As Filed with the Securities and Exchange Commission on February 28, 2000
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. 12
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
Christopher J. Kelly, c/o Funds Distributor, Inc.,
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: John E. Baumgardner, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant
to Section 8(b) of the Investment Company Act of 1940, as amended. However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests will
be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by other investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any beneficial
interests in the Registrant.
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PART A
Responses to Items 1,2,3,5 and 9 have been omitted pursuant to paragraph 2(b) of
Instruction B of the General Instructions to Form N-1A.
Item 4. GENERAL DESCRIPTION OF REGISTRANT.
INVESTMENT OBJECTIVE
The Portfolio's investment objective, which is non-fundamental and can
be changed without the approval of interest holders, is to maximize current
income that is exempt from federal income tax consistent with the preservation
of capital and same-day liquidity.
PORTFOLIO MANAGER
The following persons are primarily responsible for the day-to-day
management and implementation of the Advisor'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): John
Donohue, Vice President (since June 1997, prior thereto was employed by Goldman
Sachs & Co.); Mark Settles, vice president (since November 1999, employed by
Morgan since 1994); and Richard W. Oswald, vice president (since October 1996,
employed by Morgan since 1996 and by CBS prior to October 1996).
PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
The Portfolio invests primarily in high quality municipal obligations
whose income is exempt from federal income taxes. The Portfolio's municipal
obligations must fall into the highest short-term rating category (top two
highest categories for New York State obligations) or be of equivalent quality.
The Portfolio may also invest in certain structured municipal obligations, and
in certain municipal or other obligations whose income is subject to tax,
including the alternative minimum tax. Although the Portfolio is permitted to
hold these other obligations or cash, it aims to be fully invested in municipal
obligations. In order to maintain liquidity, the Portfolio may buy securities
with puts that allow it to liquidate the securities on short notice. Some of the
Portfolio's securities may be purchased on a when-issued or delayed delivery
basis.
The Portfolio's yield will vary in response to changes in interest
rates. How well the Portfolio's yield compares to the yields of similar money
market funds will depend on the success of the investment process described
below.
There can be no assurance that the investment objective of the
Portfolio will be achieved. Future returns will not necessarily resemble past
performance. The Portfolio does not represent a complete investment program.
As with all money market funds, the Portfolio's investments are subject
to various risks, which, while generally considered to be minimal, could cause
its share price to fall below $1. For example, the issuer or guarantor of a
portfolio security or the counterparty to a contract could default on its
obligation. An unexpected rise in interest rates could also lead to a loss in
share price if the Portfolio is near the maximum allowable dollar weighted
average maturity(currently not to exceed 90 days) at the time. However, the
Portfolio's investment process and management policies are designed to minimize
the likelihood and impact of these risks. To date, through this process, the
Portfolio's share price has never deviated from $1.
INVESTMENT PROCESS
The Portfolio's philosophy, developed by its advisor, emphasizes
investment quality through in-depth research of short-term securities and their
issuers. This allows the Portfolio to focus on providing current income without
compromising share price stability.
In researching short-term securities, J.P. Morgan's credit analysts
enhance the data furnished by rating agencies by drawing on the insights of J.P.
Morgan's fixed income trading specialists and equity analysts. Only securities
highly rated by independent rating agencies as well as J.P. Morgan's proprietary
ratings system are considered for investment.
In managing the Portfolio, J.P. Morgan employs a three-step process
that combines maturity determination, sector allocation and fundamental research
for identifying portfolio securities:
MATURITY DETERMINATION Based on analysis of a range of factors, including
current yields, economic forecasts, and anticipated fiscal and monetary
policies, J.P. Morgan establishes the desired dollar weighted average maturity
for each Portfolio within the permissible 90-day range. Controlling weighted
average maturity allows the Portfolio to manage risk, since securities with
shorter maturities are typically less sensitive to interest rate shifts than
those with longer maturities.
SECTOR ALLOCATION Analysis of the yields available in different sectors of the
short-term debt market allows J.P. Morgan to adjust the Portfolios sector
allocation, with the goal of enhancing current income while also maintaining
diversification across permissible sectors.
SECURITY SELECTION Based on the results of the firm's credit research and the
Portfolio's maturity determination and sector allocation, the portfolio managers
and dedicated fixed-income traders make buy and sell decisions according to the
Portfolio's goal and strategy.
Item 6. MANAGEMENT OF THE PORTFOLIO.
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.
MANAGEMENT AND ADMINISTRATION
The Board of Trustees provides broad supervision over the affairs of
the Portfolio. The Portfolio has retained the services of JPMIM as investment
adviser and Morgan as 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
services to the Trust, the Portfolio and certain other registered investment
companies subject to similar agreements with Pierpont Group, Inc. 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.
- ------------------------------------- ------------------------------------------
Advisory Services 0.20% of the first $1 billion of the
Portfolio's average net assets, plus 0.10%
over $1 billion
- ------------------------------------- ------------------------------------------
- ------------------------------------- ------------------------------------------
Administrative Services (fee shared Portfolio's pro rata portions of 0.90% of
with Funds Distributor, Inc.) the first $7 billion of average net assets
in J.P. Morgan-advised portfolios, plus
0.04% of average net assets over $7 billion
- ------------------------------------- ------------------------------------------
J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.
ITEM 7. SHAREHOLDER INFORMATION
INVESTING
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).
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.
ADDING TO YOUR ACCOUNT
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.
