As Filed with the Securities and Exchange Commission on December 24, 1996
File No. 811-7842
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 5
THE TAX EXEMPT MONEY MARKET PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 557-0700
John E. Pelletier, c/o Funds Distributor, Inc.,
60 State Stre et, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: Steven K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
<PAGE>
EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended. However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests will
be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by other investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any beneficial
interests in the Registrant.
<PAGE>
PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. GENERAL DESCRIPTION OF REGISTRANT.
The Tax Exempt Money Market Portfolio (the "Portfolio") is a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on January 29, 1993. Beneficial
interests in the Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by other investment companies, insurance company
separate accounts, common or commingled trust funds or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This Registration Statement does not constitute an offer to
sell, or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").
Investments in the Portfolio are not deposits or obligations of, or
guaranteed or endorsed by, Morgan or any other bank. Interests in the Portfolio
are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other governmental agency. An investment in the
Portfolio is subject to risk, as the net asset value of the Portfolio will
fluctuate with changes in the value of the Portfolio's holdings. There can be no
assurance that the investment objective of the Portfolio will be achieved.
Part B contains more detailed information about the Portfolio, including
information related to (i) the investment policies and restrictions of the
Portfolio, (ii) the Trustees, officers, Advisor and administrators of the
Portfolio, (iii) portfolio transactions, (iv) rights and liabilities of
investors and (v) the audited financial statements of the Portfolio at August
31, 1996.
The investment objective of the Portfolio is described below, together with
the policies employed to attempt to achieve this objective. Additional
information about the investment policies of the Portfolio appears in Part B
under Item 13.
The Portfolio's investment objective is to provide a high level of current
income exempt from federal income tax and maintain a high level of liquidity.
The Portfolio is designed for investors who seek current income exempt from
federal income tax, stability of capital and liquidity.
The Portfolio attempts to achieve its investment objective by investing
primarily in municipal securities which earn interest exempt from federal income
tax in the opinion of bond counsel for the issuer and which have effective
maturities not greater than thirteen months and by maintaining a dollar-weighted
average portfolio maturity of not more than 90 days. During normal market
conditions, the Portfolio will invest at least 80% of its net assets in tax
exempt obligations. Interest on these securities may be subject to state and
local taxes.
<PAGE>
MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf
of states, territories and possessions of the United States and the District of
Columbia 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. These
include industrial development bonds where payment is the responsibility of the
private industrial user of the facility financed by the bonds. The Portfolio may
invest more than 25% of its assets in industrial development bonds, but may not
invest more than 25% of its assets in industrial development bonds in projects
of similar type or in the same state.
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 Guaranty 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 Item 13 in Part B.
QUALITY INFORMATION. The Portfolio will limit its investments to those
securities which, in accordance with guidelines adopted by the Trustees, present
minimal credit risks. In addition, the Portfolio will not purchase any municipal
obligation unless (i) it is rated with the highest rating assigned to short-term
debt securities (or, in the case of New York State municipal notes, with one of
the two highest ratings assigned to short-term debt securities) by at least two
nationally recognized statistical rating organizations such as Moody's Investors
Service, Inc. and Standard & Poor's Ratings Group, (ii) it is rated by only one
agency with such rating, or (iii) it is not rated and is determined to be of
comparable quality. Determinations of comparable quality shall be made in
accordance with procedures established by the Trustees. For a more detailed
discussion of applicable quality requirements, see Item 13 in Part B. These
standards must be satisfied at the time an investment is made. If the quality of
the investment later declines below the quality required for purchase, the
Portfolio shall dispose of the investment, subject in certain circumstances to a
finding by the Trustees that disposing of the investment 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 arrangements with
domestic or foreign financial institutions, such as letters of credit,
guarantees and insurance, and these arrangements are considered, along with the
credit quality of such institutions, when investment quality is evaluated.
Favorable or unfavorable changes in the credit quality of these institutions may
cause gains or losses to the Portfolio and affect its net asset value.
The Portfolio may also invest up to 20% of the value of its total assets in
taxable securities and may purchase municipal obligations together with puts. In
addition, the Portfolio may purchase municipal obligations on a when-issued or
delayed delivery basis, enter into repurchase and reverse repurchase agreements,
loan its portfolio securities and purchase synthetic variable rate instruments.
For a discussion of these transactions, see "Additional Investment Information
and Risk Factors."
A-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and for fixed income securities no interest
accrues to the Portfolio until settlement. At the time of settlement a
when-issued security may be valued at less than its purchase price. The
Portfolio maintains with the custodian a separate account with a segregated
portfolio of securities in an amount at least equal to these commitments. When
entering into a when-issued or delayed delivery transaction, the Portfolio will
rely on the other party to consummate the transaction; if the other party fails
to do so, the Portfolio may be disadvantaged. 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 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.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment
restrictions, the Portfolio is permitted to lend its securities in an amount up
to 33 1/3% of the value of the Portfolio's net assets. The Portfolio may lend
its securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Portfolio at least equal at
all times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, the borrower will pay the Portfolio
any income accruing thereon. Loans will be subject to termination by the
Portfolio in the normal settlement time, generally three business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Portfolio and its investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will
consider all facts and circumstances, including the creditworthiness of the
borrowing financial institution, and the Portfolio will not make any loans in
excess of one year. Loans of portfolio securities may be considered extensions
of credit by the Portfolio. The risks to the Portfolio with respect to borrowers
of its portfolio securities are similar to the risks to the Portfolio with
respect to Sellers in repurchase agreement transactions. See "Repurchase
Agreements" above. The Portfolio will not lend its securities to any officer,
Trustee, Director, employee, or other affiliate of the Portfolio, the Advisor or
placement agent unless otherwise permitted by applicable law.
A-3
<PAGE>
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
purposes of the Investment Company Act of 1940, as amended (the "1940 Act"), it
is considered 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 Item 13 in Part B.
TAXABLE INVESTMENTS. The Portfolio attempts to invest its assets in tax
exempt municipal securities; however, the Portfolio is permitted to invest up to
20% of the value of its total assets in securities, the interest income on which
may be subject to federal, state or local income taxes. The Portfolio may make
taxable investments pending investment of proceeds from sales of its interests
or portfolio securities, pending settlement of purchases of portfolio
securities, to maintain liquidity, or when it is advisable in the Advisor's
opinion because of adverse market conditions. The Portfolio will invest in
taxable securities only if there are no tax exempt securities available for
purchase or if the expected return from an investment in taxable securities
exceeds the expected return on available tax exempt securities. The taxable
investments permitted for the Portfolio include obligations of the U.S.
Government and its agencies and instrumentalities, bank obligations, commercial
paper and repurchase agreements.
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. Consistent with the investment objective of the
Portfolio and subject to the supervision of the Trustees, the purpose of this
practice is to permit the Portfolio to be fully invested in tax exempt
securities while maintaining the necessary liquidity to purchase securities on a
when-issued basis, to meet unusually large withdrawals and to purchase at a
later date securities other than those subject to the put. 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; no value is assigned to any 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,
which may require the disposition of the bond which could be at a loss.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES.
The Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 10% of the 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 1933
Act and cannot be offered for public sale in the
A-4
<PAGE>
United States without first being registered under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at approximately the amount at which it is valued by
the Portfolio. The price the Portfolio pays for illiquid securities or receives
upon resale may be lower than the price paid or received for similar securities
with a more liquid market. Accordingly the valuation of these securities will
reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the Advisor
and approved by the Trustees. The Trustees will monitor the Advisor's
implementation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. Government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The investment objective of the Portfolio, together with the investment
restrictions described below and in Part B, except as noted, are deemed
fundamental policies, i.e., they may be changed only with the approval of a
majority of the outstanding voting securities of the Portfolio, as defined in
the 1940 Act.
The Portfolio may not (i) borrow money, except from banks for temporary,
extraordinary or emergency purposes and then only in amounts up to 10% of the
value of the Portfolio's total assets, taken at cost at the time of borrowing,
or purchase securities while borrowings exceed 5% of its total assets, or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowings in amounts up to 10% of the value of the Portfolio's net assets at
the time of borrowing, or (ii) acquire industrial revenue bonds if as a result
more than 5% of the Portfolio's total assets would be invested in industrial
revenue bonds where payment of principal and interest is the responsibility of
companies with fewer than three years of operating history.
For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see Item 13 in
Part B.
Item 5. MANAGEMENT OF THE PORTFOLIO.
The Board of Trustees provides broad supervision over the affairs of the
Portfolio. The Portfolio has retained the services of Morgan as investment
adviser and administrative services agent. The Portfolio has retained the
services of Funds Distributor, Inc. ("FDI") as Co-Administrator (the
"Co-Administrator").
The Portfolio has not retained the services of a principal underwriter or
distributor, since interests in the Portfolio are offered solely in private
placement transactions. FDI, acting as agent for the Portfolio, serves as
exclusive placement agent of interests in the Portfolio. FDI receives no
additional compensation for serving in this capacity.
The Portfolio has entered into an Amended and Restated Portfolio Fund
Services Agreement, dated July 11, 1996, with Pierpont Group, Inc. ("Pierpont
Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The fees to be paid under the
agreement approximate the reasonable cost of Pierpont Group in providing these
A-5
<PAGE>
services. Pierpont Group was organized in 1989 at the request of the Trustees of
the Pierpont Family of Funds for the purpose of providing these services at cost
to those funds. See Item 14 in Part B. The principal offices of Pierpont Group
are located at 461 Fifth Avenue, New York, New York 10017.
INVESTMENT ADVISOR. 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 $197 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, as Advisor,
makes the Portfolio's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the Portfolio's
investments. See Item 16 in Part B.
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):
Daniel B. Mulvey, Vice President (since August, 1995, employed by Morgan since
September 1991) and Elizabeth A. Augustin, Vice President (since January, 1992;
employed by Morgan since prior to 1991).
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 0.20% of the Portfolio's average daily net assets up to $1
billion, and 0.10% of such assets in excess of $1 billion.
Under a separate agreement, Morgan also provides administrative and
related services to the Portfolio. See "Administrative Services Agent" below.
CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with the
Portfolio, FDI serves as the Co-Administrator for the Portfolio. FDI (i)
provides office space, equipment and clerical personnel for maintaining the
organization and books and records of the Portfolio; (ii) provides officers for
the Portfolio; (iii) files Portfolio regulatory documents and mails Portfolio
communications to Trustees and investors; and (iv) maintains related books and
records. See "Administrative Services Agent" below.
For its services under the Co-Administration Agreement, the Portfolio has
agreed to pay FDI fees equal to its allocable share of an annual complex- wide
charge of $425,000 plus FDI's out-of-pocket expenses. The amount allocable to
the Portfolio is based on the ratio of its net assets to the aggregate net
assets of the Portfolio and certain other registered investment companies
subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to the Administrative Services
Agreement with the Portfolio, Morgan provides administrative and related
services to the Portfolio, including services related to tax compliance,
preparation of financial statements, calculation of performance data, oversight
of service providers and certain regulatory and Board of Trustees matters.
Under the Administrative Services Agreement, the Portfolio has agreed to
pay Morgan fees equal to its allocable share of an annual complex-wide charge.
A-6
<PAGE>
This charge is calculated daily based on the aggregate net assets of the
Portfolio and certain other registered investment companies managed by the
Advisor in accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their aggregate
average daily net assets in excess of $7 billion, less the complex- wide fees
payable to FDI.
PLACEMENT AGENT. FDI, a registered broker-dealer, also serves as exclusive
placement agent for the Portfolio. FDI is a wholly owned indirect subsidiary of
Boston Institutional Group, Inc. FDI's principal business address is 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 serves as the Portfolio's custodian and fund
accounting and transfer agent. State Street keeps the books of account for the
Portfolio.
EXPENSES. In addition to the fees payable to the service providers
identified above, the Portfolio is responsible for usual and customary expenses
associated with its operations. Such expenses include organization expenses,
legal fees, accounting and audit expenses, insurance costs, the compensation and
expenses of the Trustees, registration fees under federal securities laws,
extraordinary expenses and brokerage expenses.
Morgan has agreed that it will reimburse the Portfolio through at least
December 31, 1997 to the extent necessary to maintain the Portfolio's total
operating expenses at the annual rate of 0.35% of the Portfolio's average daily
net assets. This limit does not cover extraordinary expenses during the period.
There is no assurance that Morgan will continue this waiver beyond the specified
period. For the fiscal year ended August 31, 1996, the Portfolio's total
expenses were 0.25% of its average net assets.
Item 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of New
York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors 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 an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
As of November 30, 1996, The JPM Pierpont Tax Exempt Money Market Fund and
The JPM Institutional Tax Exempt Money Market Fund, series of The JPM Pierpont
Funds and The JPM Institutional Funds, respectively, owned 81.21% and 18.79%
respectively, of the outstanding beneficial interests in the Portfolio.
Investments in the Portfolio have no preemptive or conversion rights and
are fully paid and nonassessable, except as set forth below. The Portfolio is
not required and has no current intention of holding annual meetings of
investors, but the Portfolio will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote. Changes in fundamental policies will be submitted to investors
for approval. Investors have under certain circumstances (e.g., upon application
and submission of certain specified documents to the Trustees by a specified
percentage of the outstanding interests in the Portfolio) the right to
communicate with other investors in connection with requesting a
A-7
<PAGE>
meeting of investors for the purpose of removing one or more Trustees. Investors
also have the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified percentage of the outstanding interests in
the Portfolio. Upon liquidation of the Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
The net asset value of the Portfolio is determined each business day other
than the holidays listed in Part B ("Portfolio Business Day"). This
determination is made once each Portfolio Business Day as of 4:00 p.m. New York
time (the "Valuation Time").
The "net income" of the Portfolio will consist of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio.
The end of the Portfolio's fiscal year is August 31.
Under the anticipated method of operation of the Portfolio, the Portfolio
will not be subject to any income tax. However, each investor in the Portfolio
will be taxable on its share (as determined in accordance with the governing
instruments of the Portfolio) of the Portfolio's ordinary income and capital
gain in determining its income tax liability. The determination of such share
will be made in accordance with the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions will
be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed to FDI at 60 State Street, Boston,
Massachusetts 02109 or by calling FDI at (617)557-0700.
Item 7. PURCHASE OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by other investment companies, insurance company separate accounts,
common or commingled trust funds, or similar organizations or entities which are
"accredited investors" as defined in Rule 501 under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by the Portfolio. The net asset value of the Portfolio
is determined on each Portfolio Business Day.
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Custodian by a Federal Reserve Bank).
A-8
<PAGE>
The Portfolio may, at its own option, accept securities in payment for
investments in its beneficial interests. The securities delivered in kind are
valued by the method described in Item 19 as of the business day prior to the
day the Portfolio receives the securities. Securities may be accepted in payment
for beneficial interests only if they are, in the judgment of Morgan,
appropriate investments for the Portfolio. In addition, securities accepted in
payment for beneficial interests must: (i) meet the investment objective and
policies of the Portfolio; (ii) be acquired by the Portfolio for investment and
not for resale; (iii) be liquid securities which are not restricted as to
transfer either by law or liquidity of market; and (iv) 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. The Portfolio reserves the right to accept or reject at its
own option any and all securities offered in payment for beneficial interests.
The Portfolio and FDI reserve the right to cease accepting investments at
any time or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Portfolio Business Day. At the Valuation Time on each such
day, the value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected at the Valuation Time on such day, will
then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio at the Valuation Time on such day plus or minus, as
the case may be, the amount of net additions to or reductions in the investor's
investment in the Portfolio effected at the Valuation Time, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
Valuation Time on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of the
Valuation Time on the following Portfolio Business Day.
Item 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may reduce all or any portion of its
investment at the net asset value next determined after a request in "good
order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio in federal funds normally on the next
Portfolio Business Day after the reduction is effected, but in any event within
seven days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any reduction
may be suspended or the payment of the proceeds therefrom postponed during any
period in which the New York Stock Exchange (the "NYSE") is closed (other than
weekends or holidays) or trading on the NYSE is restricted or, to the extent
otherwise permitted by the 1940 Act, if an emergency exists.
The Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
A-9
<PAGE>
investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be.
Item 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
A-10
<PAGE>
PART B
Item 10. COVER PAGE.
Not applicable.
Item 11. TABLE OF CONTENTS. Page
General Information and History . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . B-1
Management of the Fund . . . . . . . . . . . . . . . B-11
Control Persons and Principal Holder
of Securities . . . . . . . . . . . . . . . . . . . . B-14
Investment Advisory and Other Services . . . . . . . B-14
Brokerage Allocation and Other Practices . . . . . . B-18
Capital Stock and Other Securities . . . . . . . . . B-20
Purchase, Redemption and Pricing of
Securities . . . . . . . . . . . . . . . . . . . . . B-21
Tax Status . . . . . . . . . . . . . . . . . . . . . B-21
Underwriters . . . . . . . . . . . . . . . . . . . . B-22
Calculations of Performance Data . . . . . . . . . . B-22
Financial Statements . . . . . . . . . . . . . . . . B-22
Appendix . . . . . . . . . . . . . . . . . . . . . . Appendix-1
Item 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
Item 13. INVESTMENT OBJECTIVE AND POLICIES.
The investment objective of The Tax Exempt Money Market Portfolio (the
"Portfolio") is to provide a high level of current income that is exempt from
federal income tax and maintain a high level of liquidity. See "Tax Status." 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 United States dollar-denominated securities described in Part A and
this Part B 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.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").
The following discussion supplements the information regarding the
investment objective of the Portfolio and the policies to be employed to achieve
this objective as set forth above and in Part A.
MONEY MARKET INSTRUMENTS
As discussed in Part A, the Portfolio 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 Portfolio appears below. Also see "Quality and
Diversification Requirements."
<PAGE>
U.S. TREASURY SECURITIES. The Portfolio may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds,
all of which are backed as to principal and interest payments by the full
faith and credit of the United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Portfolio 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, the Portfolio 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 the Portfolio 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.
BANK OBLIGATIONS. The Portfolio, unless otherwise noted in Part A or below,
may invest in negotiable certificates of deposit, time deposits and bankers'
acceptances of (i) banks, savings and loan associations and savings banks which
have more than $2 billion in total assets and are organized under the laws of
the United States or any state, (ii) foreign branches of these banks of
equivalent size (Euros) and (iii) U.S. branches of foreign banks of equivalent
size (Yankees). The Portfolio may not invest in obligations of foreign branches
of foreign banks. The Portfolio will not invest in obligations for which the
Advisor, or any of its affiliated persons, is the ultimate obligor or accepting
bank.
COMMERCIAL PAPER. The Portfolio may invest in commercial paper including
master demand obligations. Master demand obligations are obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no additional fee,
in its capacity as investment advisor to the Portfolio 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 Portfolio's Advisor.
Since master demand obligations typically are not rated by credit rating
agencies, the Portfolio 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 Portfolio's quality restrictions. See
"Quality and Diversification Requirements." Although there is no secondary
market for master demand obligations, such obligations are considered by the
Portfolio to be liquid because they are payable upon demand. The Portfolio does
not have
B-2
<PAGE>
any specific percentage limitation on investments in master demand
obligations.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
with brokers, dealers or banks that meet the credit guidelines approved by the
Trustees. In a repurchase agreement, the Portfolio buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon date
and price. The resale price normally is in excess of the purchase price,
reflecting an agreed upon interest rate. This interest rate is effective for the
period of time the Portfolio is invested in the agreement and is not related to
the coupon rate on the underlying security. A repurchase agreement may also be
viewed as a fully collateralized loan of money by the Portfolio to the seller.
The period of these repurchase agreements will usually be short, from overnight
to one week, and at no time will the Portfolio invest in repurchase agreements
for more than 13 months. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of 13 months from the
effective date of the repurchase agreement. The Portfolio will always receive
securities as collateral whose market value is, and during the entire term of
the agreement remains, at least equal to 100% of the dollar amount invested by
the Portfolio in each agreement plus accrued interest, and the Portfolio will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the Portfolio's custodian (the
"Custodian"). The Portfolio will be fully collateralized within the meaning of
paragraph (a)(3) of Rule 2a-7 under the 1940 Act. If the seller defaults, the
Portfolio might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization upon disposal
of the collateral by the Portfolio may be delayed or limited.
The Portfolio may make investments in other debt securities with remaining
effective maturities of not more than 13 months, including without limitation
corporate and foreign bonds, asset-backed securities and other obligations
described in Part A or this Part B. The Portfolio may not invest in foreign
bonds or asset-backed securities.
TAX EXEMPT OBLIGATIONS
As discussed in Part A, the Portfolio may invest in tax exempt
obligations to the extent consistent with the Portfolio's investment objective
and policies. A description of the various types of tax exempt obligations
which may be purchased by the Portfolio appears in Part A 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
B-3
<PAGE>
a special excise tax or from other specific revenue sources. They are not
generally payable from the general taxing power of a municipality.
