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As filed with the Securities and Exchange Commission on October 1, 1998
FILE NO. 811-08077
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
SERIES PORTFOLIO II
(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
Christopher J. Kelley, c/o Funds Distributor, Inc.,
60 State Street, Suite 1300, Boston Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: John E. Baumgardner, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant
to Section 8(b) of the Investment Company Act of 1940, as amended. However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests will
be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by other investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any beneficial
interests in the Registrant.
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A-11
PART A (THE TREASURY MONEY MARKET PORTFOLIO)
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
Series Portfolio II (the "Portfolio Trust") is an open-end management
investment company which was organized as a trust under the laws of the State of
New York on January 9, 1997. Beneficial interests of the Portfolio Trust are
divided into subtrust (or series), one of which, The Treasury Money Market
Portfolio (the "Portfolio") is described herein. The Portfolio is diversified
for purposes of the Investment Company Act of 1940, as amended (the "1940 Act").
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933 (the "1933 Act"). Investments in the
Portfolio may only be made by other investment companies, insurance company
separate accounts, common or commingled trust funds or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This Registration Statement does not constitute an offer to
sell, or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio is advised by J.P. Morgan Investment Management Inc. ("JPMIM"
or the "Advisor").
Investments in the Portfolio are not deposits or obligations of, or
guaranteed or endorsed by, Morgan Guaranty Trust Company ("Morgan") or any other
bank. Interests in the Portfolio are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
governmental agency. An investment in the Portfolio is subject to risk, as the
net asset value of the Portfolio will fluctuate with changes in the value of the
Portfolio's holdings. There can be no assurance that the investment objective of
the Portfolio will be achieved.
Part B contains more detailed information about the Portfolio,
including information related to (i) the investment policies and restrictions of
the Portfolio, (ii) the Trustees, officers, Advisor and administrators of the
Portfolio, (iii) portfolio transactions, (iv) rights and liabilities of
investors and (v) the audited financial statements of the Portfolio at October
31, 1997.
The investment objective of the Portfolio is described below, together
with the policies it employs in its efforts to achieve this objective.
Additional information about the investment policies of the Portfolio appears in
Part B under Item 13.
The Portfolio's investment objective, which is non-fundamental and can
be changed without the approval of interest holders, is to provide provide high
current income consistent with the preservation of capital and same-day
liquidity.
The Portfolio seeks to achieve its investment objective by investing in
direct obligations of the U.S. Treasury and engaging in repurchase agreement
transactions with respect to those obligations. The market value of obligations
in which the Portfolio invests is not guaranteed and may rise and fall in
response to changes in interest rates. The Portfolio maintains a dollar-weighted
average portfolio maturity of not more than 90 days and invests in the following
securities which have effective maturities of not more than thirteen months.
TREASURY SECURITIES. The Portfolio will invest in 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 ("Treasury Securities").
Treasury bills have initial maturities of one year or less; Treasury notes have
initial maturities of one to ten years; and Treasury bonds generally have
initial maturities of greater than ten years. Each such obligation must have a
remaining maturity of thirteen months or less at the time of purchase by the
Portfolio.
The Portfolio will not invest in U.S. Government agency obligations.
The Portfolio also may purchase Treasury Securities on a when-issued or
delayed delivery basis and may engage in repurchase and reverse repurchase
agreement transactions involving such securities. For a discussion of these
transactions, see "Additional Investment Information and Risk Factors."
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and for fixed income securities, no interest
accrues to the Portfolio until settlement. At the time of settlement a
when-issued security may be valued at less than its purchase price. The
Portfolio maintains with the Custodian a separate account with a segregated
portfolio of securities in an amount at least equal to these commitments. When
entering into a when-issued or delayed delivery transaction, the Portfolio will
rely on the other party to consummate the transaction; if the other party fails
to do so, the Portfolio may be disadvantaged.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trustees. In a repurchase agreement, the Portfolio buys a
security from a seller that has agreed to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate effective for the term of the
agreement. The Portfolio will only enter into repurchase agreements involving
Treasury Securities. The term of these agreements is usually from overnight to
one week. A repurchase agreement may be viewed as a fully collateralized loan of
money by the Portfolio to the seller. The Portfolio always receives securities
as collateral with a market value at least equal to the purchase price plus
accrued interest and this value is maintained during the term of the agreement.
If the seller defaults and the collateral value declines, the Portfolio might
incur a loss. If bankruptcy proceedings are commenced with respect to the
seller, the Portfolio's realization upon the disposition of collateral may be
delayed or limited. Investments in certain repurchase agreements and certain
other investments which may be considered illiquid are limited. See "Illiquid
Investments, Privately Placed and other Unregistered Securities" below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment
restrictions, the Portfolio is permitted to lend its securities in an amount up
to 33 1/3% of the value of the Portfolio's net assets. The Portfolio 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 Portfolio 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 Portfolio
any income accruing thereon. Loans will be subject to termination by the
Portfolio 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 the
Portfolio and its investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will
consider all facts and circumstances including the creditworthiness of the
borrowing financial institution, and the Portfolio will not make any loans in
excess of one year.
Loans of portfolio securities may be considered extensions of credit by
the Portfolio. The risks to the Portfolio with respect to borrowers of its
portfolio securities are similar to the risks to the Portfolio with respect to
sellers in repurchase agreement transactions. See "Repurchase Agreements" above.
The Portfolio will not lend its securities to any officer, Trustee, Director,
employee or other affiliate of the Portfolio, the Advisor or the placement
agent, unless otherwise permitted by applicable law.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may (1)
borrow money from banks solely for temporary or emergency (but not for leverage)
purposes and (2) 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 Portfolio'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 Portfolio and, therefore, a form of
leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Item 13 in Part B.
ILLIQUID INVESTMENTS, PRIVATELY PLACED AND OTHER UNREGISTERED
SECURITIES. The Portfolio may not acquire any illiquid securities if, as a
result thereof, more than 10% of the Portfolio's net assets would be in illiquid
investments. Subject to this policy limitation, the Portfolio may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the 1933 Act, and cannot
be offered for public sale in the United States without first being registered
under the 1933 Act. An illiquid investment is any investment that cannot be
disposed of within seven days in the normal course of business at approximately
the amount at which it is valued by the Portfolio. The price the Portfolio 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 Portfolio may also purchase Rule 144A securities sold to
institutional investors without registration under the 1933 Act. These
securities may be determined to be liquid in accordance with guidelines
established by the Advisor and approved by the Trustees. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
The Portfolio may not make any investment inconsistent with its
classification as a diversified investment company under the 1940 Act. The 1940
Act currently requires that 75% of the assets of the Portfolio are subject to
the following fundamental limitations: (a) the Portfolio may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
Government securities, and (b) the Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer. The Portfolio is subject to
additional non-fundamental requirements governing tax exempt money market funds.
These non-fundamental requirements generally prohibit the Portfolio from
investing more than 5% of its total assets in the securities of any single
issuer, except obligations of the U.S. Government and its agencies and
instrumentalities.
For a more detailed discussion of the Portfolio's investment
restrictions, as well as a description of certain other investment restrictions,
see Item 13 in Part B.
ITEM 5. MANAGEMENT OF THE PORTFOLIO TRUST
The Board of Trustees provides broad supervision over the affairs of
the Portfolio Trust. The Portfolio Trust has retained the services of JPMIM as
investment adviser and Morgan as administrative services agent for the
Portfolio. The Portfolio Trust has retained the services of Funds Distributor,
Inc. ("FDI") as co-administrator (the "Co-Administrator").
The Portfolio Trust has not retained the services of a principal
underwriter or distributor, since interests in the Portfolio are offered solely
in private placement transactions. FDI, acting as agent for the Portfolio,
serves as exclusive placement agent of interests in the Portfolio. FDI receives
no additional compensation for serving in this capacity.