SELLING SHARES
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.
REDEMPTION IN KIND
The Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be.
ACCOUNT AND TRANSACTION POLICIES
Business Hours and NAV Calculations
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 the close of trading on the NYSE
(normally 4:00pm eastern time)(the "Valuation Time").
DIVIDENDS AND DISTRIBUTIONS
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.
TAX CONSIDERATIONS
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.
ITEM 8. DISTRIBUTION ARRANGEMENTS: Not applicable.
ITEM 9. PENDING LEGAL PROCEEDINGS: Not applicable.
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PART B
Item 10. COVER PAGE.
Not applicable.
Item 11. TABLE OF CONTENTS. Page
General Information and History . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . B-1
Management of the Portfolio . . . . . . . . . . . . . B-11
Control Persons and Principal Holder
of Securities . . . . . . . . . . . . . . . . . . . . B-15
Investment Advisory and Other Services . . . . . . . B-15
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-22
Underwriters . . . . . . . . . . . . . . . . . . . . B-23
Calculations of Performance Data . . . . . . . . . . B-24
Financial Statements . . . . . . . . . . . . . . . . B-24
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 maximize current income that is exempt from federal income
tax consistent with the preservation of capital and same-day liquidity. See "Tax
Status." The Portfolio attempts to achieve its investment objective by
maintaining a dollar-weighted average portfolio maturity of not more than 90
days and by investing in U.S. dollar-denominated securities described in 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. See "Quality and Diversification Requirements." Interest on these
securities may be subject to state and local taxes.
The Portfolio is advised by J.P. Morgan Investment Management Inc. ("JPMIM"
or the "Advisor").
INVESTMENT PROCESS
MONEY MARKET INSTRUMENTS
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 Morgan or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. Morgan, acting as a fiduciary on behalf of its clients, has the
right to increase or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty all or any part of
the principal amount then outstanding on an obligation together with interest to
the date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change. Repayment of a master demand
obligation to participating accounts depends on the ability of the borrower to
pay the accrued interest and principal of the obligation on demand which is
continuously monitored by Morgan. Since master demand obligations typically are
not rated by credit rating agencies, the 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 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 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 a third party. See "Puts" below.
A substantial portion of the Portfolio is subject 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 Advisor will take 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 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. Also, a Fund may be disadvantaged if the other party to the
transaction defaults.
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 or any order pursuant thereto. These limits currently
require that, as determined immediately after a purchase is made, (i) not more
than 5% of the value of the Portfolio's total assets will be invested in the
securities of any one investment company, (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group, and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Portfolio. As a shareholder
of another investment company, the Portfolio would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that the Portfolio bears directly in connection with its own
operations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, a Portfolio sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price reflecting the interest rate effective for the term of the
agreement. For purposes of the 1940 Act a reverse repurchase agreement is also
considered as the borrowing of money by the Portfolio and, therefore, a form of
leverage. Leverage may cause any gains or losses for a Portfolio to be
magnified. The Portfolio will invest the proceeds of borrowings under reverse
repurchase agreements. In addition, except for liquidity purposes, the Portfolio
will enter into a reverse repurchase agreement only when the expected return
from the investment of the proceeds is greater than the 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. See
"Investment Restrictions" for the Portfolio's limitations on reverse repurchase
agreements and bank borrowings.
Loans of Portfolio Securities. Subject to applicable investment
restrictions, each Fund is permitted to lend its securities in an amount up to
33 1/3% of the value of the Fund's net assets. Each of the Funds may lend its
securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Fund at least equal at all
times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, the borrower will pay the Fund any
income accruing thereon. Loans will be subject to termination by the Funds in
the normal settlement time, generally three business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to a Fund and its
respective investors. The Funds may pay reasonable finders' and custodial fees
in connection with a loan. In addition, a Fund will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and no Fund will make any loans in excess of one year. Loans of
portfolio securities may be considered extensions of credit by the Funds. The
risks to each Fund with respect to borrowers of its portfolio securities are
similar to the risks to each Fund with respect to sellers in repurchase
agreement transactions. See "Repurchase Agreements". The Funds will not lend
their securities to any officer, Trustee, Member of the Advisory Board,
Director, employee or other affiliate of the Funds, the Advisor or the
Distributor, 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.
QUALITY AND DIVERSIFICATION REQUIREMENTS
The Portfolio intends to meet the diversification requirements of the
1940 Act. Current 1940 Act diversification requirements require that with
respect to 75% of the assets of the: (1) the Portfolio may not invest more than
5% of its total assets in the securities of any one issuer, except obligations
of the U.S. Government, its agencies and instrumentalities, and (2) the
Portfolio may not own more than 10% of the outstanding voting securities of any
one issuer. As for the other 25% of the Portfolio's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
any one issuer. Investments not subject to the limitations described above could
involve an increased risk to the Portfolio should an issuer, or a state or its
related entities, be unable to make interest or principal payments or should the
market value of such securities decline.
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 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:
1. May not make any investment inconsistent with the Portfolio's classification
as a diversified investment company under the Investment Company Act of 1940.