MUNICIPAL NOTES. Municipal notes are subdivided into three categories
of short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.
Municipal notes are short-term obligations with a maturity at the time of
issuance ranging from six months to five years. The principal types of municipal
notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.
Municipal commercial paper typically consists of very short-term,
unsecured, negotiable promissory notes that are sold to meet seasonal working
capital or interim construction financing needs of a municipality or agency.
While these obligations are intended to be paid from general revenues or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or institutions.
Municipal demand obligations are subdivided into two types: variable
rate demand notes and master demand obligations.
Variable rate demand notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to demand payment of the notes,
or to demand purchase of the notes at a purchase price equal to the unpaid
principal balance, plus accrued interest either directly by the issuer or by
drawing on a bank letter of credit or guaranty issued with respect to such note.
The issuer of the municipal obligation may have a corresponding right to prepay
at its discretion the outstanding principal of the note plus accrued interest
upon notice comparable to that required for the holder to demand payment. The
variable rate demand notes in which the Portfolio 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 the Portfolio 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 the Portfolio to be liquid because they are
payable upon demand. The Portfolio has no specific percentage limitations on
investments in master demand obligations.
The Portfolio 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
B-4
<PAGE>
a third party. See "Puts" below. A substantial portion of the Portfolio
issubject to maturity shortening mechanisms consisting of variable interest
rates coupled with unconditional 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 Portfolio may purchase without limit municipal bonds or notes
together with the right to resell the bonds or notes to the seller at an agreed
price or yield within a specified period prior to the maturity date of the bonds
or notes. Such a right to resell is commonly known as a "put." The aggregate
price for bonds or notes with puts may be higher than the price for bonds or
notes without puts. Consistent with the Portfolio's investment objective and
subject to the supervision of the Trustees, the purpose of this practice is to
permit the Portfolio 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 interests
in the Portfolio 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 creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts prior to their
expiration date and in selecting which puts to exercise, the Advisor considers
the amount of cash available to the Portfolio, the expiration dates of the
available puts, any future commitments for securities purchases, alternative
investment opportunities, the desirability of retaining the underlying
securities in the Portfolio and the yield, quality and maturity dates of the
underlying securities.
The Portfolio 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.
Since the value of the put is partly dependent on the ability of the put
writer to meet its obligation to repurchase, the Portfolio's policy is to enter
into put transactions only with municipal securities dealers who are approved by
the Portfolio's Advisor. Each dealer will be approved on its own merits, and it
is the Portfolio'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. 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 Portfolio is unable to
predict whether
B-5
<PAGE>
all or any portion of any loss sustained could subsequently be
recovered from such dealer.
The Portfolio has been advised by counsel that it 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 Portfolio. Such advice of counsel is
based on certain assumptions concerning the terms of the puts and the attendant
circumstances.
FOREIGN INVESTMENTS
To the extent that the Portfolio invests 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 the
Portfolio.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and for fixed income securities no interest accrues to the Portfolio
until settlement takes place. At the time the Portfolio makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it will record
the transaction, reflect the value each day of such securities in determining
its net asset value and, if applicable, calculate the maturity for the purposes
of average maturity from that date. At the time of settlement, a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, the Portfolio will maintain with the Custodian a segregated
account with liquid assets, consisting of cash, U.S. Government securities or
other appropriate securities, in an amount at least equal to such commitments.
On delivery dates for such transactions, the Portfolio will meet its obligations
from maturities or sales of the securities held in the segregated account and/or
from cash flow. If the Portfolio chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could, as with the disposition
of any other portfolio obligation, incur a gain or loss due to market
fluctuation. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets, less liabilities other than the obligations
created by when-issued commitments.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by the Portfolio to the extent permitted under the Investment
Company Act of 1940, as amended (the "1940 Act"). These limits require that, as
determined immediately after a purchase is made, (i) not more than 5% of the
value of the Portfolio's total assets will be invested in the securities of any
one investment company, (ii) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group, and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Portfolio. As a shareholder of another
investment company, the Portfolio would bear, along with other shareholders, its
pro rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that the Portfolio bears directly in connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells
B-6
<PAGE>
a security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act a reverse repurchase agreement is
also considered as the borrowing of money by the Portfolio and, therefore, as a
form of leverage. The Portfolio will invest the proceeds of borrowings under
reverse repurchase agreements. In addition, the Portfolio will enter into a
reverse repurchase agreement only when the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. The Portfolio will not invest the proceeds of a reverse repurchase
agreement for a period which exceeds the duration of the reverse repurchase
agreement. The Portfolio 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, the
Portfolio's entering into the reverse repurchase agreement may have a negative
impact on the ability of investors in the Portfolio to maintain a net asset
value of $1.00 per share.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its securities if
such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. The Portfolio may pay reasonable finders' and custodial fees in
connection with a loan. In addition, the Portfolio will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and the Portfolio will not make any loans in excess of one year.
The Portfolio will not lend its securities to any officer, Trustee, Director,
employee or other affiliate of the Portfolio, the Advisor or placement agent
unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolio may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in Part A.
As to illiquid investments, the 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, the 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, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
SYNTHETIC VARIABLE RATE INSTRUMENTS. The Portfolio may invest in certain
synthetic variable rate instruments as described in Part A. 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 the Portfolio will be that of holding a long-term bond, and
(iii) the disposition of the bond may be required which could be at a loss.
B-7
<PAGE>
QUALITY AND DIVERSIFICATION REQUIREMENTS
The Portfolio intends to meet the diversification requirements of the
1940 Act. To meet these requirements, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (1) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government, its agencies and instrumentalities,
and (2) the Portfolio may not own more than 10% of the outstanding voting
securities of any one issuer. As for the other 25% of the Portfolio's assets not
subject to the limitation described above, there is no limitation on investment
of these assets under the 1940 Act, so that all of such assets may be invested
in securities of any one issuer, subject to the limitation of any applicable
state securities laws. Investments not subject to the limitations described
above could involve an increased risk to the Portfolio should an issuer, or a
state or its related entities, be unable to make interest or principal payments
or should the market value of such securities decline.
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. 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 the Portfolio 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
Portfolio 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."
In order to attain the investor's objective of maintaining a stable net
asset value, the Portfolio 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
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. 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. A description of illustrative credit ratings is set
forth in Appendix A attached to this Part B.
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 13 months and (ii) require the Portfolio, in the event of certain
downgrading of or defaults on portfolio holdings, to dispose
B-8
<PAGE>
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 an
NRSRO may be based primarily or exclusively on the credit support arrangement.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Portfolio.
Except where otherwise noted, these investment restrictions are "fundamental"
policies which, under the 1940 Act, may not be changed without the vote of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Portfolio. A "majority of the outstanding voting securities" is defined in
the 1940 Act as the lesser of (a) 67% or more of the voting securities present
at a security holders meeting if the holders of more than 50% of the outstanding
voting securities are present or represented by proxy, or (b) more than 50% of
the outstanding voting securities. The percentage limitations contained in the
restrictions below apply at the time of the purchase of securities.
The Portfolio 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 Portfolio'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 Portfolio's net assets at the time of such borrowing. The Portfolio
will not purchase securities while borrowings exceed 5% of the
Portfolio's total assets. 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 Portfolio 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;1
3. Purchase industrial revenue bonds if, as a result of such purchase, more
than 5% of total Portfolio 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
- ----------------
1Pursuant to an interpetation of the staff of the Securities and Exchange
Commission, the Portfolio may not invest more than 25% of its assets in
industrial development bonds in projects of similar type or in the same
state. The Portfolio may comply with this interpretation until such time as
it may be modified by the staff or the Securities and Exchange Commission.
B-9
<PAGE>
Portfolio's total assets would be invested in securities or other
obligations of any one such issuer. 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 Portfolio'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 Portfolio's investment objective and policies (see "Investment
Objective 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 Objective and Policies"); real estate; commodities; commodity
contracts; or interests in oil, gas, or mineral exploration or development
programs. However, the Portfolio 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;
9. Act as an underwriter of securities; or
10. Issue senior securities, except as may otherwise be permitted by the
foregoing investment restrictions or under the 1940 Act or any rule, order
or interpretation thereunder.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restriction
described below is not a fundamental policy of the Portfolio and may be changed
by the Trustees. This non-fundamental investment policy requires that the
Portfolio 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 Portfolio's total assets would be in investments that are illiquid.
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.
- --------------------
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
Portfolio's credit standards without regard to the credit situation.
B-10
<PAGE>
Item 14. MANAGEMENT OF THE FUND.
The Trustees of the Portfolio, their business addresses, principal
occupations during the past five years and dates of birth are set forth below.
Frederick S. Addy -- Trustee; Retired; Executive Vice President and Chief
Financial Officer from January 1990 to April 1994, Amoco Corporation. His
address is 5300 Arbutus Cove, Austin, TX 78746, and his date of birth is January
1, 1932.
William G. Burns -- Trustee; Retired; Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779,
and his date of birth is November 2, 1932.
Arthur C. Eschenlauer -- Trustee; Retired; Senior Vice President, Morgan
Guaranty Trust Company of New York until 1987. His address is 14 Alta Vista
Drive, RD #2, Princeton, NJ 08540, and his date of birth is May 23, 1934.
Matthew Healey(*) -- Trustee; Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc. ("Pierpont Group") since 1989. His address is
Pine Tree Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL 33436, and
his date of birth is August 23, 1937.
Michael P. Mallardi -- Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group prior to April 1996. His address
is 10 Charnwood Drive, Suffern, NY 10910, and his date of birth is March 17,
1934.
- ------------
*Mr. Healey is an "interested person" of the Portfolio as that term is
defined in the 1940 Act.
Each Trustee is currently paid an annual fee of $65,000 (adjusted as of
April 1, 1995) for serving as Trustee of the Master Portfolios (as defined
below), The JPM Pierpont Funds, The JPM Institutional Funds and JPM Series Trust
and is reimbursed for expenses incurred in connection with service as a Trustee.
The Trustees may hold various other directorships unrelated to the Portfolio.
B-11
<PAGE>
The compensation paid to the Trustees for the calendar year ended December
31, 1995 is set forth below.
<TABLE>
<CAPTION>
NAME OF TRUSTEE AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL COMPENSATION FROM THE
COMPENSATION RETIREMENT BENEFITS BENEFITS MASTER PORTFOLIOS(*), THE JPM
FROM THE ACCRUED AS PART OF UPON RETIREMENT INSTITUTIONAL FUNDS AND THE
PORTFOLIO DURING PORTFOLIO EXPENSES JPM PIERPONT FUNDS PAID TO
1995 TRUSTEES DURING 1995
<S> <C> <C> <C> <C>
Frederick S. Addy,
Trustee $22,049 None None $62,500
William G. Burns, $22,049 None None $62,500
Trustee
Arthur C. Eschenlauer, $22,049 None None $62,500
Trustee
Matthew Healey, $22,049 None None $62,500
Trustee(**),
Chairman and Chief
Executive Officer
Michael P. Mallardi, $22,049 None None $62,500
Trustee
</TABLE>
(*)Includes the Portfolio and 17 other portfolios (collectively, the "Master
Portfolios") for which Morgan acts as investment adviser.
(**)During 1995, Pierpont Group paid Mr. Healey, in his role as Chairman of
Pierpont Group, compensation in the amount of $140,000, contributed $21,000 to a
defined contribution plan on his behalf and paid $20,000 in insurance premiums
for his benefit.
Currently, there are 17 investment companies (14 investment companies
comprising the Master Portfolios, The JPM Pierpont Funds, The JPM Institutional
Funds and JPM Series Trust) in the fund complex.
The Trustees of the Portfolio are the same as the Trustees of each of The JPM
Institutional Funds and The JPM Pierpont Funds. In accordance with applicable
state requirements, a majority of the disinterested Trustees have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that the same individuals are Trustees of the
Master Portfolios, The JPM Pierpont Funds and The JPM Institutional Funds, up to
and including creating a separate board of trustees.
The Trustees of the Portfolio, in addition to reviewing actions of the
Portfolio's various service providers, decide upon matters of general policy.
The Portfolio has entered into a Portfolio Fund Services Agreement with Pierpont
Group to assist the Trustees in exercising their overall supervisory
responsibilities over the affairs of the Portfolio. Pierpont Group was organized
in July 1989 to provide services for The Pierpont Family of Funds (currently an
investor in the Portfolio). The Portfolio has agreed to pay Pierpont Group a fee
in an amount representing its reasonable costs in performing these services.
These costs are periodically reviewed by the Trustees. The aggregate fees paid
to Pierpont Group by the Portfolio during the fiscal years ended August 31,
1994, 1995 and 1996 were $79,046, $110,325 and $62,310, respectively. The
Portfolio has no employees; its executive officers (listed below), other than
the Chief Executive Officer, are provided and compensated by Funds Distributor,
Inc. ("FDI"), a wholly owned indirect subsidiary of Boston Institutional Group,
Inc. The Portfolio's officers conduct and supervise the business operations of
the Portfolio.
The officers of the Portfolio, their principal occupations during the past
five years and their dates of birth are set forth below. The business address of
each of the officers unless otherwise noted is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
B-12
<PAGE>
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group, 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. His date of birth is August 23, 1937.
ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Counsel,
FDI and Premier Mutual Fund Services, Inc. ("Premier Mutual") and an officer
of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by the Dreyfus Corporation ("Dreyfus"). Prior to September 1995, Ms. Keeley
was enrolled at Fordham University School of Law and received her JD in May
1995. Prior to September 1992, Ms. Keeley was an assistant at the National
Association for Public Interest Law, Address: FDI, 200 Park Avenue, New York,
New York 10166. Her date of birth is September 14, 1969.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President
and Chief Executive Officer and Director of FDI, Premier Mutual and an officer
of RCM Capital Funds, Inc., RCM Equity Funds, Inc. and certain investment
companies advised or administered by Dreyfus. From December 1991 to July
1994, she was President and Chief Compliance Officer of FDI. Prior to
December 1991, she served as Vice President and Controller, and later as
Senior Vice President of The Boston Company Advisors, Inc. ("TBCA"). Her date
of birth is August 1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Supervisor
of Treasury Services and Administration of FDI and an officer of certain
investment companies advised or administered by Dreyfus. From April 1993 to
January 1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank &
Trust Company. Prior to March 1993, Mr. Conroy was employed as a fund
accountant at The Boston Company. His date of birth is March 31, 1969.
RICHARD W. INGRAM; President and Treasurer. Senior Vice President and Director
of Client Services and Treasury Administration of FDI, Senior Vice President of
Premier Mutual and an officer of RCM Capital Funds, Inc., RCM Equity Funds,
Inc., Waterhouse Investors Cash Management Fund, Inc. and certain investment
companies advised or administered by Dreyfus. From March 1994 to November 1995,
Mr. Ingram was Vice President and Division Manager of First Data Investor
Services Group, Inc. From 1989 to 1994, Mr. Ingram was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds of The Boston Company. His date of
birth is September 15, 1955.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant
Vice President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity
Funds, Inc. From June 1994 to January 1996, Ms. Jacoppo was a Manager, SEC
Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994, Ms.
Jacoppo was a senior paralegal at TBCA. Her date of birth is December 29,
1966.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI. From April 1994 to July 1996,
Mr. Kelley was Assistant Counsel at Forum Financial Group. From 1992 to 1994,
Mr. Kelley was employed by Putnam Investments in legal and compliance
capacities. Prior to September 1992, Mr. Kelley was enrolled at Boston
College Law School and received his J.D. in May 1992. His date of birth is
December 24, 1964.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President
and Manager of Treasury Services and Administration of FDI, an officer of RCM
Capital Funds, Inc., RCM Equity Funds, Inc. and certain investment companies
advised or administered by Dreyfus. From 1989 to 1994, Ms. Nelson was an
Assistant Vice President and client manager for The Boston Company. Her date
of birth is April 22, 1964.
B-13
<PAGE>
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President
and General Counsel of FDI and Premier Mutual and an officer of RCM Capital
Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management
Fund, Inc. and certain investment companies advised or administered by
Dreyfus. From February 1992 to April 1994, Mr. Pelletier served as Counsel
for TBCA. From August 1990 to February 1992, Mr. Pelletier was employed as an
Associate at Ropes & Gray. His date of birth is June 24, 1964.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Senior
Vice President, Treasurer and Chief Financial Officer of FDI and Premier
Mutual and an officer of Waterhouse Investors Cash Management Fund, Inc. and
certain investment companies advised or administered by Dreyfus. From July
1988 to November 1993, Mr. Tower was Financial Manager of The Boston Company.
His date of birth is June 13, 1962.
The Portfolio's Declaration of Trust provides that it will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Portfolio, unless, as to liability to the Portfolio or its investors, it is
finally adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Portfolio. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that such
officers or Trustees have not engaged in wilful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.
Item 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of November 30, 1996, The JPM Pierpont Tax Exempt Money Market Fund and The
JPM Institutional Tax Exempt Money Market Fund (the "Funds"), series of The JPM
Pierpont Funds and The JPM Institutional Funds, respectively, owned 81.21% and
18.79%, respectively, of the outstanding beneficial interests in the Portfolio.
So long as The JPM Pierpont Tax Exempt Money Market Fund controls the Portfolio,
it may take actions without the approval of any other holder of beneficial
interests in the Portfolio.
Each of the Funds has informed the Portfolio that whenever it is requested to
vote on matters pertaining to the Portfolio (other than a vote by a Portfolio to
continue the operation of the Portfolio upon the withdrawal of another investor
in the Portfolio), it will hold a meeting of its shareholders and will cast its
vote as instructed by those shareholders.
Item 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISOR. The investment advisor to the Portfolio 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. The Advisor, whose principal offices are at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. The Advisor is subject to regulation by the
New York State Banking Department and is a member bank of the Federal Reserve
System. Through offices in New York City and abroad, the Advisor offers a wide
range of services, primarily to governmental, institutional, corporate and high
net worth individual customers in the U.S.
and throughout the world.
B-14
<PAGE>
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 $197 billion (of which the Advisor advises over $30 billion).
J.P. Morgan has a long history of service as adviser, underwriter and lender
to an extensive roster of major companies and as a financial advisor to national
governments. The firm, through its predecessor firms, has been in business for
over a century and has been managing investments since 1913.
The basis of the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. Morgan currently employs over 100 full time
research analysts, among the largest research staffs in the money management
industry, in its investment management divisions located in New York, London,
Tokyo, Frankfurt, Melbourne and Singapore to cover companies, industries and
countries on site. In addition, the investment management divisions employ
approximately 300 capital market researchers, portfolio managers and traders.
The conclusions of the equity analysts' fundamental research is quantified into
a set of projected returns for individual companies through the use of a
dividend discount model. These returns are projected for 2 to 5 years to enable
analysts to take a longer term view. These returns, or normalized earnings, are
used to establish relative values among stocks in each industrial sector. These
values may not be the same as the markets' current valuations of these
companies. This provides the basis for ranking the attractiveness of the
companies in an industry according to five distinct quintiles or rankings. This
ranking is one of the factors considered in determining the stocks purchased and
sold in each sector. The Advisor's fixed income investment process is based on
analysis of real rates, sector diversification and quantitative and credit
analysis.
The investment advisory services the Advisor provides to the Portfolio are not
exclusive under the terms of the Advisory Agreement. The Advisor is free to and
does render similar investment advisory services to others. The Advisor serves
as investment advisor to personal investors and other investment companies and
acts as fiduciary for trusts, estates and employee benefit plans. Certain of the
assets of trusts and estates under management are invested in common trust funds
for which the Advisor serves as trustee. The accounts which are managed or
advised by the Advisor have varying investment objectives and the Advisor
invests assets of such accounts in investments substantially similar to, or the
same as, those which are expected to constitute the principal investments of the
Portfolio. Such accounts are supervised by officers and employees of the Advisor
who may also be acting in similar capacities for the Portfolio. See Item 17
below.
Sector weightings are generally similar to a fund's benchmark with the
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmark for the Portfolio is currently
IBC/Donoghue's Tax Exempt Money Fund Average.
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary of J.P.
Morgan, is a registered investment adviser under the Investment Advisers Act of
1940, 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.
B-15
<PAGE>
The Portfolio is managed by officers of the Advisor who, in acting for their
customers, including the Portfolio, do not discuss their investment decisions
with any personnel of J.P. Morgan or any personnel of other
divisions of the Advisor or with any of its affiliated persons, with the
exception of J.P. Morgan Investment Management Inc.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Investment
Advisory Agreement, the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.20% of the
Portfolio's average daily net assets up to $1 billion and 0.10% of the
Portfolio's average daily net assets in excess of $1 billion. For the fiscal
years ended August 31, 1994, 1995 and 1996, the Portfolio paid Morgan
$2,021,476, $2,150,291 and $2,154,248, respectively, in advisory fees.