The Portfolio has entered into an Amended and Restated Portfolio Fund
Services Agreement with Pierpont Group, Inc. ("Pierpont Group") to assist the
Trustees in exercising their overall supervisory responsibilities for the
Portfolio. The fees to be paid under the agreement approximate the reasonable
cost of Pierpont Group in providing these services to the Trust, the Portfolio
and certain other registered investment companies subject to similar agreements
with Pierpont Group. Pierpont Group was organized in 1989 at the request of the
Trustees of The Pierpont Family of Funds for the purpose of providing these
services at cost to those funds. See Item 14 in Part B. The principal offices of
Pierpont Group are located at 461 Fifth Avenue, New York, New York 10017.
INVESTMENT ADVISOR. Subject to the supervision of the Portfolio's
Trustees, the Advisor makes the Portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments. Effective October 1, 1998 the portfolio's investment
advisor is JPMIM. Prior to that date, Morgan, a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), was the Portfolio's investment
advisor. JPMIM, also a wholly owned subsidiary of J.P. Morgan, is a registered
investment adviser under the Investment Advisers Act of 1940, as amended. JPMIM
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, through the Advisor 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 approximately $275 billion.
The following persons are primarily responsible for the day-to-day
management and implementation of JPMIM's process for the Portfolio since its
inception (business experience for the past five years is indicated
parenthetically): Robert R. Johnson, Vice President (employed by Morgan since
prior to 1993), Daniel B. Mulvey, Vice President (employed by Morgan since 1993)
and and John Donahue, Vice President (since June, 1997, prior to that a
portfolio manager for Goldman Sachs & Co.)
As compensation for the services rendered and related expenses borne by
Morgan under the Investment Advisory Agreement with the Portfolio Trust, the
Portfolio has agreed to pay Morgan a fee, which is computed daily and may be
paid monthly, at the annual rate of 0.20% of the Portfolio's average daily net
assets up to $1 billion, and 0.10% of average daily net assets in excess of $1
billion.
Under a separate agreement, Morgan also provides administrative and
related services to the Portfolio Trust. See Administrative Services Agent
below.
CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with the
Portfolio Trust, FDI serves as the Co-Administrator for the Portfolio. FDI, (i)
provides office space, equipment and clerical personnel for maintaining the
organization and books and records of the Portfolio; (ii) provides officers for
the Portfolio Trust; (iii) files Portfolio regulatory documents and mails
Portfolio communications to Trustees and investors; and (iv) maintains related
books and records. See "Administrative Services Agent" below.
For its services under the Co-Administration Agreement, the Portfolio
Trust 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 Portfolio is based on the ratio of its net assets to the
aggregate net assets of the Portfolio Trust and certain other registered
investment companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to the Administrative Services
Agreement with the Portfolio Trust, Morgan provides certain administrative and
related services to the Portfolio, 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 Portfolio 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
Portfolio, the other Portfolios in which series of the Trust or the J.P. Morgan
Funds invest and J.P. Morgan Series Trust 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.
PLACEMENT AGENT. FDI, a registered broker-dealer, also serves as
exclusive placement agent for the Portfolio. 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.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston Massachusetts 02110, serves as the Portfolio's custodian
and fund accounting and transfer agent. State Street keeps the books of account
for the Portfolio.
EXPENSES. In addition to the fees payable to the service providers
identified above, the Portfolio is responsible for usual and customary expenses
associated with its 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 and
extraordinary expenses.
Morgan has agreed that it will reimburse the Portfolio through at least
February 28, 1999 to the extent necessary to maintain the Portfolio's total
operating expenses at the annual rate of 0.20% of the Portfolio's average daily
net assets. This limit does not cover extraordinary expenses during the period.
There is no assurance that Morgan will continue this waiver beyond the specified
period. For the period from July 7, 1997 (commencement of operations) through
October 31, 1997 the Portfolio's total expenses were .04% of its average net
assets after voluntary reimbursement by the Advisor.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
The Portfolio is a subtrust of the Portfolio Trust, which is organized
as a trust under the laws of the State of New York. Under the Declaration of
Trust, the Trustees are authorized to issue beneficial interests in one or more
subtrusts. Currently, there are two active subtrusts of the Portfolio Trust.
Investments in the Portfolio may not be transferred, but an investor may
withdraw all or any portion of its investment at any time at net asset value.
The Declaration of Trust provides that investors in the Portfolio (other
investment companies, insurance company separate accounts and common and
commingled trust funds) are each liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
As of January 30, 1998, the J.P. Morgan Institutional Treasury Money
Market Fund and J.P. Morgan Institutional Service Treasury Money Market Fund
(series of the J.P. Morgan Institutional Funds), owned 35% and 65%,
respectively, of the outstanding beneficial interests in the Portfolio. So long
as the Funds control the Portfolio, they may take action without the approval of
any other holder of beneficial interests in the Portfolio.
Each investor in the Portfolio is entitled to a vote in proportion to
the amount of its investment in the Portfolio. Investors in the Portfolio will
vote as a separate class, except as to voting of Trustees, as otherwise required
by the 1940 Act, or if determined by the Trustees to be a matter which affects
all subtrusts. As to any matter which only affects a specific subtrust, only
investors in that subtrust are entitled to vote. Investments in the Portfolio
have no preemptive or conversion rights and are fully paid and nonassessable,
except as set forth below. The Portfolio is not required and has no current
intention of holding annual meetings of investors, but the Portfolio will hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Changes in
fundamental policies will be submitted to investors for approval. Investors have
under certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees by a specified percentage of the outstanding
interests in the Portfolio Trust) the right to communicate with other investors
in connection with requesting a meeting of investors for the purpose of removing
one or more Trustees. Investors also have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified percentage
of the outstanding interests in the Portfolio Trust. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
The net asset value of the Portfolio is determined each business day
other than the holidays listed in Part B ("Portfolio Business Day"). This
determination is made once each Portfolio Business Day at the close of trading
on the New York Stock Exchange (normally 4:00 p.m.) (the "Valuation Time"). See
Item 19 in Part B.
The "net income" of the Portfolio will consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Income includes
dividends and interest, including discount earned (including both original issue
and market discount) on discount paper accrued ratably to the date of maturity
and any net realized and unrealized gains or losses on the assets of the
Portfolio. All the net income of the Portfolio is allocated pro rata among the
investors in the Portfolio.
The end of the Portfolio's fiscal year is October 31.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed to FDI at 60 State Street, Boston,
Massachusetts 02109, or by calling FDI at (617) 557-0700.
ITEM 7. PURCHASE OF SECURITIES
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by other investment companies, insurance company separate accounts,
common or commingled trust funds, or similar organizations or entities which are
"accredited investors" as defined in Rule 501 under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by the Portfolio Trust. The net asset value of the
Portfolio is determined at the Valuation Time on each Portfolio Business Day.
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Custodian by a Federal Reserve bank).
The Portfolio may, at its own option, accept securities in payment for
investments in its beneficial interests. The securities delivered in kind are
valued by the method described in Item 19 of Part B as of the business day prior
to the day the Portfolio receives the securities. Securities may be accepted in
payment for beneficial interests only if they are, in the judgment of Morgan,
appropriate investments for the Portfolio. In addition, securities accepted in
payment for beneficial interests must: (i) meet the investment objective and
policies of the Portfolio; (ii) be acquired by the Portfolio for investment and
not for resale; (iii) be liquid securities which are not restricted as to
transfer either by law or liquidity of market; and (iv) have a value which is
readily ascertainable as evidenced by a listing on an exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. The Portfolio reserves the right to accept or reject at its own
option any and all securities offered in payment for beneficial interests.
