As filed with the Securities and Exchange Commission on July 28, 1995
Registration Nos. 33-54632 and 811-7340
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 14
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15
THE PIERPONT FUNDS
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
James B. Craver, Esq.
6 St. James Avenue, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check appropriate box)
___ Immediately upon filing pursuant to paragraph (b)
_X_ on August 1, 1995 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(i)
___ on (date) pursuant to paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has previously registered an indefinite number of its
shares under the Securities Act of 1933, as amended, pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended. The Registrant has filed
Rule 24f-2
<PAGE>
notices with respect to its series as follows: Tax Exempt Money Market and Tax
Exempt Bond Funds (for their fiscal years ended August 31, 1994) on October 11,
1994; Treasury Money Market, Short Term Bond, Bond, Emerging Markets Equity and
International Equity Funds (for their fiscal years ended October 31, 1994) on
December 22, 1994; Money Market Fund (for its fiscal year ended November 30,
1994) on January 27, 1995; Equity and Capital Appreciation Funds (for their
fiscal years ended May 31, 1994) on July 25, 1994; Diversified Fund (for its
fiscal year ended June 30, 1994) on August 17, 1994; and New York Total
Return Bond Fund (for its fiscal year ended March 31, 1995) on May 23, 1995.
The Money Market Portfolio, The Tax Exempt Money Market Portfolio, The
Treasury Money Market Portfolio, The Short Term Bond Portfolio, The U.S. Fixed
Income Portfolio, The Tax Exempt Bond Portfolio, The Selected U.S. Equity
Portfolio, The U.S. Small Company Portfolio, The Non-U.S. Equity Portfolio, The
Diversified Portfolio, The Emerging Markets Equity Portfolio and The New York
Total Return Bond Portfolio have also executed this Registration Statement.
JPM428
<PAGE>
CROSS REFERENCE SHEET
(As required by Rule 495)
PART A ITEM NUMBER: Prospectus Headings.
1. COVER PAGE: Cover Page.
2. SYNOPSIS: Investors for Whom the Funds are Designed.
3. CONDENSED FINANCIAL INFORMATION: Financial Highlights.
4. GENERAL DESCRIPTION OF REGISTRANT: Cover Page; Investors for Whom the
Funds are Designed; Investment Objectives and Policies; Additional
Investment Information; Investment Restrictions; Special Information
Concerning Hub and Spoke(R); Organization; Appendix.
5. MANAGEMENT OF THE FUND: Management of the Trust and the Portfolios;
Shareholder Servicing; Additional Information.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not Applicable.
6. CAPITAL STOCK AND OTHER SECURITIES: Special Information Concerning Hub
and Spoke(R); Shareholder Servicing; Net Asset Value; Purchase of
Shares; Taxes; Dividends and Distributions; Organization.
7. PURCHASE OF SECURITIES BEING OFFERED: Purchase of Shares; Exchange of
Shares; Investors for Whom the Funds are Designed; Dividends and
Distributions; Net Asset Value.
8. REDEMPTION OR REPURCHASE: Redemption of Shares; Exchange of Shares; Net
Asset Value.
9. PENDING LEGAL PROCEEDINGS: Not Applicable.
<PAGE>
CROSS REFERENCE SHEET
(As required by Rule 495)
PART B ITEM NUMBER: Statement of Additional Information Headings.
10. COVER PAGE: Cover Page.
11. TABLE OF CONTENTS: Table of Contents.
12. GENERAL INFORMATION AND HISTORY: General.
13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies;
Additional Investments; Investment Restrictions; Quality and
Diversification Requirements; Appendix A.
14. MANAGEMENT OF THE FUND: Trustees and Officers.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of
Shares.
16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor;
Administrator and Distributor; Services Agent; Custodian; Shareholder
Servicing; Independent Accountants; Expenses.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.
18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares;
Dividends and Distributions.
20. TAX STATUS: Taxes.
21. UNDERWRITERS: Administrator and Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Data.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C of this Registration Statement.
<PAGE>
EXPLANATORY NOTE
This post-effective amendment no. 14 (the "Amendment") to the Registrant's
registration statement on Form N-1A (File no. 33-54632) (the "Registration
Statement") is being filed with respect to The Pierpont New York Total Return
Bond Fund, to include updated financial and other disclosure in (i) the
Statement of Additional Information and (ii) the prospectus which describe The
Pierpont New York Total Return Bond Fund.
The eleven other series of shares of the Registrant are offered via the
separate prospectuses listed below, which prospectuses are included in the
respective Parts A of the post-effective amendments to the Registration
Statement identified below. This Amendment does not relate to, amend or
otherwise affect any of the prospectuses contained in the post-effective
amendments listed below, and pursuant to Rule 485(d) under the Securities Act of
1933, the Amendment does not affect the effectiveness of any such post-effective
amendment.
POST-EFFECTIVE
SERIES AMENDMENT NO.
The Pierpont Money Market Fund 13
The Pierpont Tax Exempt Money Market Fund 12
The Pierpont Treasury Money Market Fund 13
The Pierpont Bond Fund 13
The Pierpont Short Term Bond Fund 13
The Pierpont Tax Exempt Bond Fund 12
The Pierpont Equity Fund 10
The Pierpont Capital Appreciation Fund 10
The Pierpont International Equity Fund 13
The Pierpont Diversified Fund 10
The Pierpont Emerging Markets Equity Fund 13
The Pierpont Funds (combined Prospectus, all other series) 13
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
The Pierpont New York Total Return Bond Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 521-5411
The Pierpont New York Total Return Bond Fund (the "Fund") seeks to provide a
high after tax total return for New York residents consistent with moderate risk
of capital. It is designed for investors subject to federal and New York State
income taxes who seek a high after tax total return and who are willing to
receive some taxable income and capital gains to achieve that return.
The Fund is a non-diversified no-load mutual fund for which there are no
sales charges or exchange or redemption fees. The Fund is a series of The
Pierpont Funds, an open-end management investment company organized as a
Massachusetts business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE NEW YORK TOTAL RETURN BOND
PORTFOLIO (THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN
THE PORTFOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND
SPOKE-REGISTERED TRADEMARK- FINANCIAL SERVICES METHOD. HUB AND
SPOKE-REGISTERED TRADEMARK- EMPLOYS A TWO-TIER MASTER FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE-REGISTERED TRADEMARK- ON PAGE 4.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated August 1, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The Pierpont Funds, or
by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
Investors for Whom the Fund Is
Designed........................ 1
Financial Highlights............ 3
Special Information Concerning
Hub and
Spoke-Registered Trademark-..... 4
Investment Objective and
Policies........................ 5
Additional Investment
Information and Risk Factors.... 7
Investment Restrictions......... 9
Management of the Trust and the
Portfolio....................... 10
Shareholder Servicing........... 13
Purchase of Shares.............. 13
PAGE
Redemption of Shares............ 14
Exchange of Shares.............. 14
Dividends and Distributions..... 15
Net Asset Value................. 15
Organization.................... 15
Federal Taxes................... 16
New York State and New York City
Taxes........................... 17
Additional Information.......... 18
Appendix........................ A-1
</TABLE>
<PAGE>
The Pierpont New York Total Return Bond Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors subject to federal and New York State income
taxes who seek a high after tax total return and who are willing to receive some
taxable income and capital gains to achieve that return. The Fund seeks to
achieve its investment objective by investing all of its investable assets in
The New York Total Return Bond Portfolio, a non-diversified open-end management
investment company having the same investment objective as the Fund. Since the
investment characteristics and experience of the Fund will correspond directly
with those of the Portfolio, the discussion in this Prospectus focuses on the
investments and investment policies of the Portfolio. The net asset value of
shares in the Fund fluctuates with changes in the value of the investments in
the Portfolio.
The Fund requires a minimum initial investment of $25,000, except that the
minimum initial investment is $10,000 for shareholders of another Pierpont Fund.
See Purchase of Shares. The minimum subsequent investment is $5,000. If a
shareholder reduces his or her total investment in shares of the Fund to less
than $10,000, the investment will be subject to mandatory redemption. See
Redemption of Shares--Mandatory Redemption by the Fund.
This Prospectus describes the investment objective and policies, management
and operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signature")
Hub and Spoke-Registered Trademark- financial services method. The Trustees
believe that the Fund may achieve economies of scale over time by investing
through Hub and Spoke-Registered Trademark-.
The following table illustrates that investors in the Fund incur no
shareholder transaction expenses; their investment in the Fund is subject only
to the operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average net assets of the Fund. The Trustees of the Trust believe
that the aggregate per share expenses of the Fund and the Portfolio will be
approximately equal to and may be less than the expenses that the Fund would
incur if it retained the services of an investment adviser and invested its
assets directly in portfolio securities. Fund and Portfolio expenses are
discussed below under the headings Management of the Trust and the
Portfolio--Expenses, and Shareholder Servicing.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................................. None
Sales Load Imposed on Reinvested Dividends.................................................. None
Deferred Sales Load......................................................................... None
Redemption Fees............................................................................. None
Exchange Fees............................................................................... None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees.............................................................................. 0.30%
Rule 12b-1 Fees............................................................................ None
Other Expenses............................................................................. 0.45%
---------
Total Operating Expenses................................................................... 0.75%
</TABLE>
* These expenses are based on the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, after
any applicable expense reimbursement. Without such reimbursement, the Total
Operating Expenses would have been equal on an annual basis to 0.97% of the
average daily net assets of the Fund. See Management of the Trust and the
Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year.............................................................. $ 8
3 Years............................................................. $24
5 Years............................................................. $42
10 Years............................................................ $93
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Shareholder Servicing and Financial and Fund Accounting Services
Agreements, the fees paid to Pierpont Group, Inc. under the Fund Services
Agreements, organizational expenses and fees paid to State Street Bank and Trust
Company as custodian of the Portfolio. For a more detailed description of
contractual fee arrangements, including expense reimbursement, and of the fees
and expenses included in Other Expenses, see Management of the Trust and the
Portfolio and Shareholder Servicing. In connection with the above example,
please note that $1,000 is less than the Fund's minimum investment requirement
and that there are no redemption or exchange fees of any kind. See Purchase of
Shares and Redemption of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED
SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION
OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated period
have been audited by independent accountants. The Fund's annual report, which is
incorporated by reference into the Statement of Additional Information, includes
a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's annual report will be made available
without charge upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 11, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1995
----------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 10.00
-------
Income From Investment Operations:
Net Investment Income..................................... 0.40
Net Realized and Unrealized Gain on Investment............ 0.11
-------
Total From Investment Operations............................ 0.51
-------
Less Distributions to Shareholders From:
Net Investment Income..................................... (0.40)
-------
Net Asset Value, End of Period.............................. $ 10.11
-------
-------
Total Return................................................ 5.26%(a)
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands)................ $38,137
Ratio to Average Net Assets (annualized):
Expenses................................................ 0.75%
Net Investment Income................................... 4.31%
Decrease reflected in the above expense ratio due to
expense reimbursements................................. 0.22%
</TABLE>
- ---------
(a) Not Annualized
3
<PAGE>
SPECIAL INFORMATION CONCERNING HUB AND SPOKE-REGISTERED TRADEMARK-
The Trust and the Portfolio use certain proprietary rights, know-how and
financial services referred to as Hub and Spoke-Registered Trademark-. Hub and
Spoke-Registered Trademark- is a registered service mark of Signature. Signature
Broker-Dealer Services, Inc. (the Trust's and Portfolio's Administrator and the
Trust's Distributor) is a wholly owned subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund is an open-end management investment company
which seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, a separate registered investment company
with the same investment objective as the Fund. The investment objective of the
Fund or Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and
Spoke-Registered Trademark- has been approved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio may sell shares of their own fund using a
different pricing structure than the Fund. Such different pricing structures may
result in differences in returns experienced by investors in other funds that
invest in the Portfolio. Such differences in returns are not uncommon and are
present in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from the Administrator at (800)
847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution)
from the Portfolio which may or may not be readily marketable. The distribution
in kind may result in the Fund having a less diversified portfolio of
investments or adversely affect the Fund's liquidity, and the Fund could incur
brokerage, tax or other charges in converting the securities to cash.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
4
<PAGE>
For more information about the Portfolio's investment objective, policies
and restrictions, see Investment Objective and Policies, Additional Investment
Information and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
the Portfolio. For more information about changing the investment objective,
policies and restrictions of the Fund or the Portfolio, see Investment
Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high after tax total return
for New York residents consistent with moderate risk of capital. Total return
will consist of income plus capital gains and losses. The Fund attempts to
achieve its objective by investing all of its investable assets in The New York
Total Return Bond Portfolio, a non-diversified open-end management investment
company having the same investment objective as the Fund.
The Fund is designed for investors subject to federal and New York State
income taxes who seek a high after tax total return and who are willing to
receive some taxable income and capital gains to achieve that return.
The Portfolio's primary investments are municipal securities issued by New
York State and its political subdivisions and by agencies, authorities and
instrumentalities of New York and its political subdivisions. These securities
earn income exempt from federal and New York State and local income taxes but,
in certain circumstances, may be subject to alternative minimum tax. In
addition, the Portfolio may invest in municipal securities issued by states
other than New York, by territories and possessions of the United States and
their political subdivisions, agencies and instrumentalities. These securities
earn income exempt from federal income taxes but subject to New York State and
local income taxes; in certain circumstances, they may also be subject to
alternative minimum tax. In order to seek to enhance the Portfolio's after tax
return, the Advisor may also invest in securities which earn income subject to
New York and/or federal income taxes. These securities include U.S. government
securities, corporate securities and municipal securities issued on a taxable
basis. For more information regarding tax matters, including the applicability
of the alternative minimum tax, see Taxes. Since the Portfolio limits its
purchases to investment grade securities, it may not obtain the higher current
income available from lower rated securities, see Quality Information.
The Advisor actively manages the Portfolio's duration, the allocation of
securities across market sectors and the selection of securities to seek to
achieve a high after tax total return. Based on fundamental economic and capital
markets research, the Advisor adjusts the duration of the Portfolio in light of
the Advisor's interest rate outlook. For example, if interest rates are expected
to rise, the duration may be shortened to lessen the Portfolio's exposure to the
expected decrease in bond prices. If interest rates are expected to remain
stable, the Advisor may lengthen the duration in order to enhance the
Portfolio's yield.
Duration is a measure of the weighted average maturity of the bonds held in
the Portfolio and can be used as a measure of the sensitivity of the Portfolio's
market value to changes in interest rates. The longer the duration of the
Portfolio, the greater its price sensitivity. Under normal market conditions,
the Advisor believes the Portfolio will have a duration of three to seven years.
The maturity of individual securities in the Portfolio may vary widely, however.
The Advisor also attempts to enhance after tax total return by allocating
the Portfolio's assets among market sectors. Specific securities which the
Advisor believes are undervalued are selected for purchase within sectors using
advanced quantitative tools, analysis of credit risk, the expertise of a
dedicated trading desk and the judgment of fixed income portfolio managers and
analysts.
5
<PAGE>
In seeking to achieve the Portfolio's investment objective, the Advisor
attempts to consider the tax consequences to investors of all portfolio
transactions. The Advisor will sell and purchase securities to change the
Portfolio's duration, sector allocation or securities holdings only if it
believes that the expected benefit to the Portfolio will be greater than the
capital gains or income taxes shareholders would incur as a result of these
sales and purchases. The success of this strategy depends on the Advisor's
ability to forecast accurately changes in interest rates and assess the value of
fixed income securities.
The Advisor intends to manage the Portfolio actively in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates, but the Portfolio may engage in short-term
trading consistent with its objective. The estimated portfolio turnover rate for
the Portfolio generally should not exceed 100%. Portfolio transactions may incur
taxable long term or short term capital gains which will be distributed and
taxable to investors. In addition, to the extent the Portfolio engages in
short-term trading, it may incur increased transactions costs. See Taxes below.
MUNICIPAL SECURITIES. Under normal circumstances, the Portfolio will invest at
least 65% of its total assets in municipal securities issued by New York State
and its political subdivisions and their agencies, authorities and
instrumentalities. The Portfolio may also invest in debt obligations of
municipal issuers other than New York. The municipal securities in which the
Portfolio invests are primarily municipal bonds and municipal notes.
MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf of New
York State, other states, territories and possessions of the United States and
their political subdivisions, agencies, authorities and instrumentalities. These
obligations may be general obligation bonds secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest, or they may be revenue bonds payable from specific revenue sources,
but not generally backed by the issuer's taxing power.
MUNICIPAL NOTES. The Portfolio may also invest in municipal notes of various
types, including notes issued in anticipation of receipt of taxes, the proceeds
of the sale of bonds, other revenues or grant proceeds, as well as municipal
commercial paper and municipal demand obligations such as variable rate demand
notes and master demand obligations. The interest rate on variable rate demand
notes is adjustable at periodic intervals as specified in the notes. Master
demand obligations permit the investment of fluctuating amounts at periodically
adjusted interest rates. They are governed by agreements between the municipal
issuer and Morgan acting as agent, for no additional fee, in its capacity as
Advisor to the Portfolio and as fiduciary for other clients. Although master
demand obligations are not marketable to third parties, the Portfolio considers
them to be liquid because they are payable on demand. There is no specific
percentage limitation on these investments. For more information about municipal
notes, see Investment Objectives and Policies in the Statement of Additional
Information.
NEW YORK MUNICIPAL SECURITIES. Because of the Portfolio's significant investment
in New York municipal securities, its performance will be affected by the
condition of New York's economy, as well as the fiscal condition of the State,
its agencies and municipalities. The New York State economy generally remains
weak, despite some signs of growth. Compounding this effect is the presence of a
persistent budget deficit and the significant claims placed on the State's
budget by education, social service, and infrastructure needs. In addition, the
New York City economy and fiscal condition have profound influences upon the
market for most New York debt obligations. The Advisor currently views the New
York economy and financial condition as fundamentally stable. However, the
possibility of a disruption to economic and financial conditions which would
adversely affect the creditworthiness and marketability of New York municipal
securities continues to exist. A more detailed discussion of the risks
associated with investing in New York municipal securities is contained in the
Statement of Additional Information.
NON-MUNICIPAL SECURITIES. The Portfolio may invest in non-municipal securities
including obligations of the U.S. government and its agencies and
instrumentalities, bank obligations, debt securities of corporate issuers, asset
backed and mortgage related
6
<PAGE>
securities and repurchase agreements. The Portfolio will invest in non-municipal
securities when, in the opinion of the Advisor, these securities will enhance
the after tax total return to an individual subject to federal and New York
State income taxes in the highest tax bracket. Under normal circumstances, the
Portfolio's holdings of non-municipal securities and municipal securities of
tax-exempt issuers outside New York State will not exceed 35% of its total
assets.
QUALITY INFORMATION. The Portfolio will not purchase a security unless it is
rated at least Baa or better by Moody's Investors Service, Inc. ("Moody's") or
BBB or better by Standard & Poor's Ratings Group ("Standard & Poor's") or it is
unrated and in the Advisor's opinion it is of comparable quality. Securities
rated Baa by Moody's or BBB by Standard & Poor's are considered investment
grade, but have some speculative characteristics. These standards must be
satisfied at the time an investment is made. If the quality of the investment
later declines, the Portfolio may continue to hold the investment. See Appendix
A in the Statement of Additional Information for more detailed information on
these ratings.
NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified investment
company which means that the Portfolio is not limited by the Investment Company
Act of 1940 (the "1940 Act") in the proportion of its assets that may be
invested in the obligations of a single issuer. Thus, the Portfolio may invest a
greater proportion of its assets in the securities of a smaller number of
issuers and, as a result, will be subject to greater risk with respect to its
portfolio securities. The Portfolio, however, will comply with the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. See
Investment Restrictions below and Taxes in the Statement of Additional
Information.
The Portfolio may also purchase municipal securities together with puts,
purchase securities on a when-issued or delayed delivery basis, enter into
repurchase and reverse repurchase agreements, purchase synthetic variable rate
instruments, loan its securities, purchase certain privately placed securities
and enter into certain futures and options transactions. 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 no interest or income 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. 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 these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's 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 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.
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<PAGE>
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 five 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 the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For the
purposes of the 1940 Act, it is considered as a form of borrowing by the
Portfolio and, therefore, is a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified. For more information, see Investment
Objectives and Policies in the Statement of Additional Information.
PUTS. The Portfolio may purchase without limit municipal bonds or notes together
with the right to resell them at an agreed price or yield within a specified
period prior to maturity. This right to resell is known as a put. The aggregate
price paid for securities with puts may be higher than the price which otherwise
would be paid. The principal risk of puts is that the put writer may default on
its obligation to repurchase. The Advisor will monitor each writer's ability to
meet its obligations under puts. The amortized cost method is used by the
Portfolio to value all municipal securities with maturities of less than 60
days; when these securities are subject to puts separate from the underlying
securities, no value is assigned to the puts. The cost of any such put is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. See the Statement of Additional Information for the valuation procedure
if the Portfolio were to invest in municipal securities with maturities of 60
days or more that are subject to separate puts.
SYNTHETIC VARIABLE RATE INSTRUMENTS. The Portfolio may invest in certain
synthetic variable rate instruments. Such instruments generally involve the
deposit of a long-term tax exempt bond in a custody or trust arrangement and the
creation of a mechanism to adjust the long-term interest rate on the bond to a
variable short-term rate and a right (subject to certain conditions) on the part
of the purchaser to tender it periodically to a third party at par. The Advisor
will review the structure of synthetic variable rate instruments to identify
credit and liquidity risks (including the conditions under which the right to
tender the instrument would no longer be available) and will monitor those
risks. In the event that the right to tender the instrument is no longer
available, the risk to the Portfolio will be that of holding the long-term bond.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's net assets would be in illiquid
investments. Subject to this non-fundamental 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 Securities
Act of 1933 (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.
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<PAGE>
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.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging and risk management purposes, but it does not currently intend to do
so.
INVESTMENT RESTRICTIONS
For the Fund 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 government securities.
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same
investment restrictions as the Portfolio, except that the Fund may invest all of
its investable assets in another open-end investment company with the same
investment objective and restrictions (such as the Portfolio). References below
to the Portfolio's investment restrictions also include the Fund's investment
restrictions.
The Portfolio may not (i) borrow money, except that the Portfolio may (a)
borrow money from banks for temporary or emergency purposes (not for leveraging
purposes) and (b) enter into reverse repurchase agreements for any purpose,
provided that (a) and (b) in total do not exceed 33 1/3% of the value of the
Portfolio's total assets (including the amount borrowed) less liabilities (other
than borrowings) (if at any time borrowings come to exceed 33 1/3% of the value
of the Portfolio's total assets, the Portfolio will reduce its borrowings within
three business days to the extent necessary to comply with the 33 1/3%
limitation); or (ii) issue senior securities except as permitted by the 1940 Act
or any rule, order or interpretation thereunder. See Additional Investment
Information and Risk Factors -- Loans of Portfolio Securities and Reverse
Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
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<PAGE>
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identified
below.
<TABLE>
<S> <C>
Frederick S. Addy.................................. Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns................................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer.............................. Former Senior Vice President, Morgan Guaranty
Trust Company of New York
Matthew Healey..................................... Chairman and Chief Executive Officer, The
Pierpont Funds and The JPM Institutional
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................................ Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
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 Trust and of the
Portfolio, up to and including creating a separate board of trustees. See
Trustees and Officers in the Statement of Additional Information for more
information about the Trustees and Officers of the Fund and the Portfolio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. 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 these funds. See Trustees and
Officers in the Statement of Additional Information. The principal offices of
Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser because
the Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio. The Portfolio has retained the services of
Morgan as Investment Advisor. Morgan, with principal offices 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 a wholly owned subsidiary of J.P. Morgan &
Co. Incorporated ("J.P. Morgan"), a bank holding company organized under the
laws of Delaware. Through offices in New York City and abroad, J.P. Morgan,
through the Advisor and other subsidiaries, offers a wide range of services to
governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management of over $145 billion (of which the Advisor advises over $30
billion). Morgan provides investment advice and portfolio management services to
the Portfolio. Subject to the supervision of the Portfolio's Trustees, Morgan
makes the Portfolio's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the Portfolio's
investments. See Investment Advisor in the Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For fixed income portfolios, this process focuses on the
systematic analysis of real interest rates, sector diversification and
quantitative and credit analysis.
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<PAGE>
Morgan has managed portfolios of domestic fixed income securities on behalf of
its clients for over 50 years. The Portfolio managers making investments in
domestic fixed income securities work in conjunction with fixed income, credit,
capital market and economic research analysts, as well as traders and
administrative officers.
The following persons are primarily responsible for the day-to-day
management and implementation of Morgan's process for the Portfolio (the
inception date of each person's responsibility for the Portfolio and his or her
business experience for the past five years is indicated parenthetically):
Elbridge T. Gerry, III, Vice President (since April, 1994, employed by Morgan
since prior to 1990) and Elizabeth A. Augustin, Vice President (since April,
1994, employed by Morgan since prior to 1990).
As compensation for the services rendered and related expenses borne by
Morgan under the Investment Advisory Agreement with the Portfolio, the Portfolio
has agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.30% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and
provides shareholder services to shareholders of the Fund. See Services Agent
and Shareholder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as the
Administrator for the Trust and the Portfolio and in that capacity supervises
the Fund's and the Portfolio's day-to-day operations other than management of
the Portfolio's investments. In this capacity, SBDS administers and manages all
aspects of the Fund's and the Portfolio's day-to-day operations subject to the
supervision of the Trustees, except as set forth under Advisor, Services Agent,
Custodian and Shareholder Servicing. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Code; and (v) performs such administrative and
managerial oversight of the activities of the Trust's and the Portfolio's
custodian and transfer agent as the respective Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Financial and Fund
Accounting Services Agreements with Morgan, the fees of the Administrator are
covered by Morgan's expense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of The
Pierpont Funds as well as The JPM Institutional Funds and The JPM Advisor Funds,
which are two other families of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the following
schedule: 0.040% of the first $1 billion of these funds' aggregate average daily
net assets, 0.032% of the next $2 billion of these funds' aggregate average
daily net assets, 0.024% of the next $2 billion of these funds' aggregate
average daily net assets and 0.016% of these funds' aggregate average daily net
assets in excess of $5 billion. This fee rate is then applied to the net assets
of the Fund.
Under the Portfolio's Administration Agreement, the annual administration
fee rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The
Pierpont Funds, The JPM Institutional Funds or The JPM Advisor Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net assets,
0.008% of the next $2 billion of these portfolios' aggregate average daily net
assets, 0.006% of the next $2 billion of these portfolios' aggregate average
daily net assets and 0.004% of these portfolios' aggregate average daily net
assets in excess of $5 billion. This fee rate is then applied to the net assets
of the Portfolio. The Administrator may voluntarily waive a portion of its fees.
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<PAGE>
SBDS, a registered broker-dealer, also serves as the Distributor of shares
of the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a
wholly owned subsidiary of Signature. Signature and its affiliates currently
provide administration and distribution services for a number of registered
investment companies through offices located in Boston, New York, London,
Toronto and George Town, Grand Cayman.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with the
Trust and the Portfolio (each a "Services Agreement" and collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio. The agreements provide that Morgan is responsible for certain
accounting and operational services provided to the Fund and the Portfolio,
including services related to tax returns and financial reports. In the case of
the Fund, these services also include matters related to computing the amount of
dividends and the net asset value per share and keeping the books of account.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included in
the expense undertaking: the fees of Pierpont Group, Inc., shareholder servicing
fees, the services agent fee, organization expenses and extraordinary expenses
as defined in this agreement. Under the Portfolio's Services Agreement, the
following expenses are not included in the expense undertaking: the fees of
Pierpont Group, Inc., custodian fees, advisory fees, brokerage expenses, the
services agent fee, organization expenses and extraordinary expenses as defined
in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, at the
following annual rate of the Fund's average daily net assets: 0.12% on net
assets up to $100 million and 0.10% on net assets thereafter. The Portfolio's
Services Agreement provides for the Portfolio to pay Morgan a fee for these
services, which is computed daily and may be paid monthly, at the following
annual rate of the Portfolio's average daily net assets: 0.10% on net assets up
to $200 million, 0.05% on the next $200 million in net assets and 0.03% on net
assets thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund and
the Portfolio for services rendered, as well as payments to Morgan for services
rendered. The Trustees regularly review amounts paid to and accounted for by
Morgan pursuant to these agreements. Under the agreements, Morgan may delegate
one or more of its responsibilities to other entities, including SBDS, at
Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
March 31, 1996 to the extent necessary to maintain the Fund's total operating
expenses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 0.75% of the Fund's average daily net assets. This limit on certain
expenses does not cover extraordinary increases in these expenses during the
period and no longer applies in the event of a precipitous decline in assets due
to unforeseen circumstances. There is no assurance that Morgan will continue
this waiver beyond the specified period, except as required by the following
sentence. Morgan has agreed to waive fees as necessary, if
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<PAGE>
in any fiscal year the sum of the Fund's expenses exceeds the limits set by
applicable regulations of state securities commissions. Such annual limits are
currently 2.5% of the first $30 million of average net assets, 2% of the next
$70 million of such net assets and 1.5% of such net assets in excess of $100
million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursuant
to which Morgan acts as shareholder servicing agent for its customers and other
Fund investors who are customers of an eligible institution which is a customer
of Morgan (an "Eligible Institution"). The Fund has agreed to pay Morgan for
these services at an annual rate (expressed as a percentage of the average daily
net asset value of Fund shares owned by or for shareholders for whom Morgan is
acting as shareholder servicing agent) of 0.18% of the Fund's average daily net
assets. Under the terms of the Shareholder Servicing Agreement with the Fund,
Morgan may delegate one or more of its responsibilities to other entities at
Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services,
Morgan Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York
10036 or call (800) 521-5411.
The business days of the Fund and the Portfolio are the days the New York
Stock Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any
instructions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's
Distributor. Investors must be customers of Morgan or an Eligible Institution.
Investors may also be employer-sponsored retirement plans that have designated
the Fund as an investment option for the plans. Prospective investors who are
not already customers of Morgan may apply to become customers of Morgan for the
sole purpose of Fund transactions. There are no charges associated with becoming
a Morgan customer for this purpose. Morgan reserves the right to determine the
customers that it will accept, and the Fund reserves the right to determine the
purchase orders that it will accept.
The Fund requires a minimum initial investment of $25,000, except the
minimum initial investment is $10,000 for shareholders of another Pierpont Fund
and, under current policy, for former shareholders of The Pierpont Family of
Funds. The minimum subsequent investment for all investors is $5,000. These
minimum investment requirements may be waived for certain retirement plans or
for accounts for the benefit of minors. For purposes of minimum investment
requirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of another Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor. Any shareholder
may also call J.P. Morgan Funds Services at (800) 521-5411 for assistance in
placing an order for Fund shares. If the Fund receives a purchase order prior to
4:00 P.M. New York time on any business day, the purchase of Fund shares is
effective and is made at the net asset value determined that day. If the Fund
receives a purchase order after 4:00 P.M. New York time, the purchase is
effective and is made at net asset value determined on the next business day.
All purchase orders for Fund shares must be accompanied by instructions to
Morgan (or an Eligible Institution) to transfer immediately available funds to
the Fund's Distributor on settlement date. The settlement date is generally the
business day after the purchase is effective. The purchaser will begin to
receive the daily dividends on the settlement date. See Dividends and
Distributions.
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<PAGE>
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the Eligible Institution, transmitting proxy statements,
periodic reports, updated prospectuses and other communications to shareholders
and, with respect to meetings of shareholders, collecting, tabulating and
forwarding executed proxies and obtaining such other information and performing
such other services as Morgan or the Eligible Institution's clients may
reasonably request and agree upon with the Eligible Institution. Eligible
Institutions may separately establish their own terms, conditions and charges
for providing the aforementioned services and for providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund or may telephone J.P. Morgan Funds Services
directly at (800) 521-5411 and give the Shareholder Service Representative a
preassigned shareholder Personal Identification Number and the amount of the
redemption. The Fund executes effective redemption requests at the next
determined net asset value per share. See Net Asset Value. See Additional
Information below for an explanation of the telephone redemption policy of The
Pierpont Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time
is effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
deposited on settlement date in immediately available funds to the shareholder's
account at Morgan or at his Eligible Institution or, in the case of certain
Morgan customers, are mailed by check or transferred by wire in accordance with
the customer's instructions. The redeemer will continue to receive dividends on
these shares through the day before the settlement date. Settlement date is
generally the next business day after a redemption is effective and, subject to
Further Redemption Information below, in any event is within seven days. See
Dividends and Distributions.
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below $10,000 because of a redemption of shares, the
shareholder's remaining shares may be redeemed 60 days after written notice
unless the account is increased to $10,000 or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in proper
form. To be in proper form, the Fund must have received the shareholder's
taxpayer identification number and address. As discussed under Taxes below, the
Fund may be required to impose "back-up" withholding of federal income tax on
dividends, distributions and redemption proceeds when noncorporate investors
have not provided a certified taxpayer identification number. In addition, if a
shareholder sends a check for the purchase of Fund shares and shares are
purchased before the check has cleared, the transmittal of redemption proceeds
from the shares will occur upon clearance of the check which may take up to 15
days.
The Fund reserves the right to suspend the right of redemption and to
postpone the date of payment upon redemption for up to seven days and for such
other periods as the 1940 Act or the Securities and Exchange Commission may
permit. See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other Pierpont Fund or
JPM Institutional Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains an
investor,
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<PAGE>
with a value of at least each of those funds' minimum investment amounts. See
Method of Purchase in the prospectuses for the other Pierpont Funds and The JPM
Institutional Funds for the minimum investment amount for each of those funds.
Shares are exchanged on the basis of relative net asset value per share.
Exchanges are in effect redemptions from one fund and purchases of another fund
and the usual purchase and redemption procedures and requirements are applicable
to exchanges. See Purchase of Shares and Redemption of Shares in this Prospectus
and in the prospectuses for the other Pierpont Funds and The JPM Institutional
Funds. See also Additional Information below for an explanation of the telephone
exchange policy of The Pierpont Funds.
Shareholders subject to federal income tax who exchange shares in one fund
for shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income.
The net investment income of each Fund is declared as a dividend daily
immediately prior to the determination of the net asset value of the Fund on
that day and paid monthly. If an investor's shares are redeemed during a month,
accrued but unpaid dividends are paid with the redemption proceeds. The net
investment income of the Fund for dividend purposes consists of its pro rata
share of the net income of the Portfolio less the Fund's expenses. Expenses of
the Fund and the Portfolio, including the fees payable to Morgan, are accrued
daily. Shares will accrue dividends as long as they are issued and outstanding.
Shares are issued and outstanding as of the settlement date of a purchase order
to the settlement date of a redemption order.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net Asset
Value in the Statement of Additional Information for information on valuation of
portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:00 P.M. New York time
on Monday through Friday, except that the net asset value is not computed for
the Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an
unlimited
15
<PAGE>
number of full and fractional shares ($0.001 par value) of one or more series.
To date, 12 series of shares have been authorized and are available for sale to
the public. Only shares of the Fund are offered through this Prospectus. No
series of shares has any preference over any other series of shares. See
Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee,
shareholder, officer, employee, or agent of the Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration of
Trust. The Trustees will call a meeting of shareholders to vote on removal of a
Trustee upon the written request of the record holders of ten percent of Trust
shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund 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.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in the
Portfolio.
FEDERAL TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are subject
to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to federal,
state or local taxes. See Taxes in the Statement of Additional Information.
Annual statements as to the current federal tax status of distributions, if
applicable, are mailed to shareholders after the end of the taxable year for the
Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. As a regulated investment company, the
Fund should not be subject to federal income taxes or federal excise taxes if
all of its net investment income and capital gains less any available capital
loss carryforwards are distributed to shareholders within allowable time limits.
The Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file,
the Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
The Fund intends to qualify to pay exempt-interest dividends to its
shareholders by having, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consist of tax exempt securities. An
exempt-interest dividend is that part of dividend distributions made by the Fund
which consists of interest received by the Fund on tax exempt securities.
Exempt-interest dividends received from the Fund will be treated for federal
income tax purposes as tax exempt interest income. Since, under normal
circumstances, at least 65% of the Portfolio's total assets will be invested in
New York tax exempt obligations, it is expected that a substantial portion of
the Fund's dividends will be exempt-interest dividends. However, in pursuit of
its
16
<PAGE>
investment objective of a high after tax total return, the Portfolio is
permitted to invest in securities whose income is subject to federal income tax
and to seek to realize capital gains. Therefore it is expected that a portion of
the Fund's dividends will be taxable and that the Fund may distribute net long
and short term capital gains. See Investment Objective and Policies.
Interest on certain tax exempt municipal obligations issued after August 7,
1986 is a preference item for purposes of the alternative minimum tax applicable
to individuals and corporations. Under tax regulations to be issued, the portion
of an exempt-interest dividend of a regulated investment company that is
allocable to these obligations will be treated as a preference item for purposes
of the alternative minimum tax.
Corporations should, however, be aware that interest on all municipal
securities will be included in calculating (i) adjusted current earnings for
purposes of the alternative minimum tax applicable to them, (ii) the additional
tax imposed on certain corporations by the Superfund Revenue Act of 1986, and
(iii) the foreign branch profits tax imposed on effectively connected earnings
and profits of United States branches of foreign corporations. Furthermore,
special tax provisions may apply to certain financial institutions and property
and casualty insurance companies, and they should consult their tax advisors
before purchasing shares of the Fund.
Interest on indebtedness incurred or continued by a shareholder (whether a
corporation or an individual) to purchase or carry shares of the Fund is
generally not deductible. The Treasury has been given authority to issue
regulations which would disallow the interest deduction if incurred to purchase
or carry shares of the Fund owned by the taxpayer's spouse, minor child or
entity controlled by the taxpayer. Entities or persons who are "substantial
users" (or related persons) of facilities financed by tax exempt bonds should
consult their tax advisors before purchasing shares of the Fund.
Distributions of taxable net investment income and realized net short-term
capital gains in excess of net long-term capital losses are taxable as ordinary
income to shareholders of the Fund whether such distributions are taken in cash
or reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund are not eligible for the dividends-received deduction.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares.
Long-term capital gains distributions to corporate shareholders are not eligible
for the dividends-received deduction.
Any distribution of capital gains will have the effect of reducing the net
asset value of Fund shares held by a shareholder by the same amount as the
distribution. If the net asset value of the shares is reduced below a
shareholder's cost as a result of such a distribution, the distribution,
although constituting a return of capital to the shareholder, will be taxable as
described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect to
such shares. In addition, any loss realized by a shareholder upon the redemption
or exchange of shares in the Fund held six months or less will be disallowed to
the extent of any exempt-interest dividends received by the shareholder with
respect to these shares.
NEW YORK STATE AND NEW YORK CITY TAXES
Shareholders are not subject to New York State or New York City personal income
taxes on Fund dividends to the extent that such dividends qualify as "exempt
interest dividends" and represent interest income attributable to New York tax
exempt obligations (as well as certain other obligations the interest on which
is exempt from New York State and New York City personal income taxes, such as,
for example, certain obligations of the Commonwealth of Puerto Rico). Dividends
and distributions derived from taxable income and capital gains are not exempt
from New York State and New York City taxes.
17
<PAGE>
Corporations should note that the Fund's income dividends and other
distributions are not exempt from the New York State Franchise Tax on Business
Corporations or the New York City General Corporation Tax.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of the Fund is generally not deductible for New York State or
New York City personal income tax purposes.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The financial
statements appearing in annual reports are audited by independent accountants.
Shareholders also will be sent confirmations of each purchase and redemption and
monthly statements, reflecting all other account activity, including dividends
and any distributions reinvested in additional shares or credited as cash.
All shareholders are given the privilege to initiate transactions
automatically by telephone upon opening an account. However, an investor should
be aware that a transaction authorized by telephone and reasonably believed to
be genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Shareholder
Servicing Agent or a shareholder's Eligible Institution may be liable for any
losses due to unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may
compare its performance to other investments or relevant indexes, including data
from Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes, the Lehman Brothers Bond Indexes
and other industry publications. The Fund may advertise "yield" and "tax
equivalent yield". Yield refers to the net income generated by an investment in
the Fund over a stated 30-day period. This income is then annualized -- i.e.,
the amount of income generated by the investment during the 30-day period is
assumed to be generated each 30-day period for twelve periods and is shown as a
percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The tax
equivalent yield is calculated similarly to the yield for the Fund, except that
the yield is increased using a stated income tax rate to demonstrate the taxable
yield necessary to produce an after-tax equivalent to the Fund.
The Fund may also advertise "total return" and non-standardized total return
data. The total return shows what an investment in the Fund would have earned
over a specified period of time (one, five or ten years or since commencement of
operations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all
recurring fees. These methods of calculating yield and total return are required
by regulations of the Securities and Exchange Commission. Yield and total return
data similarly calculated, unless otherwise indicated, over other specified
periods of time may also be used. See Performance Data in the Statement of
Additional Information. All performance figures are based on historical earnings
and are not intended to indicate future performance. Performance information may
be obtained by calling The Fund's Distributor at (800) 847-9487.
18
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE TRUST OR THE
DISTRIBUTOR TO MAKE SUCH OFFER IN SUCH JURISDICTION.
The
Pierpont
New York
Total Return
Bond Fund
PROSPECTUS
AUGUST 1, 1995
<PAGE>
APPENDIX
The hedging and risk management transactions which are permissible for the
Portfolio are described below. The Portfolio has no present intention of
engaging in any of these transactions.
The Portfolio may (a) purchase and sell exchange traded and over-the-counter
(OTC) put and call options on fixed income securities and indexes of fixed
income securities, (b) purchase and sell futures contracts on fixed income
securities and indexes of fixed income securities and (c) purchase and sell put
and call options on futures contracts on fixed income securities and indexes of
fixed income securities.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. See Risk Management in the Statement of Additional
Information. The Portfolio may not use futures contracts and options for
speculation.
The Portfolio may utilize options and futures contracts to manage its
exposure to changing interest rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Advisor and consistent with the Portfolio's objective and
policies. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase the Portfolio's return. While the use of these
instruments by the Portfolio may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Advisor applies a strategy at an inappropriate time or judges market
conditions or trends incorrectly, options and futures strategies may lower the
Portfolio's return. Certain strategies limit the Portfolio's possibilities to
realize gains as well as limiting its exposure to losses. The Portfolio could
also experience losses if the prices of its options and futures positions were
poorly correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option premiums,
in connection with its futures and options transactions and these transactions
could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. In addition, the Portfolio will not purchase or sell
(write) futures contracts, options, or futures contracts or commodity options
for risk management purposes if, as a result, the aggregate initial margin and
options premiums required to establish these positions exceed 5% of the net
asset value of the Portfolio.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indexes
of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a
liquid market exists. If the option is allowed to expire, the Portfolio will
lose the entire
A-1
<PAGE>
premium it paid. If the Portfolio exercises a put option on a security, it will
sell the instrument underlying the option at the strike price. If the Portfolio
exercises an option on an index, settlement is in cash and does not involve the
actual sale of securities. If an option is American style, it may be exercised
on any day up to its expiration date. A European style option may be exercised
only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price
of the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the instrument underlying the option at the option's
strike price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect to
suffer a loss if security prices do not rise sufficiently to offset the cost of
the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a put
option the Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the
option's underlying instrument in return for the strike price upon exercise of
the option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell put and call options and
sell (write) covered put and call options on any securities index based on
securities in which the Portfolio may invest. Options on securities indexes are
similar to options on securities, except that the exercise of securities index
options is settled by cash payment and does not involve the actual purchase or
sale of securities. In addition, these options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. The Portfolio, in purchasing or
selling index options, is subject to the risk that the value of its portfolio
securities may not change as much as an index because the Portfolio's
investments generally will not match the composition of an index.