2. May not purchase any security which would cause the Portfolio to concentrate
its investments in the securities of issuers primarily engaged in any particular
industry except as permitted by the SEC;
3. May not issue senior securities, except as permitted under the Investment
Company Act of 1940 or any rule, order or interpretation thereunder;
4. May not borrow money, except to the extent permitted by applicable law;
5. May not underwrite securities of other issuers, except to the extent that the
Portfolio, in disposing of portfolio securities, may be deemed an underwriter
within the meaning of the 1933 Act;
6. May not purchase or sell real estate, except that, to the extent permitted by
applicable law, the Portfolio may (a) invest in securities or other instruments
directly or indirectly secured by real estate and (b) invest in securities or
other instruments issued by issuers that invest in real estate;
7. May not purchase or sell commodities or commodity contracts unless acquired
as a result of ownership of securities or other instruments issued by persons
that purchase or sell commodities or commodities contracts; but this shall not
prevent the Portfolio from purchasing, selling and entering into financial
futures contracts (including futures contracts on indices of securities,
interest rates and currencies), options on financial futures contracts
(including futures contracts on indices of securities, interest rates and
currencies), warrants, swaps, forward contracts, foreign currency spot and
forward contracts or other derivative instruments that are not related to
physical commodities; and
8. May make loans to other persons, in accordance with the Portfolio's
investment objective and policies and to the extent permitted by applicable law.
Non-Fundamental Investment Restrictions. The investment restrictions
described below are not fundamental policies of the Fund and its corresponding
Portfolio and may be changed by their Trustees. These non-fundamental investment
policies require that the Fund and its corresponding Portfolio:
(i) May not acquire any illiquid securities, such as repurchase agreements with
more than seven days to maturity or fixed time deposits with a duration of over
seven calendar days, if as a result thereof, more than 10% of the market value
of the Portfolio's total assets would be in investments which are illiquid;
(ii) May not purchase securities on margin, make short sales of securities, or
maintain a short position, provided that this restriction shall not be deemed to
be applicable to the purchase or sale of when-issued or delayed delivery
securities
(iii) May not acquire securities of other investment companies, except as
permitted by the 1940 Act or any order pursuant thereto.
(iv) May not borrow money, except from banks for temporary, extraordinary or
emergency purposes and then only in amounts up to 10% of the value of the Fund's
total assets, taken at cost at the time of such borrowing; or mortgage, pledge
or hypothecate any assets except in connection with any such borrowing in
amounts up to 10% of the value of the Fund's net assets at the time of such
borrowing. The Fund will not purchase securities while borrowings exceed 5% of
the Fund's total assets, provided, however, that the Fund may increase its
interest in an open-end management investment company with the same investment
objective and restrictions as the Fund's while such borrowings are outstanding.
This borrowing provision, for example, facilitates the orderly sale of portfolio
securities in the event of abnormally heavy redemption requests or in the event
of redemption requests during periods of tight market supply. This provision is
not for leveraging purposes.
(v) May not purchase industrial revenue bonds if, as a result of such
purchase, more than 5% of total Fund assets would be invested in industrial
revenue bonds where payment of principal and interest are the responsibility of
companies with fewer than three years of operating history.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
For purposes of fundamental investment restrictions regarding industry
concentration, the Advisor may classify issuers by industry in accordance with
classifications set forth in the Directory of Companies Filing Annual Reports
With The Securities and Exchange Commission or other sources. In the absence of
such classification or if the Advisor determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Advisor may classify accordingly. For instance, personal credit finance
companies and business credit finance companies are deemed to be separate
industries and wholly owned finance companies are considered to be in the
industry of their parents if their activities are primarily related to financing
the activities of their parents.
Item 14. MANAGEMENT OF THE PORTFOLIO.
TRUSTEES AND OFFICERS
The mailing address of the Trustees of the Portfolio is c/o Pierpont
Group, Inc., 461 Fifth Avenue, New York, New York 10017. Their names, principal
occupations during the past five years and dates of birth are set forth below:
Frederick S. Addy -- Trustee; Retired; Former Executive Vice President
and Chief Financial Officer, Amoco Corporation. His date of birth is January 1,
1932.
William G. Burns -- Trustee; Retired; Former Vice Chairman and Chief
Financial Officer, NYNEX. His date of birth is November 2, 1932.
Arthur C. Eschenlauer -- Trustee; Retired; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. His date of birth is May 23, 1934.
Matthew Healey -- Trustee; Chairman and Chief Executive Officer; Chairman,
Pierpont Group, Inc. ("Pierpont Group") since prior to 1993. His date of birth
is August 23, 1937.
Michael P. Mallardi -- Trustee; Retired; Prior to April 1996, Senior Vice
President, Capital Cities/ABC, Inc. and President, Broadcast Group. His date of
birth is March 17, 1934.
Each Trustee is currently paid an annual fee of $75,000 for (adjusted
as pf April 1, 1997) for serving as Trustee of the Master Portfolios (as defined
below), J.P. Morgan Funds, J.P. Morgan Institutional Funds and J.P. Morgan
Series Trust and is reimbursed for expenses incurred in connection with service
as a Trustee. The Trustees may hold various other directorships unrelated to the
Portfolio.
The compensation paid to the Trustees for the calendar year ended December
31, 1999 is set forth below.