The Portfolio and FDI reserve the right to cease accepting investments
at any time or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Portfolio Business Day. At the Valuation Time on each such
day, the value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected at the Valuation Time on such day, will
then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio at the Valuation Time on such day plus or minus, as
the case may be, the amount of net additions to or reductions in the investor's
investment in the Portfolio effected at the Valuation Time, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
Valuation Time on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of the
Valuation Time on the following Portfolio Business Day.
ITEM 8. REDEMPTION OR REPURCHASE
An investor in the Portfolio may reduce all or any portion of its
investment at the net asset value next determined after a request in "good
order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio Trust in federal funds normally on the
next Portfolio Business Day after the reduction is effected, but in any event
within seven days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
reduction may be suspended or the payment of the proceeds therefrom postponed
during any period in which the New York Stock Exchange (the "NYSE") is closed
(other than weekends or holidays) or trading on the NYSE is restricted or, to
the extent otherwise permitted by the 1940 Act if an emergency exists. In the
event that trading in the money markets is scheduled to end earlier than the
close of the NYSE, the Portfolio would expect to close for purchases and
withdrawals an hour in advance of the end of trading in the money markets. The
Portfolio may also close for purchases and withdrawals at such other times as
may be determined by the Trustees to the extent permitted by applicable law.
The Portfolio Trust, on behalf of the Portfolio, reserves the right
under certain circumstances, such as accommodating requests for substantial
withdrawals or liquidations, to pay distributions in kind to investors (i.e., to
distribute portfolio securities as opposed to cash). If securities are
distributed, an investor could incur brokerage, tax or other charges in
converting the securities to cash. In addition, distribution in kind may result
in a less diversified portfolio of investments or adversely affect the liquidity
of the Portfolio or the investor's portfolio, as the case may be.
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
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B-29
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS PAGE
General Information and History................ B-1
Investment Objective and Policies.............. B-1
Management of the Portfolio Trust ............. B-6
Control Persons and Principal Holders
of Securities.................................. B-11
Investment Advisory and Other Services......... B-11
Brokerage Allocation and Other Practices....... B-16
Capital Stock and Other Securities............. B-17
Purchase, Redemption and Pricing of
Securities Being Offered....................... B-18
Tax Status..................................... B-19
Underwriters................................... B-20
Calculations of Performance Data............... B-20
Financial Statements........................... B-20
Appendix A - Description of Security Ratings... B-21
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
The Treasury Money Market Portfolio (the "Portfolio") is designed for
investors who seek to preserve capital and earn current income from a portfolio
of high quality money market instruments. The Portfolio's investment objective
is to provide high current income consistent with the preservation of capital
and same-day liquidity.
The Portfolio attempts to achieve its investment objective by
maintaining a dollar-weighted average portfolio maturity of not more than 90
days and by investing in U.S. Treasury securities and related repurchase
agreement transactions as described in Part A and in this Part B that have
effective maturities of not more than thirteen months. See "Quality and
Diversification Requirements."
The Portfolio is advised by J.P. Morgan Investment Management Inc. ("JPMIM"
or the "Advisor").
The following discussion supplements the information regarding the
investment objective of the Portfolio and the policies the Portfolio employs to
achieve its objective as set forth above and in Part A.
MONEY MARKET INSTRUMENTS
A description of the various types of money market instruments that may be
purchased by the Portfolio appears below. Also see "Quality and Diversification
Requirements."
U.S. TREASURY SECURITIES. The Portfolio 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.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Portfolio Trust's Trustees. In a repurchase agreement, the
Portfolio 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 Portfolio is invested in
the agreement 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 the Portfolio to the seller. The period of these repurchase agreements
will usually be short, from overnight to one week, and at no time will the
Portfolio 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 Portfolio will only enter into repurchase agreements
involving U.S. Treasury securities. The Portfolio 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 Portfolio
in each agreement plus accrued interest, and the Portfolio will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Portfolio's Custodian. The Portfolio will be
fully collateralized within the meaning of paragraph (a)(4) of Rule 2a-7 under
the 1940 Act. If the seller defaults, the Portfolio 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. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, realization upon disposal of the collateral by the Portfolio may
be delayed or limited.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio 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 for fixed income securities, no interest accrues to the
Portfolio until settlement takes place. At the time the Portfolio 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 than the purchase price. To
facilitate such acquisitions, the Portfolio will maintain with the Custodian a
segregated account with liquid assets, consisting of cash, U.S. government
securities or other appropriate securities, in an amount at least equal to such
commitments. On delivery dates for such transactions, the Portfolio will meet
its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If the Portfolio 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. Also, a Portfolio may be disadvantaged if the other
party to the transaction defaults. It is the current policy of the Portfolio not
to enter into when-issued commitments exceeding in the aggregate 15% of the
market value of the Portfolio's total assets, less liabilities other than the
obligations created by when-issued commitments.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies
may be acquired by the Portfolio to the extent permitted under the 1940 Act or
any order pursuant thereto. These limits currently require that, as determined
immediately after a purchase is made, (i) not more than 5% of the value of the
Portfolio's total assets will be invested in the securities of any one
investment company, (ii) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group,
and (iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Portfolio. As a shareholder of another investment
company, the Portfolio would bear, along with other shareholders, its pro rata
portion of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses that the
Portfolio bears directly in connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price reflecting the interest rate effective for the term of the
agreement. For purposes of the 1940 Act, a reverse repurchase agreement is also
considered as the borrowing of money by the Portfolio and, therefore, a form of
leverage. Leverage may cause any gains or losses for a Fund to be magnified. The
Portfolio will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, the Portfolio will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. The Portfolio
will not invest the proceeds of a reverse repurchase agreement for a period
which exceeds the duration of the reverse repurchase agreement. The Portfolio
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
the obligations created by reverse repurchase agreements. The Portfolio will
establish and maintain with the Custodian a separate account with a segregated
portfolio of securities in an amount at least equal to its purchase obligations
under its reverse repurchase agreements. See Investment Restrictions for the
Portfolio's limitation on reverse repurchase agreements and on bank borrowings.
LOANS OF PORTFOLIO SECURITIES. The Portfolio 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 Portfolio 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 Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio 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 the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or placement
agent unless otherwise permitted by applicable law.
QUALITY AND DIVERSIFICATION REQUIREMENTS
The Portfolio intends to meet the diversification requirements of the
1940 Act. Current 1940 Act diversification requirements require that with
respect to 75% of the assets of the: (1) the Portfolio may not invest more than
5% of its total assets in the securities of any one issuer, except obligations
of the U.S. Government, its agencies and instrumentalities, and (2) the
Portfolio may not own more than 10% of the outstanding voting securities of any
one issuer. As for the other 25% of the Portfolio's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
any one issuer. Investments not subject to the limitations described above could
involve an increased risk to the Portfolio should an issuer, or a state or its
related entities, be unable to make interest or principal payments or should the
market value of such securities decline.
The Portfolio will limit its investments to direct obligations of the
U.S. Treasury, including Treasury bills, notes and bonds, and related repurchase
agreement transactions, each having a remaining maturity of thirteen months or
less at the time of purchase and will maintain a dollar-weighted average
portfolio maturity of not more than 90 days so that investors can maintain a
stable net asset value per share.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Portfolio
Trust with respect to the Portfolio. Except where 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 (as defined in the 1940 Act) of the Portfolio. 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 security holders 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 the purchase of securities.
The Portfolio:
1. May not make any investment inconsistent with the Portfolio's classification
as a diversified investment company under the Investment Company Act of 1940.