A-2
<PAGE>
For a number of reasons, a liquid market may not exist and thus the
Portfolio may not be able to close out an option position that it has previously
entered into. When the Portfolio purchases an OTC option, it will be relying on
its counterparty to perform its obligations, and the Portfolio may incur
additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the Portfolio
sells a futures contract, it agrees to sell a specified quantity of the
underlying instrument at a specified future date or to receive a cash payment
based on the value of a securities index. The price at which the purchase and
sale will take place is fixed when the Portfolio enters into the contract.
Futures can be held until their delivery dates or the position can be (and
normally is) closed out before then. There is no assurance, however, that a
liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations in
the underlying instrument, much as if it had purchased the underlying instrument
directly. When the Portfolio sells a futures contract, by contrast, the value of
its futures position will tend to move in a direction contrary to the value of
the underlying instrument. Selling futures contracts, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or
pay for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant (FCM).
Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with
its use of options and futures contracts to the extent required by the staff of
the Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and
a more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-3
<PAGE>
JPM432
THE PIERPONT FUNDS
THE PIERPONT MONEY MARKET FUND
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
THE PIERPONT TREASURY MONEY MARKET FUND
THE PIERPONT SHORT TERM BOND FUND
THE PIERPONT BOND FUND
THE PIERPONT TAX EXEMPT BOND FUND
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND
THE PIERPONT DIVERSIFIED FUND
THE PIERPONT EQUITY FUND
THE PIERPONT CAPITAL APPRECIATION FUND
THE PIERPONT INTERNATIONAL EQUITY FUND
THE PIERPONT EMERGING MARKETS EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1995
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
FOR THE FUND OR FUNDS LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO TIME, WHICH MAY
BE OBTAINED UPON REQUEST FROM SIGNATURE BROKER-DEALER SERVICES, INC., ATTENTION:
THE PIERPONT FUNDS (800) 847-9487.
<PAGE>
Table of Contents
PAGE
General.................................
Investment Objectives and Policies......
Investment Restrictions.................
Trustees and Officers...................
Investment Advisor......................
Administrator and Distributor...........
Services Agent..........................
Custodian...............................
Shareholder Servicing...................
Independent Accountants.................
Expenses................................
Purchase of Shares......................
Redemption of Shares....................
Exchange of Shares......................
Dividends and Distributions.............
Net Asset Value.........................
Performance Data........................
Portfolio Transactions..................
Massachusetts Trust.....................
Description of Shares...................
Taxes...................................
Additional Information..................
Financial Statements....................
Appendix A - Description of Securities
Ratings................................. A-1
Additional Information Concerning New
York Municipal Obligations............ B-1
<PAGE>
GENERAL
The Pierpont Funds currently consist of twelve funds: The Pierpont
Money Market Fund, The Pierpont Treasury Money Market Fund, The Pierpont Tax
Exempt Money Market Fund, The Pierpont Short Term Bond Fund, The Pierpont Bond
Fund, The Pierpont Tax Exempt Bond Fund, The Pierpont New York Total Return Bond
Fund, The Pierpont Equity Fund, The Pierpont Capital Appreciation Fund, The
Pierpont International Equity Fund, The Pierpont Emerging Markets Equity Fund
and The Pierpont Diversified Fund (collectively, the "Funds"). Each of the Funds
is a series of The Pierpont Funds, an open-end management investment company
formed as a Massachusetts business trust (the "Trust"; where appropriate,
references to the "Trust" refer to the Trust acting on behalf of a Fund and
references to a "Fund" refer to a Fund acting through the Trust).
This Statement of Additional Information describes the financial
history, investment objectives and policies, management and operation of each of
the Funds to enable investors to select the Funds which best suit their needs.
The Pierpont Funds operate through Signature Financial Group, Inc.'s Hub and
Spoke(R) financial services method. Formerly, The Pierpont Money Market Fund,
The Pierpont Tax Exempt Money Market Fund, The Pierpont Bond Fund, The Pierpont
Tax Exempt Bond Fund, The Pierpont Equity Fund, The Pierpont Capital
Appreciation Fund, and The Pierpont International Equity Fund operated as
free-standing mutual funds and not through Hub and Spoke(R). Where indicated in
this Statement of Additional Information, historical information for each of
these Funds includes information for their respective predecessor entities.
This Statement of Additional Information provides additional
information with respect to the Funds, and should be read in conjunction with
the current Prospectus. Capitalized terms not otherwise defined in this
Statement of Additional Information have the meanings accorded to them in the
Funds' Prospectus. The Funds' executive offices are located at 6 St. James
Avenue, Boston, Massachusetts 02116.
INVESTMENT OBJECTIVES AND POLICIES
THE PIERPONT MONEY MARKET FUND (the "Money Market Fund") is designed to
be an economical and convenient means of making substantial investments in money
market instruments. The Money Market Fund's investment objective is to maximize
current income and maintain a high level of liquidity. The Fund attempts to
achieve this objective by investing all of its investable assets in The Money
Market Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Money Market Fund.
The Portfolio seeks 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. dollar denominated securities described in the Prospectus and
this Statement of Additional Information that meet certain rating criteria,
present minimal credit risk and have effective maturities of not more than
thirteen months. The Portfolio's ability to achieve maximum current income is
affected by its high quality standards. See "Quality and Diversification
Requirements".
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET FUND (the "Tax Exempt Money Market
Fund") is designed to be an economical and convenient means of making
substantial investments in instruments that are exempt from federal income tax.
The Tax Exempt Money Market Fund's investment objective is to provide a high
level of current income that is exempt from federal income tax and maintain a
high level of liquidity. See "Taxes". The Fund attempts to achieve this
objective by investing all of its investable assets in The Tax Exempt Money
Market Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Tax Exempt Money Market
Fund.
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. dollar-denominated securities described in the
Prospectus and this Statement of Additional Information that meet certain rating
criteria, present minimal credit risks, have effective maturities of not more
than thirteen months and earn interest wholly exempt from federal income tax in
the opinion of bond counsel for the issuer, but it may invest up to 20% of its
total assets in taxable obligations. See "Quality and Diversification
Requirements". Interest on these securities may be subject to state and local
taxes. For more detailed information regarding tax matters, including the
applicability of the alternative minimum tax, see "Taxes".
THE PIERPONT TREASURY MONEY MARKET FUND (the "Treasury Money Market
Fund") is designed to be an economical and convenient means of making
substantial investments in short term direct obligations of the U.S. Treasury.
The Treasury Money Market Fund's investment objective is to provide current
income, maintain a high level of liquidity and preserve capital. The Fund
attempts to accomplish this objective by investing all of its investable assets
in The Treasury Money Market Portfolio (the "Portfolio"), a diversified open-end
management investment company having the same investment objective as the
Treasury Money Market Fund.
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 described in the Prospectus
and in this Statement of Additional Information that have effective maturities
of not more than thirteen months. See "Quality and Diversification
Requirements".
THE PIERPONT SHORT TERM BOND FUND (the "Short Term Bond Fund") is
designed for investors who place a strong emphasis on conservation of capital
but who also want a return greater than that of a money market fund or other
very low risk investment vehicles. It is appropriate for investors who do not
require the stable net asset value typical of a money market fund but who want
less price fluctuation than is typical of a longer-term bond fund. The Short
Term Bond Fund's investment objective is to provide a high total return while
attempting to limit the likelihood of negative quarterly returns. The Short Term
Bond Fund seeks to achieve this high total return to the extent consistent with
modest risk of capital and the maintenance of liquidity. The Short Term Bond
Fund attempts to achieve its investment objective by investing all of its
investable assets in The Short Term Bond Portfolio (the "Portfolio"), a
diversified open-end
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management investment company having the same investment objective as the Short
Term Bond Fund.
The Portfolio attempts to achieve its investment objective by investing
primarily in the corporate and government debt obligations and related
securities described in the Prospectus and this Statement of Additional
Information.
THE PIERPONT BOND FUND (the "Bond Fund") is designed to be an
economical and convenient means of making substantial investments in a broad
range of corporate and government debt obligations and related investments of
domestic and foreign issuers, subject to certain quality and other restrictions.
See "Quality and Diversification Requirements". The Bond Fund's investment
objective is to provide a high total return consistent with moderate risk of
capital and maintenance of liquidity. Although the net asset value of the Bond
Fund will fluctuate, the Bond Fund attempts to conserve the value of its
investments to the extent consistent with its objective. The Bond Fund attempts
to achieve its objective by investing all of its investable assets in The U.S.
Fixed Income Portfolio (the "Portfolio"), a diversified open-end management
investment company having the same investment objective as the Bond Fund.
The Portfolio attempts to achieve its investment objective by investing
in high grade corporate and government debt obligations and related securities
of domestic and foreign issuers described in the Prospectus and this Statement
of Additional Information.
INVESTMENT PROCESS
Duration/yield curve management: Morgan's duration decision begins with
an analysis of real yields, which its research indicates are generally a
reliable indicator of longer term interest rate trends. Other factors Morgan
studies in regard to interest rates include economic growth and inflation,
capital flows and monetary policy. Based on this analysis, Morgan forms a view
of the most likely changes in the level and shape of the yield curve -- as well
as the timing of those changes -- and sets the Portfolio's duration and maturity
structure accordingly. Morgan typically limits the overall duration of the
Portfolio to a range between one year shorter and one year longer than that of
the Salomon Brothers Broad Investment Grade Bond Index, the benchmark index.
Sector allocations: Sector allocations are driven by Morgan's
fundamental and quantitative analysis of the relative valuation of a broad array
of fixed income sectors. Specifically, Morgan utilizes market and credit
analysis to assess whether the current risk-adjusted yield spreads of various
sectors are likely to widen or narrow. Morgan then overweights (underweights)
those sectors its analysis offer the most (least) relative value, basing the
speed and magnitude of these shifts on valuation considerations.
Security selection: Securities are selected by the portfolio manager,
with substantial input from Morgan's fixed income analysts and traders. Using
quantitative analysis as well as traditional valuation methods, Morgan's applied
research analysts aim to optimize security selection within the bounds of the
Portfolio's investment objective. In addition, credit analysts -- supported by
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Morgan's equity analysts -- assess the credit worthiness of issuers and
counterparties. A dedicated trading desk contributes to security selection by
tracking new issuance, monitoring dealer inventories, and identifying
attractively priced bonds. The traders also handle all transactions for the
Portfolio.
THE PIERPONT TAX EXEMPT BOND FUND (the "Tax Exempt Bond Fund") is
designed to be an economical and convenient means of making substantial
investments in debt obligations that are exempt from federal income tax. The Tax
Exempt Bond Fund's investment objective is to provide a high level of current
income exempt from federal income tax consistent with moderate risk of capital
and maintenance of liquidity. See "Taxes". The Fund attempts to achieve its
investment objective by investing all of its investable assets in The Tax Exempt
Bond Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Tax Exempt Bond Fund.
The Portfolio attempts to achieve its investment objective by investing
primarily in securities of states, territories and possessions of the United
States and their political subdivisions, agencies and instrumentalities, the
interest of which is exempt from federal income tax in the opinion of bond
counsel for the issuer, but it may invest up to 20% of its total assets in
taxable obligations. The Tax Exempt Bond Fund seeks to maintain a current yield
that is greater than that obtainable from a portfolio of short term tax exempt
obligations, subject to certain quality restrictions. See "Quality and
Diversification Requirements".
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND (the "New York Total
Return Bond Fund") is designed to be an economical and convenient means of
investing in a portfolio consisting primarily of debt obligations that are
exempt from federal and New York State income taxes. The New York Total Return
Bond Fund's investment objective is to provide a high after tax total return for
New York residents consistent with moderate risk of capital. Total return will
consist of income plus capital gains and losses. The Fund attempts to achieve
its objective by investing all of its investable assets in The New York Total
Return Bond Portfolio (the "Portfolio"), a non-diversified open-end management
investment company having the same investment objective as the Fund.
The Portfolio attempts to achieve its investment objective by investing
primarily in municipal securities issued by New York State and its political
subdivisions and by agencies, authorities and instrumentalities of New York and
its political subdivisions. These securities earn income exempt from federal and
New York State and local income taxes but, in certain circumstances, may be
subject to alternative minimum tax. In addition, the Portfolio may invest in
municipal securities issued by states other than New York, by territories and
possessions of the United States and by the District of Columbia and their
political subdivisions, agencies and instrumentalities. These securities earn
income exempt from federal income taxes but, in certain circumstances, may be
subject to alternative minimum tax. In order to seek to enhance the Portfolio's
after tax return, the Portfolio may also invest in securities which earn income
subject to New York and/or federal income taxes. These securities include
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U.S. government securities, corporate securities and municipal securities issued
on a taxable basis.
THE PIERPONT DIVERSIFIED FUND (the "Diversified Fund") is designed for
investors who wish to invest for long term objectives such as retirement and who
seek to attain real appreciation in their investments over the long term, but
with somewhat less price fluctuation than a portfolio consisting solely of
equity securities. The Diversified Fund's investment objective is to provide a
high total return from a diversified portfolio of equity and fixed income
securities. The Fund attempts to achieve its investment objective by investing
all of its investable assets in The Diversified Portfolio, a diversified
open-end management investment company having the same investment objective as
the Diversified Fund.
The following discussion supplements the information regarding the
investment objective of each of the Funds and the policies to be employed to
achieve this objective by their corresponding Portfolios as set forth above and
in the Prospectus. The investment objective of each Fund and its corresponding
Portfolio is identical. Accordingly, references below to a Fund also include the
Fund's corresponding Portfolio; similarly, references to a Portfolio also
include the corresponding Fund that invests in the Portfolio unless the context
requires otherwise.
THE PIERPONT EQUITY FUND (the "Equity Fund") is designed for investors
who want an actively managed portfolio of selected equity securities that seeks
to outperform the S&P 500 Index. The Equity Fund's investment objective is to
provide a high total return from a portfolio of selected equity securities. The
Fund attempts to achieve its investment objective by investing all of its
investable assets in The Selected U.S. Equity Portfolio (the "Portfolio"), a
diversified open-end management investment company having the same investment
objective as the Equity Fund.
In normal circumstances, at least 65% of the Portfolio's net assets
will be invested in equity securities consisting of common stocks and other
securities with equity characteristics comprised of preferred stock, warrants,
rights , convertible securities, trust certifications, limited partnership
interests and equity participations (collectively, "Equity Securities"). The
Portfolio's primary equity investments are the common stock of large and medium
sized U.S. corporations and, to a limited extent, similar securities of foreign
corporations.
INVESTMENT PROCESS
Fundamental Research: Morgan's 20 domestic equity analysts, each an
industry specialist with an average of 13 years of experience, follow 700
predominantly large- and medium-sized U.S. companies -- 500 of which form the
universe for the Portfolio's investments. Their research goal is to forecast
normalized, longer term earnings and dividends for the most attractive companies
among those they cover. In doing this, they may work in concert with Morgan's
international equity analysts in order to gain a broader perspective for
evaluating industries and companies in today's global economy.
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Systematic valuation: The analysts' forecasts are converted into
comparable expected returns by a dividend discount model, which calculates those
expected returns by comparing a company's current stock price with the "fair
value" price forecasted by its estimated long term earnings power. Within each
sector, companies are ranked by their expected return and grouped into
quintiles: those with the highest expected returns (Quintile 1) are deemed the
most undervalued relative to their long-term earnings power, while those with
the lowest expected returns (Quintile 5) are deemed the most overvalued.
Disciplined portfolio construction: A diversified portfolio is
constructed using disciplined buy and sell rules. Purchases are concentrated
among first- quintile stocks; the specific names selected reflect the portfolio
manager's judgement concerning the soundness of the underlying forecasts, the
likelihood that the perceived misvaluation will be corrected within a reasonable
time frame and the magnitude of the risks versus the rewards. Once a stock falls
into the third quintile -- because its price has risen or its fundamentals have
deteriorated -- it generally becomes a sales candidate. The portfolio manager
seeks to hold sector weightings close to those of the S&P 500 Index, reflecting
Morgan's belief that its research has the potential to add value at the
individual stock level, but not at the sector level. Sector neutrality is also
seen as a way to help protect the portfolio from macroeconomic risks, and --
together with diversification -- represents an important element of Morgan's
risk control strategy. Morgan's dedicated trading desk handles all transactions
for the Portfolio.
THE PIERPONT CAPITAL APPRECIATION FUND (the "Capital Appreciation
Fund") is designed for investors who are willing to assume the somewhat higher
risk of investing in small companies in order to seek a higher return over time
than might be expected from a portfolio of stocks of large companies. The
Capital Appreciation Fund's investment objective is to provide a high total
return from portfolio of Equity Securities of small companies. The Fund attempts
to achieve its investment objective by investing all of its investable assets in
The U.S. Small Company Portfolio (the "Portfolio"), a diversified open-end
management investment company having the same investment objective as the
Capital Appreciation Fund.
The Portfolio attempts to achieve its investment objective by investing
primarily in the common stock of small U.S. companies included in the Russell
2500 Index, which is composed of 2,500 common stocks of U.S. companies with
market capitalizations ranging between $100 million and $1.5 billion.
INVESTMENT PROCESS
Fundamental Research: Morgan's 20 domestic equity analysts -- each an
industry specialist with an average of 13 years of experience -- continuously
monitor the small cap stocks in their respective sectors with the aim of
identifying companies that exhibit superior financial strength and operating
returns. Meetings with management and on-site visits play a key role in shaping
their assessments. Their research goal is to forecast normalized, long-term
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earnings and dividends for the most attractive small cap companies among those
they monitor -- a universe that generally contains a total of 300-350 names.
Because Morgan's analysts follow both the larger and smaller companies in their
industries -- in essence, covering their industries from top to bottom -- they
are able to bring broad perspective to the research they do on both.
Systematic valuation: The analysts' forecasts are converted into
comparable expected returns by Morgan's dividend discount model, which
calculates those returns by comparing a company's current stock price with the
"fair value" price forecasted by its estimated long-term earnings power. Within
each industry, companies are ranked by their expected returns and grouped into
quintiles: those with the highest expected returns (Quintile 1) are deemed the
most undervalued relative to their long-term earnings power, while those with
the lowest investment returns (Quintile 5) are deemed the most overvalued.
Disciplined portfolio construction: A diversified portfolio is
constructed using disciplined buy and sell rules. Purchases are concentrated
among the stocks in the top two quintiles of the rankings: the specific names
selected reflect the portfolio manager's judgement concerning the soundness of
the underlying forecasts, the likelihood that the perceived misevaluation will
soon be corrected and the magnitude of the risks versus the rewards. Once a
stock falls into the third quintile -- because its price has risen or its
fundamentals have deteriorated -- it generally becomes a sales candidate. The
portfolio manager seeks to hold sector weightings close to those of the Russell
2500 Index, the Portfolio's benchmark, reflecting Morgan's belief that its
research has the potential to add value at the individual stock level, but not
at the sector level. Sector neutrality is also seen as a way to help to protect
the portfolio from macroeconomic risks, and -- together with diversification --
represents an important element of Morgan's investment strategy.
THE PIERPONT INTERNATIONAL EQUITY FUND (the "International Equity
Fund") is designed for investors with a long term investment horizon who want to
diversify their portfolios by investing in an actively managed portfolio of
non-U.S. securities that seeks to outperform the Morgan Stanley Europe,
Australia and Far East Index (the "EAFE Index"). The International Equity Fund's
investment objective is to provide a high total return from a portfolio of
Equity Securities of foreign corporations. The Fund attempts to achieve its
investment objective by investing all of its investable assets in The Non-U.S.
Equity Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the International Equity Fund.
The Portfolio seeks to achieve its investment objective by investing
primarily in the Equity Securities of foreign corporations . Under normal
circumstances, the Portfolio expects to invest at least 65% of its total assets
in such securities. The Portfolio does not intend to invest in U.S. securities
(other than money market instruments), except temporarily, when
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extraordinary circumstances prevailing at the same time in a significant number
of developed foreign countries render investments in such countries inadvisable.
INVESTMENT PROCESS
Country allocation: Morgan's country allocation decision begins with a
forecast of equity risk premiums, which provide a valuation signal by measuring
the relative attractiveness of stocks versus bonds. Using a proprietary
approach, Morgan calculates this risk premium for each of the nations in the
Portfolio's universe, determines the extent of its deviation -- if any -- from
its historical norm, and then rank countries according to the size of those
deviations. Countries with high (low) rankings are overweighted (underweighted)
in comparisons to the EAFE Index to reflect the above-average (below-average)
attractiveness of their stock markets. In determining weightings, Morgan
analyzes a quantity of qualitative factors as well -- including the liquidity,
earnings momentum and interest rate climate of the market at hand. These
qualitative assessments can change the magnitude but not the direction of the
country allocations called for by the risk premium forecast. Morgan places
limits on the total size of the Portfolio's country over- and under-weightings
relative to the EAFE Index.
Stock selection: Morgan's 44 international equity analysts, each an
industry and country specialist, forecast normalized earnings and dividend
payouts for roughly 1,000 non-U.S. companies -- taking a long-term perspective
rather than the short time frame common to consensus estimates. These forecasts
are converted into comparable expected returns by a dividend discount model, and
then companies are ranked from most to least attractive by industry and country.
A diversified portfolio is constructed using disciplined buy and sell rules. The
portfolio manager's objective is to concentrate the purchases in the top third
of the rankings, and to keep sector weightings close to those of the EAFE Index,
the Fund's benchmark. Once a stock falls into the bottom third of the rankings,
it generally becomes a sales candidate. Where available, warrants and
convertibles may be purchased instead of common stock if they are deemed a more
attractive means of investing in an undervalued company.
Currency management: Currency is actively managed, in conjunction with
country and stock allocation, with the goal of protecting and possibly enhancing
the Fund's return. Morgan's currency decisions are supported by a proprietary
tactical mode which forecasts currency movements based on an analysis of four
fundamental factors -- trade balance trends, purchasing power parity, real
short-term interest differentials and real bond yields -- plus a technical
factor designed to improve the timing of transactions. Combining the output of
this model with a subjective assessment of economic political and market
factors, Morgan's currency group recommends currency strategies that are
implemented in conjunction with the portfolio's investment strategy.
THE PIERPONT EMERGING MARKETS EQUITY FUND (the "Emerging Markets Equity
Fund") is designed for investors with a long term investment horizon who want
exposure to the rapidly growing emerging markets. The Emerging Markets Equity
Fund's investment objective is to provide a high total return from a portfolio
of Equity Securities of companies in emerging markets. The
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Fund attempts to achieve its investment objective by investing all of its
investable assets in The Emerging Markets Equity Portfolio (the "Portfolio"), a
diversified open-end management investment company having the same investment
objective as the Emerging Markets Equity Fund.
The Portfolio seeks to achieve its investment objective by investing
primarily in Equity Securities of emerging markets issuers . Under normal
circumstances, the Portfolio expects to invest at least 65% of its total assets
in such securities. The Portfolio does not intend to invest in U.S. securities
(other than money market instruments), except temporarily, when extraordinary
circumstances prevailing at the same time in a significant number of emerging
markets countries render investments in such countries inadvisable.
INVESTMENT PROCESS
Country allocation: Morgan's country allocation decision begins with a
forecast of the expected return of each market in the Portfolio's universe.
These expected returns are calculated using a proprietary valuation method that
is forward looking in nature rather than based on historical data. Morgan then
evaluates these expected returns from two different perspectives: first, it
identifies countries that have high real expected returns relative to their own
history and other nations in their universe. Second, it identifies those
countries that it expects will provide high returns relative to their currency
risk. Countries that rank highly on one or both of these scores are overweighted
relative to the Fund's benchmark, The IFC Investable Index, while those that
rank poorly are underweighted. To help contain risk, Morgan places limits on the
total size of the Portfolio's country over- and under-weightings.
Stock selection: Morgan's 12 emerging market equity analysts -- each an
industry specialist -- monitor a universe of approximately 900 companies in
these countries, developing forecasts of earnings and cash flows for the most
attractive among them. Companies are ranked from most to least attractive based
on this research, and then a diversified portfolio is constructed using
disciplined buy and sell rules. The portfolio manager's objective is to
concentrate the Portfolio's holdings in the stocks deemed most undervalued, and
to keep sector weightings relatively close to those of the index. Stocks are
generally held until they fall into the bottom half of Morgan's rankings.
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MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, each Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased by the Funds appears below. See "Quality and Diversification
Requirements".
U.S. TREASURY SECURITIES. Each of the Funds may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes
and bonds, all of which are backed as to principal and interest payments
by the full faith and credit of the United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each of the Funds, except the
Treasury Money Market Fund, may invest in obligations issued or guaranteed by
U.S. Government agencies or instrumentalities. These obligations may or may not
be backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States, each
Fund must look principally to the federal agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitments. Securities in which each Fund, except the Treasury Money
Market Fund, may invest that are not backed by the full faith and credit of the
United States include, but are not limited to, obligations of the Tennessee
Valley Authority, the Federal Home Loan Mortgage Corporation and the U.S. Postal
Service, each of which has the right to borrow from the U.S. Treasury to meet
its obligations, and obligations of the Federal Farm Credit System and the
Federal Home Loan Banks, both of whose obligations may be satisfied only by the
individual credits of each issuing agency. Securities which are backed by the
full faith and credit of the United States include obligations of the Government
National Mortgage Association, the Farmers Home Administration, and the
Export-Import Bank.
FOREIGN GOVERNMENT OBLIGATIONS. Each of the Funds, except the Tax
Exempt Money Market Fund, the Treasury Money Market Fund, the Tax Exempt Bond
Fund and the New York Total Return Bond Fund, subject to its applicable
investment policies, may also invest in short-term obligations of foreign
sovereign governments or of their agencies, instrumentalities, authorities or
political subdivisions. These securities may be denominated in the U.S. dollar
or, in the case of the Short Term Bond, Bond, Equity, Capital Appreciation,
International Equity, Emerging Markets Equity or Diversified Funds, in another
currency. See "Foreign Investments".
BANK OBLIGATIONS. Each of the Funds, except the Treasury Money Market
Fund, unless otherwise noted in the Prospectus or below, may invest in
negotiable
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certificates of deposit, time deposits and bankers' acceptances of (i) banks,
savings and loan associations and savings banks which have more than $2 billion
in total assets (the "Asset Limitation") and are organized under the laws of the
United States or any state, (ii) foreign branches of these banks or of foreign
banks of equivalent size (Euros) and (iii) U.S. branches of foreign banks of
equivalent size (Yankees). The Tax Exempt Money Market, Tax Exempt Bond and New
York Total Return Bond Funds may not invest in obligations of foreign branches
of foreign banks and the Asset Limitation is not applicable to the International
Equity or Emerging Markets Equity Funds. See "Foreign Investments". The Funds
will not invest in obligations for which the Advisor, or any of its affiliated
persons, is the ultimate obligor or accepting bank. Each of the Funds, other
than the Tax Exempt Money Market, Treasury Money Market, Tax Exempt Bond and New
York Total Return Bond Funds, may also invest in obligations of international
banking institutions designated or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the
European Investment Bank, the Inter-American Development Bank, or the World
Bank).
COMMERCIAL PAPER. Each of the Funds (except the Treasury Money Market
Fund) may invest in commercial paper, including master demand obligations.
Master demand obligations are obligations that provide for a periodic adjustment
in the interest rate paid and permit daily changes in the amount borrowed.
Master demand obligations are governed by agreements between the issuer and
Morgan Guaranty Trust Company of New York acting as agent, for no additional
fee, in its capacity as investment advisor to the Portfolios and as fiduciary
for other clients for whom it exercises investment discretion. The monies loaned
to the borrower come from accounts managed by the Advisor or its affiliates,
pursuant to arrangements with such accounts. Interest and principal payments are
credited to such accounts. The Advisor, acting as a fiduciary on behalf of its
clients, has the right to increase or decrease the amount provided to the
borrower under an obligation. The borrower has the right to pay without penalty
all or any part of the principal amount then outstanding on an obligation
together with interest to the date of payment. Since these obligations typically
provide that the interest rate is tied to the Federal Reserve commercial paper
composite rate, the rate on master demand obligations is subject to change.
Repayment of a master demand obligation to participating accounts depends on the
ability of the borrower to pay the accrued interest and principal of the
obligation on demand which is continuously monitored by the Portfolios' Advisor.
Since master demand obligations typically are not rated by credit rating
agencies, the Funds may invest in such unrated obligations only if at the time
of an investment the obligation is determined by the Advisor to have a credit
quality which satisfies the Fund's quality restrictions. See "Quality and
Diversification Requirements". Although there is no secondary market for master
demand obligations, such obligations are considered by the Funds to be liquid
because they are payable upon demand. The Funds do not have any specific
percentage limitation on investments in master demand obligations.
REPURCHASE AGREEMENTS. Each of the Funds may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Funds' Trustees. In a repurchase agreement, a Fund buys a
security from a seller that has agreed to repurchase the same security at a
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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 Fund 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 a Fund
to the seller. The period of these repurchase agreements will usually be short,
from overnight to one week, and at no time will the Funds invest in repurchase
agreements for more than thirteen months. The securities which are subject to
repurchase agreements, however, may have maturity dates in excess of thirteen
months from the effective date of the repurchase agreement. The Treasury Money
Market Fund will only enter into repurchase agreements involving U.S. Treasury
securities. The Funds will always receive securities as collateral whose market
value is, and during the entire term of the agreement remains, at least equal to
100% of the dollar amount invested by the Funds in each agreement plus accrued
interest, and the Funds will make payment for such securities only upon physical
delivery or upon evidence of book entry transfer to the account of the
Custodian. The Money Market, Tax Exempt Money Market, and Treasury Money Markets
Funds will be fully collateralized within the meaning of paragraph (a)(3) of
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act").
If the seller defaults, a Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon disposal of the collateral by a Fund may be delayed or limited.
Each of the Funds (other than the Treasury Money Market Fund) may make
investments in other debt securities with remaining effective maturities of not
more than thirteen months, including without limitation corporate and foreign
bonds, asset-backed securities and other obligations described in the Prospectus
or this Statement of Additional Information. The Tax Exempt Money Market and Tax
Exempt Bond Funds may not invest in foreign bonds or asset-backed securities.
CORPORATE BONDS AND OTHER DEBT SECURITIES
As discussed in the Prospectus, the Bond, Short Term Bond, New York
Total Return Bond and Diversified Funds may invest in bonds and other debt
securities of domestic and (except for the New York Total Return Bond Fund)
foreign issuers to the extent consistent with their investment objectives and
policies. A description of these investments appears in the Prospectus and
below. See "Quality and Diversification Requirements". For information on
short-term investments in these securities, see "Money Market Instruments".
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Payments of principal and interest may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the entities issuing the securities.
The asset-backed securities in which a Fund may invest are subject to the Fund's
overall credit requirements. However, asset-backed securities, in general, are
subject to certain risks. Most of these risks are related to limited interests
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in applicable collateral. For example, credit card debt receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts on credit card debt thereby reducing the
balance due. Additionally, if the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments or losses if the
full amounts due on underlying sales contracts are not realized. Because
asset-backed securities are relatively new, the market experience in these
securities is limited and the market's ability to sustain liquidity through all
phases of the market cycle has not been tested.
TAX EXEMPT OBLIGATIONS
As discussed in the Prospectus, the Tax Exempt Money Market, Tax Exempt
Bond and New York Total Return Bond Funds and, in certain circumstances, the
Bond and Short Term Bond Funds, may invest in tax exempt obligations to the
extent consistent with each Fund's investment objective and policies. A
description of the various types of tax exempt obligations which may be
purchased by the Funds appears in the Prospectus and below. See "Quality and
Diversification Requirements".
MUNICIPAL BONDS. Municipal bonds are debt obligations issued by the
states, territories and possessions of the United States and the District of
Columbia, by their political subdivisions and by duly constituted authorities
and corporations. For example, states, territories, possessions and
municipalities may issue municipal bonds to raise funds for various public
purposes such as airports, housing, hospitals, mass transportation, schools,
water and sewer works. They may also issue municipal bonds to refund outstanding
obligations and to meet general operating expenses. Public authorities issue
municipal bonds to obtain funding for privately operated facilities, such as
housing and pollution control facilities, for industrial facilities or for water
supply, gas, electricity or waste disposal facilities.
Municipal bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from revenues derived from particular facilities, from the proceeds of a
special excise tax or from other specific revenue sources. They are not
generally payable from the general taxing power of a municipality.
MUNICIPAL NOTES. Municipal notes are subdivided into three
categories of short-term obligations: municipal notes, municipal commercial
paper and municipal demand obligations.
Municipal notes are short-term obligations with a maturity at the time
of issuance ranging from six months to five years. The principal types of
municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.
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Municipal commercial paper typically consists of very short-term
unsecured negotiable promissory notes that are sold to meet seasonal working
capital or interim construction financing needs of a municipality or agency.
While these obligations are intended to be paid from general revenues or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or institutions.
Municipal demand obligations are subdivided into two types: variable
rate demand notes and master demand obligations.
Variable rate demand notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to demand payment of the notes,
or to demand purchase of the notes at a purchase price equal to the unpaid
principal balance, plus accrued interest either directly by the issuer or by
drawing on a bank letter of credit or guaranty issued with respect to such note.
The issuer of the municipal obligation may have a corresponding right to prepay
at its discretion the outstanding principal of the note plus accrued interest
upon notice comparable to that required for the holder to demand payment. The
variable rate demand notes in which each Fund may invest are payable, or are
subject to purchase, on demand usually on notice of seven calendar days or less.
The terms of the notes provide that interest rates are adjustable at intervals
ranging from daily to six months, and the adjustments are based upon the prime
rate of a bank or other appropriate interest rate index specified in the
respective notes. Variable rate demand notes are valued at amortized cost; no
value is assigned to the right of each Fund to receive the par value of the
obligation upon demand or notice.
Master demand obligations are tax exempt municipal obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. The interest on such obligations is, in the
opinion of counsel for the borrower, exempt from federal income tax. For a
description of the attributes of master demand obligations, see "Money Market
Instruments" above. Although there is no secondary market for master demand
obligations, such obligations are considered by each Fund to be liquid because
they are payable upon demand. The Funds have no specific percentage limitations
on investments in master demand obligations.
The Tax Exempt Money Market Fund may purchase securities of the type
described above if they have effective maturities within thirteen months. As
required by regulation of the Securities and Exchange Commission (the "SEC"),
this means that on the date of acquisition the final stated maturity (or if
called for redemption, the redemption date) must be within thirteen months or
the maturity must be deemed to be no more than thirteen months because of a
maturity shortening mechanism, such as a variable interest rate, coupled with a
conditional or unconditional right to resell the investment to the issuer or a
third party. See "Variable Rate Demand Notes" and "Puts". A substantial portion
of the Tax Exempt Money Market Fund's portfolio is subject to maturity
shortening mechanisms consisting of variable interest rates coupled with
unconditional
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rights to resell the securities to the issuers either directly or by drawing on
a domestic or foreign bank letter of credit or other credit support arrangement.
See "Foreign Investments".
PUTS. The Tax Exempt Money Market, Tax Exempt Bond and New York Total
Return Bond Funds may purchase without limit municipal bonds or notes together
with the right to resell the bonds or notes to the seller at an agreed price or
yield within a specified period prior to the maturity date of the bonds or
notes. Such a right to resell is commonly known as a "put". The aggregate price
for bonds or notes with puts may be higher than the price for bonds or notes
without puts. Consistent with each Fund's investment objective and subject to
the supervision of the Trustees, the purpose of this practice is to permit each
Fund to be fully invested in tax exempt securities while preserving the
necessary liquidity to purchase securities on a when-issued basis, to meet
unusually large redemptions, and to purchase at a later date securities other
than those subject to the put. The principal risk of puts is that the writer of
the put may default on its obligation to repurchase. The Advisor will monitor
each writer's ability to meet its obligations under puts.
Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests. These
obligations may arise during periods in which proceeds from sales of Fund shares
and from recent sales of portfolio securities are insufficient to meet
obligations or when the funds available are otherwise allocated for investment.
In addition, puts may be exercised prior to the expiration date in order to take
advantage of alternative investment opportunities or in the event the Advisor
revises its evaluation of the credit worthiness of the issuer of the underlying
security. In determining whether to exercise puts prior to their expiration date
and in selecting which puts to exercise, the Advisor considers the amount of
cash available to each Fund, the expiration dates of the available puts, any
future commitments for securities purchases, alternative investment
opportunities, the desirability of retaining the underlying securities in each
Fund's portfolio and the yield, quality and maturity dates of the underlying
securities.
The Tax Exempt Money Market Fund values any municipal bonds and notes
which are subject to puts at amortized cost. No value is assigned to the put.
The cost of any such put is carried as an unrealized loss from the time of
purchase until it is exercised or expires. The Tax Exempt Bond and New York
Total Return Bond Funds value any municipal bonds and notes subject to puts with
remaining maturities of less than 60 days by the amortized cost method. If the
Tax Exempt Bond and New York Total Return Bond Funds were to invest in municipal
bonds and notes with maturities of 60 days or more that are subject to puts
separate from the underlying securities, the puts and the underlying securities
would be valued at fair value as determined in accordance with procedures
established by the Board of Trustees. The Board of Trustees would, in connection
with the determination of the value of a put, consider, among other factors, the
credit worthiness of the writer of the put, the duration of the put, the dates
on which or the periods during which the put may be exercised and the applicable
rules and regulations of the SEC. Prior to investing in such securities, the Tax
Exempt Bond and New York Total Return Bond Funds, if deemed
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necessary based upon the advice of counsel, will apply to the SEC for an
exemptive order, which may not be granted, relating to the valuation of such
securities.
Since the value of the put is partly dependent on the ability of the
put writer to meet its obligation to repurchase, each Fund's policy is to enter
into put transactions only with municipal securities dealers who are approved by
the Funds' Advisor. Each dealer will be approved on its own merits, and it is
each Fund's general policy to enter into put transactions only with those
dealers which are determined to present minimal credit risks. In connection with
such determination, the Trustees will review regularly the Advisor's list of
approved dealers, taking into consideration, among other things, the ratings, if
available, of their equity and debt securities, their reputation in the
municipal securities markets, their net worth, their efficiency in consummating
transactions and any collateral arrangements, such as letters of credit,
securing the puts written by them. Commercial bank dealers normally will be
members of the Federal Reserve System, and other dealers will be members of the
National Association of Securities Dealers, Inc. or members of a national
securities exchange. In the case of the Tax Exempt Bond and New York Total
Return Bond Funds, other put writers will have outstanding debt rated Aa or
better by Moody's Investors Service, Inc. ("Moody's") or AA or better by
Standard & Poor's Corporation ("Standard & Poor's"), or will be of comparable
quality in the Advisor's opinion or such put writers' obligations will be
collateralized and of comparable quality in the Advisor's opinion. The Trustees
have directed the Advisor not to enter into put transactions with any dealer
which in the judgment of the Advisor becomes more than a minimal credit risk. In
the event that a dealer should default on its obligation to repurchase an
underlying security, the Funds are unable to predict whether all or any portion
of any loss sustained could subsequently be recovered from such dealer.
The Trust has been advised by counsel that the Funds will be considered
the owner of the securities subject to the puts so that the interest on the
securities is tax exempt income to the Funds. Such advice of counsel is based on
certain assumptions concerning the terms of the puts and the attendant
circumstances.
EQUITY INVESTMENTS
As discussed in the Prospectus, the Portfolios for the Equity, Capital
Appreciation, International Equity and Emerging Markets Equity Funds and the
equity portion of the Diversified Fund (collectively, the "Equity Portfolios")
invest primarily in Equity Securities. The Equity Securities in which the Equity
Portfolios invest include those listed on any domestic or foreign securities
exchange or traded in the over-the-counter market as well as certain restricted
or unlisted securities. A discussion of the various types of equity investments
which may be purchased by these Portfolios appears in the Prospectus and below.
See "Quality and Diversification Requirements".
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EQUITY SECURITIES. The Equity Securities in which the Equity Portfolios
may invest may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
The convertible securities in which the Equity Portfolios may invest
include any debt securities or preferred stock which may be converted into
common stock or which carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.
The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holders' claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors and are
senior to the claims of common shareholders.
WARRANTS
The Equity Portfolios may invest in warrants, which entitle the holder
to buy common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower
than the current market price of the underlying securities, yet warrants are
subject to similar price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities.
Warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.
FOREIGN INVESTMENTS
The International Equity and Emerging Markets Equity Funds make
substantial investments in foreign countries. The Money Market, Bond, Short Term
Bond, Equity, Capital Appreciation and Diversified Funds may invest in certain
foreign securities. The Bond, Short Term Bond, Equity, Capital Appreciation and
Diversified Funds do not expect to invest more than 25%, 25%, 30%, 30% and 30%,
respectively, of their total assets at the time of purchase in securities of
foreign issuers. All investments of the Money Market Fund must be U.S.
dollar-denominated. The Equity, Capital Appreciation Funds do not expect more
than 10% of their respective foreign investments to be in securities which are
not listed on a national securities exchange or which are not denominated or
principally traded in the U.S. dollar. In the case of the Money Market, Bond and
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Short Term Bond Funds, any foreign commercial paper must not be subject to
foreign withholding tax at the time of purchase. Foreign investments may be made
directly in securities of foreign issuers or in the form of American Depositary
Receipts ("ADRs")and European Depositary Receipts ("EDRs"). Generally, ADRs and
EDRs are receipts issued by a bank or trust company that evidence ownership of
underlying securities issued by a foreign corporation and that are designed for
use in the domestic, in the case of ADRs, or European, in the case of EDRs,
securities markets.
Since investments in foreign securities may involve foreign currencies,
the value of a Fund's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Short Term Bond, Bond, Equity,
Capital Appreciation, International Equity, Emerging Markets Equity and
Diversified Funds may enter into forward commitments for the purchase or sale of
foreign currencies in connection with the settlement of foreign securities
transactions or to manage the Funds' currency exposure related to foreign
investments. The Funds will not enter into such commitments for speculative
purposes.
For a description of the risks associated with investing in foreign
securities, see "Additional Investment Information and Risk Factors" in the
Prospectus. To the extent that the Tax Exempt Money Market, Tax Exempt Bond and
New York Total Return Bond Funds invest in municipal bonds and notes backed by
credit support arrangements with foreign financial institutions, the risks
associated with investing in foreign securities may be relevant to these Funds.
INVESTING IN JAPAN. Investing in Japanese securities may involve the
risks associated with investing in foreign securities generally. In addition,
because it invests in Japan, The International Equity Portfolio will be subject
to the general economic and political conditions in Japan.
Share prices of companies listed on Japanese stock exchanges and on the
Japanese OTC market reached historical peaks (which were later referred to as
the "bubble") as well as historically high trading volumes in 1989 and 1990.
Since then, stock prices in both markets decreased significantly, with listed
stock prices reaching their lowest levels in the third quarter of 1992 and OTC
stock prices reaching their lowest levels in the fourth quarter of 1992. During
the period from January 1, 1989 through December 31, 1994, the highest Nikkei
stock average and Nikkei OTC average were 38,915.87 and 4,149.20, respectively,
and the lowest for each were 14,309.41 and 1,099.32, respectively. There can be
no assurance that additional market corrections will not occur.
The common stocks of many Japanese companies continue to trade at high
price earnings ratios in comparison with those in the United States, even after
the recent market decline. Differences in accounting methods make it difficult
to compare the earnings of Japanese companies with those of companies in other
countries, especially the United States.
Since The International Equity Portfolio invests in securities
denominated in yen, changes in exchange rates between the U.S. dollar and the
yen affect the
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U.S. dollar value of The International Equity Portfolio's assets. Such rate of
exchange is determined by forces of supply and demand on the foreign exchange
markets. These forces are in turn affected by the international balance of
payments and other economic, political and financial conditions, government
intervention, speculation and other factors. See Foreign Currency Exchange
Transactions.