The Investment Advisory Agreement provides that it will continue in effect for
a period of two years after execution only if specifically approved annually
thereafter (i) by a vote of the holders of a majority of the Portfolio's
outstanding securities or by its Trustees and (ii) by a vote of a majority of
the Trustees who are not parties to the Advisory Agreement or "interested
persons" as defined by the 1940 Act cast in person at a meeting called for the
purpose of voting on such approval. The Investment Advisory Agreement will
terminate automatically if assigned and is terminable at any time without
penalty by a vote of a majority of the Trustees of the Portfolio or by a vote of
the holders of a majority of the Portfolio's voting securities on 60 days'
written notice to the Advisor and by the Advisor on 90 days' written notice to
the Portfolio.
The Glass-Steagall Act and other applicable laws generally prohibit banks such
as the Advisor from engaging in the business of underwriting or distributing
securities, and the Board of Governors of the Federal Reserve System has issued
an interpretation to the effect that under these laws a bank holding company
registered under the federal Bank Holding Company Act or certain subsidiaries
thereof may not sponsor, organize, or control a registered open-end investment
company continuously engaged in the issuance of its shares, such as the
Portfolio. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment advisor and custodian to such an
investment company. The Advisor believes that it may perform the services for
the Portfolio contemplated by the Advisory Agreement without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent the Advisor from continuing to perform such services for the
Portfolio.
If the Advisor were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio 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.
Under a separate agreement, Morgan also provides administrative and
related services to the Portfolio. See "Administrative Services Agreement" in
Part A above.
CO-ADMINISTRATOR. Under the Portfolio's Co-Administration Agreement dated
August 1, 1996, FDI serves as the Portfolio's Co-Administrator. The
Co-Administration Agreement may be renewed or amended by the Trustees without an
investor vote. The Co-Administration Agreement is terminable at any time without
penalty by a vote of a majority of the Trustees of the Portfolio on not more
than 60 days' written notice nor less than 30 days' written notice to
B-16
<PAGE>
the other party. The Co-Administrator, subject to the consent of the Trustees of
the Portfolio, may subcontract for the performance of its obligations, provided,
however, that unless the Portfolio expressly agrees in writing, the
Co-Administrator shall be fully responsible for the acts and omissions of any
subcontractor as it would for its own acts or omissions. See "Administrative
Services Agent" below.
For its services under the Co-Administration Agreement, the Portfolio has
agreed to pay FDI fees equal to its allocable share of an annual complex- wide
charge of $425,000 plus FDI's out-of-pocket expenses. The amount allocable to
the Portfolio is based on the ratio of its net assets to the aggregate net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, the Master
Portfolios and JPM Series Trust. For the period from August 1, 1996 through
August 31, 1996, administrative fees of $2,284 were paid by the Portfolio to
FDI.
The following administrative fees were paid by the Portfolio to
Signature Broker-Dealer Services, Inc. ("SBDS") (which provided placement
agent and administrative services to the Portfolio prior to August 1, 1996):
For the fiscal year ended August 31, 1994: $62,565. For the fiscal year ended
August 31, 1995: $72,729. For the period from September 1, 1995 through July
31, 1996: $110,848.
ADMINISTRATIVE SERVICES AGENT. The Portfolio has entered into a
Restated Administrative Services Agreement (the "Services Agreement") with
Morgan, pursuant to which Morgan is responsible for certain administrative and
related services provided to the Portfolio.
Under the Services Agreement, effective August 1, 1996, the Portfolio has
agreed to pay Morgan fees equal to its allocable share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios and JPM Series Trust in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily net
assets and 0.04% of their average daily net assets in excess of $7 billion, less
the complex-wide fees payable to FDI. The portion of this charge payable by the
Portfolio is determined by the proportionate share that its net assets bear to
the total net assets of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios, the other investors in the Master Portfolios for which Morgan
provides similar services and JPM Series Trust.
Under administrative services agreements in effect with Morgan from December
29, 1995 through July 31, 1996, the Portfolio paid Morgan a fee equal to its
proportionate share of an annual complex-wide charge. This charge was calculated
daily based on the aggregate net assets of the Master Portfolios in accordance
with the following schedule: 0.06% of the first $7 billion of the Master
Portfolios' aggregate average daily net assets and 0.03% of the Master
Portfolios' aggregate average daily net assets in excess of $7 billion. Prior to
December 29, 1995, the Portfolio had entered into a financial and fund
accounting services agreement with Morgan, the provisions of which included
certain of the activities described above and, prior to September 1, 1995, also
included reimbursement of usual and customary expenses.
For the fiscal years ended August 31, 1994, 1995 and 1996, the Portfolio paid
Morgan $153,204, $169,754 and $205,419, respectively, in administrative services
fees.
See "Expenses" below for applicable expense limitations.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02110, serves as the Portfolio's
Custodian and Transfer Agent. Pursuant to the Custodian Contract, State
B-17
<PAGE>
Street is responsible for maintaining the books of account and records of
portfolio transactions and holding the portfolio securities and cash. In
addition, the Custodian has also entered into subcustodian agreements 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 sub-custodians, who were approved by the Trustees of
the Portfolio in accordance with the regulations of the SEC. The Custodian
maintains Portfolio transaction records, calculates book and tax allocations for
the Portfolio, and computes the value of the interest of each investor.
INDEPENDENT ACCOUNTANTS. The independent accountants of the Portfolio 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 the
Portfolio, assists in the preparation and/or review of each of the Portfolio's
federal and state income tax returns and consults with the Portfolio as to
matters of accounting and federal and state income taxation.
EXPENSES. In addition to the fees payable to the service providers identified
above, the Portfolio is responsible for usual and customary expenses associated
with its operations. Such expenses include organization expenses, legal fees,
accounting and audit expenses, insurance costs, the compensation and expenses of
the Trustees, registration fees under federal securities laws, and extraordinary
expenses, applicable to the Portfolio. Such expenses also include brokerage
expenses. Under fee arrangements prior to September 1, 1995, that included
higher fees for financial and fund accounting services, Morgan as service agent
was responsible for reimbursements to the Portfolio for SBDS's fees as
Administrator and the usual and customary expenses described above (excluding
organization and extraordinary expenses, custodian fees and brokerage expenses).
Morgan has agreed that it will reimburse the Portfolio through December 31,
1997 to the extent necessary to maintain the Portfolio's total operating
expenses at the annual rate of 0.35% of the Portfolio's average daily net
assets. This limit does not cover extraordinary expenses during the period.
There is no assurance that Morgan will continue this waiver beyond the specified
period.
Item 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Advisor places orders for the Portfolio for all purchases and sales of
portfolio securities, enters into repurchase agreements, and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Portfolio. See Item 13 above.
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.
Portfolio transactions for the Portfolio will be undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio will not seek profits through
short-term trading, but the Portfolio may dispose of any portfolio security
B-18
<PAGE>
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 Portfolio, the Advisor
intends to seek the best possible price and execution on a competitive basis for
both purchases and sales of securities.
The Portfolio's policy of investing only in securities with maturities of less
than thirteen months will result in high portfolio turnover. Since brokerage
commissions are not normally paid on investments which the Portfolio makes,
turnover resulting from such investments should not adversely affect the net
asset value or net income of the Portfolio.
In selecting a broker, the Advisor 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, the
Advisor decides that the broker chosen will provide the best possible execution.
The Advisor monitors the reasonableness of the brokerage commissions paid in
light of the execution received. The Trustees of the Portfolio review regularly
the reasonableness of commissions and other transaction costs incurred by the
Portfolio 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 the Advisor 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 necessarily for the benefit of the
Portfolio. The Advisor believes that the value of research services received is
not determinable and does not significantly reduce its expenses. The Portfolio
does not reduce its fee to the Advisor by any amount that might be attributable
to the value of such services.
Subject to the overriding objective of obtaining the best possible execution
of orders, the Advisor may allocate a portion of the Portfolio's portfolio
brokerage transactions to affiliates of the Advisor. In order for affiliates of
the Advisor to effect any portfolio transactions for the Portfolio, the
commissions, fees or other remuneration received by such affiliates must be
reasonable and fair compared to the commissions, fees, or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. Furthermore, the Trustees of the Portfolio, including
a majority of the Trustees who are not "interested persons," have adopted
procedures which are reasonably designed to provide that any commissions, fees,
or other remuneration paid to such affiliates are consistent with the foregoing
standard.
The Portfolio's portfolio securities will not be purchased from or through or
sold to or through the Exclusive Placement Agent or Advisor or any other
"affiliated person" (as defined in the 1940 Act), of the Exclusive Placement
Agent or Advisor when such entities are acting as principals, except to the
extent permitted by law. In addition, the Portfolio will not purchase securities
during the existence of any underwriting group relating thereto of which the
Advisor or an affiliate of the Advisor is a member, except to the extent
permitted by law.
B-19
<PAGE>
On those occasions when the Advisor deems the purchase or sale of a security
to be in the best interests of the Portfolio as well as other customers,
including other Portfolios, the Advisor, to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction will be made by the Advisor in the manner it considers to be most
equitable and consistent with its fiduciary obligations to the Portfolio. In
some instances, this procedure might adversely affect the Portfolio.
Item 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees if they choose to do so
and in such event the other investors in the Portfolio would not be able to
elect any Trustee. The Portfolio is not required and has no current intention to
hold annual meetings of investors but the Portfolio will hold special meetings
of investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
its investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two thirds of its
investors (with the vote of each being in proportion to its percentage of the
beneficial interests in the Portfolio), except that if the Trustees recommend
such sale of assets, the approval by vote of a majority of the investors (with
the vote of each being in proportion to its percentage of the beneficial
interests of the Portfolio) will be sufficient. The Portfolio may also be
terminated (i) upon liquidation and distribution of its assets if approved by
the vote of two thirds of its investors (with the vote of each being in
proportion to the amount of its investment) or (ii) by the Trustees by written
notice to its investors.
The Portfolio is organized as a trust under the laws of the State of New York.
Investors in the Portfolio will be held personally liable for its obligations
and liabilities, subject, however, to indemnification by the Portfolio in the
event that there is imposed upon an investor a greater portion of the
liabilities and obligations of the Portfolio than its proportionate beneficial
interest in the Portfolio. The Declaration of Trust also provides that the
Portfolio shall maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Portfolio, its
investors, Trustees, officers, employees and agents covering possible tort and
other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
B-20
<PAGE>
The Portfolio's Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
Item 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act.
All portfolio securities for the Portfolio are valued by the amortized cost
method, as permitted by a rule adopted by the SEC. The purpose of this method of
calculation is to allow certain investors in the Portfolio to maintain a
constant net asset value. No assurances can be given that this goal can be
attained. The amortized cost method of valuation values a security at its cost
at the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. If a difference of more
than 1/2 of 1% occurs between valuation based on the amortized cost method and
valuation based on market value, the Trustees will take steps necessary to
reduce such deviation, such as shortening the average portfolio maturity,
realizing gains or losses, or reducing the aggregate outstanding interests. Any
reduction of outstanding interests will be effected by having each investor in
the Portfolio contribute to the Portfolio's capital the necessary amounts on a
pro rata basis. Each investor in the Portfolio will be deemed to have agreed to
such a contribution in these circumstances by his investment in the Portfolio.
If the Portfolio determines that it would be detrimental to the best interest
of the remaining investors in the Portfolio to make payment wholly or partly in
cash, payment of the redemption price may be made in whole or in part by a
distribution in kind of securities from the Portfolio, in lieu of cash, in
conformity with the applicable rule of the SEC. If interests are redeemed in
kind, the redeeming investor might incur transaction costs in converting the
assets into cash. The method of valuing portfolio securities is described above
and such valuation will be made as of the same time the redemption price is
determined. The Portfolio will not redeem in kind except in circumstances in
which an investor is permitted to redeem in kind.
The net asset value of the Portfolio will not be computed on a day in which no
orders to purchase or withdraw beneficial interests in the Portfolio has been
received or on the days the following legal holidays are observed: New Year's
Day, 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 Portfolio would expect to close for
purchases and withdrawals at the same time. The days on which net asset value is
determined are the Portfolio's business days.
Item 20. TAX STATUS.
The Portfolio is organized as a New York trust. The Portfolio is not subject
to any income or franchise tax in the State of New York or the Commonwealth of
Massachusetts. However, each investor in the Portfolio will be subject to U.S.
Federal income tax in the manner described below on its share (as determined in
accordance with the governing instruments of the Portfolio) of the Portfolio's
ordinary income and capital gain in determining its income tax liability. The
determination of such share will be made in accordance with the Code, and
regulations promulgated thereunder.
B-21
<PAGE>
Although, as described above, the Portfolio will not be subject to federal
income tax, it will file appropriate income tax returns.
It is intended that the Portfolio's assets will be managed in such a way that
an investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Code. To ensure that investors will be able to satisfy the
requirements of subchapter M, the Portfolio must satisfy certain gross income
and diversification requirements, including among other things, a requirement
that the Portfolio derive less than 30% of its gross income from the sale of
stock, securities, options, futures or forward contracts held less than three
months.
The Portfolio intends to qualify to allocate tax exempt interest to its
investors 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. Tax
exempt interest is that part of income earned by the Portfolio which consists of
interest received by the Portfolio on tax exempt securities. In view of the
Portfolio's investment policies, it is expected that a substantial portion of
all income will be tax exempt income, although the Portfolio may from time to
time realize net short-term capital gains and may invest limited amounts in
taxable securities under certain circumstances.
Gains or losses on sales of portfolio securities will be treated as long-term
capital gains or losses if the securities have been held by it for more than one
year. Other gains or losses on the sale of securities will be short-term capital
gains or losses.
STATE AND LOCAL TAXES. The Portfolio may be subject to state or local taxes in
jurisdictions in which the Portfolio is deemed to be doing business. In
addition, the treatment of the Portfolio and its investors in those states which
have income tax laws might differ from treatment under the federal income tax
laws. Investors should consult their own tax advisors with respect to any state
or local taxes.
OTHER TAXATION. The investment by an investor in the Portfolio does not cause
the investor to be liable for any income or franchise tax in the State of New
York. Investors are advised to consult their own tax advisors with respect to
the particular tax consequences to them of an investment in the Portfolio.
Item 21. UNDERWRITERS.
The exclusive placement agent for the Portfolio is FDI, which receives no
additional compensation for serving in this capacity. Investment companies,
insurance company separate accounts, common and commingled trust funds and
similar organizations and entities may continuously invest in the Portfolio.
Item 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
Item 23. FINANCIAL STATEMENTS.
The Portfolio's current annual report to investors filed with the SEC pursuant
to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder is incorporated
herein by reference.
B-22
<PAGE>
APPENDIX A
Description of Security Ratings
Standard & Poor's
Corporate and Municipal Bonds
AAA - Debt rated AAA have the highest ratings assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Debt rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a
small degree.
A - Debt rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debts
in higher rated categories.
BBB - Debt rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debts in this
category than for debts 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.
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
<PAGE>
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
Commercial Paper, including Tax Exempt
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Short-Term Tax Exempt Notes
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest
rating assigned by Moody's for notes judged to be the best
quality. Notes with this rating enjoy strong protection from
established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing,
or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of
protection not as large as MIG-1.
Appendix-2
<PAGE>
PART C
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
The audited financial statements included in Part B, Item 23 of this
registration statement are as follows:
Schedule of Investments at August 31, 1996 Statement of Assets and Liabilities
at August 31, 1996 Statement of Operations for the fiscal year ended August
31, 1996
Statement of Changes in Net Assets for the fiscal year ended August 31, 1996
Supplementary Data Notes to Financial Statements at August 31, 1996
(b) EXHIBITS
1 Declaration of Trust, as amended, of the Registrant.2
2 Restated By-Laws of the Registrant.2
5 Investment Advisory Agreement between the Registrant and Morgan Guaranty
Trust Company of New York ("Morgan").2
8 Custodian Contract between the Registrant and State Street Bank and
Trust Company ("State Street").2
9(a) Co-Administration Agreement between the Registrant and Funds
Distributor, Inc. dated August 1, 1996 ("Co-Administration Agreement").1
9(a)(1) Amended Exhibit I to Co-Administration Agreement.2
9(b) Transfer Agency and Service Agreement between the Registrant and State
Street.2
9(c) Restated Administrative Services Agreement between the Registrant and
Morgan dated August 1, 1996 ("Administrative Services Agreement").1
9(c)(1) Amended Exhibit I to Administrative Services Agreement.2
9(d) Amended and Restated Portfolio Fund Services Agreement between the
Registrant and Pierpont Group, Inc. dated July 11, 1996.1
13 Investment representation letters of initial investors.2
27 Financial Data Schedule.2
1Incorporated herein by reference from Amendment No. 4 to Registrant's
Registration Statement on Form N-1A as filed with the Securities and Exchange
Commission on October 7, 1996 (Accession Number 0000912057-96-022178).
2Filed herewith.
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Title of Class Number of Record Holders
Beneficial Interests 2 (as of November 30, 1996)
Item 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as an Exhibit hereto.
The Trustees and officers of the Registrant and the personnel of the
Registrant's co-administrator are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also insured
under the fidelity bond required by Rule 17g-1 under the Investment Company Act
of 1940, as amended.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Morgan is a New York trust company which is a wholly owned subsidiary of
J.P. Morgan & Co. Incorporated. Morgan conducts a general banking and trust
business.
To the knowledge of the Registrant, none of the directors, except those set
forth below, or executive officers of Morgan is or has been during the past two
fiscal years engaged in any other business, profession, vocation or employment
of a substantial nature, except that certain officers and directors of Morgan
also hold various positions with, and engage in business for, J.P. Morgan & Co.
Incorporated, which owns all the outstanding stock of Morgan. Set forth below
are the names, addresses, and principal business of each director of Morgan who
is engaged in another business, profession, vocation or employment of a
substantial nature.
Riley P. Bechtel: Chairman and Chief Executive Officer, Bechtel Group,
Inc. (architectural design and construction). His address is Bechtel Group,
Inc., P.O. Box 193965, San Francisco, CA 94119-3965.
Martin Feldstein: President and Chief Executive Officer, National Bureau
of Economic Research, Inc. (national research institution). His address is
National Bureau of Economic Research, Inc., 1050 Massachusetts Avenue,
Cambridge, MA 02138-5398.
Hanna H. Gray: President Emeritus, The University of Chicago (academic
institution). Her address is Department of History, The University of
Chicago, 1126 East 59th Street, Chicago, IL 60637.
James R. Houghton: Retired Chairman, Corning Incorporated (glass
products). His address is R.D.#2 Spencer Hill Road, Corning, NY 14830.
C-2
<PAGE>
James L. Ketelsen: Retired Chairman and Chief Executive Officer, Tenneco
Inc. (oil, pipe-lines, and manufacturing). His address is Tenneco, Inc., P.O.
Box 2511, Houston, TX 77252-2511.
Lee R. Raymond: Chairman and Chief Executive Officer, Exxon Corporation
(oil, natural gas, and other petroleum products). His address is Exxon
Corporation, 5959 Las Colinas Boulevard, Irving, TX 75039-2298.
Richard D. Simmons: Former President, The Washington Post Company and
International Herald Tribune (newspapers). His address is P.O. Box 242,
Sperryville, VA 22740.
Douglas C. Yearley: Chairman, President and Chief Executive Officer,
Phelps Dodge Corporation (chemicals). His address is Phelps Dodge
Corporation, 2600 N. Central Avenue, Phoenix, AZ 85004-3014.
Item 29. PRINCIPAL UNDERWRITERS.
Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in part,
at the office of the Registrant and the following locations:
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, NY
10260-0060 or 522 Fifth Avenue, New York, NY 10036. (records relating to its
functions as investment adviser and services agent).
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110. (records relating to its functions as custodian and
transfer agent).
Funds Distributor, Inc., 60 State Street, Boston, MA 02109. (records
relating to its functions as co-administrator and exclusive placement agent).
Item 31. MANAGEMENT SERVICES.
Not applicable.
Item 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, The Tax Exempt Money Market Portfolio has duly caused this amendment to
its registration statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Boston, Commonwealth of Massachusetts,
on the 20th day of December, 1996.
THE TAX EXEMPT MONEY MARKET PORTFOLIO
By: /s/ RICHARD W. INGRAM
----------------------------------
Richard W. Ingram
President and Treasurer
C-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO: DESCRIPTION OF EXHIBITS
EX-99.B1 Declaration of Trust, as amended, of the Registrant
EX-99.B2 Restated By-Laws of the Registrant
EX-99.B5 Investment Advisory Agreement between the Registrant and Morgan
Guaranty Trust Company of New York
EX-99.B8 Custodian Contract between the Registrant and State Street Bank
and Trust Company
EX-99.B9a1 Amended Exhibit I to Co-Administration Agreement between the
Registrant and Funds Distributor, Inc.