2. May not make purchase any security which would cause the Portfolio to
concentrate its investments in the securities of issuers primarily engaged in
any particular industry except as permitted by the SEC;
3. Issue senior securities, except as permitted under the Investment Company Act
of 1940 or any rule, order or interpretation thereunder;
4. May not borrow money, except to the extent permitted by applicable law;
5. May not underwrite securities of other issuers, except to the extent that the
Portfolio, in disposing of portfolio securities, may be deemed an underwriter
within the meaning of the 1933 Act;
6. May not purchase or sell real estate, except that, to the extent permitted by
applicable law, the Portfolio may (a) invest in securities or other instruments
directly or indirectly secured by real estate and (b) invest in securities or
other instruments issued by issuers that invest in real estate;
7. May not purchase or sell commodities or commodity contracts unless acquired
as a result of ownership of securities or other instruments issued by persons
that purchase or sell commodities or commodities contracts; but this shall not
prevent the Portfolio from purchasing, selling and entering into financial
futures contracts (including futures contracts on indices of securities,
interest rates and currencies), options on financial futures contracts
(including futures contracts on indices of securities, interest rates and
currencies), warrants, swaps, forward contracts, foreign currency spot and
forward contracts or other derivative instruments that are not related to
physical commodities; and
8. May make loans to other persons, in accordance with the Portfolio's
investment objective and policies and to the extent permitted by applicable law.
Non-Fundamental Investment Restrictions. The investment restrictions
described below are not fundamental policies of the Portfolio and may be changed
by their Trustees. These non-fundamental investment policies require that the
Portfolio:
(i) May not 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 10% of the market value
of the Portfolio's total assets would be in investments which are illiquid;
(ii) May not purchase securities on margin, make short sales of securities, or
maintain a short position, provided that this restriction shall not be deemed to
be applicable to the purchase or sale of when-issued or delayed delivery
securities.
(iii) May not acquire securities of other investment companies, except as
permitted by the 1940 Act or any order pursuant thereto.
(iv) Borrow money, except in amounts not to exceed 10% of the Portfolio's total
assets.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
For purposes of fundamental investment restrictions regarding industry
concentration, the Advisor 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 the Advisor 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, the
Advisor may classify 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.
ITEM 14. MANAGEMENT OF THE PORTFOLIO TRUST.
The Trustees of the Portfolio, their business addresses, principal
occupations during the past five years, and dates of birth are set forth below.
TRUSTEES
FREDERICK S. ADDY -- Trustee; Retired; Prior to April 1994, Executive
Vice President and Chief Financial Officer, 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; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. His address is 14 Alta Vista Drive,
RD #2, Princeton, New Jersey 08540, and his date of birth is May 23, 1934.
MATTHEW HEALEY (1)) -- Trustee; Chairman and Chief Executive Officer; Chairman,
Pierpont Group, Inc. since prior to 1993. 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; Prior to April 1996, Senior Vice
President, Capital Cities/ABC, Inc. and President, Broadcast Group. His address
is 10 Charnwood Drive, Suffern, New York 10910, and his date of birth is March
17, 1934.
Each Trustee is currently paid an annual fee of $75,000 (adjusted as of
April 1, 1997) for serving as Trustee of the Master Portfolios (as defined
below), J.P. Morgan Funds, J.P. Morgan Institutional Funds and J.P. Morgan
Series Trust and is reimbursed for expenses incurred in connection with service
as a Trustee. The Trustees may hold various other directorships unrelated to the
Portfolio Trust.
-------------------------
(*) Mr. Healey is an "interested person"(as
defined in the 1940 Act)of the Trust. Mr. Healey is also an "interested person"
(as defined in the 1940 Act)of the Advisor due to his son's affiliation with
JPMIM
The compensation paid to each Trustee for the calendar year ended
December 31, 1997 is set forth below.
- ---------------------------------------- --------------------------------------
TOTAL TRUSTEE COMPENSATION
ACCRUED BY THE MASTER
PORTFOLIOS(*), J.P. MORGAN
AGGREGATE TRUSTEE INSTITUTIONAL FUNDS, J.P.
COMPENSATION PAID BY MORGAN FUNDS AND J.P.
NAME OF TRUSTEE DURING 1997(***) MORGAN
SERIES TRUST
- ------------------------------ -------------------------- --------------------
- ------------------------------ -------------------------- --------------------
Frederick S. Addy, Trustee $15.61 $72,500
- ------------------------------ -------------------------- --------------------
- ------------------------------ -------------------------- --------------------
William G. Burns, Trustee $15.61 $72,500
- ------------------------------ -------------------------- --------------------
- ------------------------------ -------------------------- --------------------
Arthur C. Eschenlauer, Trustee $15.61 $72,500
- ------------------------------ -------------------------- --------------------
- ------------------------------ -------------------------- --------------------
Matthew Healey, Trustee(**),
Chairman and Chief
Executive Officer $15.61 $72,500
- ------------------------------ -------------------------- ---------------------
- ------------------------------ -------------------------- ---------------------
Michael P. Mallardi, Trustee $15.61 $72,500
- ---------------------------------------- ------------- --------------------
(*) Includes the Portfolio and 19 other portfolios (collectively, the
"Master Portfolios") for which JPMIM acts as investment adviser.
(**) During 1997, Pierpont Group paid Mr. Healey, in his role as Chairman of
Pierpont Group, compensation in the amount of $147,500, contributed
$22,100 to a defined contribution plan on his behalf, and paid $20,500
in insurance premiums for his benefit.
(***) No investment company within the fund complex has a pension or
retirement plan. Currently there are 18 investment companies (15
investment companies comprising the Master Portfolios, the J.P. Morgan
Funds, the J.P. Morgan Institutional Funds and J.P. Morgan Series
Trust) in the fund complex.
The Trustees of the Portfolio Trust are the same as the Trustees of
each of the other Master Portfolios, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds and J.P. Morgan Series Trust. In accordance with applicable
state requirements, a majority of the disinterested Trustees have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that the same individuals are Trustees of the
Master Portfolios, the J.P. Morgan Funds and the J.P. Morgan Institutional
Funds, up to and including creating a separate board of trustees.
The Trustees of the Portfolio, decide upon matters of general policies
and are responsible for overseeing the Trust's and Portfolio's business affairs.
The Portfolio has entered into a Portfolio Fund Services Agreement with Pierpont
Group to assist the Trustees in exercising their overall supervisory
responsibilities over the affairs of the Portfolio. Pierpont Group was organized
in July 1989 to provide services for the J.P. Morgan Family of Funds (formerly,
"The Pierpont Family of Funds") (currently an investor in the Portfolio). The
Portfolio has agreed to pay Pierpont Group a fee in an amount representing its
reasonable costs in performing these services. These costs are periodically
reviewed by the Trustees. The aggregate fees paid to Pierpont Group by the
Portfolio for the period from July 7, 1997 (commencement of operations) through
October 31, 1997 was $800. The Portfolio has no employees; its 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 Portfolio's officers conduct
and supervise the business operations of the Portfolio.
The Portfolio Trust has no employees; its executive officers (listed
below), other than the Chief Executive Officer and the officers who are
employees of the Advisor, are provided and compensated by Funds Distributor,
Inc. ("FDI"), a wholly owned indirect subsidiary of Boston Institutional Group,
Inc. The Portfolio Trust's officers conduct and supervise the business
operations of the Portfolio Trust. The Trustees of the Portfolio Trust are equal
and sole shareholders of Pierpont Group.
The officers of the Portfolio Trust, their principal occupations during
the past five years and their dates of birth are set forth below. The business
address of each of the officers unless otherwise noted is 60 State Street, Suite
1300, Boston, Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1993. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, Florida 33436. His date of birth is August 23, 1937.
MARGARET W. CHAMBERS; Vice President and Secretary. Senior Vice President
and General Counsel of FDI since April, 1998. From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company, L.P. From January 1986 to July 1996, she was an associate with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI, Premier
Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies distributed or administered by FDI.