Japanese securities held by The International Equity Portfolio are not
registered with the SEC nor are the issuers thereof subject to its reporting
requirements. There may be less publicly available information about issuers of
Japanese securities than about U.S. companies and such issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. companies are subject.
Although the Japanese economy has grown substantially over the past
four decades, recently the rate of growth had slowed substantially. During 1991,
1992 and 1993, the Japanese economy grew at rates of 4.3%, 1.1% and 0.1%,
respectively, as measured by real gross domestic product.
Japan's success in exporting its products has generated a sizeable
trade surplus. Such trade surplus has caused tensions at times between Japan and
some of its trading partners. In particular, Japan's trade relations with the
United States have recently been the subject of discussion and negotiation
between the two nations. The United States has imposed certain measures designed
to address trade issues in specific industries. These measures and similar
measures in the future may adversely affect the performance of The International
Equity Portfolio.
Japan's economy has typically exhibited low inflation and low interest
rates. There can be no assurance that low inflation and low interest rates will
continue, and it is likely that a reversal of such factors would adversely
affect the Japanese economy. Moreover, the Japanese economy may differ,
favorably or unfavorably, from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position.
Japan has a parliamentary form of government. In 1993 a coalition
government was formed which, for the first time since 1955, did not include the
Liberal Democratic Party. Since mid-1993, there have been several changes in
leadership in Japan. What, if any, effect the current political situation will
have on prospective regulatory reforms of the economy in Japan cannot be
predicted. Recent and future developments in Japan and neighboring Asian
countries may lead to changes in policy that might adversely affect The
International Equity Portfolio.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each of the Portfolios
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
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payable, if any, on the securities are fixed on the purchase commitment date or
at the time the settlement date is fixed. The value of such securities is
subject to market fluctuation and no interest accrues to a Portfolio until
settlement takes place. At the time a 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, each 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, each Portfolio will meet its
obligations from maturities or sales of the securities held in the segregated
account and/or from cash flow. If a 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. It is the current policy of each 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 each of the Funds and their corresponding Portfolios to the
extent permitted under the 1940 Act. These limits require that, as determined
immediately after a purchase is made, (i) not more than 5% of the value of a
Fund'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 a Fund, provided however, that a Fund may invest all of
its investable assets in an open-end investment company that has the same
investment objective as the Fund (its corresponding Portfolio). As a shareholder
of another investment company, a Fund would bear, along with other shareholders,
its PRO RATA portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that a Fund bears directly in connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. Each of the Portfolios may enter into
reverse repurchase agreements. In a reverse repurchase agreement, a Portfolio
sells a security and agrees to repurchase the same security at a mutually agreed
upon date and price. The Portfolio for the Treasury Money Market Fund will only
enter into reverse repurchase agreements involving Treasury securities. For
purposes of the 1940 Act it is also considered as the borrowing of money by the
Portfolio and, therefore, a form of leverage. The Portfolios will invest the
proceeds of borrowings under reverse repurchase agreements. In addition, a
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. A Portfolio will not invest the proceeds of
a reverse repurchase agreement for a period which exceeds the duration of the
reverse repurchase agreement. A Portfolio may not
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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. Each 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. If interest rates rise during the term
of a reverse repurchase agreement, entering into the reverse repurchase
agreement may have a negative impact on the Money Market, Tax Exempt Money
Market and Treasury Money Market Funds' ability to maintain a net asset value of
$1.00 per share.
See "Investment Restrictions".
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Portfolios for the Short Term
Bond Fund and the Bond Fund may engage in mortgage dollar roll transactions with
respect to mortgage securities issued by the Government National Mortgage
Association, the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation. In a mortgage dollar roll transaction, the Portfolio sells
a mortgage backed security and simultaneously agrees to repurchase a similar
security on a specified future date at an agreed upon price. During the roll
period, the Portfolio will not be entitled to receive any interest or principal
paid on the securities sold. The Portfolio is compensated for the lost interest
on the securities sold by the difference between the sales price and the lower
price for the future repurchase as well as by the interest earned on the
reinvestment of the sales proceeds. The Portfolio may also be compensated by
receipt of a commitment fee. When the Portfolio enters into a mortgage dollar
roll transaction, liquid assets in an amount sufficient to pay for the future
repurchase are segregated with the Custodian. Mortgage dollar roll transactions
are considered reverse repurchase agreements for purposes of the Portfolio's
investment restrictions.
LOANS OF PORTFOLIO SECURITIES. Each of the Portfolios 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
Portfolios in the normal settlement time, generally five business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to a
Portfolio and its respective investors. The Portfolios may pay reasonable
finders' and custodial fees in connection with a loan. In addition, a Portfolio
will consider all facts and circumstances including the credit worthiness of the
borrowing financial institution, and no Portfolio will make any loans in excess
of one year. The Portfolios will not lend their securities to any officer,
Trustee, Director, employee or other affiliate of the Portfolios, the Advisor or
the Distributor , unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolios
for each of the Funds (except the Treasury Money Market Fund) may invest in
privately
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placed, restricted, Rule 144A or other unregistered securities as described in
the Prospectus.
As to illiquid investments, a Portfolio is subject to a risk that
should the Portfolio decide to sell them when a ready buyer is not available at
a price the Portfolio deems representative of their value, the value of the
Portfolio's net assets could be adversely affected. Where an illiquid security
must be registered under the Securities Act of 1933, as amended (the "1933 Act")
before it may be sold, a Portfolio may be obligated to pay all or part of the
registration expenses, and a considerable period may elapse between the time of
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
SYNTHETIC VARIABLE RATE INSTRUMENTS. The Portfolios for the Tax Exempt
Bond, New York Total Return Bond and Tax Exempt Money Market Funds may invest in
certain synthetic variable rate instruments as described in the Prospectus. In
the case of some types of instruments credit enhancement is not provided, and if
certain events, which may include (a) default in the payment of principal or
interest on the underlying bond, (b) downgrading of the bond below investment
grade or (c) a loss of the bond's tax exempt status, occur, then (i) the put
will terminate, (ii) the risk to a Fund will be that of holding a long-term
bond, and (iii) in the case of the Tax Exempt Money Market Fund, the disposition
of the bond may be required which could be at a loss.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Each of the Funds, except the New York Total Return Bond Fund, intends
to meet the diversification requirements of the 1940 Act. To meet these
requirements, 75% of the assets of these Funds is subject to the following
fundamental limitations: (1) the Fund 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 Fund may not own
more than 10% of the outstanding voting securities of any one issuer. As for the
other 25% of the Fund'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, subject to
the limitation of any applicable state securities laws, or with respect to the
Money Market and Treasury Money Market Funds, as described below. Investments
not subject to the limitations described above could involve an increased risk
to a Fund 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.
Although the New York Total Return Bond Fund is not limited by the
diversification requirements of the 1940 Act
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, the Fund will comply with the diversification requirements imposed by the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. To meet these requirements, the Fund must
diversify its holdings so that, with respect to 50% of the Fund's assets, no
more than 5% of its assets are invested in the securities of any one issuer
other than the U.S. Government at the close of each quarter of the Fund's
taxable year. The Fund may with respect to the remaining 50% of its assets,
invest up to 25% of its assets in the securities of any one issuer (except this
limitation does not apply to U.S. Government Securities).
With respect to the Tax Exempt Money Market and Tax Exempt Bond Funds,
for purposes of diversification and concentration under the 1940 Act,
identification of the issuer of municipal bonds or notes depends on the terms
and conditions of the obligation. With respect to the New York Total Return Bond
Fund, for purposes of diversification under the Code and concentration under the
1940 Act, identification of the issuer of municipal bonds or notes also depends
on the terms and conditions of the obligation. If the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the subdivision and the obligation is
backed only by the assets and revenues of the subdivision, such subdivision is
regarded as the sole issuer. Similarly, in the case of an industrial development
revenue bond or pollution control revenue bond, if the bond is backed only by
the assets and revenues of the nongovernmental user, the nongovernmental user is
regarded as the sole issuer. If in either case the creating government or
another entity guarantees an obligation, the guaranty is regarded as a separate
security and treated as an issue of such guarantor. Since securities issued or
guaranteed by states or municipalities are not voting securities, there is no
limitation on the percentage of a single issuer's securities which a Fund may
own so long as it does not invest more than 5% of its total assets that are
subject to the diversification limitation in the securities of such issuer,
except obligations issued or guaranteed by the U.S. Government. Consequently,
the Funds may invest in a greater percentage of the outstanding securities of a
single issuer than would an investment company which invests in voting
securities. See "Investment Restrictions".
MONEY MARKET FUND. In order to attain the Money Market Fund's objective
of maintaining a stable net asset value, the Portfolio for the Money Market Fund
will (i) limit its investment in the securities (other than U.S. Government
securities) of any one issuer to no more than 5% of its assets, measured at the
time of purchase, except for investments held for not more than three business
days (subject, however, to the investment restriction No. 4 set forth under
"Investment Restrictions" below); and (ii) limit investments to securities that
present minimal credit risks and securities (other than U.S. Government
securities) that are rated within the highest short-term rating category by at
least two nationally recognized statistical rating organizations ("NRSROs") or
by the only NRSRO that has rated the security. Securities which originally had a
maturity of over one year are subject to more complicated, but generally similar
rating requirements. A description of illustrative credit ratings is set forth
in Appendix A attached to this Statement of Additional Information. The
Portfolio may also purchase unrated securities that are of comparable quality to
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the rated securities described above. Additionally, if the issuer of a
particular security has issued other securities of comparable priority and
security and which have been rated in accordance with (ii) above, that security
will be deemed to have the same rating as such other rated securities.
In addition, the Board of Trustees has adopted procedures which (i)
require the Board of Trustees to approve or ratify purchases by the Portfolio of
securities (other than U.S. Government securities) that are rated by only one
NRSRO or that are unrated; (ii) require the Portfolio to maintain a
dollar-weighted average portfolio maturity of not more than 90 days and to
invest only in securities with a remaining maturity of not more than thirteen
months; and (iii) require the Portfolio, in the event of certain downgradings of
or defaults on portfolio holdings, to dispose of the holding, subject in certain
circumstances to a finding by the Trustees that disposing of the holding would
not be in the Portfolio's best interest.
TAX EXEMPT MONEY MARKET FUND. In order to attain the Tax Exempt Money
Market Fund's objective of maintaining a stable net asset value, the Portfolio
for the Tax Exempt Money Market Fund will limit its investments to securities
that present minimal credit risks and securities (other than New York State
municipal notes) that are rated within the highest rating assigned to short-term
debt securities (or, in the case of New York State municipal notes, within one
of the two highest ratings assigned to short-term debt securities) by at least
two NRSROs or by the only NRSRO that has rated the security. Securities which
originally had a maturity of over one year are subject to more complicated, but
generally similar rating requirements. The Portfolio may also purchase unrated
securities that are of comparable quality to the rated securities described
above. Additionally, if the issuer of a particular security has issued other
securities of comparable priority and security and which have been rated in
accordance with the criteria described above that security will be deemed to
have the same rating as such other rated securities.
In addition, the Board of Trustees has adopted procedures which (i)
require the Portfolio to maintain a dollar-weighted average portfolio maturity
of not more than 90 days and to invest only in securities with a remaining
maturity of not more than thirteen months and (ii) require the Portfolio, in the
event of certain downgrading of or defaults on portfolio holdings, to dispose of
the holding, subject in certain circumstances to a finding by the Trustees that
disposing of the holding would not be in the Portfolio's best interest.
The credit quality of variable rate demand notes and other municipal
obligations is frequently enhanced by various credit support arrangements with
domestic or foreign financial institutions, such as letters of credit,
guarantees and insurance, and these arrangements are considered when investment
quality is evaluated. The rating of credit-enhanced municipal obligations by a
NRSRO may be based primarily or exclusively on the credit support arrangement.
TREASURY MONEY MARKET FUND. In order to attain its objective of
maintaining a stable net asset value, the Treasury Money Market Fund will limit
its investments to direct obligations of the U.S. Treasury including Treasury
bills, notes and bonds with remaining maturities of thirteen
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months or less at the time of purchase and will maintain a dollar-weighted
average portfolio maturity of not more than 90 days.
SHORT TERM BOND, BOND, AND DIVERSIFIED FUNDS. The Short Term Bond and
Bond Funds, and the fixed income portion of the Diversified Fund, invest
principally in a diversified portfolio of "high grade" and "investment grade"
securities. Investment grade debt is rated, on the date of investment, within
the four highest ratings of Moody's, currently Aaa, Aa, A and Baa, or of
Standard & Poor's, currently AAA, AA, A and BBB, while high grade debt is rated,
on the date of the investment, within the two highest of such ratings. The Bond
Fund may also invest up to 5% of its total assets in securities which are "below
investment grade". Such securities must be rated, on the date of investment, Ba
by Moody's or BB by Standard & Poor's. The Funds may invest in debt securities
which are not rated or other debt securities to which these ratings are not
applicable, if in the opinion of the Advisor, such securities are of comparable
quality to the rated securities discussed above. In addition, at the time the
Funds invest in any commercial paper, bank obligation or repurchase agreement,
the issuer must have outstanding debt rated A or higher by Moody's or Standard &
Poor's, the issuer's parent corporation, if any, must have outstanding
commercial paper rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no
such ratings are available, the investment must be of comparable quality in the
Advisor's opinion.
TAX EXEMPT BOND FUND. The Tax Exempt Bond Fund invests principally in a
diversified portfolio of "high grade" and "investment grade" tax exempt
securities. On the date of investment (i) municipal bonds must be rated within
the three highest ratings of Moody's, currently Aaa, Aa and A, or of Standard &
Poor's, currently AAA, AA, and A, (ii) municipal notes must be rated MIG-1 by
Moody's or SP-1 by Standard & Poor's (or, in the case of New York State
municipal notes, MIG-1 or MIG-2 by Moody's or SP-1 or SP-2 by Standard & Poor's)
and (iii) municipal commercial paper must be rated Prime-1 by Moody's or A-1 by
Standard & Poor's or, if not rated by either Moody's or Standard & Poor's,
issued by an issuer either (a) having an outstanding debt issue rated A or
higher by Moody's or Standard & Poor's or (b) having comparable quality in the
opinion of the Advisor. The Fund may invest in other tax exempt securities which
are not rated if, in the opinion of the Advisor, such securities are of
comparable quality to the rated securities discussed above. In addition, at the
time the Fund invests in any commercial paper, bank obligation or repurchase
agreement, the issuer must have outstanding debt rated A or higher by Moody's or
Standard & Poor's, the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Advisor's opinion.
NEW YORK TOTAL RETURN BOND FUND. The New York Total Return Bond Fund
invests principally in a diversified portfolio of "investment grade" tax exempt
securities. An investment grade bond is rated, on the date of investment within
the four highest ratings of Moody's, currently Aaa, Aa, A and Baa or of Standard
& Poor's, currently AAA, AA, A and BBB, while high grade debt is rated, on the
date of the investment within the two highest of such ratings. Investment grade
municipal notes are rated, on the date of investment, MIG-1 or MIG-2 by Standard
& Poor's or SP-1 and SP-2 by Moody's. Investment grade municipal commercial
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paper is rated, on the date of investment, Prime 1 or Prime 2 by Moody's and A-1
or A-2 by Standard & Poor's. The New York Total Return Bond Fund may also invest
up to 5% of its total assets in securities which are "below investment grade".
Such securities must be rated, on the date of investment, Ba by Moody's or BB by
Standard & Poor's. The New York Total Return Bond Fund may invest in debt
securities which are not rated or other debt securities to which these ratings
are not applicable, if in the opinion of the Advisor, such securities are of
comparable quality to the rated securities discussed above. In addition, at the
time the Fund invests in any taxable commercial paper, bank obligation or
repurchase agreement, the issuer must have outstanding debt rated A or higher by
Moody's or Standard & Poor's, the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Advisor's opinion.
EQUITY, CAPITAL APPRECIATION, INTERNATIONAL EQUITY, EMERGING MARKETS
EQUITY AND DIVERSIFIED FUNDS. The Equity, Capital Appreciation, International
Equity, Emerging Markets Equity and Diversified Funds may invest in convertible
debt securities, for which there are no specific quality requirements. In
addition, at the time the Fund invests in any commercial paper, bank obligation
or repurchase agreement, the issuer must have outstanding debt rated A or higher
by Moody's or Standard & Poor's, the issuer's parent corporation, if any, must
have outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Advisor's opinion. At the time the Fund invests in any
other short-term debt securities, they must be rated A or higher by Moody's or
Standard & Poor's, or if unrated, the investment must be of comparable quality
in the Advisor's opinion.
In determining suitability of investment in a particular unrated
security, the Advisor takes into consideration asset and debt service coverage,
the purpose of the financing, history of the issuer, existence of other rated
securities of the issuer, and other relevant conditions, such as comparability
to other issuers.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OVER-THE-COUNTER OPTIONS. All options purchased or sold by
the Portfolios will be traded on a securities exchange or will be purchased or
sold by securities dealers (over-the-counter or OTC options) that meet credit
worthiness standards approved by the Portfolio's Board of Trustees. While
exchange-traded options are obligations of the Options Clearing Corporation, in
the case of OTC options, a Portfolio relies on the dealer from which it
purchased the option to perform if the option is exercised. Thus, when a
Portfolio purchases an OTC option, it relies on the dealer from which it
purchased the option to make or take delivery of the underlying securities.
Failure by the dealer to do so would result in the loss of the premium paid by
the Portfolio as well as loss of the expected benefit of the transaction.
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The staff of the SEC has taken the position that, in general, purchased
OTC options and the underlying securities used to cover written OTC options are
illiquid securities. However, a Portfolio may treat as liquid the underlying
securities used to cover written OTC options, provided it has arrangements with
certain qualified dealers who agree that the Portfolio may repurchase any option
it writes for a maximum price to be calculated by a predetermined formula. In
these cases, the OTC option itself would only be considered illiquid to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolios permitted to
enter into futures and options transactions may purchase or sell (write) futures
contracts and purchase put and call options, including put and call options on
futures contracts. In addition, the Portfolios for the Emerging Markets Equity
and Diversified Funds may sell (write) put and call options, including options
on futures. Futures contracts obligate the buyer to take and the seller to make
delivery at a future date of a specified quantity of a financial instrument or
an amount of cash based on the value of a securities index. Currently, futures
contracts are available on various types of fixed-income securities, including
but not limited to U.S. Treasury bonds, notes and bills, Eurodollar certificates
of deposit and on indexes of fixed income securities and indexes of equity
securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by a Portfolio are paid by the Portfolio into a segregated
account, in the name of the Futures Commission Merchant, as required by the 1940
Act and the SEC's interpretations thereunder.
COMBINED POSITIONS. The Portfolios permitted to purchase and write options may
do so in combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, certain Portfolios may purchase a put option and write a
call option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase.
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Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match a
Portfolio's current or anticipated investments exactly. A Portfolio may invest
in options and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require a Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and Over-the-Counter
Options" above for a discussion of the liquidity of options not traded on an
exchange.)
POSITION LIMITS. Futures exchanges can limit the number of futures and options
on futures contracts that can be held or controlled by an entity. If an adequate
exemption cannot be obtained, a Portfolio or the Advisor may be required to
reduce the size of its futures and options positions or may not be able to trade
a certain futures or options contract in order to avoid exceeding such limits.
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ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Portfolios
intend to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which a Portfolio can commit assets to
initial margin deposits and option premiums. In addition, the Portfolios will
comply with guidelines established by the SEC with respect to coverage of
options and futures contracts by mutual funds, and if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be sold
while the futures contract or option is outstanding, unless they are replaced
with other suitable assets. As a result, there is a possibility that segregation
of a large percentage of a Portfolio's assets could impede portfolio management
or the Portfolio's ability to meet redemption requests or other current
obligations.
RISK MANAGEMENT
The Portfolios for the New York Total Return Bond, Diversified and
Emerging Markets Equity Funds may employ non-hedging risk management techniques.
Examples of such strategies include synthetically altering the duration of a
portfolio or the mix of securities in a portfolio. For example, if the Advisor
wishes to extend maturities in a fixed income portfolio in order to take
advantage of an anticipated decline in interest rates, but does not wish to
purchase the underlying long term securities, it might cause the Portfolio to
purchase futures contracts on long term debt securities. Similarly, if the
Advisor wishes to decrease fixed income securities or purchase equities, it
could cause the Portfolio to sell futures contracts on debt securities and
purchase futures contracts on a stock index. Such non-hedging risk management
techniques are not speculative, but because they involve leverage include, as do
all leveraged transactions, the possibility of losses as well as gains that are
greater than if these techniques involved the purchase and sale of the
securities themselves rather than their synthetic derivatives.
SPECIAL FACTORS AFFECTING THE NEW YORK TOTAL RETURN BOND FUND. The New York
Total Return Bond Fund intends to invest a high proportion of its assets in
municipal obligations of the State of New York and its political subdivisions,
municipalities, agencies, instrumentalities and public authorities. Payment of
interest and preservation of principal is dependent upon the continuing ability
of New York issuers and/or obligators of state, municipal and public authority
debt obligations to meet their obligations thereunder.
The fiscal stability of New York State is related, at least in part, to
the fiscal stability of its localities and authorities. Various State agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the State through lease-purchase arrangements, other
contractual arrangements or moral obligation provisions. While debt service is
normally paid out of revenues generated by projects of such State agencies,
authorities and localities, the State has had to provide special assistance in
recent years, in some cases of a recurring nature, to enable such agencies,
authorities and localities to meet their financial obligations and, in some
cases, to prevent or cure defaults. To the extent State agencies and local
governments require State assistance to meet their financial obligations, the
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ability of the State to meet its own obligations as they become due or to obtain
additional financing could be adversely affected.
For further information concerning New York municipal obligations, see
Appendix B to this Statement of Additional Information. The summary set forth
above and in Appendix B is included for the purpose of providing a general
description of New York State and New York City credit and financial conditions.
This summary is based on information from an official statement of New York
general obligation municipal obligations and does not purport to be complete.
PORTFOLIO TURNOVER
Set forth below are the portfolio turnover rates for the Portfolios
corresponding to the Funds. A rate of 100% indicates that the equivalent of all
of the Portfolio's assets have been sold and reinvested in a year. High
portfolio turnover may result in the realization of substantial net capital
gains or losses. To the extent net short term capital gains are realized, any
distributions resulting from such gains are considered ordinary income for
federal income tax purposes. See "Taxes" below.
THE SHORT TERM BOND PORTFOLIO (SHORT TERM BOND FUND) -- For the fiscal year
ended October 31, 1994: 230%
THE TAX EXEMPT BOND PORTFOLIO (TAX EXEMPT BOND FUND) -- For the fiscal year
ended August 31, 1994: 32.57%
THE NEW YORK TOTAL RETURN BOND PORTFOLIO (NEW YORK TOTAL RETURN BOND FUND)
- -- For the period April 11, 1994 (commencement of operations) through March 31,
1995: 63%
THE U.S. FIXED INCOME PORTFOLIO (BOND FUND) -- For the fiscal year ended
October 31, 1994: 234%
THE SELECTED U.S. EQUITY PORTFOLIO (EQUITY FUND) -- For the period July 19, 1993
(commencement of operations) through May 31, 1994: 76%
THE U.S. SMALL COMPANY PORTFOLIO (CAPITAL APPRECIATION FUND) -- For the period
July 19, 1993 (commencement of operations) through May 31, 1994: 97%
THE NON-U.S. EQUITY PORTFOLIO (INTERNATIONAL EQUITY FUND) -- For the fiscal year
ended October 31, 1994: 56%
THE EMERGING MARKETS EQUITY PORTFOLIO (EMERGING MARKETS EQUITY FUND) -- For the
fiscal year ended October 31, 1994: 27.48%
THE DIVERSIFIED PORTFOLIO (DIVERSIFIED FUND) -- For the period July 8, 1993
(commencement of operations) through June 30, 1994: 115%
INVESTMENT RESTRICTIONS
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The investment restrictions of each Fund and its corresponding
Portfolio are identical, unless otherwise specified. Accordingly, references
below to a Fund also include the Fund's corresponding Portfolio unless the
context requires otherwise; similarly, references to a Portfolio also include
its corresponding Fund unless the context requires otherwise.
The investment restrictions below have been adopted by the Trust with
respect to each Fund and by each corresponding 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 of the Fund or Portfolio, as the case may be. A "majority of
the outstanding voting securities" is defined in the 1940 Act as the lesser of
(a) 67% or more of the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy, or (b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions below apply at the time of the
purchase of securities. Whenever a Fund is requested to vote on a change in the
fundamental investment restrictions of its corresponding Portfolio, the Trust
will hold a meeting of Fund shareholders and will cast its votes as instructed
by the Fund's shareholders.
The MONEY MARKET FUND and its corresponding PORTFOLIO may not:
1. 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 Fund's total assets would be in investments which
are illiquid;
2. Enter into reverse repurchase agreements exceeding in the aggregate
one-third of the market value of the Fund's total assets, less
liabilities other than obligations created by reverse repurchase
agreements;
3. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts not to exceed 10% of the value of the Fund's
total assets, taken at cost, at the time of such borrowing. Mortgage,
pledge, or hypothecate any assets except in connection with any such
borrowing and in amounts not to exceed 10% of the value of the Fund's
net assets at the time of such borrowing. The Fund will not purchase
securities while borrowings exceed 5% of the Fund's total assets;
provided, however, that the Fund may increase its interest in an
open-end management investment company with the same investment
objective and restrictions as the Fund while such borrowings are
outstanding. This borrowing provision is included to facilitate the
orderly sale of portfolio securities, for example, in the event of
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abnormally heavy redemption requests, and is not for investment purposes
and shall not apply to reverse repurchase agreements;
4. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer; provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund. This
limitation shall not apply to issues of the U.S. Government, its
agencies or instrumentalities and to permitted investments of up to 25%
of the Fund's total assets;
5. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase, the value of its investment in such industry would exceed
25% of the value of the Fund's total assets; provided, however, that the
Fund may invest all or part of its investable assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund. For purposes of industry concentration, there
is no percentage limitation with respect to investments in U.S.
Government securities, negotiable certificates of deposit, time
deposits, and bankers' acceptances of U.S. branches of U.S. banks;
6. Make loans, except through purchasing or holding debt obligations, or
entering into repurchase agreements, or loans of portfolio securities in
accordance with the Fund's investment objective and policies (see
"Investment Objectives and Policies");
7. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, or commodity contracts or interests
in oil, gas, or mineral exploration or development programs. However,
the Fund may purchase bonds or commercial paper issued by companies
which invest in real estate or interests therein including real estate
investment trusts;
8. 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
securities or of securities for delivery at a future date;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act; or
10. Act as an underwriter of securities.
The TAX EXEMPT MONEY MARKET FUND and its corresponding PORTFOLIO may not:
1. Borrow money, except from banks for temporary, extraordinary or
emergency purposes and then only in amounts up to 10% of the value of
the Fund's total assets, taken at cost at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any
such borrowing in
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amounts up to 10% of the value of the Fund's net assets at the time of
such borrowing. The Fund will not purchase securities while borrowings
exceed 5% of the Fund's total assets, provided, however, that the Fund
may increase its interest in an open-end management investment company
with the same investment objective and restrictions as the Fund's while
such borrowings are outstanding. This borrowing provision, for example,
facilitates the orderly sale of portfolio securities in the event of
abnormally heavy redemption requests or in the event of redemption
requests during periods of tight market supply. This provision is not
for leveraging purposes;
2. Invest more than 25% of its total assets in securities of governmental
units located in any one state, territory, or possession of the United
States. The Fund may invest more then 25% of its total assets in
industrial development and pollution control obligations whether or not
the users of facilities financed by such obligations are in the same
industry;1
3. Purchase industrial revenue bonds if, as a result of such purchase, more
than 5% of total Fund assets would be invested in industrial revenue
bonds where payment of principal and interest are the responsibility of
companies with fewer than three years of operating history;
4. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer, provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund's. Each
state and each political subdivision, agency or instrumentality of such
state and each multi-state agency of which such state is a member will
be a separate issuer if the security is backed only by the assets and
revenues of that issuer. If the security is guaranteed by another
entity, the guarantor will be deemed to be the issuer.2 This limitation
shall not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Fund's total assets;
5. Make loans, except through the purchase or holding of debt obligations,
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's investment objective and policies (see "Investment
Objectives and Policies");
- --------
1Pursuant to an interpretation of the staff of the SEC, the Fund may not
invest more than 25% of its assets in industrial development bonds in
projects of similar type or in the same state. The Fund shall comply
with this interpretation until such time as it may be modified by the
staff or the SEC. 2For purposes of interpretation of Investment
Restriction No. 4 "guaranteed by another entity" includes credit
substitutions, such as letters of credit or insurance, unless the
Advisor determines that the security meets the Fund's credit standards
without regard to the credit substitution.
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6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof except to the extent that securities subject to a demand
obligation, stand-by commitments and puts may be purchased (see
"Investment Objectives and Policies"); real estate; commodities;
commodity contracts; or interests in oil, gas, or mineral exploration or
development programs. However, the Fund may purchase municipal bonds,
notes or commercial paper secured by interests in real estate;
7. 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
securities or of securities for delayed delivery;
8. Acquire securities of other investment companies, except as permitted by
the 1940 Act; or
9. Act as an underwriter of securities.
The TREASURY MONEY MARKET FUND and its corresponding PORTFOLIO may not:
1. Enter into reverse repurchase agreements which together with any other
borrowing exceeds in the aggregate one-third of the market value of the
Fund's or the Portfolio's total assets, less liabilities other than the
obligations created by reverse repurchase agreements;
2. Borrow money (not including reverse repurchase agreements), except from
banks for temporary or extraordinary or emergency purposes and then only
in amounts up to 10% of the value of the Fund's or the Portfolio's total
assets, taken at cost at the time of such borrowing (and provided that
such borrowings and reverse repurchase agreements do not exceed in the
aggregate one-third of the market value of the Fund's and the
Portfolio's total assets less liabilities other than the obligations
represented by the bank borrowings and reverse repurchase agreements).
Mortgage, pledge, or hypothecate any assets except in connection with
any such borrowing and in amounts up to 10% of the value of the Fund's
or the Portfolio's net assets at the time of such borrowing. The Fund or
the Portfolio will not purchase securities while borrowings exceed 5% of
the Fund's or the Portfolio's total assets, respectively; provided,
however, that the Fund may increase its interest in an open-end
management investment company with the same investment objective and
restrictions as the Fund while such borrowings are outstanding. This
borrowing provision is included to facilitate the orderly sale of
portfolio securities, for example, in the event of abnormally heavy
redemption requests, and is not for investment purposes;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
or the Portfolio's total assets would be invested in securities or other
obligations of any one such issuer; provided, however, that the Fund may
invest all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions
as
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the Fund. This limitation also shall not apply to issues of the U.S.
Government and repurchase agreements related thereto;
4. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase, the value of its investment in such industry would exceed
25% of the value of the Fund's or the Portfolio's total assets;
provided, however, that the Fund may invest all or part of its assets in
an open-end management investment company with the same investment
objective and restrictions as the Fund. For purposes of industry
concentration, there is no percentage limitation with respect to
investments in U.S. Government securities and repurchase agreements
related thereto;
5. Make loans, except through purchasing or holding debt obligations,
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's or the Portfolio's investment objective and policies
(see "Investment Objectives and Policies");
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, or commodity contracts or interests
in oil, gas, or mineral exploration or development programs;
7. 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
securities or of securities for delivery at a future date;
8. Acquire securities of other investment companies, except as permitted by
the 1940 Act or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange; provided,
however, that nothing in this investment restriction shall prevent the
Trust from investing all or part of the Fund's assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund; or
9. Act as an underwriter of securities.
The SHORT TERM BOND FUND and its corresponding PORTFOLIO may not:
1. Purchase securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase the value of its investments in such industry would exceed
25% of the value of the Fund's total assets; provided, however, that the
Fund may invest all or part of its investable assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund's. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S.
Government securities;
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one
35
<PAGE>
such issuer; provided, however, that the Fund may invest all or part of
its investable assets in an open-end management investment company with
the same investment objective and restrictions as the Fund's. This
limitation shall not apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Fund's total assets;
3. Purchase the securities of an issuer if, immediately after such
purchase, the Fund owns more than 10% of the outstanding voting
securities of such issuer; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions
as the Fund's. This limitation shall not apply to permitted investments
of up to 25% of the Fund's total assets;
4. Borrow money (not including reverse repurchase agreements), except from
banks for temporary or extraordinary or emergency purposes and then only
in amounts up to 30% of the value of the Fund's or the Portfolio's total
assets, taken at cost at the time of such borrowing (and provided that
such borrowings and reverse repurchase agreements do not exceed in the
aggregate one-third of the market value of the Fund's and the
Portfolio's total assets less liabilities other than the obligations
represented by the bank borrowings and reverse repurchase agreements).
The Fund will not mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not to exceed 30% of
the value of the Fund's or the Portfolio's net assets at the time of
such borrowing. The Fund or the Portfolio will not purchase securities
while borrowings exceed 5% of the Fund's total assets; provided,
however, that the Fund may increase its interest in an open-end
management investment company with the same investment objective and
restrictions as the Fund's while such borrowings are outstanding.
Collateral arrangements for premium and margin payments in connection
with the Fund's hedging activities are not deemed to be a pledge of
assets;
5. Issue any senior security, except as appropriate to evidence
indebtedness which constitutes a senior security and which the Fund is
permitted to incur pursuant to Investment Restriction No. 4 and except
that the Fund may enter into reverse repurchase agreements, provided
that the aggregate of senior securities, including reverse repurchase
agreements, shall not exceed one-third of the market value of the Fund's
total assets, less liabilities other than obligations created by reverse
repurchase agreements. The Fund's arrangements in connection with its
hedging activities as described in "Investment Objectives and Policies"
shall not be considered senior securities for purposes hereof;
6. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's investment objective and policies;
7. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, or commodity contracts, except for
the Fund's interests in hedging activities as described under
"Investment
36
<PAGE>
Objectives and Policies"; or interests in oil, gas, or mineral
exploration or development programs. However, the Fund may purchase
securities or commercial paper issued by companies which invest in real
estate or interests therein, including real estate investment trusts,
and purchase instruments secured by real estate or interests therein;
8. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except to obtain such
short-term credit as necessary for the clearance of purchases and sales
of securities; provided that this restriction shall not be deemed to be
applicable to the purchase or sale of when-issued securities or delayed
delivery securities;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange; provided,
however, that nothing in this investment restriction shall prevent the
Trust from investing all or part of the Fund's assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund; or
10. Act as an underwriter of securities.
The BOND FUND and its corresponding PORTFOLIO may not:
1. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts up to 30% of the value of the Fund's total
assets, taken at cost at the time of such borrowing and except in
connection with reverse repurchase agreements permitted by Investment
Restriction No. 8. Mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing in amounts up to 30% of the value of
the Fund's net assets at the time of such borrowing. The Fund will not
purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of the Fund's total assets; provided, however,
that the Fund may increase its interest in an open-end management
investment company with the same investment objective and restrictions
as the Fund's while such borrowings are outstanding. This borrowing
provision facilitates the orderly sale of portfolio securities, for
example, in the event of abnormally heavy redemption requests. This
provision is not for investment purposes. Collateral arrangements for
premium and margin payments in connection with the Fund's hedging
activities are not deemed to be a pledge of assets;
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer; provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund's. This
limitation shall not apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Fund's total assets;
37
<PAGE>
3. Purchase the securities of an issuer if, immediately after such
purchase, the Fund owns more than 10% of the outstanding voting
securities of such issuer; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions
as the Fund's. This limitation shall not apply to permitted investments
of up to 25% of the Fund's total assets;
4. Purchase securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase the value of its investments in such industry would exceed
25% of the value of the Fund's total assets; provided, however, that the
Fund may invest all or part of its investable assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund's. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S.
Government securities;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's investment objective and policies;
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, commodity contracts, except for the
Fund's interest in hedging activities as described under "Investment
Objectives and Policies"; or interests in oil, gas, or mineral
exploration or development programs. However, the Fund may purchase debt
obligations secured by interests in real estate or issued by companies
which invest in real estate or interests therein including real estate
investment trusts;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except in the course of the
Fund's hedging activities, unless at all times when a short position is
open the Fund owns an equal amount of such securities; provided that
this restriction shall not be deemed to be applicable to the purchase or
sale of when-issued securities or delayed delivery securities;
8. Issue any senior security, except as appropriate to evidence
indebtedness which constitutes a senior security and which the Fund is
permitted to incur pursuant to Investment Restriction No. 1 and except
that the Fund may enter into reverse repurchase agreements, provided
that the aggregate of senior securities, including reverse repurchase
agreements, shall not exceed one-third of the market value of the Fund's
total assets, less liabilities other than obligations created by reverse
repurchase agreements. The Fund's arrangements in connection with its
hedging activities as described in "Investment Objectives and Policies"
shall not be considered senior securities for purposes hereof;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act; or
10. Act as an underwriter of securities.
38
<PAGE>
The TAX EXEMPT BOND FUND and its corresponding PORTFOLIO may not:
1. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts up to 10% of the value of the Fund's total
assets, taken at cost at the time of such borrowing; or mortgage,
pledge, or hypothecate any assets except in connection with any such
borrowing in amounts up to 10% of the value of the Fund's net assets at
the time of such borrowing. The Fund will not purchase securities while
borrowings exceed 5% of the Fund's total assets; provided, however, that
the Fund may increase its interest in an open-end management investment
company with the same investment objective and restrictions as the
Fund's while such borrowings are outstanding. This borrowing provision
facilitates the orderly sale of portfolio securities, for example, in
the event of abnormally heavy redemption requests. This provision is not
for investment purposes. Collateral arrangements for premium and margin
payments in connection with the Fund's hedging activities are not deemed
to be a pledge of assets;
2. Purchase securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer; provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund's. Each
state and each political subdivision, agency or instrumentality of such
state and each multi-state agency of which such state is a member will
be a separate issuer if the security is backed only by the assets and
revenue of that issuer. If the security is guaranteed by another entity,
the guarantor will be deemed to be the issuer.1 This limitation shall
not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or to permitted investments of up to 25%
of the Fund's total assets;
3. Invest more than 25% of its total assets in securities of governmental
units located in any one state, territory, or possession of the United
States. The Fund may invest more than 25% of its total assets in
industrial developments and pollution control obligations whether or not
the users of facilities financed by such obligations are in that same
industry;2
4. Purchase industrial revenue bonds if, as a result of such purchase, more
than 5% of total Fund assets would be invested in industrial revenue
bonds
- --------
1 For purposes of interpretation of Investment Restriction No. 2 "guaranteed
by another entity" includes credit substitutions, such as letters of credit or
insurance, unless the Advisor determines that the security meets the Fund's
credit standards without regard to the credit substitution. 2Pursuant to an
interpretation of the staff of the SEC, the Fund may not invest more than 25% of
its assets in industrial development bonds in projects of similar type or in the
same state. The Fund shall comply with this interpretation until such time as it
may be modified by the staff of the SEC.
39
<PAGE>
where payment of principal and interest are the responsibility of
companies with fewer than three years of operating history (including
predecessors);
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's investment objective and policies (see "Investment
Objectives and Policies");
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof except to the extent that securities subject to a demand
obligation, stand-by commitments and puts may be purchased (see
"Investment Objectives and Policies"); real estate; commodities;
commodity contracts, except for the Fund's interests in hedging
activities as described under "Investment Objectives and Policies"; or
interests in oil, gas, or mineral exploration or development programs.
However, the Fund may purchase municipal bonds, notes or commercial
paper secured by interests in real estate;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position, except in the course of the Fund's hedging
activities, unless at all times when a short position is open the Fund
owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount
to, the securities sold short; provided that this restriction shall not
be deemed to be applicable to the purchase or sale of when-issued or
delayed delivery securities;
8. Issue any senior security, except as appropriate to evidence
indebtedness which the Fund is permitted to incur pursuant to Investment
Restriction No. 1. The Fund's arrangements in connection with its
hedging activities as described in "Investment Objectives and Policies"
shall not be considered senior securities for purposes hereof;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act; or
10. Act as an underwriter of securities.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC staff
interpretations thereof, are amended or modified, the NEW YORK TOTAL RETURN BOND
FUND and its corresponding PORTFOLIO may not:
1. Purchase any security if, as a result, more than 25% of the value of the
Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry. This
limitation shall not apply to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
2. Borrow money, except that the Fund may (i) borrow money from banks for
temporary or emergency purposes (not for leveraging purposes) and (ii)
enter
40
<PAGE>
into reverse repurchase agreements for any purpose; provided that (i)
and (ii) in total do not exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed) less liabilities (other than
borrowings). If at any time any borrowings come to exceed 33 1/3% of the
value of the Fund's total assets, the Fund will reduce its borrowings
within three business days to the extent necessary to comply with the 33
1/3% limitation;
3. Make loans to other persons, except through the purchase of debt
obligations, loans of portfolio securities, and participation in
repurchase agreements;
4. Purchase or sell physical commodities or contracts thereon, unless
acquired as a result of the ownership of securities or instruments, but
the Fund may purchase or sell futures contracts or options (including
options on futures contracts, but excluding options or futures contracts
on physical commodities) and may enter into foreign currency forward
contracts;
5. Purchase or sell real estate, but the Fund may purchase or sell
securities that are secured by real estate or issued by companies
(including real estate investment trusts) that invest or deal in real
estate;
6. Underwrite securities of other issuers, except to the extent the Fund,
in disposing of portfolio securities, may be deemed an underwriter
within the meaning of the 1933 Act;
7. Issue senior securities, except as permitted under the 1940 Act or any
rule, order or interpretation thereunder; or
8. Notwithstanding any other investment restriction of the Fund, the Fund
may invest all of its investable assets in an open-end management
investment company having the same investment objective and restrictions
as the Fund.
The DIVERSIFIED FUND and its corresponding PORTFOLIO may not:
1. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase the value of its investments in such industry would exceed
25% of the value of the Fund's total assets; provided, however, that the
Fund may invest all or part of its investable assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund's. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S.
Government securities;
41
<PAGE>
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer; provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund's. This
limitation shall not apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Fund's total assets;
3. Purchase the securities of an issuer if, immediately after such
purchase, the Fund owns more than 10% of the outstanding voting
securities of such issuer; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions
as the Fund's. This limitation shall not apply to permitted
investments of up to 25% of the Fund's total assets;
4. Borrow money (not including reverse repurchase agreements), except from
banks for temporary or extraordinary or emergency purposes and then only
in amounts up to 30% of the value of the Fund's or the Portfolio's total
assets, taken at cost at the time of such borrowing (and provided that
such borrowings and reverse repurchase agreements do not exceed in the
aggregate one-third of the market value of the Fund's and the
Portfolio's total assets less liabilities other than the obligations
represented by the bank borrowings and reverse repurchase agreements).