- -------------------------------- --------------------- -------------------------
TOTAL TRUSTEE
COMPENSATION ACCRUED BY
AGGREGATE TRUSTEE THE MASTER PORTFOLIOS(*),
COMPENSATION ACCRUED J.P. MORGAN INSTITUTIONAL
BY THE PORTFOLIO FUNDS AND J.P. MORGAN
NAME OF TRUSTEE DURING 1999 FUNDS DURING 1999(***)
- -------------------------------- --------------------- -------------------------
- -------------------------------- --------------------- -------------------------
Frederick S. Addy, Trustee $3,632 $75,000
- -------------------------------- --------------------- -------------------------
- -------------------------------- --------------------- -------------------------
William G. Burns, Trustee $3,632 $75,000
- -------------------------------- --------------------- -------------------------
- -------------------------------- --------------------- -------------------------
Arthur C. Eschenlauer, Trustee $3,632 $75,000
- -------------------------------- --------------------- -------------------------
- -------------------------------- --------------------- -------------------------
Matthew Healey, Trustee(**), $3,632 $75,000
Chairman and Chief
Executive Officer
- -------------------------------- --------------------- -------------------------
- -------------------------------- --------------------- -------------------------
Michael P. Mallardi, Trustee $3,632 $75,000
- -------------------------------- --------------------- -------------------------
(*) Includes the Portfolio and 19 other portfolios (collectively,
the "Master Portfolios") for which JPMIM acts as investment
adviser.
(**) No investment company within the fund complex has a pension or
retirement plan. Currently, there are 18 investment companies (15
investment companies comprising the Master Portfolios, the J.P.
Morgan Funds, the J.P. Morgan Institutional Funds and J.P. Morgan
Series Trust) in the fund complex.
(***) During 1999, Pierpont Group paid Mr. Healey, in his role as
Chairman of Pierpont Group, compensation in the amount of
$153,800, contributed $23,100 to a defined contribution plan
on his behalf and paid $17,300 in insurance premiums for his
benefit.
The Trustees of the Portfolio are the same as the Trustees of each of
the other Master Portfolios, J.P. Morgan Institutional Funds, J.P. Morgan Funds
and J.P. MORGAN Series Trust. In accordance with applicable state requirements,
a majority of the disinterested Trustees have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Master Portfolios, the
J.P. Morgan Funds and the J.P. Morgan Institutional Funds, up to and including
creating a separate board of trustees.
The Trustees of the Portfolio decide upon matters of general policies
and are responsible for overseeing the Trust's and Portfolio's business affairs.
The Portfolio has entered into a Portfolio Fund Services Agreement with Pierpont
Group to assist the Trustees in exercising their overall supervisory
responsibilities over the affairs of the Portfolio. Pierpont Group was organized
in July 1989 to provide services for the J.P. Morgan Family of Funds (formerly
"The Pierpont Family of Funds") (currently an investor in the Portfolio). The
Portfolio has agreed to pay Pierpont Group a fee in an amount representing its
reasonable costs in performing these services. These costs are periodically
reviewed by the Trustees. The aggregate fees paid to Pierpont Group by the
Portfolio during the fiscal years ended August 31, 1997, 1998 and 1999 were
$43,285, $53,097 and $46,121, respectively. For the three months ended November
30, 1999: $8,727. 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.
ADVISORY BOARD
The Trustees determined as of January 26, 2000 to establish an advisory
board and appoint four members ("Members of the Advisory Board") thereto. Each
member serves at the pleasure of the Trustees. The advisory board is distinct
from the Trustees and provides advice to the Trustees as to investment,
management and operations of the Portfolio; but has no power to vote upon any
matter put to a vote of the Trustees. It is also the current intention of the
Trustees that the Members of the Advisory Board will be proposed at the next
shareholders' meeting, expected to be held within a year from the date hereof,
for election as Trustees of the Portfolio. The creation of the Advisory Board
and the appointment of the members thereof was designed so that the Board of
Trustees will continuously consist of persons able to assume the duties of
Trustees and be fully familiar with the business and affairs of the Portfolio,
in anticipation of the current Trustees reaching the mandatory retirement age of
seventy. Each member of the Advisory Board is paid an annual fee of $75,000 for
serving in this capacity and is reimbursed for expenses incurred in connection
for such service. The members of the Advisory Board may hold various other
directorships unrelated to the Portfolio. The mailing address of the Members of
the Advisory Board is c/o Pierpont Group, Inc., 461 Fifth Avenue, New York, New
York 10017. Their names, principal occupations during the past five years and
dates of birth are set forth below:
Ann Maynard Gray - President, Diversified Publishing Group and Vice
President, Capital Cities/ABC, Inc. Her date of birth is August 22, 1945.
John R. Laird -- Retired; Former Chief Executive Officer, Shearson
Lehman Brothers and The Boston Company. His date of birth is June 21, 1942.
Gerard P. Lynch -- Retired; Former Managing Director, Morgan Stanley
Group and President and Chief Operating Officer, Morgan Stanley Services, Inc.
His date of birth is October 5, 1936.
James J. Schonbachler -- Retired; Prior to September, 1998, Managing
Director, Bankers Trust Company and Chief Executive Officer and Director,
Bankers Trust A.G., Zurich and BT Brokerage Corp. His date of birth is January
26, 1943.
Officers
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.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1993. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, Florida 33436. His date of birth is August 23, 1937.
MARGARET W. CHAMBERS; Vice President and Secretary. Senior Vice President
and General Counsel of FDI since April, 1998. From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company, L.P. From January 1986 to July 1996, she was an associate with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI, Premier
Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies distributed or administered by FDI. Her
date of birth is August 1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant Vice
President and Assistant Department Manager of Treasury Services and
Administration of FDI and an officer of certain investment companies distributed
or administered by FDI. Prior to April 1997, Mr. Conroy was Supervisor of
Treasury Services and Administration of FDI. His date of birth is March 31,
1969.