Prior to July 1994, she was President and Chief Compliance Officer of FDI. Her
date of birth is August 1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant Vice
President and Assistant Department Manager of Treasury Services and
Administration of FDI and an officer of certain investment companies distributed
or administered by FDI. Prior to April 1997, Mr. Conroy was Supervisor of
Treasury Services and Administration of FDI. From April 1993 to January 1995,
Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust Company. His
date of birth is March 31, 1969.
JACQUELINE HENNING; Assistant Secretary and Assistant Treasurer of the
Portfolio only. Managing Director, State Street Cayman Trust Company, Ltd. since
October 1994. Prior to October 1994, Mrs. Henning was head of mutual funds at
Morgan Grenfell in Cayman and was Managing Director of Bank of Nova Scotia Trust
Company (Cayman) Limited prior to September 1993. Address: P.O. Box 2508 GT,
Elizabethan Square, 2nd Floor, Shedden Road, George Town, Grand Cayman, Cayman
Islands, BWI. Her date of birth is March 24, 1942.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Vice President
and Senior Counsel of FDI and an officer of certain investment companies
distributed or administered by FDI. From June 1994 to January 1996, Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder, Stevens & Clark, Inc.
Prior to May 1994, Ms. Jacoppo-Wood was a senior paralegal at The Boston Company
Advisors, Inc. ("TBCA"). Her date of birth is December 29, 1966.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial
Group. Prior to April 1994, Mr. Kelley was employed by Putnam Investments in
legal and compliance capacities. His date of birth is December 24, 1964.
LENORE J. MCCABE; Assistant Secretary and Assistant Treasurer of the
Portfolio only. Assistant Vice President, State Street Bank and Trust Company
since November 1994. Assigned as Operations Manager, State Street Cayman Trust
Company, Ltd. since February 1995. Prior to November, 1994, employed by Boston
Financial Data Services, Inc. as Control Group Manager. Address: P.O. Box 2508
GT, Elizabethan Square, 2nd Floor, Shedden Road, George Town, Grand Cayman,
Cayman Islands, BWI. Her date of birth is May 31, 1961.
KATHLEEN K. MORRISEY. Vice President and Assistant Secretary. Vice
President and Assistant Secretary of FDI. Manager of Treasury Services
Administration and an officer of certain investment companies advised or
administered by Montgomery Asset Management, L.P. and Dresdner RCM Global
Investors, Inc., and their respective affiliates. From July 1994 to November
1995, Ms. Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Prior to July 1994 she was a Finance student at Stonehill College in North
Easton, Massachusetts. Her date of birth is July 5, 1972.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI.
Prior to August 1994, Ms. Nelson was an Assistant Vice President and Client
Manager for The Boston Company, Inc. Her date of birth is April 22, 1964.
MARY JO PACE; Assistant Treasurer. Vice President, Morgan Guaranty Trust
Company of New York. Ms. Pace serves in the Funds Administration group as a
Manager for the Budgeting and Expense Processing Group. Prior to September 1995,
Ms. Pace served as a Fund Administrator for Morgan Guaranty Trust Company of New
York. Her address is 60 Wall Street, New York, New York 10260. Her date of birth
is March 13, 1966.
STEPHANIE D. PIERCE; Vice President and Assistant Secretary. Vice President
and Client Development Manager for FDI since April 1998. From April 1997 to
March 1998, Ms. Pierce was employed by Citibank, NA as an officer of Citibank
and Relationship Manager on the Business and Professional Banking team handling
over 22,000 clients. Address: 200 Park Avenue, New York, New York 10166. Her
date of birth is August 18, 1968.
MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior Vice
President and Director of Strategic Client Initiatives for FDI since December
1996. From December 1989 through November 1996, Mr. Petrucelli was employed with
GE Investments where he held various financial, business development and
compliance positions. He also served as Treasurer of the GE Funds and as
Director of GE Investment Services. Address: 200 Park Avenue, New York, New
York, 10166. His date of birth is May 18, 1961.
GEORGE A. RIO; President and Treasurer. Executive Vice President and Client
Service Director of FDI since April 1998. From June 1995 to March 1998, Mr. Rio
was Senior Vice President and Senior Key Account Manager for Putnam Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of Business Development
for First Data Corporation. From September 1983 to May 1994, Mr. Rio was Senior
Vice President & Manager of Client Services and Director of Internal Audit at
The Boston Company. His date of birth is January 2, 1955.
CHRISTINE ROTUNDO; Assistant Treasurer. Vice President, Morgan Guaranty
Trust Company of New York. Ms. Rotundo serves in the Funds Administration group
as a Manager of the Tax Group and is responsible for U.S. mutual fund tax
matters. Prior to September 1995, Ms. Rotundo served as a Senior Tax Manager in
the Investment Company Services Group of Deloitte & Touche LLP. Her address is
60 Wall Street, New York, New York 10260. Her date of birth is September 26,
1965.
The Portfolio Trust's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Portfolio, unless, as to liability to the Portfolio or its
investors, it is finally adjudicated that they engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
their offices, or unless with respect to any other matter it is finally
adjudicated that they did not act in good faith in the reasonable belief that
their actions were in the best interests of the Portfolio. In the case of
settlement, such indemnification will not be provided unless it has been
determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not engaged
in willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of January 30, 1998, the J.P. Morgan Institutional Treasury Money
Market Fund and J.P. Morgan Institutional Service Treasury Money Market Fund
series of the J.P. Morgan Institutional Funds, owned 35% and 65%, respectively,
of the outstanding beneficial interests in the Portfolio. So long as the Funds
control the Portfolio, they may take action without the approval of any other
holder of beneficial interests in the Portfolio.
Each of the Portfolio's investors has informed the Portfolio that
whenever it is requested to vote on matters pertaining to the Portfolio (other
than a vote by the Portfolio to continue the operation of the Portfolio upon the
withdrawal of another investor in the Portfolio), it will hold a meeting of its
shareholders and will cast its vote as instructed by those shareholders.
The officers and Trustees of the Portfolio own none of the outstanding
beneficial interests in the Portfolio.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISOR. The investment advisor to the Portfolio is JPMIM, a
wholly-owned subsidiary of J.P. Morgan. Subject to the supervision of the
Portfolio's Trustees, the Advisor makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. Prior to October 1, 1998, Morgan was the
investment advisor. JPMIM, a wholly owned subsidiary of J.P. Morgan, is a
registered investment adviser under the Investment Advisers Act of 1940, as
amended, 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, through the Advisor 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 approximately $275 billion.
J.P. Morgan has a long history of service as adviser, 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 the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. 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 Advisor's fixed income investment process is based on analysis of real
rates, sector diversification and quantitative and credit analysis.
The investment advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Investment Advisory Agreement. The
Advisor is free to and does render similar investment advisory services to
others. The Advisor 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 the Advisor serves as trustee. The
accounts which are managed or advised by the Advisor have varying investment
objectives and the Advisor invests assets of such accounts in investments
substantially similar to, or the same as, those which are expected to constitute
the principal investments of the Portfolio. Such accounts are supervised by
officers and employees of the Advisor who may also be acting in similar
capacities for the Portfolio. See Item 17 below.
Sector weightings are generally similar to the Portfolio's benchmark
with the emphasis on security selection as the method to achieve investment
performance superior to the benchmark. The benchmark for the Portfolio is IBC's
Treasury and Repo Money Fund Average.
Morgan, also a wholly owned subsidiary of J.P. Morgan, is 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. Morgan 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.
The Portfolio is managed by officers of the Advisor who, in acting for
their customers, including the Portfolio, do not discuss their investment
decisions with any personnel of J.P. Morgan or any personnel of other divisions
of the Advisor or with any of its affiliated persons, with the exception of J.P.
