Claim, the defense shall be conducted by counsel chosen by
the Trust and reasonably satisfactory to Morgan. Morgan may retain additional
counsel at its expense. Except with the prior written consent of the Trust,
Morgan shall not confess any Claim or make any compromise in any case in which
the Trust will be asked to indemnify Morgan.
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10.2. Indemnification of the Trust. Without limiting the rights of the
Trust under applicable law, Morgan will indemnify and hold the Trust harmless
from all losses, claims, damages, liabilities or expenses (including reasonable
fees and disbursements of counsel) from any Claim (a) resulting from the willful
misfeasance, bad faith or gross negligence of Morgan, its officers, employees,
or agents, in the performance of Morgan's duties or from reckless disregard by
Morgan, its officers, employees or agents of Morgan's obligations and duties
under this Agreement, and (b) not resulting from Morgan's actions in accordance
with written instructions reasonably believed by Morgan to have been executed by
any person duly authorized by the Trust, or in reliance upon any instrument or
stock certificate reasonably believed by Morgan to have been genuine and signed,
countersigned or executed by a person authorized by the Trust.
In any case in which Morgan may be asked to indemnify or hold the Trust
harmless, Morgan shall be advised of all pertinent facts concerning the
situation in question and the Trust shall use reasonable care to identify and
notify Morgan promptly concerning any situation which presents or appears likely
to present a claim for indemnification against Morgan. Morgan shall have the
option to defend the Trust against any Claim which may be the subject of
indemnification under this Section 10.2. In the event that Morgan elects to
defend against such Claim, the defense shall be conducted by counsel chosen by
Morgan and reasonably satisfactory to the Trust. The Trust may retain additional
counsel at its expense. Except with the prior written consent of Morgan, the
Trust shall not confess any Claim or make any compromise in any case in which
Morgan will be asked to indemnify the Trust.
10.3. Survival of Indemnities. The indemnities granted by the
parties in this Section 10 shall survive the termination of this Agreement.
11. Insurance. Morgan shall maintain reasonable insurance
coverage against any and all liabilities which may arise in connection with
the performance of its duties hereunder.
12. Further Assurances. Each party agrees to perform such further
acts and execute further documents as are necessary to effectuate the purposes
hereof.
13. Termination. This Agreement shall continue in effect for a period
of one year and may thereafter be renewed by the Trustees of the Trust;
provided, however, that this Agreement may be terminated by the Trust at any
time without the payment of any penalty, by the Trustees of the Trust or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of the Trust, upon not less than six (6) months' written notice to Morgan or by
Morgan at any time, without the payment of any penalty, on not less than ninety
(90) days' written notice to the Trust. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
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14. Subcontracting by Morgan. Morgan may subcontract for the
performance of its obligations hereunder with any one or more persons, including
but not limited to any one or more persons which is an affiliate of Morgan;
provided however, unless the Trust otherwise expressly agrees in writing, Morgan
shall be as fully responsible to the Trust for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
15. Nothing in this Agreement shall limit or restrict the right of
Morgan to engage in any other business or to render services of any kind to any
other corporation, firm, individual or association.
16. Changes; Amendments. This Agreement may be amended only by mutual
written consent.
17. Notices. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to Morgan at Morgan Guaranty Trust Company
of New York, 522 Fifth Avenue, New York, New York 10036, Attention: Funds
Management, or (2) to the Trust at JPM Series Trust c/o Funds Distributor, Inc.,
60 State Street, Suite 1300, Boston, Massachusetts 02109, Attention: Treasurer,
or at such other address as either party may designate by notice to the other
party.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written.