JOHN P. COVINO - Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of FDI. Prior to
November 1998, Mr. Covino was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to joining
Fidelity, Mr. Covino was employed by SunGard Brokerage systems where he was
responsible for the technology and development of the accounting product group.
His date of birth is October 8, 1963.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Vice President
and Senior Counsel of FDI and an officer of certain investment companies
distributed or administered by FDI. From June 1994 to January 1996, Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder, Stevens & Clark, Inc.
Her date of birth is December 29, 1966.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial
Group. His date of birth is December 24, 1964.
KATHLEEN K. MORRISEY. Vice President and Assistant Secretary. Vice
President and Assistant Secretary of FDI. Manager of Treasury Services
Administration and an officer of certain investment companies advised or
administered by Montgomery Asset Management, L.P. and Dresdner RCM Global
Investors, Inc., and their respective affiliates. From July 1994 to November
1995, Ms. Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Her date of birth is July 5, 1972.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. Her
date of birth is April 22, 1964.
MARY JO PACE; Assistant Treasurer. Vice President, Morgan Guaranty Trust
Company of New York. Ms. Pace serves in the Funds Administration group as a
Manager for the Budgeting and Expense Processing Group. Prior to September 1995,
Ms. Pace served as a Fund Administrator for Morgan Guaranty Trust Company of New
York. Her address is 60 Wall Street, New York, New York 10260. Her date of birth
is March 13, 1966.
STEPHANIE D. PIERCE; Vice President and Assistant Secretary. Vice President
and Client Development Manager for FDI since April 1998. From April 1997 to
March 1998, Ms. Pierce was employed by Citibank, NA as an officer of Citibank
and Relationship Manager on the Business and Professional Banking team handling
over 22,000 clients. Address: 200 Park Avenue, New York, New York 10166. Her
date of birth is August 18, 1968.
GEORGE A. RIO; President and Treasurer. Executive Vice President and Client
Service Director of FDI since April 1998. From June 1995 to March 1998, Mr. Rio
was Senior Vice President and Senior Key Account Manager for Putnam Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of Business Development
for First Data Corporation. His date of birth is January 2, 1955.
CHRISTINE ROTUNDO; Assistant Treasurer. Vice President, Morgan Guaranty
Trust Company of New York. Ms. Rotundo serves in the Funds Administration group
as a Manager of the Tax Group and is responsible for U.S. mutual fund tax
matters. Prior to September 1995, Ms. Rotundo served as a Senior Tax Manager in
the Investment Company Services Group of Deloitte & Touche LLP. Her address is
60 Wall Street, New York, New York 10260. Her date of birth is September 26,
1965.
The Portfolio'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 January 31, 2000, J.P. Morgan Tax Exempt Money Market Fund, J.P.
Morgan Institutional Tax Exempt Money Market Fund and J.P. Morgan Institutional
Service Tax Exempt Money Market Fund (the "Funds"), series of the J.P. Morgan
Funds and the J.P. Morgan Institutional Funds, respectively, owned 78%, 22% and
less than 1%, respectively, of the outstanding beneficial interests in the
Portfolio. So long as J.P. Morgan 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 Portfolio's investors has informed the Portfolio that
whenever it is requested to vote on matters pertaining to the Portfolio (other
than a vote by 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 JPMIM, a
wholly owned subsidiary of J.P. Morgan. Subject to the supervision of the
Portfolio's Trustees, the Advisor makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. Prior to October 1, 1998, Morgan was the
investment advisor. JPMIM, a wholly owned subsidiary of J.P. Morgan, is a
registered investment adviser under the Investment Advisers Act of 1940, as
amended, manages employee benefit funds of corporations, labor unions and state
and local governments and the accounts of other institutional investors,
including investment companies. Certain of the assets of employee benefit
accounts under its management are invested in commingled pension trust funds for
which Morgan serves as trustee.
J.P. Morgan, through the Advisor and other subsidiaries, acts as
investment advisor to individuals, governments, corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of approximately $349 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 120 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 and Singapore to cover companies, industries and countries on
site. In addition, the investment management divisions employ approximately 380
capital market researchers, portfolio managers and traders. The Advisor's fixed
income investment process is based on analysis of real rates, sector
diversification and quantitative and credit analysis.
The investment advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the 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 Morgan 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 employees of the Advisor who
may also be acting in similar capacities for the Portfolio. See Item 17 below.
Morgan, also a wholly owned subsidiary of J.P. Morgan, is a bank
holding company organized under the laws of the State of Delaware. Morgan, whose
principal offices are at 60 Wall Street, New York, New York 10260, is a New York
trust company which conducts a general banking and trust business. Morgan is
subject to regulation by the New York State Banking Department and is a member
bank of the Federal Reserve System. Through offices in New York City and abroad,
Morgan offers a wide range of services, primarily to governmental,
institutional, corporate and high net worth individual customers in the United
States and throughout the world.
The Portfolio is managed by emplpoyees 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
certain other investment management affiliates of J.P. Morgan.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Investment
Advisory Agreement, the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.20% of the
Portfolio's average daily net assets up to $1 billion and 0.10% of the
Portfolio's average daily net assets in excess of $1 billion. For the fiscal
years ended August 31, 1997, 1998 and 1999 the Portfolio paid Morgan, the
Portfolio's investment advisor prior to October 1, 1998, $2,267,159, $2,710,567,
and $3,052,997, respectively, in advisory fees. For the three months ended
November 30, 1999: $760,119.