The Fund will not mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not to exceed 30% of
the value of the Fund's or the Portfolio's net assets at the time of
such borrowing. The Fund or the Portfolio will not purchase securities
while borrowings exceed 5% of the Fund's total assets; provided,
however, that the Fund may increase its interest in an open-end
management investment company with the same investment objective and
restrictions as the Fund's while such borrowings are outstanding. This
borrowing provision is included to facilitate the orderly sale of
portfolio securities, for example, in the event of abnormally heavy
redemption requests, and is not for investment purposes. Collateral
arrangements for premium and margin payments in connection with the
Fund's use of futures contracts and options are not deemed to be a
pledge of assets;
5. Issue any senior security, except as appropriate to evidence
indebtedness which constitutes a senior security and which the Fund is
permitted to incur pursuant to Investment Restriction No. 4 and except
that the Fund may enter
42
<PAGE>
into reverse repurchase agreements, provided that the aggregate of
senior securities, including reverse repurchase agreements, shall not
exceed one-third of the market value of the Fund's total assets, less
liabilities other than obligations created by reverse repurchase
agreements. The Fund's arrangements in connection with its use of
futures contracts and options shall not be considered senior securities
for purposes hereof ;
6. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities), or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's investment objective and policies (see "Investment
Objectives and Policies");
7. Purchase or sell commodities or commodity contracts, but this
restriction shall not prohibit the Fund from purchasing or selling
futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or
entering into foreign currency forward contracts; or purchase or sell
real estate or interests in oil, gas, or mineral exploration or
development programs. However, the Fund may purchase securities or
commercial paper issued by companies which invest in real estate or
interests therein, including real estate investment trusts , and
purchase instruments secured by real estate or interests therein;
8. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except to obtain such short
term credit as necessary for the clearance of purchases and sales of
securities, provided that this restriction shall not be deemed to be
applicable to the purchase or sale of when-issued securities or delayed
delivery securities or to restrict the Fund's use of futures contracts
or options;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange; provided,
however, that nothing in this investment restriction shall prevent the
Trust from investing all or part of the Fund's assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund; or
10. Act as an underwriter of securities .
43
<PAGE>
Each of the EQUITY FUND and the CAPITAL APPRECIATION FUND and their
corresponding PORTFOLIOS may not:
1. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase the value of its investments in such industry would exceed
25% of the value of the Fund's total assets; provided, however, that the
Fund may invest all or part of its investable assets in an open-end
management investment company with the same investment objective and
restrictions as the Fund's. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S.
Government securities;
2. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts not to exceed 10% of the value of the Fund's
total assets, taken at cost, at the time of such borrowing. Mortgage,
pledge, or hypothecate any assets except in connection with any such
borrowing and in amounts not to exceed 10% of the value of the Fund's
net assets at the time of such borrowing. The Fund will not purchase
securities while borrowings exceed 5% of the Fund's total assets;
provided, however, that the Fund may increase its interest in an
open-end management investment company with the same investment
objective and restrictions as the Fund's while such borrowings are
outstanding. This borrowing provision is included to facilitate the
orderly sale of portfolio securities, for example, in the event of
abnormally heavy redemption requests, and is not for investment
purposes. Collateral arrangements for premium and margin payments in
connection with the Fund's hedging activities are not deemed to be a
pledge of assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer; provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund's. This
limitation shall not apply to issues of the U.S. Government, its
agencies or instrumentalities and to permitted investments of up to 25%
of the Fund's total assets;
44
<PAGE>
4. Purchase the securities of an issuer if, immediately after such
purchase, the Fund owns more than 10% of the outstanding voting
securities of such issuer; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions
as the Fund's
;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities), or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the Fund's investment objective and policies (see "Investment
Objectives and Policies");
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, or commodity contracts, except for
the Fund's interests in hedging activities as described under
"Investment Objectives and Policies"; or interests in
45
<PAGE>
oil, gas, or mineral exploration or development programs. However, the
Fund may purchase securities or commercial paper issued by companies
which invest in real estate or interests therein, including real estate
investment trusts ;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position , except in the course of the Fund's hedging
activities, provided that this restriction shall not be deemed to be
applicable to the purchase or sale of when-issued securities or delayed
delivery securities ;
8. Acquire securities of other investment companies, except as permitted
by the 1940 Act;
9. Act as an underwriter of securities ;
10. Issue any senior security, except as appropriate to evidence
indebtedness which the Fund is permitted to incur pursuant to Investment
Restriction No. 2. The Fund's arrangements in connection with its
hedging activities as described in "Investment Objectives and Policies"
shall not be considered senior securities for purposes hereof; or
11. Purchase any equity security if, as a result, the Fund would then have
more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for
fewer than three years.
The INTERNATIONAL EQUITY FUND and its corresponding PORTFOLIO may not:
1. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts up to 30% of the value of the Fund's net assets
at the time of borrowing, and except in connection with reverse
repurchase agreements and then only in amounts up to 33 1/3% of the
value of the Fund's net assets; or purchase securities while borrowings,
including reverse repurchase agreements, exceed 5% of the Fund's total
assets; provided, however, that the Fund may increase its interest in an
open-end management investment company with the same investment
objective and restrictions as the Fund's while such borrowings are
outstanding. The Fund will not mortgage, pledge, or hypothecate any
assets except in connection with any such borrowing and in amounts not
to exceed 30% of the value of the Fund's net assets at the time of such
borrowing;
46
<PAGE>
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities or other obligations of any
one such issuer; provided, however, that the Fund may invest all or part
of its investable assets in an open-end management investment company
with the same investment objective and restrictions as the Fund's. This
limitation shall not apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Fund's total assets;
3. Purchase the securities of an issuer if, immediately after such
purchase, the Fund owns more than 10% of the outstanding voting
securities of such issuer; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions
as the Fund's. This limitation shall not apply to permitted investments
of up to 25% of the Fund's total assets;
4. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase, the value of its investments in such industry would
exceed 25% of the value of the Fund's total assets; provided, however,
that the Fund may invest all or part of its investable assets in an
open-end management investment company with the same investment
objective and restrictions as the Fund's. For purposes of industry
concentration, there is no percentage limitation with respect to
investments in U.S. Government securities;
5. Make loans, except through the purchase or holding of debt obligations
(including restricted securities), or the entering into of repurchase
agreements, or loans of portfolio securities in accordance with the
Fund's investment objective and policies, see "Additional Investment
Information" in the Prospectus and "Investment Objectives and Policies"
in this Statement of Additional Information;
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real property, including limited partnership interests,
commodities, or commodity contracts, except for the Fund's interests in
hedging and foreign exchange activities as described under "Additional
Investment Information" in the Prospectus; or interests in oil, gas,
mineral or other exploration or development programs or leases. However,
the Fund may purchase securities or commercial paper issued by companies
that invest in real estate or interests therein including real estate
investment trusts;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except to obtain such
short-term credit as necessary for the clearance of purchases and sales
of securities, provided that this restriction shall not be deemed to
apply to the purchase or sale of when-issued securities or delayed
delivery securities;
8. Acquire securities of other investment companies, except as permitted by
the 1940 Act;
47
<PAGE>
9. Act as an underwriter of securities, except insofar as the Fund may be
deemed to be an underwriter under the 1933 Act by virtue of disposing of
portfolio securities; or
10. Issue any senior security, except as appropriate to evidence
indebtedness which the Fund is permitted to incur pursuant to Investment
Restriction No. 1. The Fund's arrangements in connection with its
hedging activities as described in "Additional Investment Information"
in the Prospectus shall not be considered senior securities for purposes
hereof.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act, or any SEC or SEC
staff interpretations thereof, are amended or modified, the EMERGING MARKETS
EQUITY FUND and its corresponding PORTFOLIO may not:
1. Purchase any security if, as a result, more than 25% of the value of the
Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry. This
limitation shall not apply to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
2. Borrow money, except that the Fund may (i) borrow money from banks for
temporary or emergency purposes (not for leveraging purposes) and (ii)
enter into reverse repurchase agreements for any purpose; provided that
(i) and (ii) in total do not exceed 33 1/3% of the value of the Fund's
total assets (including the amount borrowed) less liabilities (other
than borrowings). If at any time any borrowings come to exceed 33 1/3%
of the value of the Fund's total assets, the Fund will reduce its
borrowings within three business days to the extent necessary to comply
with the 33 1/3% limitation;
3. With respect to 75% of its total assets, purchase any security if, as a
result, (a) more than 5% of the value of the Fund's total assets would
be invested in securities or other obligations of any one issuer; or (b)
the Fund would hold more than 10% of the outstanding voting securities
of that issuer. This limitation shall not apply to Government securities
(as defined in the 1940 Act);
4. Make loans to other persons, except through the purchase of debt
obligations, loans of portfolio securities, and participation in
repurchase agreements;
5. Purchase or sell physical commodities or contracts thereon, unless
acquired as a result of the ownership of securities or instruments, but
the Fund may purchase or sell futures contracts or options (including
options on futures contracts, but excluding options or futures contracts
on physical commodities) and may enter into foreign currency forward
contracts;
6. Purchase or sell real estate, but the Fund may purchase or sell
securities that are secured by real estate or issued by companies
(including real estate investment trusts) that invest or deal in real
estate;
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<PAGE>
7. Underwrite securities of other issuers, except to the extent the Fund,
in disposing of portfolio securities, may be deemed an underwriter
within the meaning of the 1933 Act;
8. Issue senior securities, except as permitted under the 1940 Act or any
rule, order or interpretation thereunder; and
9. Notwithstanding any other investment restriction of the Fund, the Fund
may invest all of its investable assets in an open-end management
investment company having the same investment objective and restrictions
as the Fund.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - TAX EXEMPT MONEY MARKET FUND
AND TREASURY MONEY MARKET FUND. The investment restriction described below is
not a fundamental policy of these Funds or their corresponding Portfolios and
may be changed by their respective Trustees. This non-fundamental investment
policy requires that each such Fund may not:
(i) 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 Fund's total assets would be in investments that
are illiquid.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - SHORT TERM BOND FUND, TAX
EXEMPT BOND FUND, BOND FUND, EQUITY FUND, CAPITAL APPRECIATION FUND,
INTERNATIONAL EQUITY FUND AND DIVERSIFIED FUND. The investment restriction
described below is not a fundamental policy of these Funds or their
corresponding Portfolios and may be changed by their respective Trustees. This
non-fundamental investment policy requires that each such Fund may not:
(i) acquire any illiquid securities, such as repurchase agreements with
more than seven days to maturity or fixed time deposits with a duration
of over seven calendar days, if as a result thereof, more than 15% of
the market value of the Fund's total assets would be in investments that
are illiquid.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - NEW YORK TOTAL RETURN BOND
FUND. The investment restrictions described below are not fundamental policies
of the New York Total Return Bond Fund and its corresponding Portfolio and may
be changed by their Trustees. These non-fundamental investment policies require
that the New York Total Return Bond Fund and its corresponding Portfolio may
not:
(i) Acquire securities of other investment companies, except as
permitted by the 1940 Act or any rule, order or interpretation
thereunder, or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange;
(ii) Acquire any illiquid securities, such as repurchase agreements with
more than seven days to maturity or fixed time deposits with a duration
of over seven calendar days, if as a result thereof, more than 15% of
the market value of the Fund's total assets would be in investments that
are illiquid;
49
<PAGE>
(iii) Sell any security short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold or
unless it covers such short sales as required by the current rules or
positions of the SEC or its staff. Transactions in futures contracts and
options shall not constitute selling securities short; or
(iv) Purchase securities on margin, but the Fund may obtain such short
term credits as may be necessary for the clearance of transactions.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - INTERNATIONAL EQUITY FUND AND
DIVERSIFIED FUND. The investment restrictions described below are not
fundamental policies of these Funds or their corresponding Portfolios and may be
changed by their respective Trustees. These non-fundamental investment policies
require that each such Fund may not:
(i) purchase any equity security if, as a result, the Fund would then
have more than 5% of its total assets invested in securities of
companies (including predecessors) that have been in continuous
operation for fewer than three years;
(ii) invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if, as
a result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of the Fund's net assets or if, as a result, more
than 2% of the Fund's net assets would be invested in warrants not
listed on a recognized U.S. or foreign stock exchange, to the extent
permitted by applicable state securities laws; or
(iii) invest in any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or
Trustee of the Trust, or is an officer of the Investment Advisor, if
after the Portfolio's purchase of the securities of such issuer, one or
more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities, or both, all taken at market value, of such issuer, and
such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or
both, all taken at market value.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - EQUITY FUND AND CAPITAL
APPRECIATION FUND. The investment restrictions described below are not
fundamental policies of these Funds or their corresponding Portfolios and may be
changed by their respective Trustees. These non-fundamental investment policies
require that each such Fund may not:
(i) invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of the Fund's net assets or if, as a result, more
than 2% of the Fund's net assets would be invested in warrants not
listed on a recognized U.S. or foreign stock exchange, to the extent
permitted by applicable state securities laws; or
50
<PAGE>
(ii) invest in any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Trust, or is an officer of the Investment Advisor, if after the
Portfolio's purchase of the securities of such issuer, one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities, or both, all
taken at market value.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - EQUITY FUND, CAPITAL
APPRECIATION FUND AND DIVERSIFIED FUND. The investment restrictions described
below are not fundamental policies of these Funds or their corresponding
Portfolios and may be changed by their respective Trustees. These
non-fundamental investment policies require that each such Fund may not:
(i) invest in real estate limited partnership interests; or
(ii) invest in oil, gas or other mineral leases.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - EMERGING MARKETS EQUITY FUND.
The investment restrictions described below are not fundamental policies of the
Emerging Markets Equity Fund and its corresponding Portfolio and may be changed
by their Trustees. These non-fundamental investment policies require that the
Emerging Markets Equity Fund and its corresponding Portfolio may not:
(i) Acquire securities of other investment companies, except as
permitted by the 1940 Act or any rule, order or interpretation
thereunder, or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange;
(ii) Acquire any illiquid securities, such as repurchase agreements with
more than seven days to maturity or fixed time deposits with a duration
of over seven calendar days, if as a result thereof, more than 15% of
the market value of the Fund's total assets would be in investments that
are illiquid;
(iii) Purchase any security if, as a result, the Fund would then have
more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for
fewer than three years;
(iv) Invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if, as
a result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of the Fund's net assets or if, as a result, more
than 2% of the Fund's net assets would be invested in warrants not
listed on a recognized U.S. or foreign stock exchange, to the extent
permitted by applicable state securities laws;
(v) Sell any security short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold or
unless
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<PAGE>
it covers such short sales as required by the current rules or positions
of the SEC or its staff. Transactions in futures contracts and options
shall not constitute selling securities short;
(vi) Purchase securities on margin, but the Fund may obtain such short
term credits as may be necessary for the clearance of transactions;
(vii) Purchase or retain securities of any issuer if, to the knowledge
of the Fund, any of the Fund's officers or Trustees or any officer of
the Portfolio's investment adviser individually owns more than 1/2 of 1%
of the issuer's outstanding securities and such persons owning more than
1/2 of 1% of such securities together beneficially own more than 5% of
such securities, all taken at market; or
(viii) Invest in real estate limited partnerships or purchase interests
in oil, gas or mineral exploration or development programs or leases.
ALL FUNDS. 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.
TRUSTEES AND OFFICERS
The Trustees of the Trust, who are also the Trustees of each of the
Portfolios, their business addresses, and their principal occupations during the
past five years are set forth below.
TRUSTEES
FREDERICK S. ADDY--Trustee; Retired; Executive Vice President and Chief
Financial Officer from January 1990 to April 1994
, Amoco Corporation; Director, Ensearch Corp. (natural
gas), since 1994. His address is 19129 RR 2147 W. Horseshoe Bay, TX 78654.
WILLIAM G. BURNS--Trustee; Retired; Limited Partner, Galen Partners L.P.
and Vice Chairman, Galen Associates, since 1990; Chief Executive Officer, Galen
Associates and General Partner, Galen Partners L.P., until 1991. His address is
4241 S.W. Parkgate Blvd., Palm City, FL 34990.
ARTHUR C. ESCHENLAUER--Trustee; Retired; Senior Vice President, Morgan
Guaranty Trust Company of New York until 1987. His address is 14 Alta Vista
Drive, RD #2, Princeton, NJ 08540.
MATTHEW HEALEY (*)--Trustee; Chairman and Chief Executive Officer, The
Pierpont Funds and The JPM Institutional Funds; Chairman, Pierpont Group, Inc.,
since 1989; Chairman and Chief Executive Officer, Execution Services, Inc. until
October 1991. His address is Pine Tree Club Estates, 10286 Saint Andrew Road,
Boynton Beach, FL 33436.
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<PAGE>
MICHAEL P. MALLARDI--Trustee; Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group, since 1986. His address is 77 West 66th
Street, New York, NY 10017.
- ------------------------
(*) Mr. Healey is an "interested person" of the Trust and each Portfolio as that
term is defined in the 1940 Act.
The Trustees of the Trust are the same as the Trustees of each of the
Portfolios. 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 Trust, each of the Portfolios and The JPM
Institutional Funds, up to and including creating a separate board of trustees.
Each Trustee is paid an annual fee as follows for serving as Trustee of
the Trust, each of the Portfolios, The Series Portfolio, and The JPM
Institutional Funds, and is reimbursed for expenses incurred in connection with
service as a Trustee. The compensation paid to the Trustees in calendar 1994 is
set forth below. The Trustees may hold various other directorships unrelated to
these funds.
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
PENSION OR THE TRUST, THE JPM
AGGREGATE RETIREMENT INSTITUTIONAL FUNDS AND
COMPENSATION BENEFITS ESTIMATED CORRESPONDING PORTFOLIOS
FROM THE TRUST ACCRUED AS PART ANNUAL BENEFITS PAID TO TRUSTEES
DURING 1994 OF FUND EXPENSES UPON RETIREMENT DURING 1994
----------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
Frederick S. Addy, Trustee None None $55,000
$21,721
William G. Burns, Trustee None None $55,000
$21,721
Arthur C. Eschenlauer, Trustee None None $55,000
$21,721
Matthew Healey, Trustee (*), None None $55,000
Chairman and Chief Executive $21,721
Officer
Michael P. Mallardi, Trustee $21,721 None None $55,000
<FN>
(*) During 1994, Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
of Pierpont Group, Inc., compensation in the amount of $130,000, contributed
$19,500 to a defined contribution plan on his behalf and paid $20,000 in
insurance premiums for his benefit.
</FN>
</TABLE>
As of April 1, 1995 the annual fee paid to each Trustee for serving as
a Trustee of the Trust each of the Portfolios, The Series Portfolio and The JPM
Institutional Funds was adjusted to $65,000.
The Trustees , in addition to reviewing actions of the Trust's and the
Portfolios' various service providers, decide upon matters of general policy. On
January 15, 1994 each of the Portfolios and the Trust entered into a Fund
Services Agreement with Pierpont Group, Inc. to assist the Trustees in
exercising their overall supervisory responsibilities over the affairs of the
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<PAGE>
Portfolios and the Trust. Pierpont Group, Inc. was organized in July 1989 to
provide services for The Pierpont Family of Funds, and the Trustees
are the equal and sole shareholders of Pierpont Group, Inc. The Trust and
the Portfolios have agreed to pay Pierpont Group, Inc. a fee in an amount
representing its reasonable costs in performing these services. These costs are
periodically reviewed by the Trustees.
The aggregate fees paid to Pierpont Group, Inc. by each Fund and its
corresponding Portfolio during their respective fiscal years completed after
January 15, 1994 are set forth below:
MONEY MARKET FUND--For the fiscal year ended November 30, 1994: $302,195. THE
MONEY MARKET PORTFOLIO--For the fiscal year ended November 30, 1994:
$246,089.
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<PAGE>
TAX EXEMPT MONEY MARKET FUND -- For the fiscal year ended August 31, 1994:
$175,737.
THE TAX EXEMPT MONEY MARKET PORTFOLIO -- For the fiscal year ended August 31,
1994: $79,046.
TREASURY MONEY MARKET FUND -- For the fiscal year ended October 31, 1994:
$16,086.
THE TREASURY MONEY MARKET PORTFOLIO -- For the fiscal year ended October 31,
1994: $17,104.
SHORT TERM BOND -- For the fiscal year ended October 31, 1994: $952. THE SHORT
TERM BOND PORTFOLIO -- For the fiscal year ended October 31, 1994:
$4,545.
TAX EXEMPT BOND FUND -- For the fiscal year ended August 31, 1994: $80,810. THE
TAX EXEMPT BOND PORTFOLIO -- For the fiscal year ended August 31, 1994:
$35,243.
NEW YORK TOTAL RETURN BOND FUND -- For the period April 11, 1994 through
March 31, 1995: $2,847. THE NEW YORK TOTAL RETURN BOND PORTFOLIO -- For the
period April 11, 1994 through March 31, 1995: $4,140.
BOND FUND -- For the fiscal year ended October 31, 1994: $15,491. THE U.S. FIXED
INCOME PORTFOLIO -- For the fiscal year ended October 31, 1994:
$23,028.
EQUITY FUND -- For the period July 19, 1993 through May 31, 1994: $48,660.
THE SELECTED U.S. EQUITY PORTFOLIO -- For the period July 19, 1993 through
May 31, 1994: $20,385.
CAPITAL APPRECIATION FUND -- For the period July 19, 1993 through May 31, 1994:
$47,244.
THE U.S. SMALL COMPANY PORTFOLIO -- For the period July 19, 1993 through May 31,
1994: $33,435.
INTERNATIONAL EQUITY FUND -- For the fiscal year ended October 31, 1994:
$27,503.
THE NON-U.S. EQUITY PORTFOLIO -- For the fiscal year ended October 31, 1994:
$32,512.
EMERGING MARKETS EQUITY FUND -- For the fiscal year ended October 31, 1994:
$4,331.
THE EMERGING MARKETS EQUITY PORTFOLIO -- For the fiscal year ended October 31,
1994: $42,764.
DIVERSIFIED FUND -- For the period July 8, 1993 through June 30, 1994: $247. THE
DIVERSIFIED PORTFOLIO -- For the period July 8, 1993 through June 30, 1994:
$3,434.
55
<PAGE>
The Trust's and Portfolios' executive officers (listed below), other
than the Chief Executive Officer, are provided and compensated by Signature
Broker- Dealer Services, Inc. ("SBDS"), a wholly owned subsidiary of Signature
Financial Group, Inc. ("Signature"). The officers conduct and supervise the
business operations of the Trust and the Portfolios. The Trust and the
Portfolios have no employees.
OFFICERS
The officers of the Trust and the Portfolios and their principal
occupations during the past five years are set forth below. Unless otherwise
specified, each officer holds the same position with the Trust and each
Portfolio. The business address of each of the officers unless otherwise noted
is Signature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston,
Massachusetts 02116.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
Inc., since 1989; Chairman and Chief Executive Officer, Execution Services, Inc.
until October 1991. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436.
56
<PAGE>
PHILIP W. COOLIDGE; President; Chairman, Chief Executive Officer and
President, Signature since December 1988 and SBDS since April 1989.
JAMES B. CRAVER; Treasurer and Secretary; Senior Vice President and
General Counsel, Signature since January 1991; Secretary, SBDS since February
1991; Partner, Baker & Hostetler prior to January 1991.
DAVID G. DANIELSON; Assistant Treasurer; Assistant Manager, Signature
since May 1991; Graduate Student, Northeastern University from April 1990 to
March 1991.
LINDA T. GIBSON; Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since June 1991; Assistant Secretary, SBDS since November
1992; law student, Boston University School of Law prior to May 1992.
JAMES E. HOOLAHAN; Vice President; Senior Vice President, Signature
since December 1989.
SUSAN JAKUBOSKI; Assistant Secretary and Assistant Treasurer of the
Portfolios only; Manager and Senior Fund Administrator, SFG and Signature
(Cayman) (since August 1994); Assistant Treasurer, SBDS (since September 1994);
Fund Compliance Administrator, Concord Financial Group, Inc. (from November 1990
to August 1994); Senior Fund Accountant, Neuberger & Berman Management
57
<PAGE>
Incorporated (since prior to 1990). Her address is P.O. Box 2494, Elizabethan
Square, George Town, Grand Cayman, Cayman Islands, B.W.I.
JAMES S. LELKO; Assistant Treasurer; Assistant Manager, Signature since
January 1993; Senior Tax Compliance Accountant, Putnam Companies since prior to
December 1992.
THOMAS M. LENZ; Assistant Secretary; Vice President and Associate
General Counsel, Signature since November 1989; Assistant Secretary, SBDS since
February 1991.
MOLLY S. MUGLER; Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since December 1988; Assistant Secretary, SBDS since April
1989.
ANDRES E. SALDANA; Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since November 1992; Assistant Secretary, SBDS since
September 1993; Attorney, Ropes & Gray from September 1990 to November 1992.
DANIEL E. SHEA; Assistant Treasurer; Assistant Manager of Fund
Administration, Signature since November 1993; Supervisor and Senior Technical
Advisor, Putnam Investments since prior to 1990.
Messrs. Coolidge, Craver, Danielson, Hoolahan, Lelko, Lenz, Saldana and
Shea and Mss. Gibson, Mugler and Jakuboski hold similar positions for other
investment companies for which SBDS or an affiliate serves as principal
underwriter.
INVESTMENT ADVISOR
The investment advisor to the Portfolios is Morgan Guaranty Trust
Company of New York, a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), a bank holding company organized under the laws of the State of
Delaware. Morgan, whose principal offices are at 60 Wall Street, New York, New
York 10260, is a New York trust company which conducts a general banking and
trust business. 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.
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 $150 billion (of which the Advisor advises over $30 billion).
58
<PAGE>
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 Morgan'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 conclusions of the equity analysts' fundamental research is quantified into
a set of projected returns for individual companies through the use of a
dividend discount model. These returns are projected for 2 to 5 years to enable
analysts to take a longer term view. These returns, or normalized earnings, are
used to establish relative values among stocks in each industrial sector. These
values may not be the same as the markets' current valuations of these
companies. This provides the basis of ranking the attractiveness of the
companies in an industry according to five distinct quintiles or rankings. This
ranking is one of the factors considered in determining the stocks purchased and
sold in each sector. 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 Portfolios
are not exclusive under the terms of the Advisory Agreements. 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 Portfolios. Such accounts are supervised by officers and employees of the
Advisor who may also be acting in similar capacities for the Portfolios. See
"Portfolio Transactions ".
59
<PAGE>
Sector weightings are generally similar to a fund's benchmark with the emphasis
on security selection as the method to achieve investment performance superior
to the benchmark. The benchmarks for the Portfolios in which the Funds invest
are currently: The Money Market Portfolio and The Treasury Money Market
Portfolio--IBC/Donoghue's Money Fund Average; The Tax Exempt Money Market
Portfolio--IBC/Donoghue's Tax Exempt Money Fund Average; The Short Term Bond
Portfolio--Merrill Lynch 1-3 Year Treasury Index; The U.S. Fixed Income
Portfolio--Salomon Brothers Broad Investment Grade Bond Index; The Tax Exempt
Bond Portfolio--Lehman Brothers Quality Intermediate Municipal Bond Index; The
New York Total Return Bond Portfolio--Lehman Brothers 1-15 Year Municipal Bond
Index; The Selected U.S. Equity Portfolio--S&P 500 Index; The U.S. Small Company
Portfolio--Russell 2500 Index; The Non-U.S. Equity Portfolio--EAFE Index; The
Emerging Markets Equity Portfolio--IFC Emerging Markets Index; The Diversified
Portfolio--diversified benchmark (52% S&P 500, 35% Solomon Brothers Broad
Investment Grade Bond, 3% Russell 2000 and 10% EAFE indexes).
J.P. Morgan Investment Management Inc., a wholly-owned subsidiary of
J.P. Morgan , is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, which 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 the Advisor serves as trustee. J.P. Morgan
Investment Management Inc. advises the Advisor on investment of the commingled
pension trust funds.
The Portfolios are managed by officers of the Advisor who, in acting
for their customers, including the Portfolios, 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. See "Portfolio Transactions" below for a
description of services provided to the Portfolios by J.P. Morgan Investment
Management Inc.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Advisory
Agreements, the Portfolio corresponding to each Fund has agreed to pay the
Advisor a fee, which is computed daily and may be paid monthly, equal to the
annual rates of each Portfolio's average daily net assets shown below.
60
<PAGE>
MONEY MARKET: 0.20% of net assets up to $1 billion and 0.10% of net assets in
excess of $1 billion
TAX EXEMPT MONEY MARKET: 0.20% of net assets up to $1 billion and 0.10% of net
assets in excess of $1 billion
TREASURY MONEY MARKET: 0.20% of net assets up to $1 billion and 0.10% of net
assets in excess of $1 billion
SHORT TERM BOND: 0.25%
U.S. FIXED INCOME: 0.30%
TAX EXEMPT BOND: 0.30%
NEW YORK TOTAL RETURN BOND: 0.30%
SELECTED U.S. EQUITY: 0.40%
U.S. SMALL COMPANY: 0.60%
NON-U.S. EQUITY: 0.60%
EMERGING MARKETS EQUITY: 1.00%
DIVERSIFIED: 0.55%
The table below sets forth for the predecessor of each Fund listed
below (for the indicated fiscal years) the advisory fees, net of fee waivers and
reimbursements, paid by the Fund (expressed as an aggregate amount of the Fund's
average daily net assets) and the advisory fees waived or reimbursed by Morgan
for the Fund (expressed as an aggregate amount), in each case prior to such
Fund's reorganization. See "Expenses" in the Prospectus and below for applicable
expense limitations.
61
<PAGE>
62
<PAGE>
Money Market: Nov. 1993 - net amount paid: $2,244,381; amount waived: $0.
Money Market: Nov. 1992 - net amount paid: $3,999,028; amount waived: $0.
Tax Exempt Money Market: Aug. 1993 - net amount paid: $1,688,141; amount waived:
$0.
Tax Exempt Money Market: Aug. 1992 - net amount paid: $1,905,283; amount waived:
$0.
Bond: Oct. 1993 - net amount paid: $149,804; amount waived: $25,312.
Bond: Oct. 1992 - net amount paid: $129,227; amount waived: $60,229.
Tax Exempt Bond: Aug. 1993 - net amount paid: $1,035,734; amount waived: $0.
Tax Exempt Bond: Aug. 1992 - net amount paid: $930,500; amount waived: $0.
Equity: May 1993 - net amount paid: $485,214; amount waived: $51,158.
Equity: May 1992 - net amount paid: $194,191; amount waived: $71,129.
Capital Appreciation: May 1993 - net amount paid: $434,662; amount waived:
$29,585.
Capital Appreciation: May 1992 - net amount paid: $214,269; amount waived:
$45,442.
International Equity: May 1993 - net amount paid: $359,813; amount waived:
$27,018.
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<PAGE>
International Equity: May 1992 - net amount paid: $95,439; amount waived:
$82,266.
Below are set forth for each Fund listed the advisory fees paid by its
corresponding Portfolio to Morgan following the Fund's reorganization or
commencement of operations and its corresponding Portfolio's commencement of
operations. See "Expenses" in the Prospectus and below for applicable expense
limitations.
THE MONEY MARKET PORTFOLIO (Money Market Fund)--For the period July 12, 1993
(commencement of operations) through November 30, 1993: $1,370,552. For the
fiscal year ended November 30, 1994: $3,423,576.
THE TAX EXEMPT MONEY MARKET PORTFOLIO (Tax Exempt Money Market Fund)--For the
period July 12, 1993 (commencement of operations) through August 31, 1993:
$271,454. For the for the fiscal year ended August 31, 1994: $2,021,476.
THE TREASURY MONEY MARKET PORTFOLIO (Treasury Money Market Fund)--For the period
January 4, 1993 (commencement of operations) through October 31, 1993: $93,370.
For the fiscal year ended October 31, 1994: $339,521.
THE SHORT TERM BOND PORTFOLIO (Short Term Bond Fund)--For the period
July 8, 1993 (commencement of operations) through October 31, 1993: $10,427. For
the fiscal year ended October 31, 1994: $113,379.
THE U.S. FIXED INCOME PORTFOLIO (Bond Fund)--For the period July 12,
1993 (commencement of operations) through October 31, 1993: $119,488. For the
fiscal year ended October 31, 1994: $699,081.
THE TAX EXEMPT BOND PORTFOLIO (Tax Exempt Bond Fund)--For the period July 12,
1993 (commencement of operations) through August 31, 1993: $200,272. For the
fiscal year ended August 31, 1994: $1,383,986.
THE NEW YORK TOTAL RETURN BOND PORTFOLIO (New York Total Return Bond Fund) --
For the period April 11, 1994 (commencement of operations) through March 31,
1995:
$120,281.
THE SELECTED U.S. EQUITY PORTFOLIO (Equity Fund)--For the period July 19, 1993
(commencement of operations) through May 31, 1994: $1,263,048.
THE U.S. SMALL COMPANY PORTFOLIO (Capital Appreciation Fund)--For the period
July 19, 1993 (commencement of operations) through May 31, 1994: $2,912,670.
THE NON-U.S. EQUITY PORTFOLIO (International Equity Fund)--For the period
October 4, 1993 (commencement of operations) through October 31, 1993: $78,550.
For the fiscal year ended October 31, 1994: $1,911,202.
THE EMERGING MARKETS EQUITY PORTFOLIO (Emerging Markets Equity Fund)--For the
period November 15, 1993 (commencement of operations) through October 31, 1994:
$4,122,465.
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THE DIVERSIFIED PORTFOLIO (Diversified Fund)--For the period December 15, 1993
(commencement of operations) through June 30, 1994: $197,026.
The Investment Advisory Agreements provide that they will continue in
effect for a period of two years after execution only if specifically approved
thereafter annually in the same manner as the Distribution Agreement. See
"Administrator and Distributor" below. Each of the Investment Advisory
Agreements will terminate automatically if assigned and is terminable at any
time without penalty by a vote of a majority of the Portfolio's Trustees or by a
vote of the holders of a majority of the Portfolio's outstanding voting
securities on 60 days' written notice to the Advisor and by the Advisor on 90
days' written notice to the Portfolio. See "Additional Information".
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as Morgan from engaging in the business of underwriting or
distributing securities, 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 shares, such as
the 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. Morgan believes that it may perform the services for the
Portfolios contemplated by the Advisory Agreements without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent Morgan from continuing to perform such services for the
Portfolios.
If Morgan were prohibited from acting as investment advisor to any
Portfolio, it is expected that the Trustees of the Portfolio would recommend to
investors that they approve the Portfolio's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Morgan also receives compensation from the Trust and the Portfolios in
its capacity as Services Agent to them (see "Services Agent") and receives
compensation from the Fund as shareholder servicing agent (see "Shareholder
Servicing").
ADMINISTRATOR AND DISTRIBUTOR
SBDS serves as the Trust's exclusive Distributor and holds itself
available to receive purchase orders for each Fund's shares. In that capacity,
SBDS has been granted the right, as agent of the Trust, to solicit and accept
orders for the purchase of each Fund's shares in accordance with the terms of
the
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Distribution Agreement between the Trust and SBDS. The Distribution Agreement
shall continue in effect with respect to each Fund for a period of two years
after execution only if it is approved at least annually thereafter (i) by a
vote of the holders of a majority of the Fund's outstanding shares or by its
Trustees and (ii) by a vote of a majority of the Trustees of the Trust who are
not "interested persons" (as defined by the 1940 Act) of the parties to the
Distribution Agreement , cast in person at a meeting called for the purpose of
voting on such approval (see "Trustees and Officers"). The Distribution
Agreement will terminate automatically if assigned by either party thereto and
is terminable at any time without penalty by a vote of a majority of the
Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested persons" of the Trust, or by a vote of the holders of a majority of
the Fund's outstanding shares as defined under "Additional Information", in any
case without payment of any penalty on not more than 60 days' nor less than 30
days' written notice to the other party. The principal office of SBDS is located
at 6 St. James Avenue, Boston, Massachusetts 02116.
SBDS also serves as the Trust's and the Portfolios' Administrator and
in that capacity administers and manages all aspects of the Funds' and the
Portfolios' day-to-day operations subject to the supervision of the Trustees,
except as set forth under Investment Advisor, Services Agent, Custodian, and
Shareholder Services. In connection with its responsibilities as Administrator,
SBDS (i) furnishes ordinary clerical and related services for day-to-day
operations including certain record keeping responsibilities; (ii) takes
responsibility for compliance with all applicable federal and state securities
and other regulatory requirements including, without limitation, preparing and
mailing and filing (but not paying for) registration statements, prospectuses,
statements of additional information, and proxy statements and all required
reports to the Trust's shareholders, the SEC, the Secretary of The Commonwealth
of Massachusetts, and state securities commissions (but not the Trust's federal
and state tax returns); (iii) is responsible for the registration of sufficient
Fund shares under federal and state securities laws; (iv) takes responsibility
for monitoring each Fund's status as a regulated investment company under the
Code ; and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolios' custodian and transfer agent as
the Trustees may direct from time to time.
Under the Trust's Administration Agreement, the annual administration
fee rate is calculated based on the aggregate daily net assets of The Pierpont
Funds, as well as The JPM Institutional Funds and The JPM Advisor Funds, which
are two other families of mutual funds investing in the Portfolios. The fee rate
is calculated daily in accordance with the following schedule: 0.040% of the
first $1 billion of these funds' aggregate daily net assets, 0.032% of the next
$2 billion of these funds' aggregate daily net assets, 0.024% of the next $2
billion of these funds' aggregate daily net assets and 0.016% of these funds'
aggregate daily net assets in excess of $5 billion. This fee rate is then
applied to the net assets of each Fund. The Administrator may voluntarily waive
a portion of its fees.
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Under the Portfolios' Administration Agreements, the annual
administration fee rate is calculated based on the aggregate average daily net
assets of the Portfolios, as well as all of the other portfolios in which series
of The Pierpont Funds and the JPM Advisor Funds invest. The fee ate is
calculated daily in accordance with the following schedule: 0.010% of the first
$1 billion of these Portfolios' aggregate daily net assets, 0.008% of the next
$2 billion of these Portfolios' aggregate daily net assets, 0.006% of the next
$2 billion of these Portfolios' aggregate daily net assets and 0.004% of these
Portfolios' aggregate daily net assets in excess of $5 billion. This fee rate is
then applied to the net assets of each Portfolio. The Administrator may
voluntarily waive a portion of its fees.
Below are set forth for each Fund listed and its corresponding
Portfolio the administrative fees paid to the Administrator for the fiscal
periods indicated following each Fund's reorganization or commencement of
operations and its corresponding Portfolio's commencement of operations. See
"Expenses" in the Prospectus and below for applicable expense limitations.
THE MONEY MARKET PORTFOLIO--For the period July 12, 1993 (commencement of
operations) through November 30, 1993: $32,869. For the fiscal year ended
November 30, 1994: $165,519.
MONEY MARKET FUND--For the period July 12, 1993 (commencement of operations)
through November 30, 1993: $341,591. For the fiscal year ended November 30,
1994: $631,683.
THE TAX EXEMPT MONEY MARKET PORTFOLIO--For the period July 12, 1993
(commencement of operations) through August 31, 1993: $0. For the fiscal year
ended August 31, 1994: $62,565.
TAX EXEMPT MONEY MARKET FUND--For the period July 12, 1993 (commencement of
operations) through August 31, 1993: $51,665. For the fiscal year ended August
31, 1994: $306,768.
THE TREASURY MONEY MARKET PORTFOLIO--For the period January 4, 1993
(commencement of operations) through October 31, 1993: $677. For the fiscal year
ended October 31, 1994: $11,777.
TREASURY MONEY MARKET FUND--For the period January 4, 1993 (commencement of
operations) through October 31, 1993: $17,014. For the fiscal year ended
October 31, 1994: $32,587.
THE SHORT TERM BOND PORTFOLIO--For the period July 8, 1993 (commencement of
operations) through October 31, 1993 $210. For the fiscal year ended October 31,
1994: $3,149.
SHORT TERM BOND FUND--For the period July 8, 1993 (commencement of operations)
through October 31, 1993: $272. For the fiscal year ended October 31, 1994:
$1,839.
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THE U.S. FIXED INCOME PORTFOLIO--For the period July 12, 1993 (commencement of
operations) through October 31, 1993: $950. For the fiscal year ended
October 31, 1994: $16,107.
BOND FUND--For the period July 12, 1993 (commencement of operations) through
October 31, 1993: $10,804. For the fiscal year ended October 31, 1994:
$30,915.
THE TAX EXEMPT BOND PORTFOLIO--For the period July 12, 1993 (commencement of
operations) through August 31, 1993: $0. For the fiscal year ended August 31,
1994: $28,345.
TAX EXEMPT BOND FUND--For the period July 12, 1993 (commencement of operations)
through August 31, 1993: $25,780. For the fiscal year ended August 31, 1994:
$137,890.
THE NEW YORK TOTAL RETURN BOND PORTFOLIO -- For the period April 11, 1994
(commencement of operations) through March 31, 1995: $2,563.
NEW YORK TOTAL RETURN BOND FUND -- For the period April 11, 1994 (commencement
of operations) through March 31, 1995: $7,716.
THE SELECTED U.S. EQUITY PORTFOLIO--For the period July 19, 1993 (commencement
of operations) through May 31, 1994: $19,348.
EQUITY FUND--For the period July 19, 1993 (commencement of operations)
through May 31, 1994: $78,201.
THE U.S. SMALL COMPANY PORTFOLIO--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $30,420.
CAPITAL APPRECIATION FUND--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $75,401.
THE NON-U.S. EQUITY PORTFOLIO--For the period October 4, 1993 (commencement of
operations) through October 31, 1993: $1,005. For the fiscal year ended October
31, 1994: $22,024.
INTERNATIONAL EQUITY FUND--For the period October 4, 1993 (commencement of
operations) through October 31, 1993: $3,988. For the fiscal year ended
October 31, 1994: $55,782.
THE EMERGING MARKETS EQUITY PORTFOLIO--For the period November 15, 1993
(commencement of operations) through October 31, 1994: $30,828.
EMERGING MARKETS EQUITY FUND--For the period November 15, 1993 (commencement of
operations) through October 31, 1994: $11,373.
THE DIVERSIFIED PORTFOLIO--For the period December 15, 1993 (commencement of
operations) through June 30, 1994: $2,423.
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DIVERSIFIED FUND--For the period December 15, 1993 (commencement of operations)
through June 30, 1994: $638.
The Administration Agreements may be renewed or amended by the
respective Trustees without a shareholder vote. The Administration Agreements
are terminable at any time without penalty by a vote of a majority of the
Trustees of the Trust or the Portfolios, as applicable, on not more than 60
days' written notice nor less than 30 days' written notice to the other party.
The Administrator may subcontract for the performance of its obligations under
the Administration Agreements only if the Trustees approve such subcontract and
find the subcontracting party to be qualified to perform the obligations sought
to be subcontracted, provided, however, that unless the Trust or the Portfolios,
as applicable, expressly agrees in writing, the Administrator shall be fully
responsible for the acts and omissions of any subcontractor as it would for its
own acts or omissions.
SERVICES AGENT
The Trust, on behalf of each Fund, and the Portfolios have entered into
Financial and Fund Accounting Services Agreements with Morgan pursuant to which
Morgan provides two types of services to the Funds and the Portfolios. First,
Morgan is responsible for certain financial and fund accounting services
provided to each Fund and each Portfolio. The services to be provided by Morgan
under these agreements include, but are not limited to, monitoring the fund and
shareholder accounting activities of the Custodian; assisting the Administrator
in preparing tax returns, reviewing financial reports, coordinating annual
audits, assisting in the development of budgets, overseeing preparation of tax
information for Fund shareholders; monitoring the fund accounting activities and
daily partnership allocation; and providing other related services.
Second, Morgan is responsible for the annual costs both to the Funds
and to the Portfolios of certain usual and customary expenses incurred by the
Funds and the Portfolios (the "expense undertakings"). The expenses covered by
the expense undertakings include, but are not limited to, transfer, registrar,
and dividend disbursing costs, legal and accounting expenses, the fees of the
Administrator, the cost of any liability insurance or fidelity bonds, the
compensation and expenses of the Trustees, the expenses of printing and mailing
reports, notices, and proxies to Fund shareholders, interest charges, membership
dues in the Investment Company Institute, shareholder meeting fees and
registration fees under federal or state securities laws. The Funds and the
Portfolios will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under any of these agreements, Morgan will
reimburse the applicable Fund or Portfolio, as appropriate, for such excess
amounts.