JPM SERIES TRUST
By ________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By ___________________________
Name:
Title:
6
<PAGE>
Schedule A
Shareholder Servicing Fees
California Bond Fund - JPM Institutional Shares
0.05% the average daily net asset value of JPM Institutional Shares owned by or
for Customers
California Bond Fund - Pierpont Shares
_.__% of the average daily net asset value of Pierpont Shares owned by or for
Customers
Tax Aware Equity Fund - Pierpont Shares
Tax Aware Disciplined Equity Fund - Pierpont Shares
0.25% of the average daily net asset value of Pierpont Shares owned by or for
Customers
PFSSA2
Approved: _______ __, 1996
Effective _______ __, 1996
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
November 4, 1996, relating to the financial statements of Tax Aware Equity Fund,
Tax Aware Disciplined Equity Fund and California Bond Fund (constituting JPM
Series Trust), which appear in such Statement of Additional Information, and to
the incorporation by reference of our reports into the Prospectuses which
constitute part of this Registration Statement. We also consent to the
references to us under the headings "Financial Statements" and "Independent
Accountants" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 4, 1996
PURCHASE AGREEMENT
With respect to its purchase of initial shares of Tax Aware Equity Fund, Tax
Aware Disciplined Equity Fund and California Bond Fund (each a "Fund" and
collectively the "Funds"), each a series of JPM Series Trust (the "Trust") (a
Massachusetts business trust), FDI Distribution Services, Inc. ("FDSI"), a
Delaware corporation, hereby represents and warrants to the Trust as follows:
1. That this purchase agreement (the "Agreement") shall be entered into
for the benefit of the Trust and each Fund, such benefit to be evidenced by the
Trust's acceptance of the terms of this Agreement by signature inscribed at the
end hereof,
2. That FDSI hereby purchases the following shares (par value $0.001
per shares) of the Funds (the "Shares") by deposit of the sums indicated,
determined at the net asset value of the Shares (the "Cash Deposit").
Fund Shares Cash Deposit
Tax Aware Equity Fund
(JPM Pierpont Shares) 2,500 $25,000
Tax Aware Disciplined Equity Fund
(JPM Pierpont Shares) 5,000 $50,000
California Bond Fund
(JPM Institutional Shares) 2,500 $25,000
3. That the Shares are being acquired for investment purposes and not
with a view to the distribution thereof.
4. FDSI agrees that if it or any direct or indirect transferee of any
of the Shares of a Fund redeems any of such Shares prior to the fifth
anniversary of the commencement of investment operations of that Fund, FDSI will
pay to that Fund 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 Shares redeemed by FDSI or such transferee and
the denominator of which is equal to the number of Shares held by FDSI
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.
5. That FDSI is authorized and otherwise duly qualified to purchase and
hold such Shares and to enter into this Agreement.
FDI Distribution Services, Inc.
By: /s/ Joseph F. Tower
Joseph F. Tower, Senior Vice
President & Treasurer
Date: November 7, 1996
JPM Series Trust
By:/s/ Richard W. Ingram
Richard W. Ingram
President and Treasurer
Date: November 7, 1996
JPM515B
JPM260A Exhibit 16
JPM SERIES TRUST
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
CALIFORNIA BOND FUND
30-Day Yield
Quotations of yield will be computed separately for each class of
shares outstanding and will be based on income earned during a particular 30-day
period, less the class specific total expenses directly attributable to the
class accrued during the period ("net investment income") and will be computed
by dividing net investment income by the average daily number of shares of the
class eligible to receive such income multiplied by the maximum offering price
per share of the class on the last day of the period, according to the following
formula:
30-DAY YIELD = 2[(a-b + 1)6[superscript]-1]
---
cd
(where a = dividends and interest earned during the period, b = expenses accrued
for the period attributable to the share class (net of any reimbursements), c =
the average daily number of shares of the class outstanding during the period
that were entitled to receive dividends and d = the maximum offering price per
share of the class on the last day of the period).
ALL FUNDS
Annual Total Return
Quotations of average annual total return will be computed separately
for each of the Fund's classes of shares and will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in such
shares over periods of 1, 5 and 10 years (up to the life of the class),
calculated pursuant to the following formula:
P (1 + T)n [superscript] + ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of class specific expenses (net of
certain expenses reimbursed) on an annual basis and will assume that all
dividends and distributions are reinvested when paid.
Aggregate Total Return
The aggregate total return, reflecting the cumulative percentage change
over a measuring period, is calculated separately for each class of shares of a
Fund outstanding and according to the following formula:
P (1 + T) = ERV
(where P = a hypothetical initial payment of $1,000 and T = total return).