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 and their subsidiaries, 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 subsidiaries thereof may not sponsor, organize, or control a
registered open-end investment company continuously engaged in the issuance of
its shares, such as the Trust. The interpretation does not prohibit a holding
company or a subsidiary thereof from acting as investment advisor and custodian
to such an investment company. 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. On November 12, 1999, the Gramm-Leach-Bliley Act was signed into
law, the relevant provisions of which go into effect March 11, 2000. Until March
11, 2000, federal banking law, specifically the Glass-Steagall Act and the Bank
Holding Company Act, generally prohibits banks and bank holding companies and
their subsidiaries, such as the Advisor, from engaging in the business of
underwriting or distributing securities. Pursuant to interpretations issued
under these laws by the Board of Governors of the Federal Reserve System, such
entities also may not sponsor, organize or control a registered open-end
investment company continuously engaged in the issuance of its shares (together
with underwriting and distributing securities, the "Prohibited Activities"),
such as the Trust. These laws and interpretations do not prohibit a bank 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 laws in effect until March 11, 2000. Effective March 11, 2000,
the sections of the Glass-Steagall Act which prohibited the Prohibited
Activities are repealed, and the Bank Holding Company Act is amended to permit
bank holding companies which satisfy certain capitalization, managerial and
other criteria (the "Criteria") to engage in the Prohibited Activities; bank
holding companies which do not satisfy the Criteria may continue to engage in
any activity that was permissible for a bank holding company under the Bank
Holding Company Act as of November 11, 1999. Because the services to be
performed for the Portfolio under the Advisory Agreement were permissible for a
bank holding company as of November 11, 1999, the Advisor believes that it also
may perform such services after March 11, 2000 whether or not the Advisor's
parent satisfies the Criteria. 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.
Under a separate agreement, Morgan 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 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 J.P. Morgan Funds, J.P. Morgan Institutional Funds, the Master
Portfolios and J.P. MORGAN Series Trust. The Portfolio paid FDI the following
administrative fees for the fiscal years ended 1997, 1998 and 1999: $25,082,
$24,913 and $20,175, respectively. For the three months ended November 30, 1999:
$4,090.
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 J.P. MORGAN Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their aggregate
average daily net assets and 0.04% of their average daily net assets in excess
of $7 billion, less the complex-wide fees payable to FDI. The portion of this
charge payable by the Portfolio is determined by the proportionate share that
its net assets bear to the total net assets of the J.P. Morgan Funds, the J.P.
Morgan Institutional Funds, the Master Portfolios, the other investors in the
Master Portfolios for which Morgan provides similar services and J.P. MORGAN
Series Trust.
For the fiscal years ended August 31, 1997, 1998 and 1999, the
Portfolio paid Morgan $397,340, $502,654 and $542,467, respectively, in
administrative services fees. For the three months ended November 30, 1999:
$128,236.
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 Street
is responsible for holding the portfolio securities and cash and maintaining the
books of account and records of portfolio transactions. 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 PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036. PricewaterhouseCoopers LLP conducts an annual audit of the financial
statements of the Portfolio, assists in the preparation and/or review of 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.
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
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. 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.
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.
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 willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
Item 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.
All portfolio securities for the Portfolio are valued by the amortized
cost method, as permitted by a rule adopted by the SEC. The purpose of this
method of calculation is to allow certain investors in the Portfolio to maintain
a constant net asset value. No assurances can be given that this goal can be
attained. The amortized cost method of valuation values a security at its cost
at the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. If a difference of more
than 1/2 of 1% occurs between valuation based on the amortized cost method and
valuation based on market value, the Trustees will take steps necessary to
reduce such deviation, such as shortening the average portfolio maturity,
realizing gains or losses, or reducing the aggregate outstanding interests. Any
reduction of outstanding interests will be effected by having each investor in
the Portfolio contribute to the Portfolio's capital the necessary amounts on a
pro rata basis. Each investor in the Portfolio will be deemed to have agreed to
such a contribution in these circumstances by his investment in the Portfolio.
If the Portfolio determines that it would be detrimental to the best
interest of the remaining investors in the Portfolio to make payment wholly or
partly in cash, payment of the redemption price may be made in whole or in part
by a distribution in kind of securities from the Portfolio, in lieu of cash, in
conformity with the applicable rule of the SEC. If interests are redeemed in
kind, the redeeming investor might incur transaction costs in converting the
assets into cash. The method of valuing portfolio securities is described above
and such valuation will be made as of the same time the redemption price is
determined. The Portfolio will not redeem in kind except in circumstances in
which an investor is permitted to redeem in kind.
The net asset value of the Portfolio will not be computed on a day 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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Veteran's Day, Columbus Day, Thanksgiving Day,
and Christmas Day. In the event that trading in the money markets is scheduled
to end earlier than the close of the New York Stock Exchange in observance of
these holidays, the Portfolio would expect to close for purchases and
withdrawals an hour in advance of the end of trading in the money markets. The
Portfolio may also close for purchases and withdrawals at such other times as
may be determined by the Trustees to the extent permitted by applicable law. The
days on which net asset value is determined are the Portfolio's business days.
Item 20. TAX STATUS.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York 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.
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. Effective as of an investor's first taxable year beginning after
August 5, 1997, the 30% of gross income test will no longer apply to investors
in the Fund wishing to satisfy the requirements of subchapter M of the Code.