EX-99.B9b Transfer Agency and Service Agreement between the Registrant and
State Street Bank and Trust Company
EX-99.B9c1 Amended Exhibit I to Restated Administrative Services Agreement
between the Registrant and Morgan Guaranty Trust Company of New
York
EX-99.B13 Investment representation letters of initial investors
EX-27 Financial Data Schedule
C-5
JPM408
AMENDMENT NO. 1 TO DECLARATION OF TRUST OF
THE TAX EXEMPT MONEY MARKET PORTFOLIO
DATED AS OF APRIL 13, 1995
The undersigned, being all the Trustees of The Tax Exempt Money Market
Portfolio, a trust organized under the laws of the State of New York (the
"Trust["]), acting pursuant to the last paragraph of Section 10.4 of the
Declaration of Trust dated as of January 29, 1993, hereby amend in its entirety
paragraph Section 6.2 of the Trust's Declaration of Trust as follows:
6.2. Non-Transferability. A Holder may not transfer, sell or exchange
its Interest except as part of a merger or similar plan of reorganization
of a Holder that qualifies under Section 368 of the Code as permitted by the
Trustees.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 13th day of April, 1995. This instrument may be executed by the Trustees on
separate counterparts but shall be effective only when signed by all of the
Trustees.
/s/ F.S. Addy
Frederick S. Addy
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
/s/ Michael P. Mallardi
Michael P. Mallardi
/s/ William G. Burns
William G. Burns
/s/ Matthew Healey
Matthew Healey
<PAGE>
JPM08
THE TAX EXEMPT MONEY MARKET PORTFOLIO
-----------------------
DECLARATION OF TRUST
Dated as of January 29, 1993
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--Trustees 3
Section 2.1 Number and Qualification 3
Section 2.2 Term and Election 4
Section 2.3 Resignation, Removal and Retirement 4
Section 2.4 Vacancies 5
Section 2.5 Meetings 5
Section 2.6 Officers; Chairman of the Board 6
Section 2.7 By-Laws 6
ARTICLE III--Powers of Trustees 6
Section 3.1 General 6
Section 3.2 Investments 6
Section 3.3 Legal Title 7
Section 3.4 Sale and Increases of Interests 7
Section 3.5 Decreases and Redemptions of Interests 8
Section 3.6 Borrow Money 8
Section 3.7 Delegation; Committees 8
Section 3.8 Collection and Payment 8
Section 3.9 Expenses 8
Section 3.10 Miscellaneous Powers 9
Section 3.11 Further Powers 9
ARTICLE IV--Investment Management and Administration and Placement
Agent Arrangements 9
Section 4.1 Investment Management and Other Arrangements 10
Section 4.2 Parties to Contract 10
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers. etc. 10
Section 5.1 Liability of Holders; Indemnification 11
Section 5.2 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties 11
Section 5.3 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. 11
Section 5.4 Mandatory Indemnification 11
i
<PAGE>
PAGE
Section 5.5 No Bond Required of Trustees 12
Section 5.6 No Duty of Investigation; Notice in
Trust Instruments, etc. 12
Section 5.7 Reliance on Experts, etc. 13
ARTICLE VI--Interests 14
Section 6.1 Interests 14
Section 6.2 Non-Transferability 14
Section 6.3 Register of Interests 14
ARTICLE VII--Increases, Decreases, And Redemptions of Interests 14
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions 15
Section 8.1 Book Capital Account Balances 15
Section 8.2 Allocations and Distributions to Holders 15
Section 8.3 Power to Modify Foregoing Procedures 15
ARTICLE IX--Holders 15
Section 9.1 Rights of Holders 15
Section 9.2 Meetings of Holders 16
Section 9.3 Notice of Meetings 16
Section 9.4 Record Date for Meetings, Distributions, etc. 16
Section 9.5 Proxies, etc. 17
Section 9.6 Reports 17
Section 9.7 Inspection of Records 17
Section 9.8 Holder Action by Written Consent 17
Section 9.9 Notices 18
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc. 18
Section 10.1 Duration 18
Section 10.2 Termination 19
Section 10.3 Dissolution 20
Section 10.4 Amendment Procedure 20
Section 10.5 Merger, Consolidation and Sale of Assets 21
Section 10.6 Incorporation 21
ii
<PAGE>
PAGE
ARTICLE XI--Miscellaneous 22
Section 11.1 Certificate of Designation; Agent for
Service of Process 22
Section 11.2 Governing Law 22
Section 11.3 Counterparts 22
Section 11.4 Reliance by Third Parties 22
Section 11.5 Provisions in Conflict With Law or Regulations 23
iii
<PAGE>
JPM08
DECLARATION OF TRUST
OF
THE TAX EXEMPT MONEY MARKET PORTFOLIO
---------------------
This DECLARATION OF TRUST of [the] The Tax Exempt Money Market
Portfolio is made as of the 29th day of January, 1993 by the parties signatory
hereto, as Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the
law of the State of New York for the investment and reinvestment of its assets;
and
WHEREAS, it is proposed that the trust assets be composed of
money and property contributed thereto by the holders of interests in the trust
entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust all money and property contributed to the trust fund and will
manage and dispose of the same for the benefit of the holders of interests in
the Trust and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust")
shall be The Tax Exempt Money Market Portfolio and so far as may be practicable
the Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not individually,
and shall not refer to the officers, employees, agents or independent
contractors of the Trust or holders of interests in the Trust.
1.2. Definitions. As used in this Declaration, the following
terms shall have the following meanings:
The term "Interested Person" shall have the meaning given it
in the 1940 Act.
"Book Capital Account" shall mean, for any Holder at any time,
the Book Capital Account of the Holder for such day, determined in accordance
with Section 8.1 hereof.
<PAGE>
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, as well as any non-superseded provisions of
the Internal Revenue Code of 1954, as amended (or any corresponding provision or
provisions of succeeding law).
"Commission" shall mean the United States Securities and
Exchange Commission.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which any such word appears.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on December 31 of each year or on such other day as is
permitted or required by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual, S
corporation, partnership or grantor trust beneficially owned by any individual,
S corporation or partnership.
"Interest(s)" shall mean the interest of a Holder in the
Trust, including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined by
calculating, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to the
total of all Holders' Book Capital Account balances. Reference herein to a
specified percentage of, or fraction of, Interests, means Holders whose combined
Book Capital Account balances represent such specified percentage or fraction of
the combined Book Capital Account balances of all, or a specified group of,
Holders.
"Investment Manager and Administrator" shall mean any party
furnishing services to the Trust pursuant to any investment management or
administration contract described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders, of (A) 67% or more of the Interests present or represented at such
meeting, if Holders of more than 50% of all Interests are present or represented
by proxy, or (B) more than 50% of all Interests, whichever is less.
2
<PAGE>
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Redemption" shall mean the complete withdrawal of an Interest
of a Holder the result of which is to reduce the Book Capital Account balance of
that Holder to zero, and the term "redeem" shall mean to effect a Redemption.
"Trustees" shall mean each signatory to this Declaration, so
long as such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been duly
elected or appointed and have qualified as Trustees in accordance with the
provisions hereof and are then in office, and reference in this Declaration to a
Trustee or Trustees shall refer to such individual or individuals in their
capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the United States Investment Company
Act of 1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be
fixed from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than three or more than 15. Any vacancy created by an increase in
the number of Trustees may be filled by the appointment of an individual having
the qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual 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 this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing 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 this Declaration. A Trustee shall be an individual
at least 21 years of age who is not under legal disability.
3
<PAGE>
2.2. Term and Election. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the event
of resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. Resignation. Removal and Retirement. Any Trustee may
resign his or her trust (without need for prior or subsequent accounting) by an
instrument in writing executed by such Trustee and delivered or mailed to the
Chairman, if any, the President or the Secretary of the Trust and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any Trustee may be removed by the affirmative
vote of Holders of two-thirds of the Interests or (provided the aggregate number
of Trustees, after such removal and after giving effect to any appointment made
to fill the vacancy created by such removal, shall not be less than the number
required by Section 2.1 hereof) with cause, by the action of two-thirds of the
remaining Trustees. Removal with cause includes, but is not limited to, the
removal of a Trustee due to physical or mental incapacity or failure to comply
with such written policies as from time to time may be adopted by at least
two-thirds of the Trustees with respect to the conduct of the Trustees and
attendance at meetings. Any Trustee who has attained a mandatory retirement age,
if any, established pursuant to any written policy adopted from time to time by
at least two-thirds of the Trustees shall, automatically and without action by
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. 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 executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee 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 such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee such documents as the remaining Trustees shall
require for the purpose set forth in the preceding sentence.
4
<PAGE>
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
retirement, adjudicated incompetence or other incapacity to perform the duties
of the office, or removal, of a Trustee. No such vacancy shall operate to annul
this Declaration or to revoke any existing agency created pursuant to the terms
of this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President, the
Secretary, an Assistant Secretary or any two Trustees. Regular meetings of the
Trustees may be held without call or notice at a time and place fixed by the
By-Laws or 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. 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. The Trustees may act with
or without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration, any
action of the Trustees may be taken at a meeting by vote of a majority of the
Trustees present (a quorum being present) or without a meeting by written
consent of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee 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 under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
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
5
<PAGE>
other and participation in a meeting by means of such communications equipment
shall constitute presence in person at such meeting.
2.6. Officers; Chairman of the Board. The Trustees shall, from
time to time, elect a President, a Secretary and a Treasurer. The Trustees may
elect or appoint, from time to time, a Chairman of the Board who shall preside
at all meetings of the Trustees and carry out such other duties as the Trustees
may designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers, agents or independent contractors with such powers
as the Trustees may deem to be advisable. The Chairman, if any, shall be and
each other officer may, but need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to time,
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
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 such
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees may perform such acts as in their
sole discretion they deem proper for conducting the business of the Trust. The
enumeration of or failure to mention any specific power herein shall not be
construed as limiting such exclusive and absolute control. The powers of the
Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in
or dispose of United States and foreign currencies and related instruments
including forward contracts, and securities, including common and preferred
stock, warrants, bonds, debentures, time notes and all other evidences of
indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state,
6
<PAGE>
territory or possession of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, or by the United
States Government, any foreign government, or any agency, instrumentality or
political subdivision of the United States Government or any foreign government,
or any international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or under any foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of any 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 such rights, powers and privileges in respect of any
of such investments; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional instruments in which the Trustees may
determine to invest.
The Trustees shall not be limited to investing in 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.
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 the
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 or
nominee name of any other Person on behalf of the Trust, 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 individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation, removal
or death of a Trustee, such resigning, removed or deceased Trustee shall
automatically cease to have any right, title or interest in any Trust Property,
and the right, title and interest of such resigning, removed or deceased 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.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
Institutional Investor to purchase an Interest, or increase its Interest, for
such type of consideration, including cash or property, at such time or times
(including, without limitation, each business day), 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. Individuals,
7
<PAGE>
S corporations, partnerships and grantor trusts that are beneficially owned by
any individual, S corporation or partnership may not purchase Interests. A
Holder which has redeemed its Interest may not be permitted to purchase an
Interest until the later of 60 calendar days after the date of such Redemption
or the first day of the Fiscal Year next succeeding the Fiscal Year during which
such Redemption occurred.
3.5 Decreases and Redemptions of Interests. Subject to Article
VII hereof, the Trustees, in their discretion, may, from time to time, without a
vote of the Holders, permit a Holder to redeem its Interest, or decrease its
Interest, for either cash or property, at such time or times (including, without
limitation, each business day), and on such terms as the Trustees may deem best.
3.6. Borrow Money. 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 assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the Trust
Property and over the business of the Trust, to delegate from time to time to
such of their number or to officers, employees, agents or independent
contractors of the Trust the doing of such things and the execution of such
instruments in either the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust or the Trust Property; to foreclose any security
interest securing any obligation, by virtue of which any property is owed to the
Trust; and to enter into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have 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 this Declaration, and to pay reasonable
compensation from the Trust Property to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal and
brokerage services, as they in good faith may deem reasonable, and reimbursement
for expenses reasonably incurred by themselves on behalf of the Trust.
8
<PAGE>
3.10. Miscellaneous Powers. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem appropriate
for the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents 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 the Trust would
have the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
the Trustees, officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious, educational,
scientific, civic or similar purposes; (f) to the extent permitted by law,
indemnify any Person with whom the Trust has dealings, including the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, 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, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust.
3.11. Further Powers. 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, whether within or without the State of New York,
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 they deem necessary, proper, appropriate 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 which is made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees. The Trustees shall not be required to
obtain any court order in order to deal with Trust Property.
9
<PAGE>
ARTICLE IV
Investment Management and Administration
and Placement Agent Arrangements
4.1. Investment Management and Other Arrangements. The
Trustees may in their discretion, from time to time, enter into investment
management and administration contracts or placement agent agreements whereby
the other party to such contract or agreement shall undertake to furnish the
Trustees such investment management and administration, placement agent and/or
other services as the Trustees shall, from time to time, consider appropriate or
desirable and all upon such terms and conditions as the Trustees may in their
sole discretion determine. Notwithstanding any provision of this Declaration,
the Trustees may authorize any Investment Manager and Administrator (subject to
such general or specific instructions as the Trustees may, from time to time,
adopt) to effect purchases, sales, loans or exchanges of Trust Property 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
any such Investment Manager and Administrator (all without any further action by
the Trustees). Any such purchase, sale, loan or exchange shall be deemed to have
been authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 hereof or in the By-Laws of the Trust may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any individual 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 reasonable and fair and not inconsistent with the provisions of this Article
IV or the By-Laws of the Trust. The same Person may be the other party to one or
more contracts entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, 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 4.2 or in the By-Laws of the Trust.
10
<PAGE>
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees Officers etc.
5.1. Liability of Holders; Indemnification. Each Holder shall
be jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of being or having been a Holder to the extent that such claim or
liability imposes on the Holder an obligation or liability which, when compared
to the obligations and liabilities imposed on other Holders, is greater than
such Holder's Interest (proportionate share), and shall reimburse such Holder
for all legal and other expenses reasonably incurred by such Holder in
connection with any such claim or liability. The rights accruing to a Holder
under this Section 5.1 shall not exclude any other right to which such Holder
may be lawfully entitled, nor shall anything contained herein restrict the right
of the Trust to indemnify or reimburse a Holder in any appropriate situation
even though not specifically provided herein. Notwithstanding the
indemnification procedure described above, it is intended that each Holder shall
remain jointly and severally liable to the Trust's creditors as a legal matter.
5.2. Limitations of Liability of Trustees, Officers, Employees
Agents, Independent Contractors to Third Parties. No Trustee, officer, employee,
agent or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
shall be subject to any personal liability whatsoever to any Person, other than
the Trust or the Holders, in connection with Trust Property or the affairs of
the Trust; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee, agent
or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
arising in connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust shall be liable to the Trust or the Holders 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)
11
<PAGE>
except for such Person's own bad faith, willful misfeasance, gross negligence or
reckless disregard of such Person's duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust (including any Person who serves at the Trust's request
as a director, officer or trustee of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) against all liabilities
and expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably incurred by
such Person in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to any
matter as to which such Person shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties; provided, however, that as to any matter disposed of by a
compromise payment by such Person, pursuant to a consent decree or otherwise, no
indemnification either for such payment or for any other expenses shall be
provided unless there has been a determination that such Person did not engage
in willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Person's 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 such Person did not engage in such conduct by
written opinion from independent legal counsel approved by the Trustees. The
rights accruing to any Person under these provisions shall not exclude any other
right to which such Person may be lawfully entitled; provided that no Person may
satisfy any right of indemnity or reimbursement granted in this Section 5.4 or
in Section 5.2 hereof or to which such Person may be otherwise entitled except
out of the Trust Property. The Trustees may make advance payments in connection
with indemnification under this Section 5.4, provided that the indemnified
Person shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that such Person is not entitled to such
indemnification.
5.5. No Bond Required of Trustees. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the performance of
any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with any Trustee, officer,
employee, agent or independent
12
<PAGE>
contractor of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by such Trustee, officer,
employee, agent or independent contractor or be liable for the application of
money or property paid, loaned or delivered to or on the order of such Trustee,
officer, employee, agent or independent contractor. Every obligation, contract,
instrument, certificate or other interest or undertaking of the Trust, and every
other act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees, officers, employees, agents or independent
contractors of the Trust. Every written obligation, contract, instrument,
certificate or other interest or undertaking of the Trust made or sold by any
Trustee, officer, employee, agent or independent contractor of the Trust, in
such capacity, shall contain an appropriate recital to the effect that the
Trustee, officer, employee, agent or independent contractor of the Trust shall
not personally be bound by or liable thereunder, nor shall resort be had to
their private property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to the Declaration,
and may contain any further recital which they may deem appropriate, but the
omission of such recital shall not operate to impose personal liability on any
Trustee, officer, employee, agent or independent contractor of the Trust.
Subject to the provisions of the 1940 Act, the Trust may maintain insurance for
the protection of the Trust Property, the Holders, and the Trustees, officers,
employees, agents and independent contractors of the Trust 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.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust shall, in the performance
of such Person's 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 (whether or not the
Trust would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any Investment Manager and Administrator,
accountant, appraiser 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.
13
<PAGE>
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property
shall consist of non-transferable Interests except as provided in Section 6.2
hereof. The Interests shall be personal property giving only the rights in this
Declaration specifically set forth. The value of an Interest shall be equal to
the Book Capital Account balance of the Holder of the Interest.
6.2. Non-Transferability. A Holder may not transfer, sell or
exchange its Interest except as part of a merger or similar plan of
reorganization of a Holder as permitted by the Trustees.
6.3. Register of Interests. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name, address
and Book Capital Account balance of each Holder. Such register shall be
conclusive as to the identity of the Holders. No Holder shall be entitled to
receive payment of any distribution, nor to have notice given to it as herein
provided, until it has given its address to such officer or agent of the Trust
as is keeping such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted by the
Trustees, each Holder shall have the right to vary its investment in the Trust
at any time without limitation by increasing (through a capital contribution) or
decreasing (through a capital withdrawal) or by a Redemption of its Interest. An
increase in the investment of a Holder in the Trust shall be reflected as an
increase in the Book Capital Account balance of that Holder and a decrease in
the investment of a Holder in the Trust or the Redemption of the Interest of a
Holder shall be reflected as a decrease in the Book Capital Account balance of
that Holder. The Trust shall, upon appropriate and adequate notice from any
Holder increase, decrease or redeem such Holder's Interest for an amount
determined by the application of a formula adopted for such purpose by
resolution of the Trustees; provided that (a) the amount received by the Holder
upon any such decrease or Redemption shall not exceed the decrease in the
Holder's Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at any
time and from time to time, charge fees for effecting any such decrease or
Redemption, at such rates as the Trustees may establish, and may, at any time
and from time to time, suspend such right of decrease or Redemption. The
procedures for effecting
14
<PAGE>
decreases or Redemptions shall be as determined by the Trustees from time to
time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account
balance of each Holder shall be determined on such days and at such time or
times as the Trustees may determine. The Trustees shall adopt resolutions
setting forth the method of determining the Book Capital Account balance of each
Holder. The power and duty to make calculations pursuant to such resolutions may
be delegated by the Trustees to the Investment Manager and Administrator,
custodian, or such other Person as the Trustees may determine. Upon the
Redemption of an Interest, the Holder of that Interest shall be entitled to
receive the balance of its Book Capital Account in cash or in kind. Except as
provided in Section 6.2, a holder may not transfer, sell or exchange its Book
Capital Account balance.
8.2. Allocations and Distributions to Holders. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall make
(i) the allocation of unrealized gains and losses, taxable income and tax loss,
and profit and loss, or any item or items thereof, to each Holder, (ii) the
payment of distributions, if any, to Holders, and (iii) upon liquidation, the
final distribution of items of taxable income and expense. Such procedures shall
be set forth in writing and be furnished to the Trust's accountants. The
Trustees may amend the procedures adopted pursuant to this Section 8.2 from time
to time. The Trustees may retain from the net profits such amount as they may
deem necessary to pay the liabilities and expenses of the Trust, to meet
obligations of the Trust, and as they may deem desirable to use in the conduct
of the affairs of the Trust or to retain for future requirements or extensions
of the business.
8.3. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income of the Trust, the allocation of income of the Trust, the Book Capital
Account balance of each Holder, or the payment of distributions to the Holders
as they may deem necessary or desirable to enable the Trust to comply with any
provision of the 1940 Act or any order of exemption issued by the Commission or
with the Code.