Morgan Investment Management Inc. and certain other investment management
affiliates of J.P. Morgan.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Investment
Advisory Agreement, the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.20% of the
Portfolio's average daily net assets up to $1 billion and 0.10% of the
Portfolio's average daily net assets in excess of $1 billion. For the period
from July 7, 1997 (commencement of operations) through October 31, 1997, the
Portfolio paid Morgan, the Portfolio's investment advisor prior to October 1,
1998, $49,123 in advisory fees.
The Investment Advisory Agreement provides that it will continue in
effect with respect to the Portfolio for a period of two years after execution
only if specifically approved annually thereafter (i) by a vote of the holders
of a majority of the Portfolio's outstanding securities or by the Trustees and
(ii) by a vote of a majority of the Trustees who are not parties to the
agreement or "interested persons" as defined by the 1940 Act cast in person at a
meeting called for the purpose of voting on such approval. The Investment
Advisory Agreement will terminate automatically if assigned and is terminable at
any time without penalty by a vote of a majority of the Trustees of the
Portfolio Trust or by a vote of the holders of a majority of the Portfolio's
voting securities on 60 days' written notice to Morgan and by Morgan on 90 days'
written notice to the Portfolio.
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as the Advisor from engaging in the business of underwriting or
distributing securities, and 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 continuously engaged in the issuance of its securities, such
as the Portfolio Trust. The interpretation does not prohibit a holding company
or a subsidiary thereof from acting as investment advisor and custodian to such
an investment company. The Advisor believes that it may perform the services for
the Portfolio 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 the Advisor from continuing to
perform such services for the Portfolio.
If the Advisor were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio Trust would
recommend to investors that they approve the Portfolio Trust's entering into a
new investment advisory agreement with another qualified investment advisor
selected by the Trustees.
Under a separate agreement, Morgan provides administrative and related
services to the Portfolio. See "Administrative Services Agreement" in Part A
above.
PLACEMENT AGENT. FDI, a registered broker-dealer, also serves as
exclusive placement agent for the Portfolio. 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.
CO-ADMINISTRATOR. Under the Portfolio Trust's Co-Administration
Agreement dated August 1, 1996, FDI serves as the Portfolio Trust's
Co-Administrator. The Co-Administration Agreement may be renewed or amended by
the Trustees without an investor vote. The Co-Administration Agreement is
terminable at any time without penalty by a vote of a majority of the Trustees
of the Portfolio Trust on not more than 60 days' written notice nor less than 30
days' written notice to the other party. The Co-Administrator may, subject to
the consent of the Trustees of the Portfolio Trust, subcontract for the
performance of its obligations, provided, however, that unless the Portfolio
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 Administrative Services Agent below.
For its services under the Co-Administration Agreement, the Portfolio
Trust 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 Portfolio is based on the ratio of its net assets to the
aggregate net assets of the J.P. Morgan Funds, the J.P. Morgan Institutional
Funds, the Master Portfolios, and certain other investment companies subject to
similar agreements with FDI. For the period from July 7, 1997 (commencement of
operations) through October 31, 1997, administrative fees in the amount of $406
were paid by the Portfolio Trust to FDI.
ADMINISTRATIVE SERVICES AGENT. The Portfolio Trust has entered into a
Restated Administrative Services Agreement (the "Services Agreement") with
Morgan, pursuant to which Morgan is responsible for certain administrative and
related services provided to the Portfolio.
Under the Services Agreement the Portfolio Trust 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 Master
Portfolios and J.P. Morgan Series Trust 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 average daily net assets in excess of $7 billion, less
the complex-wide fees payable to FDI. The portion of this charge payable by the
Portfolio is determined by the proportionate share that its net assets bear to
the total net assets of the J.P. Morgan Funds, the J.P. Morgan Institutional
Funds, the Master Portfolios, the other investors in the Master Portfolios for
which Morgan provides similar services and J.P. Morgan Series Trust.
For the period from July 7, 1997 (commencement of operations) through
October 31, 1997, the Portfolio paid Morgan $7,289 in administrative services
fees.
See "Expenses" below for applicable expense limitations.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02110, serves as the Portfolio Trust's
custodian and fund accounting and transfer agent. Pursuant to the Custodian
Contract, State Street is responsible for maintaining the books of account and
records of portfolio transactions and holding portfolio securities and cash. The
Custodian maintains portfolio transaction records, calculates book and tax
allocations for the Portfolio and computes the value of the interest of each
investor.
INDEPENDENT ACCOUNTANTS. The independent accountants of the Portfolio
Trust are PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York,
New York 10036. PricewaterhouseCoopers LLP conducts an annual audit of the
financial statements of the Portfolio, assists in the preparation and/or review
of the Portfolio's federal and state income tax returns and consults with the
Portfolio Trust as to matters of accounting and federal and state income
taxation.
EXPENSES. In addition to the fees payable to the service providers
identified above, the Portfolio is responsible for usual and customary expenses
associated with its 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, and
extraordinary expenses applicable to the Portfolio Trust.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Advisor places orders for the Portfolio for all purchases and sales
of portfolio securities, enters into repurchase agreements, may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Portfolio. See Item 13 above.
Fixed income securities 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 Portfolio, the
Advisor intends to seek best execution on a competitive basis for both purchases
and sales of securities.
The Portfolio's policy of investing only in securities with maturities
of less than thirteen months will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments which the Portfolio
makes, turnover resulting from such investments should not adversely affect the
net asset value or net income of the Portfolio.
Subject to the overriding objective of obtaining the best execution of
orders, the Advisor may allocate a portion of the Portfolio's brokerage
transactions to affiliates of the Advisor. In order for affiliates of the
Advisor to effect any portfolio transactions for the Portfolio, 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 Trustees of the Portfolio Trust, 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.
The Portfolio Trust's portfolio securities will not be purchased from
or through or sold to or through the Exclusive Placement Agent or Advisor or any
other "affiliated person" (as defined in the 1940 Act) of the Exclusive
Placement Agent or Advisor when such entities are acting as principals, except
to the extent permitted by law. In addition, the Portfolio will not purchase
securities during the existence of any underwriting group relating thereto of
which the Advisor or an affiliate of the Advisor is a member, except to the
extent permitted by law.
On those occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of the Portfolio as well as other
customers, including other Master Portfolios, the Advisor, to the extent
permitted by applicable laws and regulations may, but is not obligated to,
aggregate the securities to be sold or purchased for the Portfolio with those to
be sold or purchased for other customers 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 the Advisor in the manner it considers to be most
equitable and consistent with its fiduciary obligations to the Portfolio. In
some instances, this procedure might adversely affect the Portfolio.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is a subtrust (or series) of the Portfolio Trust, which
is organized as a trust under the laws of the State of New York. Under the
Portfolio Trust's Declaration of Trust, the Trustees are authorized to issue
beneficial interests in one or more series (each a "Series"), including the
Portfolio. Investors in a Series will be held personally liable for the
obligations and liabilities of that Series (and of no other Series), subject,
however, to indemnification by the Portfolio Trust in the event that there is
imposed upon an investor a greater portion of the liabilities and obligations of
the Series than its proportionate beneficial interest in the Series. The
Declaration of Trust also provides that the Portfolio Trust shall maintain
appropriate insurance (for example, a fidelity bond and errors and omissions
insurance) for the protection of the Portfolio Trust, its investors, Trustees,
officers, employees and agents, and covering possible tort and other
liabilities. Thus, the risk of an investor incurring financial loss on account
of investor liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio Trust itself was unable to meet its
obligations.
