As filed with the Securities and Exchange Commission on May 11, 2001
Registration No. 333-58940/811-07342
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U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 Post-Effective Amendment No.___
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
J.P. MORGAN INSTITUTIONAL FUNDS
Area Code and Telephone Number:
(800) 766-7722
Address of Principal Executive Offices:
522 Fifth Avenue
New York, NY 10036
Name and Address of Agent for Service:
Sharon Weinberg
522 Fifth Avenue
New York, NY 10036
Copies to:
JOSEPH J. BERTINI, ESQ. SARAH E. COGAN, ESQ. JOHN E. BAUMGARDNER, JR., ESQ.
PETER B. ELDRIDGE, ESQ. Simpson Thacher & Bartlett Sullivan & Cromwell
c/o J.P. Morgan Fleming Asset Management 425 Lexington Avenue 125 Broad Street
(USA) Inc. New York, NY 10017-3954 New York, NY 10004
522 Fifth Avenue
New York, NY 10036
================================================================================
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on May 13, 2001 pursuant
to Rule 488 under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration No. 033-54642/811-07342) pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The Registrant's
Form 24f-2 for the fiscal year ended June 30, 2000 was filed on October 3, 2000.
Pursuant to Rule 429, this Registration Statement relates to the aforesaid
Registration Statement on Form N-1A.
J.P. MORGAN DIVERSIFIED FUND
A SERIES OF J.P. MORGAN FUNDS
522 FIFTH AVENUE
NEW YORK, NY 10036
(800) 521-5411
May 13, 2001
Dear Shareholder:
A special meeting of the shareholders of J.P. Morgan Diversified Fund (the
"Merging Fund"), a series of J.P. Morgan Funds ("JPMF"), will be held on July 3,
2001 at 9:00 a.m., Eastern Time. Formal notice of the meeting appears after this
letter, followed by materials regarding the meeting.
As you may be aware, The Chase Manhattan Corporation has recently completed
a merger with J.P. Morgan & Co. Incorporated, the former corporate parent of the
investment adviser of the Merging Fund's assets, to form J.P. Morgan Chase & Co.
("JPMC"). As a result of this merger, JPMC is seeking to reorganize parts of its
investment management business and funds advised by its subsidiaries. At the
special meeting (the "Meeting"), shareholders will be asked to consider and vote
upon the proposed reorganization of the Merging Fund into J.P. Morgan
Institutional Diversified Fund (the "Surviving Fund"), a series of J.P. Morgan
Institutional Funds ("JPMIF") (the "Reorganization"). After the Reorganization,
shareholders of the Merging Fund will hold Select Class Shares of the Surviving
Fund. The investment objective and policies of the Surviving Fund are identical
to those of the Merging Fund. Both the Merging Fund and the Surviving Fund
currently invest all of their investable assets in The Diversified Portfolio
(the "Master Portfolio"). Concurrent with the Reorganization, the Surviving Fund
will cease to operate under a "master/feeder" structure and will instead invest
directly in portfolio securities. In connection with the Reorganization, the
Surviving Fund will be renamed "JPMorgan Diversified Fund."
At the Meeting, you will also be asked to consider and vote upon the
election of Trustees of JPMF.
The investment adviser for the assets of both the Merging Fund and the
Surviving Fund is J.P. Morgan Investment Management Inc. ("JPMIM").
Please see the enclosed Combined Prospectus/Proxy Statement for detailed
information regarding the proposed Reorganization and a comparison of the
Merging Fund and JPMF to the Surviving Fund and JPMIF. The cost and expenses
associated with the Reorganization, including costs of soliciting proxies, will
be borne by JPMC and not by the Merging Fund, JPMF, the Surviving Fund, JPMIF or
their shareholders.
If approval of the Reorganization is obtained, you will automatically
receive Select Class shares of the Surviving Fund.
The Proposals have been carefully reviewed by the Board of Trustees of JPMF,
which has approved the Proposals.
THE BOARD OF TRUSTEES OF JPMF UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
EACH OF THE PROPOSALS.
Following this letter is a list of commonly asked questions. If you have any
additional questions on voting of proxies and/or the meeting agenda, please call
us at 1-800-521-5411.
A proxy card is enclosed for your use in the shareholder meeting. This card
represents shares you held as of the record date, April 6, 2001. IT IS IMPORTANT
THAT YOU COMPLETE, SIGN, AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED OR
CALL THE NUMBER PROVIDED ON THE PROXY CARD AS SOON AS POSSIBLE. This will ensure
that your shares will be represented at the Meeting to be held on July 3, 2001.
Please read the enclosed materials carefully. You may, of course, attend the
meeting in person if you wish, in which case the proxy can be revoked by you at
the Meeting.
Sincerely,
/s/ Matthew Healey
Matthew Healey
Chairman
SPECIAL NOTE: Certain shareholders may receive a telephone call from our
proxy solicitor, D.F. King & Co., Inc., or us to answer any questions they may
have or to provide assistance in voting. Remember, your vote is important!
Please sign, date and promptly mail your proxy card(s) in the return envelope
provided or call the number provided on the proxy card in order to vote.
WHY IS THE REORGANIZATION BEING PROPOSED?
The Reorganization is being proposed because each Fund's board believes that
it is in the best interests of its shareholders.
IF THE REORGANIZATION IS APPROVED, WHAT WILL HAPPEN?
In connection with the Reorganization, the Merging Fund will transfer all of
its assets and liabilities to the Surviving Fund and will receive, in exchange,
Select Class shares of the Surviving Fund. The Merging Fund will then be
liquidated and the Select Class shares of the Surviving Fund will be distributed
pro rata to shareholders. After the Reorganization, you will own Select Class
shares of the Surviving Fund rather than shares of the Merging Fund.
WHAT WILL BE THE EFFECT ON THE INVESTMENT STRATEGIES ASSOCIATED WITH MY
INVESTMENT IF THE PROPOSED CHANGES ARE APPROVED?
The Surviving Fund has identical investment objectives and policies to those
of the Merging Fund. Both the Merging Fund and the Surviving Fund currently
invest all of their investable assets in the Master Portfolio. In connection
with the Reorganization, the Surviving Fund will cease to operate under a
"master/ feeder" structure and will instead invest its assets directly in
portfolio securities rather than in the Master Portfolio.
HOW WILL THE FEES AND EXPENSES ASSOCIATED WITH MY INVESTMENT BE AFFECTED?
As a result of the Reorganization, the contractual (or pre-waiver) total
expense ratios will be higher for your shares in the Surviving Fund than they
are for your shares in the Merging Fund. However, the actual (or post-waiver)
total expense ratios are expected to be the same or less for your shares in the
Surviving Fund than they are for your shares in the Merging Fund. This is
because Morgan Guaranty Trust Company of New York, the Surviving Fund's
administrator, has contractually agreed to waive fees payable to it and
reimburse expenses so that the actual total operating expenses will remain the
same for THREE YEARS after the Reorganization.
WILL THERE BE ANY CHANGE IN WHO MANAGES MY INVESTMENT?
No. JPMIM will continue to manage the assets of the Surviving Fund after the
Reorganization.
WHO WILL PAY FOR THE REORGANIZATION?
The cost and expenses associated with the Reorganization, including costs of
soliciting proxies, will be borne by JPMC and not by either the Merging Fund or
the Surviving Fund (or shareholders of either fund).
WHAT IF I DO NOT VOTE OR VOTE AGAINST THE REORGANIZATION, YET APPROVAL OF THE
REORGANIZATION IS OBTAINED?
You will automatically receive Select Class shares of the Surviving Fund.
WHY AM I BEING ASKED TO VOTE ON THE ELECTION OF TRUSTEES FOR JPMF IF AFTER THE
REORGANIZATION I WILL OWN SHARES IN THE SURVIVING FUND, A SERIES OF JPMIF?
Even if the Reorganization is approved, other mutual funds that are series
of JPMF will continue to exist and operate. All shareholders of any series of
JPMF as of the record date (April 6, 2001) are required to be given a vote on
proposals regarding Trustees. Because as of the record date you are still a
shareholder in JPMF, you are entitled to vote on this proposal. Shareholders of
JPMIF are being asked to approve the same Trustees that are proposed for JPMF.
AS A HOLDER OF SHARES OF THE MERGING FUND, WHAT DO I NEED TO DO?
Please read the enclosed Combined Prospectus/Proxy Statement and vote. Your
vote is important! Accordingly, please sign, date and mail the proxy card(s)
promptly in the enclosed return envelope as soon as possible after reviewing the
enclosed Combined Prospectus/Proxy Statement.
MAY I ATTEND THE MEETING IN PERSON?
Yes, you may attend the Meeting in person. If you complete a proxy card and
subsequently attend the Meeting, your proxy can be revoked. Therefore, to ensure
that your vote is counted, we strongly urge you to mail us your signed, dated
and completed proxy card(s) even if you plan to attend the Meeting.
J.P. MORGAN DIVERSIFIED FUND
A SERIES OF J.P. MORGAN FUNDS
522 FIFTH AVENUE
NEW YORK, NY 10036
(800) 521-5411
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 3, 2001
To the Shareholders of J.P. Morgan Diversified Fund:
NOTICE IS HEREBY GIVEN THAT a Special Meeting (the "Meeting") of the
shareholders ("Shareholders") of J.P. Morgan Diversified Fund (the "Merging
Fund"), a series of J.P. Morgan Funds ("JPMF"), will be held at the offices of
J.P. Morgan Chase & Co., 1211 Avenue of the Americas, 41st Floor, New York, New
York, on July 3, 2001 at 9:00 a.m., (Eastern time) for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement and Plan
of Reorganization (the "Reorganization Plan") by and among JPMF, on
behalf of the Merging Fund, J.P. Morgan Institutional Funds ("JPMIF"),
on behalf of J.P. Morgan Institutional Diversified Fund (the
"Surviving Fund") and J.P. Morgan Chase & Co., and the transactions
contemplated thereby, including (a) the transfer of all of the assets
and liabilities of the Merging Fund to the Surviving Fund in exchange
for Select Class shares of the Surviving Fund (the "Select Class
Shares"), and (b) the distribution of such Select Class Shares to the
Shareholders of the Merging Fund in connection with the liquidation of
the Merging Fund.
ITEM 2. To elect eight Trustees to serve as members of the Board of Trustees
of JPMF.
ITEM 3. To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
YOUR FUND TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF ITEMS 1
AND 2.
Each proposal is described in the accompanying Combined Prospectus/Proxy
Statement. Attached as Appendix A to the Combined Prospectus/Proxy Statement is
a copy of the Reorganization Plan.
Shareholders of record as of the close of business on April 6, 2001 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof. The Meeting will be a joint meeting with the meetings of shareholders
of all series of JPMF, which meetings are being called for purposes of
considering in all cases proposals 1 and 2 above and certain other proposals not
applicable to you.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE BOARD OF
TRUSTEES OF JPMF. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO
THE MERGING FUND A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY
OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
/s/ Sharon Weinberg
SHARON WEINBERG
SECRETARY
May 13, 2001
COMBINED PROSPECTUS/PROXY STATEMENT
DATED MAY 13, 2001
ACQUISITION OF THE ASSETS AND LIABILITIES OF
J.P. MORGAN DIVERSIFIED FUND
A SERIES OF J.P. MORGAN FUNDS
522 FIFTH AVENUE
NEW YORK, NY 10036
(800) 521-5411
BY AND IN EXCHANGE FOR SELECT CLASS SHARES OF
J.P. MORGAN INSTITUTIONAL DIVERSIFIED FUND
A SERIES OF J.P. MORGAN INSTITUTIONAL FUNDS
522 FIFTH AVENUE
NEW YORK, NY 10036
(800) 766-7722
This Combined Prospectus/Proxy Statement relates to the proposed
reorganization of J.P. Morgan Diversified Fund (the "Merging Fund"), a series of
J.P. Morgan Funds ("JPMF"), into J.P. Morgan Institutional Diversified Fund (the
"Surviving Fund"), a series of J.P. Morgan Institutional Funds ("JPMIF"). If
approved by shareholders of the Merging Fund, the proposed reorganization will
be effected by transferring all of the assets and liabilities of the Merging
Fund to the Surviving Fund, which has identical investment objectives and
policies to those of the Merging Fund, in exchange for Select Class shares of
the Surviving Fund (the "Reorganization"). Therefore, as a result of the
proposed Reorganization, current shareholders of the Merging Fund (the "Merging
Fund Shareholders") will become shareholders of the Surviving Fund ("Surviving
Fund Shareholders"). JPMF and JPMIF are both open-end management investment
companies offering shares in several portfolios. In connection with the
Reorganization, the J.P. Morgan Institutional Diversified Fund will be renamed
"JPMorgan Diversified Fund."
In connection with the proposed Reorganization, the Surviving Fund will
implement a new multi-class structure under which it will offer Select Class and
Institutional Class shares. If the proposed Reorganization is approved by
Merging Fund Shareholders, each Merging Fund Shareholder will receive Select
Class shares (the "Select Class Shares") of the Surviving Fund with a value
equal to such Merging Fund Shareholder's holdings in the Merging Fund. Merging
Fund Shareholders will not pay a sales charge on Select Class Shares received in
the Reorganization or on subsequent purchases or exchanges of Select Class
Shares of the Surviving Fund or other JPMorgan Funds.
At the Meeting, you will also be asked to consider and vote upon the
election of Trustees of JPMF.
The terms and conditions of these transactions are more fully described in
this Combined Prospectus/ Proxy Statement and in the Agreement and Plan of
Reorganization (the "Reorganization Plan") among JPMF, on behalf of the Merging
Fund, JPMIF, on behalf of the Surviving Fund and J.P. Morgan Chase & Co.
attached to this Combined Prospectus/Proxy Statement as Appendix A.
The Board of Trustees for JPMF is soliciting proxies in connection with a
Special Meeting (the "Meeting") of Shareholders to be held on July 3, 2001 at
9:00 a.m., Eastern time, at the offices of J.P. Morgan Chase & Co., 1211 Avenue
of the Americas, 41st Floor, New York, NY, at which meeting shareholders in the
Merging Fund will be asked to consider and approve the proposed Reorganization
Plan, certain transactions contemplated by the Reorganization Plan and certain
other proposals. This Combined Prospectus/Proxy Statement constitutes the proxy
statement of the Merging Fund for the meeting of its Shareholders and also
constitutes JPMIF's prospectus for Select Class Shares that have been registered
with the Securities and Exchange Commission (the "Commission") and are to be
issued in connection with the Reorganization.
This Combined Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about JPMF and JPMIF that
an investor should know before voting on the proposals. The current Prospectus,
Statement of Additional Information and Annual Report of the Merging Fund and
the preliminary Prospectus, Statement of Additional Information and the current
Annual Report of the Surviving Fund (including the Annual Report of the
Diversified Portfolio), and the Semi-Annual Reports of the Merging Fund and the
Surviving Fund (including the Semi-Annual Report of The Diversified
Portfolio) are incorporated herein by reference, and the preliminary Prospectus,
current Annual Report (including the Annual Report of the Diversified
Portfolio), and Semi-Annual Report (including the Semi-Annual Report of The
Diversified Portfolio) for the Surviving Fund is enclosed with this Combined
Prospectus/Proxy Statement. A Statement of Additional Information relating to
this Combined Prospectus/ Proxy Statement dated May 13, 2001 containing
additional information about JPMF and JPMIF has been filed with the Commission
and is incorporated by reference into this Combined Prospectus/Proxy Statement.
A copy of the Statement of Additional Information, as well as the Prospectus,
Statement of Additional Information, Annual Report and Semi-Annual Report of the
Merging Fund may be obtained without charge by writing to JPMF at its address
noted above or by calling 1-800-521-5411.
This Combined Prospectus/Proxy Statement is expected to first be sent to
shareholders on or about May 13, 2001.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS COMBINED PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY JPMF OR JPMIF.
INVESTMENTS IN THE SURVIVING FUND ARE SUBJECT TO RISK--INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. NO SHARES IN THE SURVIVING FUND ARE BANK DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY
INSURED BY, OBLIGATIONS OF, OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
TABLE OF CONTENTS
Page
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INTRODUCTION...................................... 1
PROPOSAL 1: REORGANIZATION PLAN................... 1
SUMMARY........................................... 1
COMPARATIVE FEE AND EXPENSE TABLES................ 5
RISK FACTORS...................................... 6
INFORMATION RELATING TO THE PROPOSED
REORGANIZATION................................... 7
PURCHASES, REDEMPTIONS AND EXCHANGES.............. 10
DISTRIBUTIONS AND TAXES........................... 12
COMPARISON OF THE MERGING FUND'S AND THE SURVIVING
FUND'S ORGANIZATION STRUCTURE.................... 13
INFORMATION RELATING TO THE ADVISORY CONTRACTS AND
OTHER SERVICES................................... 14
PROPOSAL 2: ELECTION OF TRUSTEES.................. 16
INFORMATION RELATING TO VOTING MATTERS............ 20
ADDITIONAL INFORMATION ABOUT JPMF................. 22
ADDITIONAL INFORMATION ABOUT JPMIF................ 22
FINANCIAL STATEMENTS AND EXPERTS.................. 23
OTHER BUSINESS.................................... 23
LITIGATION........................................ 23
SHAREHOLDER INQUIRIES............................. 23
APPENDIX A--AGREEMENT AND PLAN OF
REORGANIZATION................................... A-1
INTRODUCTION
GENERAL
This Combined Prospectus/Proxy Statement is being furnished to the
shareholders of the Merging Fund, an open-end management investment company, in
connection with the solicitation by the Board of Trustees of JPMF of proxies to
be used at a Special Meeting of Shareholders of the Merging Fund to be held on
July 3, 2001 at 9:00 a.m., Eastern time, at the offices of J.P. Morgan Chase &
Co., 1211 Avenue of the Americas, 41st Floor, New York, NY (together with any
adjournments thereof, the "Meeting"). The Meeting will be a joint meeting with
the meetings of shareholders of all series of JPMF, which meetings are being
called for purposes of considering proposals 1 and 2 and certain other proposals
not applicable to you. It is expected that the mailing of this Combined
Prospectus/Proxy Statement will be made on or about May 13, 2001.
PROPOSAL 1: REORGANIZATION PLAN
At the Meeting, Merging Fund Shareholders will consider and vote upon the
Agreement and Plan of Reorganization (the "Reorganization Plan") dated May 11,
2001 among JPMF, on behalf of the Merging Fund, JPMIF, on behalf of the
Surviving Fund (the Merging Fund and the Surviving Fund are collectively defined
as the "Funds") and J.P. Morgan Chase & Co. ("JPMC") pursuant to which all of
the assets and liabilities of the Merging Fund will be transferred to the
Surviving Fund in exchange for Select Class Shares of the Surviving Fund. As a
result of the Reorganization, Merging Fund Shareholders will become shareholders
of the Surviving Fund and will receive Select Class Shares equal in value to
their holdings in the Merging Fund on the date of the Reorganization. In
connection with the Reorganization, the Surviving Fund will be renamed "JPMorgan
Diversified Fund." Further information relating to the Surviving Fund is set
forth herein, and the Surviving Fund's preliminary Prospectus and current Annual
Report (including the Annual Report of The Diversified Portfolio) is enclosed
with this Combined Prospectus/Proxy Statement.