Under the Trust's Financial and Fund Accounting Services Agreement, the
administration and operation expenses of each Fund not covered by the expense
undertakings, and for which each Fund is responsible, include the
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fees of Pierpont Group, Inc., shareholder servicing fees, the services agent
fee, organization expenses and extraordinary expenses as defined in the
agreement, which includes litigation and indemnification expenses and material
increases in expenses due to occurrences such as significant increases in the
fee schedules of service providers or significant decreases in a Fund's asset
level due to changes in tax or other laws or other extraordinary occurrences
outside of the ordinary course of a Fund's business. Under the Portfolios'
agreements, the administration and operation expenses of the Portfolios not
covered by the expense undertakings, and for which the Portfolios are
responsible, include the fees of Pierpont Group, Inc., the services agent fee,
custodian fees, advisory fees or expenses otherwise incurred in connection with
the management and reinvestment of a Portfolio's assets, expenses connected with
the execution, recording, and settlement of portfolio security transactions,
organization expenses and extraordinary expenses as defined in these agreements
(and as set forth above).
The Trust's agreement provides for each Fund to pay Morgan a fee for
these services which is computed daily and may be paid monthly at the following
annual rates of average daily net assets: Money Market and Tax Exempt Money
Market Funds, 0.043%; Treasury Money Market Fund, 0.047%; Bond, Tax Exempt Bond,
New York Total Return Bond and Short Term Bond Funds, 0.12% of the first $100
million and 0.10% thereafter; Equity, Capital Appreciation and Diversified
Funds, 0.15% of the first $100 million and 0.13% thereafter; and International
Equity and Emerging Markets Equity Funds, 0.223% of the first $100 million and
0.2% thereafter. The Portfolios' agreements provide for each of the Portfolios
to pay Morgan a fee for these services which is computed daily and may be paid
monthly at the following annual rates of average daily net assets: Money Market,
Tax Exempt Money Market and Treasury Money Market Portfolios, 0.03%; Short Term
Bond Portfolio, 0.05% on the first $200 million and 0.03% thereafter; U.S. Fixed
Income, Tax Exempt Bond, New York Total Return Bond, Selected U.S. Equity, U.S.
Small Company and Diversified Portfolios, 0.10% on the first $200 million, 0.05%
on the next $200 million and 0.03% thereafter; Non-U.S. Equity and Emerging
Markets Equity Portfolios, 0.15% on the first $200 million, 0.10% on the next
$200 million, 0.05% on the next $200 million and 0.03% thereafter. As noted
immediately above, both of these fee levels reflect payments made directly to
third parties by each of the Funds and the Portfolios for expenses covered by
the expense undertakings, as well as payments to Morgan for services rendered
under the agreements. The Trustees regularly review amounts paid to and
accounted for by Morgan pursuant to these agreements. Under the agreements,
Morgan may delegate one or more of its responsibilities to other entities,
including SBDS, at Morgan's expense. The agreements may be terminated at any
time, without penalty, by the Trustees or Morgan, in each case on not more than
60 days' nor less than 30 days' written notice to the other party.
Below are set forth for each Fund listed and its corresponding
Portfolio the fees paid to Morgan, net of fee waivers and reimbursements, under
the Financial and Fund Accounting Services Agreements for the fiscal periods
indicated following each Fund's reorganization or commencement of operations and
its corresponding Portfolio's commencement of operations. See "Expenses" in the
Prospectus and below for applicable expense limitations.
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THE MONEY MARKET PORTFOLIO--For the period July 12, 1993 (commencement of
operations) through November 30, 1993: $193,980. For the fiscal year ended
November 30, 1994: $385,012.
MONEY MARKET FUND--For the period July 12, 1993 (commencement of operations)
through November 30, 1993: $(86,373)*. For the fiscal year ended November 30,
1994: $(92,422)*.
THE TAX EXEMPT MONEY MARKET PORTFOLIO--For the period July 12, 1993
(commencement of operations) through August 31, 1993: $(5,756)*. For the fiscal
year ended August 31, 1994: $153,204.
TAX EXEMPT MONEY MARKET FUND--For the period July 12, 1993 (commencement of
operations) through August 31, 1993: $(24,092)*. For the fiscal year ended
August 31, 1994: $(98,653)*.
THE TREASURY MONEY MARKET PORTFOLIO--For the period January 4, 1993
(commencement of operations) through October 31, 1993: $(30,702)*. For the
fiscal year ended October 31, 1994: $(13,844)*.
TREASURY MONEY MARKET FUND--For the period January 4, 1993 (commencement of
operations) through October 31, 1993: $(74,904)*. For the fiscal year ended
October 31, 1994: $(98,377)*.
THE SHORT TERM BOND PORTFOLIO--For the period July 8, 1993 (commencement of
operations) through October 31, 1993 $(39,290)*. For the fiscal year ended
October 31, 1994: $(22,054)*.
SHORT TERM BOND FUND--For the period July 8, 1993 (commencement of operations)
through October 31, 1993: $(22,474)*. For the fiscal year ended October 31,
1994: $(75,727)*.
THE U.S. FIXED INCOME PORTFOLIO--for the period July 12, 1993 (commencement of
operations) through October 31, 1993: $7,691. For the fiscal year ended
October 31, 1994: $140,493.
BOND FUND--For the period July 12, 1993 (commencement of operations) through
October 31, 1993: $(20,885)*. For the fiscal year ended October 31, 1994:
$(9,177)*.
THE TAX EXEMPT BOND PORTFOLIO--For the period July 12, 1993 (commencement of
operations) through August 31, 1993: $(1,816)*. For the fiscal year ended
August 31, 1994: $210,795.
TAX EXEMPT BOND FUND--For the period July 12, 1993 (commencement of operations)
through August 31, 1993: $13,305. For the fiscal year ended August 31, 1994:
$179,891.
THE NEW YORK TOTAL RETURN BOND PORTFOLIO -- For the period April 11, 1994
(commencement of operations) through March 31, 1995: $(11,830)*.
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THE NEW YORK TOTAL RETURN BOND FUND -- For the Period April 11, 1994
(commencement of operations) through March 31, 1995: $(37,934)*.
THE SELECTED U.S. EQUITY PORTFOLIO--For the period July 19, 1993 (commencement
of operations) through May 31, 1994: $155,348.
EQUITY FUND--For the period July 19, 1993 (commencement of operations)
through May 31, 1994: $113,959.
THE U.S. SMALL COMPANY PORTFOLIO--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $203,764.
CAPITAL APPRECIATION FUND--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $72,970.
THE NON-U.S. EQUITY PORTFOLIO--For the period October 4, 1993 (commencement of
operations) through October 31, 1993: $(22,160)*. For the fiscal year ended
October 31, 1994: $327,569.
INTERNATIONAL EQUITY FUND--For the period October 4, 1993 (commencement of
operations) through October 31, 1993: $(46,370)*. For the fiscal year ended
October 31, 1994: $223,806.
THE EMERGING MARKETS EQUITY PORTFOLIO--For the period November 15, 1993
(commencement of operations) through October 31, 1994: $347,925.
EMERGING MARKETS EQUITY FUND--For the period November 15, 1993 (commencement of
operations) through October 31, 1994: $(37,902)*.
THE DIVERSIFIED PORTFOLIO--For the period December 15, 1993 (commencement of
operations) through June 30, 1994: $(17,807)*.
DIVERSIFIED FUND--For the period December 15, 1993 (commencement of operations)
through June 30, 1994: $(43,203)*.
- ------------------------------------
(*) Indicates a reimbursement by Morgan for expenses in excess of its fees
under a Financial and Fund Accounting Services Agreement. No fees were paid for
the fiscal period.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02101, serves as the Trust's and each of the
Portfolio's Custodian and Transfer and Dividend Disbursing Agent. Pursuant to
the Custodian Contract with each of the Portfolios, it is responsible for
maintaining the books and records of portfolio transactions and holding
portfolio securities and cash. In addition, the
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Custodian has entered into subcustodian agreements on behalf of the
Portfolios for the Tax Exempt Money Market, Tax Exempt Bond and New York Total
Return Bond Funds with Bankers Trust Company for the purpose of holding TENR
Notes and with Bank of New York and Chemical Bank, N.A. for the purpose of
holding certain variable rate demand notes. In the case of foreign assets held
outside the United States, the Custodian employs various subcustodians who were
approved by the Trustees of the Portfolios in accordance with the regulations of
the SEC. The Custodian maintains portfolio transaction records. As Transfer
Agent and Dividend Disbursing Agent, State Street is responsible for maintaining
account records detailing the ownership of Fund shares and for crediting income,
capital gains and other changes in share ownership to shareholder accounts.
Under the terms of the Financial and Fund Accounting Services Agreements between
the Trust and Morgan, Morgan is responsible for the usual and customary fees of
the Custodian for each Fund (see "Services Agent"); the corresponding Portfolio
is responsible for the fees of the Custodian for the Portfolio (see "Services
Agent").
SHAREHOLDER SERVICING
The Trust on behalf of each of the Funds has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for its customers and for other Fund investors who are customers
of an Eligible Institution. Under this agreement, Morgan is responsible for
performing shareholder account administrative and servicing functions, which
includes but is not limited to, answering inquiries regarding account status and
history, the manner in which purchases and redemptions of Fund shares may be
effected, and certain other matters pertaining to a Fund; assisting customers in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to coordinate the establishment and
maintenance of shareholder accounts and records with the Funds' transfer agent;
transmitting purchase and redemption orders to the Funds' transfer agent and
arranging for the wiring or other transfer of funds to and from customer
accounts in connection with orders to purchase or redeem Fund shares; verifying
purchase and redemption orders, transfers among and changes in accounts;
informing the Distributor of the gross amount of purchase orders for Fund
shares; and providing other related services.
Under the Shareholder Servicing Agreement, each Fund has agreed to pay
Morgan for these services a fee at the following annual rates (expressed as a
percentage of the average daily net asset values of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder servicing agent): Money
Market and Treasury Money Market Funds, 0.18% of average daily net assets up to
$1.5 billion and 0.15% of such assets thereafter; Tax Exempt Money Market Fund,
0.21%; Short Term Bond, Bond, Tax Exempt Bond and New York Total Return Bond
Funds, 0.18%; Equity, Capital Appreciation, International Equity, Emerging
Markets Equity and Diversified Funds, 0.25%. Morgan acts as shareholder
servicing agent for all shareholders.
Below are set forth for each Fund listed the shareholder servicing fees
paid by each Fund to Morgan, net of fee waivers and reimbursements, for the
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fiscal periods indicated following each Fund's reorganization or commencement of
operations. See "Expenses" in the Prospectus and below for applicable expense
limitations.
MONEY MARKET FUND--For the period July 12, 1993 (commencement of operations)
through November 30, 1993: $1,628,914. For the fiscal year ended November 30,
1994: $3,701,260.
TAX EXEMPT MONEY MARKET FUND--For the period July 12, 1993 (commencement of
operations) through August 31, 1993: $278,665. For the fiscal year ended August
31, 1994: $2,121,421.
TREASURY MONEY MARKET FUND--For the period January 4, 1993 (commencement of
operations) through October 31, 1993: $71,617. For the fiscal year ended
October 31, 1994: $200,453.
SHORT TERM BOND FUND--For the period July 8, 1993 (commencement of operations)
through October 31, 1993: $1,437. For the fiscal year ended October 31, 1994:
$11,275.
BOND FUND--For the period July 12, 1993 (commencement of operations) through
October 31, 1993: $53,352. For the fiscal year ended October 31, 1994:
$189,959.
TAX EXEMPT BOND FUND--For the period July 12, 1993 (commencement of operations)
through August 31, 1993: $119,828. For the fiscal year ended August 31, 1994:
$816,408.
NEW YORK TOTAL RETURN BOND FUND -- For the period April 11, 1994 (commencement
of operations) through March 31, 1995: $49,958.
EQUITY FUND--For the period July 19, 1993 (commencement of operations)
through May 31, 1994: $506,629.
CAPITAL APPRECIATION FUND--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $491,556.
INTERNATIONAL EQUITY FUND--For the period October 4, 1993 (commencement of
operations) through October 31, 1993: $32,604. For the fiscal year ended
October 31, 1994: $476,339.
EMERGING MARKETS EQUITY FUND--For the period November 15, 1993 (commencement of
operations) through October 31, 1994: $92,084.
DIVERSIFIED FUND--For the period December 15, 1993 (commencement of operations)
through June 30, 1994: $5,411.
As discussed under "Investment Advisor", the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end
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investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
and providing financial and accounting services to the Funds and the Portfolios
under the Financial and Fund Accounting Services Agreements and in acting as
Advisor to the Portfolios under the Investment Advisory Agreements, may raise
issues under these laws. However, Morgan believes that it may properly perform
these services and the other activities described in the Prospectus without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations.
If Morgan were prohibited from providing any of the services under the
Shareholder Servicing and Financial and Fund Accounting Services Agreements, the
Trustees would seek an alternative provider of such services. In such event,
changes in the operation of the Funds or the Portfolios might occur and a
shareholder might no longer be able to avail himself or herself of any services
then being provided to shareholders by Morgan.
INDEPENDENT ACCOUNTANTS
The independent accountants of the Trust and the Portfolios are Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. Price
Waterhouse LLP conducts an annual audit of the financial statements of each of
the Funds and the Portfolios, assists in the preparation and/or review of each
of the Fund's and the Portfolio's federal and state income tax returns and
consults with the Funds and the Portfolios as to matters of accounting and
federal and state income taxation. The independent auditors of the predecessors
of the Money Market, Tax Exempt Money Market, Bond, Tax Exempt Bond, Equity,
Capital Appreciation and International Equity Funds were Ernst & Young LLP, 787
7th Avenue, New York, New York 10019.
EXPENSES
Each Fund is responsible for Morgan's fees as shareholder servicing
agent and Services Agent for the Fund, the fees of Pierpont Group, Inc., and any
fees or expenses not covered by the Financial and Fund Accounting Services
Agreement with the Trust on behalf of the Fund (see "Services Agent" above). In
addition, each Portfolio is responsible for Morgan's fees as Investment Advisor
and Services Agent for the Portfolio, the fees of the Custodian for the
Portfolio, and any fees or expenses not covered by the Financial and Fund
Accounting Services Agreement with the Portfolio (see "Services Agent" above).
Morgan has agreed that if in any fiscal year the sum of any Fund's
expenses exceeds the limits set by applicable regulations of state securities
commissions, the fees payable by the Fund to Morgan for that year shall be
reduced as specified by agreement with the Trust on behalf of the Fund.
Currently, Morgan believes that the most restrictive expense limitation of state
securities commissions limits expenses to 2.5% of the first $30 million of
average net assets, 2% of the next $70 million of such net assets and 1.5% of
such net assets in excess of $100 million for any fiscal year. For additional
information regarding waivers or expense subsidies, see "Management of the Trust
and the Portfolio(s)" in the Prospectus.
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The Administrator paid the organization expenses and expenses incurred
in the initial offering of shares of the Trust. The organization expenses and
expenses incurred in the initial offering of shares of the predecessors to the
Money Market, Tax Exempt Money Market, Bond, Tax Exempt Bond, Equity, Capital
Appreciation and International Equity Funds were paid by the administrators to
these predecessor funds.
PURCHASE OF SHARES
Investors may open Fund accounts and purchase shares as described in
the Prospectus under "Purchase of Shares." References in the Prospectus and this
Statement of Additional Information to customers of Morgan or an Eligible
Institution include customers of their affiliates and references to transactions
by customers with Morgan or an Eligible Institution include transactions with
their affiliates. Only Fund investors who are using the services of a financial
institution acting as shareholder servicing agent pursuant to an agreement with
the Trust on behalf of a Fund may make transactions in shares of a Fund.
Each Fund may, at its own option, accept securities in payment for
shares. The securities delivered in are valued by the method described in Net
Asset Value as of the day the Fund receives the securities. This is a taxable
transaction to the shareholder. Securities may be accepted in payment for shares
only if they are, in the judgment of Morgan, appropriate investments for the
Fund's corresponding Portfolio. In addition, securities accepted in payment for
shares must: (i) meet the investment objective and policies of the acquiring
Fund's corresponding Portfolio; (ii) be acquired by the applicable Fund for
investment and not for resale (other than for resale to the Fund's corresponding
Portfolio); (iii) be liquid securities which are not restricted as to transfer
either by law or liquidity of market; and (iv) if stock, have a value which is
readily ascertainable as evidenced by a listing on a stock exchange, over the
counter market or by readily available market quotations from a dealer in such
securities. Each Fund reserves the right to accept or reject at its own option
any and all securities offered in payment for its shares.
Prospective investors may purchase shares with the assistance of an
Eligible Institution, and the Eligible Institution may charge the investor a fee
for this service and other services it provides to its customers.
REDEMPTION OF SHARES
Investors may redeem shares as described in the Prospectus under
"Redemption of Shares". Shareholders redeeming shares of the Money Market, Tax
Exempt Money Market or Treasury Money Market Funds should be aware that these
Funds attempt to maintain a stable net asset value of $1.00 per share; however,
there can be no assurance that they will be able to continue to do so, and in
that case the net asset value of the Funds' shares might deviate from $1.00 per
share. Accordingly, a redemption request might result in payment of a dollar
amount which differs from the number of shares redeemed. See "Net Asset Value"
in the Prospectus and below.
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If the Trust on behalf of a Fund and its corresponding Portfolio
determine that it would be detrimental to the best interest of the remaining
shareholders of a Fund to make payment wholly or partly in cash, payment of the
redemption price may be made in whole or in part by a distribution in kind of
securities from the Portfolio, in lieu of cash, in conformity with the
applicable rule of the SEC. If shares are redeemed in kind, the redeeming
shareholder might incur transaction costs in converting the assets into cash.
The method of valuing portfolio securities is described under "Net Asset Value,"
and such valuation will be made as of the same time the redemption price is
determined. The Trust on behalf of all of the Funds and their corresponding
Portfolios have elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Funds and the corresponding Portfolios are obligated to redeem
shares solely in cash up to the lesser of $250,000 or one percent of the net
asset value of the Fund during any 90 day period for any one shareholder. The
Trust will redeem Fund shares in kind only if it has received a redemption in
kind from the corresponding Portfolio and therefore shareholders of the Fund
that receive redemptions in kind will receive securities of the Portfolio. The
Portfolios have advised the Trust that the Portfolios will not redeem in kind
except in circumstances in which a Fund is permitted to redeem in kind.
FURTHER REDEMPTION INFORMATION. The Trust, on behalf of a Fund , and
the Portfolios reserve the right to suspend the right of redemption and to
postpone the date of payment upon redemption as follows: (i) for up to seven
days, (ii) during periods when the New York Stock Exchange is closed for other
than weekends and holidays or when trading on such Exchange is restricted as
determined by the SEC by rule or regulation, (iii) during periods in which an
emergency , as determined by the SEC, exists that causes disposal by the
Portfolio of, or evaluation of the net asset value of, its portfolio securities
to be unreasonable or impracticable, or (iv) for such other periods as the SEC
may permit.
EXCHANGE OF SHARES
An investor may exchange shares from any Pierpont Fund into any other
Pierpont Fund or JPM Institutional Fund, as described under "Exchange of Shares"
in the Prospectus. For complete information, the Prospectus as it relates to the
Fund into which a transfer is being made should be read prior to the transfer.
Requests for exchange are made in the same manner as requests for redemptions.
See "Redemption of Shares". Shares of the Fund to be acquired are purchased for
settlement when the proceeds from redemption become available. In the case of
investors in certain states, state securities laws may restrict the availability
of the exchange privilege. The Trust reserves the right to discontinue, alter or
limit the exchange privilege at any time.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays dividends and distributions as described
under "Dividends and Distributions" in the Prospectus.
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Net investment income of the Money Market, Tax Exempt Money Market and
Treasury Money Market Funds consists of accrued interest or discount and
amortized premium, less the accrued expenses of the Fund applicable to that
dividend period including the fees payable to Morgan. See "Net Asset Value".
Determination of the net income for Money Market, Tax Exempt Money
Market, Treasury Money Market, Short Term Bond, Bond, Tax Exempt Bond and New
York Total Return Bond Funds is made at the times described in the Prospectus;
in addition, net investment income for days other than business days is
determined at the time net asset value is determined on the prior business day.
NET ASSET VALUE
Each of the Funds computes its net asset value once daily on Monday
through Friday as described under "Net Asset Value" in the Prospectus. The net
asset value will not be computed on a day in which no orders to purchase or
redeem Fund shares have been received or on the day the following legal holidays
are observed: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. On days when
U.S. trading markets close early in observance of these holidays, the Funds and
the Portfolios would expect to close for purchases and redemptions at the same
time. The days on which net asset value is determined are the Funds' business
days.
The net asset value of each Fund is equal to the value of the Fund's
investment in its corresponding Portfolio (which is equal to the Fund's pro rata
share of the total investment of the Fund and of any other investors in the
Portfolio less the Fund's pro rata share of the Portfolio's liabilities) less
the Fund's liabilities. The following is a discussion of the procedures used by
the Portfolios corresponding to each Fund in valuing their assets.
MONEY MARKET, TAX EXEMPT MONEY MARKET AND TREASURY MONEY MARKET FUNDS.
In the case of the Portfolios for the Money Market, Tax Exempt Money Market and
Treasury Money Market Funds, all portfolio securities are valued by the
amortized cost method. The purpose of this method of calculation is to attempt
to maintain a constant net asset value per share of the Fund of $1.00. 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
changing the Fund's dividend policy, shortening the average portfolio maturity,
realizing gains or losses, or reducing the number of outstanding Fund shares.
Any reduction of outstanding shares will be effected by having each shareholder
contribute to a Fund's capital the necessary shares on a PRO RATA basis. Each
shareholder will be deemed to have agreed to such contribution in these
circumstances by his investment in the Funds. See "Taxes".
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BOND, TAX EXEMPT BOND, NEW YORK TOTAL RETURN BOND, SHORT TERM BOND AND
DIVERSIFIED FUNDS. In the case of the Bond, Tax Exempt Bond, New York Total
Return Bond and Short Term Bond Funds, and the fixed income portion of the
Diversified Fund, portfolio securities with a maturity of 60 days or more,
including securities that are listed on an exchange or traded over the counter,
are valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national securities
exchange or, in the absence of recorded sales, at the readily available closing
bid price on such exchange or at the quoted bid price in the over-the-counter
market, if such exchange or market constitutes the broadest and most
representative market for the security and (ii) in other cases, take into
account various factors affecting market value, including yields and prices of
comparable securities, indication as to value from dealers and general market
conditions. If such prices are not supplied by the Portfolio's independent
pricing service, such securities are priced in accordance with procedures
adopted by the Trustees. All portfolio securities with a remaining maturity of
less than 60 days are valued by the amortized cost method Securities listed on a
foreign exchange are valued at the last quoted sale price available before the
time when net assets are valued. Because of the large number of municipal bond
issues outstanding and the varying maturity dates, coupons and risk factors
applicable to each issuer's books, no readily available market quotations exist
for most municipal securities.
Trading in securities in most foreign markets is normally completed
before trading in U.S. markets and may also take place on days on which the U.S.
markets are closed. If events materially affecting the value of securities occur
between the time when the market in which they are traded closes and the time
when a Portfolio's net asset value is calculated, such securities will be valued
at fair value in accordance with procedures established by and under the general
supervision of the Trustees.
EQUITY, CAPITAL APPRECIATION, INTERNATIONAL EQUITY, EMERGING MARKETS
EQUITY AND DIVERSIFIED FUNDS. In the case of the Equity Portfolios, the value of
investments listed on a domestic securities exchange, other than options on
stock indexes, is based on the last sale prices on the New York Stock Exchange
at 4:00 P.M. or, in the absence of recorded sales, at the average of readily
available closing bid and asked prices on such exchange. Securities listed on a
foreign exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the average
of the quoted bid and asked prices in the over-the-counter market. The value of
each security for which readily available market quotations exist is based on a
decision as to the broadest and most representative market for such security.
For purposes of calculating net asset value all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the
prevailing market rates available at the time of valuation.
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Options on stock indexes traded on national securities exchanges are
valued at the close of options trading on such exchanges which is currently 4:10
P.M., New York time. Stock index futures and related options, which are traded
on commodities exchanges, are valued at their last sales price as of the close
of such commodities exchanges which is currently 4:15 P.M., New York time.
Securities or other assets for which market quotations are not readily available
are valued at fair value in accordance with procedures established by and under
the general supervision and responsibility of the Trustees. Such procedures
include the use of independent pricing services which use prices based upon
yields or prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Short-term
investments which mature in 60 days or less are valued at amortized cost if
their original maturity was 60 days or less, or by amortizing their value on the
61st day prior to maturity, if their original maturity when acquired by the
Portfolio was more than 60 days, unless this is determined not to represent fair
value by the Trustees.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days on which the New York Stock Exchange is closed.
If events materially affecting the value of securities occur between the time
when the exchange on which they are traded closes and the time when a
Portfolio's net asset value is calculated, such securities will be valued at
fair value in accordance with procedures established by and under the general
supervision of the Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of yield,
actual distributions, total return or capital appreciation in reports, sales
literature and advertisements published by the Trust. Current performance
information for the Funds may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.
YIELD QUOTATIONS. As required by regulations of the SEC, current yield
for the Money Market, Tax Exempt Money Market and Treasury Money Market Funds is
computed by determining the net change exclusive of capital changes in the value
of a hypothetical pre-existing account having a balance of one share at the
beginning of a seven-day calendar period, dividing the net change in account
value of the account at the beginning of the period, and multiplying the return
over the seven-day period by 365/7. For purposes of the calculation, net change
in account value reflects the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, but does not reflect realized gains or
losses or unrealized appreciation or depreciation. Effective yield for the Money
Market, Tax Exempt Money Market and Treasury Money Market Funds is computed by
annualizing the seven-day return with all dividends reinvested in additional
Fund shares. In the case of the Tax Exempt Money Market Fund, the tax equivalent
yield is computed by first computing the yield as discussed above. Then the
portion of the yield attributable to securities the income of which was exempt
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for federal income tax purposes is determined. This portion of the yield is then
divided by one minus the stated assumed federal income tax rate for individuals
and then added to the portion of the yield that is not attributable to
securities, the income of which was not tax exempt.
As required by regulations of the SEC, the annualized yield for the
Bond, Tax Exempt Bond, New York Total Return Bond and Short Term Bond Funds is
computed by dividing each Fund's net investment income per share earned during a
30-day period by the net asset value on the last day of the period. The average
daily number of shares outstanding during the period that are eligible to
receive dividends is used in determining the net investment income per share.
Income is computed by totaling the interest earned on all debt obligations
during the period and subtracting from that amount the total of all recurring
expenses incurred during the period. The 30-day yield is then annualized on a
bond-equivalent basis assuming semi-annual reinvestment and compounding of net
investment income, as described under "Additional Information" in the
Prospectus.
Historical performance for periods prior to the establishment of the
Money Market, Tax Exempt Money Market, Bond, and Tax Exempt Bond Funds will be
that of the respective predecessor free-standing fund and will be presented in
accordance with applicable SEC staff interpretations.
Below is set forth historical yield information for the Funds or their
predecessors for the periods indicated:
MONEY MARKET FUND (11/30/94): 7-day current yield: 5.20%; 7-day effective yield:
5.33%.
TAX EXEMPT MONEY MARKET FUND (8/31/94): 7-day current yield: 2.82%; 7-day tax
equivalent yield at 39% tax rate: 4.67%; 7-day effective yield: 2.86%.
TREASURY MONEY MARKET FUND (10/31/94): 7-day current yield: 4.43%; 7-day
effective yield: 4.53%.
SHORT TERM BOND FUND (10/31/94): 30-day yield: 5.35%.
BOND FUND (10/31/94): 30-day yield: 5.99%.
TAX EXEMPT BOND FUND (8/31/94): 30-day yield: 4.52%; 30-day tax equivalent yield
at 39% tax rate: 7.41%.
NEW YORK TOTAL RETURN BOND FUND (3/31/95): 30-day yield: 4.98%; 30-day tax
equivalent yield at 39% tax rate: 8.16%.
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TOTAL RETURN QUOTATIONS. As required by regulations of the SEC, the
annualized total return of the Bond, Tax Exempt Bond, New York Total Return
Bond, Short Term Bond, Equity, Capital Appreciation, International Equity,
Emerging Markets Equity and Diversified Funds for a period is computed by
assuming a hypothetical initial payment of $1,000. It is then assumed that all
of the dividends and distributions by the Fund over the period are reinvested.
It is then assumed that at the end of the period, the entire amount is redeemed.
The annualized total return is then calculated by determining the annual rate
required for the initial payment to grow to the amount which would have been
received upon redemption.
Aggregate total returns, reflecting the cumulative percentage change
over a measuring period, may also be calculated.
Historical performance information for periods prior to the
establishment of the Bond, Tax Exempt Bond, Equity, Capital Appreciation and
International Equity Funds will be that of the respective predecessor
free-standing fund and will be presented in accordance with applicable SEC staff
interpretations.
Below is set forth historical return information for the Funds or their
predecessors for the periods indicated:
MONEY MARKET FUND (11/30/94): Average annual total return, 1-year: 3.73%;
average annual total return, 5-years: 4.95%; average annual total return,
commencement of operations(*) to period end: 6.76%; aggregate total return,
1-year: 3.73%; aggregate total return, 5-years: 27.34%; aggregate total return,
commencement of operations(*) to period end: 118%.
TAX EXEMPT MONEY MARKET FUND (8/31/94): Average annual total return, 1-year:
2.14%; average annual total return, 5-years: 3.57%; average annual total return,
commencement of operations(*) to period end: 4.25%; aggregate total return, 1-
year: 2.14%; aggregate total return, 5-years: 18.18%; aggregate total return,
commencement of operations(*) to period end: 59.75%.
TREASURY MONEY MARKET FUND (10/31/94): Average annual total return, 1-year:
3.41%; average annual total return, 5-years: N/A; average annual total return,
commencement of operations(*) to period end: 3.02%; aggregate total return, 1-
year: 3.41%; aggregate total return, 5-years: N/A; aggregate total return,
commencement of operations(*) to period end: 5.58%.
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SHORT TERM BOND FUND (10/31/94): Average annual total return, 1-year: 0.61%;
average annual total return, 5-years: N/A; average annual total return,
commencement of operations(*) to period end: 1.16%; aggregate total return, 1-
year: 0.61%; aggregate total return, 5-years: N/A; aggregate total return,
commencement of operations(*) to period end: 1.56%.
BOND FUND (10/31/94): Average annual total return, 1-year: (3.50)%; average
annual total return, 5-years: 7.47%; average annual total return, commencement
of operations(*) to period end: 7.34%; aggregate total return, 1-year: (3.50)%;
aggregate total return, 5-years: 43.37%; aggregate total return, commencement of
operations(*) to period end: 60.07%.
TAX EXEMPT BOND FUND (8/31/94): Average annual total return, 1-year: 1.35%;
average annual total return, 5-years: 7.35%; average annual total return,
commencement of operations(*) to period end: 8.10%; aggregate total return, 1-
year: 1.35%; aggregate total return, 5-years: 42.54%; aggregate total return,
commencement of operations(*) to period end: 115.60%.
NEW YORK TOTAL RETURN BOND FUND (3/31/95): Average annual total return, 1-year:
5.62%; average annual total return, 5-years: N/A; average annual total return,
commencement of operations(*) to period end: 5.62%; aggregate total return, 1-
year: 5.62%; aggregate total return, 5-years: N/A; aggregate total return,
commencement of operations(*) to period end: 5.62%.
DIVERSIFIED FUND (6/30/94): Average annual total return, 1-year: (1.82)%;
average annual total return, 5-years: N/A; average annual total return,
commencement of operations(*) to period end: (1.82)%; aggregate total return,
1-year: (1.82)%; aggregate total return, 5-years: N/A; aggregate total return,
commencement of operations(*) to period end: (1.82)%.
EQUITY FUND (5/31/94): Average annual total return, 1-year: 8.54%; average
annual total return, 5-years: 13.29%; average annual total return, commencement
of operations(*) to period end: 14.17%; aggregate total return, 1-year: 8.54%;
aggregate total return, 5-years: 86.62%; aggregate total return, commencement of
operations(*) to period end: 226.1%.
CAPITAL APPRECIATION FUND (5/31/94): Average annual total return, 1-year: 1.14%;
average annual total return, 5-years: 9.00%; average annual total return,
commencement of operations(*) to period end: 11.94%; aggregate total return, 1-
year: 1.14%; aggregate total return, 5-years: 53.85%; aggregate total return,
commencement of operations(*) to period end: 173.68%.
INTERNATIONAL EQUITY FUND (10/31/94): Average annual total return, 1-year:
5.73%; average annual total return, 5-years: N/A; average annual total return,
commencement of operations(*) to period end: 4.57%; aggregate total return, 1-
year: 5.73%; aggregate total return, 5-years: N/A; aggregate total return,
commencement of operations(*) to period end: 21.84%.
EMERGING MARKETS EQUITY FUND (10/31/94): Average annual total return, 1-year:
24.30%; average annual total return, 5-years: N/A; average annual total return,
commencement of operations(*) to period end: 24.30%; aggregate total return, 1-
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year: 24.30%; aggregate total return, 5-years: N/A; aggregate total return,
commencement of operations(*) to period end: 24.30%.
- -------------------------------------
* The Money Market, Tax Exempt Money Market, Treasury Money Market, Short Term
Bond, Bond, Tax Exempt Bond, New York Total Return Bond, Diversified, Equity,
Capital Appreciation, International Equity, and Emerging Markets Equity Funds
commenced operations on October 1, 1982, September 12, 1983, January 4, 1993,
July 8, 1993, March 11, 1988, October 3, 1984, April 1, 1994, December 15, 1993,
June 27, 1985, June 27, 1985, June 1, 1990, November 15, 1993, respectively.
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GENERAL. A Fund's performance will vary from time to time depending
upon market conditions, the composition of its corresponding Portfolio, and its
operating expenses. Consequently, any given performance quotation should not be
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considered representative of a Fund's performance for any specified period in
the future. In addition, because performance will fluctuate, it may not provide
a basis for comparing an investment in a Fund with certain bank deposits or
other investments that pay a fixed yield or return for a stated period of time.
Comparative performance information may be used from time to time in
advertising the Funds' shares, including data from Lipper Analytical Services,
Inc., Micropal, Inc., Ibbotson Associates, Morningstar Inc., the S&P 500
Composite Stock Price Index, the Dow Jones Industrial Average, the Frank Russell
Indexes, The EAFE Index, The IFC-JPM Emerging Markets Index and other industry
publications. The Money Market and Treasury Money Market Funds may compare their
performance to IBC/Donoghue's Money Market fund average and the Tax Exempt Money
Market Fund may compare its performance to IBC/Donoghue's Tax Free Money Market
fund average, respectively.
In order to illustrate the benefits of balanced investing across asset
classes over longer periods of time, the Diversified Fund may use performance
data that will be based on the return of, as appropriate, the S&P 500 Index, the
Salomon Broad Investment Grade Bond Index, the Frank Russell 2000 and 2500
Indexes, and the EAFE Index. The quoted performance will illustrate what results
could have been achieved had the Fund invested specified percentages of the
Fund's assets in classes of securities that would have produced a return equal
to the relevant index over the time period at issue.
From time to time, the Funds may quote performance in terms of yield,
actual distributions, total return, or capital appreciation in reports, sales
literature, and advertisements published by the Funds. Current performance
information for the Funds may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.
PORTFOLIO TRANSACTIONS
J.P. Morgan Investment Management Inc., acting as agent for Morgan,
places orders for all Portfolios for all purchases and sales of portfolio
securities. Morgan enters into repurchase agreements and reverse repurchase
agreements and executes loans of portfolio securities on behalf of all the
Portfolios. See "Investment Objectives and Policies".
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On occasion,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
MONEY MARKET, TAX EXEMPT MONEY MARKET, TREASURY MONEY MARKET, BOND,
SHORT TERM BOND, TAX EXEMPT BOND AND NEW YORK TOTAL RETURN BOND FUNDS. Portfolio
transactions for the Portfolios corresponding to the Money Market, Tax Exempt
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Money Market, Treasury Money Market, Bond, Short Term Bond, Tax Exempt Bond and
New York Total Return Bond Funds will be undertaken principally to accomplish a
Portfolio's objective in relation to expected movements in the general level of
interest rates. The Portfolios corresponding to the Money Market, Treasury Money
Market, Bond, Tax Exempt Bond, New York Total Return Bond and Short Term Bond
Funds may engage in short-term trading consistent with their objectives. The Tax
Exempt Money Market Portfolio will not seek profits through short-term trading,
but the Portfolio may dispose of any portfolio security prior to its maturity if
it believes such disposition is appropriate even if this action realizes profits
or losses.
In connection with portfolio transactions for the Portfolios, J.P.
Morgan Investment Management Inc. intends to seek best price and execution on a
competitive basis for both purchases and sales of securities.
The Portfolios corresponding to the Money Market, Tax Exempt Money
Market and Treasury Money Market Funds have a policy of investing only in
securities with maturities of less than thirteen months, which policy will
result in high portfolio turnovers. The Portfolio corresponding to the Short
Term Bond Fund has a policy of maintaining a short duration, which policy will
also result in a high portfolio turnover. Since brokerage commissions are not
normally paid on investments which the Portfolios make, turnover resulting from
such investments should not adversely affect the net asset value or net income
of the Portfolios.
EQUITY, CAPITAL APPRECIATION, INTERNATIONAL EQUITY, EMERGING MARKETS
EQUITY AND DIVERSIFIED FUNDS. In connection with portfolio transactions for the
Equity Portfolios , the overriding objective is to obtain the best possible
execution of purchase and sale orders.
In selecting a broker, J.P. Morgan Investment Management Inc. considers
a number of factors including: the price per unit of the security; the broker's
reliability for prompt, accurate confirmations and on-time delivery of
securities; the firm's financial condition; as well as the commissions charged.
A broker may be paid a brokerage commission in excess of that which another
broker might have charged for effecting the same transaction if, after
considering the foregoing factors, J.P. Morgan Investment Management Inc.
decides that the broker chosen will provide the best possible execution. J.P.
Morgan Investment Management Inc. and Morgan monitor the reasonableness of the
brokerage commissions paid in light of the execution received. The Trustees of
each Portfolio review regularly the reasonableness of commissions and other
transaction costs incurred by the Portfolios in light of facts and circumstances
deemed relevant from time to time, and, in that connection, will receive reports
from the Advisor and published data concerning transaction costs incurred by
institutional investors generally. Research services provided by brokers to
which J.P. Morgan Investment Management Inc. has allocated brokerage business in
the past include economic statistics and forecasting services, industry and
company analyses, portfolio strategy services, quantitative data, and consulting
services from economists and political analysts. Research services furnished by
brokers are used for the benefit of all the Advisor's clients and not solely or
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necessarily for the benefit of an individual Portfolio. The Advisor believes
that the value of research services received is not determinable and does not
significantly reduce its expenses. The Portfolios do not reduce their fee to the
Advisor by any amount that might be attributable to the value of such services.
The Portfolios or their predecessors corresponding to the Equity,
Capital Appreciation, International Equity, Emerging Markets Equity and
Diversified Funds paid the following approximate brokerage commissions for the
indicated fiscal
years:
DIVERSIFIED FUND (June): 1994: $78,737; 1993: N/A; 1992: N/A.
EQUITY FUND (May): 1994: $744,676; 1993: $293,698; 1992: $182,000.
CAPITAL APPRECIATION FUND (May): 1994: $1,760,320; 1993: $142,310; 1992:
$42,000.
INTERNATIONAL EQUITY FUND (October): 1994: $1,413,238; 1993: $639,000; 1992:
$157,000.
EMERGING MARKETS EQUITY FUND (October): 1994: $1,262,905; 1993: N/A; 1992: N/A.
The increases in brokerage commissions reflected above were due to
increased portfolio activity and an increase in net investments by shareholders
in the Portfolio or its predecessor .
Subject to the overriding objective of obtaining the best possible
execution of orders, J.P. Morgan Investment Management Inc. may allocate a
portion of a Portfolio's brokerage transactions to affiliates of Morgan. In
order for affiliates of Morgan to effect any portfolio transactions for a
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 each Portfolio, including a majority of the Trustees who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any
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commissions, fees, or other remuneration paid to such affiliates are consistent
with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to
or through the Portfolios' Administrator, Distributor or Advisor or any
"affiliated person" (as defined in the 1940 Act) of the Administrator,
Distributor or Advisor when such entities are acting as principals, except to
the extent permitted by law. In addition, the Portfolios 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 Morgan deems the purchase or sale of a security
to be in the best interests of a Portfolio as well as other customers including
other Portfolios, J.P. Morgan Investment Management Inc. to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for a 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 J.P. Morgan Investment Management Inc. in the manner
it considers to be most equitable and consistent with Morgan's fiduciary
obligations to a Portfolio. In some instances, this procedure might adversely
affect a Portfolio.
If a Portfolio that writes options effects a closing purchase
transaction with respect to an option written by it, normally such transaction
will be executed by the same broker-dealer who executed the sale of the option.
The writing of options by a Portfolio will be subject to limitations established
by each of the exchanges governing the maximum number of options in each class
which may be written by a single investor or group of investors acting in
concert, regardless of whether the options are written on the same or different
exchanges or are held or written in one or more accounts or through one or more
brokers. The number of options which a Portfolio may write may be affected by
options written by the Advisor for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
MASSACHUSETTS TRUST
The Trust is a trust fund of the type commonly known as a
"Massachusetts business trust" of which each Fund is a separate and distinct
series. A copy of the Declaration of Trust for the Trust is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The Declaration of
Trust and the By-Laws of the Trust are designed to make the Trust similar in
most respects to a Massachusetts business corporation. The principal distinction
between the two forms concerns shareholder liability described below.
Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust which is not the case for a corporation. However, the Trust's
Declaration of Trust provides that the shareholders shall not be subject to any
personal
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liability for the acts or obligations of any Fund and that every written
agreement, obligation, instrument or undertaking made on behalf of any Fund
shall contain a provision to the effect that the shareholders are not personally
liable thereunder.
No personal liability will attach to the shareholders under any
undertaking containing such provision when adequate notice of such provision is
given, except possibly in a few jurisdictions. With respect to all types of
claims in the latter jurisdictions, (i) tort claims, (ii) contract claims where
the provision referred to is omitted from the undertaking, (iii) claims for
taxes, and (iv) certain statutory liabilities in other jurisdictions, a
shareholder may be held personally liable to the extent that claims are not
satisfied by the Fund. However, upon payment of such liability, the shareholder
will be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Trust in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Funds.
The Trust's Declaration of Trust further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as individuals or
personally, that no Trustee, officer, employee, or agent of a Fund is liable to
a Fund or to a shareholder, and that no Trustee, officer, employee, or agent is
liable to any third persons in connection with the affairs of a Fund, except as
such liability may arise from his or its own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or its duties to such third
persons. It also provides that all third persons shall look solely to Fund
property for satisfaction of claims arising in connection with the affairs of a
Fund. With the exceptions stated, the Trust's Declaration of Trust provides that
a Trustee, officer, employee, or agent is entitled to be indemnified against all
liability in connection with the affairs of a Fund.
The Trust shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.
DESCRIPTION OF SHARES
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which each Fund
represents a separate series of shares of beneficial interest. See
"Massachusetts Trust".
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares (of any
series, if applicable) without changing the proportionate beneficial interest of
each shareholder in a Fund (or in the assets of other series, if applicable). To
date shares of the twelve series described in this Statement of Additional
Information have been authorized and are available for sale to the public. Each
share represents an equal proportional interest in a Fund with each other share.