15
<PAGE>
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property
and the right to conduct any business described herein are vested exclusively in
the Trustees, and the Holders shall have no right or title therein other than
the beneficial interest conferred by their Interests and they shall have no
power or right to call for any partition or division of any Trust Property.
9.2. 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, 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 New York and within or 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, 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, this Declaration or the By-Laws of the Trust. 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 of the Holders
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, this Declaration or the By-Laws of the Trust.
All or any one of 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.
9.3. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purposes 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.
16
<PAGE>
9.4. Record Date for Meetings, Distributions, etc. For the
purpose of determining the Holders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a record
date for the determination of the Persons to be treated as Holders for such
purpose.
9.5. Proxies, etc. 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. Only Holders on the record date shall be entitled to vote. Each
such Holder shall be entitled to a vote proportionate to its Interest. When an
Interest is held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Interest, 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. 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.
9.6. Reports. The Trustees shall cause to be prepared and
furnished to each Holder, at least annually as of the end of each Fiscal Year, a
report of operations containing a balance sheet and a statement of income of the
Trust prepared in conformity with generally accepted accounting principles and
an opinion of an independent public accountant on such financial statements. The
Trustees shall, in addition, furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of the
end of such period and an unaudited statement of income for the period from the
beginning of the then-current Fiscal Year to the end of such period.
9.7. Inspection of Records. Therecords of the Trust shall be
open to inspection by Holders during normal business hours for any purpose not
harmful to the Trust.
9.8. Holder Action by Written Consent. Any action which may
be taken by Holders may be taken without a meeting if Holders
17
<PAGE>
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. 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.
9.9. Notices. Any and all communications, including any and
all notices to which any Holder may be entitled, shall be deemed duly served or
given if mailed, postage prepaid, addressed to a Holder at its last known
address as recorded on the register of the Trust.
ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible termination or dissolution
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of the initial Trustees named herein
and the following named persons:
Name Address Date of Birth
Nicole Catherine 18 Rio Vista Street 12/21/91
Rumery North Billerica, MA 01862
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Merrick, NY 11566
Amanda Jehan 400 South Pointe Drive, #803 08/16/89
Sher Coolidge Miami Beach FL 33139
David Cornelius Johnson 752 West End Avenue, Apt. 10J 05/02/89
Conner Leahy McCabe 100 Parkway Road, Apt. 3C 02/22/89
Bronxville, NY 10708
Andrea Hellegers 530 East 84th Street, Apt. 5H 12/22/88
New York, NY 10028
18
<PAGE>
Emilie Blair Ruble 65 Duck Pond Road 02/24/89
Glen Cove, NY 11542
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Caroline Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
Katherine Driscoll Cima 11 Beechwood Lane 04/05/92
Scarsdale, NY 10583
10.2. Termination.
(a) The Trust may be terminated (i) by the affirmative
vote of Holders of not less than two-thirds of all Interests at any meeting of
Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by Holders of not less than two-thirds
of all Interests, or (ii) by the Trustees by written notice to the Holders. Upon
any such termination,
(i) 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 and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust have been
wound up, including the power to fulfill or discharge the contracts of
the Trust, collect the assets of the Trust, sell, convey, assign,
exchange or otherwise dispose of all or any part of the Trust Property
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,
and do all other acts appropriate to liquidate the business of the
Trust; provided that any sale, conveyance, assignment, exchange or
other disposition of all or substantially all the Trust Property shall
require approval of the principal terms of the transaction and the
nature and amount of the consideration by the vote of Holders holding
more than 50% of all Interests; 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 shall distribute the remaining Trust Property,
in cash or in kind or partly each, among the Holders according to their
19
<PAGE>
respective rights as set forth in the procedures established pursuant
to Section 8.2 hereof.
(b) Upon termination of the Trust and distribution to
the Holders as herein provided, a majority of the Trustees shall execute and
file with the records of the Trust an instrument in writing setting forth
the fact of such termination and distribution. Upon termination of the Trust,
the Trustees shall thereupon be discharged from all further liabilities and
duties hereunder, and the rights and interests of all Holders shall thereupon
cease.
10.3. Dissolution. Upon the bankruptcy of any Holder, or upon
the Redemption of any Interest, the Trust shall be dissolved effective 120 days
after the event. However, the Holders (other than such bankrupt or redeeming
Holder) may, by a unanimous affirmative vote at any meeting of such Holders or
by an instrument in writing without a meeting executed by a majority of the
Trustees and consented to by all such Holders, agree to continue the business of
the Trust even if there has been such a dissolution.
10.4. Amendment Procedure.
(a) This Declaration may be amended by the vote of Holders of more than 50% of
all Interests at any meeting of Holders or by an instrument in writing without a
meeting, executed by a majority of the Trustees and consented to by the Holders
of more than 50` of all Interests. Notwithstanding any other provision hereof,
this Declaration may be amended by an instrument in writing executed by a
majority of the Trustees, and without the vote or consent of Holders, for any
one or more of the following purposes: (i) to change the name of the Trust, (ii)
to supply any omission, or to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, (iii) to conform this Declaration to
the requirements of applicable federal law or regulations or the requirements of
the applicable provisions of the Code, (iv) to change the state or other
jurisdiction designated herein as the state or other jurisdiction whose law
shall be the governing law hereof, (v) to effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the law 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 Code,
or (C) to permit the transfer of Interests (or to permit the transfer of any
other beneficial interest in or share of the Trust, however denominated), and
(vi) in conjunction with any amendment contemplated by the foregoing clause (iv)
or the foregoing clause (v) 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 (v)
or the foregoing clause (vi) to be conclusively evidenced by the execution
20
<PAGE>
of any such amendment by a majority of the Trustees; provided, however, that
unless effected in compliance with the provisions of Section 10.4(b) hereof, no
amendment otherwise authorized by this sentence may be made which would reduce
the amount payable with respect to any Interest upon liquidation of the Trust
and; provided, further, that the Trustees shall not be liable for failing to
make any amendment permitted by this Section 10.4(a).
(b) No amendment may be made under Section 10.4(a)
hereof which would change any rights with respect to any Interest by reducing
the amount payable thereon upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of Holders of two-thirds of all Interests.
(c) A certification in recordable form executed by a
majority of the Trustees setting forth an amendment and reciting that it was
duly adopted by the Holders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, in recordable form, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when filed with the
records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
10.5. 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, including good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Holders called for such
purpose by the affirmative vote of Holders of not less than two-thirds of all
Interests, or by an instrument in writing without a meeting, consented to by
Holders of not less than two-thirds of all Interests, 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 State of New York.
10.6. Incorporation. Upon a Majority Interests Vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to carry on
any business in which the Trust directly or indirectly has any interest, and to
sell, convey and transfer the Trust Property to any such corporation, trust,
partnership, association or other organization in exchange for the equity
interests thereof or otherwise, and to lend money to,
21
<PAGE>
subscribe for the equity interests of, and enter into any contract with any such
corporation, trust, partnership, association or other organization, or any
corporation, trust, partnership, association or other organization in which the
Trust holds or is about to acquire equity interests. 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 herein shall be construed as
requiring approval of the Holders 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 one or more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service of
Process. The Trust shall file, with the Department of State of the State of New
York, a certificate, in the name of the Trust and executed by an officer of the
Trust, designating the Secretary of State of the State of New York as an agent
upon whom process in any action or proceeding against the Trust may be served.
11.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed in accordance with the
law of the State of New York and reference shall be specifically made to the
trust law of the State of New York as to the construction of matters not
specifically covered herein or as to which an ambiguity exists.
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 one such original
counterpart.
11.4. Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or Holders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Holders, (d) the fact that
the number of Trustees or Holders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officer elected by the
22
<PAGE>
Trustees, or (f) the existence of any fact or facts which in any manner relate
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.
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
of such provisions is in conflict with the 1940 Act, or with other applicable
law 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 this Declaration in any jurisdiction.
/s/ Matthew Healey
Matthew Healey
As Trustee and not individually
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
As Trustee and not individually
/s/ F.S. Addy
Frederick S. Addy
As Trustee and not individually
/s/ Michael P. Mallardi
Michael P. Mallardi
As Trustee and not individually
/s/ William G. Burns
William B. Burns
As Trustee and not individually
23
Exhibit 2
JPM345A
AMENDED AND RESTATED BY-LAWS
OF
EACH MASTER TRUST LISTED ON SCHEDULE I
AND
EACH FEEDER TRUST LISTED ON SCHEDULE II
AND
EACH STAND ALONE TRUST LISTED ON SCHEDULE III
ARTICLE I
DEFINITIONS
Each Trust listed on Schedule I is referred to in these By-Laws as a
"Master Trust". Each Trust listed on Schedule II is referred to in these By-Laws
as a "Feeder Trust". Each Trust listed on Schedule III is referred to in these
By-Laws as a "Stand Alone Trust".
In the case of each Trust, unless otherwise specified, capitalized
terms have the respective meanings given them in the Declaration of Trust of
such Trust dated as of the date set forth in Schedule I, II or III, as amended
from time to time. In the case of each Feeder Trust and each Stand Alone Trust,
the term "Holder" has the meaning given the term "Shareholder" in the respective
Declarations of Trust.
ARTICLE II
OFFICES
Section 1. Principal Office. In the case of each Master Trust, the
principal office of the Trust shall be in such place as the Trustees may
determine from time to time, provided that the principal office shall be outside
the United States of America if the Trustees determine that the Trust is
intended to be operated so that it is not engaged in United States trade or
business for United States federal income tax purposes. In the case of each
Feeder Trust and each Stand Alone Trust, until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within the state of its organization and the United
States of America as the Trustees may from time to time determine.
ARTICLE III
HOLDERS
Section 1. Meetings of Holders. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests in the case of each Master Trust or 10% of the voting securities
entitled to vote thereat in the case of each Feeder Trust and each Stand Alone
Trust, such request specifying the purpose or purposes for which such meeting is
to be called.
Any such meeting shall be held within or without the state of
organization of the Trust and within, or, if applicable, in the case of a Master
Trust only without, the United States of America on such day
<PAGE>
and at such time as
the Trustees shall designate. Holders of one third of the Interests in the case
of each Master Trust or one third of the voting securities entitled to vote
thereat in the case of each Feeder Trust and each Stand Alone Trust, present in
person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other applicable
law, the Declaration or these By-Laws. If a quorum is present at a meeting, an
affirmative vote of the Holders present in person or by proxy, holding more than
50% of the total Interests in the case of each Master Trust, or 50% of the
voting securities entitled to vote thereat in the case of each Feeder Trust and
each Stand Alone Trust, present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless a greater number of affirmative
votes is required by the 1940 Act, other applicable law, the Declaration or
these By-Laws.
All or any one or more Holders may participate in a meeting of Holders
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
In the case of The Series Portfolio or any Feeder Trust or any Stand
Alone Trust, whenever a matter is required to be voted by Holders of the Trust
in the aggregate under Section 9.1 and Section 9.2 of the Declaration of The
Series Portfolio or Section 6.8 and Section 6.9 and Section 6.9(g) of the
Declaration of the Feeder Trust and the Stand Alone Trust, the Trust may either
hold a meeting of Holders of all series, as defined in Section 1.2 of the
Declaration of The Series Portfolio or Section 6.9 of the Declaration of the
Feeder Trust and the Stand Alone Trust, to vote on such matter, or hold separate
meetings of Holders of each of the individual series to vote on such matter,
provided that (i) such separate meetings shall be held within one year of each
other, (ii) a quorum consisting of the Holders of one third of the voting
securities of the individual series entitled to vote shall be present at each
such separate meeting except as may otherwise be required by the 1940 Act, other
applicable law, the Declaration or these By-Laws and (iii) a quorum consisting
of the Holders of one third of all voting securities of the Trust entitled to
vote, except as may otherwise be required by the 1940 Act, other applicable law,
the Declaration or these By-Laws, shall be present in the aggregate at such
separate meetings, and the votes of Holders at all such separate meetings shall
be aggregated in order to determine if sufficient votes have been cast for such
matter to be voted.
Section 2. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purpose of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at least 10
days and not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Holder attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. At any meeting, any
business properly before the meeting may be considered whether or not stated in
the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
In the case of The Series Portfolio and each Feeder Trust and each
Stand Alone Trust, where separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by
2
<PAGE>
Holders of the
Trust in the aggregate, as provided in Article III, Section 1 above, notice of
each such separate meeting shall be provided in the manner described above in
this Section 2.
Section 3. Record Date for Meetings. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, the Trustees
may from time to time fix a date, not more than 90 days prior to the date of any
meeting of Holders as a record date for the determination of the Persons to be
treated as Holders for such purpose.
In the case of The Series Portfolio and each Feeder Trust and each
Stand Alone Trust, where separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by Holders of the
Trust in the aggregate, as provided in Article III, Section 1 above, the record
date of each such separate meeting shall be determined in the manner described
above in this Section 3.
Section 4. Voting, Proxies, Inspectors of Election. At any meeting of
Holders, any Holder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote is
to be taken. A proxy may be revoked by a Holder at any time before it has been
exercised by placing on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, a later dated proxy or written
revocation. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of the Trust or of one or more Trustees or of one or
more officers of the Trust. No proxy shall be valid after one year from the date
of its execution, unless a longer period is expressly stated in the proxy.
In the case of each Master Trust, only Holders on the record date shall
be entitled to vote and each such Holder shall be entitled to a vote
proportionate to its Interest. In the case of each Feeder Trust, (i) only
Holders on the record date shall be entitled to vote, and (ii) each whole Share
shall be entitled to vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust shall not be voted. In the
case of each Stand Alone Trust, unless the Trustees determine that each Share
will entitle Holders to one vote per Share, on any matter submitted to a vote of
Holders of Shares of any series or class thereof, if any, each dollar of net
asset value (number of Shares owned times net asset value per Share of such
series or class, as applicable) shall be entitled to one vote on any matter on
which such shares are entitled to vote and each fractional dollar amount shall
be entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. In the case of each Feeder Trust and
each Stand Alone Trust, (i) Shares shall be voted by individual series or
classes thereof, if any, on any matter submitted to a vote of the Holders of the
Trust except as provided in Section 6.9(g) of the Declaration, and (ii) at any
meeting of Holders of the Trust or of any series or class thereof, if any, a
Shareholder Servicing Agent may vote any Shares as to which such Shareholder
Servicing Agent is the agent of record.
The Chairman of the meeting may, and upon the request of the Holders of
10% of the Interests or Shares, as the case may be, entitled to vote at such
election shall, appoint one or three inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after
3
<PAGE>
the election certify the result of the vote taken. No
candidate for Trustee shall be appointed such inspector. If there are three
inspectors of election, the decision, act or certification of a majority is
effective in all respects as the decision, act or certificate of all.
At every meeting of the Holders, all proxies shall be required and
taken in charge of and all ballots shall be required and canvassed by the
Secretary of the meeting, who shall decide all questions touching the
qualification of voters, the validity of the proxies, the acceptance or
rejection of votes and any other questions related to the conduct of the vote
with fairness to all Holders, unless inspectors of election shall have been
appointed, in which event the inspectors of election shall decide all such
questions. On request of the Chairman of the meeting, or of any Holder or his
proxy, the Secretary shall make a report in writing of any question determined
and shall execute a certificate of facts found, unless inspectors of election
shall have been appointed, in which event the inspectors of election shall do
so.
When an Interest is held or Shares are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest or Shares, but if more than one of them is present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest or Shares. A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger.
Section 5. Holder Action by Written Consent. In the case of each Master
Trust, any action which may be taken by Holders may be taken without a meeting
if Holders of all Interests entitled to vote consent to the action in writing
and the written consents are filed with the records of the meetings of Holders.
In the case of each Feeder Trust and each Stand Alone Trust, any action which
may be taken by Holders may be taken without a meeting if Holders holding a
majority of Shares entitled to vote on the matter (or such larger proportion
thereof as shall be required by law, the Declaration or these By-Laws for
approval of such matter) consent to the action in writing and the written
consents are filed with the records of the meetings of Holders.
Such consents shall be treated for all purposes as a vote taken at a
meeting of Holders. Each such written consent shall be executed by or on behalf
of the Holder delivering such consent and shall bear the date of such execution.
No such written consent shall be effective to take the action referred to
therein unless, within one year of the earliest dated consent, written consents
executed by a sufficient number of Holders to take such action are filed with
the records of the meetings of Holders.
Section 6. Conduct of Meetings. The meetings of the Holders shall be
presided over by the Chairman, or if he is not present, by a Chairman to be
elected at the meeting. The Secretary of the Trust, if present, shall act as
secretary of such meetings, or if he is not present, an Assistant Secretary
shall so act; if neither the Secretary nor any Assistant Secretary is present,
then the meeting shall elect its secretary
4
<PAGE>
ARTICLE IV
TRUSTEES
Section 1. Place of Meeting, etc. The Trustees may hold their meetings,
have one or more offices, and keep the books of the Trust, inside or outside the
state of organization of the Trust or the United States of America, at any
office of the Trust or at any other place as they may from time to time
determine, or in the case of meetings, as they may from time to time determine
or as shall be specified or fixed in the respective notices or waivers of notice
thereof.
Section 2. Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman or any two Trustees. The President, the
Secretary or an Assistant Secretary may call meetings only upon the written
direction of the Chairman or two Trustees. The Trustees shall hold an annual
meeting for the election of officers and transaction of other business which may
come before such meeting. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed by resolution of the Trustees. Notice
of any other meeting shall be mailed or otherwise given not less than 24 hours
before the meeting but may be waived in writing by any Trustee either before or
after such meeting. Notice shall be given of any proposed action to be taken by
written consent. Notice of a meeting or proposed action to be taken by written
consent may be given by telegram (which term shall include a cablegram), by
telecopier or delivered personally (which term shall include by telephone), as
well as by mail. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except in the situation in which a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting was not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Trustees need be stated in the notice or waiver of notice of such meeting.
Section 3. Quorum. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in the Declaration, the 1940
Act or other applicable law, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present).
In the absence of a quorum, a majority of the Trustees present may adjourn the
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
With respect to actions of the Trustees, Trustees who are Interested
Persons of the Trust or otherwise interested in any action to be taken may be
counted for quorum purposes and shall be entitled to vote to the extent
permitted by the 1940 Act.
Section 4. Committees. The Trustees, by the majority vote of all the
Trustees then in office, may appoint from the Trustees committees which shall in
each case consist of such number of Trustees (not less than two) and shall have
and may exercise such powers as the Trustees may determine in the resolution
appointing them. Unless provided otherwise in the Declaration or by the
Trustees, a majority of all the members of any such committee may determine its
actions and fix the time and place of its meetings. With respect to actions of
any committee, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes and
shall be entitled to vote to the extent permitted by the 1940 Act. The Trustees
shall have power at any time to change the members and powers of any such
committee, to fill vacancies and to discharge any such committee. Each committee
5
<PAGE>
shall keep regular minutes of its meetings and cause them to be filed with the
minutes of the proceedings of the Trustees.
Section 5. Telephone Meetings. All or any one or more Trustees may
participate in a meeting of the Trustees or any committee thereof by means of a
conference telephone or similar communications equipment by means of which all
individuals participating in the meeting can hear each other, and participating
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting. Any conference telephone meeting shall be deemed to
have been held at a place designated by the Trustees at the meeting.
Section 6. Action without a Meeting. Any action required or permitted
to be taken at any meeting of the Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed either by all
the Trustees or all members of such committee then in office or by an 80%
majority of the Trustees or an 80% majority of members of such committee,
provided that no action by 80% majority consent shall be effective unless and
until (i) each Trustee or committee member signing such consent shall have been
advised in writing of the following information: the identity of any Trustee or
committee member not signing such consent and the reasons for his not signing;
and (ii) after receiving such information signing Trustees or committee members
who represent an 80% majority then in office indicate in writing that the
consent shall become effective by 80% majority, rather than unanimous, consent.
All such effective written consents shall be filed with the minutes of the
proceedings of the Trustees and treated as a vote for all purposes.
Section 7. Compensation. The Trustees shall be entitled to receive
such compensation from the Trust for their services as may from time to time
be voted by the Trustees.
Section 8. Chairman. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to serve until his successor
shall have been duly elected and qualified; the Chairman may serve on committees
of the Trustees. The Chairman shall not be an officer of the Trust solely by
virtue of his serving as Chairman. The Chairman shall preside at all meetings of
the Trustees at which he is present, shall serve as the liaison between the
Trustees and the officers of the Trust and between the Trustees and their staff
and shall have such other duties as from time to time may be assigned to him by
the Trustees.
Section 9. Trustees' Staff; Counsel for the Trust and Trustees, etc.
The Trustees may employ or contract with one or more Persons to serve as their
staff and to provide such services related thereto as may be determined from
time to time. The Trustees may employ attorneys as counsel for the Trust and/or
the Trustees and may engage such other experts or consultants as may be
determined from time to time.