Investors in a Series are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
Series only. Upon liquidation or dissolution of a Series, investors are entitled
to share pro rata in that Series' (and no other Series) net assets available for
distribution to its investors. The Portfolio Trust reserves the right to create
and issue additional Series of beneficial interests, in which case the
beneficial interests in each new Series would participate equally in the
earnings, dividends and assets of that particular Series only (and no other
Series). Any property of the Portfolio Trust is allocated and belongs to a
specific Series to the exclusion of all other Series. All consideration received
by the Portfolio Trust for the issuance and sale of beneficial interests in a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings and proceeds thereof, and any funds
or payments derived from any reinvestment of such proceeds, is held by the
Trustees in a separate Series for the benefit of investors in that Series and
irrevocably belongs to that Series for all purposes. Neither a Series nor
investors in that Series possess any right to or interest in the assets
belonging to any other Series.
Investments in a Series have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Investments in a Series may not be transferred. Certificates representing an
investor's beneficial interest in a Series are issued only upon the written
request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in each Series. Investors in a Series do not have cumulative voting
rights, and investors holding more than 50% of the aggregate beneficial
interests in all outstanding Series may elect all of the Trustees if they choose
to do so and in such event other investors would not be able to elect any
Trustees. Investors in each Series will vote as a separate class except as to
voting of Trustees, as otherwise required by the 1940 Act, or if determined by
the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of a particular Series, only investors in the one
or more affected Series are entitled to vote. The Portfolio Trust is not
required and has no current intention of holding annual meetings of investors,
but the Portfolio Trust will hold special meetings of investors when in the
judgment of the Portfolio Trust's Trustees it is necessary or desirable to
submit matters for an investor vote. The Portfolio Trust's Declaration of Trust
may be amended without the vote of investors, except that investors have the
right to approve by affirmative majority vote any amendment which would affect
their voting rights, alter the procedures to amend the Declaration of Trust of
the Portfolio Trust, or as required by law or by the Portfolio Trust's
registration statement, or as submitted to them by the Trustees. Any amendment
submitted to investors which the Trustees determine would affect the investors
of any Series shall be authorized by vote of the investors of such Series and no
vote will be required of investors in a Series not affected.
The Portfolio Trust or any Series (including the Portfolio) may enter
into a merger or consolidation, or sell all or substantially all of its assets,
if approved by the vote of two-thirds of its investors (with the vote of each
being in proportion to its percentage of the beneficial interests in the
Series), except that if the Trustees recommend such sale of assets, the approval
by vote of a majority of the investors (with the vote of each being in
proportion to its percentage of the beneficial interests in the Series) will be
sufficient. The Portfolio Trust or any Series may also be terminated (i) upon
liquidation and distribution of its assets if approved by the vote of two-thirds
of its investors (with the vote of each being in proportion to the amount of its
investment) or (ii) by the Trustees by written notice to its investors.
The Portfolio Trust's Declaration of Trust provides that obligations of
the Portfolio Trust are not binding upon the Trustees individually but only upon
the property of the Portfolio Trust and that the Trustees will not be liable for
any action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.
All portfolio securities for the Portfolio are valued by the amortized
cost method, as permitted by a rule adopted by the SEC. The purpose of this
method of calculation is to allow certain investors in the Portfolio to maintain
a constant net asset value. No assurances can be given that this goal can be
attained. The amortized cost method of valuation values a security at its cost
at the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. If a difference of more
than 1/2 of 1% occurs between valuation based on the amortized cost method and
valuation based on market value, the Trustees will take steps necessary to
reduce such deviation, such as shortening the average portfolio maturity,
realizing gains or losses, or reducing the aggregate outstanding interests. Any
reduction of outstanding interests will be effected by having each investor in
the Portfolio contribute to the Portfolio's capital the necessary amounts on a
pro rata basis. Each investor in the Portfolio will be deemed to have agreed to
such a contribution in these circumstances by his investment in the Portfolio.
If the Portfolio determines that it would be detrimental to the best
interest of the remaining investors in the Portfolio 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 Portfolio, in lieu of cash, in
conformity with the applicable rule of the SEC. If interests are redeemed in
kind, the redeeming investor might incur transaction costs in converting the
assets into cash. The method of valuing portfolio securities is described above
and such valuation will be made as of the same time the redemption price is
determined. The Portfolio will not redeem in kind except in circumstances in
which an investor is permitted to redeem in kind.
The net asset value of the Portfolio will not be computed on a day
which no orders to purchase or withdraw beneficial interests in the Portfolio
has been received or on the days the following legal holidays are observed: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Veteran's Day, Columbus Day, Thanksgiving Day,
and Christmas Day. In the event that trading in the money markets is scheduled
to end earlier than the close of the New York Stock Exchange in observance of
these holidays, the Portfolio would expect to close for purchases and
withdrawals an hour in advance of the end of trading in the money markets. The
Portfolio may also close for purchases and withdrawals at such other times as
may be determined by the Trustees to the extent permitted by applicable law. The
days on which net asset value is determined are the Portfolio's business days.
ITEM 20. TAX STATUS.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York. However, each
investor in the Portfolio will be subject to U.S. Federal income tax in the
manner described below on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Code, and regulations promulgated
thereunder.
Although, as described above, the Portfolio will not be subject to
federal income tax, it will file appropriate income tax returns.
It is intended that the Portfolio's assets will be managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Code. To ensure that investors will be able to satisfy
the requirements of subchapter M, the Portfolio must satisfy certain gross
income and diversification requirements.
For the Portfolio to qualify as a regulated investment company under
Subchapter M of the Code, the Portfolio limits 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, except government
securities, 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, except U.S.
Government securities.
Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. Long-term capital gain of individual investors will be
subject to a reduced rate of tax if the portfolio securities have been held by
the Portfolio for more than one year at the time of sale and will be subject to
a further reduced rate of tax if the portfolio securities have been held by the
Portfolio for more than eighteen months at the time of sale. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
STATE AND LOCAL TAXES. The Portfolio may be subject to state or local
taxes in jurisdictions in which the Portfolio is deemed to be doing business. In
addition, the treatment of the Portfolio and its investors in those states which
have income tax laws might differ from treatment under the federal income tax
laws. Investors should consult their own tax advisors with respect to any state
or local taxes.
OTHER TAXATION. The investment by an investor in the Portfolio does not
cause the investor to be liable for any income or franchise tax in the State of
New York. Investors are advised to consult their own tax advisors with respect
to the particular tax consequences to them of an investment in the Portfolio.
The Year 2000 Initiative
With the new millennium rapidly approaching, organizations are
examining their computer systems to ensure they are year 2000 compliant. The
issue, in simple terms, is that many existing computer systems use only two
numbers to identify a year in the date field with the assumption that the first
two digits are always 19. As the century is implied in the date, on January 1,
2000, computers that are not year 2000 compliant will assume the year is 1900.
Systems that calculate, compare, or sort using the incorrect date will cause
erroneous results, ranging from system malfunctions to incorrect or incomplete
transaction processing. If not remedied, potential risks include business
interruption or shutdown, financial loss, reputation loss, and/or legal
liability.
J.P. Morgan has undertaken a firmwide initiative to address the year
2000 issue and has developed a comprehensive plan to prepare, as appropriate,
its computer systems. Each business line has taken responsibility for
identifying and fixing the problem within its own area of operation and for
addressing all interdependencies. A multidisciplinary team of internal and
external experts supports the business teams by providing direction and firmwide
coordination. Working together, the business and multidisciplinary teams have
completed a thorough education and awareness initiative and a global inventory
and assessment of J.P. Morgan's technology and application portfolio to
understand the scope of the year 2000 impact at J.P. Morgan. J.P. Morgan
presently is renovating and testing these technologies and applications in
partnership with external consulting and software development organizations, as
well as with year 2000 tool providers. J.P. Morgan is on target with its plan to
substantially complete renovation, testing, and validation of its key systems by
year-end 1998 and to participate in industry-wide testing (or streetwide
testing) in 1999. J.P. Morgan is also working with key external parties,
including clients, counterparties, vendors, exchanges, depositories, utilities,
suppliers, agents and regulatory agencies, to stem the potential risks the year
2000 problem poses to J.P. Morgan and to the global financial community.