Upon liquidation of a Fund, holders are entitled to share pro rata in the net
assets of a Fund available for distribution to such shareholders. See
"Massachusetts Trust." Shares of a Fund have no preemptive or conversion rights
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and are fully paid and nonassessable . The rights of redemption and exchange are
described in the Prospectus and elsewhere in this Statement of Additional
Information.
The shareholders of the Trust are entitled to a full vote for each full
share held and to a fractional vote for each fractional share. Subject to the
1940 Act, the Trustees themselves have the power to alter the number and the
terms of office of the Trustees, to lengthen their own terms, or to make their
terms of unlimited duration subject to certain removal procedures, and appoint
their own successors, PROVIDED, HOWEVER, that immediately after such appointment
the requisite majority of the Trustees have been elected by the shareholders of
the Trust. The voting rights of shareholders are not cumulative so that holders
of more than 50% of the shares voting can, if they choose, elect all Trustees
being selected while the shareholders of the remaining shares would be unable to
elect any Trustees. It is the intention of the Trust not to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for action
by shareholder vote as may be required by either the 1940 Act or the Trust's
Declaration of Trust.
Shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of its outstanding shares, to remove a
Trustee. The Trustees will call a meeting of shareholders to vote on removal of
a Trustee upon the written request of the record holders of 10% of the Trust's
shares. In addition, whenever ten or more shareholders of record who have been
such for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000 or at
least 1% of the Trust's outstanding shares, whichever is less, shall apply to
the Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting for the
purpose of voting upon the question of removal of any Trustee or Trustees and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the names and
addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of request. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the SEC,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statements
filed, the SEC may, and if demanded by the Trustees or by such applicants shall,
enter an order either sustaining one or more of such objections or refusing to
sustain any of them. If the SEC shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more of
such
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objections, the SEC shall find, after notice and opportunity for hearing, that
all objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all shareholders
with reasonable promptness after the entry of such order and the renewal of such
tender.
The Trustees have authorized the issuance and sale to the public of
shares of twelve series of the Trust. The Trustees have no current intention to
create any classes within the initial series or any subsequent series. The
Trustees may, however, authorize the issuance of shares of additional series and
the creation of classes of shares within any series with such preferences,
privileges, limitations and voting and dividend rights as the Trustees may
determine. The proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with distinct investment
objectives, policies and restrictions, and share purchase, redemption and net
asset valuation procedures. Any additional classes would be used to distinguish
among the rights of different categories of shareholders, as might be required
by future regulations or other unforeseen circumstances. All consideration
received by the Trust for shares of any additional series or class, and all
assets in which such consideration is invested, would belong to that series or
class, subject only to the rights of creditors of the Trust and would be subject
to the liabilities related thereto. Shareholders of any additional series or
class will approve the adoption of any management contract or distribution plan
relating to such series or class and of any changes in the investment policies
related thereto, to the extent required by the 1940 Act.
For information relating to mandatory redemption of Fund shares or
their redemption at the option of the Trust under certain circumstances, see
"Redemption of Shares" in the Prospectus.
As of July 2, 1995, the following owned of record or, to the knowledge
of management, beneficially owned more than 5% of the outstanding shares of:
Short Term Bond Fund--Estate of A. Marek (7.3%), Barnett Newman
Foundation (5.6%), S. P. Marshall and E. F. Waller Trust B (7.3%), E.C.
Chang (16.3%); Morgan Guaranty Trust as Agent for L. Johnson IRA 22.4%;
Bond Fund--B. Spitzer (9.6%); Boston & Co. (7.9%);
New York Total Return Bond Fund--
Morgan Guaranty Trust
as agent for G. Attfield (5%), M. Tang (5.1%), J. Simon PAAS account
(7.2%), M. Barron (9.5%);
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Diversified Fund--Wheels, Inc. 401K Retirement Savings Plan (8.7%),
Gantrade Corporation Retirement Plan (8.2%) ; E.S. Gordon Company
401K (7.4%), New York Zoological Society d/b/a Wildlife Conservation
Society (9.9%), Church of St. Joseph
(5.2%), S. Ginkel (7.6%);
Unless otherwise noted, the address of each owner listed above is c/o
Morgan, 9 West 57th Street, New York, New York 10019. As of the date of this
Statement of Additional Information, the officers and Trustees as a group owned
less than 1% of the shares of each Fund.
TAXES
Each Fund qualifies and intends to remain qualified as a regulated
investment company under Subchapter M of the Code . As a regulated investment
company, a Fund must, among other things, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of stock and
securities, gains from the sale or other disposition of stock, securities or
foreign currency and other income (including but not limited to gains from
options, futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months, or foreign
currencies (or options, futures or forward contracts on foreign currencies), but
only if such currencies (or options, futures or forward contracts on foreign
currencies) are not directly related to a Fund's principal business of investing
in stocks or securities (or options and futures with respect to stocks or
securities); and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the value of the Fund's total assets is represented
by cash, U.S. Government securities,investments in other regulated investment
companies and other securities limited, in respect of any one issuer, to an
amount not greater than 5% of the Fund's total assets, and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities). As a regulated investment company, a Fund (as
opposed to its shareholders) will not be subject to federal income taxes on the
net investment income and capital gains that it distributes to its shareholders,
provided that at least 90% of its net investment income and realized net
short-term capital gains in excess of net long-term capital losses for the
taxable year is distributed.
Under the Code, a Fund will be subject to a 4% excise tax on a portion
of its undistributed income if it fails to meet certain distribution
requirements by the end of the calendar year. Each Fund intends to make
distributions in a timely manner and accordingly does not expect to be subject
to the excise tax.
For federal income tax purposes, dividends that are declared by a Fund
in October, November or December as of a record date in such month and actually
paid
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in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
The Tax Exempt Money Market, Tax Exempt Bond and New York Total Return
Bond Funds intend to qualify to pay exempt-interest dividends to their
respective shareholders by having, at the close of each quarter of their
respective taxable years, at least 50% of the value of their respective total
assets consist of tax exempt securities. An exempt-interest dividend is that
part of dividend distributions made by the Funds which consists of interest
received by the Funds on tax exempt securities. Shareholders will not incur any
federal income tax on the amount of exempt-interest dividends received by them
from the Funds. In view of each Fund's investment policies, it is expected that
a substantial portion of all dividends will be exempt-interest dividends,
although the Funds may from time to time realize and distribute net short-term
capital gains and may invest limited amounts in taxable securities under certain
circumstances. See "Investment Objective(s) and Policies" in the Prospectus.
Distributions of net investment income and realized net short-term
capital gains in excess of net long-term capital losses (other than exempt
interest dividends) are generally taxable to shareholders of the Funds as
ordinary income whether such distributions are taken in cash or reinvested in
additional shares. The Equity, Capital Appreciation and Diversified Funds expect
that a portion of these distributions to corporate shareholders will be eligible
for the dividends-received deduction. Distributions to corporate shareholders of
the Money Market, Tax Exempt Money Market, Treasury Money Market, Tax Exempt
Bond, New York Total Return Bond, Bond, Short Term Bond, International Equity
and Emerging Markets Equity Funds are not eligible for the dividends received
deduction. Distributions of net long-term capital gains (i.e., net long-term
capital gains in excess of net short-term capital losses) are taxable to
shareholders of a Fund as long-term capital gains, regardless of whether such
distributions are taken in cash or reinvested in additional shares and
regardless of how long a shareholder has held shares in the Fund. See "Taxes" in
the Prospectus for a discussion of the federal income tax treatment of any gain
or loss realized on the redemption or exchange of a Fund's shares. Additionally,
any loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent the shares disposed of are replaced within a period of
61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend in shares of the Fund.
To maintain a constant $1.00 per share net asset value, the Trustees of
the Money Market, Tax Exempt Money Market and Treasury Money Market Funds may
direct that the number of outstanding shares be reduced pro rata. If this
adjustment is made, it will reflect the lower market value of portfolio
securities and not realized losses. The adjustment may result in a shareholder
having more dividend income than net income in his account for a period. When
the number of outstanding shares of a Fund is reduced, the shareholder's basis
in the shares of the Fund may be adjusted to reflect the difference between
taxable income and net dividends actually distributed. This difference may be
realized as a capital loss when the shares are liquidated. See "Net Asset
Value".
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Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where, if applicable, a put is acquired or a
call option is written thereon. Other gains or losses on the sale of securities
will be short-term capital gains or losses. Gains and losses on the sale, lapse
or other termination of options on securities will be treated as gains and
losses from the sale of securities. If an option written by a Portfolio lapses
or is terminated through a closing transaction, such as a repurchase by the
Portfolio of the option from its holder, the Portfolio will realize a short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount paid by the Portfolio in the closing transaction. If securities
are purchased by a Portfolio pursuant to the exercise of a put option written by
it, the Portfolio will subtract the premium received from its cost basis in the
securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to foreign currency contracts, or to fluctuations in exchange rates
between the time a Portfolio accrues income or receivables or expenses or other
liabilities denominated in a foreign currency and the time a Portfolio actually
collects such income or pays such liabilities, are treated as ordinary income or
ordinary loss. Similarly, gains or losses on the disposition of debt securities
held by a Portfolio, if any, denominated in foreign currency, to the extent
attributable to fluctuations in exchange rates between the acquisition and
disposition dates are also treated as ordinary income or loss.
Forward currency contracts, options and futures contracts entered into
by a Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, a Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Certain options, futures and foreign currency contracts held by a
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes -- i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
The Equity Portfolios may invest in Equity Securities of foreign
issuers. If a Portfolio purchases shares in certain foreign investment funds
(referred to as passive foreign investment companies ("PFICs") under the Code),
the Portfolio may be subject to federal income tax on a portion of an "excess
distribution" from such foreign investment fund or gain from the disposition of
such shares, even though such
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income may have to be distributed as a taxable dividend by the Fund to its
shareholders. In addition, certain interest charges may be imposed on a Fund or
its shareholders in respect of unpaid taxes arising from such distributions or
gains. Alternatively, a Fund may each year include in its income and distribute
to shareholders a pro rata portion of the foreign investment fund's income,
whether or not distributed to the Fund.
Pursuant to proposed regulations, open-end regulated investment
companies such as the Portfolios would be entitled to elect to mark to market
their stock in certain PFICs. Marking to market in this context means
recognizing as gain for each taxable year the excess, as of the end of that
year, of the fair market value of each PFIC's stock over the owner's adjusted
basis in that stock (including mark to market gains of a prior year for which an
election was in effect).
FOREIGN SHAREHOLDERS. Dividends of net investment income and
distributions of realized net short-term gains in excess of net long-term losses
to a shareholder who, as to the United States, is a nonresident alien
individual, fiduciary of a foreign trust or estate, foreign corporation or
foreign partnership (a "foreign shareholder") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) unless the dividends
are effectively connected with a U.S. trade or business of the shareholder, in
which case the dividends will be subject to tax on a net income basis at the
graduated rates applicable to U.S. individuals or domestic corporations.
Distributions of net long term capital gains to foreign shareholders will not be
subject to U.S. tax unless the distributions are effectively connected with the
shareholder's trade or business in the United States or, in the case of a
shareholder who is a nonresident alien individual, the shareholder was present
in the United States for more than 182 days during the taxable year and certain
other conditions are met.
In the case of a foreign shareholder who is a nonresident alien
individual and who is not otherwise subject to withholding as described above, a
Fund may be required to withhold U.S. federal income tax at the rate of 31%
unless IRS Form W-8 is provided. See "Taxes" in the Prospectus. Transfers by
gift of shares of a Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of shares
of the Fund held by such a shareholder at his or her death will be includible in
his or her gross estate for U.S. federal estate tax purposes.
FOREIGN TAXES. It is expected that the Equity, Capital Appreciation,
International Equity, Emerging Markets Equity and Diversified Funds may be
subject to foreign withholding taxes with respect to income received from
sources within foreign countries. In the case of the International Equity and
Emerging Markets Equity Funds, so long as more than 50% in value of the total
assets of the Fund's corresponding Portfolio at the close of any taxable year
consists of stock or securities of foreign corporations, the Fund may elect to
treat any foreign income taxes paid by it as paid directly by its shareholders.
These Funds will make such an election only if they deem it to be in the best
interest of their respective shareholders. The Funds will notify their
respective shareholders in writing each year if they make the election and of
the amount of foreign income taxes, if any, to be treated as paid by the
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shareholders. If a Fund makes the election, each shareholder will be required to
include in his income his proportionate share of the amount of foreign income
taxes paid by the Fund and will be entitled to claim either a credit (subject to
the limitations discussed below) or, if he itemizes deductions, a deduction for
his share of the foreign income taxes in computing federal income tax liability.
(No deduction will be permitted in computing an individual's alternative minimum
tax liability.) A shareholder who is a nonresident alien individual or a foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the election described in this paragraph, but may not be able to claim a credit
or deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. A tax-exempt shareholder will not ordinarily benefit
from this election. Shareholders who choose to utilize a credit (rather than a
deduction) for foreign taxes will be subject to the limitation that the credit
may not exceed the shareholder's U.S. tax (determined without regard to the
availability of the credit) attributable to his or her total foreign source
taxable income. For this purpose, the portion of dividends and distributions
paid by each of the International Equity and Emerging Markets Equity Funds from
its foreign source net investment income will be treated as foreign source
income. Each of these Funds' gains and losses from the sale of securities will
generally be treated as derived from U.S. sources, however, and certain foreign
currency gains and losses likewise will be treated as derived from U.S. sources.
The limitation on the foreign tax credit is applied separately to foreign source
"passive income," such as the portion of dividends received from the Fund which
qualifies as foreign source income. In addition, the foreign tax credit is
allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, shareholders may be
unable to claim a credit for the full amount of their proportionate shares of
the foreign income taxes paid by the International Equity and Emerging Markets
Equity Funds.
STATE AND LOCAL TAXES. Each Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business. In addition,
the treatment of a Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.
OTHER TAXATION. The Trust is organized as a Massachusetts business
trust and, under current law, neither the Trust nor any Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts, provided that the
Fund continues to qualify as a regulated investment company under Subchapter M
of the Code. The Portfolios are organized as New York trusts. The Portfolios are
not subject to any federal income taxation or income or franchise tax in the
State of New York or The Commonwealth of Massachusetts. The investment by a Fund
in its corresponding Portfolio does not cause the Fund to be liable for any
income or franchise tax in the State of New York.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" means the vote of (i)
67% or more of the Fund's shares or the Portfolio's outstanding
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voting securities present at a meeting, if the holders of more than 50% of the
Fund's outstanding shares are present or represented by proxy, or (ii) more than
50% of the Fund's outstanding shares or the Portfolio's outstanding securities,
whichever is less.
Telephone calls to the Funds , Morgan or Eligible Institutions as
shareholder servicing agent may be tape recorded. With respect to the securities
offered hereby, this Statement of Additional Information and the Prospectuses do
not contain all the information included in the Trust's Registration Statement
filed with the SEC under the 1933 Act and the Trust's and the Portfolios'
Registration Statements filed under the 1940 Act. Pursuant to the rules and
regulations of the SEC, certain portions have been omitted. The Registration
Statements including the exhibits filed therewith may be examined at the office
of the SEC in Washington D.C.
Statements contained in this Statement of Additional Information and
the Prospectuses concerning the contents of any contract or other document are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectuses and this Statement of Additional Information, in connection with
the offer contained therein and, if given or made, such other information or
representations must not be relied upon as having been authorized by any of the
Trust, the Pierpont Funds or the Distributor. The Prospectus and this Statement
of Additional Information do not constitute an offer by any Fund or by the
Distributor to sell or solicit any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Fund or
the Distributor to make such offer in such jurisdictions.
FINANCIAL STATEMENTS
Each of The Pierpont Funds' current reports to shareholders filed with
the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder are
hereby incorporated herein by reference. A copy of each such report will be
provided, without charge, to each person receiving this Statement of Additional
Information.
JPM432
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APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to default
than other speculative issues. However, it faces 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.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory capacity
to pay principal and interest.
A-1
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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.
A-2
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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.
JPM432
A-3
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APPENDIX B
ADDITIONAL INFORMATION CONCERNING NEW YORK MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting
investments in New York Municipal Obligations. The sources of payment for such
obligations and the marketability thereof may be affected by financial or other
difficulties experienced by New York State (the "State") and certain of its
municipalities and public authorities. It does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of New York issuers.
NEW YORK STATE. The financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities but also by entities that are not under the control of the
State. Adverse developments affecting the State's financing activities, its
authorities, the City of New York (the "City") or other localities could
adversely affect the State's financial condition.
There are a number of methods by which the State may incur debt. Under
the State Constitution, the State may not, with limited exceptions for
emergencies, undertake long-term borrowing (I.E., borrowing for more than one
year) unless the borrowing is authorized in a specific amount for a single work
or purpose by the Legislature and approved by the voters. There is no limitation
on the amount of long-term debt that may be so authorized and subsequently
incurred by the State. The total amount of long-term State general obligation
debt authorized but not issued as of March 31, 1994 was approximately $2.039
billion.
The State may undertake short-term borrowings without voter approval
(i) in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds
from the sale of duly authorized but unissued bonds, by issuing bond
anticipation notes. The State may also, pursuant to specific constitutional
authorization, directly guarantee certain obligations of the State of New York's
authorities and public benefit corporations ("Authorities"). Payments of debt
service on New York State general obligation and New York State-guaranteed bonds
and notes are legally enforceable obligations of the State of New York.
The State also employs two other types of long-term financing
mechanisms that are State-supported but do not result in general obligations of
the State: moral obligation and lease-purchase or contractual-obligation
financing.
Payments for principal and interest due on general obligation bonds,
interest due on bond anticipation notes and on tax and revenue anticipation
notes, and contractual-obligation and lease-purchase payments were $1.783
billion and $2.045 billion in the aggregate for the State's 1991-92 and 1992-93
fiscal years, respectively, and were estimated to be $2.326 billion for the
State's 1993-94 fiscal year. These figures do not include the interest payable
on either State General Obligation Refunding Bonds issued in July 1992
("Refunding Bonds") to the extent that such interest is to be paid from an
escrow fund established
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with the proceeds of such Refunding Bonds or the State's installment payments
relating to the issuance of certificates of participation.
The State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees. There has never been a default on any moral
obligation debt of any Authority.
In 1990, as part of a State fiscal reform program, legislation was
enacted creating the New York Local Government Assistance Corporation ("LGAC"),
a public benefit corporation empowered to issue long-term obligations to fund
certain payments to local governments traditionally funded through New York
State's annual seasonal borrowing. The legislation empowered LGAC to issue its
bonds and notes in an amount not in excess of $4.7 billion (exclusive of certain
refunding bonds) plus certain other amounts. Over a period of years, the
issuance of those long-term obligations, which will be amortized over no more
than 30 years, is expected to result in eliminating the need for continuing
short-term seasonal borrowing for those purposes. The legislation also imposed a
cap on the annual seasonal borrowing of the State at $4.7 billion, less net
proceeds of bonds issued by LGAC and bonds issued to provide for capitalized
interest, except in cases where the Governor and the legislative leaders have
certified both the need for additional borrowing and provided a schedule for
reducing it to the cap. If borrowing above the cap is thus permitted in any
fiscal year, it is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. To date, LGAC has issued its bonds to
provide net proceeds of $3.856 billion and has been authorized to issue its
bonds to provide net proceeds of up to an additional $315 million during the
State's 1994-95 fiscal year.
In April 1993, legislation was also enacted providing for significant
changes in the long-term financing practices of the State and the Authorities.
The Legislature passed a proposed constitutional amendment that would
permit the State, without a voter referendum but within a formula-based cap, to
issue revenue bonds, which would be debt of the State secured solely by a pledge
of certain State tax receipts (including those allocated to State funds
dedicated for transportation purposes), and not by the full faith and credit of
the State. In addition, the proposed amendment would require that State debt be
incurred only for capital projects included in a multi-year capital financing
plan and would prohibit lease-purchase and contractual-obligation financing
mechanisms for State facilities. The Governor and the Legislative leaders have
indicated that public hearings will be held on the proposed constitutional
amendment. Before becoming effective, the proposed constitutional amendment must
first be passed again by the next separately elected Legislature and then
approved by the voters at a general election, so that it could not become
effective until after the general election in November 1995.
On March 26, 1990, S&P downgraded the State's (i) general obligation
bonds from "AA-" to "A" and (ii) commercial paper from "A-1+" to "A-1." S&P also
downgraded certain of the State's variously rated moral obligation, lease
purchase, guaranteed and contractual obligation debt, including debt issued by
certain State agencies. On August 27, 1990, S&P affirmed these ratings without
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change. On June 6, 1990, Moody's downgraded the State's general obligation debt
from "A1" to "A," confirmed its rating of the State's limited liability lease
and contractual obligations at "A," and assigned a rating of "MIG-2" to the
State's tax and revenue anticipation notes issued in June 1990 and March 1990.
On January 6, 1992, Moody's lowered from "A" to "Baa1" its rating of those New
York State bonds that are backed by annual legislative appropriations. The
downgrade affected two-thirds of the State's outstanding debt. Moody's
attributed the downgrade to the inability of State officials to agree on a plan
to fill the $875 million gap in 1992's $30 billion general fund budget. Moody's
also placed its "A" rating of the State's general obligation bonds under review
for possible downgrading in the coming months. On January 13, 1992, S&P lowered
its rating of the State's $4.8 billion in general obligation bonds from "A" to
"A-." S&P maintained its ratings on outstanding short-term borrowings because it
believes the State is still generating more than enough cash to meet its
obligations. Moody's and S&P variously cited the State's continued economic
deterioration, chronic operating deficits, and the legislative stalemate in
closing the budget gap, as factors contributing to the downgrades.
The State Constitution requires the Governor to submit to the
Legislature a balanced Executive Budget which contains a complete plan of
expenditures for the ensuing fiscal year and all moneys and revenues estimated
to be available therefor, accompanied by bills containing all proposed
appropriations or reappropriation and any new or modified revenue measures to be
enacted in connection with the Executive Budget. The entire plan constitutes the
proposed State financial plan for that fiscal year. The Governor submits to the
Legislature, on at least a quarterly basis, reports of actual receipts,
revenues, disbursements, expenditures, tax refunds and reimbursements, and
repayment of advances in form suitable for comparison with the State financial
plan, together with explanations of deviations from the State financial plan. At
such time, the Governor is required to submit any amendments to the State
financial plan necessitated by such deviations. The State issued the first of
the three required quarterly updates to the 1994-95 cash-basis State Financial
Plan on July 29, 1994. The major uncertainties in the State Financial Plan
continue to be those related to the economy and tax collections, and could
produce either favorable or unfavorable variances during the balance of the
year. Continued turmoil in the financial, currency and commodity markets could
adversely affect the profit structures of key industries in the State, as well
as provoke cautious attitudes among businesses and consumers. Conversely,
stronger than expected employment and income levels, and continued moderate
inflation, could produce higher sales and income tax receipts in the months
ahead.
The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the fiscal
year. The recommended 1994-95 State Financial Plan projects a balanced General
Fund. Total General Fund receipts are projected to be $34.321 billion, an
increase of $2.092 billion over total receipts in the prior fiscal year.
Disbursements are projected to be $34.248 billion, an increase of $2.351 billion
over the total amount disbursed and transferred in the prior fiscal year.
The 1994-95 State Financial Plan formulated on June 16, 1994 (the
"1994-95 State Financial Plan"), following enactment of the State's 1994-95
budget,
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projected General Fund receipts and transfers from other funds at $34.321
billion and disbursements and transfers to other funds at $34.248 billion.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation as
a whole, gradually eroding its relative economic position. The recession has
been more severe in the State, owing to a significant retrenchment in the
financial services industry, cutbacks in defense spending, and an over built
real estate market. The State's economy has also been slower to recover than in
the rest of the nation. There can be no assurance that the State economy will
not experience worse-than-predicted results in the 1994-95 fiscal year, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions to
align recurring receipts and disbursements in future fiscal years.
The State anticipates that its borrowings for capital purposes in its
1994-95 fiscal year will consist of approximately $374 million in general
obligation bonds and $140 million in new commercial paper issuances. In
addition, it is anticipated that the State will issue $140 million in general
obligation bonds for the purpose of redeeming outstanding bond anticipation
notes. The Legislature has also authorized the issuance of up to $69 million in
certificates of participation for equipment purchases during the State's 1994-95
fiscal year. The projection of the State regarding its borrowings for the
1993-94 fiscal year may change if actual receipts fall short of State
projections or if other circumstances require.
AUTHORITIES. The fiscal stability of the State is related to the fiscal
stability of its Authorities, which generally have responsibility for financing,
constructing and operating revenue-producing public benefit facilities.
Authorities are not subject to the constitutional restrictions on the incurrence
of debt that apply to the State itself and may issue bonds and notes within the
amounts of, and as otherwise restricted by, their legislative authorization. As
of September 30, 1993, the latest data available, 18 Authorities had outstanding
debt of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Authorities was $63.5 billion as of September 30,
1993. As of March 31, 1994, aggregate public authority debt outstanding as
State-supported debt was $21.1 billion and as State-related debt was $29.4
billion.
In recent years the State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
Authorities for operating and other expenses and in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt service.
During the 1992-93 fiscal year, the State provided operating assistance of
$935.6 million for the Metropolitan Transportation Authority (the "MTA") and
$19.9 million for four non-transit Authorities (i.e., the Housing Finance Agency
(the
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"HFA"), the Urban Development Corporation (the "UDC"), the Energy Research and
Development Authority and the Environmental Facilities Corporation). For the
1993-94 fiscal year, $1.078 billion and $18.1 million are estimated to be
provided to the MTA and the four non-transit Authorities, respectively. For the
1994-95 State fiscal year, total State assistance to the MTA is estimated at
approximately $1.3 billion. This operating assistance (possibly in increasing
amounts) is expected to continue to be required in future years. The State's
experience has been that if an Authority suffers serious financial difficulties,
both the ability of the State and the Authorities to obtain financing in the
public credit markets and the market price of the State's outstanding bonds and
notes may be adversely affected.
The MTA oversees the operation of the City's bus and subway systems by
its affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA") and, through
subsidiaries, operates certain commuter rail and bus lines. Through its
affiliated agency, the Triborough Bridge and Tunnel Authority (the "TBTA"), the
MTA operates certain intrastate toll bridges and tunnels. Because fare revenues
are not sufficient to finance the mass transit portion of these operations, the
MTA has depended, and will continue to depend, for operating support upon a
system of State, local government and TBTA support, and, to the extent
available, Federal operating assistance, including loans, grants and subsidies.
The TA and the commuter railroads ended fiscal year 1992 with their
budgets balanced on a cash basis. The TA had an estimated closing cash balance
of approximately $25 million, and the commuter railroads had a closing cash
balance of approximately $237 million, which includes dedicated tax monies held
by the State. For 1993, the TA originally projected a budget gap of
approximately $266 million. An increase in TBTA tolls which took effect in
January 1993, and other developments, reduced the projected gap to approximately
$241 million. Legislation passed in April 1993 relating to the MTA's 1992-1996
Capital Program reflected a plan for closing this gap without raising fares. If
any of the assumptions used in making these projections prove incorrect, the
TA's gap could grow, and the TA would be required to seek additional State
assistance, raise fares or take other action.
NEW YORK CITY AND MUNICIPAL ASSISTANCE CORPORATION. The fiscal health
of the State of New York is closely related to the fiscal health of its
localities, particularly the City of New York, which has required and continues
to require significant financial assistance from New York State. The City's
independently audited operating results for each of its 1981 through 1993 fiscal
years, which end on June 30, show a General Fund surplus reported in accordance
with GAAP. The City has eliminated the cumulative deficit in its net General
Fund position. In addition, the City's financial statements for the 1993 fiscal
year received an unqualified opinion from the City's independent auditors, the
eleventh consecutive year the City has received such an opinion.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and the State. In that year the City lost
access to public credit markets and was not able to sell debt to the public
again until 1979. In response to the City's fiscal crisis, the State created the
Municipal Assistance Corporation ("MAC") to provide financing assistance for the
City, and
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the New York State Financial Control Board (the "Control Board") to exercise
certain oversight and review functions with respect to the City's financing.
Prior to 1985, MAC had the authority to issue bonds and notes and to pay or lend
the proceeds to the City. Since 1985 MAC has been authorized to issue bonds and
notes only to refund its outstanding bonds and notes. MAC also has the authority
to exchange its obligations for City obligations. MAC bonds are payable from
appropriations of certain State sales and use taxes imposed by the City, the
State stock transfer tax and per capita State aid to the City. The State is not,
however, obligated to continue these taxes, continue to appropriate revenue from
these taxes or continue the appropriation of per capita State aid to pay MAC
obligations. MAC does not have taxing powers and its bonds are not obligations
enforceable against either the City or the State.
On February 11, 1991, Moody's lowered its rating on the City's general
obligation bonds to "Baa1" from "A". Moody's expressed doubts about whether the
City's January 16, 1991 financial plan presented a "reasonable program to
achieve budget balance in fiscal 1991 and 1992 and assure long-term structural
integrity." Moody's stated that "the enormity of the current problem, the
severity of required expenditure cuts, the substantial revenue enhancements that
will be required to achieve balance, the vulnerability to exogenous factors, and
the extremely short time frame within which all this must be accomplished
introduce substantial new risk to the City's short and long-term credit
outlook." On April 29, 1991, S&P downgraded New York City's outstanding $1.3
billion of general obligation revenue and anticipation notes from "SP-1" to
"SP-2". S&P also announced a rating of "SP-2" for the City's offering of $1.25
billion of general obligation revenue anticipation notes. The lower ratings of
S&P "reflect the City's aggravated short-term cash position for fiscal 1991, the
unusually high level of total revenue anticipation note exposure resulting from
the State's delay in passing its budget and distributing fiscal aid, and
continued pressure on revenues and expenditures due to prevailing economic
conditions." On April 30, 1991, Moody's assigned a rating of "MIG-2" to the same
offering of $1.25 billion of general obligation revenue anticipation notes.
Moody's stated that "although an increasingly strained financial outlook for
both the City and the State complicates the State budget adoption process, this
rating on revenue anticipation notes relies explicitly on the expectation that
the State is fully cognizant of the consequences of further untimely delays in
state budget adoption and will act responsibly. Failure of the State to find a
timely resolution to the budget process will have severe implications for the
normal financial performance of New York City and other local governments in New
York State." On October 7, 1991, Moody's again assigned a "MIG-2" rating to New
York City's $1.25 billion of revenue anticipation notes, fiscal 1992, Series A.
Moody's stated in its January 6, 1992 downgrade of certain New York
State obligations that while such action did not directly affect the bond
ratings of local governments in New York State, the impact of the State's fiscal
stringency on local government bond ratings will be assessed on a case-by-case
basis. On June 22, 1992, Moody's gave its "MIG-1" rating to the City's $1.4
billion revenue anticipation notes and tax anticipation notes citing New York
City's "markedly improved" short-term credit position.
On July 6, 1993, S&P reaffirmed the City's "A-" rating on $20.4 billion
of general obligation bonds stating that "[t]he City has identified additional
gap-
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closing measures that have recurring value and will reduce next year's budget
gap . . . by approximately $400 million." Officials at Moody's also indicated
that there were no plans to alter its "Baa1" rating on the City's general
obligation bonds.
The Mayor is responsible for preparing the City's four-year financial
plan. On February 10, 1994 the City released a financial plan for the 1994
through 1997 fiscal years (the "1994-1997 Financial Plan" or "Financial Plan").
The City's projections set forth in the Financial Plan are based on various
assumptions and contingencies which are uncertain and which may not materialize.
Changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements. Such assumptions and contingencies include the timing
and pace of any regional and local economic recovery, the impact on real estate
tax revenues of the current downturn in the real estate market, wage increases
for City employees consistent with those assumed in the Financial Plan,
employment growth, the ability to implement proposed reductions in City
personnel and other cost reduction initiatives which may require in certain
cases the cooperation of the City's municipal unions and MAC, provision of State
and Federal aid and mandate relief, adoption of the budget by the City Council
in substantially the form submitted by the Mayor and the impact on the New York
City region of the tax increases contained in President Clinton's economic plan.
The 1994-1997 Financial Plan projects revenues and expenditures for the
1994 fiscal year balanced in accordance with GAAP. The 1994-1997 Financial Plan
sets forth actions, which were outlined in the City's August Financial Plan, to
close a previously projected gap of approximately $2.0 billion in the 1994
fiscal year. The gap-closing actions for the 1994 fiscal year included
substantial productivity savings and savings from restructuring the delivery of
City services, service reductions, and the sale of delinquent real property tax
receivables for $215 million. The proposed sale of real property tax receivables
requires authorization by the City Council.
The Financial Plan also sets forth projections for the 1995 through
1997 fiscal years and outlines a proposed gap-closing program to close projected
budget gaps of $2.3 billion, $3.2 billion and $3.3 billion for the 1995 through
1997 fiscal years, respectively. The projections include the continuation of the
personal income tax surcharge, resulting in revenues of $415 million, $443
million and $470 million in the 1995, 1996 and 1997 fiscal years, respectively,
and reflect a decline in the property tax forecasted for each of the 1995
through 1997 fiscal years. The proposed gap-closing actions include City actions
aggregating $1.9 billion, $1.8 billion and $1.6 billion in the 1995 through 1997
fiscal years, respectively; $275 million, $525 million and $705 million in
proposed State actions in the 1995 through 1997 fiscal years, respectively; $125
million, $200 million and $250 million in proposed additional Federal assistance
in the 1995 through 1997 fiscal years, respectively; and other unspecified
Federal, State or City actions of $629 million and $740 million in the 1996 and
1997 fiscal years, respectively.
The $2.3 billion budget gap for the 1995 fiscal year is the largest
budget gap which has been projected for the next succeeding fiscal year at this
stage of the budget planning process for the last four years. It can be expected
that
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the proposals contained in the Financial Plan to close the projected budget gap
for the 1995 fiscal year will engender substantial public debate, and that
public debate relating to the 1995 fiscal year budget will continue through the
time the budget is scheduled to be adopted in June 1994.
On March 1, 1994, the City Comptroller issued a report on the state of
the City's economy. The report concluded that, while the City's long recession
is over, moderate growth is the best the City can expect. The report projects
that total tax revenues for the 1994, 1995 and 1996 fiscal years will be
slightly higher than projected in the Financial Plan, and that tax revenues for
the 1997 fiscal year will be slightly below the Financial Plan projections. The
report identified revenue risks for the 1994 through 1997 fiscal years totaling
$9 million, $134 million, $184 million and $184 million, respectively, relating
to the proposed video lottery and certain audit initiatives and other revenues.
On March 21, 1994, the City Comptroller issued a report on the Financial Plan.
In the report, the City Comptroller identified as risks for the 1995 fiscal year
the proposals in the Financial Plan that are uncertain because they depend on
actions by organizations other than City government, including the State
Legislature and municipal unions. The City Comptroller stated that if none of
the uncertain proposals are implemented, the total risk could be as much as
$1.15 billion to $1.53 billion. The City Comptroller noted that there are a
number of additional issues, the impact of which cannot be currently quantified.
On March 22, 1994, the Office of the State Deputy Comptroller for the
City of New York ("OSDC") issued a report reviewing the Financial Plan. The
report concluded that a balanced budget is achievable for the 1994 fiscal year.
The report noted that expenditures for the 1994 fiscal year may be higher than
projected by $176 million, due primarily to possible overspending at BOE,
revenue shortfalls at HHC and overtime costs in the uniformed agencies; however,
the City has initiated a program that is intended to reduce nonpersonnel costs
by up to $150 million. In addition, the report noted that the Financial Plan
includes a general reserve of $198 million and assumes savings of $117 million
from the implementation of the proposed severance program for the 1994 fiscal
year. While the City intends to transfer $234 million of these resources to help
balance the 1995 fiscal year budget, the report concluded that most of these
resources will be needed to maintain budget balance in the 1994 fiscal year.
With respect to each of the 1995 through 1997 fiscal years, the report
noted the potential for a budget gap of approximately $300 million greater than
shown in the Financial Plan, primarily due to possible shortfalls in projected
HHC revenues, greater than anticipated spending at BOE and overtime costs in the
uniformed agencies. Additional risks for such years include the potential for
increased recycling costs due to a recent court decision, lower than anticipated
revenues from the renegotiation of certain Port Authority leases, and greater
personnel costs, since the Financial Plan makes no provision for wage increases
after the expiration of current contracts. For the 1996 and 1997 fiscal years,
the report identified the extension of the resident personal income tax
surcharge as an additional risk.
With respect to the City's $2.3 billion gap-closing program for the
1995 fiscal year, the report noted that approximately $1.4 billion of the
gap-closing initiatives must be considered as high risk because the initiatives
are outside
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the Mayor's direct control to implement. The report noted that the City will
need to obtain the approval and cooperation of the municipal labor unions, the
City Actuary, certain Covered Organizations, the City Council and the State and
Federal governments, and that if the necessary approvals are not obtained, the
City will have only a few months to develop alternative solutions.
On March 23, 1994, the staff of the Control Board issued its report on
the Financial Plan. The report states that, while the Financial Plan moves the
City in the direction of structural balance, the Financial Plan has more risks
and fewer details than are desirable and does not set forth contingency plans or
other protections to assist the City if unknown but inevitable impediments
emerge.
Estimates of the City's revenues and expenditures are based on numerous
assumptions and are subject to various uncertainties. If expected federal or
State aid is not forthcoming, if unforeseen developments in the economy
significantly reduce revenues derived from economically sensitive taxes or
necessitate increased expenditures for public assistance, if the City should
negotiate wage increases for its employees greater than the amounts provided for
in the City's financial plan or if other uncertainties materialize that reduce
expected revenues or increase projected expenditures, then, to avoid operating
deficits, the City may be required to implement additional actions, including
increases in taxes and reductions in essential City services. The City might
also seek additional assistance from New York State.
OTHER LOCALITIES. The cities, towns, villages and school districts of
the State are political subdivisions of the State with the powers granted by the
State Constitution and statutes. As the sovereign, the State retains broad
powers and responsibilities with respect to the finances and welfare of these
subdivisions, especially in education and social services.
In recent years, the State has been called upon to provide financial
assistance to certain localities. To the extent that the State is constrained by
its financial condition, State assistance to localities may be further reduced,
compounding the serious fiscal constraints already experienced by many local
governments. Localities also face anticipated and potential problems resulting
from pending litigation (including challenges to local property tax
assessments), judicial decisions and socio-economic trends.
Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance during the
State's 1994-95 fiscal year and thereafter. The potential impact on the State of
such requests by localities is not included in the projections of the State
receipts and disbursements in the State's 1994-95 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of Yonkers
(the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged
with oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor or the Legislature to assist Yonkers could result in allocation of New
York State resources in amounts that cannot yet be determined.
B-9
<PAGE>
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1992, the total indebtedness of all
localities in New York State other than New York City was approximately $15.7
billion, a small portion (approximately $71.6 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
enabling New York State legislation. State law requires the Comptroller to
review and make recommendations concerning the budgets of those local government
units other than New York City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding. Seventeen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1992.
From time to time, Federal expenditure reductions could reduce, or in
some cases eliminate, Federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities. If New York State, New York City or any of the Authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within New York State could be adversely affected. Localities also
face anticipated and potential problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. The longer-range
problems of declining urban population, increasing expenditures and other
economic trends could adversely affect localities and require increasing New
York State assistance in the future.
LITIGATION. Certain litigation pending against the State, its
subdivisions and their officers and employees could have a substantial and
long-term adverse effect on State finances. The State is a party to numerous
legal proceedings, many of which normally recur in governmental operations.
Because of the prospective nature of these proceedings, no estimate of the
potential loss can be made.
Among the more significant of these cases are those that involve: (i)
the validity and fairness of agreements and treaties by which various Indian
tribes transferred title to the State of approximately six million acres of land
in central New York; (ii) certain aspects of the State's Medicaid policies and
its rates and regulations, including reimbursements to providers of mandatory
and optional Medicaid services; (iii) contamination in the Love Canal area of
Niagara Falls; (iv) alleged employment discrimination by the State of New York
and its agencies; (v) a challenge to the practice of reimbursing certain Office
of Mental Health patient care expenses from the client's Social Security
benefits; (vi) a challenge to the methods by which the State reimburses
localities for the administrative costs of food stamp programs; (vii) an action
in which the State is a third party defendant for injunctive or other
appropriate relief concerning liability for the maintenance of stone groins
constructed along certain areas of Long Island's shoreline; (viii) an action
against New York State and New York City officials alleging inadequate shelter
allowances to maintain proper housing; (ix) the constitutionality of legislation
enacted during the 1990 legislative session which changed actuarial funding
methods for determining state and local contributions to state employee
retirement systems; (x) action by school districts and their employees
challenging the constitutionality of Chapter 175 of the Laws of 1990 which
deferred school district contributions to the public retirement system and
reduced by like amount state aid to the school districts;
B-10
<PAGE>
(xi) the constitutionality of various public authority financing programs; and
(xii) the constitutionality of bridge and mass transportation bonding programs
of the New York State Thruway Authority and the Metropolitan Transportation
Authority authorized by Chapter 56 of the Laws of 1993.
The legal proceedings noted above involve State finances, State
programs and miscellaneous tort, real property and contract claims in which the
State is a defendant and the monetary damages sought are substantial. These
proceedings could affect adversely the financial condition of the State in the
1994-95 fiscal year or thereafter. Adverse developments in these proceedings or
the initiation of new proceedings could affect the ability of the State to
maintain a balanced 1994-95 State Financial Plan. An adverse decision in any of
these proceedings could exceed the amount of the 1994-95 State Financial Plan
reserve for the payment of judgments and, therefore, could affect the ability of
the State to maintain a balanced 1994-95 State Financial Plan. In its audited
financial statements for the 1992-93 fiscal year, the State reported its
estimated liability for awarded and anticipated unfavorable judgments to be $489
million. The State has stated its belief that the 1994-95 State Financial Plan
includes sufficient reserves for the payment of judgments that may be required
during the 1994-95 fiscal year.
JPM432
B-11
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
The following financial statements are included in Part A:
Financial Highlights -- The Pierpont Money Market Fund, The Pierpont Tax Exempt
Money Market Fund, The Pierpont Treasury Money Market Fund, The Pierpont Short
Term Bond Fund, The Pierpont Bond Fund, The Pierpont Tax Exempt Bond Fund, The
Pierpont Equity Fund, The Pierpont Capital Appreciation Fund, The Pierpont
International Equity Fund, The Pierpont Diversified Fund, The Pierpont Emerging
Markets Equity Fund and The Pierpont New York Total Return Bond Fund.