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
STATEMENT OF ASSETS AND LIABILITIES DATED NOVEMBER 4, 1996 FOR JPM SERIES
TRUST'S TAX AWARE EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENT. </LEGEND>
<CIK> 0001016937
<NAME> JPM SERIES TRUST
<SERIES>
<NUMBER> 001
<NAME> JPM PIERPONT SHARES OF TAX AWARE EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-04-1996
<PERIOD-END> NOV-04-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 73
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 73
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 48
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25
<SHARES-COMMON-STOCK> 2
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<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 AUDITED
STATEMENT OF ASSETS AND LIABILITIES DATED NOVEMBER 4, 1996 FOR JPM SERIES
TRUST'S TAX AWARE DISCIPLINED EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENT. </LEGEND>
<CIK> 0001016937
<NAME> JPM SERIES TRUST
<SERIES>
<NUMBER> 002
<NAME> JPM PIERPONT SHARES OF TAX AWARE DISCIPLINED EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-04-1996
<PERIOD-END> NOV-04-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 98
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 48
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50
<SHARES-COMMON-STOCK> 5
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 50
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<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 AUDITED
STATEMENT OF ASSETS AND LIABILITIES DATED NOVEMBER 4, 1996 FOR JPM SERIES
TRUST'S CALIFORNIA BOND FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANICAL STATEMENT.
</LEGEND>
<CIK> 0001016937
<NAME> JPM SERIES TRUST
<SERIES>
<NUMBER> 003
<NAME> JPM INSTITUTIONAL SHARES OF CALIFORNIA BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> NOV-04-1996
<PERIOD-END> NOV-04-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 73
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 73
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 48
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25
<SHARES-COMMON-STOCK> 2
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 19
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth
A. Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher
J. Kelley, Jacqueline Henning and Lenore J. McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds, The JPM Advisor Funds or JPM Series Trust (each a
"Trust"), or the Registration Statement(s), and any and all amendments thereto,
filed by any other investor in any registered investment company in which any of
the Trusts invest, with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th
day of October, 1996, in Hamilton, Bermuda.
/s/ Frederick S. Addy
Frederick S. Addy
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth
A. Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher
J. Kelley, Jacqueline Henning and Lenore J. McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds, The JPM Advisor Funds or JPM Series Trust (each a
"Trust"), or the Registration Statement(s), and any and all amendments thereto,
filed by any other investor in any registered investment company in which any of
the Trusts invest, with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th
day of October, 1996, in Hamilton, Bermuda.
/s/ William G. Burns
William G. Burns
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth
A. Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher
J. Kelley, Jacqueline Henning and Lenore J. McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds, The JPM Advisor Funds or JPM Series Trust (each a
"Trust"), or the Registration Statement(s), and any and all amendments thereto,
filed by any other investor in any registered investment company in which any of
the Trusts invest, with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th
day of October, 1996, in Hamilton, Bermuda.
/s/ Arthur S. Eschenlauer
Arthur C. Eschenlauer
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram,
Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman,
Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher J. Kelley,
Jacqueline Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in his name
and on his behalf in any and all capacities the Registration Statements on Form
N-1A, and any and all amendments thereto, filed by The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds or JPM Series Trust (each a "Trust"),
or the Registration Statement(s), and any and all amendments thereto, filed by
any other investor in any registered investment company in which any of the
Trusts invest, with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th
day of October, 1996, in Hamilton, Bermuda.
/s/ Matthew Healey
Matthew Healey
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth
A. Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher
J. Kelley, Jacqueline Henning and Lenore J. McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds, The JPM Advisor Funds or JPM Series Trust (each a
"Trust"), or the Registration Statement(s), and any and all amendments thereto,
filed by any other investor in any registered investment company in which any of
the Trusts invest, with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th
day of October, 1996, in Hamilton, Bermuda.
/s/ Michael P. Mallardi
Michael P. Mallardi
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Marie
E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher J. Kelley,
Jacqueline Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in his name
and on his behalf in any and all capacities the Registration Statements on Form
N-1A, and any and all amendments thereto, filed by The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds or JPM Series Trust (each a "Trust"),
or the Registration Statement(s), and any and all amendments thereto, filed by
any other investor in any registered investment company in which any of the
Trusts invest, with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th
day of October, 1996, in Hamilton, Bermuda.
/s/ Richard W. Ingram
Richard W. Ingram