ARTICLE V
OFFICERS
Section 1. General Provisions. The Trustees may elect or appoint such
officers or agents as the business of the Trust may require, including without
limitation a Chief Executive Officer, a President, one or more Vice Presidents,
a Treasurer, a Secretary, one or more Assistant Treasurers and one or more
Assistant Secretaries. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
6
<PAGE>
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these ByLaws, each of the principal
executive officer described in Section 4 below, the Treasurer and the Secretary
shall hold office until a successor shall have been duly elected and qualified,
and any other officers shall hold office at the pleasure of the Trustees. Any
two or more offices may be held by the same Person, provided that at least two
different individuals shall serve as officers. Any officer may be, but does not
need be, a Trustee.
Section 3. Removal. The Trustees may remove any officer with or without
cause by a vote of a majority of the Trustees. Any subordinate officer or agent
appointed by any officer or committee may be removed with or without cause by
such appointing officer or committee.
Section 4. Powers and Duties of the Chief Executive Officer; President.
The Chief Executive Officer, if any, shall be the principal executive officer of
the Trust. Subject to the control of the Trustees, the Chief Executive Officer
shall (i) at all times exercise general supervision and direction over the
affairs of the Trust, (ii) have the power to grant, issue, execute or sign such
documents as may be deemed advisable or necessary in the ordinary course of the
Trust's business and (iii) have such other powers and duties as from time to
time may be assigned by the Trustees.
If there is no Chief Executive Officer, the President shall be the
principal executive officer of the Trust and shall have the powers and duties
set forth above in this Section 4. If there is a Chief Executive Officer and a
President, the President shall have such powers and duties as from time to time
may be assigned by the Trustees or the Chief Executive Officer.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, any Vice President designated by the Trustees or
the President shall perform all the duties, and may exercise any of the powers,
of the President. Each Vice President shall perform such other duties as from
time to time may be assigned to him by the Trustees or the Chief Executive
Officer.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to the Trust's
custodian. The Treasurer shall render a statement of condition of the finances
of the Trust to the Trustees as often as they shall require the same and shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Holders in proper books provided for that
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust, if any; and shall have charge of the Holder
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise
7
<PAGE>
any of the powers, of the Treasurer. Each Assistant Treasurer shall perform
such other duties as from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers. Subject to any applicable law or
provision of the Declaration, any compensation of any officer may be fixed from
time to time by the Trustees. No officer shall be prevented from receiving any
such compensation as such officer by reason of the fact that he is also a
Trustee. If no such compensation is fixed for any officer, such officer shall
not be entitled to receive any compensation from the Trust.
Section 11. Bond and Surety. As provided in the Declaration, any
officer may be required by the Trustees to be bonded for the faithful
performance of his duties in the amount and with such sureties as the Trustees
may determine.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE VII
FISCAL YEAR
The Trust may have different fiscal years for its separate and distinct
series, if applicable. The fiscal year(s) of the Trust shall be determined by
the Trustees, provided that the Trustees (or the Treasurer subject to
ratification by the Trustees) may from time to time change any fiscal year.
ARTICLE VIII
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times
employ one or more banks or trust companies having a capital, surplus and
undivided profits of at least $50,000,000 as custodian with authority as the
Trust's agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Declaration, these By-Laws and
the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same upon
written order; (ii) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; (iii) to disburse such funds upon orders or
vouchers; (iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of
8
<PAGE>
the
Trust and the net asset value of the Trust or, in the case of each
Feeder Trust and each Stand Alone Trust, Shares; all upon such basis of
compensation as may be agreed upon between the Trustees and the
custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
Section 2. Successor Custodian. The Trust shall upon the resignation
or inability to serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian; (ii) require that the cash and
securities owned by the Trust be delivered directly to the successor
custodian; and (iii) in the event that no successor custodian can be
found, submit to the Holders before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor custodian,
the question whether the Trust shall be liquidated or shall function
without a custodian.
ARTICLE IX
INDEMNIFICATION
In the case of each Master Trust, insofar as the conditional advancing
of indemnification monies under Section 5.4 of the Declaration for actions based
upon the 1940 Act may be concerned, such payments will be made only on the
following conditions:
(i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may
be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay the amount of the advance which exceeds the amount
to which it is ultimately determined that he is entitled to receive
from the Trust by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayment may be
obtained by the Trust without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient
of the advance, or (b) a majority of a quorum of the Trust's
disinterested, nonparty Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
9
<PAGE>
ARTICLE X
AMENDMENTS, ADDITIONAL TRUSTS, ETC.
The Trustees shall have the power to alter, amend or repeal
these By-Laws or adopt new By-Laws at any time to the extent such power is not
reserved to the Holders by the 1940 Act, other applicable law or the
Declaration. Action by the Trustees with respect to these By-Laws shall be taken
by an affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
One or more additional trusts may be added to Schedule I or Schedule II
by resolution of the trustees of such trust(s), provided that the trustees of
such trust(s) are identical to the Trustees of the Master Trusts, the Feeder
Trusts and the Stand Alone Trusts immediately prior to such addition.
In the case of each Master Trust, the Declaration refers to the
Trustees as Trustees, but not as individuals or personally; and no Trustee,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Trust. In
the case of each Feeder Trust and each Stand Alone Trust, the Declaration refers
to the Trustees not individually, but as Trustees under the Declaration, and no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Holders, in connection with Trust Property or the affairs of the Trust, save
only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust.
JPM345A
10
<PAGE>
SCHEDULE I
MASTER TRUSTS
State of Date of Date
Organiza- Declara- By-Laws
Trust tion tion Adopted
The Treasury Money Market New York 11/4/92 10/10/96
Portfolio
The Money Market Portfolio New York 1/29/93 10/10/96
The Tax Exempt Money Market New York 1/29/93 10/10/96
Portfolio
The Short Term Bond Portfolio New York 1/29/93 10/10/96
The U.S. Fixed Income Portfolio New York 1/29/93 10/10/96
The Tax Exempt Bond Portfolio New York 1/29/93 10/10/96
The Selected U.S. Equity Portfolio New York 1/29/93 10/10/96
The U.S. Small Company Portfolio New York 1/29/93 10/10/96
The Non-U.S. Equity Portfolio New York 1/29/93 10/10/96
The Diversified Portfolio New York 1/29/93 10/10/96
The Non-U.S. Fixed Income New York 6/13/93 10/10/96
Portfolio
The Emerging Markets Equity New York 6/13/93 10/10/96
Portfolio
The New York Total Return Bond New York 6/13/93 10/10/96
Portfolio
The Series Portfolio New York 6/14/94 10/10/96
11
<PAGE>
SCHEDULE II
FEEDER TRUSTS
State of Date of Date
Organization Declara- By-Laws
Trust tion Adopted
The JPM Pierpont Funds Massachusetts 11/4/92 10/10/96
The JPM Institutional
Funds Massachusetts 11/4/92 10/10/96
12
<PAGE>
SCHEDULE III
STAND ALONE TRUSTS
State of Date of Date
Organization Declara- By-Laws
Trust tion Adopted
JPM Series Trust Massachusetts 8/15/96 10/10/96
13
THE TAX EXEMPT MONEY MARKET PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 30th day of June, 1993, between The Tax Exempt
Money Market Portfolio, a trust organized under the law of the State of New York
(the "Portfolio") and Morgan Guaranty Trust Company of New York, a New York
trust company authorized to conduct a general banking business (the "Advisor"),
WHEREAS, the Portfolio is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Portfolio desires to retain the Advisor to render
investment advisory services to the Portfolio, and the Advisor is willing to
render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Advisor to act as
investment adviser to the Portfolio for the period and on the terms set forth in
this Agreement. The Advisor accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of the
Portfolio, the Advisor shall manage the investment operations of the Portfolio
and the composition of the Portfolio's holdings of securities and investments,
including cash, the purchase, retention and disposition thereof and agreements
relating thereto, in accordance with the Portfolio's investment objectives and
policies as stated in the Registration Statement (as defined in paragraph 3(d)
of this Agreement) and subject to the following understandings:
(a) the Advisor shall furnish a continuous investment program
for the Portfolio and determine from time to time what investments or
securities will be purchased, retained, sold or lent by the Portfolio,
and what portion of the assets will be invested or held uninvested as
cash;
(b) the Advisor shall use the same skill and care in the
management of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
1
<PAGE>
(c) the Advisor, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust, By-Laws and Registration Statement of the
Portfolio and with the instructions and directions of the Trustees of
the Portfolio and will conform to and comply with the requirements of
the 1940 Act and all other applicable federal and state laws and
regulations;
(d) the Advisor shall determine the securities to be
purchased, sold or lent by the Portfolio and as agent for the Portfolio
will effect portfolio transactions pursuant to its determinations
either directly with the issuer or with any broker and/or dealer in
such securities; in placing orders with brokers and/or dealers the
Advisor intends to seek best price and execution for purchases and
sales; the Advisor shall also determine whether or not the Portfolio
shall enter into repurchase or reverse repurchase agreements;
On occasions when the Advisor deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
customers of the Advisor, the Advisor may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be so sold or purchased in order to obtain
best execution, including lower brokerage commissions, if applicable.
In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the
Advisor in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio;
(e) the Advisor shall maintain books and records with respect
to the Portfolio's securities transactions and shall render to the
Portfolio's Trustees such periodic and special reports as the Trustees
may reasonably request; and
(f) the investment management services of the Advisor to the
Portfolio under this Agreement are not to be deemed exclusive, and the
Advisor shall be free to render similar services to others.
3. The Portfolio has delivered copies of each of the following
documents to the Advisor and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) Declaration of Trust of the Portfolio (such Declaration of
Trust, as presently in effect and as amended from time to time, is
herein called the "Declaration of Trust");
(b) By-Laws of the Portfolio (such By-Laws, as presently in
effect and as amended from time to time, are herein called the
"By-Laws");
2
<PAGE>
(c) Certified resolutions of the Trustees of the Portfolio
authorizing the appointment of the Advisor and approving the form of
this Agreement;
(d) The Portfolio's Notification of Registration on Form N-8A
and Registration Statement on Form N-1A (No. 811-7842) each under the
1940 Act (the "Registration Statement") as filed with the Securities
and Exchange Commission (the "Commission") on July 6, 1993, all
amendments thereto.
4. The Advisor shall keep the Portfolio's books and records
required to be maintained by it pursuant to paragraph 2(e). The Advisor agrees
that all records which it maintains for the Portfolio are the property of the
Portfolio and it will promptly surrender any of such records to the Portfolio
upon the Portfolio's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 of the Commission under the 1940 Act any such
records as are required to be maintained by the Advisor with respect to the
Portfolio by Rule 31a-1 of the Commission under the 1940 Act.
5. During the term of this Agreement the Advisor will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased for the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, the Portfolio will pay to the Advisor as full compensation
therefor a fee at an annual rate equal to (i) .20% of the Portfolio's average
daily net assets up to and including $1,000,000,000 and (ii) .10% of the
Portfolio's average daily net assets in excess of $1,000,000,000. This fee will
be computed daily and payable as agreed by the Portfolio and the Advisor, but no
more frequently than monthly.
7. The Advisor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
8. This Agreement shall continue in effect for a period of
more than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Portfolio at any time, without the payment of any penalty, by vote of a majority
of all the Trustees of the Portfolio or by vote of a majority of the outstanding
voting securities of the
3
<PAGE>
Portfolio on 60 days' written notice to the Advisor, or by the Advisor at any
time, without the payment of any penalty, on 90 days' written notice to the
Portfolio. This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
9. The Advisor shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided herein
or authorized by the Trustees of the Portfolio from time to time, have no
authority to act for or represent the Portfolio in any way or otherwise be
deemed an agent of the Portfolio.
10. This Agreement may be amended by mutual consent, but the
consent of the Portfolio must be approved (a) by vote of a majority of those
Trustees of the Portfolio who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such amendment, and (b) by vote of a majority of the outstanding
voting securities of the Portfolio.
11. Notices of any kind to be given to the Advisor by the
Portfolio shall be in writing and shall be duly given if mailed or delivered to
the Advisor at 9 West 57th Street, New York, New York 10019, Attention: Managing
Director, Funds Management Division, or at such other address or to such other
individual as shall be specified by the Advisor to the Portfolio. Notices of any
kind to be given to the Portfolio by the Advisor shall be in writing and shall
be duly given if mailed or delivered to the Portfolio at 6 St. James Avenue,
Suite 900, Boston, Massachusetts 02116 or at such other address or to such other
individual as shall be specified by the Portfolio to the Advisor.
12. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually and the Advisor
agrees that neither the shareholders nor the Trustees nor any officer, employee,
representative or agent of the Portfolio shall be personally liable upon, or
shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Portfolio, that
the shareholders, trustees, officers, employees, representatives and agents of
the Portfolio shall not be personally liable hereunder, and that it shall look
solely to the property of the Portfolio for the satisfaction of any claim
hereunder.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the 30th day
of June, 1993.
THE TAX EXEMPT MONEY MARKET
PORTFOLIO
By: /s/ Philip W. Coolidge
Philip W. Coolidge
President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Kathleen H. Tripp
Kathleen H. Tripp
Vice President
TEMMIAAH
CUSTODIAN CONTRACT
Between
TAX EXEMPT MONEY MARKET PORTFOLIO
and
STATE STREET BANK AND TRUST COMPANY
21E593
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be
Held By It............................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States................2
2.1 Holding Securities...........................................2
2.2 Delivery of Securities.......................................3
2.3 Registration of Securities...................................7
2.4 Bank Accounts................................................8
2.5 Availability of Federal Funds................................9
2.6 Collection of Income.........................................9
2.7 Payment of Fund Monies......................................10
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased...................................................13
2.9 Appointment of Agents.......................................13
2.10 Deposit of Fund Assets in Securities System.................14
2.10A Fund Assets Held in the Custodian's Direct Paper
System.............................................17
2.11 Segregated Account..........................................18
2.12 Ownership Certificates for Tax Purposes.....................19
2.13 Proxies.....................................................20
2.14 Communications Relating to Fund Securities..................20
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States...........................21
3.1 Appointment of Foreign Sub-Custodians.......................21
3.2 Assets to be Held...........................................21
3.3 Foreign Securities Depositories.............................22
3.4 Agreements with Foreign Banking Institutions................22
3.5 Access of Independent Accountants of the Fund...............23
3.6 Reports by Custodian........................................23
3.7 Transactions in Foreign Custody Account.....................24
3.8 Liability of Foreign Sub-Custodians.........................25
3.9 Liability of Custodian......................................25
3.10 Reimbursement for Advances..................................26
3.11 Monitoring Responsibilities.................................27
3.13 Branches of U.S. Banks......................................28
3.13 Tax Law.....................................................28
4. Payments for Sales or Repurchase or Redemptions of Shares of
the Fund.............................................................29
5. Proper Instructions..................................................30
<PAGE>
TABLE OF CONTENTS continued
Page
6. Actions Permitted Without Express Authority..........................31
7. Evidence of Authority................................................32
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income........................32
9. Records..............................................................33
10. Opinion of Fund's Independent Accountants............................34
11. Reports to Fund by Independent Public Accountants....................34
12. Compensation of Custodian............................................35
13. Responsibility of Custodian..........................................35
14. Effective Period, Termination and Amendment..........................37
15. Successor Custodian..................................................39
16. Interpretive and Additional Provisions...............................41
17. Massachusetts Law to Apply...........................................41
18. Prior Contracts......................................................41
19. Shareholder Communications Election..................................41
20. Limitation of Liability..............................................42
<PAGE>
CUSTODIAN CONTRACT
This Contract between Tax Exempt Money Market Portfolio, a business
trust organized and existing under the laws of the State of New York, having its
principal place of business at 6 St. James Avenue, Boston, Massachusetts 02116,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of the Declaration of Trust. The Fund agrees to deliver to the Custodian all
securities and cash of the Fund, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Fund from time to time, and the cash consideration received by it
for such new or treasury shares of beneficial interest of the Fund ("Shares") as
may be issued or sold from time to time. The
<PAGE>
Custodian shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Article 5), the Custodian shall on behalf of the applicable Fund(s)
from time to time employ one or more sub-custodians, located in the
United States but only in accordance with an applicable vote by the
Board of Trustees of the Fund and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account
of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian.
The Custodian may employ as sub-custodian for the Fund's foreign
securities foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in accordance
with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in
the United States including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively
2
<PAGE>
referred to herein as "Securities System" and (b) commercial paper of
an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 Deliveries of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in
a Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions from the Fund,
which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of
the Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with
any repurchase agreement related to such
securities entered into by the Fund;
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.10 hereof;
4) To the depository agent in connection with
tender or other similar offers for securities of
the Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
3
<PAGE>
otherwise become payable; provided that, in any
such case, the cash or other consideration is to
be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or
nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units; provided that, in any
such case, the new securities are to be delivered
to the Custodian;
7) Upon the sale of such securities for the account
of the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery" custom; provided that in
any such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's own negligence or
willful misconduct;
8) For exchange or conversion pursuant to any plan
of
4
<PAGE>
merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise
of such warrants, rights or similar securities or
the surrender of interim receipts or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against
receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund
on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United
States government, its agencies or
instrumentalities, except that in connection with
any loans for which collateral is to be credited
to the Custodian's account in the book-entry
system authorized by the
5
<PAGE>
U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the
delivery of securities owned by the Fund prior
to the receipt of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of
assets by the Fund, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing
Corporation and of any registered national
securities exchange, or of any similar
organization or organizations, regarding escrow
or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, and
a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to
compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract
Market, or any
6
<PAGE>
similar organization or organizations, regarding
account deposits in connection with transactions
by the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for
delivery to such Transfer Agent or to the holders
of shares in connection with distributions in
kind, as may be described from time to time in
the currently effective prospectus and statement
of additional information of the Fund, related to
the Fund ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions from the Fund, a certified copy of a
resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the
Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of
the Fund to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held
by
7
<PAGE>
the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered
investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian under
the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to
notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency
of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it
from or for the account of the Fund, other than cash
maintained by the Fund
8
<PAGE>
in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for a Fund may be deposited by it to
its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or
trust company and the funds to be deposited with each such
bank or trust company shall be approved by vote of a
majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund,
make federal funds available to such Fund as of specified
times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for
Shares of such Fund which are deposited into the Fund's
account.
2.6 Collection of Income. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all
income and other payments with respect to registered
domestic securities held hereunder to which the Fund shall
9
<PAGE>
be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer
domestic securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected,
to such Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items
requiring presentation as and when they become due and
shall collect interest when due on securities held
hereunder. Income due the Fund on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than
to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which
the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund, which may be continuing
instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of domestic securities, options,
options, futures contracts or options on futures
contracts
10
<PAGE>
for the account of the Fund but only (a) against
the delivery of such securities or evidence of
title to such options, futures contracts or
options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing
business in the United States or abroad which is
qualified under the Investment Company Act of
1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for
this purpose) registered in the name of the Fund
or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase
effected through a Securities System, in
accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in
accordance with the conditions set forth in
Section 2.10A; (d) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery
of the securities either in certificate form or
through an entry crediting the Custodian's
account at the Federal Reserve Bank with such
securities or (ii) against delivery of the
receipt evidencing purchase by the
11
<PAGE>
Fund of securities owned by the Custodian along
with written evidence of the agreement by the
Custodian to repurchase such securities from the
Fund or(e)for transfer to a time deposit account
of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article
5;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as set
forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares
issued by the Fund as set forth in Article 4
hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited
to the following payments for the account of the
Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated
as deferred expenses;
5) For the payment of any dividends on Shares of the
Fund declared pursuant to the governing documents
of the Fund;
6) For payment of the amount of dividends received
in
12
<PAGE>
respect of securities sold short;
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions
from the Fund, a certified copy of a resolution
of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the
Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which
such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
domestic securities for the account of a Fund is made by the
Custodian in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund so pay in
advance, the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the Investment
Company Act of 1940, as
13
<PAGE>
amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent
shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any,
and subject to the following provisions:
1) The Custodian may keep securities of the Fund
in a Securities System provided that such
securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a
14
<PAGE>
Securities System shall identify by book-entry
those securities belonging to the Fund; 3) The
Custodian shall pay for securities purchased for
the account of the Fund upon (i) receipt of
advice from the Securities System that such
securities have been transferred to the Account,
and (ii) the making of an entry on the records of
the Custodian to reflect such payment and
transfer for the account of the Fund. The
Custodian shall transfer securities sold for the
account of the Fund upon (i) receipt of advice
from the Securities System that payment for such
securities has been transferred to the Account,
and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of
all advices from the Securities System of
transfers of securities for the account of the
Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Fund
confirmation of each transfer to or from the
account of the Fund in the form of a written
advice or notice and shall furnish to the Fund on
behalf of the Fund copies of daily transaction
sheets reflecting each day's
15
<PAGE>
transactions in the Securities System for the
account of the Fund;
4) The Custodian shall provide the Fund with any
report obtained by the Custodian on the
Securities System's accounting system, internal
accounting control and procedures for
safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund
initial or annual certificate, as the case may
be, required by Article 14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to
the Fund for any loss or damage to the Fund
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents
or of any of its or their employees or from
failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated
to the rights of the Custodian with respect to
any claim against the Securities System or any
other person which the Custodian may have as a
consequence of any such loss or damage if and to
the extent that the Fund has not been made whole
16
<PAGE>
for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System The
Custodian may deposit and/or maintain securities owned by the Fund
in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions from the Fund;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities
are represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other
than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in
the Direct Paper System shall identify by book-
entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
17
<PAGE>
the making of an entry on the records of the
Custodian to reflect such transfer and
receipt of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice,
of Direct Paper on the next business day
following such transfer and shall furnish to the
Fund copies of daily transaction sheets
reflecting each day's transaction in the
Securities System for the account of the Fund;
6) The Custodian shall provide the Fund on behalf of
the Fund with any report on its system of
internal accounting control as the Fund may
reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated
account or accounts for and on behalf of the Fund, into which
account or accounts may be transferred cash and/or securities,
including securities maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of
the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
18
<PAGE>
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for
purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by the Fund with
the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund,
a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian
19
<PAGE>
shall execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of
income or other payments with respect to domestic securities of
the Fund held by it and in connection with transfers of
securities.