THE JPMF BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL
1.
VOTE REQUIRED
Approval of the Reorganization Plan by the Merging Fund requires the
affirmative vote of the lesser of (i) 67% or more of the voting shares of the
Merging Fund present at the joint Meeting if the holders of more than 50% of the
outstanding voting shares of the Merging Fund are present or represented by
proxy and (ii) more than 50% of all outstanding voting shares of the Merging
Fund. If the Reorganization Plan is not approved by the Merging Fund
Shareholders, the JPMF Board will consider other appropriate courses of action.
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization, the parties thereto and the transactions contemplated thereby,
and is qualified by reference to the more complete information contained
elsewhere in this Combined Prospectus/Proxy Statement, the Prospectus, Statement
of Additional Information, Annual Report (including the Annual Report of The
Diversified Portfolio), and Semi-Annual Report (including the Semi-Annual Report
of The Diversified Portfolio) of the Merging Fund, the preliminary Prospectus
and Statement of Additional Information and the current Semi-Annual Report and
Annual Report of the Surviving Fund (including the Annual and Semi-Annual Report
of The Diversified Portfolio), and the Reorganization Plan attached to this
Combined Prospectus/Proxy Statement as Appendix A.
PROPOSED REORGANIZATION
Each of the Surviving Fund and the Merging Fund currently invests all of its
investable assets in The Diversified Portfolio (the "Master Portfolio"), which
has identical investment objectives and policies as the Surviving Fund and the
Merging Fund and which is advised by J.P. Morgan Investment Management Inc.
("JPMIM").
If the Reorganization is approved by the shareholders of the Merging Fund
and certain other conditions are met, the Merging Fund and the Feeder Portfolio
will be reorganized into the Surviving Fund. Concurrent with the Reorganization,
the Surviving Fund will cease to operate under a "master/feeder" structure and
will instead invest its assets directly in portfolio securities rather than in
the Master Portfolio.
1
In connection with the proposed Reorganization, the Surviving Fund will
implement a new multi-class structure under which it will offer Select Class
Shares and Institutional Class Shares. Pursuant to the proposed Reorganization,
the Merging Fund will transfer all of its assets and liabilities to the
Surviving Fund in exchange for Select Class Shares.
Under the proposed Reorganization, each Merging Fund Shareholder will
receive a number of Select Class Shares of the Surviving Fund with an aggregate
net asset value equal on the date of the exchange to the aggregate net asset
value of such shareholder's Merging Fund Shares on such date. Therefore,
following the proposed Reorganization, Merging Fund Shareholders will be
Surviving Fund Shareholders. Merging Fund Shareholders will not pay a sales load
in connection with the Reorganization. See "Information Relating to the Proposed
Reorganization."
The Surviving Fund has investment objectives, policies and restrictions
identical to those of the Merging Fund. However, while the Merging Fund and the
Surviving Fund currently invest all of their assets in the Master Portfolio
(which in turn invests in portfolio securities), after the Reorganization the
Surviving Fund will invest directly in portfolio securities. Following the
Reorganization the Surviving Fund will have substantially similar purchase,
redemption and dividend policies as the Merging Fund.
Based upon their evaluation of the relevant information presented to them,
including an analysis of the operation of the Surviving Fund both before and
after the Reorganization, the terms of the Reorganization Plan, the opportunity
to combine the two Funds with identical investment objectives and policies, and
the fact that the Reorganization will be tax-free, and in light of their
fiduciary duties under federal and state law, the JPMF Board and the JPMIF
Board, including a majority of each Board's members who are not "interested
persons" within the meaning of the Investment Company Act of 1940, as amended
(the "1940 Act"), have each determined that the proposed Reorganization is in
the best interests of its respective Fund and shareholders and that the
interests of such shareholders will not be diluted as a result of such
Reorganization.
REASONS FOR THE REORGANIZATION
The Reorganization is being proposed because each Fund's board believes that
it is in the best interest of its shareholders.
FEDERAL INCOME TAX CONSEQUENCES
Simpson Thacher & Bartlett will issue an opinion (based on certain
assumptions) as of the effective time of the Reorganization to the effect that
the transaction will not give rise to the recognition of income, gain or loss
for federal income tax purposes to the Merging Fund, the Surviving Fund or the
shareholders of the Merging Fund. A shareholder's holding period and tax basis
of Select Class Shares received by a Shareholder of the Merging Fund will be the
same as the holding period and tax basis of the shareholder's shares of the
Merging Fund. In addition, the holding period and tax basis of those assets
owned by the Merging Fund and transferred to the Surviving Fund will be
identical for the Surviving Fund. See "Information Relating to the Proposed
Reorganization--Federal Income Tax Consequences."
INVESTMENT ADVISER
The investment adviser for the Master Portfolio (and therefore the assets of
the Merging Fund, the Feeder Portfolio and the Surviving Fund) is JPMIM.
Following the Reorganization, JPMIM will serve as the Surviving Fund's
investment adviser. JPMIM is a wholly owned subsidiary of JPMC.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Surviving Fund and the Merging Fund is to
provide high total return from a diversified portfolio of stocks and bonds. See
"Risk Factors." Both Funds have identical investment policies, and the Surviving
Fund's investment policies will not change as a result of the Reorganization,
although, as mentioned above, the Surviving Fund will invest directly in
portfolio securities rather than the Master Portfolio. For more information
regarding the Surviving Fund's investment policies, see the Surviving Fund's
Prospectus enclosed with this Combined Prospectus/Proxy Statement. Each Fund may
change its objective without shareholder approval.
Drawing on a variety of analytical tools, each Fund's portfolio management
team allocates assets among various types of stock and bond investments, based
on a model allocation as follows:
- 52% medium-and large-cap U.S. stocks
- 35% U.S. and foreign bonds
2
- 10% foreign stocks
- 3% small-cap U.S. stocks
The team periodically adjusts the Surviving Fund's actual asset allocation
according to the relative attractiveness of each asset class.
Within this asset allocation framework, each Fund's team selects the Fund's
securities. With the stock portion of its portfolio, each Fund keeps its
economic sector weighting in line with the markets in which it invests, while
actively seeking the most attractive stocks within each sector. In choosing
individual stocks, the Fund's team ranks them according to their relative value
using a proprietary model that incorporates research from JPMIM's worldwide
network of analysts. Foreign stocks are chosen using a similar process, while
also monitoring country allocation and currency exposure.
With the bond portion of its portfolio, each Fund's team uses fundamental,
economic, and capital markets research to select securities. The team actively
manages the mix of U.S. and foreign bonds while typically keeping duration--a
common measurement of sensitivity to interest rate movements--within one year of
the average for the U.S. investment-grade bond universe (currently about 5
years).
Under normal circumstances the Surviving Fund plans to remain fully
invested, with at least 65% in stocks and 35% in bonds and other fixed income
securities. Stock investments may include U.S. and foreign common stocks,
convertible securities, preferred stocks, trust or partnership interests,
warrants, rights, and investment company securities. Bond investments may
include U.S. and foreign corporate and government bonds, mortgage-backed and
asset-backed securities, convertible securities, participation interests and
private placements. The Surviving Fund seeks to limit risk and enhance
performance through careful management, sector allocation, individual securities
selection, duration management and diversification. During severe market
downturns, the Surviving Fund has the option of investing up to 100% of assets
in investment-grade short-term securities.
The Surviving Fund's maintains its own policies for balancing credit quality
against potential yields and gains in light of its investment goals. At least
75% of the Surviving Fund bonds must be investment-grade (BBB/Baa or better, of
which 65% must be A or better), and no more than 25% BB/Ba or B; the fund may
include unrated bonds of equivalent quality in these categories. J.P. Morgan
develops its own ratings of unrated securities and makes a credit quality
determination for unrated securities.
The Surviving Fund anticipates that total foreign investments will not
exceed 30% of assets. The Surviving Fund actively manages the currency exposure
of its foreign investments relative to its benchmark, and may hedge back into
the U.S. dollar from time to time, although the fund typically maintains full
currency exposure to those emerging markets in which its invests.
PRINCIPAL RISKS OF INVESTING IN THE SURVIVING FUND
The value of your investment in the Surviving Fund will fluctuate in
response to movements in the stock and bond markets. The Surviving Fund's broad
diversification among asset classes and among individual stocks and bonds is
more effective in reducing volatility when asset classes perform differently.
Fund performance will also depend on the effectiveness of JPMIM research and the
management team's asset allocation and security selection decisions.
To the extent that the Surviving Fund invests in foreign securities, it
could lose money because of foreign government actions, political instability,
currency fluctuation or lack of adequate and accurate information. While the
portfolio may engage in options, futures and foreign currency transactions for
hedging or risk management purposes only, these transactions sometimes may
reduce returns or increase volatility.
Over the long term, investors can anticipate that the Surviving Fund's total
return and volatility should exceed those of bonds but remain less than those of
medium-and large-capitalization domestic stocks.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS
ADVISORY SERVICES
The investment adviser for the Surviving Fund's and the Merging Fund's
assets is JPMIM. JPMIM oversees the asset management of both funds. As
compensation for its services, JPMIM receives a management fee indirectly from
both funds at an annual rate of 0.55% of average daily net assets. Following the
Reorganization, JPMIM will manage the Surviving Fund's assets directly and will
receive a fee at an annual rate of 0.55% of average daily net assets.
3
OTHER SERVICES
J.P. Morgan Fund Distributors, Inc. (the "Distributor") is the distributor
for the Surviving Fund. Morgan Guaranty Trust Company of New York ("Morgan")
currently serves as administrator and shareholder servicing agent and an
affiliate of the Distributor currently serves as sub-administrator. The Bank of
New York ("BONY") currently serves as fund accountant and custodian, and DST
Systems, Inc. ("DST") currently serves as transfer agent and dividend disbursing
agent for the Surviving Fund. It is anticipated that subsequent to the
consummation of the Reorganization, The Chase Manhattan Bank ("Chase") will
become the Surviving Fund's fund accountant and custodian.
PricewaterhouseCoopers LLP serves as the Surviving Fund's independent
accountants.
ADMINISTRATOR
In connection with the Reorganization, the administration fee paid to Morgan
will be increased on August 11, 2001, to 0.15% of average daily net assets for
complex wide non-money market fund assets up to $25 billion and 0.075% on assets
in excess of $25 billion (currently such assets are less than $25 billion). The
Merging Fund currently pays Morgan, its administrator, an administration fee at
an effective rate of 0.048% of its average daily net assets.
ORGANIZATION
Each of JPMF and JPMIF is organized as a Massachusetts business trust. The
Merging Fund is organized as a series of JPMF and the Surviving Fund is
organized as a series of JPMIF.
PURCHASES, REDEMPTIONS AND EXCHANGES
After the Reorganization, the procedures for making purchases, redemptions
and exchanges of Select Class Shares of the Surviving Fund will be substantially
similar to those with respect to shares of the Merging Fund, as described in
this Combined Prospectus/Proxy Statement and the Surviving Fund's Prospectus and
Statement of Additional Information.
4
COMPARATIVE FEE AND EXPENSE TABLES
The table below shows (i) information regarding the fees and expenses paid
by the Merging Fund for the most recent fiscal year that reflect current expense
reimbursement arrangements and (ii) estimated fees and expenses on a pro forma
basis for the Surviving Fund after giving effect to the Reorganization. Under
the Reorganization, holders of Shares in the Merging Fund will receive Select
Class Shares in the Surviving Fund. Please note that the Surviving Fund
currently has one class of shares (which will not be distributed to Merging Fund
Shareholders as a result of the Reorganization and, therefore, no information on
this class is shown in the table below). In connection with the Reorganization,
this class will be re-named "Institutional Class" and the Select Class share
class will be introduced.
The table indicates that while contractual (pre-waiver) total expense ratio
for current shareholders of the Merging Fund are anticipated to be higher
following the Reorganization, actual (post-waiver) total expense ratios for
current shareholders of the Merging Fund will be less or stay the same for at
least three years following the Reorganization. This is because Morgan, the
Surviving Fund's administrator, has contractually agreed to waive certain fees
and/or reimburse certain expenses to ensure that actual total operating expenses
do not increase for three years after the Reorganization.
THE MERGING FUND
----------------
SHARES
----------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) when you buy shares,
shown as % of the offering price None
Maximum Deferred Sales Charge (Load) shown as
lower of original
purchase price or redemption proceeds None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.55%
Distribution (12b-1) Fees None
Other Expenses 0.43%
----
Total Annual Fund Operating Expenses 0.98%
====
THE SURVIVING FUND
-----------------------------
PRO FORMA WITH REORGANIZATION
-----------------------------
SELECT CLASS SHARES
-----------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) when you buy shares,
shown as % of the offering price None
Maximum Deferred Sales Charge (Load) Shown as
lower of original purchase price or redemption
proceeds None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.55%
Distribution (12b-1) Fees None
Other Expenses 0.51%
----
Total Annual Fund Operating Expenses 1.06%
====
Fee Waivers and Expense Reimbursements(2) 0.08%
----
Net Expenses 0.98%
====
- ---------------------
(2) Reflects an agreement by Morgan, an affiliate of JPMC, to reimburse the
Surviving Fund to the extent total operating expenses (which exclude
interest, taxes, extraordinary expenses and expenses related to the
deferred compensation plan) exceed 0.98% of average daily net assets with
respect to Select Class Shares for three years after the Reorganization.
The total annual Fund operating expenses are not expected to exceed 0.91%
for Select Class Shares due to contractual caps on other classes of shares
which require Fund level subsidies. Morgan may end this arrangement when
these fund level subsidies are no longer required.
5
The table does not reflect charges or credits which investors might incur if
they invest through a financial institution.
EXAMPLE: This example helps investors compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example assumes:
- You invest $10,000;
- You sell all of your shares at the end of each period;
- Your investment has a 5% return each year; and
- You pay net expenses for three years after the Reorganization and total
operating expenses as indicated in the table above.
Although actual costs may be higher or lower, based upon these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ --------------- ------- --------
THE MERGING FUND $100 $312 $542 $1,201
PRO FORMA THE SURVIVING FUND
WITH REORGANIZATION
SELECT CLASS SHARES $100 $312 $560 $1,271
RISK FACTORS
The following discussion highlights the principal risk factors associated
with an investment in the Surviving Fund. The Surviving Fund has investment
policies and investment restrictions, and therefore risks, identical to those of
the Merging Fund. This discussion is qualified in its entirety by the more
extensive discussion of risk factors set forth in the Prospectus and Statement
of Additional Information of the Surviving Fund, which are incorporated herein
by reference.
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Surviving Fund. The Surviving Fund may not achieve its
objective if JPMIM's expectations regarding particular securities or markets are
not met. In addition, the Surviving Fund's share price, and performance will
fluctuate in response to stock and bond market movements. The value of the
Surviving Fund's bonds (and potentially its convertible securities and stocks)
will fall when interest rates rise, and the longer a bond's maturity and the
lower its credit quality, the more its value typically falls. How well the
Surviving Fund's performance compares to that of similar funds will depend on
the success of the investment process.
Mortgage-backed and asset-backed securities (securities representing an
interest in, or secured by, a pool of mortgages or other assets such as
receivable) could generate capital losses or periods of low yields if they are
paid off substantially earlier or later than anticipated.
Adverse market conditions may from time to time cause the Surviving Fund to
take temporary defensive positions that are inconsistent with its principal
investment strategies and may hinder the Surviving Fund from achieving its
investment objective. The Surviving Fund could underperform its benchmark due to
its securities and asset allocation choices and other management decisions.
The default of an issuer would leave the Surviving Fund with unpaid interest
or principal. Non-investment grade bonds have a higher risk of default, tend to
be less liquid, and may be more difficult to value.
Currency exchange rate movements could reduce gains or create losses. The
Surviving Fund could lose money because of foreign government actions, political
instability, or lack of adequate and/or accurate information. Investment risks
tend to be higher in emerging markets. These markets also present higher
liquidity and valuation risks.
The Surviving Fund may buy securities before issue or for delayed delivery.
The Surviving Fund may use derivatives for hedging and for risk management
(i.e. to adjust duration or yield curve exposure, or to establish or adjust
exposure to particular securities, markets or currencies.) Derivatives such as
futures, options, swaps and forward foreign currency contracts that are used for
hedging the portfolio or specific securities may not fully offset the underlying
positions and this could result in losses to the Surviving Fund that would not
have otherwise occurred. Derivatives used for risk management may not have the
intended effects and may result in losses or missed opportunities. The
counterparty to a
6
derivatives contract could default. Certain types of derivatives involve costs
to the Surviving Fund which can reduce returns. Derivatives that involve
leverage could magnify losses.
The Surviving Fund may lend some of its portfolio securities in order to
earn income. When the Surviving Fund lends a security, there is a risk that the
loaned securities may not be returned if the borrower defaults. The collateral
the Surviving Fund receives from the borrower will be subject to the risks of
the securities in which it is invested. While the Surviving Fund may engage in
securities lending, it generally does not do so.
The Surviving Fund may purchase illiquid holdings. The Surviving Fund could
have difficulty valuing illiquid holdings precisely. The Surviving Fund could be
unable to sell these holdings at the time or price it desires.
The Surviving Fund may engage in short-term trading. Increased trading could
raise the Surviving Fund's brokerage and related costs. Increased short-term
capital gains distributions could raise shareholders' income tax liability.
An investment in the Surviving Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. You could lose money if you sell when the Surviving Fund's
share price is lower than when you invested.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
GENERAL
The terms and conditions under which the Reorganization may be consummated
are set forth in the Reorganization Plan. Significant provisions of the
Reorganization Plan are summarized below; however, this summary is qualified in
its entirety by reference to the Reorganization Plan, a copy of which is
attached as Appendix A to this Combined Prospectus/Proxy Statement and which is
incorporated herein by reference.
DESCRIPTION OF THE REORGANIZATION PLAN
The Reorganization Plan provides that at the Effective Time (as defined in
the Reorganization Plan) of the Reorganization, the assets and liabilities of
the Merging Fund will be transferred to and assumed by the Surviving Fund. In
exchange for the transfer of the assets and the assumption of the liabilities of
the Merging Fund, JPMIF will issue at the Effective Time of the Reorganization
full and fractional Select Class Shares of the Surviving Fund equal in aggregate
dollar value to the aggregate net asset value of full and fractional outstanding
shares of the Merging Fund as determined at the valuation time specified in the
Reorganization Plan. The Reorganization Plan provides that the Merging Fund will
declare a dividend or dividends prior to the Effective Time of the
Reorganization which, together with all previous dividends, will have the effect
of distributing to Merging Fund Shareholders all undistributed net investment
income earned and net capital gain realized up to and including the Effective
Time of the Reorganization.