The following financial statements are included in Part B:
The Pierpont Money Market Fund
Statement of Assets and Liabilities at November 30, 1994
Statement of Operations for the fiscal year ended November 30, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements November 30, 1994
The Money Market Portfolio
Schedule of Investments at November 30, 1994
Statement of Assets and Liabilities at November 30, 1994
Statement of Operations for the fiscal year ended November 30, 1994
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements November 30, 1994
The Pierpont Tax Exempt Money Market Fund
Statement of Assets and Liabilities at August 31, 1994
Statement of Operations for the fiscal year ended August 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements August 31, 1994
Statement of Assets and Liabilities at February 28, 1995 (unaudited)
Statement of Operations for the six months ended February 28, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements February 28, 1995 (unaudited)
The Tax Exempt Money Market Portfolio
Schedule of Investments at August 31, 1994
Statement of Assets and Liabilities at August 31, 1994
Statement of Operations For the fiscal year ended August 31, 1994
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements August 31, 1994
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Schedule of Investments at February 28, 1995 (unaudited)
Statement of Assets and Liabilities at February 28, 1995 (unaudited)
Statement of Operations For the six months ended February 28, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements February 28, 1995 (unaudited)
The Pierpont Treasury Money Market Fund
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements October 31, 1994
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations for the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Treasury Money Market Portfolio
Schedule of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements October 31, 1994
Schedule of Investments at April 30, 1995 (unaudited)
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations For the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Pierpont Short Term Bond Fund
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements October 31, 1994
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations for the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Short Term Bond Portfolio
Schedule of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements October 31, 1994
Schedule of Investments at April 30, 1995 (unaudited)
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
C-2
<PAGE>
Statement of Operations For the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Pierpont Bond Fund
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements October 31, 1994
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations for the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The U.S. Fixed Income Portfolio
Schedule of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements October 31, 1994
Schedule of Investments at April 30, 1995 (unaudited)
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations For the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Pierpont Tax Exempt Bond Fund
Statement of Assets and Liabilities at August 31, 1994
Statement of Operations for the fiscal year ended August 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements August 31, 1994
Statement of Assets and Liabilities at February 28, 1995 (unaudited)
Statement of Operations for the six months ended February 28, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements February 28, 1995 (unaudited)
The Tax Exempt Bond Portfolio
Schedule of Investments at August 31, 1994
Statement of Assets and Liabilities at August 31, 1994
Statement of Operations for the fiscal year ended August 31, 1994
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements August 31, 1994
Schedule of Investments at February 28, 1995 (unaudited)
Statement of Assets and Liabilities at February 28, 1995 (unaudited)
Statement of Operations For the six months ended February 28, 1995 (unaudited)
C-3
<PAGE>
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements February 28, 1995 (unaudited)
The Pierpont Equity Fund
Statement of Assets and Liabilities at May 31, 1994
Statement of Operations For the Period July 19, 1993 (commencement of
operations) to May 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements May 31, 1994
Statement of Assets and Liabilities at November 30, 1994 (unaudited)
Statement of Operations for the six months ended November 30, 1994 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements November 30, 1994 (unaudited)
The Selected U.S. Equity Portfolio
Schedule of Investments at May 31, 1994
Statement of Assets and Liabilities at May 31, 1994
Statement of Operations For the Period July 19, 1993 (commencement of
operations) to May 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements May 31, 1994
Schedule of Investments at November 30, 1994 (unaudited)
Statement of Assets and Liabilities at November 30, 1994 (unaudited)
Statement of Operations for the six months ended November 30, 1994 (unaudited)
Statement of Changes in Net Assets (unaudited)
Notes to Financial Statements November 30, 1994 (unaudited)
The Pierpont Capital Appreciation Fund
Statement of Assets and Liabilities at May 31, 1994
Statement of Operations For the Period July 19, 1993 (commencement of
operations) to May 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements May 31, 1994
Statement of Assets and Liabilities at November 30, 1994 (unaudited)
Statement of Operations for the six months ended November 30, 1994 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements November 30, 1994 (unaudited)
The U.S. Small Company Portfolio
Schedule of Investments at May 31, 1994
Statement of Assets and Liabilities at May 31, 1994
Statement of Operations For the Period July 19, 1993 (commencement of
operations) to May 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements May 31, 1994
Schedule of Investments at November 30, 1994 (unaudited)
C-4
<PAGE>
Statement of Assets and Liabilities at November 30, 1994 (unaudited)
Statement of Operations for the six months ended November 30, 1994 (unaudited)
Statement of Changes in Net Assets (unaudited)
Notes to Financial Statements November 30, 1994 (unaudited)
The Pierpont International Equity Fund
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements October 31, 1994
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations for the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Non-U.S. Equity Portfolio
Schedule of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements October 31, 1994
Schedule of Investments at April 30, 1995 (unaudited)
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations For the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Pierpont Diversified Fund
Statement of Assets and Liabilities at June 30, 1994
Statement of Operations For the Period December 15, 1993 (commencement of
operations) to June 30, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements June 30, 1994
Statement of Assets and Liabilities at December 31, 1994 (unaudited)
Statement of Operations for the six months ended December 31, 1994 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements December 31, 1994 (unaudited)
C-5
<PAGE>
The Diversified Portfolio
Schedule of Investments at June 30, 1994
Statement of Assets and Liabilities at June 30, 1994
Statement of Operations For the Period December 15, 1993 (commencement of
operations) to June 30, 1994
Statement of Changes in Net Assets
Notes to Financial Statements June 30, 1994
Schedule of Investments at December 31, 1994 (unaudited)
Statement of Assets and Liabilities at December 31, 1994 (unaudited)
Statement of Operations For the six months ended December 31, 1994 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements December 31, 1994 (unaudited)
The Pierpont Emerging Markets Equity Fund
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements October 31, 1994
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations for the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Emerging Markets Equity Portfolio
Schedule of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statement October 31, 1994
Schedule of Investments at April 30, 1995 (unaudited)
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations For the six months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements April 30, 1995 (unaudited)
The Pierpont New York Total Return Bond Fund
Statement of Assets and Liabilities at March 31, 1995
Statement of Operations for the period ended March 31, 1995
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements March 31, 1995
The New York Total Return Bond Portfolio
Schedule of Investments at March 31, 1995
Statement of Assets and Liabilities at March 31, 1995
Statement of Operations for the period ended March 31, 1995
Statement of Changes in Net Assets
Notes to Financial Statements March 31, 1995
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<PAGE>
(b) Exhibits
Exhibit Number
1 Declaration of Trust, as amended.*
2 Restated By-Laws.*
3 Not Applicable.
4 Not Applicable.
5 Not Applicable.
6 Distribution Agreement between Registrant and Signature Broker-Dealer
Services, Inc. ("SBDS") was filed as Exhibit No. 6 to Post-Effective
Amendment No. 12.
7 Not Applicable.
8 Custodian Contract between Registrant and State Street Bank and Trust
Company ("State Street") was filed as Exhibit No. 8 to Post-Effective
Amendment No. 12.
9(a) Restated Administration Agreement between Registrant and SBDS was
filed as Exhibit No. 9(a) to Post-Effective Amendment No. 12.
9(b) Restated Shareholder Servicing Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty") was filed as
Exhibit No. 9(b) to Post-Effective Amendment No. 12.
9(c) Transfer Agency and Service Agreement between Registrant and State
Street was filed as Exhibit No. 9(c) to Post-Effective Amendment No.
12.
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<PAGE>
9(d) Amended and Restated Fund Services Agreement between Registrant and
Pierpont Group, Inc. was filed as Exhibit No. 9(d) to Post-Effective
Amendment No. 12.
9(e) Restated Financial and Fund Accounting Services Agreement between
Registrant and Morgan Guaranty was filed as Exhibit No. 9(e) to Post-
Effective Amendment No. 12.
10 Opinion and consent of Sullivan & Cromwell was filed as Exhibit No. 10
to Registrant's Pre-Effective Amendment No. 1 to the Registration
Statement filed on December 30, 1992 ("Pre-Effective Amendment
No. 1").
11 Consents of independent accountants.*
12 Not Applicable.
13 Purchase Agreement was filed as Exhibit No. 13 to Pre-Effective
Amendment No. 1.
14 Not Applicable.
15 Not Applicable.
16 Schedule for computation of performance quotations was filed as
Exhibit No. 16 to Registrant's Post-Effective Amendment No. 9 to the
Registration Statement filed on June 1, 1994.
17 Financial Data Schedules.*
18 Powers of Attorney.*
___________________
* 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: Number of Record Holders as of July 2, 1995.
The Pierpont Money Market Fund: 5,782
The Pierpont Tax Exempt Money Market Fund: 2,928
The Pierpont Treasury Money Market Fund: 564
The Pierpont Short Term Bond Fund: 125
The Pierpont Bond Fund: 823
The Pierpont Tax Exempt Bond Fund: 1,605
The Pierpont New York Total Return Bond Fund: 133
The Pierpont Diversified Fund: 247
The Pierpont Equity Fund: 2,211
The Pierpont Capital Appreciation Fund: 2,079
The Pierpont International Equity Fund: 1,695
C-8
<PAGE>
The Pierpont Emerging Markets Equity Fund: 1,313
Item 27. Indemnification.
Reference is made to Section 5.3 of Registrant's Declaration of Trust
and Article 4 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain
expenses in connection with the defense of claims, demands, actions, suits, or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to directors,
trustees, officers and controlling persons of the Registrant and the principal
underwriter pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, trustee, officer, or controlling person of the
Registrant and the principal underwriter in connection with the successful
defense of any action, suite or proceeding) is asserted against the Registrant
by such director, trustee, officer or controlling person or principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
Not Applicable.
Item 29. Principal Underwriters.
(a) SBDS is the Distributor (the "Distributor") for the shares of the
Registrant. SBDS also serves as the principal underwriter or placement agent for
numerous other registered investment companies.
(b) The following are the directors and officers of the Distributor. The
principal business address of these individuals is 6 St. James Avenue, Suite
900, Boston, Massachusetts 02116 unless otherwise noted. Their respective
position and offices with the Registrant, if any, are also indicated.
Philip W. Coolidge: President, Chief Executive Officer and Director of SBDS.
President of Registrant.
James B. Craver: Secretary of SBDS. Secretary and Treasurer of Registrant.
Barbara M. O'Dette: Assistant Treasurer of SBDS.
Linwood C. Downs: Treasurer of SBDS.
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<PAGE>
Thomas M. Lenz: Assistant Secretary of SBDS. Assistant Secretary of Registrant.
Molly S. Mugler: Assistant Secretary of SBDS. Assistant Secretary of Registrant.
Linda T. Gibson: Assistant Secretary of SBDS. Assistant Secretary of Registrant.
Beth A. Remy: Assistant Treasurer of SBDS.
Andres E. Saldana: Assistant Secretary of SBDS. Assistant Secretary of
Registrant.
Susan Jakuboski: Assistant Treasurer of SBDS.
Julie J. Wyetzner: Product Management Officer of SBDS.
Christopher W. Tomecek: Director of SBDS.
Kate B.M. Bolsover: Director of SBDS; Signature Financial Group (Europe), Ltd.,
49 St. James's Street, London SW1A 1JT.
Robert G. Davidoff: Director of SBDS; CMNY Capital, L.P., 135 East 57th Street
New York, NY 10022.
Leeds Hackett: Director of SBDS; Hackett Associates Limited, 1260 Avenue of the
Americas, 12th Floor, New York, NY 10020
Laurence B. Levine: Director of SBDS; Blair Corporation, 250 Royal Palm Way,
Palm Beach, FL 33480
Donald S. Chadwick: Director of SBDS; 4609 Bayard Street, Apartment 411,
Pittsburgh, PA 15213.
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder will be maintained at the offices of:
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).
Morgan Guaranty Trust Company of New York: 60 Wall Street, New York, New York
10260-0060, or 9 West 57th Street, New York, New York 10019 (records relating to
its functions as shareholder servicing agent, and services agent).
State Street Bank and Trust Company: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 (records relating to its functions as custodian, transfer
agent and dividend disbursing agent).
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<PAGE>
Signature Broker-Dealer Services, Inc.: 6 St. James Avenue, Boston,
Massachusetts 02116 (records relating to its functions as distributor and
administrator).
Investors Bank and Trust Company: 1 First Canadian Place, Suite 5820, P.O. Box
231, Toronto, Ontario M5X1C8 (accounting records).
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) If the information called for by Item 5a of Form N-1A is contained in the
latest annual report to shareholders, the Registrant shall furnish each person
to whom a prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders upon request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this amendment to its Registration Statement
on Form N-1A ("Registration Statement") pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 27th day of July, 1995.
THE PIERPONT FUNDS
By /s/ JAMES B. CRAVER
James B. Craver
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on July 27, 1995.
MATTHEW HEALEY*
Matthew Healey
Chairman and Chief Executive Officer
PHILIP W. COOLIDGE*
Philip W. Coolidge
President
/s/ JAMES B. CRAVER
James B. Craver
Treasurer and Chief Financial and Accounting Officer
F.S. ADDY*
F.S. Addy
Trustee
WILLIAM G. BURNS*
William G. Burns
Trustee
ARTHUR C. ESCHENLAUER*
Arthur C. Eschenlauer
Trustee
MICHAEL P. MALLARDI*
Michael P. Mallardi
Trustee
*By /s/ JAMES B. CRAVER
James B. Craver
As attorney-in-fact pursuant to a power of attorney filed herewith
<PAGE>
SIGNATURES
Each Portfolio has duly caused this Post-Effective Amendment to the
Registration Statement on Form N-1A ("Registration Statement") of The Pierpont
Funds (the "Trust") (File No. 33-54632) to be signed on its behalf by the
undersigned, thereto duly authorized, in George Town, Grand Cayman, Cayman
Islands, on the 26th day of July, 1995.
THE MONEY MARKET PORTFOLIO, THE TAX EXEMPT MONEY MARKET PORTFOLIO, THE TREASURY
MONEY MARKET PORTFOLIO, THE SHORT TERM BOND PORTFOLIO, THE U.S. FIXED INCOME
PORTFOLIO, THE TAX EXEMPT BOND PORTFOLIO, THE SELECTED U.S. EQUITY PORTFOLIO,
THE U.S. SMALL COMPANY PORTFOLIO, THE NON U.S. EQUITY PORTFOLIO, THE DIVERSIFIED
PORTFOLIO, THE EMERGING MARKETS EQUITY PORTFOLIO AND THE NEW YORK TOTAL RETURN
BOND PORTFOLIO
By /s/ SUSAN JAKUBOSKI
Susan Jakuboski
Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on July 26, 1995.
PHILIP W. COOLIDGE*
Philip W. Coolidge
President of the Portfolios
JAMES B. CRAVER*
James B. Craver
Treasurer and Chief Financial and Accounting Officer of the Portfolios
MATTHEW HEALEY*
Matthew Healey
Chairman and Chief Executive Officer of the Portfolios
F.S. ADDY*
F.S. Addy
Trustee of the Portfolios
WILLIAM G. BURNS*
William G. Burns
Trustee of the Portfolios
ARTHUR C. ESCHENLAUER*
Arthur C. Eschenlauer
Trustee of the Portfolios
MICHAEL P. MALLARDI*
Michael P. Mallardi
Trustee of the Portfolios
*By /s/ SUSAN JAKUBOSKI
Susan Jakuboski
As attorney-in-fact pursuant to a power of attorney filed herewith
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THE PIERPONT FUNDS
INDEX TO EXHIBITS TO REGISTRATION STATEMENT ON FORM N-1A
Exhibit No. Description of Exhibit
1. Declaration of Trust, as amended.
2. Restated By-Laws.
11. Consents of independent accountants.
17. Financial Data Schedules.
18. Powers of Attorney.
THE PIERPONT FUNDS
DECLARATION OF TRUST
Dated as of November 4, 1992
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TABLE OF CONTENTS
PAGE
ARTICLE I--NAME AND DEFINITIONS 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--TRUSTEES 3
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 3
Section 2.4 Vacancies 4
Section 2.5 Delegation of Power to Other Trustees 4
ARTICLE III--POWERS OF TRUSTEES 4
Section 3.1 General 4
Section 3.2 Investments 5
Section 3.3 Legal Title 6
Section 3.4 Issuance and Repurchase of Securities 6
Section 3.5 Borrowing Money; Lending Trust Property 6
Section 3.6 Delegation; Committees 6
Section 3.7 Collection and Payment 6
Section 3.8 Expenses 7
Section 3.9 Manner of Acting; By-Laws 7
Section 3.10 Miscellaneous Powers 7
Section 3.11 Principal Transactions 7
Section 3.12 Trustees and Officers as Shareholders 8
ARTICLE IV--INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER
AGENT AND SHAREHOLDER SERVICING AGENTS 8
Section 4.1 Investment Adviser 8
Section 4.2 Distributor 9
Section 4.3 Administrator 9
Section 4.4 Transfer Agent and Shareholder Servicing Agents 9
Section 4.5 Parties to Contract 9
ARTICLE V--LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS 10
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 10
Section 5.2 Non-Liability of Trustees, etc. 10
Section 5.3 Mandatory Indemnification; Insurance 11
Section 5.4 No Bond Required of Trustees 12
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 12
Section 5.6 Reliance on Experts, etc. 13
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ARTICLE VI--SHARES OF BENEFICIAL INTEREST 13
Section 6.1 Beneficial Interest 13
Section 6.2 Rights of Shareholders 13
Section 6.3 Trust Only 13
Section 6.4 Issuance of Shares 14
Section 6.5 Register of Shares 14
Section 6.6 Transfer of Shares 14
Section 6.7 Notices 15
Section 6.8 Voting Powers 15
Section 6.9 Series Designation 15
ARTICLE VII--REDEMPTIONS 18
Section 7.1 Redemptions 18
Section 7.2 Suspension of Right of Redemption 18
Section 7.3 Redemption of Shares; Disclosure of Holding 19
Section 7.4 Redemptions of Accounts of Less than
Minimum Amount 19
ARTICLE VIII--DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS 19
ARTICLE IX--DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. 20
Section 9.1 Duration 20
Section 9.2 Termination of Trust 20
Section 9.3 Amendment Procedure 20
Section 9.4 Merger, Consolidation and Sale of Assets 22
Section 9.5 Incorporation, Reorganization 22
Section 9.6 Incorporation or Reorganization of Series 23
ARTICLE X--REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 23
ARTICLE XI--MISCELLANEOUS 23
Section 11.1 Filing 23
Section 11.2 Governing Law 23
Section 11.3 Counterparts 23
Section 11.4 Reliance by Third Parties 24
Section 11.5 Provisions in Conflict with Law or Regulations 24
Section 11.6 Principal Office 24
APPENDIX I--SERIES DESIGNATION 26
ii
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DECLARATION OF TRUST
OF
THE PIERPONT FUNDS
Dated as of November 4, 1992
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable Shares of Beneficial Interest (par value
$0.001 per share) ("Shares") issued in one or more series as hereinafter
provided; and
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares issued
hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1. NAME. The name of the trust created hereby is "The
Pierpont Funds".
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "ADMINISTRATOR" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.3 hereof.
(b) "BY-LAWS" means the By-laws referred to in Section 3.9 hereof, as
from time to time amended.
(c) "COMMISSION" has the meaning given that term in the 1940 Act.
(d) "CUSTODIAN" means a party employed by the Trust to furnish services
as described in Article X of the By-Laws.
(e) "DECLARATION" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "DECLARATION", "HEREOF",
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2
"HEREIN", and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(f) "DISTRIBUTOR" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.2 hereof.
(g) "INTERESTED PERSON" has the meaning given that term in the 1940
Act.
(h) "INVESTMENT ADVISER" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(i) "MAJORITY SHAREHOLDER VOTE" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the 1940
Act, except that such term may be used herein with respect to the Shares of the
Trust as a whole or the Shares of any particular series, as the context may
require.
(j) "1940 ACT" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(k) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign.
(l) "SHAREHOLDER" means a record owner of outstanding Shares.
(m) "SHARES" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series of Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(n) "SHAREHOLDER SERVICING AGENT" means a party furnishing services to
the Trust pursuant to any shareholder servicing contract described in Section
4.4 hereof.
(o) "TRANSFER AGENT" means a party furnishing services to the Trust
pursuant to any transfer agency contract described in Section 4.4 hereof.
(p) "TRUST" means the trust created hereby.
(q) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(r) "TRUSTEES" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference
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herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by the
Trustees, provided, however, that the number of Trustees shall in no event be
less than three.
SECTION 2.2. TERM OF OFFICE OF TRUSTEES. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided; except
that (a) any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) any Trustee may be removed with cause, at any time by
written instrument signed by at least two-thirds of the remaining Trustees,
specifying the date when such removal shall become effective; (c) any Trustee
who has attained a mandatory retirement age established pursuant to any written
policy adopted from time to time by at least two thirds of the Trustees shall,
automatically and without action of such Trustee or the remaining Trustees, be
deemed to have retired in accordance with the terms of such policy, effective as
of the date determined in accordance with such policy; (d) any Trustee who has
become incapacitated by illness or injury as determined by a majority of the
other Trustees, may be retired by written instrument signed by a majority of the
other Trustees, specifying the date of his retirement; and (e) a Trustee may be
removed at any meeting of Shareholders by a vote of two thirds of the
outstanding Shares of each series. For purposes of the foregoing clause (b), the
term "cause" shall include, but not be limited to, failure to comply with such
written policies as may from time to time be adopted by at least two thirds of
the Trustees with respect to the conduct of Trustees and attendance at meetings.
Upon the resignation, retirement or removal of a Trustee, or his otherwise
ceasing to be a Trustee, he shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to the Trust or
the remaining Trustees any Trust Property held in the name of the resigning,
retiring or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.3. RESIGNATION AND APPOINTMENT OF TRUSTEES. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy by
appointing such other individual as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
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4
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16
(a) of the 1940 Act.
SECTION 2.4. VACANCIES. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
SECTION 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
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5
SECTION 3.2. INVESTMENTS. (a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an investment
company;
(ii) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of U.S. and foreign currencies, any form of gold
or other precious metal, commodity contracts, any form of option contract,
contracts for the future acquisition or delivery of fixed income or other
securities, shares of, or any other interest in, any investment company as
defined in the Investment Company Act of 1940, and securities and related
derivatives of every nature and kind, including, without limitation, all types
of bonds, debentures, stocks, negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed or sponsored by any and all
Persons, including, without limitation,
(A) states, territories and possessions of the United States and the
District of Columbia and any political subdivision, agency or instrumentality of
any such Person,
(B) the U.S. Government, any foreign government, any political
subdivision or any agency or instrumentality of the U.S. Government, any foreign
government or any political subdivision of the U.S. Government or any foreign
government,
(C) any international or supranational instrumentality,
(D) any bank or savings institution, or
(E) any corporation, trust, partnership or other organization organized
under the laws of the United States or of any state, territory or possession
thereof, or under any foreign law;
or in "when issued" contracts for any such securities, to retain Trust assets in
cash and from time to time to change the securities or obligations in which the
assets of the Trust are invested; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect of
any of said investments; and
(iii) to carry on any other business in connection with or incidental
to any of the foregoing powers, to do everything necessary, proper or desirable
for the accomplishment of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, and to do every other act or
thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
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(b) The Trustees shall not be limited to investing in securities or
obligations maturing before the possible termination of the Trust, nor shall the
Trustees be limited by any law limiting the investments which may be made by
fiduciaries.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
SECTION 3.3. LEGAL TITLE. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person or nominee, on such terms as the Trustees may determine. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds of the Trust or other Trust Property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
SECTION 3.5. BORROWING MONEY; LENDING TRUST PROPERTY. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust Property.
SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
SECTION 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
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SECTION 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
SECTION 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees at which a quorum is
present, including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of a majority of the
Trustees. The Trustees may adopt By-Laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not reserved to the Shareholders.
SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, the Administrator, Trustees,
officers, employees, agents, the Investment Adviser, the Distributor, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust; (f) to the extent permitted by law, indemnify any person
with whom the Trust has dealings, including any Investment Adviser,
Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing
Agent and any dealer, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.
SECTION 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted
by the 1940 Act, or any order of exemption issued by the Commission, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Administrator, Shareholder Servicing
Agent, Custodian, Distributor or Transfer Agent or with any Interested Person of
such Person; but
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the Trust may, upon customary terms, employ any such Person, or firm or company
in which such Person is an Interested Person, as broker, legal counsel,
registrar, transfer agent, dividend disbursing agent or custodian.
SECTION 3.12. TRUSTEES AND OFFICERS AS SHAREHOLDERS. Except as
hereinafter provided, no officer, Trustee or member of any advisory board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser, Administrator or of the Distributor, and no Investment Adviser,
Administrator or Distributor of the Trust, shall take long or short positions in
the securities issued by the Trust. The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, Trustee or member of any advisory board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the current prospectus or statement of
additional information for the Shares being purchased; or
(d) The Investment Adviser, the Distributor, the Administrator, or any
of their officers, partners, directors or trustees from purchasing Shares prior
to the effective date of the Trust's Registration Statement under the Securities
Act of 1933, as amended, relating to the Shares.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND SHAREHOLDER SERVICING AGENTS
SECTION 4.1. INVESTMENT ADVISER. Subject to a Majority Shareholder Vote
of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby the other party to each such contract shall
undertake to furnish the Trust such management, investment advisory, statistical
and research facilities and services, promotional activities, and such other
facilities and services, if any, with respect to one or more series of Shares,
as the Trustees shall from time to time consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provision of the Declaration, the Trustees may delegate to
the Investment Adviser authority (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
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9
sales, loans or exchanges of assets of the Trust on behalf of the Trustees or
may authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Investment Adviser (and
all without further action by the Trustees). Any of such purchases, sales, loans
or exchanges shall be deemed to have been authorized by all the Trustees. Such
services may be provided by one or more Persons.
SECTION 4.2. DISTRIBUTOR. The Trustees may in their discretion from
time to time enter into one or more distribution contracts providing for the
sale of Shares whereby the Trust may either agree to sell the Shares to the
other party to any such contract or appoint any such other party its sales agent
for such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the Declaration
or the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer and sales agreements with
registered securities dealers and depository institutions to further the purpose
of the distribution or repurchase of the Shares. Such services may be provided
by one or more Persons.
SECTION 4.3. ADMINISTRATOR. The Trustees may in their discretion from
time to time enter into one or more administrative services contracts whereby
the other party to each such contract shall undertake to furnish such
administrative services to the Trust as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine, provided that such terms and conditions are not
inconsistent with the provisions of this Declaration or the By-Laws. Such
services may be provided by one or more Persons.
SECTION 4.4. TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS. The
Trustees may in their discretion from time to time enter into one or more
transfer agency and shareholder servicing contracts whereby the other party to
each such contract shall undertake to furnish such transfer agency and/or
shareholder services to the Trust or to shareholders of the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of this
Declaration or the By-Laws. Such services may be provided by one or more
Persons. Except as otherwise provided in the applicable shareholder servicing
contract, a Shareholder Servicing Agent shall be deemed to be the record owner
of outstanding Shares beneficially owned by customers of such Shareholder
Servicing Agent for whom it is acting pursuant to such shareholder servicing
contract.
SECTION 4.5. PARTIES TO CONTRACT. Any contract of the character
described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any Custodian
contract as described in Article X of the By-Laws may be entered into with any
Person, although one or more of the Trustees or officers of the Trust may be an
officer, partner, director, trustee, shareholder, or member of such other party
to the contract, and no such contract shall be invalidated or rendered voidable
by
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10
reason of the existence of any such relationship; nor shall any Person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of any such contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was not inconsistent with the provisions of this
Article IV or the By-Laws. The same Person may be the other party to contracts
entered into pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian
contract as described in Article X of the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series other than Trust Property
allocated or belonging to that series.
SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, wilful misfeasance, gross negligence or reckless disregard of his
duties.
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SECTION 5.3. MANDATORY INDEMNIFICATION; INSURANCE. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is or has been a Trustee or officer of the Trust
shall be indemnified by the Trust, to the fullest extent permitted by law
(including the 1940 Act) as currently in effect or as hereafter amended, against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim", "action", "suit", or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee or
officer or other disposition not involving a final adjudication as provided in
paragraph (b) (i) or (b) (ii) above resulting in a payment by a Trustee or
officer, unless there has been either a determination that such Trustee or
officer did not engage in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or by a
reasonable determination, based upon a review of readily available facts (as
opposed to a full trial-type inquiry) that he did not engage in such conduct:
(a) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(b) by written opinion of independent legal counsel.
(c) Subject to the provisions of the 1940 Act, the Trust may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability (whether or not the Trust would have
the power to indemnify such Persons against such liability), and such other
insurance as the Trustees in their sole judgment shall deem advisable.
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12
(d) The rights of indemnification herein provided shall be severable,
shall not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to be such a
Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such Person. Nothing contained herein shall affect any rights
to indemnification to which personnel other than Trustees and officers may be
entitled by contract or otherwise under law.
(e) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, Shareholder Servicing Agent, Transfer Agent or other
Person dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under the
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually, but as Trustees
under the
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13
Declaration, and that the obligations of any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind any of
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, Shareholders,
Trustees, officers, employees and agents in such amount as the Trustees shall
deem adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, any Shareholder Servicing Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder may be divided into transferable Shares, which may be divided into one
or more series as provided in Section 6.9 hereof. Each such series shall have
such class or classes of Shares as the Trustees may from time to time determine.
The number of Shares authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.
SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, pre-emptive, appraisal, conversion
or exchange rights, except as the Trustees may determine with respect to any
series of Shares.
SECTION 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and the
Shareholders. It is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, corporation, bailment
or any form of legal relationship other than a trust. Nothing in the Declaration
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14
shall be construed to make the Shareholders, either by themselves or with the
Trustees, partners or members of a joint stock association.
SECTION 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, and on such terms as the Trustees may deem best, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection, with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares of any series into a
greater or lesser number without thereby changing their proportionate beneficial
interests in Trust Property allocated or belonging to such series. Contributions
to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or fractions of a Share.
SECTION 6.5. REGISTER OF SHARES. A register or registers shall be kept
at the principal office of the Trust or at an office of the Transfer Agent or
any one or more Shareholder Servicing Agents which register or registers, taken
together, shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register or registers shall be conclusive as to who are the
holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent, the Shareholder
Servicing Agent which is the agent of record for such Shareholder, or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
SECTION 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees, the Transfer Agent or
the Shareholder Servicing Agent which is the agent of record for such
Shareholder, of a duly executed instrument of transfer, together with any
certificate or certificates (if issued) for such Shares and such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent, Shareholder Servicing Agent or
registrar nor any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees, the Transfer
Agent or
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15
the Shareholder Servicing Agent which is the agent of record for such
Shareholder; but until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and neither
the Trustees nor any Transfer Agent, Shareholder Servicing Agent or registrar
nor any officer or agent of the Trust shall be affected by any notice of such
death, bankruptcy or incompetence, or other operation of law.
SECTION 6.7. NOTICES. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote, except that Shares
held in the treasury of the Trust shall not be voted. Shares shall be voted by
individual series on any matter submitted to a vote of the Shareholders of the
Trust except as provided in Section 6.9(g) hereof. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the By-Laws to be taken by Shareholders. At any meeting of
Shareholders of the Trust or of any series of the Trust, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are not otherwise represented in person or by proxy at
the meeting, proportionately in accordance with the votes cast by holders of all
shares otherwise represented at the meeting in person or by proxy as to which
such Shareholder Servicing Agent is the agent of record. Any shares so voted by
a Shareholder Servicing Agent will be deemed represented at the meeting for
quorum purposes. The By-Laws may include further provisions for Shareholder
votes and meetings and related matters.
SECTION 6.9. SERIES DESIGNATION. As set forth in Appendix I hereto, the
Trustees have authorized the division of Shares into series, as designated and
established pursuant to the provisions of Appendix I and this Section 6.9. The
Trustees, in their discretion, may authorize the division of Shares into one or
more additional series, and the different series shall be established and
designated, and the variations in the relative rights, privileges and
preferences
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16
as between the different series shall be fixed and determined by the Trustees
upon and subject to the following provisions:
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption and the price, terms and manner
of redemption, and special and relative rights as to dividends and on
liquidation.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issuance or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income and earnings thereon,
profits therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
proceeds, funds or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them to and among any one or
more of the series established and designated from time to time in such manner
and on such basis as the Trustees, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all series for all purposes. No Shareholder of any
particular series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees, in their sole discretion, deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to any particular series be charged with liabilities, expenses,
costs, charges or reserves attributable to any other series. All Persons who
have extended credit which has been allocated to a particular series, or who
have
<PAGE>
17
a claim or contract which has been allocated to any particular series, shall
look only to the assets of that particular series for payment of such credit,
claim or contract.
(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest in the
net assets allocated or belonging to such series only, and such interest shall
not extend to the assets of the Trust generally. Dividends and distributions on
Shares of a particular series may be paid with such frequency as the Trustees
may determine, which may be monthly or otherwise, pursuant to a standing vote or
votes adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of that series only, from such of the income and capital gains,
accrued or realized, from the assets belonging to that series, as the Trustees
may determine, after providing for actual and accrued liabilities belonging to
that series. All dividends and distributions on Shares of a particular series
shall be distributed PRO RATA to the Shareholders of that series in proportion
to the number of Shares of that series held by such Shareholders at the date and
time of record established for the payment of such dividends or distributions.
Shares of any particular series of the Trust may be redeemed solely out of Trust
Property allocated or belonging to that series. Upon liquidation or termination
of a series of the Trust, Shareholders of such series shall be entitled to
receive a PRO RATA share of the net assets of such series only.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series, except that (i) when required by
the 1940 Act to be voted in the aggregate, Shares shall not be voted by
individual series, and (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
(i) Notwithstanding anything in this Declaration to the contrary, the
Trustees may, in their discretion, authorize the division of Shares of any
series into Shares of one or more classes or subseries of such series. All
Shares of a class or a subseries shall be identical with each other and with the
Shares of each other class or subseries of the same series except for such
variations between classes or subseries as may be approved by the Board of
Trustees and be
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18
permitted under the 1940 Act or pursuant to any exemptive order issued by the
Commission.
ARTICLE VII
REDEMPTIONS
SECTION 7.1 REDEMPTIONS. In case any Shareholder at any time desires to
dispose of his Shares, he may deposit his certificate or certificates therefor,
duly endorsed in blank or accompanied by an instrument of transfer executed in
blank, or if the Shares are not represented by any certificate, a written
request or other such form of request as the Trustees may from time to time
authorize, at the office of the Transfer Agent, the Shareholder Servicing Agent
which is the agent of record for such Shareholder, or at the office of any bank
or trust company, either in or outside of the Commonwealth of Massachusetts,
which is a member of the Federal Reserve System and which the said Transfer
Agent or the said Shareholder Servicing Agent has designated in writing for that
purpose, together with an irrevocable offer in writing in a form acceptable to
the Trustees to sell the Shares represented thereby to the Trust at the net
asset value per Share thereof, next determined after such deposit as provided in
Section 8.1 hereof. Payment for said Shares shall be made to the Shareholder
within seven days after the date on which the deposit is made, unless (i) the
date of payment is postponed pursuant to Section 7.2 hereof, or (ii) the
receipt, or verification of receipt, of the purchase price for the Shares to be
redeemed is delayed, in either of which events payment may be delayed beyond
seven days.
SECTION 7.2 SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment of the
redemption proceeds for the whole or any part of any period (i) during which the
New York Stock Exchange is closed other than customary week-end and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which disposal
by the Trust of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust fairly to determine the value of its
net assets, or (iv) during which the Commission for the protection of
Shareholders by order permits the suspension of the right of redemption or
postponement of the date of payment of the redemption proceeds; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment of the
redemption proceeds until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
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SECTION 7.3. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the
Trustees shall, at any time and in good faith, be of the opinion that direct or
indirect ownership of Shares has or may become concentrated in any Person to an
extent which would disqualify the Trust, or any series of the Trust, as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), then the Trustees shall have the power by lot or other means
deemed equitable by them (i) to call for redemption by any such Person a number
of Shares of the Trust, or such series of the Trust, sufficient to maintain or
bring the direct or indirect ownership of Shares of the Trust, or such series of
the Trust, into conformity with the requirements for such qualification, and
(ii) to refuse to transfer or issue Shares of the Trust, or such series of the
Trust, to any Person whose acquisition of the Shares of the Trust, or such
series of the Trust, would result in such disqualification. The redemption shall
be effected at the redemption price and in the manner provided in Section 7.1
hereof.
The Shareholders of the Trust shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees deem necessary to comply with
the provisions of the Code, or to comply with the requirements of any other
authority. Upon the failure of a Shareholder to disclose such information and to
comply with such demand of the Trustees, the Trust shall have the power to
redeem such Shares at a redemption price determined in accordance with Section
7.1 hereof.
SECTION 7.4 REDEMPTIONS OF ACCOUNTS OF LESS THAN MINIMUM AMOUNT. The
Trustees shall have the power, and any Shareholder Servicing Agent with whom the
Trust has so agreed (or a subcontractor of such Shareholder Servicing Agent)
shall have the power, at any time to redeem Shares of any Shareholder at a
redemption price determined in accordance with Section 7.1 hereof if at such
time the aggregate net asset value of the Shares owned by such Shareholder is
less than a minimum amount as determined from time to time and disclosed in a
prospectus of the Trust or in the Shareholder Servicing Agent's (or sub-
contractor's) agreement with its customer. A Shareholder shall be notified that
the aggregate value of his Shares is less than such minimum amount and allowed
60 days to make an additional investment before redemption is processed.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall set
forth in the By-Laws or in a duly adopted vote or votes of the Trustees such
bases and times for determining the per Share net asset value of the Shares or
net income, or the declaration and payment of dividends and distributions, as
they may deem necessary or desirable.
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ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
SECTION 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
SECTION 9.2. TERMINATION OF TRUST. (a) The Trust may be terminated (i)
by a Majority Shareholder Vote of its Shareholders, or (ii) by the Trustees by
written notice to the Shareholders. Any series of the Trust may be terminated
(i) by a Majority Shareholder Vote of the Shareholders of that series, or (ii)
by the Trustees by written notice to the Shareholders of that series. Upon the
termination of the Trust or any series of the Trust:
(i) The Trust or series of the Trust shall carry on no business except
for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
series of the Trust and all the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or series of the Trust shall have
been wound up, including the power to fulfill or discharge the contracts of the
Trust, collect the assets of the Trust or series of the Trust, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property of the Trust or series of the Trust to one or more
Persons at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind, discharge or pay
the liabilities of the Trust or series of the Trust, and to do all other acts
appropriate to liquidate the business of the Trust or series of the Trust;
provided, that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all of the Trust Property of the Trust or
series of the Trust shall require Shareholder approval in accordance with
Section 9.4 or 9.6 hereof, respectively; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of the Trust or series of the Trust, in
cash or in kind or partly in cash and partly in kind, among the Shareholders of
the Trust or series of the Trust according to their respective rights.
(b) After termination of the Trust or series of the Trust and
distribution to the Shareholders of the Trust or series of the Trust as herein
provided, a majority of the Trustees shall execute and lodge among the records
of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder with respect to the Trust or series of the
Trust, and the rights and interests of all Shareholders of the Trust or series
of the Trust shall thereupon cease.
SECTION 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended
by a Majority Shareholder Vote of the Shareholders or by any instrument in
<PAGE>
21
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of the Shares of the Trust. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to designate series in accordance with Section 6.9 hereof, to
change the name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code of 1986, as amended, or to (i) change the state or
other jurisdiction designated herein as the state or other jurisdiction whose
laws shall be the governing law hereof, (ii) effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the laws of such state or other jurisdiction applicable to
trusts or voluntary associations, (B) to permit the Trust to elect to be treated
as a "regulated investment company" under the applicable provisions of the
Internal Revenue Code of 1986, as amended, or (C) to permit the transfer of
shares (or to permit the transfer of any other beneficial interests or shares in
the Trust, however denominated), and (iii) in conjunction with any amendment
contemplated by the foregoing clause (i) or the foregoing clause (ii) to make
any and all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (ii) or clause (iii) to be conclusively
evidenced by the execution of any such amendment by a majority of the Trustees,
but the Trustees shall not be liable for failing so to do.
(b) No amendment which the Trustees have determined would affect the
rights, privileges or interests of holders of a particular series of Shares, but
not the rights, privileges or interests of holders of all series of Shares
generally, and which would otherwise require a Majority Shareholder Vote under
paragraph (a) of this Section 9.3, may be made except with the vote or consent
by a Majority Shareholder Vote of Shareholders of such series.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
(d) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the Majority Shareholder Vote of the Shares or
that series of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
<PAGE>
22
Trustees as aforesaid, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
(f) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority of the
Trustees.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property (or all or substantially all of the Trust Property allocated or
belonging to a particular series of the Trust) including its good will, upon
such terms and conditions and for such consideration when and as authorized at
any meeting of Shareholders called for such purpose by the vote of the holders
of two-thirds of the outstanding Shares of all series of the Trust voting as a
single class, or of the affected series of the Trust, as the case may be, or by
an instrument or instruments in writing without a meeting, consented to by the
vote of the holders of two-thirds of the outstanding Shares of all series of the
Trust voting as a single class, or of the affected series of the Trust, as the
case may be; provided, however, that if such merger, consolidation, sale, lease
or exchange is recommended by the Trustees, the vote or written consent by
Majority Shareholder Vote shall be sufficient authorization; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of the Commonwealth
of Massachusetts. Nothing contained herein shall be construed as requiring
approval of Shareholders for any sale of assets in the ordinary course of the
business of the Trust.
SECTION 9.5. INCORPORATION, REORGANIZATION. With the approval of the
holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
<PAGE>
23
SECTION 9.6. INCORPORATION OR REORGANIZATION OF SERIES. With the
approval of a Majority Shareholder Vote of any series, the Trustees may sell,
lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. FILING. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other place or places as may be required under the laws of the
Commonwealth of Massachusetts and may also be filed or recorded in such other
places as the Trustees deem appropriate. Each amendment so filed shall state or
be accompanied by a certificate signed and acknowledged by a Trustee stating
that such action was duly taken in the manner provided herein, and unless such
amendment or such certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its filing. A restated
Declaration, integrating into a single instrument all of the provisions of the
Declaration which are then in effect and operative, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of this original
Declaration and the various amendments thereto.
SECTION 11.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
SECTION 11.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
<PAGE>
24
SECTION 11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, is a Trustee hereunder
certifying to: (i) the number or identity of Trustees or Shareholders, (ii) the
due authorization of the execution of any instrument or writing, (iii) the form
of any vote passed at a meeting of Trustees or Shareholders, (iv) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (v) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (vi) the existence of any fact or facts which in any manner relates
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
SECTION 11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any such provision is in conflict
with the 1940 Act, the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration; provided however, that such determination shall not affect any
of the remaining provisions of this Declaration or render invalid or improper
any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
SECTION 11.6. PRINCIPAL OFFICE. The principal office of the Trust is
6 St. James Avenue, 9th Floor, Boston, Massachusetts, 02116.
<PAGE>
25
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 4th day of November, 1992.
/s/THOMAS M. LENZ
Thomas M. Lenz
as Trustee and not individually
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS.
November 4, 1992
Then personally appeared the above-named Thomas M. Lenz, who severally
acknowledged the foregoing instrument to be their free act and deed.
Before me,
/s/MARK PIETKIEWICZ
Notary Public
My commission expires: January 24, 1997
<PAGE>
JPM10 Appendix I
THE PIERPONT FUNDS
Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.001 per share)
Dated as of January 29, 1993
Pursuant to Section 6.9 of the Declaration of Trust, dated as of
November 4, 1992 (the "Declaration of Trust"), of The Pierpont Funds (the
"Trust"), the Trustees of the Trust hereby amend and restate the Establishment
and Designation of Series appended to the Declaration of Trust to establish and
to designate one additional series of Shares (as defined in the Declaration of
Trust), such additional series of Shares together with the eight existing series
of Shares totalling nine series of Shares (each a "Fund" and collectively the
"Funds").
1. The Funds shall be designated as follows:
The Pierpont Treasury Money Market Fund
The Pierpont Money Market Fund
The Pierpont Tax Exempt Money Market Fund
The Pierpont Bond Fund
The Pierpont Tax Exempt Bond Fund
The Pierpont Equity Fund
The Pierpont Capital Appreciation Fund
The Pierpont International Equity Fund
The Pierpont Short Term Bond Fund
and shall have the following special and relative
rights:
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of the Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to the Fund, and shall
be entitled to receive its pro rata share of the net assets of the Fund upon
liquidation of the Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect
<PAGE>
to the Fund as provided in, Rule 18f-2, as from time to time in effect, under
the Investment Company Act of 1940, as amended, or any successor rule, and by
the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund now or hereafter created, or otherwise to
change the special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 29th day of January, 1993.