2.13 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Fund or a nominee of
the Fund, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the
Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.14 Communications Relating to Fund Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly
to the Fund all written information (including, without
limitation, pendency of calls and maturities of domestic
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund
and the maturity of futures contracts purchased or sold by the
Fund) received by the Custodian from issuers of the securities
being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities
20
<PAGE>
whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Fund
desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Fund shall notify the
Custodian at least three business days prior to the date on which
the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States.
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Custodian to
employ as sub-custodians for the Fund's securities and other
assets maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon receipt of
"Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of
Trustees, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the
21
<PAGE>
securities and other assets maintained in the custody of the
foreign sub-custodians to: (a) "foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Funds
shall be maintained in foreign securities depositories only
through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms
hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in Section 3.4
hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with
a foreign banking institution shall be substantially in the form
set forth in Exhibit 1 hereto and shall provide that: (a) the
assets of the Fund will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors or agent, except a
claim of
22
<PAGE>
payment for their safe custody or administration; (b) beneficial
ownership for the assets of the Fund will be freely transferable
without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) officers of
or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law
the independent public accountants for the Fund, will be given
access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian;
and (e) assets of the Fund held by the foreign sub-custodian will
be subject only to the instructions of the Custodian or its
agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the
books and records of any foreign banking institution employed as a
foreign sub-custodian insofar as such books and records relate to
the performance of such foreign banking institution under its
agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of
the securities and other assets of the Fund(s) held by foreign
sub-custodians, including but not
23
<PAGE>
limited to an identification of entities having possession of the
Fund's securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account
maintained by a foreign banking institution for the Custodian on
behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of
such securities.
3.7 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section
3.7, the provision of Sections 2.2 and 2.7 of this Contract shall
apply, mutatis mutandis to the foreign securities of the Fund held
outside the United States by foreign sub-custodians. (b)
Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of
the Fund and delivery of securities maintained for the account of
Fund may be effected in accordance with the customary established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation
of receiving later payment for such securities from such purchaser
or dealer.
24
<PAGE>
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless
from any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a
foreign sub-custodian shall require the institution to exercise
reasonable care in the performance of its duties and to indemnify,
and hold harmless, the Custodian and the Fund from and against any
loss, damage, cost, expense, liability or claim arising out of or
in connection with the institution's performance of such
obligations. At the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any
claims against a foreign banking institution as a consequence of
any such loss, damage, cost, expense, liability or claim if and to
the extent that the Fund has not been made whole for any such
loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts
or omissions of a foreign banking institution to he same extent as
set forth with respect to sub-custodians generally in this
Contract and, regardless of whether assets are maintained in the
custody of a foreign banking
25
<PAGE>
institution, a foreign securities depository or a branch of a U.S.
bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to the Fund
for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities)
or (b) other losses (excluding a bankruptcy or insolvency of State
Street London Ltd. not caused by political risk) due to Acts of
God, nuclear incident or other losses under circumstances where
the Custodian and State Street London Ltd. have exercised
reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase
or sale of foreign exchange or of contracts for foreign exchange,
or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this
26
<PAGE>
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund's assets to the extent necessary
to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually
to the Fund, during the month of June, information concerning the
foreign sub-custodians employed by the Custodian. Such information
shall be similar in kind and scope to that furnished to the Fund
in connection with the initial approval of this Contract. In
addition, the Custodian will promptly inform the Fund in the event
that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any material
loss of the assets of the Fund or in the case of any foreign
sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity will decline below $200 million
(U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting
27
<PAGE>
principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody
of the Fund's assets are maintained in a foreign branch of a
banking institution which is a "bank" as defined by Section
2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract. (b) Cash held for the
Fund in the United Kingdom shall be maintained in an interest
bearing account established for the Fund with the Custodian's
London branch, which account shall be subject to the direction of
the Custodian, State Street London Ltd. or both.
3.13 Tax Law.
(a) United States Taxes
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. The
Custodian will be responsible for informing the Fund of the income
received by the Fund which is United States source income and
which is non-United States source income.
(b) Claiming for Exemption or Refunds under the Tax Laws of
28
<PAGE>
Non-United States Jurisdictions
The sole responsibility of the Custodian with regard to the tax
laws of non-United States jurisdictions shall be to identify the
income of the Fund which has been subject to withholding and other
tax assessments or other governmental charges by such
jurisdictions and, on the basis of information furnished to it by
the Fund as to the allocated amount of such income that is
attributable to each of its investors, to use reasonable efforts
to assist the Fund or its investors with respect to any claim for
exemption or refund of such charges that can be made on behalf of
such Fund or such investors.
4. Payments for Sales or Repurchases or Redemptions of Interests in
the Fund. The Custodian shall receive and deposit into the account
of the Fund such payments as are received for interests in the
Fund issued or sold from time to time by the Fund. The Custodian
will provide notification to the Fund of any receipt by it of
payments for interests in the Fund.
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and
any applicable votes of the Board of Trustees of the Fund
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Fund, make funds available to an
account designated by the Fund for payment to holders of
interests in the Fund who have delivered to the Fund a
29
<PAGE>
request for redemption or repurchase of their interests.
5. Proper Instructions. Proper Instructions as used through-
out this Contract means a writing signed or initialled by
one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of trans-
action involved, including a specific statement of the
purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. It is understood
and agreed that the Board of Directors has authorized
Morgan Guaranty Trust Company of New York ("Morgan
Guaranty"), as Advisor of the Fund pursuant to an
Investment Advisory Agreement, dated as of May 30, 1990
between Morgan Guaranty and the Fund, to deliver Proper
Instructions with respect to all matters for which Proper
Instructions are required by paragraphs 2.2(1) through
2.2(14), 2.5 , 2.7(1) and 2.7(2), 2.7(6), 2.11(i) through
2.11(iii) and 3.7(a). The Custodian may rely upon the
certificate of an officer of Morgan Guaranty with respect
to the person or persons authorized on behalf of Morgan
Guaranty to sign, initial or give Proper Instructions for
the purposes of such paragraphs. Upon
30
<PAGE>
receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees
of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper
Instructions may include communications effected directly
between electro-mechanical or electronic devices provided
that the Board of Trustees and the Custodian are satisfied
that such procedures afford adequate safeguards for the
Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which
requires a segregated asset account in accordance with
Section 2.11.
6. Actions Permitted without Express Authority. The Custodian
may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for
minor expenses of handling securities or
or other similar items relating to its
duties under this Contract, provided that
all such payments shall be accounted for to
the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Fund, checks, drafts end other negotiable
instruments; and
31
<PAGE>
4) in general, attend to all
non-discretionary details in connection
with the sale, exchange, substitution,
purchase, transfer and other dealings
with the securities and property of the
Fund except as otherwise directed by the
Board of Trustees of the Fund.
7. Evidence of Authority. The Custodian shall be protected
in acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to
be genuine and to have been properly executed by or on
behalf of the Fund. The Custodian may receive and accept
a certified copy of a vote of the Board of Trustees of
the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of
any determination or of any action by the Board of
Trustees pursuant to the Declaration of Trust as described
in such vote, and such vote may be considered as in full
force and effect until receipt by the Custodian of written
notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Income.
The Custodian shall keep the books of account of the
Fund. Until otherwise directed by Proper Instructions,
the Custodian shall calculate daily the net income of the
Fund as described in Part A of its Registration Statement
under the 1940 Act and shall advise
32
<PAGE>
the Fund daily of the total amounts of such net income,
including the categorization of such net income by source.
The calculation of the Fund's net income and it components
shall include, but may not be limited to, accounting for
purchases and sales of portfolio securities, calculation
of realized and unrealized gains and losses, accruals of
income on portfolio investments, hub level expense
accruals and calculations of market value of portfolio
securities. The Custodian will transmit accounting
information produced by the Custodian to the Fund or an
agent designated by the Fund in such format and by such
means as the Fund and the Custodian shall agree in order
that the Fund or such agent may calculate the net asset
value and SEC yield of the Fund and the allocation of its
various components to investors in the Fund. The Custodian
shall in no event be responsible for the calculation or
publication of the net asset value or yields of the Fund.
9. Records. The Custodian shall with respect to the Fund
create and maintain all records relating to its activities
and obligations under this Contract in such manner as the
Fund and the Custodian may agree from time to time. All
such records shall be the property of the Fund and shall
at all times during the regular business hours of the
Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees
and
33
<PAGE>
agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by the Fund and held
by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate
numbers in such tabulations.
10. Opinion of Fund's Independent Accountant. The Custodian
shall take all reasonable action, as the Fund may from
time to time request, to assist the Fund in obtaining from
year to year favorable opinions from the Fund's
independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other periodic reports to the
Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the
Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal
accounting control and procedures for safeguarding
securities, futures contracts and options on futures
contracts, including securities deposited and/or
maintained in a Securities System, relating to the
services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be
34
<PAGE>
required by the Fund to provide reasonable assurance that
any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian. The Custodian shall be entitled
to reasonable compensation for its services and expenses
as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
13. Responsibility of Custodian. So long as and to the extent
that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence
of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including
any futures commission merchant acting pursuant to the
terms of a three-party futures or options agreement. The
Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Contract, but shall
be kept indemnified by and shall be without liability to
the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability
for
35
<PAGE>
any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution appointed pursuant to the provisions
of Article 3 to the same extent as set forth in Article 1 hereof
with respect to sub-custodians located in the United States
(except as specifically provided in Article 3.9) and, regardless
of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch
of a U.S. bank as contemplated by paragraph 3.12 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of
or authorization by the Fund to maintain custody or any securities
or cash of the Fund in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism. If the Fund
requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Fund being
liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian
to take such action, shall provide indemnity to the Custodian in
an
36
<PAGE>
amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries
or agents, to advance cash or securities for any purpose
(including but not limited to securities settlements, foreign
exchange contracts and assumed settlement) for the benefit of the
Fund including the purchase or sale of foreign exchange or of
contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's
assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment. This Contract shall
become effective as of its execution, shall continue in full force
and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and
may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such
termination to take effect
37
<PAGE>
not sooner than thirty (30) days after the date of such delivery
or mailing; provided, however that the Custodian shall not with
respect to the Fund act under Section 2.10 hereof in the absence
of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such
Fund and the receipt of an annual certificate of the Secretary or
an Assistant Secretary that the Board of Trustees has reviewed the
use by such Fund of such Securities System, as required in each
case by Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not with respect to a Fund
act under Section 2.10A hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the
Direct Paper System by such Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by such Fund of the Direct
Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Declaration of Trust, and further provided, that the Fund may at
any time by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as
38
<PAGE>
described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian. If a successor custodian for the Fund shall
be appointed by the Board of Trustees of the Fund, the Custodian
shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for
transfer, all securities of the Fund then held by it hereunder and
shall transfer to an account of the successor custodian all of the
securities of the Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote
of the Board of Trustees of the Fund, deliver at the office of
the Custodian and transfer such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the
39
<PAGE>
Board of Trustees shall have been delivered to the Custodian on or
before the date when such termination shall become effective, then
the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$50,000,000, all securities, funds and other properties held by
the Custodian on behalf of the Fund and all instruments held by
the Custodian relative thereto and all other property held by it
under this Contract on behalf of the Fund and to transfer to an
account of such successor custodian all of the securities of the
Fund held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of Trustees
to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the
duties
40
<PAGE>
and obligations of the Custodian shall remain in full force and
effect.
16. Interpretive and Additional Provisions. In connection with the
operation of this Contract, the Custodian and the Fund, may from
time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust of the Fund. No interpretive
or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Massachusetts Law to Apply. This Contract shall be construed
and the provisions thereof interpreted under and in accordance
with laws of The Commonwealth of Massachusetts.
18. Prior Contracts. This Contract supersedes and terminates, as of
the date hereof, all prior contracts between the Fund and the
Custodian relating to the custody of the Fund's assets.
19. Shareholder Communications Election. Securities and Exchange
Commission Rule 14b-2 requires banks which hold
41
<PAGE>
securities for the account of customers to respond to requests by
issuers of securities for the names, addresses and holdings of
beneficial owners of securities of that issuer held by the bank
unless the beneficial owner has expressly objected to disclosure
of this information. In order to comply with the rule, the
Custodian need~ the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position
to requesting companies whose securities the Fund owns. If the
Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the
Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting
to disclosure of this information for all securities owned by the
Fund or any funds or accounts established by the Fund. For the
Fund's protection, the Rule prohibits the requesting company from
using the Fund's name and address for any purpose other than
corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
20. Limitation of Liability
42
<PAGE>
The references herein to the Trustees of the Fund are to the
Trustees of the Fund as trustees and not individually or
personally. The obligations of the Fund entered into in the name
of or on behalf of the Fund by any of the Trustees are not made
individually but in their capacity as trustees and are not binding
on any of the trustees personally. All persons dealing with the
Fund must look solely to the assets of the Fund for the
enforcement of any claims against the Fund.
43
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative as of
the 9th day of July, 1993.
TAX EXEMPT MONEY MARKET PORTFOLIO
By /s/ James B. Craver
James B. Craver
Treasurer
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and The Tax Exempt Money Market Portfolio (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated July 9, 1993 (the "Custodian Contract");
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions Custodian Contract pursuant to which the custodian provides services
to the Fund;
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, the Custodian and the Fund hereby agree as follows:
1. The existing Section 3.13 of the Custodian Contract shall be amended
and restated in its entirety to read as follows:
3.13 Tax Law.
(a) United States Taxes. The Custodian shall have no
responsibility or liability for any obligations now or
hereafter imposed on the Fund or the Custodian as custodian of
the Fund by the tax law of the United States of America or any
state or political subdivision thereof. The Custodian will be
responsible for informing the Fund of the income received by
the Fund which is United States source income and which is not
United States source income.
(b) Claiming for Exemption or Refund under the Tax Laws of
Non-United States Jurisdictions. The sole responsibility of
the Custodian with regard to the tax laws of non-United States
jurisdictions shall be to identify the income of the Fund
which has been subject to withholding and other tax
assessments or other governmental charges by such
jurisdictions and the amount thereof and to use reasonable
efforts to assist the Fund or its investors with respect to
any claim for exemption or refund of such charges that can be
made on behalf of the Fund or its investors.
2. The existing Article 8 of the Custodian Contract shall be amended and
restated in its entirety to read as follows:
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Income. The Custodian shall keep the books
of account of the Fund and shall perform the following duties
as described in Part A of its Registration Statement under the
1940 Act and in accordance with written procedures as may be
agreed upon by the Fund and the Custodian from time to time:
<PAGE>
(a) record general ledger entries;
(b) calculate daily net income;
(c) reconcile activity to the trial balance;
(d) calculate book capital account balances;
(e) calculate and provide to the Fund the daily net asset
value of the Fund and the SEC yield of the Fund and
the allocation of its various components to investors
of the Fund;
(f) prepare capital allocation reports in accordance with
Regulation 1.704-3(e)(3) (special aggregation rule
for securities partnerships) under the U.S. Internal
Revenue Code, based upon tax adjustments supplied by
the Fund; and
(g) prepare account balances.
The Custodian shall advise the Fund daily of the total amounts
of such net income, including the categorization of such net
income by source. The calculation of the Fund's net income and
its components shall include, but may not be limited to,
accounting for purchases and sales of portfolio securities,
calculation of realized and unrealized gains and losses,
accruals of income on portfolio investments, expense accruals
and calculations of market value of portfolio securities.
3. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this amendment to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative as of this first day of July, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
Name: Ronald E. Logue
Title: Executive Vice President
THE TAX EXEMPT MONEY MARKET PORTFOLIO
By: /s/ Matthew Healey
Matthew Healey, Chairman and
Chief Executive Officer
JPM507
<PAGE>
INTERPRETATIVE PROVISIONS REGARDING CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and The Tax Exempt Money Market Portfolio (the "Fund")
The Custodian and the Fund are parties to a custodian contract dated
July 9, 1993 (the "Custodian Contract"). As contemplated by Article 16 of the
Custodian Contract, the Custodian and the Fund desire to agree upon provisions
interpretative of the provisions of the Custodian Contract. ACCORDINGLY, the
Custodian and the Fund agree to the following provision interpretative of the
provisions of the Custodian Contract:
The Custodian and the Fund shall adopt written procedures as shall be
agreed upon from time to time regarding the books of account,
allocations for book and tax purposes and calculation of net income in
accordance with Article 8 of the Custodian Contract.
This Agreement shall not supersede or amend the terms of the Custodian
Contract which shall continue to apply with full force and effect.
Each of the parties has caused this agreement to be executed in its
name and behalf by its duly authorized representative as of this first day of
July, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
Name: Ronald E. Logue
Title: Executive Vice President
THE TAX EXEMPT MONEY MARKET PORTFOLIO
By: /s/ Matthew Healey
Matthew Healey, Chairman and
Chief Executive Officer
JPM507
<TABLE>
<CAPTION>
10/10/96 Exhibit I
Date of Declaration
Portfolio of Trust Address Effective Date
<S> <C> <C> <C>
The Treasury Money Market Portfolio.11/4/92 60 State Street, Boston, MA 02109 8/1/96
The Money Market Portfolio..........1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Tax Exempt Money Market
Portfolio...........................1/29/93 60 State Street, Boston, MA 02109 8/1/96
The Short Term Bond Portfolio.......1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The U.S. Fixed Income Portfolio.....1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Tax Exempt Bond Portfolio.......1/29/93 60 State Street, Boston, MA 02109 8/1/96
The Selected U.S. Equity Portfolio..1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The U.S. Small Company Portfolio....1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Non-U.S. Equity Portfolio.......1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Diversified Portfolio...........1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Non-U.S. Fixed Income Portfolio.6/16/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Emerging Markets Equity
Portfolio...........................6/16/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The New York Total Return
Bond Portfolio......................6/16/93 60 State Street, Boston, MA 02109 8/1/96
The Series Portfolio--
The Asia Growth Portfolio*..........6/24/94 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Series Portfolio--
The Japan Equity Portfolio*.........6/24/94 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Series Portfolio--
The European Equity Portfolio*......6/24/94 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Series Portfolio--
The Disciplined Equity Portfolio*...6/24/94 P.O. Box 2508 GT 12/27/96
Grand Cayman, Cayman Islands, BWI
The Series Portfolio--The Inter-
national Opportunities Portfolio*...6/24/94 P.O. Box 2508 GT 12/27/96
Grand Cayman, Cayman Islands, BWI
The Series Portfolio--The Global
Strategic Income Portfolio*.........6/24/94 P.O. Box 2508 GT 12/27/96
Grand Cayman, Cayman Islands, BWI
*In the case of The Series Portfolio, references to the "Portfolio" refer to its individual series as the context
requires.