Following the transfer of assets to, and the assumption of the liabilities
of the Merging Fund by, the Surviving Fund, the Merging Fund will distribute
Select Class Shares received by it to the Merging Fund Shareholders in
liquidation of the Merging Fund. Each Merging Fund Shareholder at the Effective
Time of the Reorganization will receive an amount of Select Class Shares with a
total net asset value equal to the net asset value of their Merging Fund Shares
plus the right to receive any dividends or distributions which were declared
before the Effective Time of the Reorganization but that remained unpaid at that
time with respect to the shares of the Merging Fund.
The Surviving Fund expects to maintain most of the portfolio investments of
the Merging Fund in light of the identical investment policies of the Merging
Fund and the Surviving Fund. Concurrently with the Reorganization, the Surviving
Fund will cease to operate under a "master/feeder" structure and will instead
invest directly in portfolio securities rather than in the Master Portfolio.
After the Reorganization, all of the issued and outstanding shares of the
Merging Fund shall be canceled on the books of the Merging Fund and the stock
transfer books of the Merging Fund will be permanently closed.
The Reorganization is subject to a number of conditions, including without
limitation: approval of the Reorganization Plan and the transactions
contemplated thereby described in this Combined Prospectus/Proxy Statement by
the Merging Fund Shareholders; the receipt of a legal opinion from Simpson
Thacher & Bartlett with respect to certain tax issues, as more fully described
in "Federal Income Tax Consequences" below; and the parties' performance in all
material respects of their respective agreements and undertakings
7
in the Reorganization Plan. Assuming satisfaction of the conditions in the
Reorganization Plan, the Effective Time of the Reorganization will be on
September 1, 2001 or such other date as is agreed to by the parties.
The expenses of the Funds in connection with the Reorganization will be
borne by JPMC or one of its affiliates.
The Reorganization Plan and the Reorganization described herein may be
abandoned at any time prior to the Effective Time of the Reorganization by
either party if a material condition to the performance of such party under the
Reorganization Plan or a material covenant of the other party is not fulfilled
by the date specified in the Reorganization Plan or if there is a material
default or material breach of the Reorganization Plan by the other party. In
addition, either party may terminate the Reorganization Plan if its trustees
determine that proceeding with the Reorganization Plan is not in the best
interests of their Fund's shareholders.
BOARD CONSIDERATIONS
The Merging Fund and the Surviving Fund currently exists in a
"master/feeder" format, pursuant to which each Fund (the feeders) invests its
assets in a common portfolio--the "master"--and shares of each fund are sold to
different categories of investors with different distribution and shareholder
services and fees. Among other reasons for the creation of this structure was
the opportunity to obtain the economies of scale from an investment and expense
perspective that might come from the investment and administration of a larger
pool of assets than any one fund could expect to have on its own. An important
factor in the decision to structure the funds in this way was that non-U.S.
investors' assets would be invested alongside those of U.S. investors within the
master portfolio on a basis that was not disadvantageous to the non-U.S.
investors from a U.S. tax perspective. For various reasons, non-U.S. feeders in
the fund complex withdrew their assets from the masters commencing in 1997,
thereby eliminating one of the principal reasons for the master/feeder format.
Nevertheless, the funds continued in that format and, the JPMF Board believes,
conducted their operations on a basis at least as favorable to the funds as
would have obtained if the format had been abandoned, as is now proposed.
Following the announcement of the merger of the Chase Manhattan Corporation
and J.P. Morgan & Co., JPMIM and Morgan and their counterparts within the Chase
organization reviewed the compatibilities of their various mutual fund groups,
including their respective organizational structures, service providers,
distribution arrangements and methodologies, and fees and expenses. The proposed
Reorganization of the Merging Fund into the Surviving Fund is a part of the more
general integration of the J.P. Morgan funds complex with the Chase Vista funds
complex to create a single mutual fund complex with substantially similar
arrangements for the provision of advisory, administration, distribution,
custody and fund accounting and transfer agency services.
The JPMF Board believes that the conversion by way of the proposed
Reorganization of the current master/feeder format into the multiclass format
discussed in this Combined/Prospectus Proxy Statement and the adoption of the
service arrangements by the Surviving Fund described herein (the "Service
Arrangements") are in the best interests of the Merging Fund and its
shareholders and that the interests of shareholders will not be diluted as a
result of the Reorganization.
In considering the proposed Reorganization and Service Arrangements on
January 23 and 24 and on March 26 and 27, 2001, the JPMF Board also noted that
there were important benefits expected to arise out of the integration of the
J.P. Morgan and Chase Vista mutual funds complexes. Among these benefits, the
Board considered (1) investor and shareholder confusion should be mitigated if
not eliminated by the adoption by both the J.P. Morgan and the Chase Vista
mutual funds of common organizational structures and common service providers;
(2) Surviving Fund shareholders would be able to exchange into a larger number
and greater variety of funds without paying sales charges, (3) to the extent
that additional share classes are subsequently offered by the Surviving Fund it
should have a positive effect on asset growth, which in turn over time could
result in a lower total expense ratio as economies of scale were realized;
(4) JPMIM advised the Board that it believes that the outsourcing of many
functions to the sub-administrator will (a) upgrade the quality of services
currently being provided to the Funds, and (b) enhance Morgan's ability
effectively to monitor and oversee the quality of all Fund service providers,
including the investment adviser, distributor, custodian and transfer agent;
(5) Morgan's undertaking for three years to waive fees or reimburse the
Surviving Fund's expenses in order that the total expense ratios of the Select
and Institutional Classes do not exceed those of the Merging Fund and the
Surviving Fund, respectively; (6) the fact that all costs and expenses of the
Reorganization and implementation of the Service Arrangements would be borne by
JPMC and (7) the fact that the Reorganization would constitute a tax-free
reorganization.
8
In addition, each Board took into account that, notwithstanding the increase
in the administration fee paid to Morgan, Morgan agreed to cap the total
expenses as set forth in the expense table above and to institute a breakpoint
in the administration fee from 0.15% of average daily net assets for complex
wide non-money market fund assets up to $25 billion to 0.075% on assets in
excess of $25 billion (currently such assets are less than $25 billion). The
Merging Fund currently pays its administrator, Morgan, an administration fee at
an effective rate of 0.048% of its average daily net assets. Moreover, JPMIM
agreed that, notwithstanding its proposed increase to $1 million of the minimum
investment in the Select Class, all current shareholders of the Merging Fund
(for which the current minimum is $2,500) will be entitled to make additional
investments in the Select Class of the Surviving Fund or of any other fund in
the integrated fund complex or to exchange shares of the Select Class of the
Surviving Fund for Select Shares of any other such fund. The Board also noted
that Morgan did not propose, and advised that it does not expect to propose, the
imposition of any distribution (12b-1) fees or shareholder servicing fees on the
Select or Institutional Class that are not already in place. Finally the Board
was advised that the custody and fund accounting fees to be charged by Chase
will be lower than those currently charged by The Bank of New York. It should be
recognized that, at current asset levels and in consequence of the expense cap,
the lower custody and fund accounting fees will not have an immediate effect on
the Surviving Fund's total expense ratio but should have some positive effect in
the future.
Based upon their evaluation of the relevant information provided to them,
the changes effected in the Service Arrangements in the negotiations between the
Trustees and Morgan, and in light of their fiduciary duties under federal and
state law, the Trustees, including a majority who are not interested persons of
the Funds or JPMC as defined in the 1940 Act, determined that the proposed
Reorganization is in the best interests of the Merging and Surviving Fund, as
applicable, that the interests of their respective shareholders would not be
diluted as a result of the Reorganization, and that the Service Arrangements are
in the best interests of the Surviving Fund.
THE JPMF BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL.
The JPMF Board has not determined what action the Merging Fund will take in
the event shareholders do not approve the Reorganization Plan or for any reason
the Reorganization is not consummated. In either such event, the Board will
consider other appropriate courses of action.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that JPMF
receive an opinion from Simpson Thacher & Bartlett to the effect that for
federal income tax purposes: (i) the transfer of all of the assets and
liabilities of the Merging Fund to the Surviving Fund in exchange for the Select
Class Shares and the liquidating distributions to shareholders of the Select
Class Shares so received, as described in the Reorganization Plan, will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and with respect to the
Reorganization, the Merging Fund and the Surviving Fund will each be considered
"a party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Merging Fund as a result of such
transaction; (iii) no gain or loss will be recognized by the Surviving Fund as a
result of such transaction; (iv) no gain or loss will be recognized by the
Merging Fund Shareholders on the distribution to the Merging Fund Shareholders
of the Select Class Shares solely in exchange for their Merging Fund Shares;
(v) the aggregate basis of shares of the Surviving Fund received by a
shareholder of the Merging Fund will be the same as the aggregate basis of such
Merging Fund Shareholder's Merging Fund Shares immediately prior to the
Reorganization; (vi) the basis of the Surviving Fund in the assets of the
Merging Fund received pursuant to such transaction will be the same as the basis
of such assets in the hands of the Merging Fund immediately before such
transaction; (vii) a Merging Fund Shareholder's holding period for the Select
Class Shares will be determined by including the period for which such Merging
Fund Shareholder held the Merging Fund Shares exchanged therefor, provided that
the Merging Fund Shareholder held such Merging Fund Shares as a capital asset;
and (viii) the Surviving Fund's holding period with respect to the assets
received in the Reorganization will include the period for which such assets
were held by the Merging Fund.
JPMF has not sought a tax ruling from the Internal Revenue Service (the
"IRS"), but is acting in reliance upon the opinion of counsel discussed in the
previous paragraph. That opinion is not binding on the IRS and does not preclude
the IRS from adopting a contrary position. Shareholders should consult their own
advisers concerning the potential tax consequences to them, including state and
local income taxes.
9
CAPITALIZATION
Because the Merging Fund will be combined with the Surviving Fund in the
Reorganization, the total capitalization of the Surviving Fund after the
Reorganization is expected to be greater than the current capitalization of the
Merging Fund. The following table sets forth as of December 31, 2000: (i) the
capitalization of the Merging Fund; (ii) the capitalization of the Surviving
Fund and (iii) the pro forma capitalization of the Surviving Fund as adjusted to
give effect to the Reorganization. There is, of course, no assurance that the
Reorganization will be consummated. Moreover, if consummated, the
capitalizations of the Surviving Fund and the Merging Fund are likely to be
different at the Effective Time of the Reorganization as a result of
fluctuations in the value of portfolio securities of each Fund and daily share
purchase and redemption activity in each Fund. The Surviving Fund currently has
one class of shares. In connection with the Reorganization, this class will be
renamed Institutional Class and the Select Class share class will be introduced.
PRO FORMA COMBINED WITH REORGANIZATION
---------------------------------------------------------------
THE MERGING THE SURVIVING
FUND FUND SELECT CLASS SHARES INSTITUTIONAL
------------ ------------- ------------------- -------------
Net Assets 12/31/00 $327,441,102 $621,057,264 $327,441,102 $621,057,264
Beneficial Interest
Outstanding 12/31/00 21,535,238 45,376,091 -- --
Shares Outstanding -- -- 23,923,715 45,376,091
Net Asset Value $ 15.20 $ 13.69 $ 13.69 13.69
PURCHASES, REDEMPTIONS AND EXCHANGES
Following the Reorganization, the procedures for purchases, redemptions and
exchanges of shares of the Surviving Fund will be substantially similar to those
of the Merging Fund. The Surviving Fund currently has one class of shares. In
connection with the Reorganization, this class will be renamed "Institutional
Class" and the Class A share class and the Select Class share class will be
introduced. The following discussion reflects the new class structure. This
section is qualified in its entirety by the discussion in the preliminary
Prospectus and Statement of Additional Information of the Surviving Fund, which
are incorporated herein by reference.
BUYING SURVIVING FUND SHARES
THE FOLLOWING DISCUSSION APPLIES TO PURCHASES OF THE SELECT CLASS SHARES
THAT YOU MIGHT MAKE AFTER THE REORGANIZATION AND REFLECTS THE NEW CLASS
STRUCTURE.
The price shareholders pay for their shares is the net asset value per share
(NAV). NAV is the value of everything the Surviving Fund owns, minus everything
it owes, divided by the number of shares held by investors. The Surviving Fund
generally values its assets at fair market values but may use fair value if
market prices are unavailable.
The NAV of each class of the Surviving Fund's shares is generally calculated
once each day as of the close of regular trading on the New York Stock Exchange.
A shareholder will pay the next NAV calculated after the JPMorgan Funds Service
Center (the "Center") receives that shareholder's order in proper form. An order
is in proper form only after payment is converted into federal funds.
The Center accepts purchase orders on any business day that the New York
Stock Exchange is open. If an order is received in proper form by the close of
regular trading on the New York Stock Exchange (or such other time as determined
by your financial intermediary), it will be processed at that day's price and
the purchaser will be entitled to all dividends declared on that day. If an
order is received after such time, it will generally be processed at the next
day's price. If a purchaser pays by check for Surviving Fund shares before the
close of regular trading on the New York Stock Exchange, it will generally be
processed the next day the Surviving Fund is open for business.
If a shareholder buys through an agent and not directly from the Center, the
agent could set earlier cut-off times. Each shareholder must provide a Social
Security Number or Taxpayer Identification Number when opening an account.
The Surviving Fund has the right to reject any purchase order for any
reason.
The investment minimum for Select Class Shares is $1,000,000. However
shareholders who receive Select Class Shares as a result of the Reorganization
may purchase new Select Class Shares in the Surviving Fund or Select Class
Shares in other JPMorgan Funds with an investment minimum of $2,500. For Select
10
Class Shares, checks should be made out to JPMorgan Funds in U.S. dollars.
Credit cards, cash, or checks from a third party will not be accepted. Shares
bought by check may not be sold for 15 calendar days. Shares bought through an
automated clearing house cannot be sold until the payment clears. This could
take more than seven business days. Purchase orders will be canceled if a check
does not clear and the investor will be responsible for any expenses and losses
to the Fund. Orders by wire will be canceled if the Center does not receive
payment by 4:00 p.m., Eastern Time, on the day the shareholder buys.
Shareholders seeking to buy Select Class Shares through an investment
representative should instruct their representative to contact the Surviving
Fund. Such representatives may charge investors a fee and may offer additional
services, such as special purchase and redemption programs, "sweep" programs,
cash advances and redemption checks. Such representative may set different
minimum investments and earlier cut-off times.
SELLING SURVIVING FUND SHARES
THE FOLLOWING DISCUSSION APPLIES TO SALES OF THE SELECT CLASS SHARES THAT
YOU MIGHT MAKE AFTER THE REORGANIZATION AND REFLECTS THE NEW CLASS STRUCTURE.
Select Class Shares of the Surviving Fund may be sold on any day the Center
is open for trading, either directly to the Fund or through an investment
representative. Shareholders of the Surviving Fund will receive the next NAV
calculated after the Center accepts his or her sale order.
An order to sell shares will not be accepted if the Surviving Fund has not
collected payment for the shares. The Surviving Fund may stop accepting orders
to sell and may postpone payments for more than seven days only when permitted
by federal securities laws.
Generally, proceeds are sent by check, electronic transfer or wire for
Select Class Shares. However, if a shareholder's address of record has changed
within the 30 days prior to the sale request or if more than $25,000 of shares
is sold by phone, proceeds will be sent by electronic transfer or wire only to
the bank account on the Surviving Fund's records.
For Select Class Shares, a shareholder will need to have his or her
signature guaranteed if he or she wants payment to be sent to an address other
than the one in the Surviving Fund's records. Additional documents or a letter
from a surviving joint owner may also be needed.
A shareholder who purchased through an investment representative, or through
a financial service firm, should contact that representative, who will send the
necessary documents to the Center. The representative might charge a fee for
this service.
Shareholders may also sell their shares by contacting the Center directly or
their financial intermediary. Select Class shareholders may call 1-800-622-4273.
EXCHANGING SURVIVING FUND SHARES
THE FOLLOWING DISCUSSION APPLIES TO EXCHANGES OF THE SELECT CLASS SHARES
THAT YOU MIGHT MAKE AFTER THE REORGANIZATION.
Select Class Shares of the Surviving Fund may be exchanged for shares of the
same class in certain other JPMorgan Funds.
For tax purposes, an exchange is treated as a sale of those shares.
Shareholders should carefully read the prospectus of the fund into which they
want to exchange.
The exchange privilege is not a means of short-term trading as this could
increase management cost and affect all shareholders of the Surviving Fund. The
Fund reserves the right to limit the number of exchanges or refuse an exchange.
Each exchange privilege may also be terminated. The Surviving Fund charges an
administration fee of $5 for each exchange if an investor makes more than 10
exchanges in a year or three in a quarter.
OTHER INFORMATION CONCERNING THE SURVIVING FUND
For Select Class Shares, if the balance falls below the applicable
investment minimum for 30 days as a result of selling shares (and not because of
performance), then the Surviving Fund reserves the right to request that you buy
more shares or close your account. At least 60 days' notice will be given before
closing the account.
Unless a shareholder indicates otherwise on his or her account application,
the Surviving Fund is authorized to act on redemption and transfer instructions
received by phone. If someone trades on an
11
account by phone, the Surviving Fund will ask that person to confirm the account
registration and address to make sure they match those in the Surviving Fund
records. If they do correspond, the Fund is generally authorized to follow that
person's instructions. The Surviving Fund will take all reasonable precautions
to confirm that the instructions are genuine. Investors agree that they will not
hold the Surviving Fund liable for any loss or expenses from any sales request,
if the Surviving Fund takes reasonable precautions. The Surviving Fund will be
liable for any losses to a shareholder from an unauthorized sale or fraud
against such shareholder if the Surviving Fund does not follow reasonable
procedures.
It may not always be possible to reach the Center by telephone. This may be
true at times of unusual market changes and shareholder activity. In that event,
shareholders can mail instructions to the Surviving Fund or contact their
investment representative or agent. The Surviving Fund may modify or cancel the
sale of shares by phone without notice.
JPMIF, on behalf of the Surviving Fund, has entered into agreements with
certain shareholder servicing agents (including Chase) under which the
shareholder servicing agents will agree to provide certain support services to
their customers. For performing these services, each shareholder-servicing agent
will receive an annual fee of up to 0.25% of the average daily net assets of the
Select Class Shares held by investors serviced by the shareholder-servicing
agent. The Merging Fund likewise has similar arrangements with respect to its
Shares.
JPMIM and/or the Distributor may, at their own expense, make additional
payments to certain selected dealers or other shareholder servicing agents for
performing administrative services for their customers.
The Surviving Fund issues multiple classes of shares. Each class may have
different requirements for who may invest, and may have different sales charges
and expense levels. A person who gets compensated for selling Fund Shares may
receive a different amount for each class.
DISTRIBUTIONS AND TAXES
The Surviving Fund can earn income and realize capital gain. The Surviving
Fund will deduct from these earnings any expenses and then pay to shareholders
the distributions.
The Surviving Fund typically distributes any net investment income four
times a year. Net capital gain, if any, is distributed annually. You have three
options for your Surviving Fund distributions. You may:
- reinvest all of them in additional Surviving Fund shares;
- take distributions of net investment income in cash or as a deposit in a
pre-assigned bank account and reinvest distributions of net capital gain
in additional shares; or
- take all distributions in cash or as a deposit in a pre-assigned bank
account.