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. Long-term capital gain of individual investors will be
subject to a reduced rate of tax if the portfolio securities have been held by
the Portfolio for more than one year at the time of sale and will be subject to
a further reduced rate of tax if the portfolio securities have been held by the
Portfolio for more than eighteen months at the time of sale. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
STATE AND LOCAL TAXES. The Portfolio may be subject to state or local
taxes in jurisdictions in which the Portfolio is deemed to be doing business. In
addition, the treatment of the Portfolio and its investors in those states which
have income tax laws might differ from treatment under the federal income tax
laws. Investors should consult their own tax advisors with respect to any state
or local taxes.
OTHER TAXATION. The investment by an investor in the Portfolio does not
cause the investor to be liable for any income or franchise tax in the State of
New York. Investors are advised to consult their own tax advisors with respect
to the particular tax consequences to them of an investment in the Portfolio.
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 November 30, 1999 annual report filed with the SEC
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder are
incorporated herein by reference (Accession Number 0000912057-00-004062 filed
February 7, 2000).
<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 principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Commercial Paper, including Tax Exempt
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Short-Term Tax Exempt Notes
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest
rating assigned by Moody's for notes judged to be the best
quality. Notes with this rating enjoy strong protection from
established cash flows of funds for their servicing or from
established and broad-based access to the market for
refinancing, or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.
<PAGE>
PART C
Item 23. EXHIBITS.
(a). Declaration of Trust, as amended, of the Registrant.2
(b). Amended and Restated By-Laws of the Registrant (filed herewith).
(c). None
(d). Investment Advisory Agreement between the Registrant and J.P. Morgan
Investment Management Inc. ("JPMIM").2
(d)(1). Investment Advisory Agreement between the Registrant and J.P. Morgan
Investment Management Inc.3
(e). None
(f). N/A
(g)(1). Custodian Contract between the Registrant and State Street Bank and
Trust Company ("State Street").2
(g)(2). Custodian Contract between Registrant and The Bank of New York (filed
herewith).
(h). Co-Administration Agreement between the Registrant and Funds Distributor,
Inc. dated August 1, 1996 ("Co-Administration Agreement").1
(h)(i). Amended Exhibit I to Co-Administration Agreement.2
(h)(1). Transfer Agency and Service Agreement between the Registrant and State
Street.2
(h)(2). Restated Administrative Services Agreement between the Registrant and
Morgan dated August 1, 1996 ("Administrative Services Agreement").1
(h)(2)(i). Amended Exhibit I to Administrative Services Agreement.2
(h)(3). Amended and Restated Portfolio Fund Services Agreement between the
Registrant and Pierpont Group, Inc. dated July 11, 1996.1
(i). None
(j). None
(k). N/A
(l). Investment representation letters of initial investors.2
(m). N/A
(n). N/A
(o). none
(p). Code of Ethics (to be filed by amendment).
- -----------------------------
1 Incorporated herein by reference from Amendment No. 4 to the
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).
2 Incorporated herein by reference from Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission on December 24, 1996 (Accession
Number 0001016964-96-000048).
3 Incorporated herein by reference from Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission on October 1, 1998 (Accession Number
0001042058-98-000101).
Item 24. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 25. 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
JPMIM is a Delaware corporation which is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated.
JPMIM is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, and is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated. JPMIM manages employee benefit funds of corporations, labor unions
and state and local governments and the accounts of other institutional
investors, including investment companies.
To the knowledge of the Registrant, none of the directors or executive
officers of JPMIM is or has been during the past two fiscal years engaged in any
other business, profession, vocation or employment of a substantial nature,
except that certain officers and directors of JPMIM also hold various positions
with, and engage in business for, J.P. Morgan & Co. Incorporated, which owns all
the outstanding stock of JPMIM.
Item 27. PRINCIPAL UNDERWRITERS.
Not applicable.
Item 28. 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).
J.P. Morgan Investment Management Inc. and Morgan Trust Guaranty Company of
New York, 522 Fifth Avenue, New York, New York 10036 and/or 60 Wall Street, New
York, New York 10260-0060 (records relating to their functions as investment
adviser and administrative services agent).
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 or 40 King Street West, Toronto, Ontario, Canada M5H 3Y8
(records relating to its functions as custodian and fund accounting and transfer
agent).
Funds Distributor, Inc., 60 State Street, Boston, MA 02109. (records
relating to its functions as co-administrator and exclusive placement agent).
Item 29. MANAGEMENT SERVICES.
Not applicable.
Item 30. UNDERTAKINGS.
Not applicable.
<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 28th day of February, 2000.
THE TAX EXEMPT MONEY MARKET PORTFOLIO
By /S/ GEORGE A. RIO
--------------------------------------------
George A. Rio
President
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ------------- ------------------------
EX-99.(b)(1) Amendment to By-laws
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.
Section 10.Advisory Boards; The Trustees may from time to time establish an
advisory board and appoint a member or members thereof. Each member shall serve
at the pleasure of the Trustees. Any advisory board shall be distinct from the
Board of Trustees and shall provide advise as to investments, management and
operations of the Trust and such other roles as may be designed by the Trustees,
but shall have no power to determine that any security or other investment shall
be purchased or sold by any Fund, to conduct any business of the Trust, or to
vote upon any matter put to a vote of the Trustees. Each advisory board member
may be indemnified in respect of claims arising in connection with his or her
services as such, in accordance with the indemnification provisions of the
Trust's Declaration of Trust and By-Laws, as then in effect with respect to the
Trustees. Any member of an advisory board shall be compensated in accordance
with policies in respect thereof adopted b the Trustees. Service by a person on
an advisory board shall not preclude such person's subsequent service as an
Independent Trustee.