</TABLE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE PORTFOLIOS NAMED HEREIN
and
STATE STREET BANK AND TRUST COMPANY
JPM259A1
<PAGE>
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank 1
Article 2 Fees and Expenses 3
Article 3 Representations and Warranties of the Bank 4
Article 4 Representations and Warranties of
the Portfolio(s) 5
Article 5 Data Access and Proprietary Information 5
Article 6 Indemnification 8
Article 7 Standard of Care 11
Article 8 Covenants of the Portfolios and the Bank 11
Article 9 Termination of Agreement 13
Article 10 Additional Parties to Agreement 14
Article 11 Assignment 14
Article 12 Amendment 15
Article 13 Massachusetts Law to Apply 15
Article 14 Merger of Agreement 15
Article 15 Limitations of Liability of the Trustees
and the Investors 15
Article 16 Counterparts 16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 23rd day of December, 1992, by and between
each of the New York trusts executing this Agreement on the signature pages
hereto or becoming a party to this Agreement subsequent to the date hereof as
provided in Article 10 (each a "Portfolio"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, each Portfolio's assets are composed of money and property
contributed thereto by the holders of interests in the Portfolio ("Interest(s)")
entitled to ownership rights in the Portfolio ("Investors");
WHEREAS, each Portfolio desires to appoint the Bank as its transfer
agent and agent in connection with certain other activities, and the Bank
desires to accept such appointment;
WHEREAS, additional Portfolios may become subject to this Agreement in
accordance with Article 10; and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, each Portfolio hereby employs and appoints the Bank to act as, and
the Bank agrees to act, as its transfer agent for the authorized Interests.
<PAGE>
1.02 The Bank agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Portfolios and the Bank, the Bank shall:
(i) Receive orders for the purchase of
Interests and promptly deliver payment and
appropriate documentation thereof to the custodian of
the applicable Portfolio authorized pursuant to the
Declaration of Trust of the Portfolio (the
"Custodian");
(ii) Pursuant to purchase orders, hold each
Interest in the appropriate Investor account;
(iii) Receive requests for purchases and
withdrawals and directions associated therewith and
deliver the appropriate documentation thereof to the
Custodian;
(iv) At the appropriate time as and when it
receives monies paid to it by the Custodian with
respect to any withdrawal, pay over or cause to be
paid over in the appropriate manner such monies as
instructed by the withdrawing Investor; and
(v) Maintain records of account for and
advise the Portfolios and their respective Investors
as to the foregoing; and
(vi) Record the Interest of each Investor
and maintain pursuant to SEC Rule 17Ad-lO(e) a record
of the
-2-
<PAGE>
total number and value of Interests which have been
established, based upon data provided to it by the
applicable Portfolio.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall perform the
customary services of a transfer agent, including but not limited to:
maintaining all Investor accounts and withholding taxes, as applicable, on
non-resident alien Investors.
(c) Procedures as to who shall provide certain of these
services in Article 1 may be established from time to time by agreement between
the Portfolios and the Bank per the attached service responsibility schedule.
The Bank may at times perform only a portion of these services and the
Portfolios or their agents may perform these services on the Portfolios' behalf.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement,
each Portfolio agrees to pay the Bank an annual fee as agreed to from time to
time by the Bank and the Portfolios. Such fees and out-of-pocket expenses and
advances identified under Section 2.02 below may be changed from time to time
subject to mutual written agreement between the Portfolios and the Bank.
2.02 In addition to the fee paid under Section 2.01 above,
each Portfolio agrees to reimburse the Bank for out-of-pocket expenses,
including but not limited to confirmation production, postage, forms, telephone,
microfilm, microfiche,
-3-
<PAGE>
tabulating information statements and/or proxies, records storage or advances
incurred by the Bank. In addition, any other expenses incurred by the Bank at
the request or with the consent of a Portfolio, will be reimbursed by such
Portfolio.
2.03 Each Portfolio agrees to pay all fees and reimbursable
expenses promptly following the receipt of the respective billing notice.
Procedures applicable to advance payment by the Portfolios to the Bank of
postage for mailing information statements and/or proxies, reports and other
mailings to Investor accounts may be established from time to time by agreement
between the Portfolios and the Bank.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to each Portfolio that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
-4-
<PAGE>
Article 4 Representations and Warranties of the Portfolio(s)
Each Portfolio represents and warrants to the Bank that:
4.01 It is a common law trust duly organized and existing
under the laws of the State of New York.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open - end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
Article 5 Data Access and Proprietary Information
5.01 Each Portfolio acknowledges that the data bases, computer
programs, screen format, report formats, interactive design techniques, and
documentation manuals (collectively, "Proprietary Information") furnished to the
Portfolio by the Bank as part of the Portfolio's ability to access certain
Portfolio-related data ("Customer Data") maintained by the Bank on data bases
under the control and ownership of the Bank or other third party ("Data Access
Services") constitute copyrighted, trade secret, or other proprietary
information of substantial value to the Bank or other third party. In no event
shall Proprietary Information be deemed Customer Data. Each Portfolio agrees to
treat all Proprietary Information as proprietary to the Bank and further
-5-
<PAGE>
agrees that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, each Portfolio agrees for itself and its employees and agents:
(a) to access Customer Data solely from
locations as may be designated in writing by the Bank
and solely in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating
in any way the Proprietary Information;
(c) to refrain from obtaining unauthorized
access to any portion of the Proprietary Information,
and if such access is inadvertently obtained, to
inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's
instructions;
(d) to refrain from causing or allowing
third-party data required hereunder from being
retransmitted to any other computer facility or other
location, except with the prior written consent of
the Bank;
(e) that the Portfolio shall have access
only to those authorized transactions agreed upon
by the parties;
(f) to honor all reasonable written
requests made by the Bank to protect at the Bank's
expense the rights of the Bank in Proprietary
Information at
-6-
<PAGE>
common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its
employees of their obligations pursuant to this Article 5. The obligations of
this Article shall survive any earlier termination of this Agreement.
5.02 If a Portfolio notifies the Bank that any of the Data
Access Services do not operate in material compliance with the most recently
issued user documentation for such services, the Bank shall use its best efforts
to promptly correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for the
contents of such data and each Portfolio agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS
IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT
THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Portfolios include
the ability to originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or (ii) transmit Investor information or
other information (such transactions are known as "Customer Originated
Electronic Financial Instructions" or "COEFI"), then in such event the Bank
shall be
-7-
<PAGE>
entitled to rely on the validity and authenticity of such instruction without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and each Portfolio
shall indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributable to any claim, demand, action or suit in
connection with:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Portfolio's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Portfolio hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Portfolio or any other person or firm
on behalf of the Portfolio.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Portfolio.
-8-
<PAGE>
(e) The offer or sale of Interests in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Interests be registered in such state
or in violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer of Interests in such
state.
6.02 The Bank shall indemnify and hold each Portfolio harmless
from and against any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liability arising out of or attributable to any
action or failure or omission to act by the Bank as a result of the Bank's lack
of good faith, negligence or willful misconduct.
6.03 At any time the Bank may apply to any officer of a
Portfolio for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the applicable Portfolio for any action taken
or omitted by it in reliance upon such instructions or upon the opinion of such
counsel. The Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of a
Portfolio, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar
-9-
<PAGE>
means authorized by the Portfolio, and shall not be held to have notice of any
change of authority of any person, until receipt of written notice thereof from
the Portfolio. The Bank, its agents and subcontractors shall also be protected
and indemnified in recognizing stock certificates which are reasonably believed
to bear the proper manual or facsimile signatures of the officers of a
Portfolio, and the proper countersignature of any former transfer agent or
former registrar, or of a co-transfer agent or co-registrar.
6.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes, provided that the Bank shall use its best efforts to
minimize the likelihood of all damage, loss of data, delays and errors resulting
from uncontrollable events, and if such damage, loss of data, delays or errors
occur, the Bank shall use its best efforts to mitigate the effects of such
occurrence.
6.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to act
hereunder.
-10-
<PAGE>
6.06 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees.
Article 8 Covenants of the Portfolios and the Bank
8.01 Each of the Portfolios shall promptly furnish to the Bank
the following:
(a) A certified copy of the resolution of the Trustees of the
Portfolio authorizing the appointment of the Bank and the execution and delivery
of this Agreement.
-11-
<PAGE>
(b) A copy of the Declaration of Trust and By-Laws of the
Portfolio and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Portfolios for safe-
keeping of stock certificates, check forms and facsimile signature imprinting
devices, if any, and for the preparation or use, and for keeping account of,
such certificates, forms and devices. The forms and documents used for a
Portfolio or its Investors shall be acceptable to the Portfolio.
8.03 The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable and as
may be reasonably acceptable to the Portfolios. To the extent required by
Section 31 of the 1940 Act and the Rules thereunder, the Bank agrees that all
such records prepared or maintained by the Bank relating to the services to be
performed by the Bank hereunder are the property of the Portfolios and will be
preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to each Portfolio on and in accordance
with its request.
8.04 The Bank and the Portfolios agree that all books,
records, information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law. Notice shall be
given to the other party a reasonable time in advance of any such
-12-
<PAGE>
disclosure. In addition, in the case of any request or demand for the inspection
of the Investor records of a Portfolio, the Bank will notify the Portfolio
promptly of receipt of such request or demand and request instructions from an
authorized officer of the Portfolio as to such inspection. The Portfolio will
within two business days furnish instructions to the Bank. Pending receipt of
such instructions, the Bank will not disclose such Investor records and upon
receipt the Bank will abide by such instructions. Notwithstanding any other
provision of this Agreement, in the event that (a) the Portfolio instructs the
Bank not to disclose such Investor records and the Bank has furnished the
Portfolio with an opinion of counsel that the Bank may be held liable for the
failure to disclose such Investor records, the Portfolio will indemnify the Bank
for any such liability, or (b) the Bank discloses such Investor records without
proper instructions from the Portfolio, the Bank shall indemnify and hold the
Portfolio harmless from and against any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of or
attributable to such disclosure. The provision of Section 6.06 shall govern such
indemnification.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should a Portfolio exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and material
will be borne by the Portfolio. Additionally, the
-13-
<PAGE>
Bank reserves the right to charge for any other reasonable expenses associated
with such termination.
Article 10 Additional Parties to Agreement
10.01 In the event that the Board of Trustees of the
Portfolio(s) organizes one or more separate New York trusts in addition to the
Portfolio executing this Agreement on the date hereof with respect to which it
desires to have the Bank render services as transfer agent under the terms
hereof, the Bank shall be so notified in writing by the officers of such trust,
and if the Bank agrees in writing to provide such services, such trust shall
become a party to this Agreement and shall be referred to as a Portfolio
hereunder.
Article 11 Assignment
11.01 Except as provided in Section 11.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of any
Portfolio, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
-14-
<PAGE>
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Portfolio for the acts and omissions of any subcontractor as it is for its
own acts and omissions.
Article 12 Amendment
12.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Trustees of the Portfolio(s).
Article 13 Massachusetts Law to Apply
13.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
Article 14 Merger of Agreement
14.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
Article 15 Limitations of Liability of the Trustees and the Investors
15.01 A copy of the Declaration of Trust of each Portfolio is
on file at the principal business address of the Portfolio, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Portfolio(s) as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Investors individually
but are binding only upon the assets and property of the Portfolio(s).
-15-
<PAGE>
Article 16 Counterparts
16.01 This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
THE TREASURY MONEY MARKET PORTFOLIO
BY: /s/ James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
Executive Vice President
-16-
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SERVICE RESPONSIBILITIES*
Responsibility
Service Performed Bank Portfolio
1. Receives orders for the purchase of Interests. X
2. Hold Interests in Investor Accounts. X
3. Receive requests for withdrawals. X
4. Effect transactions 1-3 above directly
with broker-dealers. N/A
5. Pay over monies to withdrawing investors. X
6. Effect transfers of Interests. N/A
7. Prepare and transmit distributions. N/A
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. N/A
10. Maintain records of account. X
11. Maintain and keep a current and accurate
control book for each issue of securities. X
12. Mail information statements and/or proxies. X
13. Mail Investor reports. X
14. Mail offering documents to prospective Investors. X
15. Withhold taxes on non-resident alien accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation
statements for Investors. X
-17-
<PAGE>
Responsibility
Service Performed Bank Portfolio
18. Provide Investor account information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
THE TREASURY MONEY MARKET PORTFOLIO
BY: /s/ James B. Craver
James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
Executive Vice President
-18-
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
February 1, 1993
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 0[2]171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees of The Treasury Money Market
Portfolio has organized the following ten additional New York trusts:
The Money Market Portfolio The Selected U.S. Equity Portfolio
The Tax Exempt Money Market Portfolio The U.S. Stock Portfolio
The Short Term Bond Portfolio The U.S. Small Company Portfolio
The U.S. Fixed Income Portfolio The Non-U.S. Equity Portfolio
The Tax Exempt Bond Portfolio The Diversified Portfolio
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 between The Treasury Money
Market Portfolio and State Street Bank and Trust Company, each of the ten
Portfolios hereby requests that you act as Transfer Agent of the Portfolio under
the terms of the agreement.
Please indicate your acceptance of the foregoing by executing two copies of this
letter agreement, returning one to the Portfolios and retaining one copy for
your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT 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. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
By /s/ Cheri J. Baumann
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
February 1, 1993
Page 2
Agreed to this 2nd day of February,
1993
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
The Emerging Markets Equity Portfolio
The Non-U.S. Fixed Income Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
September 27, 1993
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 0[2]171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees of The Treasury Money Market
Portfolio has organized the following two additional New York trusts:
The Emerging Markets Equity Portfolio The Non-U.S. Fixed Income Portfolio
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 between The Treasury Money
Market Portfolio and State Street Bank and Trust Company as amended, each of the
two Portfolios hereby requests that you act as Transfer Agent of the Portfolio
under the terms of the agreement.
Please indicate your acceptance of the foregoing by executing two copies of this
letter agreement, returning one to the Portfolios and retaining one copy for
your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT 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. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
THE EMERGING MARKETS EQUITY PORTFOLIO
THE NON-U.S. FIXED INCOME PORTFOLIO
By /s/ Cheri J. Baumann
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
September 27, 1993
Page 2
Agreed to this 27th day of September,
1993
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
The New York Total Return Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
The Emerging Markets Equity Portfolio
The Non-U.S. Fixed Income Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
March 10, 1994
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees [of] has organized the
following additional New York trust: The New York Total Return Bond Portfolio
(the "Trust").
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 as amended between the
other Portfolios referenced above and State Street Bank and Trust Company, the
Trust hereby requests that you act as its Transfer Agent under the terms of the
agreement.
Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two the Portfolios and the Trust and
retaining two for your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT 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. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
THE EMERGING MARKETS EQUITY PORTFOLIO
THE NON-U.S. FIXED INCOME PORTFOLIO
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
By /s/ Laura R. Young
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
March 10, 1994
Page 2
Agreed to this 10th day of March,
1994
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
The New York Total Return Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
The Emerging Markets Equity Portfolio
The Non-U.S. Fixed Income Portfolio
The Series Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
July 8, 1994
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees has organized the following
additional New York trust: The Series Portfolio (the "Trust") (the Trust is
comprised initially of three separate and distinct investment portfolios--The
Asia Growth Portfolio, The European Equity Portfolio and The Japan Equity
Portfolio (each a "Series")).
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 as amended between the
other Portfolios referenced above and State Street Bank and Trust Company, the
Trust hereby requests that you act as Transfer Agent for each Series under the
terms of the agreement.
Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two the Portfolios and the Trust and
retaining two for your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT 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. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
THE EMERGING MARKETS EQUITY PORTFOLIO
THE NON-U.S. FIXED INCOME PORTFOLIO
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
THE SERIES PORTFOLIO
By /s/ Laura R. Young
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
July 8, 1994
Page 2
Agreed to this 8th day of July,
1994
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
Schedule A
Administrative Services Fees
Portfolios listed on Exhibit I
The annual administrative services fee charged to and payable
by each Portfolio listed on Exhibit I, as amended from time to time (the "Master
Portfolios"), is equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios and in accordance with the following annual schedule:
0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets; and 0.04% of the Master
Portfolios' aggregate average daily net assets in excess of $7
billion less the complex-wide charge of the Co-Administrator.
The portion of this charge payable by each Master Portfolio is determined by the
proportionate share that its net assets bear to the total of the net assets of
the Master Portfolios, The JPM Pierpont Funds, The JPM Institutional Funds, The
JPM Advisor Funds, JPM Series Trust and other investors in the Master Portfolios
for which Morgan provides similar services.
Approved: October 10, 1996
Effective: November 4, 1996
RMMFFAS5
<PAGE>
Exhibit I
Date of Effective
Portfolio Declaration of Trust Date
The Treasury Money Market Portfolio 11/4/92 8/1/96
The Money Market Portfolio 1/29/93 8/1/96
The Tax Exempt Money Market Portfolio 1/29/93 8/1/96
The Short Term Bond Portfolio 1/29/93 8/1/96
The U.S. Fixed Income Portfolio 1/29/93 8/1/96
The Tax Exempt Bond Portfolio 1/29/93 8/1/96
The Selected U.S. Equity Portfolio 1/29/93 8/1/96
The U.S. Small Company Portfolio 1/29/93 8/1/96
The Non-U.S. Equity Portfolio 1/29/93 8/1/96
The Diversified Portfolio 1/29/93 8/1/96
The Non-U.S. Fixed Income Portfolio 6/16/93 8/1/96
The Emerging Markets Equity Portfolio 6/16/93 8/1/96
The New York Total Return Bond Portfolio 6/16/93 8/1/96
The Series Portfolio* 6/24/94
The Asia Growth Portfolio 8/1/96
The Japan Equity Portfolio 8/1/96
The European Equity Portfolio 8/1/96
The Disciplined Equity Portfolio 12/27/96
The Global Strategic Income Portfolio 12/27/96
The International Opportunities Portfolio 12/27/96
JPM Series Trust* 8/15/96
Tax Aware Equity Fund 11/4/96
Tax Aware Disciplined Equity Fund 11/4/96
California Bond Fund 11/4/96
*In the cases of The Series Portfolio and JPM Series Trust, references to
"Portfolio" or "Fund" refer to their respective individual series as the context
requires.
The JPM Institutional Funds
6 St. James Avenue, 9th Floor
Boston, Massachusetts 02116
(617) 423-0800
June 30, 1993
The Tax Exempt Money Market Portfolio
6 St. James Avenue, 9th Floor
Boston, MA 02116
Ladies and Gentlemen:
With respect to our purchase from you, for the account of The JPM
Institutional Tax Exempt Money Market Fund, at the purchase price of $100, of a
beneficial interest (an "Initial Interest") in The Tax Exempt Money Market
Portfolio (the "Portfolio"), we hereby advise you that we are purchasing such
Initial Interest for investment purposes without any present intention of
withdrawing or reselling.
The amount paid by the Portfolio on any decrease or withdrawal by us of
any portion of such Initial Interest will be reduced by a portion of any
unamortized organization expenses, determined by the proportion of the amount of
such Initial Interest withdrawn to the aggregate Initial Interests of all
holders of similar Initial Interests then outstanding after taking into account
any prior withdrawals of any such Initial Interest.
Very truly yours,
THE JPM INSTITUTIONAL FUNDS
/s/ James B. Craver
James B. Craver
Secretary and Treasurer
JPM104
[176]
<PAGE>
The Pierpont Funds
461 Fifth Avenue
New York, New York 10017
(212) 685-2547
June 30, 1993
The Tax Exempt Money Market Portfolio
6 St. James Avenue, 9th Floor
Boston, MA 02116
Ladies and Gentlemen:
With respect to our purchase from you, for the account of The Pierpont
Tax Exempt Money Market Fund, at the purchase price of $100,000, of a beneficial
interest (an "Initial Interest") in The Tax Exempt Money Market Portfolio (the
"Portfolio"), we hereby advise you that we are purchasing such Initial Interest
for investment purposes without any present intention of withdrawing or
reselling.
The amount paid by the Portfolio on any decrease or withdrawal by us of
any portion of such Initial Interest will be reduced by a portion of any
unamortized organization expenses, determined by the proportion of the amount of
such Initial Interest withdrawn to the aggregate Initial Interests of all
holders of similar Initial Interests then outstanding after taking into account
any prior withdrawals of any such Initial Interest.
Very truly yours,
THE PIERPONT FUNDS
/s/ Carol R. Schepp
Carol R. Schepp
Secretary
JPM104
[177]
5
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the report on
Form N-SAR dated August 31, 1996 for The Tax Exempt Money Market Portfolio and
is qualified in its entirety by reference to such report.
</LEGEND>
<CIK>0000909009
<NAME> THE TAX EXEMPT MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 1206628
<INVESTMENTS-AT-VALUE> 1206628
<RECEIVABLES> 6749
<ASSETS-OTHER> 1546
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1214923
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 346
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1214577
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 42041
<OTHER-INCOME> 0
<EXPENSES-NET> 2847
<NET-INVESTMENT-INCOME> 39194
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 39192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2847
<AVERAGE-NET-ASSETS> 1154041
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