If you don't notify us otherwise, we'll reinvest all distributions. If your
distributions are reinvested, they will be in the form of shares of the same
class. The taxation of dividends won't be affected by the form in which you
receive them.
Dividends of net investment income are usually taxable as ordinary income at
the federal, state and local levels.
If you receive distributions of net capital gain, the tax rate will be based
on how long the Surviving Fund held a particular asset, not on how long you have
owned your shares. If you buy shares just before a distribution, you will pay
tax on the entire amount of the taxable distribution you receive, even though
the NAV will be higher on that date because it includes the distribution amount.
Early in each calendar year, the Surviving Fund will send its shareholders a
notice showing the amount of distributions received in the preceding year and
the tax status of those distributions.
The above is only a general summary of tax implications of investing in the
Surviving Fund. Shareholders should consult their tax advisors to see how
investing in the Surviving Fund will affect their own tax situation.
12
COMPARISON OF THE MERGING FUND'S
AND THE SURVIVING FUND'S ORGANIZATION STRUCTURE
There are no material differences in the organizational structure of the
Merging Fund and the Surviving Fund. Set forth below are descriptions of the
structure, voting rights, shareholder liability and the liability of Trustees.
STRUCTURE OF THE MERGING FUND
The Merging Fund is organized as a series of JPMF, which is organized under
the law of the Commonwealth of Massachusetts. As a Massachusetts business trust,
JPMF's operations are governed by JPMF's Declaration of Trust and By-Laws and
applicable Massachusetts law. The operations of the Merging Fund are also
subject to the provisions of the 1940 Act and the rules and regulations
thereunder.
STRUCTURE OF THE SURVIVING FUND
The Surviving Fund is organized as a series of JPMIF, which is organized
under the law of the Commonwealth of Massachusetts. As a Massachusetts business
trust, JPMIF's operations are governed by JPMF's Declaration of Trust and
By-Laws and applicable Massachusetts law. The operations of the Surviving Fund
are also subject to the provisions of the 1940 Act and the rules and regulations
thereunder.
TRUSTEES AND OFFICERS
Subject to the provisions of its trust documents, the business of the
Merging Fund is managed by JPMF's Trustees and the business of the Surviving
Fund is managed by JPMIF's Trustees, who serve indefinite terms (subject to
mandatory retirement age) and have all powers necessary or convenient to carry
out their responsibilities.
Information concerning the current Trustees and officers of JPMF and JPMIF
is set forth in the Funds' respective Statements of Additional Information,
which are incorporated herein by reference.
SHARES OF FUNDS
Each of JPMF and JPMIF is a trust with an unlimited number of authorized
shares of beneficial interest which may be divided into series or classes
thereof. Each Fund is one series of a trust and may issue multiple classes of
shares. Each share of a series or class of a trust represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class of either JPMF or JPMIF
participate equally in the earnings, dividends and assets of the particular
series or class. Fractional shares have proportionate rights to full shares.
Expenses of JPMF or JPMIF that are not attributable to a specific series or
class will be allocated to all the series of that trust in a manner believed by
its board to be fair and equitable. Generally, shares of each series will be
voted separately, for example, to approve an investment advisory agreement.
Likewise, shares of each class of each series will be voted separately, for
example, to approve a distribution plan, but shares of all series and classes
vote together, to the extent required by the 1940 Act, including for the
election of Trustees. Neither JPMF nor JPMIF is required to hold regular annual
meetings of shareholders, but may hold special meetings from time to time. There
are no conversion or preemptive rights in connection with shares of either JPMF
or JPMIF.
SHAREHOLDER VOTING RIGHTS
With respect to all matters submitted to a vote of shareholders,
shareholders of JPMF are entitled to the number of votes (or "voting shares")
equal to the product of the number of shares owned multiplied by the net asset
value per share on the record date.
A vacancy in the Board of either JPMF or JPMIF resulting from the
resignation of a Trustee or otherwise may be filled similarly by a vote of a
majority of the remaining Trustees then in office, subject to the 1940 Act. In
addition, Trustees may be removed from office by a vote of holders of voting
shares representing two-thirds of the outstanding voting shares of each
portfolio of that trust. A meeting of shareholders shall be held upon the
written request of the holders of voting shares representing not less than 10%
of the outstanding voting shares entitled to vote on the matters specified in
the written request. Except as set forth above, the Trustees may continue to
hold office and may appoint successor Trustees.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders of either JPMF or JPMIF could, under
certain circumstances, be held personally liable as partners for the obligations
of that trust. However, the Declaration of Trust of each of JPMF and JPMIF
disclaims shareholder liability for acts or obligations of that trust and
provides for indemnification and reimbursement of expenses out of trust property
for any shareholder held personally liable for the obligations of that trust.
Each of JPMF and JPMIF may maintain appropriate insurance (for
13
example, fidelity bonding and errors and omissions insurance) for the protection
of that trust, its shareholders, Trustees, officers, employees and agents
covering possible tort and other liabilities. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability generally is
limited to circumstances in which both inadequate insurance exists and the trust
itself is unable to meet its obligations.
LIABILITY OF DIRECTORS AND TRUSTEES
Under the Declaration of Trust of each of JPMF and JPMIF, the Trustees of
that trust are personally liable only for bad faith, willful misfeasance, gross
negligence or reckless disregard of their duties as Trustees. Under the
Declaration of Trust of each of JPMF and JPMIF, a Trustee or officer will
generally be indemnified against all liability and against all expenses
reasonably incurred or paid by such person in connection with any claim, action,
suit or proceeding in which such person becomes involved as a party or otherwise
by virtue of such person being or having been a Trustee or officer and against
amounts paid or incurred by such person in the settlement thereof.
The foregoing is only a summary of certain organizational and governing
documents and Massachusetts business trust law. It is not a complete
description. Shareholders should refer to the provisions of these documents and
state law directly for a more thorough comparison. Copies of the Declaration of
Trust and By-Laws of each of JPMF and JPMIF are available without charge upon
written request to that trust.
INFORMATION RELATING TO THE ADVISORY CONTRACTS AND OTHER SERVICES
GENERAL INFORMATION
As noted above, the assets of the Surviving Fund currently invested in the
Master Portfolio are managed by JPMIM pursuant to an Advisory Agreement between
JPMIM and the Master Portfolio, and JPMIM is responsible for the day-to-day
management of the Surviving Fund's assets. Following the Reorganization, the
Surviving Fund's assets will be managed directly by JPMIM pursuant to an
Advisory Agreement substantially similar to the agreement between the Master
Portfolio and JPMIM.
DESCRIPTION OF JPMIM
JPMIM is an indirect wholly-owned subsidiary of JPMC incorporated under the
laws of Delaware. JPMIM's principal executive offices are located at 522 Fifth
Avenue, New York, New York 10036. JPMIM, a registered investment adviser,
manages employee benefit funds of corporations, labor unions and state and local
governments and the accounts of other institutional investors, including
investment companies. As of March 31, 2001, JPMIM and certain of its affiliates
provided investment management services with respect to assets of approximately
$607.7 billion.
Under the Advisory Agreement, JPMIM will be responsible for making decisions
with respect to, and placing orders for, all purchases and sales of the
portfolio securities of the Surviving Fund. JPMIM's responsibilities under the
Advisory Agreement will include supervising the Surviving Fund's investments and
maintaining a continuous investment program, placing purchase and sale orders
and paying costs of certain clerical and administrative services involved in
managing and servicing the Surviving Fund's investments and complying with
regulatory reporting requirements. The services to be provided to the Surviving
Fund by JPMIM are substantially similar to the services currently provided to
the Master Portfolio and, therefore, indirectly to the Merging Fund by JPMIM.
EXPENSES AND MANAGEMENT FEES. The Advisory Agreement provides that the
Surviving Fund will pay JPMIM a monthly management fee based upon the net assets
of the Surviving Fund. The annual rate of this management fee is 0.55%. The
Master Portfolio and, therefore, indirectly the Merging Fund also currently pays
0.55% of average net assets to JPMIM for its advisory services. JPMIM may waive
fees from time to time.
Under the Advisory Agreement, except as indicated above, the Surviving Fund
is responsible for its operating expenses including, but not limited to, taxes;
interest; fees (including fees paid to its Trustees who are not affiliated with
JPMIM or any of its affiliates); fees payable to the Commission; state
securities qualification fees; association membership dues; costs of preparing
and printing prospectuses for regulatory purposes and for distribution to
existing shareholders; management and administrative fees; charges of the
custodian and transfer agent; insurance premiums; auditing and legal expenses;
costs of shareholders' reports and shareholder meetings; any extraordinary
expenses; and brokerage fees and commissions, if any, in connection with the
purchase or sale of portfolio securities.
LIMITATION ON LIABILITY. The Advisory Agreement provides that JPMIM will not
be liable for any error of judgment or mistake of law or for any act or omission
or loss suffered by JPMIF or the Surviving Fund in
14
connection with the performance of the Advisory Agreement except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or from willful misfeasance, bad faith, or gross
negligence in the performance of its duties or reckless disregard of its
obligations and duties under the Advisory Agreement.
DURATION AND TERMINATION. The Advisory Agreement will continue in effect
from year to year with respect to the Surviving Fund, only so long as such
continuation is approved at least annually by (i) the Board of Trustees of JPMIF
or the majority vote of the outstanding voting securities of the Surviving Fund,
and (ii) a majority of those Trustees who are neither parties to the Advisory
Agreement nor "interested persons," as defined in the 1940 Act, of any such
party, acting in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement will terminate automatically in the event of
its "assignment," as defined in the 1940 Act. In addition, the Advisory
Agreement is terminable at any time as to the Surviving Fund without penalty by
the JPMIF Board or by vote of the majority of the Surviving Fund's outstanding
voting securities upon 60 days' written notice to JPMIM, and by JPMIM on 90
days' written notice to JPMIF.
PORTFOLIO MANAGER
The portfolio management team for the Surviving Fund is led by Anne Lester,
vice president, who joined the team in June of 2000 and has been at JPMorgan
since 1992 and John M. Devlin, vice president, who joined the team in December
of 1993 and has been at JPMorgan since 1986. Prior to managing this fund, Ms.
Lester worked in the Product Development group and as a fixed income and
currency trader and portfolio manger in Milan.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
JPMIM places orders for the Surviving Fund 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 Surviving Fund. 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 Surviving Fund will be undertaken principally
to accomplish the Surviving Fund's objective in relation to expected movements
in the general level of interest rates. The Surviving Fund may engage in
short-term trading consistent with its objectives.
In connection with portfolio transactions, JPMIM intends to seek best
execution on a competitive basis for both purchases and sales of securities.
Subject to the overriding objective of obtaining the best execution of orders,
JPMIM may allocate a portion of the Surviving Fund's brokerage transactions to
affiliates of JPMIM. Under the 1940 Act, persons affiliated with the Surviving
Fund and persons who are affiliated with such persons are prohibited from
dealing with the fund as principal in the purchase and sale of securities unless
a permissive order allowing such transactions is obtained from the Commission.
However, affiliated persons of the Fund may serve as its broker in listed or
over-the-counter transactions conducted on an agency basis provided that, among
other things, the fee or commission received by such affiliated broker is
reasonable and fair compared to the fee or commission received by non-affiliated
brokers in connection with comparable transactions. In addition, the Surviving
Fund may not purchase securities during the existence of any underwriting
syndicate for such securities of which JPMIM or an affiliate is a member or in a
private placement in which JPMIM or an affiliate serves as placement agent
except pursuant to procedures adopted by the Board of Trustees that either
comply with rules adopted by the Commission or with interpretations of the
Commission's staff.
Investment decisions made by JPMIM are the product of many factors in
addition to basic suitability for the particular fund or other client in
question. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more other clients are selling the same security. The Surviving Fund may
only sell a security to other portfolios or accounts managed by JPMIM or its
affiliates in accordance with procedures adopted by the Trustees.
It also sometimes happens that two or more clients simultaneously purchase
or sell the same security. On those occasions when JPMIM deems the purchase or
sale of a security to be in the best interests of the
15
Surviving Fund, as well as other clients including other funds, JPMIM, 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 Surviving Fund with
those to be sold or purchased for other clients in order to obtain best
execution, including lower brokerage commissions if appropriate. In such event,
allocation of the securities so purchased or sold as well as any expenses
incurred in the transaction will be made by JPMIM in the manner it considers to
be most equitable and consistent with JPMIM's fiduciary obligations to the
Surviving Fund. In some instances, this procedure might adversely affect the
Surviving Fund.
OTHER SERVICES
The Distributor is a wholly owned, indirect subsidiary of BISYS Fund
Services, Inc., which currently serves as the Merging Fund's and the Surviving
Fund's distributor. An affiliate of the Distributor serves as sub-administrator
for the Merging Fund and the Surviving Fund. The Distributor is unaffiliated
with JPMC or any of its subsidiaries.
Morgan serves as administrator and shareholder servicing agent, BONY serves
as fund accountant and custodian, and DST serves as transfer agent and dividend
disbursing agent for the Surviving Fund. The services provided by Morgan and
BONY include day-to-day maintenance of certain books and records, calculation of
the offering price of the shares and preparation of reports. In its role as
custodian, BONY will be responsible for the daily safekeeping of securities
In connection with the Reorganization, the administration fee paid to Morgan
will be increased on August 11, 2001, to 0.15% of average daily net assets for
complex wide non-money market fund assets up to $25 billion and 0.075% on assets
in excess of $25 billion (currently such assets are less than $25 billion). The
Merging Fund currently pays Morgan, its administrator, an administration fee at
an effective rate of 0.048% of its average daily net assets.
PROPOSAL 2:
ELECTION OF TRUSTEES
It is proposed that shareholders of the Merging Fund consider the election
of the individuals listed below (the "Nominees") to the Board of Trustees of
JPMF, which is currently organized as a Massachusetts business trust. Even if
the Reorganization described in Proposal 1 is approved, other mutual funds that
are series of JPMF will continue to exist and operate. All shareholders of any
series of JPMF as of the record date (April 6, 2001) are required to be given a
vote on the proposal regarding Trustees. Because as of the record date you were
still a shareholder in JPMF, you are entitled to vote on this proposal.
Shareholders of JPMIF are being asked to approve the same Trustees as are being
proposed for JPMF.
In connection with the recent merger of J.P. Morgan & Co. Incorporated and
The Chase Manhattan Corporation, it has been proposed, subject to shareholder
approval, that the Boards of Trustees of the investment companies managed by
JPMIM and their affiliates be rationalized in order to obtain additional
operating efficiencies by having the same Board of Trustees for all of the
funds. Therefore, the Nominees include certain current Trustees of JPMF, certain
current Trustees of JPMIF, current members of their respective Advisory Boards
and certain Trustees of the former Chase Vista Funds. Each Nominee has consented
to being named in this Combined Prospectus/Proxy Statement and has agreed to
serve as a Trustee if elected. Each Trustee will hold office for a term of
unlimited duration subject to the current retirement age of 70(1). The Trustees
have no reason to believe that any Nominee will be unavailable for election.
Shareholders of JPMIF are concurrently considering the election of the same
individuals to the Board of Trustees of JPMIF. Biographical information about
the Nominees and other relevant information is set forth below. More information
regarding the current Trustees of JPMIF and JPMF is contained in the Funds'
Statements of Additional Information, which are incorporated herein by
reference.
The persons named in the accompanying form of proxy intend to vote each such
proxy "FOR" the election of the Nominees, unless shareholders specifically
indicate on their proxies the desire to withhold authority to vote for elections
to office. It is not contemplated that any Nominee will be unable to serve as a
Board member for any reason, but if that should occur prior to the Meeting, the
proxy holders reserve the right to substitute another person or persons of their
choice as nominee or nominees.
(1) Each Nominee is grandfathered with respect to the mandatory retirement
age for three years from the date of election.
16
THE JPMF BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF
THE NOMINEES LISTED BELOW.
VOTE REQUIRED
The affirmative vote of the holders of more than 50% of the voting shares of
JPMF present, in person or by proxy, at the joint Meeting is required to elect a
Trustee of JPMF, provided that at least one-third of the outstanding shares of
JPMF is represented at the joint Meeting, either in person or by proxy. In the
event that the requisite vote is not reached, the current Trustees would remain
as the only Trustees of JPMF.
The following are the nominees:
NAME OF NOMINEE AND CURRENT TRUSTEE BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATIONS
POSITION WITH FUND COMPLEX SINCE AGE DURING THE PAST FIVE YEARS
- ----------------------------------- ------- --- ---------------------------------------------
William J. Armstrong-- Nominee 59 Retired; formerly Vice President and
Trustee of certain other trusts Treasurer, Ingersoll- Rand Company. Address:
in the Fund Complex. 287 Hampshire Ridge, Park Ridge, NJ 07656.
Roland R. Eppley, Jr.-- Nominee 68 Retired; formerly President and Chief
Trustee of certain other trusts Executive Officer, Eastern States Bankcard
in the Fund Complex. Association Inc. (1971-1988); Director, Janel
Hydraulics, Inc.; formerly Director of The
Hanover Funds, Inc. Address: 105 Coventry
Place, Palm Beach Gardens, FL 33418.
Ann Maynard Gray-- Nominee 55 Former President, Diversified Publishing
Member of Advisory Board of the Group and Vice President, Capital
Trust and certain other trusts in Cities/ABC, Inc. Address: 1262, Rockrimmon
the Fund Complex Road, Stamford, CT 06903.
Matthew Healey-- 1982 63 Former Chief Executive Officer of the Trust
Chairman of the Trust and certain through April 2001; Chairman, Pierpont Group,
other trusts in the Fund Complex since prior to 1993. Address: Pine Tree
Country Club Estates, 10286 Saint Andrews
Road, Boynton Beach, Florida 33436.
Fergus Reid, III*-- Nominee 68 Chairman and Chief Executive Officer,
Chairman of the Trust and certain Lumelite Corporation, since September 1985;
other trusts in the Fund Complex. Trustee, Morgan Stanley Funds. Address: 202
June Road, Stamford, CT 06903.
James J. Schonbachler-- Nominee 58 Retired; Prior to September, 1998, Managing
Member of Advisory Board of the Director, Bankers Trust Company and Group
Trust and certain other trusts in Head and Director, Bankers Trust A.G., Zurich
the Fund Complex and BT Brokerage Corp. Address: 3711
Northwind Court, Jupiter, FL 33477.
Leonard M. Spalding, Jr.*-- Nominee 65 Retired; formerly Chief Executive Officer of
Trustee of certain other trusts Chase Mutual Funds Corp.; formerly President
in the Fund Complex and Chief Executive Officer of Vista Capital
Management; and formerly Chief Investment
Executive of The Chase Manhattan Private
Bank. Address: 2025 Lincoln Park Road,
Springfield, KY 40069.