Costs associated with efforts to prepare J.P. Morgan's systems for the
year 2000 approximated $95 million in 1997. In 1998, J.P. Morgan will continue
its efforts to prepare its systems for the year 2000. The total cost to become
year-2000 compliant is estimated at $250 million, for internal systems
renovation and testing, testing equipment, and both internal and external
resources working on the project. Remaining costs will be incurred primarily in
1998. The costs associated with J.P. Morgan becoming year-2000 compliant will be
borne by J.P. Morgan and not the Fund nor the Portfolio.
ITEM 21. UNDERWRITERS.
Not Applicable.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
<PAGE>
Appendix-2
The Portfolio's October 31, 1997 annual report filed with the
Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act and
Rule 30b2-1 thereunder is incorporated herein by reference (Accession
No.0001016969-97-100, filed December 24, 1997).
<PAGE>
BA-2
I:\dsfndlgl\tspii\amend2.txt
APPENDIX A
Description of Security Ratings
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS
AAA- Debt rated AAA have 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 have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small
degree.
A - Debt rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB- Debt rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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 - Debt rated BB are regarded as having less near-term vulnerability to
default than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
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.
<PAGE>
BA-3
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.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
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.
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.
<PAGE>
C-3
I:\dsfndlgl\tspii\amend2.txt
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
Not applicable.
FINANCIAL STATEMENTS INCORPORATED BY REFERENCE INTO PART B:
The audited financial statements included in Item 23 are as
follows:
Schedule of Investments at October 31, 1997 Statement of Assets and
Liabilities at October 31, 1997 Statement of Operations for the fiscal
year ended October 31, 1997 Statement of Changes in Net Assets for the
fiscal years ended October 31, 1997 and 1996 Supplementary Data Notes
to Financial Statements, October 31, 1997
(B) EXHIBITS
1 Restated Declaration of Trust of the Registrant.1
2 Restated By-Laws of the Registrant.2
5 Form of Investment Advisory Agreement between The Global Strategic Income
Portfolio and Morgan Guaranty Trust Company of New York ("Morgan").2
5(a) Form of Investment Advisory Agreement between the Registrant and J.P.
Morgan Investment Management ("JPMIM") with respect to The Treasury Money Market
Portoflio.3
8 Form of Custodian Contract between the Registrant and State Street Bank
and Trust Company ("State Street").2
9(a) Co-Administration Agreement between the Registrant and Funds
Distributor, Inc. dated August 1, 1996.2
9(b) Transfer Agency and Service Agreement between the Registrant and State
Street.2
9(c) Restated Administrative Services Agreement between the Registrant and
Morgan dated August 1, 1996.2
9(d) Amended and Restated Portfolio Fund Services Agreement between the
Registrant and Pierpont Group, Inc. dated July 11, 1996.2
13 Purchase Agreement with respect to initial capital.2
27 Financial Data Schedules.3
- -------------------
1 Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A as filed with the Securities and Exchange Commission on
May 30, 1997 (Accession Number ).
2 Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A as filed with the Securities and Exchange Commission on
February 28, 1997 (Accession Number 0001016964-97-000040).
3 Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class: Beneficial Interests
As of September 30, 1998, the number of record holders were as follows:
The Global Strategic Income Portfolio 2
The Treasury Money Market Portfolio 2
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an exhibit to its Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
JPMIM is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, and is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated. JPMIM manages employee benefit funds of corporations, labor unions
and state and local governments and the accounts of other institutional
investors, including investment companies.
To the knowledge of the Registrant, none of the directors, except those
set forth below, or executive officers of JPMIM, 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 JPMIM also hold various positions with, and engage in business for, J.P.
Morgan & Co. Incorporated, which owns all the outstanding stock of JPMIM.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
J.P. Morgan Investment Management Inc. and Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York 10260-0060 or 522 Fifth Avenue, New
York, New York 10036 (records relating to their function as investment adviser
and administrative services agent, respectively).
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 or 40 King Street West, Toronto, Ontario, Canada M5H 3Y8
(records relating to its functions as custodian and fund accounting and transfer
agent).
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109 (records relating to its functions as co-administrator and
exclusive placement agent).
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.
Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, Commonwealth of Massachusetts, on the
1st day of October, 1998.
SERIES PORTFOLIO II
By: /S/ George A. Rio
-----------------------------
George A. Rio
President
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
EX-5 Investment Advisory Agreement
EX-27 Financial Data Schedules.
<PAGE>
SERIES PORTFOLIO II
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 1st day of October, 1998, between Series Portfolio II
(the "Trust"), a master trust organized under the law of the State of New York
and J.P. Morgan Investment Management, Inc., a Delaware corporation (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 subtrusts or
series (each, a "Portfolio") and other future Portfolios 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 Portfolios 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 Portfolio and the
composition of the Portfolio's holdings of securities and investments, including
cash, the purchase, retention and disposition thereof and agreements relating
thereto, in accordance with the Portfolio'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
Portfolio, under the Investment Company Act of 1940, as amended (the "1940
Act"), and subject to the following understandings:
(a) the Advisor shall furnish a continuous investment program
for each Portfolio and determine from time to time what investments or
securities will be purchased, retained, sold or lent by the Portfolio,
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 Portfolio'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 Portfolio and as agent for the
Portfolio 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
Portfolio 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 Portfolios as well as
other customers of the Advisor, including any other of the Portfolios,
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 Portfolio;
(e) the Advisor shall maintain books and records with respect
to each Portfolio'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 Portfolios under this Agreement are not to be deemed exclusive,
and the Advisor shall be free to render similar services to others.
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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio (including
taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, each Portfolio 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 Portfolio 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
Portfolio for a period of more than two years from the Portfolio's commencement
of investment operations only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated with respect to each
Portfolio 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 Portfolio 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
Portfolios.
10. This Agreement may be amended, with respect to any Portfolio, 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 Portfolio.
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. at 60 State Street, Suite 1300, Boston,
Massachusetts 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 Portfolio's investors nor any representative or agent of the Trust or of the
Portfolio(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 Portfolio(s), that such Trustees,
officers, employees, investors, 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the 1st day of October,
1998.
SERIES PORTFOLIO II
By: /s/ George A. Rio
-------------
George A. Rio
President
J.P. MORGAN INVESTMENT MANAGEMENT, INC.
/s/ Stephen H. Hopkins
By: ________________________
Stephen H. Hopkins
Managing Director
<PAGE>
Schedule A
Series Portfolio II
Investment Advisory Fees
The Treasury Money Market Portfolio
.20% of the average daily net assets of the Portfolio up to $1 billion, .10% of
the average daily net assets of the Portfolio in excess of $ 1 billion
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the annual report
dated 10/31/97 for the Treasury Money Market Portfolio and is qualified in its
entirety by reference to such annual report.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 117028
<INVESTMENTS-AT-VALUE> 117028
<RECEIVABLES> 70050
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 187093
<PAYABLE-FOR-SECURITIES> 69906
<SENIOR-LONG-TERM-DEBT> 83
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 69989
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<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> 117104
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1365
<OTHER-INCOME> 0
<EXPENSES-NET> 9
<NET-INVESTMENT-INCOME> 1356
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1360
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 154888
<NUMBER-OF-SHARES-REDEEMED> 39144
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 127
<AVERAGE-NET-ASSETS> 76623
<PER-SHARE-NAV-BEGIN> 1.00
<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> 1.00
<EXPENSE-RATIO> .04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