/s/ Frederick S. Addy
Frederick S. Addy
/s/ William G. Burns
William G. Burns
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
/s/ Matthew Healey
Matthew Healey
/s/ Michael P. Mallardi
Michael P. Mallardi
JPM10
<PAGE>
JPM10A Appendix I
THE PIERPONT FUNDS
Second Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.001 per share)
Dated as of June 24, 1993
Pursuant to Section 6.9 of the Declaration of Trust, dated as of
November 4, 1992 (the "Declaration of Trust"), of The Pierpont Funds (the
"Trust"), the Trustees of the Trust hereby amend and restate the Amended and
Restated Establishment and Designation of Series appended to the Declaration of
Trust to establish and to designate six additional series of Shares (as defined
in the Declaration of Trust), such additional series of Shares together with the
nine existing series of Shares totalling fifteen series of Shares (each a "Fund"
and collectively the "Funds").
1. The Funds shall be designated as follows:
The Pierpont Treasury Money Market Fund
The Pierpont Money Market Fund
The Pierpont Tax Exempt Money Market Fund
The Pierpont Bond Fund
The Pierpont Tax Exempt Bond Fund
The Pierpont Equity Fund
The Pierpont Capital Appreciation Fund
The Pierpont International Equity Fund
The Pierpont Short Term Bond Fund
The Pierpont U.S. Stock Fund
The Pierpont Diversified Fund
The Pierpont International Bond Fund
The Pierpont Emerging Markets Equity Fund
The Pierpont International Fixed Income Fund
The Pierpont US$ Short Duration Tax Exempt Fund
and shall have the following special and relative
rights:
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of the Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to the Fund, and shall
be entitled to receive its pro rata share of the net assets of the Fund upon
liquidation of the Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any
<PAGE>
diminution or expenses thereof, shall irrevocably belong to that Fund, unless
otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund now or hereafter created, or otherwise to
change the special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 24th day of June, 1993. This instrument may be executed by the Trustees on
separate counterparts but shall be effective only when signed by a majority of
the Trustees.
/s/ Frederick S. Addy
Frederick S. Addy
William G. Burns
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
/s/ Matthew Healey
Matthew Healey
Michael P. Mallardi
JPM10A
<PAGE>
JPM10C Appendix I
THE PIERPONT FUNDS
Third Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.001 per share)
Dated as of December 16, 1993
Pursuant to Sections 6.9 and 9.3 of the Declaration of Trust, dated as
of November 4, 1992 (the "Declaration of Trust"), of The Pierpont Funds (the
"Trust"), the Trustees of the Trust hereby amend and restate the Second Amended
and Restated Establishment and Designation of Series appended to the Declaration
of Trust to change the names of The Pierpont International Fixed Income Fund and
The Pierpont US$ Short Duration Tax Exempt Fund to "The Pierpont Emerging
Markets Fixed Income Fund" and "The Pierpont New York Municipal Bond Fund",
respectively, two series of Shares (as defined in the Declaration of Trust) of
the fifteen series of Shares (each a "Fund" and collectively the "Funds") of the
Trust.
1. The Funds shall be designated as follows:
The Pierpont Treasury Money Market Fund
The Pierpont Money Market Fund
The Pierpont Tax Exempt Money Market Fund
The Pierpont Bond Fund
The Pierpont Tax Exempt Bond Fund
The Pierpont Equity Fund
The Pierpont Capital Appreciation Fund
The Pierpont International Equity Fund
The Pierpont Short Term Bond Fund
The Pierpont U.S. Stock Fund
The Pierpont Diversified Fund
The Pierpont International Bond Fund
The Pierpont Emerging Markets Equity Fund
The Pierpont Emerging Markets Fixed Income Fund
The Pierpont New York Municipal Bond Fund
and shall have the following special and relative
rights:
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of the Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to the Fund, and shall
be entitled to receive its pro rata share of the net assets of the Fund upon
liquidation of the Fund, all as provided in Section 6.9
<PAGE>
of the Declaration of Trust. The proceeds of sales of Shares of a Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund now or hereafter created, or otherwise to
change the special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 16th day of December, 1993. This instrument may be executed by the Trustees
on separate counterparts but shall be effective only when signed by a majority
of the Trustees.
Frederick S. Addy
/s/ William G. Burns
William G. Burns
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
/s/ Matthew Healey
Matthew Healey
/s/ Michael P. Mallardi
Michael P. Mallardi
JPM10C
<PAGE>
THE PIERPONT FUNDS
Fourth Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.001 per share)
Dated as of March 8, 1994
Pursuant to Sections 6.9 and 9.3 of the Declaration of Trust, dated as
of November 4, 1992 (the "Declaration of Trust"), of The Pierpont Funds (the
"Trust"), the Trustees of the Trust hereby amend and restate the Third Amended
and Restated Establishment and Designation of Series appended to the Declaration
of Trust to change the name of The Pierpont New York Municipal Bond Fund to "The
Pierpont New York Total Return Bond Fund", one series of Shares (as defined in
the Declaration of Trust), and to designate three additional series of Shares,
such additional series of Shares together with the fifteen existing series of
Shares totalling eighteen series of Shares (each a "Fund" and collectively the
"Funds") of the Trust.
1. The Funds shall be designated as follows:
The Pierpont Treasury Money Market Fund
The Pierpont Money Market Fund
The Pierpont Tax Exempt Money Market Fund
The Pierpont Bond Fund
The Pierpont Tax Exempt Bond Fund
The Pierpont Equity Fund
The Pierpont Capital Appreciation Fund
The Pierpont International Equity Fund
The Pierpont Short Term Bond Fund
The Pierpont U.S. Stock Fund
The Pierpont Diversified Fund
The Pierpont International Bond Fund
The Pierpont Emerging Markets Equity Fund
The Pierpont Emerging Markets Fixed Income Fund
The Pierpont New York Total Return Bond Fund
The Pierpont Asia Growth Fund
The Pierpont Japan Equity Fund
The Pierpont European Equity Fund
and shall have the following special and relative
rights:
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of the Fund shall be
<PAGE>
entitled to vote, shall represent a pro rata beneficial interest in the assets
allocated or belonging to the Fund, and shall be entitled to receive its pro
rata share of the net assets of the Fund upon liquidation of the Fund, all as
provided in Section 6.9 of the Declaration of Trust. The proceeds of sales of
Shares of a Fund, together with any income and gain thereon, less any diminution
or expenses thereof, shall irrevocably belong to that Fund, unless otherwise
required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund now or hereafter created, or otherwise to
change the special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 8th day of March, 1994. This instrument may be executed by the Trustees on
separate counterparts but shall be effective only when signed by a majority of
the Trustees.
Frederick S. Addy
/s/ William G. Burns
William G. Burns
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
/s/ Matthew Healey
Matthew Healey
/s/ Michael P. Mallardi
Michael P. Mallardi
JPM10D
JPM345
BY-LAWS
OF
EACH HUB TRUST LISTED ON SCHEDULE I
AND
EACH SPOKE TRUST LISTED ON SCHEDULE II
ARTICLE I
DEFINITIONS
Each Trust listed on Schedule I is referred to in these By-Laws as a
"HUB TRUST".* Each Trust listed on Schedule II is referred to in these By-Laws
as a "SPOKE TRUST".*
In the case of each Hub Trust and each Spoke Trust, unless otherwise
specified, capitalized terms have the respective meanings given them in the
Declaration of Trust of such Trust dated as of the date set forth in Schedule I
or II, as amended from time to time. In the case of each Spoke Trust, the term
"Holder" has the meaning given the term "Shareholder" in the Declaration.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. In the case of each Hub Trust, the
principal office of the Trust shall be in such place as the Trustees may
determine from time to time, PROVIDED THAT the principal office shall be outside
the United States of America if the Trustees determine that the Trust is
intended to be operated so that it is not engaged in United States trade or
business for United States federal income tax purposes. In the case of each
Spoke Trust, until changed by the Trustees, the principal office of the Trust in
the Commonwealth of Massachusetts shall be in the City of Boston, County of
Suffolk.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other
places without as well as within the state of its organization and the United
States of America as the Trustees may from time to time determine.
- --------
*"Hub" and "Spoke" are service marks of Signature
Financial Group, Inc.
1
<PAGE>
ARTICLE III
HOLDERS
SECTION 1. MEETINGS OF HOLDERS. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests in the case of each Hub Trust or 10% of the Shares issued and
outstanding and entitled to vote thereat in the case of each Spoke Trust, such
request specifying the purpose or purposes for which such meeting is to be
called.
Any such meeting shall be held within or without the state of
organization of the Trust and within, or, if applicable, in the case of a Hub
Trust only without, the United States of America on such day and at such time as
the Trustees shall designate. Holders of one third of the Interests in the case
of each Hub Trust or one third of the Shares issued and outstanding and entitled
to vote thereat in the case of each Spoke Trust, present in person or by proxy,
shall constitute a quorum for the transaction of any business, except as may
otherwise be required by the 1940 Act, other applicable law, the Declaration or
these By-Laws. If a quorum is present at a meeting, an affirmative vote of the
Holders present in person or by proxy, holding more than 50% of the total
Interests in the case of each Hub Trust, or 50% of the total Shares issued and
outstanding and entitled to vote thereat in the case of each Spoke Trust,
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless a greater number of affirmative votes is required by the
1940 Act, other applicable law, the Declaration or these By-Laws.
All or any one or more Holders may participate in a meeting of Holders
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
In the case of The Series Portfolio or any Spoke Trust, whenever a
matter is required to be voted by Holders of the Trust in the aggregate under
Section 9.1 and Section 9.2 of the Declaration of The Series Portfolio or
Section 6.8 and Section 6.9 and Section 6.9(g) of the Declaration of the Spoke
Trust, the Trust may either hold a meeting of Holders of all series, as defined
in Section 1.2 of the Declaration of The Series Portfolio or Section 6.9 of the
Declaration of the Spoke Trust, to vote on such matter, or hold separate
meetings of Holders of each of the individual series to vote
2
<PAGE>
on such matter, PROVIDED THAT (i) such separate meetings shall be held within
one year of each other, (ii) a quorum consisting of the Holders of one third of
the outstanding Interests or Shares, as the case may be, of the individual
series entitled to vote shall be present at each such separate meeting except as
may otherwise be required by the 1940 Act, other applicable law, the Declaration
or these ByLaws and (iii) a quorum consisting of the Holders of one third of all
Interests or Shares, as the,case may be, of the Trust entitled to vote, except
as may otherwise be required by the 1940 Act, other applicable law, the
Declaration or these By-Laws, shall be present in the aggregate at such separate
meetings, and the votes of Holders at all such separate meetings shall be
aggregated in order to determine if sufficient votes have been cast for such
matter to be voted.
SECTION 2. NOTICE OF MEETINGS. Notice of each meeting of Holders,
stating the time, place and purpose of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at least 10
days and not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Holder attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. At any meeting, any
business properly before the meeting may be considered whether or not stated in
the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
In the case of The Series Portfolio and each Spoke Trust, where
separate meetings are held for Holders of each of the individual series to vote
on a matter required to be voted on by Holders of the Trust in the aggregate, as
provided in Article III, Section 1 above, notice of each such separate meeting
shall be provided in the manner described above in this Section 2.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, the Trustees
may from time to time fix a date, not more than 90 days prior to the date of any
meeting of Holders as a record date for the determination of the Persons to be
treated as Holders for such purpose.
In the case of The Series Portfolio and each Spoke Trust, where
separate meetings are held for Holders of each of the individual series to vote
on a matter required to be voted on by Holders of the Trust in the aggregate, as
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provided in Article III, Section 1 above, the record date of each such separate
meeting shall be determined in the manner described above in this Section 3.
SECTION 4. VOTING, PROXIES, INSPECTORS OF ELECTION. At any meeting of
Holders, any Holder entitled to vote thereat may vote by proxy, PROVIDED THAT no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote is
to be taken. A proxy may be revoked by a Holder at any time before it has been
exercised by placing on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, a later dated proxy or written
revocation. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of the Trust or of one or more Trustees or of one or
more officers of the Trust. No proxy shall be valid after one year from the date
of its execution, unless a longer period is expressly stated in the proxy.
In the case of each Hub Trust, only Holders on the record date shall be
entitled to vote and each such Holder shall be entitled to a vote proportionate
to its Interest. In the case of each Spoke Trust, (i) only Holders on the record
date shall be entitled to vote; (ii) each whole Share shall be entitled to vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted; (iii) Shares shall be voted by
individual series on any matter submitted to a vote of the Holders of the Trust
except as provided in Section 6.9(g) of the Declaration; and (iv) at any meeting
of Holders of the Trust or of any series of the Trust, a Shareholder Servicing
Agent may vote any Shares as to which such Shareholder Servicing Agent is the
agent of record.
The Chairman of the meeting may, and upon the request of the Holders of
10% of the Interests or Shares, as the case may be, entitled to vote at such
election shall, appoint one or three inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election certify the result of the vote taken. No
candidate for Trustee shall be appointed such inspector. If there are three
inspectors of election, the decision, act or certification of a majority is
effective in all respects as the decision, act or certificate of all.
At every meeting of the Holders, all proxies shall be required and
taken in charge of and all ballots shall be
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required and canvassed by the Secretary of the meeting, who shall decide all
questions touching the qualification of voters, the validity of the proxies, the
acceptance or rejection of votes and any other questions related to the conduct
of the vote with fairness to all Holders, unless inspectors of election shall
have been appointed, in which event the inspectors of election shall decide all
such questions. On request of the Chairman of the meeting, or of any Holder or
his proxy, the Secretary shall make a report in writing of any question
determined and shall execute a certificate of facts found, unless inspectors of
election shall have been appointed, in which event the inspectors of election
shall do so.
When an Interest is held or Shares are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest or Shares, but if more than one of them is present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest or Shares. A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger.
SECTION 5. HOLDER ACTION BY WRITTEN CONSENT. In the case of each Hub
Trust, any action which may be taken by Holders may be taken without a meeting
if Holders of all Interests entitled to vote consent to the action in writing
and the written consents are filed with the records of the meetings of Holders.
In the case of each Spoke Trust, any action which may be taken by Holders may be
taken without a meeting if Holders holding a majority of Shares entitled to vote
on the matter (or such larger proportion thereof as shall be required by law,
the Declaration or these By-Laws for approval of such matter) consent to the
action in writing and the written consents are filed with the records of the
meetings of Holders.
Such consents shall be treated for all purposes as a vote taken at a
meeting of Holders. Each such written consent shall be executed by or on behalf
of the Holder delivering such consent and shall bear the date of such execution.
No such written consent shall be effective to take the action referred to
therein unless, within one year of the earliest dated consent, written consents
executed by a sufficient number of Holders to take such action are filed with
the records of the meetings of Holders.
SECTION 6. CONDUCT OF MEETINGS. The meetings of the Holders shall be
presided over by the Chairman, or if he is
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not present, by a Chairman to be elected at the meeting. The Secretary of the
Trust, if present, shall act as secretary of such meetings, or if he is not
present, an Assistant Secretary shall so act; if neither the Secretary nor any
Assistant Secretary is present, then the meeting shall elect its secretary.
ARTICLE IV
TRUSTEES
SECTION 1. PLACE OF MEETING, ETC. The Trustees may hold their meetings,
have one or more offices, and keep the books of the Trust, inside or outside the
state of organization of the Trust or the United States of America, at any
office of the Trust or at any other place as they may from time to time
determine, or in the case of meetings, as they may from time to time determine
or as shall be specified or fixed in the respective notices or waivers of notice
thereof.
SECTION 2. MEETINGS. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman or any two Trustees. The President, the
Secretary or an Assistant Secretary may call meetings only upon the written
direction of the Chairman or two Trustees. The Trustees shall hold an annual
meeting for the election of officers and transaction of other business which may
come before such meeting. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed by resolution of the Trustees. Notice
of any other meeting shall be mailed or otherwise given not less than 24 hours
before the meeting but may be waived in writing by any Trustee either before or
after such meeting. Notice shall be given of any proposed action to be taken by
written consent. Notice of a meeting or proposed action to be taken by written
consent may be given by telegram (which term shall include a cablegram), by
telecopier or delivered personally (which term shall include by telephone), as
well as by mail. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except in the situation in which a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting was not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Trustees need be stated in the notice or waiver of notice of such meeting.
SECTION 3. QUORUM. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in the Declaration, the 1940
Act or other applicable law, any action of the Trustees may be taken at a
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meeting by vote of a majority of the Trustees present (a quorum being present).
In the absence of a quorum, a majority of the Trustees present may adjourn the
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
With respect to actions of the Trustees, Trustees who are Interested
Persons of the Trust or otherwise interested in any action to be taken may be
counted for quorum purposes and shall be entitled to vote to the extent
permitted by the 1940 Act.
SECTION 4. COMMITTEES. The Trustees, by the majority vote of all the
Trustees then in office, may appoint from the Trustees committees which shall in
each case consist of such number of Trustees (not less than two) and shall have
and may exercise such powers as the Trustees may determine in the resolution
appointing them. Unless provided otherwise in the Declaration or by the
Trustees, a majority of all the members of any such committee may determine its
actions and fix the time and place of its meetings. With respect to actions of
any committee, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes and
shall be entitled to vote to the extent permitted by the 1940 Act. The Trustees
shall have power at any time to change the members and powers of any such
committee, to fill vacancies and to discharge any such committee. Each committee
shall keep regular minutes of its meetings and cause them to be filed with the
minutes of the proceedings of the Trustees.
SECTION 5. TELEPHONE MEETINGS. All or any one or more Trustees may
participate in a meeting of the Trustees or any committee thereof by means of a
conference telephone or similar communications equipment by means of which all
individuals participating in the meeting can hear each other, and participating
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting. Any conference telephone meeting shall be deemed to
have been held at a place designated by the Trustees at the meeting.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed either by all
the Trustees or all members of such committee then in office or by an 80%
majority of the Trustees or an 80% majority of members of such committee,
PROVIDED THAT no action by 80% majority consent shall be effective unless and
until (i) each Trustee or committee member signing such consent shall have been
advised in writing of the following
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information: the identity of any Trustee or committee member not signing such
consent and the reasons for his not signing; and (ii) after receiving such
information signing Trustees or committee members who represent an 80% majority
then in office indicate in writing that the consent shall become effective by
80% majority, rather than unanimous, consent. All such effective written
consents shall be filed with the minutes of the proceedings of the Trustees and
treated as a vote for all purposes.
SECTION 7. COMPENSATION. The Trustees shall be entitled to receive such
compensation from the Trust for their services as may from time to time be voted
by the Trustees.
SECTION 8. CHAIRMAN. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to serve until his successor
shall have been duly elected and qualified; the Chairman may serve on committees
of the Trustees. The Chairman shall not be an officer of the Trust solely by
virtue of his serving as Chairman. The Chairman shall preside at all meetings of
the Trustees at which he is present, shall serve as the liaison between the
Trustees and the officers of the Trust and between the Trustees and their staff
and shall have such other duties as from time to time may be assigned to him by
the Trustees.
SECTION 9. TRUSTEES' STAFF; COUNSEL FOR THE TRUST AND TRUSTEES, ETC.
The Trustees may employ or contract with one or more Persons to serve as their
staff and to provide such services related thereto as may be determined from
time to time. The Trustees may employ attorneys as counsel for the Trust and/or
the Trustees and may engage such other experts or consultants as may be
determined from time to time.
ARTICLE V
OFFICERS
SECTION 1. GENERAL PROVISIONS. The Trustees may elect or appoint such
officers or agents as the business of the Trust may require, including without
limitation a Chief Executive Officer, a President, one or more Vice Presidents,
a Treasurer, a Secretary, one or more Assistant Treasurers and one or more
Assistant Secretaries. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise
provided by law, the Declaration or these ByLaws, each of the principal
executive officer described in Section 4 below, the Treasurer and the Secretary
shall hold
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office until a successor shall have been duly elected and qualified, and any
other officers shall hold office at the pleasure of the Trustees. Any two or
more offices may be held by the same Person, PROVIDED THAT at least two
different individuals shall serve as officers. Any officer may be, but does not
need be, a Trustee.
SECTION 3. REMOVAL. The Trustees may remove any officer with or without
cause by a vote of a majority of the Trustees. Any subordinate officer or agent
appointed by any officer or committee may be removed with or without cause by
such appointing officer or committee.
SECTION 4. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER; PRESIDENT.
The Chief Executive Officer, if any, shall be the principal executive officer of
the Trust. Subject to the control of the Trustees, the Chief Executive Officer
shall (i) at all times exercise general supervision and direction over the
affairs of the Trust, (ii) have the power to grant, issue, execute or sign such
documents as may be deemed advisable or necessary in the ordinary course of the
Trust's business and (iii) have such other powers and duties as from time to
time may be assigned by the Trustees.
If there is no Chief Executive Officer, the President shall be the
principal executive officer of the Trust and shall have the powers and duties
set forth above in this Section 4. If there is a Chief Executive Officer and a
President, the President shall have such powers and duties as from time to time
may be assigned by the Trustees or the Chief Executive Officer.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, any Vice President designated by the Trustees or
the President shall perform all the duties, and may exercise any of the powers,
of the President. Each Vice President shall perform such other duties as from
time to time may be assigned to him by the Trustees or the Chief Executive
Officer.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to the Trust's
custodian. The Treasurer shall render a statement of condition of the finances
of the Trust to the Trustees as often as they shall require the same and shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
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SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep
the minutes of all meetings of the Holders in proper books provided for that
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust, if any; and shall have charge of the Holder
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
SECTION 10. COMPENSATION OF OFFICERS. Subject to any applicable law or
provision of the Declaration, any compensation of any officer may be fixed from
time to time by the Trustees. No officer shall be prevented from receiving any
such compensation as such officer by reason of the fact that he is also a
Trustee. If no such compensation is fixed for any officer, such officer shall
not be entitled to receive any compensation from the Trust.
SECTION 11. BOND AND SURETY. As provided in the Declaration, any
officer may be required by the Trustees to be bonded for the faithful
performance of his duties in the amount and with such sureties as the Trustees
may determine.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
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ARTICLE VII
FISCAL YEAR
The Trust may have different fiscal years for its separate and distinct
series, if applicable. The fiscal year(s) of the Trust shall be determined by
the Trustees, PROVIDED THAT the Trustees (or the Treasurer subject to
ratification by the Trustees) may from time to time change any fiscal year.
ARTICLE VIII
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times
employ one or more banks or trust companies having a capital, surplus and
undivided profits of at least $50,000,000 as custodian with authority as the
Trust's agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Declaration, these By-Laws and
the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same upon
written order; (ii) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; (iii) to disburse such funds upon orders or
vouchers; (iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of the
Trust and the net asset value of the Trust or, in the case of each
Spoke Trust, Shares;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
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SECTION 2. SUCCESSOR CUSTODIAN. The Trust shall upon the resignation or
inability to serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian; (ii) require that the cash and
securities owned by the Trust be delivered directly to the successor
custodian; and (iii) in the event that no successor custodian can be
found, submit to the Holders before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor custodian,
the question whether the
Trust shall be liquidated or shall function without a custodian.
ARTICLE IX
INDEMNIFICATION
In the case of each Hub Trust, insofar as the conditional advancing of
indemnification monies under Section 5.4 of the Declaration for actions based
upon the 1940 Act may be concerned, such payments will be made only on the
following conditions:
(i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may
be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay the amount of the advance which exceeds the amount
to which it is ultimately determined that he is entitled to receive
from the Trust by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayment may be
obtained by the Trust without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient
of the advance, or (b) a majority of a quorum of the Trust's
disinterested, nonparty Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
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ARTICLE X
AMENDMENTS, ADDITIONAL TRUSTS, ETC.
The Trustees shall have the power to alter, amend or repeal
these By-Laws or adopt new By-Laws at any time to the extent such power is not
reserved to the Holders by the 1940 Act, other applicable law or the
Declaration. Action by the Trustees with respect to these By-Laws shall be taken
by an affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
One or more additional trusts may be added to Schedule I or Schedule II
by resolution of the trustees of such trust(s), PROVIDED THAT the trustees of
such trust(s) are identical to the Trustees of the Hub Trusts and the Spoke
Trusts immediately prior to such addition.
In the case of each Hub Trust, the Declaration refers to the Trustees
as Trustees, but not as individuals or personally; and no Trustee, officer,
employee or agent of the Trust shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Trust. In
the case of each Spoke Trust, the Declaration refers to the Trustees not
individually, but as Trustees under the Declaration, and no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or its Holders, in connection
with Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard for his duty
to such Person; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
JPM345
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SCHEDULE I
HUB TRUSTS
STATE OF DATE OF DATE
ORGANIZA- DECLARA- BY-LAWS
TRUST TION TION ADOPTED
The Treasury Money Market New York 11/4/92 10/13/94
Portfolio
The Money Market Portfolio New York 1/29/93 10/13/94
The Tax Exempt Money Market New York 1/29/93 10/13/94
Portfolio
The Short Term Bond Portfolio New York 1/29/93 10/13/94
The U.S. Fixed Income Portfolio New York 1/29/93 10/13/94
The Tax Exempt Bond Portfolio New York 1/29/93 10/13/94
The Selected U.S. Equity Portfolio New York 1/29/93 10/13/94
The U.S. Stock Portfolio New York 1/29/93 10/13/94
The U.S. Small Company Portfolio New York 1/29/93 10/13/94
The Non-U.S. Equity Portfolio New York 1/29/93 10/13/94
The Diversified Portfolio New York 1/29/93 10/13/94
The Non-U.S. Fixed Income New York 6/13/93 10/13/94
Portfolio
The Emerging Markets Equity New York 6/13/93 10/13/94
Portfolio
The New York Total Return Bond New York 6/13/93 10/13/94
Portfolio
The Series Portfolio New York 6/14/94 10/13/94
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SCHEDULE II
SPOKE TRUSTS
STATE OF DATE OF DATE
ORGANIZA- DECLARA- BY-LAWS
TRUST TION TION ADOPTED
The Pierpont Funds Massachusetts 11/4/92 10/13/94
The JPM Institutional Funds Massachusetts 11/4/92 10/13/94
The JPM Institutional Plus Funds Massachusetts 11/4/92 10/13/94
15
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Accountants" in the Statement of Additional Information in this Registration
Statement (Form N-1A No. 33-54632, 1933 Act Post-Effective Amendment No. 14) of
The Pierpont Funds.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
July 24, 1995
Consents of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 14 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated July 22, 1994, relating to the financial
statements and financial highlights of The Pierpont Equity Fund and the Pierpont
Capital Appreciation Fund and the financial statements and supplementary data of
The Selected U.S. Equity Portfolio and The U.S. Small Company Portfolio
appearing in the May 31, 1994 Annual Reports, which are also incorporated by
reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated August 23, 1994, relating to the financial
statements and financial highlights of The Pierpont Diversified Fund and the
financial statements and supplementary data of The Diversified Portfolio
appearing in the June 30, 1994 Annual Report, which is also incorporated by
reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated October 25, 1994, relating to the financial
statements and financial highlights of The Pierpont Tax Exempt Money Market Fund
and The Pierpont Tax Exempt Bond Fund and the financial statements and
supplementary data of The Tax Exempt Money Market Portfolio and The Tax Exempt
Bond Portfolio appearing in the August 31, 1994 Annual Reports, which are also
incorporated by reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated December 27, 1994, relating to the financial
statements and financial highlights of The Pierpont Treasury Money Market Fund,
The Pierpont Short Term Bond Fund, The Pierpont Bond Fund and The Pierpont
International Equity Fund and the financial statements and supplementary data of
The Treasury Money Market Portfolio, The Short Term Bond Portfolio, The U.S.
Fixed Income Portfolio and The Non-U.S. Equity Portfolio appearing in the
October 31, 1994 Annual Reports, which are also incorporated by reference into
the Registration Statement.
<PAGE>
Consents of
Independent Accountants
Page 2
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated December 30, 1994, relating to the financial
statements and financial highlights of The Pierpont Emerging Markets Equity Fund
and the financial statements and supplementary data of The Emerging Markets
Equity Portfolio appearing in the October 31, 1994 Annual Report, which is also
incorporated by reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated January 25, 1995, relating to the financial
statements and financial highlights of The Pierpont Money Market Fund and the
financial statements and supplementary data of The Money Market Portfolio
appearing in the November 30, 1994 Annual Report, which is also incorporated by
reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated May 23, 1995, relating to the financial
statements and financial highlights of The Pierpont New York Total Return Bond
Fund and the financial statements and supplemental data of The New York Total
Return Bond Portfolio appearing in the March 31, 1995 Annual Report, which is
also incorporated by reference into the Registration Statement.
We also consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information.
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
July 25, 1995
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Philip W. Coolidge,
James B. Craver, Susan Jakuboski, Thomas M. Lenz, Molly S. Mugler, Linda T.
Gibson, Andres E. Saldana, David G. Danielson, James S. Lelko and Daniel E.
Shea, and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Advisor Funds, The JPM Institutional Funds, The JPM
Institutional Plus Funds or The Pierpont Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of July, 1995, in Tuckers Town, Bermuda.
/s/ Frederick S. Addy
-------------------------------
Frederick S. Addy
JPM451
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Philip W. Coolidge,
James B. Craver, Susan Jakuboski, Thomas M. Lenz, Molly S. Mugler, Linda T.
Gibson, Andres E. Saldana, David G. Danielson, James S. Lelko and Daniel E.
Shea, and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Advisor Funds, The JPM Institutional Funds, The JPM
Institutional Plus Funds or The Pierpont Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of July, 1995, in Tuckers Town, Bermuda.
/s/ Michael P. Mallardi
-------------------------------
Michael P. Mallardi
JPM451
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Philip W. Coolidge,
James B. Craver, Susan Jakuboski, Thomas M. Lenz, Molly S. Mugler, Linda T.
Gibson, Andres E. Saldana, David G. Danielson, James S. Lelko and Daniel E.
Shea, and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Advisor Funds, The JPM Institutional Funds, The JPM
Institutional Plus Funds or The Pierpont Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of July, 1995, in Tuckers Town, Bermuda.
/s/ William G. Burns
-------------------------------
William G. Burns
JPM451
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Philip W. Coolidge,
James B. Craver, Susan Jakuboski, Thomas M. Lenz, Molly S. Mugler, Linda T.
Gibson, Andres E. Saldana, David G. Danielson, James S. Lelko and Daniel E.
Shea, and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Advisor Funds, The JPM Institutional Funds, The JPM
Institutional Plus Funds or The Pierpont Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of July, 1995, in Tuckers Town, Bermuda.
/s/ Arthur C. Eschenlauer
-------------------------------
Arthur C. Eschenlauer
JPM451
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Philip W. Coolidge,
James B. Craver, Susan Jakuboski, Thomas M. Lenz, Molly S. Mugler, Linda T.
Gibson, Andres E. Saldana, David G. Danielson, James S. Lelko and Daniel E.
Shea, and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Advisor Funds, The JPM Institutional Funds, The JPM
Institutional Plus Funds or The Pierpont Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of July, 1995, in Tuckers Town, Bermuda.
/s/ Matthew Healey
-------------------------------
Matthew Healey
JPM451
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Bond Fund Semi-Annual Report dated April 30, 1995 and is qualified in its
entirety by reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>3
<NAME>BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 118,765,695
<RECEIVABLES> 207,776
<ASSETS-OTHER> 538
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 118,974,009
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81,078
<TOTAL-LIABILITIES> 81,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123,356,338
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7,423
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,240,881)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 770,051
<NET-ASSETS> 118,892,931
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,949,859
<OTHER-INCOME> 0
<EXPENSES-NET> 173,846
<NET-INVESTMENT-INCOME> 3,776,013
<REALIZED-GAINS-CURRENT> (816,912)
<APPREC-INCREASE-CURRENT> 4,159,694
<NET-CHANGE-FROM-OPS> 7,118,795
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,767,896
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,815,185
<NUMBER-OF-SHARES-REDEEMED> 1,828,813
<SHARES-REINVESTED> 370,140
<NET-CHANGE-IN-ASSETS> 6,843,797
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 179,151
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> .28
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .32
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Capital Appreciation Fund Semi Annual Report dated November 30, 1994 and is
qualified in its entirety by reference to such Semi Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>11
<NAME> CAPITAL APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 177,690,808
<RECEIVABLES> 202,711
<ASSETS-OTHER> 6,354
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 177,899,873
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 647,567
<TOTAL-LIABILITIES> 647,567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 175,651,483
<SHARES-COMMON-STOCK> 8,790,183
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,059,479
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,900,651
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,359,307)
<NET-ASSETS> 177,252,306
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,150,514
<OTHER-INCOME> 0
<EXPENSES-NET> 173,413
<NET-INVESTMENT-INCOME> 977,101
<REALIZED-GAINS-CURRENT> 180,027
<APPREC-INCREASE-CURRENT> (4,516,252)
<NET-CHANGE-FROM-OPS> (3,359,124)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,598,408
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 904,466
<NUMBER-OF-SHARES-REDEEMED> 2,035,256
<SHARES-REINVESTED> 365,646
<NET-CHANGE-IN-ASSETS> (27,192,632)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 384,816
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 21.40
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> (.51)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .84
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.16
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Diversified Fund Semi-Annual Report dated December 31, 1994 and is qualified in
its entirety be reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>8
<NAME>DIVERSIFIED FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 15,838,012
<RECEIVABLES> 110,748
<ASSETS-OTHER> 27,460
<OTHER-ITEMS-ASSETS> 88
<TOTAL-ASSETS> 15,976,308
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,446
<TOTAL-LIABILITIES> 108,446
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,181,153
<SHARES-COMMON-STOCK> 1,616,333
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,258
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (88,213)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (229,336)
<NET-ASSETS> 15,867,862
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 191,383
<OTHER-INCOME> 0
<EXPENSES-NET> 17,278
<NET-INVESTMENT-INCOME> 174,105
<REALIZED-GAINS-CURRENT> (87,197)
<APPREC-INCREASE-CURRENT> 46,127
<NET-CHANGE-FROM-OPS> 133,035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 267,394
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,055,515
<NUMBER-OF-SHARES-REDEEMED> 180,590
<SHARES-REINVESTED> 25,646
<NET-CHANGE-IN-ASSETS> 8,854,002
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 59,832
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> .15
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Emerging Markets Equity Fund Semi Annual Report dated April 30, 1995 and is
qualified in its entirety to reference to such Semi Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>5
<NAME> EMERGING MARKETS EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 47,140,669
<RECEIVABLES> 64,995
<ASSETS-OTHER> 31,065
<OTHER-ITEMS-ASSETS> 793
<TOTAL-ASSETS> 47,237,522
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125,672
<TOTAL-LIABILITIES> 125,672
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56,089,268
<SHARES-COMMON-STOCK> 4,873,263
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11,707
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,364,766)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,624,359)
<NET-ASSETS> 47,111,850
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 174,167
<OTHER-INCOME> 0
<EXPENSES-NET> 111,661
<NET-INVESTMENT-INCOME> 62,506
<REALIZED-GAINS-CURRENT> (2,364,751)
<APPREC-INCREASE-CURRENT> (8,668,773)
<NET-CHANGE-FROM-OPS> (10,971,018)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (721,773)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,797,137
<NUMBER-OF-SHARES-REDEEMED> 1,287,513
<SHARES-REINVESTED> 64,658
<NET-CHANGE-IN-ASSETS> (6,319,371)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 128,952
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.43
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> (2.60)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .17
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.67
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Equity Fund Semi-Annual Report dated November 30, 1994 and is qualified in its
entirety by reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>10
<NAME> EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> MAY-1-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 235,576,383
<RECEIVABLES> 181,175
<ASSETS-OTHER> 8,156
<OTHER-ITEMS-ASSETS> 14,325
<TOTAL-ASSETS> 235,799,663
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 727,094
<TOTAL-LIABILITIES> 727,094
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 228,066,918
<SHARES-COMMON-STOCK> 13,155,308
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,056,531
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,859,439
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,910,319)
<NET-ASSETS> 235,072,569
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,516,358
<OTHER-INCOME> 0
<EXPENSES-NET> 459,827
<NET-INVESTMENT-INCOME> 2,056,531
<REALIZED-GAINS-CURRENT> 10,209,306
<APPREC-INCREASE-CURRENT> (18,460,955)
<NET-CHANGE-FROM-OPS> (6,195,118)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,210,696
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,220,473
<NUMBER-OF-SHARES-REDEEMED> 1,633,959
<SHARES-REINVESTED> 633,395
<NET-CHANGE-IN-ASSETS> 3,766,589
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 474,152
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 19.38
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> (.64)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.87
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
International Equity Fund Semi-Annual Report dated April 30, 1995 and is
qualified in its entirety by reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>4
<NAME> INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 195,209,272
<RECEIVABLES> 192,174
<ASSETS-OTHER> 608
<OTHER-ITEMS-ASSETS> 1073
<TOTAL-ASSETS> 195,403,127
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 808,006
<TOTAL-LIABILITIES> 808,006
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182,684,910
<SHARES-COMMON-STOCK> 17,937,005
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,796,950
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (779,555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,892,816
<NET-ASSETS> 194,595,121
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 871,686
<OTHER-INCOME> 0
<EXPENSES-NET> 449,635
<NET-INVESTMENT-INCOME> 422,051
<REALIZED-GAINS-CURRENT> (153,384)
<APPREC-INCREASE-CURRENT> (3,190,738)
<NET-CHANGE-FROM-OPS> (2,922,071)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,815,321
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 8,815,321
<NUMBER-OF-SHARES-SOLD> 2,778,370
<NUMBER-OF-SHARES-REDEEMED> 3,960,432
<SHARES-REINVESTED> 822,349
<NET-CHANGE-IN-ASSETS> (15,840,013)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 450,907
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.50
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.18)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.49)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.85
<EXPENSE-RATIO> 1.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Financial Information extracted from the Pierpont New
York Total Return Bond Fund Annual Report dated March 31, 1995 and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>13
<NAME>NEW YORK BOND TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-11-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 38,207,858
<RECEIVABLES> 40,378
<ASSETS-OTHER> 10,935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,259,171
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 122,045
<TOTAL-LIABILITIES> 122,045
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,635,907
<SHARES-COMMON-STOCK> 3,771,970
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (100,420)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 601,639
<NET-ASSETS> 38,137,126
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 73,593
<NET-INVESTMENT-INCOME> 1,196,026
<REALIZED-GAINS-CURRENT> (101,570)
<APPREC-INCREASE-CURRENT> 601,639
<NET-CHANGE-FROM-OPS> 1,696,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,196,026
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,811,690
<NUMBER-OF-SHARES-REDEEMED> 1,143,997
<SHARES-REINVESTED> 104,267
<NET-CHANGE-IN-ASSETS> 38,137,026
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 126,637
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> .11
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .40
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Short Term Bond Fund Semi-Annual Report dated April 30, 1995 and is qualified in
its entirety by reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>2
<NAME>SHORT TERM BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 8,761,551
<RECEIVABLES> 2,933
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 19,920
<TOTAL-ASSETS> 8,784,433
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,554
<TOTAL-LIABILITIES> 47,554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,915,048
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 348
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (158,478)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (20,039)
<NET-ASSETS> 8,736,879
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 254,582
<OTHER-INCOME> 0
<EXPENSES-NET> 11,458
<NET-INVESTMENT-INCOME> 243,124
<REALIZED-GAINS-CURRENT> (10,387)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 338,871
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (243,087)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 682,109
<NUMBER-OF-SHARES-REDEEMED> 425,621
<SHARES-REINVESTED> 20,601
<NET-CHANGE-IN-ASSETS> 2,729,323
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 54,046
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.60
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .29
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the
Pierpont Tax Exempt Bond Fund Semi-Annual Report dated February 28, 1995 and is
qualified in its entirety by reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> THE PIERPONT FUNDS
<SERIES>
<NUMBER>6
<NAME>TAX EXEMPT BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 353,253,362
<RECEIVABLES> 3,326,817
<ASSETS-OTHER> 2,533
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 356,582,712
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 697,660
<TOTAL-LIABILITIES> 697,660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 349,016,737
<SHARES-COMMON-STOCK> 355,885,052
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (545,494)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,413,809
<NET-ASSETS> 355,885,052
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,357,032
<OTHER-INCOME> 0
<EXPENSES-NET> 1,383,738
<NET-INVESTMENT-INCOME> 8,831,824
<REALIZED-GAINS-CURRENT> (647,045)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,631,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,762,126)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,736,067
<NUMBER-OF-SHARES-REDEEMED> (13,509,143)
<SHARES-REINVESTED> 684,462
<NET-CHANGE-IN-ASSETS> 6,631,550
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 525,208
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.45
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Tax Exempt Money Market Fund Semi-Annual Report dated February 28, 1995 and is
is qualified in its entirety by reference to such Semi-Annual Report.
</LEGEND>
<CIK>0000894089
<NAME> THE PIERPONT FUNDS
<SERIES>
<NUMBER>7
<NAME> TAX EXEMPT MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1,104,165,595
<RECEIVABLES> 48,787
<ASSETS-OTHER> 6,562
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,104,220,944
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,351,686
<TOTAL-LIABILITIES> 3,351,686
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,101,134,626
<SHARES-COMMON-STOCK> 1,100,869,258
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (237,827)
<OVERDISTRIBUTION-GAINS> (27,541)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,100,869,258
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,131,268
<OTHER-INCOME> 0
<EXPENSES-NET> 1,383,738
<NET-INVESTMENT-INCOME> 16,383,738
<REALIZED-GAINS-CURRENT> (224,777)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 16,522,753
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16,762,126
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,107,419,630
<NUMBER-OF-SHARES-REDEEMED> 1,994,474,273
<SHARES-REINVESTED> 14,563,780
<NET-CHANGE-IN-ASSETS> 127,269,764
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,432,525
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .016
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .016
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Money Market Annual Report dated November 30, 1994 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>12
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> OCT-31-1993
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2,013,438,483
<RECEIVABLES> 62,228
<ASSETS-OTHER> 25,253
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,013,525,964
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,836,242
<TOTAL-LIABILITIES> 9,836,242
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,003,740,899
<SHARES-COMMON-STOCK> 2,003,740,899
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (51,177)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,003,689,722
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 83,817,910
<OTHER-INCOME> 0
<EXPENSES-NET> 4,935,482
<NET-INVESTMENT-INCOME> 78,882,428
<REALIZED-GAINS-CURRENT> (51,177)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 78,831,251
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,882,428
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,776,268,715
<NUMBER-OF-SHARES-REDEEMED> 12,408,436,546
<SHARES-REINVESTED> 73,195,486
<NET-CHANGE-IN-ASSETS> (559,023,522)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,027,904
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .037
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .037
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the Pierpont
Treasury Money Market Fund Semi Annual Report dated April 30, 1995 and is
qualified in its entirety by reference to such Semi Annual Report.
</LEGEND>
<CIK> 0000894089
<NAME> PIERPONT FUNDS
<SERIES>
<NUMBER>1
<NAME> TREASURY MONEY MARKET FUNDS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 155,861,325
<RECEIVABLES> 33,341
<ASSETS-OTHER> 39,219
<OTHER-ITEMS-ASSETS> 616
<TOTAL-ASSETS> 155,934,501
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 808,302
<TOTAL-LIABILITIES> 808,302
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155,099,379
<SHARES-COMMON-STOCK> 155,099,379
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,820
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 155,126,199
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,647,624
<OTHER-INCOME> 0
<EXPENSES-NET> 132,130
<NET-INVESTMENT-INCOME> 3,515,494
<REALIZED-GAINS-CURRENT> 32,687
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,548,181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,515,494
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 608,375,006
<NUMBER-OF-SHARES-REDEEMED> 574,958,619
<SHARES-REINVESTED> 3,046,438
<NET-CHANGE-IN-ASSETS> 36,495,512
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 216,374
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .026
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .026
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .4
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