H. Richard Vartabedian-- Nominee 65 Former President of certain other trusts in
Trustee of certain other trusts the Fund Complex through April 2001;
in the Fund Complex. Investment Management Consultant; formerly,
Senior Investment Officer, Division Executive
of the Investment Management Division of The
Chase Manhattan Bank, N.A., 1980-1991.
Address: P.O. Box 296, Beach Road, Hendrick's
Head, Southport, ME 04576.
- ---------------------
* Mr. Spalding is deemed to be an "interested person" (as defined in the 1940
Act) due to his ownership of equity securities of affiliates of JPMC. It is
anticipated that Mr. Reid will be named Chairman of the Trust and therefore
will be deemed to be an "interested person" of the Trust.
17
The Board of Trustees and Advisory Board Members of JPMF each met five times
during the 2000 calendar year, and each of the Trustees attended at least 75% of
the meetings of the Board and any committee on which he or she serves.
The Board of Trustees of JPMF presently has an Audit Committee. The members
of the Audit Committee are Messrs. Addy (Chairman), Eschenlauer, Burns, Mallardi
and Healey. The function of the Audit Committee is to recommend independent
auditors and monitor accounting and financial matters. The Audit Committee met
four times during the 2000 calendar year.
The Board of Trustees of JPMF presently has a Nominating Committee. The
members of the Nominating Committee are Messrs. Addy, Eschenlauer, Burns and
Mallardi. The function of the Nominating Committee is to nominate trustees, for
the Board to consider. The Nominating Committee met one time during the 2000
calendar year.
REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS:
Each current Trustee is reimbursed for expenses incurred in attending each
meeting of the Board of Trustees or any committee thereof. Each Trustee who is
not an affiliate of JPMIM is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by JPMIM. Each Trustee receives a
fee, allocated among all investment companies for which the Trustee serves.
Annually, each Trustee receives $75,000.
Set forth below is information regarding compensation paid or accrued during
the calendar year ended December 31, 2000 for each nominee of JPMF:
COMPENSATION FROM PENSION OR RETIREMENT TOTAL COMPENSATION FROM
"MORGAN FUND COMPLEX"(1) BENEFITS ACCRUED "FUND COMPLEX"(2)
-------------------------- --------------------- -----------------------
William J. Armstrong NA $ 41,781 $ 90,000(10)(3)
Roland R. Eppley, Jr. NA $ 58,206 $ 91,000(10)(3)
Ann Maynard Gray $75,000 NA $ 75,000(17)(3)
Matthew Healey(4) $75,000 NA $ 75,000(17)(3)
Fergus Reid, III, Trustee NA $110,091 $202,750(10)(3)
James J. Schonbachler $75,000 NA $ 75,000(17)(3)
Leonard M. Spalding, Jr. NA $ 35,335 $ 89,000(10)(3)
H. Richard Vartabedian NA $ 86,791 $134,350(10)(3)
- ---------------------
1 The Morgan Fund Complex means registered investment companies advised by
JPMIM.
2 A Fund Complex generally means two or more investment companies that hold
themselves out to investors as related companies for purposes of investment
and investment services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies (as used herein, registered
investment companies advised by JPMIM and J.P. Morgan Fleming Asset
Management (USA) Inc.). The Fund Complex for which the nominees will serve
includes 14 investment companies.
3 Total number of investment company boards with respect to Trustees, or
Advisory Boards with respect to Advisory Board members, served on within
the Fund Complex.
4 Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman of Pierpont
Group, Inc., compensation in the amount of $200,000, contributed $25,500 to
a defined contribution plan on his behalf and paid $18,400 in insurance
premiums for his benefit.
Inasmuch as the Morgan Fund Complex does not have any retirement plan for
its Trustees and JPMC will also benefit from the administrative efficiencies of
a consolidated board, JPMC has agreed to pay a one-time retirement package to
the Trustees of the Morgan Fund Complex and the Advisory Board members who have
volunteered to leave the Board of Trustees or Advisory Board of the Morgan Fund
Complex prior to their normal retirement date. For each retiring Trustee, the
retirement package is equal to three times the annual fee (which may increase)
for the new combined Board per Trustee; for each retiring Advisory Board member,
the retirement package is one and a half times the annual fee (which may
increase) for the new combined Board per Trustee.
18
FORMER CHASE VISTA FUNDS' RETIREMENT PLAN AND DEFERRED COMPENSATION PLAN FOR
ELIGIBLE TRUSTEES
Effective August 21, 1995, the Trustees of the former Chase Vista Funds also
instituted a Retirement Plan for Eligible Trustees (the "Plan") pursuant to
which each Trustee (who is not an employee of the former Chase Vista Funds'
adviser, administrator or distributor or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible Trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the investment companies advised by the
adviser of certain former Chase Vista Funds and its affiliates (collectively,
the "Covered Funds"). Each Eligible Trustee is entitled to receive from the
Covered Funds an annual benefit commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to the sum of
(1) 8% of the highest annual compensation received from the Covered Funds
multiplied by the number of such Trustee's years of service (not in excess of 10
years) completed with respect to any Covered Funds and (2) 4% of the highest
annual compensation received from the Covered Funds for each year of service in
excess of 10 years, provided that no Trustee's annual benefit will exceed the
highest annual compensation received by that Trustee from the Covered Funds.
Such benefit is payable to each eligible Trustee in monthly installments for the
life of the Trustee. On February 22, 2001, the Board of Trustees voted to
terminate the Plan in furtherance of this determination agreed and to pay
Trustees an amount of compensation equal, in the aggregate, to $10.95 million,
of which $5.3 million had been previously accrued by the Covered Funds. The
remaining $5.65 million was paid by Chase. Mssrs. Armstrong, Eppley, Reid,
Spalding and Vartabedian, who are Nominees for Director, received $1,027,673,
$800,600, $2,249,437, $463,798 and $1,076,927, respectively, in connection with
the termination. Each nominee has elected to defer receipt of such amount
pursuant to the Deferred Compensation Plan for Eligible Trustees.
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which
each Trustee (who is not an employee of the former Chase Vista Funds' adviser,
administrator or distributor or any of their affiliates) may enter into
agreements with such Funds whereby payment of the Trustees' fees are deferred
until the payment dated elected by the Trustee (or the Trustee's termination of
service). The deferred amounts are deemed invested in shares of funds as elected
by the Trustee at the time of deferral. If a deferring Trustee dies prior to the
distribution of amounts held in the deferral account, the balance of the
deferral account will be distributed to the Trustee's designated beneficiary in
a single lump sum payment as soon as practicable after such deferring Trustee's
death. Messrs. Armstrong, Eppley, Reid, Spalding and Vartabedian are the only
Nominees who have elected to defer compensation under such plan.
The Trustees decide upon general policies and are responsible for overseeing
JPMF's business affairs. To assist the Trustees in exercising their overall
supervisory responsibilities, each of JPF and the Master Portfolio has entered
into a Fund Services Agreement with Pierpont Group, Inc. to assist the Trustees
in exercising their overall supervisory responsibilities. Pierpont Group, Inc.
was organized in July 1989 to provide services for the J.P. Morgan Family of
Funds (formerly "The Pierpont Family of Funds"), and the Trustees are the equal
and sole shareholders of Pierpont Group, Inc. JPMF paid Pierpont Group, Inc. a
fee in an amount representing its reasonable costs in performing these services.
As part of the overall integration and rationalization of the Funds within the
Fund Complex, it is anticipated that the Merging Fund and the Surviving Fund
will terminate their agreements with Pierpont Group, Inc. in connection with the
Reorganization. The consolidated Board of Trustees will instead look to counsel,
auditors, Morgan and other service providers, as necessary.
The aggregate fees paid to Pierpont Group, Inc. by the Merging Fund, the
Surviving Fund and the Master Portfolio during the indicated fiscal periods are
set forth below:
MERGING FUND--For the fiscal years ended June 30, 1998, 1999 and 2000:
$4,318, $5,873 and $5,344, respectively.
SURVIVING FUND--For the fiscal years ended June 30, 1998, 1999 and 2000:
$9,751, $10,569 and $10,326, respectively.
MASTER PORTFOLIO--For the fiscal years ended June 30, 1998, 1999 and 2000:
$13,886, $16,444 and $15,670, respectively.
PRINCIPAL EXECUTIVE OFFICERS:
JPMF's principal executive officers are listed below. The officers conduct
and supervise the business operations of JPMF. The business address of each of
the officers, unless otherwise noted, is J.P. Morgan
19
Fund Distributors, Inc., 1211 Avenue of Americas, New York, New York, 10036. The
principal executive officers of JPMF are as follows:
NAME AND POSITION AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ----------------- ---- ------------------------------------------
David Wezdenko 37 Vice President, J.P. Morgan Investment
President and Management Inc. Mr. Wezdenko is the Chief
Treasurer Operating Officer for the U.S. Mutual
Funds and Financial Intermediaries
Business. Since joining J.P. Morgan in
1996, he has held numerous financial and
operations related positions supporting
the J.P. Morgan pooled funds business.
Sharon Weinberg 41 Vice President, J.P. Morgan Investment
Vice-President Management Inc. Ms. Weinberg is head of
and Secretary Business and Product Strategy for the U.S.
Mutual Funds and Financial Intermediaries
business. Since joining J.P. Morgan in
1996 in New York, she has held numerous
positions throughout the asset management
business in mutual funds marketing, legal
and product development.
ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the Merging Fund's, the Surviving
Fund's and the Master Portfolio's independent accountants, auditing and
reporting on the annual financial statements and reviewing certain regulatory
reports and each Fund's federal income tax returns. PricewaterhouseCoopers LLP
also performs other professional accounting, auditing, tax and advisory services
when JPMF or JPMIF engages it to do so.
AUDIT FEES. The aggregate fees paid to PriceWaterhouseCoopers LLP in
connection with the annual audit of the Merging Fund and the Master Portfolio
for the last fiscal year was $47,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were no
financial systems design and implementation services rendered by
PriceWaterhouseCoopers LLP to the Merging Fund, JPMIM and JPMIM's affiliates
that provide services to the Fund for the calendar year ended December 31, 2000.
ALL OTHER FEES. The aggregate fees billed for all other non-audit services,
including fees for tax-related services, rendered by PriceWaterhouseCoopers LLP
to the Surviving Fund, JPMIM and JPMIM's affiliates that provide services to the
Fund for the calendar year ended December 31, 2000 was $11,029,400.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of
PricewaterhouseCoopers LLP.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION
This Combined Prospectus/Proxy Statement is being furnished in connection
with the solicitation of proxies by the JPMF Board for use at the Meeting. It is
expected that the solicitation of proxies will be primarily by mail. JPMF's
officers and service providers may also solicit proxies by telephone, facsimile
machine, telegraph, the Internet or personal interview. In addition JPMF may
retain the services of professional solicitors to aid in the solicitation of
proxies for a fee. It is anticipated that banks, brokerage houses and other
custodians will be requested on behalf of JPMF to forward solicitation materials
to their principals to obtain authorizations for the execution of proxies. Any
Merging Fund Shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to JPMF a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and electing to vote in person.
Only the Merging Fund Shareholders of record at the close of business on
April 6, 2001 will be entitled to vote at the Meeting. On that date, there were
outstanding and entitled to be voted 1,245,754.621 Merging Fund voting shares.
Each shareholder of the Merging Fund is entitled to the number of votes equal to
the product of the number of shares owned multiplied by the net asset value per
share on the record date.
The presence in person or by proxy of shareholders that own one-third of the
outstanding Merging Fund shares will constitute a quorum for purposes of
transacting all business at the Meeting. If a quorum is not present at the
Meeting, sufficient votes in favor of the proposals are not received by the time
scheduled for the Meeting, or the Merging Fund Shareholders determine to adjourn
the Meeting for any other reason, the Merging Fund Shareholders present (in
person or proxy) may adjourn the Meeting from time to time, without notice other
than announcement at the Meeting. Any such adjournment will require the
affirmative vote of the Merging Fund Shareholders holding a majority of the
Merging Fund voting shares present, in person or by proxy, at the Meeting. The
persons named in the Proxy will vote in favor of such adjournment those Merging
Fund voting shares that they are entitled to vote if such adjournment is
necessary to obtain a
20
quorum or if they determine such an adjournment is desirable for any other
reason. Business may be conducted once a quorum is present and may continue
until adjournment of the Meeting notwithstanding the withdrawal or temporary
absence of sufficient Merging Fund voting shares to reduce the number present to
less than a quorum. If the accompanying proxy is executed and returned in time
for the Meeting, the voting shares covered thereby will be voted in accordance
with the proxy on all matters that may properly come before the meeting (or any
adjournment thereof).
PROXIES
All Merging Fund voting shares represented by each properly signed proxy
received prior to the Meeting will be voted at the Meeting. If a Merging Fund
Shareholder specifies how the proxy is to be voted on any of the business to
come before the Meeting, it will be voted in accordance with such
specifications. If a Merging Fund Shareholder returns its proxy but no direction
is made on the proxy, the proxy will be voted FOR each Proposal described in
this Combined Prospectus/Proxy Statement. The Merging Fund Shareholders voting
to ABSTAIN on the Proposals will be treated as present for purposes of achieving
a quorum and in determining the votes cast on the Proposals, but not as having
voted FOR (and therefore will have the effect of a vote against) the Proposals.
A properly signed proxy on which a broker has indicated that it has no authority
to vote on the Proposals on behalf of the beneficial owner (a "broker non-vote")
will be treated as present for purposes of achieving a quorum but will not be
counted in determining the votes cast on (and therefore will have the effect of
a vote against) the Proposals.
A proxy granted by any Merging Fund Shareholder may be revoked by such
Merging Fund Shareholder at any time prior to its use by written notice to JPMF,
by submission of a later dated Proxy or by voting in person at the Meeting. If
any other matters come before the Meeting, proxies will be voted by the persons
named as proxies in accordance with their best judgment.
EXPENSES OF PROXY SOLICITATION
JPMC, and not the Merging Fund or the Surviving Fund (or shareholders of
either Fund) will pay the cost of the preparation, printing and mailing to its
shareholders of the Combined Prospectus/Proxy Statement, accompanying Notice of
Meeting, form of proxy and any supplementary solicitation of its shareholders.
It is expected that the cost of retaining D. F. King & Co., Inc., to assist
in the proxy solicitation process for the fund complex will not exceed $200,000,
which cost will be borne by JPMC.
ABSTENTIONS AND BROKER NON-VOTES
In tallying the Merging Fund Shareholder votes, abstentions and broker
non-votes (i.e., proxies sent in by brokers and other nominees that cannot be
voted on a proposal because instructions have not been received from the
beneficial owners) will be counted for purposes of determining whether or not a
quorum is present for purposes of convening the Meeting. Abstentions and broker
non-votes will be considered to be a vote against each proposal.
INTERESTED PARTIES
On the record date, the Trustees and officers of JPMF as a group owned less
than 1% of the outstanding shares of the Merging Fund. On the record date, the
name, address and percentage ownership of the persons who owned beneficially
more than 5% of the shares of the Merging Fund and the percentage of shares of
the Surviving Fund that would be owned by such persons upon consummation of the
Reorganization based upon their holdings at April 6, 2001 are as follows:
AMOUNT PERCENTAGE OF PERCENTAGE OF
OF SHARES MERGING FUND OWNED SURVIVING FUND OWNED
NAME AND ADDRESS OWNED ON RECORD DATE UPON CONSUMMATION
- ----------------------------------- -------------- ------------------ --------------------
National Financial Services Corp 3,301,591.3810 13.25% 4.75%
for the Exclusive Benefit of Our
Customers
Attn: Mutual Funds - 5th fl
200 Liberty St - World Financial
New York NY 10281-1003
Ferrell Companies Inc 401(k) 2,339,081.5050 9.39% 3.37%
Investment Plan
Attn: RPS MGMT RPTG
PO Box 419784
Kansas City MO 64141-6784
21
On the record date, the Trustees and officers of JPMIF as a group owned less
than 1% of the outstanding shares of the Surviving Fund. On the record date, the
name, address and share ownership of the persons who owned beneficially more
than 5% of shares of the Surviving Fund and the percentage of shares of the
Surviving Fund that would be owned by such person upon consummation of the
Reorganization based upon their holdings at April 6, 2001 were as follows:
PERCENTAGE OF
AMOUNT SURVIVING FUND PERCENTAGE OF
OF SHARES OWNED ON SURVIVING FUND OWNED
NAME AND ADDRESS OWNED RECORD DATE UPON CONSUMMATION
- ----------------------------------- --------------- -------------- --------------------
JPMIM as Agent for UNIFI Inc Prft 2,523,344.6200 5.67% 3.63%
Sharing Plan Tr JPM Inst Dvrsf Fund
Merrill Lynch Trust Co M/T
Attn: Fran Gentile
522 Fifth Avenue
New York NY 10036
Celtic Insurance Company Ltd 3,420,014.7170 7.68% 4.92%
Harold L. Maxon VP
c/o Procter & Gamble
2 Procter & Gamble Plaza TE-12
Cincinnati OH 45202
Wendel & Co FBO: The Marmon 3,149,972.9930 7.07% 4.53%
Retirement Master Trust
DTD 1/1/83-CTC
Illinois Trust Co
209 West Jackson Suite 7000
Chicago IL 60606-6907
Mgt of New York Deferred Profit 13,804,170.5780 30.99% 19.87%
Sharing Plan of Mgt of NY &
Affiliated Co for US Employees
American Century Services Inc
Attn: Steve Levitt
4500 Main Street
Kansas City MO 64111-1816
Newell Rubbermaid 401k Savings Plan 3,467,315.3690 7.78% 4.99%
Attn: Steven Levitt
4500 Main Street
Kansas City MO 64111-1816
ADDITIONAL INFORMATION ABOUT JPMF
Information about the Merging Fund is included in its Prospectus, which is
incorporated by reference herein. Additional information about the Merging Fund
is also included in JPMF's Statement of Additional Information which has been
filed with the Commission and which is incorporated herein by reference. Copies
of the Prospectus and Statement of Additional information may be obtained
without charge by calling 1-800-521-5411. JPMF is subject to the requirements of
the 1940 Act and, in accordance with such requirements, files reports and other
information with the Commission. These materials can be inspected and copied at
the Public Reference Facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, Suite 1300, New York, NY 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates, and are also available on the Commission's web site
at http://www.sec.gov.
ADDITIONAL INFORMATION ABOUT JPMIF
Information about the Surviving Fund is included in its Prospectus, which is
incorporated by reference and enclosed herein. Additional information about the
Surviving Fund is also included in JPMIF's Statement
22
of Additional Information which has been filed with the Commission and which is
incorporated herein by reference. Copies of the Statement of Additional
information may be obtained without charge by calling 1-800-766-7722. JPMIF is
subject to the requirements of the 1940 Act and, in accordance with such
requirements, files reports and other information with the Commission. These
materials can be inspected and copied at the Public Reference Facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, Suite 1300,
New York, NY 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549, at prescribed rates, and are also
available on the Commission's web site at http://www.sec.gov.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial highlights, financial statements and notes thereto of
each of the Merging Fund and the Surviving Fund for the fiscal year ended June
30, 2000 and the audited financial statements, notes thereto and supplementary
data of the Master Portfolio for the fiscal year ended June 30, 2000, are
incorporated by reference herein and into the Statement of Additional
Information related to this Combined Prospectus/Proxy Statement. The audited
financial highlights, financial statements, notes thereto and supplementary
data, as applicable, for the Merging Fund, the Surviving Fund and the Master
Portfolio have been incorporated herein by reference in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on their authority
as experts in auditing and accounting.