ARTICLE V
OFFICERS
Section 1. General Provisions. The Trustees may elect or appoint such
officers or agents as the business of the Trust may require, including without
limitation a Chief Executive Officer, a President, one or more Vice Presidents,
a Treasurer, a Secretary, one or more Assistant Treasurers and one or more
Assistant Secretaries. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
6
<PAGE>
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these ByLaws, each of the principal
executive officer described in Section 4 below, the Treasurer and the Secretary
shall hold office until a successor shall have been duly elected and qualified,
and any other officers shall hold office at the pleasure of the Trustees. Any
two or more offices may be held by the same Person, provided that at least two
different individuals shall serve as officers. Any officer may be, but does not
need be, a Trustee.
Section 3. Removal. The Trustees may remove any officer with or without
cause by a vote of a majority of the Trustees. Any subordinate officer or agent
appointed by any officer or committee may be removed with or without cause by
such appointing officer or committee.
Section 4. Powers and Duties of the Chief Executive Officer; President.
The Chief Executive Officer, if any, shall be the principal executive officer of
the Trust. Subject to the control of the Trustees, the Chief Executive Officer
shall (i) at all times exercise general supervision and direction over the
affairs of the Trust, (ii) have the power to grant, issue, execute or sign such
documents as may be deemed advisable or necessary in the ordinary course of the
Trust's business and (iii) have such other powers and duties as from time to
time may be assigned by the Trustees.
If there is no Chief Executive Officer, the President shall be the
principal executive officer of the Trust and shall have the powers and duties
set forth above in this Section 4. If there is a Chief Executive Officer and a
President, the President shall have such powers and duties as from time to time
may be assigned by the Trustees or the Chief Executive Officer.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, any Vice President designated by the Trustees or
the President shall perform all the duties, and may exercise any of the powers,
of the President. Each Vice President shall perform such other duties as from
time to time may be assigned to him by the Trustees or the Chief Executive
Officer.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to the Trust's
custodian. The Treasurer shall render a statement of condition of the finances
of the Trust to the Trustees as often as they shall require the same and shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Holders in proper books provided for that
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust, if any; and shall have charge of the Holder
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise
7
<PAGE>
any of the powers, of the Treasurer. Each Assistant Treasurer shall perform such
other duties as from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers. Subject to any applicable law or
provision of the Declaration, any compensation of any officer may be fixed from
time to time by the Trustees. No officer shall be prevented from receiving any
such compensation as such officer by reason of the fact that he is also a
Trustee. If no such compensation is fixed for any officer, such officer shall
not be entitled to receive any compensation from the Trust.
Section 11. Bond and Surety. As provided in the Declaration, any
officer may be required by the Trustees to be bonded for the faithful
performance of his duties in the amount and with such sureties as the Trustees
may determine.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE VII
FISCAL YEAR
The Trust may have different fiscal years for its separate and distinct
series, if applicable. The fiscal year(s) of the Trust shall be determined by
the Trustees, provided that the Trustees (or the Treasurer subject to
ratification by the Trustees) may from time to time change any fiscal year.
ARTICLE VIII
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times
employ one or more banks or trust companies having a capital, surplus and
undivided profits of at least $50,000,000 as custodian with authority as the
Trust's agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Declaration, these By-Laws and
the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same upon
written order; (ii) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; (iii) to disburse such funds upon orders or
vouchers; (iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of
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<PAGE>
the
Trust and the net asset value of the Trust or, in the case of each
Feeder Trust and each Stand Alone Trust, Shares; all upon such basis of
compensation as may be agreed upon between the Trustees and the
custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
Section 2. Successor Custodian. The Trust shall upon the resignation
or inability to serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian; (ii) require that the cash and
securities owned by the Trust be delivered directly to the successor
custodian; and (iii) in the event that no successor custodian can be
found, submit to the Holders before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor custodian,
the question whether the Trust shall be liquidated or shall function
without a custodian.
ARTICLE IX
INDEMNIFICATION
In the case of each Master Trust, insofar as the conditional advancing
of indemnification monies under Section 5.4 of the Declaration for actions based
upon the 1940 Act may be concerned, such payments will be made only on the
following conditions:
(i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may
be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay the amount of the advance which exceeds the amount
to which it is ultimately determined that he is entitled to receive
from the Trust by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayment may be
obtained by the Trust without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient
of the advance, or (b) a majority of a quorum of the Trust's
disinterested, nonparty Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
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ARTICLE X
AMENDMENTS, ADDITIONAL TRUSTS, ETC.
The Trustees shall have the power to alter, amend or repeal
these By-Laws or adopt new By-Laws at any time to the extent such power is not
reserved to the Holders by the 1940 Act, other applicable law or the
Declaration. Action by the Trustees with respect to these By-Laws shall be taken
by an affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
One or more additional trusts may be added to Schedule I or Schedule II
by resolution of the trustees of such trust(s), provided that the trustees of
such trust(s) are identical to the Trustees of the 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
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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
The Global Strategic Income
Portfolio New York 1/9/97 2/13/97
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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
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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
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