The unaudited financial highlights, financial statements and notes thereto
of each of the Merging Fund and the Surviving Fund for the fiscal period ended
December 31, 2000, and the unaudited financial statements, notes thereto and
supplementary data of the Master Portfolio for the fiscal period ended December
31, 2000, are incorporated by reference herein and into the Statement of
Additional Information related to this Combined Prospectus/Proxy Statement.
OTHER BUSINESS
The JPMF Board knows of no other business to be brought before the Meeting.
However, if any other matters come before the Meeting, it is the intention of
the JPMF Board that proxies that do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
LITIGATION
Neither JPMF nor JPMIF is involved in any litigation that would have any
material adverse effect upon either the Merging Fund or the Surviving Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to JPMF in writing at the address on
the cover page of this Combined Prospectus/Proxy Statement or by telephoning
1-800-521-5411.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
23
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan") made this 11th day of
May, 2001 by and among J.P. Morgan Funds (the "Transferor Trust"), a
Massachusetts business trust, on behalf of the J.P. Morgan Diversified Fund (the
"Transferor Portfolio"), J.P. Morgan Institutional Funds (the "Acquiring
Trust"), a Massachusetts business trust, on behalf of the J.P. Morgan
Institutional Diversified Fund (the "Acquiring Portfolio") and J.P. Morgan Chase
& Co.
WHEREAS, the Board of Trustees of each of the Transferor Trust and the
Acquiring Trust has determined that the transfer of all of the assets and
liabilities of the Transferor Portfolio to the Acquiring Portfolio is in the
best interests of the Transferor Portfolio and the Acquiring Portfolio, as well
as the best interests of shareholders of the Transferor Portfolio and the
Acquiring Portfolio, and that the interests of existing shareholders would not
be diluted as a result of this transaction;
WHEREAS, each of the Transferor Trust and the Acquiring Trust intends to
provide for the reorganization of the Transferor Portfolio (the
"Reorganization") through the acquisition by the Acquiring Portfolio of all of
the assets, subject to all of the liabilities, of the Transferor Portfolio in
exchange for shares of beneficial interest of the Acquiring Portfolio (the
"Acquiring Portfolio Shares"), the liquidation of the Transferor Portfolio and
the distribution to Transferor Portfolio shareholders of such Acquiring
Portfolio Shares, all pursuant to the provisions of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. TRANSFER OF ASSETS OF THE TRANSFEROR PORTFOLIO IN EXCHANGE FOR THE ACQUIRING
PORTFOLIO SHARES AND LIQUIDATION AND TERMINATION OF THE TRANSFEROR PORTFOLIO
(a) PLAN OF REORGANIZATION.
(i) The Transferor Trust on behalf of the Transferor Portfolio listed
above, will convey, transfer and deliver to the Acquiring Portfolio all of the
then existing assets of the Transferor Portfolio (consisting, without
limitation, of portfolio securities and instruments, dividend and interest
receivables, cash and other assets). In consideration thereof, the Acquiring
Trust on behalf of the Acquiring Portfolio will (A) assume and pay, to the
extent that they exist on or after the Effective Time of the Reorganization (as
defined in Section 1(b)(i) hereof), all of the obligations and liabilities of
the Transferor Portfolio and (B) issue and deliver to the Transferor Portfolio
full and fractional shares of beneficial interest of the Acquiring Portfolio,
with respect to the Acquiring Portfolio equal to that number of full and
fractional Acquiring Portfolio Shares as determined in Section 1(c) hereof. The
Acquiring Portfolio Shares issued and delivered to the Transferor Portfolio
shall be of the Select Class share class in exchange for Shares of the
Transferor Portfolio, with the amounts of shares to be determined by the
parties. Any shares of beneficial interest (if any) of the Transferor Portfolio
("Transferor Portfolio Shares") held in the treasury of the Transferor Trust at
the Effective Time of the Reorganization shall thereupon be retired. Such
transactions shall take place on the date provided for in Section 1(b) hereof
(the "Exchange Date"). All computations for the Transferor Portfolio and the
Acquiring Portfolio shall be performed by their respective custodians and
J.P. Morgan Chase & Co. The determination of said parties shall be conclusive
and binding on all parties in interest.
(ii) As of the Effective Time of the Reorganization, the Transferor Trust
will liquidate and distribute pro rata to its shareholders of record
("Transferor Portfolio Shareholders") as of the Effective Time of the
Reorganization the Acquiring Portfolio Shares received by such Transferor
Portfolio pursuant to Section 1(a)(i) in actual or constructive exchange for the
shares of the Transferor Portfolio held by the Transferor Portfolio
shareholders. Such liquidation and distribution will be accomplished by the
transfer of the Acquiring Portfolio Shares then credited to the account of the
Transferor Portfolio on the books of the Acquiring Portfolio, to open accounts
on the share records of the Acquiring Portfolio in the names of the Transferor
Portfolio Shareholders and representing the respective pro rata number of the
Acquiring Portfolio Shares due such shareholders. The Acquiring Portfolio will
not issue certificates representing the Acquiring Portfolio Shares in connection
with such exchange.
A-1
(iii) As soon as practicable after the Effective Time of the
Reorganization, the Transferor Trust shall take all the necessary steps under
Massachusetts law, the Transferor Trust's Declaration of Trust and any other
applicable law to effect a complete termination of the Transferor Portfolio.
(b) EXCHANGE DATE AND EFFECTIVE TIME OF THE REORGANIZATION.
(i) Subject to the satisfaction of the conditions to the Reorganization
specified in this Plan, the Reorganization shall occur as of the close of
regularly scheduled trading on the New York Stock Exchange (the "Effective Time
of the Reorganization") on September 1, 2001, or such later date as may be
agreed upon by the parties (the "Exchange Date").
(ii) All acts taking place on the Exchange Date shall be deemed to take
place simultaneously as of the Effective Time of the Reorganization unless
otherwise provided.
(iii) In the event that on the proposed Exchange Date (A) the New York
Stock Exchange shall be closed to trading or trading thereon shall be
restricted, or (B) trading or the reporting of trading on said Exchange or
elsewhere shall be disrupted so that accurate valuation of the net assets of the
Acquiring Portfolio or the Transferor Portfolio is impracticable, the Exchange
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
(iv) On the Exchange Date, portfolio securities of the Transferor
Portfolio shall be transferred by the Custodian to the accounts of the Acquiring
Portfolio duly endorsed in proper form for transfer, in such condition as to
constitute good delivery thereof in accordance with the custom of brokers, and
shall be accompanied by all necessary federal and state stock transfer stamps or
a check for the appropriate purchase price thereof.
(c) VALUATION.
(i) The net asset value of the shares of the Acquiring Portfolio and the
net value of the assets of the Transferor Portfolio to be transferred in
exchange therefore shall be determined as of the Effective Time of the
Reorganization. The net asset value of the Acquiring Portfolio Shares shall be
computed by the Custodian in the manner set forth in the Acquiring Trust's
Declaration of Trust or By-laws and then current prospectus and statement of
additional information and shall be computed to not less than two decimal
places. The net value of the assets of the Transferor Portfolio to be
transferred shall be computed by the Custodian by calculating the value of the
assets transferred by the Transferor Portfolio and by subtracting therefrom the
amount of the liabilities assigned and transferred to the Acquiring Portfolio,
said assets and liabilities to be valued in the manner set forth in the
Transferor Trust's Declaration of Trust or By-laws and then current prospectus
and statement of additional information.
(ii) The number of Select Class shares of the Acquiring Portfolio to be
issued (including fractional shares, if any) by the Acquiring Portfolio in
exchange for the Transferor Portfolio's assets attributable to the Transferor
Portfolio's shares shall be determined by an exchange ratio computed by dividing
the net value of the Transferor Portfolio's assets attributable to its shares by
the net asset value per share of the Select Class shares of the Acquiring
Portfolio, both as determined in accordance with Section 1(c)(i). All
computations of value shall be made by the Custodian in accordance with its
regular practice as pricing agent for the Acquiring Portfolio and the Transferor
Portfolio.
2. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING TRUST
The Acquiring Trust represents and warrants as follows:
(a) ORGANIZATION, EXISTENCE, ETC. The Acquiring Trust is a business trust
that is duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts and has the power to carry on its business as
it is now being conducted. The Acquiring Portfolio is a validly existing series
of shares of such business trust representing interests therein under the laws
of Massachusetts. Each of the Acquiring Portfolio and the Acquiring Trust have
all necessary federal, state and local authorization to own all of its
properties and assets and to carry on its business as now being conducted.
(b) REGISTRATION AS INVESTMENT COMPANY. The Acquiring Trust is registered
under the Investment Company Act of 1940, as amended (the "Act") as an open-end
investment company of the management type; such registration has not been
revoked or rescinded and is in full force and effect.
(c) CURRENT OFFERING DOCUMENTS. The current prospectuses and statements of
additional information of the Acquiring Trust, as amended, included in the
Acquiring Trust's registration statement on Form N-1A
A-2
filed with the Securities and Exchange Commission, comply in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Act and do not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) CAPITALIZATION. The Acquiring Trust has an unlimited number of
authorized shares of beneficial interest, of which as of December 31, 2000 there
were outstanding 45,376,091 shares of the Acquiring Portfolio, and no shares of
such Portfolio were held in the treasury of the Acquiring Trust. All of the
outstanding shares of the Acquiring Trust have been duly authorized and are
validly issued, fully paid and nonassessable (except as disclosed in the
Acquiring Trust's prospectus and recognizing that under Massachusetts law,
shareholders of an Acquiring Trust portfolio could, under certain circumstances,
be held personally liable for the obligations of such Acquiring Trust
portfolio). Because the Acquiring Trust is an open-end investment company
engaged in the continuous offering and redemption of its shares, the number of
outstanding shares may change prior to the Effective Time of the Reorganization.
All of the issued and outstanding shares of the Acquiring Portfolio have been
offered and sold in compliance in all material respects with applicable
registration requirements of the Securities Act and applicable state securities
laws.
(e) FINANCIAL STATEMENTS. The financial statements of the Acquiring Trust
with respect to the Acquiring Portfolio and The Diversified Portfolio for the
fiscal year ended June 30, 2000, which have been audited by
PricewaterhouseCoopers LLP, fairly present the financial position of the
Acquiring Portfolio and The Diversified Portfolio as of the dates thereof and
the respective results of operations and changes in net assets for each of the
periods indicated in accordance with generally accepted accounting principles
("GAAP"). The financial statements of the Acquiring Trust with respect to the
Acquiring Portfolio and for The Diversified Portfolio for the fiscal period
ended December 31, 2000 fairly present the financial position of the Acquiring
Portfolio and The Diversified Portfolio as of the dates thereof and the
respective results of operations and changes in net assets for each of the
periods indicated in accordance with GAAP.
(f) SHARES TO BE ISSUED UPON REORGANIZATION. The Acquiring Portfolio Shares
to be issued in connection with the Reorganization will be duly authorized and
upon consummation of the Reorganization will be validly issued, fully paid and
nonassessable (except as disclosed in the Trust's prospectus and recognizing
that under Massachusetts law, shareholders of an Acquiring Trust portfolio
could, under certain circumstances, be held personally liable for the
obligations of such portfolio).
(g) AUTHORITY RELATIVE TO THIS PLAN. The Acquiring Trust, on behalf of the
Acquiring Portfolio, has the power to enter into this Plan and to carry out its
obligations hereunder. The execution and delivery of this Plan and the
consummation of the transactions contemplated hereby have been duly authorized
by the Acquiring Trust's Board of Trustees and no other proceedings by the
Acquiring Trust other than those contemplated under this Plan are necessary to
authorize its officers to effectuate this Plan and the transactions contemplated
hereby. The Acquiring Trust is not a party to or obligated under any provision
of its Declaration of Trust or By-laws, or under any indenture or contract
provision or any other commitment or obligation, or subject to any order or
decree, which would be violated by or which would prevent its execution and
performance of this Plan in accordance with its terms.
(h) LIABILITIES. There are no liabilities of the Acquiring Portfolio,
whether actual or contingent and whether or not determined or determinable,
other than liabilities disclosed or provided for in the Acquiring Trust's
financial statements with respect to the Acquiring Portfolio and liabilities
incurred in the ordinary course of business subsequent to December 31, 2000 or
otherwise previously disclosed to the Acquiring Trust with respect to the
Acquiring Portfolio, none of which has been materially adverse to the business,
assets or results of operations of the Acquiring Portfolio.
(i) NO MATERIAL ADVERSE CHANGE. Since December 31, 2000, there has been
no material adverse change in the financial condition, results of operations,
business, properties or assets of the Acquiring Portfolio, other than those
occurring in the ordinary course of business (for these purposes, a decline in
net asset value and a decline in net assets due to redemptions do not constitute
a material adverse change).
(j) LITIGATION. There are no claims, actions, suits or proceedings pending
or, to the knowledge of the Acquiring Trust, threatened which would adversely
affect the Acquiring Trust or the Acquiring Portfolio's assets or business or
which would prevent or hinder consummation of the transactions contemplated
hereby, there are no facts which would form the basis for the institution of
administrative proceedings against the Acquiring Trust or the Acquiring
Portfolio and, to the knowledge of the Acquiring Trust, there are no regulatory
investigations of the Acquiring Trust or the Acquiring Portfolio, pending or
threatened, other than routine inspections and audits.
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(k) CONTRACTS. No default exists under any material contract or other
commitment to which the Acquiring Trust, on behalf of the Acquiring Portfolio,
is subject.
(l) TAXES. The federal income tax returns of the Acquiring Trust with
respect to the Acquiring Portfolio, and all other income tax returns required to
be filed by the Acquiring Trust with respect to the Acquiring Portfolio, have
been filed, and all taxes payable pursuant to such returns have been paid. To
the knowledge of the Acquiring Trust, no such return is under audit and no
assessment has been asserted in respect of any such return. All federal and
other taxes owed by the Acquiring Trust with respect to the Acquiring Portfolio
have been paid so far as due. The Acquiring Portfolio has elected to qualify and
has qualified as a "regulated investment company" under Subchapter M of the Code
as of and since its first taxable year and intends to continue to so qualify.
(m) NO APPROVALS REQUIRED. Except for the Registration Statement (as defined
in Section 4(a) hereof) and the approval of the Transferor Portfolio's
shareholders (referred to in Section 6(a) hereof), no consents, approvals,
authorizations, registrations or exemptions under federal or state laws are
necessary for the consummation by the Acquiring Trust of the Reorganization,
except such as have been obtained as of the date hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR TRUST
The Transferor Trust represents and warrants as follows:
(a) ORGANIZATION, EXISTENCE, ETC. The Transferor Trust is a business trust
that is duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts and has the power to carry on its business as
it is now being conducted. The Transferor Portfolio is a validly existing series
of shares of such business trust representing interests therein under the laws
of Massachusetts. Each of Transferor Portfolio and the Transferor Trust has all
necessary federal, state and local authorization to own all of its properties
and assets and to carry on its business as now being conducted.
(b) REGISTRATION AS INVESTMENT COMPANY. The Transferor Trust is registered
under the Act as an open-end investment company of the management type; such
registration has not been revoked or rescinded and is in full force and effect.
(c) CURRENT OFFERING DOCUMENTS. The current prospectuses and statements of
additional information of the Transferor Trust, as amended, included in the
Transferor Trust's registration statement on Form N-1A filed with the
Commission, comply in all material respects with the requirements of the
Securities Act and the Act and do not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) CAPITALIZATION. The Transferor Trust has an unlimited number of
authorized shares of beneficial interest, of which as of December 31, 2000 there
were outstanding 21,535,238 shares of the Transferor Portfolio, and no shares of
such Portfolio were held in the treasury of the Transferor Trust. All of the
outstanding shares of the Transferor Trust have been duly authorized and are
validly issued, fully paid and nonassessable (except as disclosed in the
Transferor Trust's prospectus and recognizing that under Massachusetts law,
shareholders of a Trust portfolio could, under certain circumstances, be held
personally liable for the obligations of such Trust portfolio). Because the
Transferor Trust is an open-end investment company engaged in the continuous
offering and redemption of its shares, the number of outstanding shares may
change prior to the Effective Time of the Reorganization. All such shares will,
at the Exchange Date, be held by the shareholders of record of the Transferor
Portfolio as set forth on the books and records of the Transferor Trust in the
amounts set forth therein, and as set forth in any list of shareholders of
record provided to the Acquiring Portfolio for purposes of the Reorganization,
and no such shareholders of record will have any preemptive rights to purchase
any Transferor Portfolio shares, and the Transferor Portfolio does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Transferor Portfolio shares (other than any existing dividend reinvestment
plans of the Transferor Portfolio or as set forth in this Plan), nor are there
outstanding any securities convertible into any shares of the Transferor
Portfolio (except pursuant to any existing exchange privileges described in the
current prospectus and statement of additional information of the Transferor
Trust). All of the Transferor Portfolio's issued and outstanding shares have
been offered and sold in compliance in all material respects with applicable
registration requirements of the Securities Act and applicable state securities
laws.
(e) FINANCIAL STATEMENTS. The financial statements for the Transferor Trust
with respect to the Transferor Portfolio and The Diversified Portfolio for the
fiscal year ended June 30, 2000 which have been audited by
PricewaterhouseCoopers LLP fairly present the financial position of the
Transferor Portfolio and
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The Diversified Portfolio as of the dates thereof and the respective results of
operations and changes in net assets for each of the periods indicated in
accordance with GAAP. The financial statements of the Transferor Trust with
respect to the Transferor Portfolio and the Diversified Portfolio for the fiscal
period ended December 31, 2000 fairly present the financial position of the
Transferor Portfolio and The Diversified Portfolio as of the dates thereof and
the respective results of operations and changes in net assets for each of the
periods indicated in accordance with GAAP.
(f) AUTHORITY RELATIVE TO THIS PLAN. The Transferor Trust, on behalf of the
Transferor Portfolio, has the power to enter into this Plan and to carry out its
obligations hereunder. The execution and delivery of this Plan and the
consummation of the transactions contemplated hereby have been duly authorized
by the Transferor Trust's Board of Trustees and no other proceedings by the
Transferor Trust other than those contemplated under this Plan are necessary to
authorize its officers to effectuate this Plan and the transactions contemplated
hereby. The Transferor Trust is not a party to or obligated under any provision
of its Declaration of Trust or By-laws, or under any indenture or contract
provision or any other commitment or obligation, or subject to any order or
decree, which would be violated by or which would prevent its execution and
performance of this Plan in accordance with its terms.
(g) LIABILITIES. There are no liabilities of the Transferor Portfolio,
whether actual or contingent and whether or not determined or determinable,
other than liabilities disclosed or provided for in the Transferor Trust's
Financial Statements with respect to the Transferor Portfolio and liabilities
incurred in the ordinary course of business subsequent to December 31, 2000 or
otherwise previously disclosed to the Transferor Trust with respect to the
Transferor Portfolio, none of which has been materially adverse to the business,
assets or results of operations of the Transferor Portfolio.
(h) NO MATERIAL ADVERSE CHANGE. Since December 31, 2000, there has been no
material adverse change in the financial condition, results of operations,
business, properties or assets of the Transferor Portfolio, other than those
occurring in the ordinary course of business (for these purposes, a decline in
net asset value and a decline in net assets due to redemptions do not constitute
a material adverse change).
(i) LITIGATION. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Transferor Trust, threatened which would
adversely affect the Transferor Trust or the Transferor Portfolio's assets or
business or which would prevent or hinder consummation of the transactions
contemplated hereby, there are no facts which would form the basis for the
institution of administrative proceedings against the Transferor Trust or the
Transferor Portfolio and, to the knowledge of the Transferor Trust, there are no
regulatory investigations of the Transferor Trust or the Transferor Portfolio,
pending or threatened, other than routine inspections and audits.
(j) CONTRACTS. The Transferor Trust, on behalf of the Transferor Portfolio,
is not subject to any contracts or other commitments (other than this Plan)
which will not be terminated with respect to the Transferor Portfolio without
liability to the Transferor Trust or the Transferor Portfolio as of or prior to
the Effective Time of the Reorganization.
(k) TAXES. The federal income tax returns of the Transferor Trust with
respect to the Transferor Portfolio, and all other income tax returns required
to be filed by the Transferor Trust with respect to the Transferor Portfolio,
have been filed and all taxes payable pursuant to such returns have been paid.
To the knowledge of the Transferor Trust, no such return is under audit and no
assessment has been asserted in respect of any such return. All federal and
other taxes owed by the Transferor Trust with respect to the Transferor
Portfolio have been paid so far as due. The Transferor Portfolio has elected to
qualify as a "regulated investment company" under Subchapter M of the Code, as
of and since its first taxable year, and shall continue to so qualify until the
Effective Time of the Reorganization.
(l) NO APPROVALS REQUIRED. Except for the Registration Statement (as
defined in Section 4(a) hereof) and the approval of the Transferor Portfolio's
shareholders referred to in Section 6(a) hereof, no consents, approvals,
authorizations, registrations or exemptions under federal or state laws are
necessary for the consummation by the Transferor Trust of the Reorganization,
except such as have been obtained as of the date hereof.
4. COVENANTS OF THE ACQUIRING TRUST
The Acquiring Trust covenants to the following:
(a) REGISTRATION STATEMENT. On behalf of the Acquiring Portfolio, the
Acquiring Trust shall file with the Commission a Registration Statement on Form
N-14 (the "Registration Statement") under the Securities Act
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relating to the Acquiring Portfolio Shares issuable hereunder and the proxy
statement of the Transferor Portfolio relating to the meeting of the Transferor
Portfolio's shareholders referred to in Section 5(a) herein. At the time the
Registration Statement becomes effective, the Registration Statement (i) will
comply in all material respects with the provisions of the Securities Act and
the rules and regulations of the Commission thereunder (the "Regulations") and
(ii) will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and at the time the Registration Statement becomes
effective, at the time of the Transferor Portfolio shareholders' meeting
referred to in Section 5(a) hereof, and at the Effective Time of the
Reorganization, the prospectus/proxy statement (the "Prospectus") and statement
of additional information (the "Statement of Additional Information") included
therein, as amended or supplemented by any amendments or supplements filed by
the Trust, will not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) COOPERATION IN EFFECTING REORGANIZATION. The Acquiring Trust agrees to
use all reasonable efforts to effectuate the Reorganization, to continue in
operation thereafter, and to obtain any necessary regulatory approvals for the
Reorganization. The Acquiring Trust shall furnish such data and information
relating to the Acquiring Trust as shall be reasonably requested for inclusion
in the information to be furnished to the Transferor Portfolio shareholders in
connection with the meeting of the Transferor Portfolio's shareholders for the
purpose of acting upon this Plan and the transactions contemplated herein.
(c) OPERATIONS IN THE ORDINARY COURSE. Except as otherwise contemplated by
this Plan, the Acquiring Trust shall conduct the business of the Transferor
Portfolio in the ordinary course until the consummation of the Reorganization,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions.
5. COVENANTS OF THE TRANSFEROR TRUST
The Transferor Trust covenants to the following:
(a) MEETING OF THE TRANSFEROR PORTFOLIO'S SHAREHOLDERS. The Transferor
Trust shall call and hold a meeting of the shareholders of the Transferor
Portfolio for the purpose of acting upon this Plan and the transactions
contemplated herein.
(b) PORTFOLIO SECURITIES. With respect to the assets to be transferred in
accordance with Section 1(a), the Transferor Portfolio's assets shall consist of
all property and assets of any nature whatsoever, including, without limitation,
all cash, cash equivalents, securities, claims and receivables (including
dividend and interest receivables) owned, and any deferred or prepaid expenses
shown as an asset on the Transferor Trust's books maintained on behalf of the
Transferor Portfolio. At least five (5) business days prior to the Exchange
Date, the Transferor Portfolio will provide the Acquiring Trust, for the benefit
of the Acquiring Portfolio, with a list of its assets and a list of its stated
liabilities. The Transferor Portfolio shall have the right to sell any of the
securities or other assets shown on the list of assets prior to the Exchange
Date but will not, without the prior approval of the Acquiring Trust, on behalf
of the Acquiring Portfolio, acquire any additional securities other than
securities which the Acquiring Portfolio is permitted to purchase, pursuant to
its investment objective and policies or otherwise (taking into consideration
its own portfolio composition as of such date). In the event that the Transferor
Portfolio holds any investments that the Acquiring Portfolio would not be
permitted to hold, the Transferor Portfolio will dispose of such securities
prior to the Exchange Date to the extent practicable, to the extent permitted by
its investment objective and policies and to the extent that its shareholders
would not be materially affected in an adverse manner by such a disposition. In
addition, the Transferor Trust will prepare and deliver immediately prior to the
Effective Time of the Reorganization, a Statement of Assets and Liabilities of
the Transferor Portfolio, prepared in accordance with GAAP (each, a "Schedule").
All securities to be listed in the Schedule for the Transferor Portfolio as of
the Effective Time of the Reorganization will be owned by the Transferor
Portfolio free and clear of any liens, claims, charges, options and
encumbrances, except as indicated in such Schedule, and, except as so indicated,
none of such securities is or, after the Reorganization as contemplated hereby,
will be subject to any restrictions, legal or contractual, on the disposition
thereof (including restrictions as to the public offering or sale thereof under
the Securities Act) and, except as so indicated, all such securities are or will
be readily marketable.
(c) REGISTRATION STATEMENT. In connection with the preparation of the
Registration Statement, the Transferor Trust will cooperate with the Acquiring
Trust and will furnish to the Acquiring Trust the information relating to the
Transferor Portfolio required by the Securities Act and the Regulations to be
set
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forth in the Registration Statement (including the Prospectus and Statement of
Additional Information). At the time the Registration Statement becomes
effective, the Registration Statement, insofar as it relates to the Transferor
Portfolio, (i) will comply in all material respects with the provisions of the
Securities Act and the Regulations and (ii) will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and at the
time the Registration Statement becomes effective, at the time of the Transferor
Portfolio's shareholders' meeting referred to in Section 5(a) and at the
Effective Time of the Reorganization, the Prospectus and Statement of Additional
Information, as amended or supplemented by any amendments or supplements filed
by the Transferor Trust, insofar as they relate to the Transferor Portfolio,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection shall apply only to
statements in or omissions from the Registration Statement, Prospectus or
Statement of Additional Information made in reliance upon and in conformity with
information furnished by the Transferor Portfolio for use in the registration
statement, prospectus or statement of additional information as provided in this
Section 5(c).
(d) COOPERATION IN EFFECTING REORGANIZATION. The Transferor Trust agrees to
use all reasonable efforts to effectuate the Reorganization and to obtain any
necessary regulatory approvals for the Reorganization.
(e) OPERATIONS IN THE ORDINARY COURSE. Except as otherwise contemplated by
this Plan, the Transferor Trust shall conduct the business of the Transferor
Portfolio in the ordinary course until the consummation of the Reorganization,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions.
(f) STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in
any case within 60 days after the Exchange Date, the Transferor Trust on behalf
of the Transferor Portfolio, shall prepare a statement of the earnings and
profits of the Transferor Portfolio for federal income tax purposes, and of any
capital loss carryovers and other items that the Acquiring Portfolio will
succeed to and take into account as a result of Section 381 of the Code.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRANSFEROR TRUST
The obligations of the Transferor Trust with respect to the consummation of the
Reorganization are subject to the satisfaction of the following conditions:
(a) APPROVAL BY THE TRANSFEROR PORTFOLIO'S SHAREHOLDERS. This Plan and the
transactions contemplated by the Reorganization shall have been approved by the
requisite vote of the shares of the Transferor Portfolio entitled to vote on the
matter ("Transferor Shareholder Approval").
(b) COVENANTS, WARRANTIES AND REPRESENTATIONS. The Acquiring Trust shall
have complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all material
respects as of the Effective Time of the Reorganization (except as otherwise
contemplated herein), and there shall have been no material adverse change (as
described in Section 2(i)) in the financial condition, results of operations,
business, properties or assets of the Acquiring Portfolio since December 31,
2000.
(c) REGULATORY APPROVAL. The Registration Statement shall have been
declared effective by the Commission and no stop orders under the Securities Act
pertaining thereto shall have been issued, and all other approvals,
registrations, and exemptions under federal and state laws considered to be
necessary shall have been obtained (collectively, the "Regulatory Approvals").
(d) TAX OPINION. The Transferor Trust shall have received the opinion of
Simpson Thacher & Bartlett, dated on or before the Exchange Date, addressed to
and in form and substance satisfactory to the Transferor Trust, as to certain of
the federal income tax consequences under the Code of the Reorganization,
insofar as it relates to the Transferor Portfolio and the Acquiring Portfolio,
and to shareholders of the Transferor Portfolio (the "Tax Opinion"). For
purposes of rendering the Tax Opinion, Simpson Thacher & Bartlett may rely
exclusively and without independent verification, as to factual matters, upon
the statements made in this Plan, the Prospectus and Statement of Additional
Information, and upon such other written representations as the President or
Treasurer of the Transferor Trust will have verified as of the Effective Time of
the Reorganization. The Tax Opinion will be to the effect that, based on the
facts and assumptions stated therein, for federal income tax purposes: (i) the
Reorganization will constitute a reorganization within the meaning of section
368(a)(1) of the Code with respect to the Transferor Portfolio and the Acquiring
Portfolio; (ii) no gain or loss will be recognized by any of the Transferor
Portfolio or the Acquiring Portfolio
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upon the transfer of all the assets and liabilities, if any, of the Transferor
Portfolio to the Acquiring Portfolio solely in exchange for shares of the
Acquiring Portfolio or upon the distribution of the shares of the Acquiring
Portfolio to the holders of the shares of the Transferor Portfolio solely in
exchange for all of the shares of the Transferor Portfolio; (iii) no gain or
loss will be recognized by shareholders of the Transferor Portfolio upon the
exchange of shares of such Transferor Portfolio solely for shares of the
Acquiring Portfolio; (iv) the holding period and tax basis of the shares of the
Acquiring Portfolio received by each holder of shares of the Transferor
Portfolio pursuant to the Reorganization will be the same as the holding period
and tax basis of shares of the Transferor Portfolio held by the immediately
prior to the Reorganization (provided the shares of the Transferor Portfolio
were held as a capital asset on such holder date of the Reorganization); and
(v) the holding period and tax basis of the assets of the Transferor Portfolio
acquired by the Acquiring Portfolio will be the same as the holding period and
tax basis of those assets to the Transferor Portfolio immediately prior to the
Reorganization.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING TRUST
The obligations of the Acquiring Trust with respect to the consummation of the
Reorganization are subject to the satisfaction of the following conditions:
(a) APPROVAL BY THE TRANSFEROR PORTFOLIO'S SHAREHOLDERS. The Transferor
Shareholder Approval shall have been obtained.
(b) COVENANTS, WARRANTIES AND REPRESENTATIONS. The Transferor Trust shall
have complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all material
respects as of the Effective Time of the Reorganization (except as otherwise
contemplated herein), and there shall have been no material adverse change (as
described in Section 3(h)) in the financial condition, results of operations,
business, properties or assets of the Transferor Portfolio since December 31,
2000.
(c) PORTFOLIO SECURITIES. All securities to be acquired by the Acquiring
Portfolio in the Reorganization shall have been approved for acquisition by J.P.
Morgan Investment Management Inc. ("JPMIM"), in its capacity as investment
adviser to the Acquiring Portfolio, as consistent with the investment policies
of the Acquiring Portfolio.
(d) REGULATORY APPROVAL. The Regulatory Approvals shall have been obtained.
(e) DISTRIBUTION OF INCOME AND GAINS. The Transferor Trust on behalf of the
Transferor Portfolio shall have distributed to the shareholders of the
Transferor Portfolio all of the Transferor Portfolio's investment company
taxable income (determined without regard to the deduction for dividends paid)
as defined in Section 852(b)(2) of the Code for its taxable year ending on the
Exchange Date and all of its net capital gain as such term is used in
Section 852(b)(3) of the Code, after reduction by any capital loss carry
forward, for its taxable year ending on the Exchange Date.
(f) TAX OPINION. The Acquiring Trust shall have received the Tax Opinion.
8. AMENDMENTS; TERMINATIONS; NO SURVIVAL OF COVENANTS, WARRANTIES AND
REPRESENTATIONS
(a) AMENDMENTS. The parties hereto may, by agreement in writing authorized
by their respective Board of Trustees amend this Plan at any time before or
after approval hereof by the shareholders of the Transferor Portfolio, but after
such approval, no amendment shall be made which substantially changes the terms
hereof.
(b) WAIVERS. At any time prior to the Effective Time of the Reorganization,
either the Transferor Trust or the Acquiring Trust may by written instrument
signed by it (i) waive any inaccuracies in the representations and warranties
made to it contained herein and (ii) waive compliance with any of the covenants
or conditions made for its benefit contained herein, except that conditions set
forth in Sections 6(c) and 7(d) may not be waived.
(c) TERMINATION BY THE TRANSFEROR TRUST. The Transferor Trust, on behalf of
the Transferor Portfolio, may terminate this Plan with respect to the Transferor
Portfolio at any time prior to the Effective Time of the Reorganization by
notice to the Acquiring Trust and JPMIM if (i) a material condition to the
performance of the Transferor Trust hereunder or a material covenant of the
Acquiring Trust contained herein shall not be fulfilled on or before the date
specified for the fulfillment thereof or (ii) a material default or material
breach of this Plan shall be made by the Acquiring Trust. In addition, this Plan
may be terminated by the
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Transferor Trust at any time prior to the Effective Time of the Reorganization,
whether before or after approval of this Plan by the shareholders of the
Transferor Portfolio, without liability on the part of any party hereto, its
Trustees, officers or shareholders or JPMIM on notice to the other parties in
the event that the Board of Trustees determines that proceeding with this Plan
is not in the best interests of the shareholders of the Transferor Portfolio.
(d) TERMINATION BY THE ACQUIRING TRUST. The Acquiring Trust, on behalf of
the Acquiring Portfolio, may terminate this Plan with respect to the Acquiring
Portfolio at any time prior to the Effective Time of the Reorganization by
notice to the Transferor Trust and JPMIM if (i) a material condition to the
performance of the Acquiring Trust hereunder or a material covenant of the
Transferor Trust contained herein shall not be fulfilled on or before the date
specified for the fulfillment thereof or (ii) a material default or material
breach of this Plan shall be made by the Transferor Trust. In addition, this
Plan may be terminated by the Acquiring Trust at any time prior to the Effective
Time of the Reorganization, whether before or after approval of this Plan by the
shareholders of the Transferor Portfolio, without liability on the part of any
party hereto, its Trustees, officers or shareholders or JPMIM on notice to the
other parties in the event that the Board of Trustees determines that proceeding
with this Plan is not in the best interests of the shareholders of the Acquiring
Portfolio.
(e) SURVIVAL. No representations, warranties or covenants in or pursuant to
this Plan, except for the provisions of Section 5(f) and Section 9 of this Plan,
shall survive the Reorganization.
9. EXPENSES
The expenses of the Reorganization will be borne by J.P. Morgan Chase & Co.
("JPMC"). Such expenses include, without limitation, (i) expenses incurred in
connection with the entering into and the carrying out of the provisions of this
Plan; (ii) expenses associated with the preparation and filing of the
Registration Statement; (iii) fees and expenses of preparing and filing such
forms as are necessary under any applicable state securities laws in connection
with the Reorganization; (iv) postage; (v) printing; (vi) accounting fees; (vii)
legal fees and (viii) solicitation costs relating to the Reorganization. In
addition, JPMC or an affiliate will waive fees payable to it or reimburse
expenses to the extent necessary such that the actual (post-waiver) total
expense ratios of the Select Class Shares and Institutional Class Shares of the
Acquiring Portfolio are not higher than those set forth in the Registration
Statement for a period of three years after the Exchange Date.
10. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Plan shall be in writing and shall be given by hand, certified
mail or by facsimile transmission, shall be deemed given when received and shall
be addressed to the parties hereto at their respective addresses listed below or
to such other persons or addresses as the relevant party shall designate as to
itself from time to time in writing delivered in like manner:
if to the Transferor Trust (for itself or on behalf of the Transferor
Portfolio):
60 State Street
Suite 1300
Boston, Massachusetts 02109
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: John E. Baumgardner, Jr., Esq.
if to the Acquiring Trust (for itself or on behalf of the Acquiring Portfolio):
60 State Street
Suite 1300
Boston, Massachusetts 02109
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with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: John E. Baumgardner, Jr., Esq.
if to the adviser of the Transferor Trust:
522 Fifth Avenue
New York, NY 10036
if to the adviser of the Acquiring Trust:
522 Fifth Avenue
New York, NY 10036
if to J.P. Morgan Chase & Co.:
522 Fifth Avenue
New York, NY 10036
11. RELIANCE
All covenants and agreements made under this Plan shall be deemed to have
been material and relied upon by the Transferor Trust and the Acquiring Trust
notwithstanding any investigation made by such party or on its behalf.
12. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
(a) The section and paragraph headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan.
(b) This Plan may be executed in any number of counterparts, each of which
shall be deemed an original.
(c) This Plan shall be governed by and construed in accordance with the
laws of The State of New York.
(d) This Plan shall bind and inure to the benefit of the Transferor Trust,
the Transferor Portfolio, the Acquiring Trust and the Acquiring Portfolio and
their respective successors and assigns, but no assignment or transfer hereof or
of any rights or obligations hereunder shall be made by any party without the
written consent of the other parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this Plan.
(e) The name "J.P. Morgan Funds" is the designation of its Trustees under a
Declaration of Trust dated November 4, 1992, as amended, and all persons dealing
with the Transferor Trust must look solely to the Transferor Trust's property
for the enforcement of any claims against the Transferor Trust, as none of the
Transferor Trustees, officers, agents or shareholders assumes any personal
liability for obligations entered into on behalf of the Transferor Trust. No
series of the Transferor Trust shall be liable for claims against any other
series of the Transferor Trust.
(f) The name "J.P. Morgan Institutional Funds" is the designation of its
Trustees under a Declaration of Trust dated November 4, 1992, as amended, and
all persons dealing with the Acquiring Trust must look solely to the Acquiring
Trust's property for the enforcement of any claims against the Acquiring Trust,
as none of the Acquiring Trustees, officers, agents or shareholders assumes any
personal liability for obligations entered into on behalf of the Acquiring
Trust. No series of the Acquiring Trust shall be liable for claims against any
other series of the Acquiring Trust.
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IN WITNESS WHEREOF, the undersigned have executed this Plan as of the date first
above written.
J.P. MORGAN INSTITUTIONAL FUNDS
on behalf of J.P. Morgan Institutional
Diversified Fund
By: /s/
--------------------------------------------
Name: Sharon Weinberg
Title: Vice President and Secretary
J.P. MORGAN FUNDS
on behalf of J.P. Morgan Diversified Fund
By: /s/
--------------------------------------------
Name: Sharon Weinberg
Title: Vice President and Secretary
Agreed and acknowledged with respect to
Section 9:
J.P. MORGAN CHASE & CO.
By: /s/
--------------------------------------------
Name: George Gatch
Title: Managing Director
A-11
STATEMENT OF ADDITIONAL INFORMATION
(SPECIAL MEETING OF SHAREHOLDERS OF
J.P. MORGAN DIVERSIFIED FUND
A SERIES OF J.P. MORGAN FUNDS)
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Combined Prospectus/Proxy Statement
dated May 12, 2001 for the Special Meeting of Shareholders of JPMorgan
Diversified Fund (the "Merging Fund"), a series of J.P. Morgan Funds ("JPF"),
to be held on July 3, 2001. Copies of the Combined Prospectus/Proxy Statement
may be obtained at no charge by calling J.P. Morgan Diversified Fund at
1-800-521-5411.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Prospectus/Proxy Statement.
Further information about the Surviving Fund and the Merging Fund is
contained in JPMF's Statement of Additional Information, which are incorporated
herein by reference.
The date of this Statement of Additional Information is May 12, 2001.
1
GENERAL INFORMATION
The Shareholders of the Merging Fund are being asked to consider and
vote on two proposals.
With respect to an Agreement and Plan of Reorganization (the
"Reorganization Plan") dated as of May 11, 2001 by and among JPF, on behalf
of the Merging Fund, and JPMF, on behalf of the Surviving Fund, and JPMC, and
the transactions contemplated thereby, the Reorganization Plan contemplates the
transfer of all of the assets and liabilities of the Merging Fund to the
Surviving Fund in exchange for shares issued by JPMF in the Surviving Fund that
will have an aggregate net asset value equal to the aggregate net asset value of
the shares of the Merging Fund that are outstanding immediately before the
Effective Time of the Reorganization.
Following the exchange, the Merging Fund will make a liquidating
distribution of the Surviving Fund shares to its Shareholders, so that a holder
of Shares in the Merging Fund will receive Select Class Shares of the Surviving
Fund of equal value, plus the right to receive any unpaid dividends and
distributions that were declared before the Effective Time of the
Reorganization.
At the Meeting, shareholders will also be asked to consider and vote
upon the election of Trustees of JPF.
A Special Meeting of Shareholders of the Merging Fund to consider the
proposals and the related transaction will be held at the offices of J.P. Morgan
Chase & Co., 1211 Avenue of the Americas, 41st Floor, New York, NY, on July 3,
2001 at 9:00 a.m., Eastern time. For further information about the transaction,
see the Combined Prospectus/Proxy Statement.
2
FINANCIAL STATEMENTS
The audited financial highlights, financial statements and notes
thereto of each of the Merging Fund and the Surviving Fund contained in their
respective Annual Reports dated June 30, 2000, and the audited financial
statements, notes thereto and supplementary data of the Master Portfolio
contained in its Annual Report dated June 30, 2000, are incorporated by
reference into this Statement of Additional Information related to this Combined
Prospectus/Proxy Statement. The audited financial highlights, financial
statements and notes thereto and supplementary data, as applicable, of the
Surviving Fund's, the Merging Fund's and the Master Portfolio's Annual Report
have been audited by PricewaterhouseCoopers LLP, whose reports thereon also
appear in such Annual Reports and are also incorporated herein by reference. The
financial highlights, financial statements, notes thereto and supplementary
data, as applicable, for the Merging Fund, the Surviving Fund and the Master
Portfolio for the fiscal year ended June 30, 2000 have been incorporated herein
by reference in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on their authority as experts in auditing and
accounting.
The unaudited financial highlights, financial statements and notes
thereto of the Merging Fund and the Surviving Fund contained in their respective
Semi-Annual Reports dated December 31, 2000, and the unaudited financial
statements, notes thereto and supplementary data of the Master Portfolio
contained in its Semi-Annual Report dated December 31, 2000, are incorporated by
reference into this Statement of Additional Information related to this Combined
Prospectus/Proxy Statement.
3
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 4.9%
$2,075,700 $2,075,700 AmeriCredit Automobile Receivables
Trust, Series 2000 A, Class A2
SEQ, 6.54%, 10/14/02 $ 2,075,377 $ 2,075,377
10,000,000 10,000,000 Associates Automobile Receivables
Trust, Series 2000-2, Class A3
SEQ, 6.82%, 2/15/05 10,153,130 10,153,130
3,204,198 3,204,198 Capital Auto Receivables Asset Trust,
Series 1999-1, Class A2 SEQ, 5.58%,
6/15/02 3,194,168 3,194,168
5,050,000 5,050,000 CNH Equipment Trust, Series 2000 A,
Class A3 SEQ, 7.14%, 8/15/04 5,116,761 5,116,761
3,200,000 3,200,000 Daimler-Benz Vehicle Trust, Series 1998 A,
Class A4 SEQ, 5.22%, 12/22/03 3,174,976 3,174,976
1,894,058 1,894,058 EQCC Home Equity Loan Trust, Series
1997-3, Class A8, 6.41%, 12/15/04 1,906,483 1,906,483
3,500,000 3,500,000 First USA Credit Card Master Trust,
Series 1997-6, Class A, 6.42%,
3/17/05 3,522,960 3,522,960
5,000,000 5,000,000 Ford Credit Auto Owner Trust, Series
2000 D, Class A4 SEQ, 7.13%, 7/15/04 5,096,095 5,096,095
4,810,000 4,810,000 Green Tree Home Improvement Loan Trust,
Series 1999 E, Class A3 SEQ, 7.18%,
6/15/15 4,808,499 4,808,499
6,700,000 6,700,000 LB Commercial Conduit Mortgage Trust,
Series 1998 C1, Class A3 SEQ, 6.48%,
1/18/08 6,708,375 6,708,375
3,265,000 3,265,000 Residential Asset Securities Corp., Series
2000 KS5, Class AI1 SEQ, 7.21%, 9/25/16 3,278,354 3,278,354
-------------- --------------
TOTAL ASSET-BACKED SECURITIES 49,035,178 49,035,178
(Cost $48,316,519) -------------- --------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 5.7%
5,300,000 5,300,000 Asset Securitization Corp., Series 1997 D5,
Class A1D SEQ, 6.85%, 2/14/41 5,339,750 5,339,750
8,000,000 8,000,000 Chase Manhattan Bank-First Union National
Bank, Series 1999-1, Class A2 SEQ, 7.44%,
7/15/09 8,462,504 8,462,504
3,600,000 3,600,000 Commercial Mortgage Acceptance Corp.,
Series 1998 C2, Class A2 SEQ, 6.03%,
3/15/08 3,520,127 3,520,127
480,000 480,000 CS First Boston Mortgage Securities Corp.,
Series 1999 C1, Class A2 SEQ, 7.29%,
9/15/09 501,900 501,900
5,470,705 5,470,705 First Nationwide Trust, Series 1999-4, Class
3PA1, SEQ, 6.50%, 10/19/29 5,364,683 5,364,683
8,000,000 8,000,000 First Union Commercial Mortgage Securities,
Inc., Series 1997 C1, Class A3 SEQ,
7.38%, 4/18/07 8,402,504 8,402,504
199,528 199,528 GE Capital Mortgage Services, Inc., Series
1995-10, Class B2, 7.00%, 10/25/10 191,377 191,377
3,000,000 3,000,000 LB-UBS Commerical Mortgage Trust, Series
2000 C3, Class A2 SEQ, 7.95%, 1/15/10 3,277,500 3,277,500
6,000,000 6,000,000 Merrill Lynch Mortgage Investors, Inc.,
Series 1998 C2, Class A2 SEQ, 6.39%,
2/15/30 5,969,064 5,969,064
$4,598,397 $4,598,397 Morgan Stanley Capital I, Series 1999 WF1,
Class A1 SEQ, 5.91%, 4/15/08 4,571,124 4,571,124
120,000 120,000 PNC Mortgage Acceptance Corp., Series
2000 C2, Class A2 SEQ, 7.30%, 9/12/10 125,426 125,426
8,220,000 8,220,000 PNC Mortgage Acceptance Corp., Series
2000 C1, Class A2 SEQ, 7.61%, 2/15/10 8,751,735 8,751,735
2,500,000 2,500,000 SACO I Inc. Series 1997-2, Class 1A5 SEQ,
7.00%, 8/25/36 2,402,735 2,402,735
-------------- --------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 56,880,429 56,880,429
(Cost $54,444,185) -------------- --------------
COMMON STOCKS - 59.7%
CAPITAL MARKETS - 1.1%
SECURITIES & ASSET MANAGEMENT - 1.1%
3,800 3,800 American Capital Strategies 95,713 95,713
12,200 12,200 Edwards (A.G.), Inc. 578,738 578,738
7,800 7,800 Espeed Inc.+ 122,363 122,363
13,931 13,931 Fimatex(i)(s)+ 90,118 90,118
38,700 38,700 Goldman Sachs Group, Inc. (The) 4,138,480 4,138,480
9,000 9,000 John Hancock Financial Services, Inc. 338,625 338,625
14,100 14,100 Lehman Brothers Holdings Inc. 953,512 953,512
50,600 50,600 Merrill Lynch & Co., Inc. 3,450,287 3,450,287
11,100 11,100 Ocwen Financial Corp.+ 70,763 70,763
5,700 5,700 Stilwell Financial Inc. 224,794 224,794
30,600 30,600 TD Waterhouse Group, Inc.+ 405,450 405,450
3,700 3,700 W.P. Stewart & Co., Ltd.+ 96,200 96,200
-------------- --------------
10,565,043 10,565,043
-------------- --------------
COMPUTER HARDWARE - 3.3%
COMPUTER HARDWARE & BUSINESS MACHINES - 3.3%
13,258 13,258 Avaya Inc.+ 136,723 136,723
349,400 349,400 Cisco Systems Inc.+ 13,364,550 13,364,550
151,800 151,800 Compaq Computer Corp. 2,284,590 2,284,590
120,300 120,300 Dell Computer Corp.+ 2,097,731 2,097,731
88,500 88,500 EMC Corp. (Mass.)+ 5,885,250 5,885,250
34,000 34,000 Hewlett-Packard Co. 1,073,125 1,073,125
9,200 9,200 Lexar Media Inc.+ 8,625 8,625
6,800 6,800 M-Systems Flash Disk Pioneers+ 94,775 94,775
14,400 14,400 Network Appliances, Inc.+ 924,300 924,300
7,800 7,800 Optimal Robotics Corp.+ 261,788 261,788
7,800 7,800 Pitney Bowes, Inc. 258,375 258,375
16,100 16,100 Quantum Corp. - DLT & Storage Systems+ 214,331 214,331
2,500 2,500 Redback Networks Inc.+ 102,500 102,500
214,900 214,900 Sun Microsystems, Inc.+ 5,990,338 5,990,338
7,784 7,784 Trintech Group Plc ADR(i)(s)+ 89,160 89,160
-------------- --------------
32,786,161 32,786,161
-------------- --------------
CONSUMER CYCLICAL - 2.2%
AIRLINES - 0.3%
8,200 8,200 AMR Corp.+ 321,338 321,338
21,000 21,000 Singapore Airlines Ltd.(i)(s) 208,305 208,305
The Accompanying Notes are an Integral Part of the Financial Statements.
4
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
10,800 10,800 SkyWest, Inc. $ 310,500 $ 310,500
54,400 54,400 Southwest Airlines Co. 1,824,031 1,824,031
-------------- --------------
2,664,174 2,664,174
-------------- --------------
APPAREL & TEXTILES - 0.1%
3,100 3,100 Coach, Inc.+ 89,125 89,125
14,200 14,200 Jones Apparel Group, Inc.+ 457,063 457,063
8,400 8,400 NIKE, Inc. 468,825 468,825
4,000 4,000 Skechers U.S.A. Inc.+ 62,000 62,000
4,800 4,800 Vans, Inc.+ 81,300 81,300
24,400 24,400 Wellman Inc. 344,650 344,650
-------------- --------------
1,502,963 1,502,963
-------------- --------------
CONSUMER DURABLES - 0.5%
41,704 41,704 Carphone Warehouse Group Plc(i)(s)+ 121,468 121,468
6,908 6,908 Christian Dior S.A.(i)(s) 331,099 331,099
5,000 5,000 Fuji Photo Film Co. Ltd.(i)(s) 209,282 209,282
2,784 2,784 Genset S.A.(i)(s)+ 115,009 115,009
36,826 36,826 Koninklijke Philips Electronics
NV(i)(s) 1,349,123 1,349,123
45,000 45,000 Matsushita Electric Industrial Co.,
Ltd.(i)(s) 1,075,744 1,075,744
2,600 2,600 Nintendo Co., Ltd.(i)(s) 409,580 409,580
4,000 4,000 Pioneer Corp(i)(s) 106,830 106,830
9,600 9,600 Sony Corp.(i)(s) 664,098 664,098
209 209 The Swatch Group AG, B Shares(i)(s) 261,169 261,169
-------------- --------------
4,643,402 4,643,402
-------------- --------------
HOTELS - 0.2%
57,700 57,700 Hilton Hotels Corp. 605,850 605,850
22,000 22,000 Marriott International, Inc. 929,500 929,500
26,200 26,200 Starwood Hotels & Resorts Worldwide, Inc. 923,550 923,550
-------------- --------------
2,458,900 2,458,900
-------------- --------------
MOTOR VEHICLES & PARTS - 1.0%
2,500 2,500 Borg-Warner Automotive, Inc. 100,000 100,000
6,300 6,300 Daimlerchrysler AG(i)(s) 264,634 264,634
24,900 24,900 Dana Corp. 381,281 381,281
65,500 65,500 Delphi Automotive Systems 736,875 736,875
87,600 87,600 Ford Motor Co. 2,053,124 2,053,124
4,000 4,000 Fuji Heavy Industries Ltd.(i)(s) 24,308 24,308
57,200 57,200 General Motors Corp. 2,913,624 2,913,624
4,500 4,500 Gentex Corp.+ 83,813 83,813
11,000 11,000 Honda Motor Co., Ltd.(i)(s) 410,333 410,333
11,700 11,700 Johnson Controls, Inc. 608,400 608,400
7,400 7,400 Monaco Coach Corp.+ 130,888 130,888
114,000 114,000 Nissan Motor Co., Ltd.(i)(s)+ 656,848 656,848
2,196 2,196 PSA Peugeot Citreon(i)(s) 499,569 499,569
29,500 29,500 Toyota Motor Corp.(i)(s) 942,863 942,863
-------------- --------------
9,806,560 9,806,560
-------------- --------------
PUBLISHING - 0.0%(z)
2,100 2,100 Knight-Ridder, Inc. 119,438 119,438
5,400 5,400 New York Times Co. (The) Cl A 216,338 216,338
-------------- --------------
335,776 335,776
-------------- --------------
RESTAURANTS - 0.1%
1,600 1,600 California Pizza Kitchen Inc.+ 45,200 45,200
31,700 31,700 McDonald's Corp. 1,077,800 1,077,800
-------------- --------------
1,123,000 1,123,000
-------------- --------------
22,534,775 22,534,775
-------------- --------------
CONSUMER SERVICES - 2.0%
ENTERTAINMENT - 0.4%
5,600 5,600 American Classic Voyages Co.+ 78,400 78,400
84,200 84,200 Viacom, Inc. Cl B+ 3,936,349 3,936,349
-------------- --------------
4,014,749 4,014,749
-------------- --------------
LEISURE - 0.5%
18,415 18,415 Amadeus Global Travel Distribution
S.A.(i)(s)+ 136,587 136,587
7,500 7,500 Anchor Gaming+ 292,500 292,500
6,800 6,800 Concord Camera Corp.+ 112,200 112,200
30,600 30,600 Eastman Kodak Co. 1,204,875 1,204,875
50,918 50,918 Granada Compass Plc(i)(s)+ 545,686 545,686
10,500 10,500 Harley-Davidson, Inc. 417,375 417,375
27,500 27,500 Hasbro, Inc. 292,188 292,188
71,300 71,300 Hilton Group Plc(i)(s) 222,580 222,580
14,000 14,000 International Game Technology+ 672,000 672,000
8,400 8,400 Mattel, Inc. 121,296 121,296
1,300 1,300 Namco Ltd.(i)(s) 23,905 23,905
1,600 1,600 Oriental Land Co., Ltd.(i)(s) 107,180 107,180
7,600 7,600 Penn National Gaming Inc.+ 77,425 77,425
10,568 10,568 Scottish & Newcastle Plc(i)(s) 74,189 74,189
12,400 12,400 Station Casinos, Inc.+ 185,225 185,225
7,300 7,300 WMS Industries Inc.+ 146,913 146,913
-------------- --------------
4,632,124 4,632,124
-------------- --------------
MEDIA - 1.1%
69,800 69,800 AT&T Corp. - Liberty Media Group Cl A+ 946,663 946,663
27,012 27,012 British SKY Broadcasting Plc(i)(s) 452,285 452,285
87,100 87,100 Comcast Corp. Cl A+ 3,636,425 3,636,425
11,400 11,400 Fox Entertainment Group, Inc. Cl A+ 203,775 203,775
10,100 10,100 Gannett Co., Inc. 636,931 636,931
8,200 8,200 HEARST-ARGYLE Television Inc.+ 167,588 167,588
11,981 11,981 Pearson Plc(i)(s) 284,538 284,538
15,000 15,000 Singapore Press Holdings(i)(s) 221,453 221,453
85,300 85,300 Time Warner Inc. 4,456,071 4,456,071
5,039 5,039 VNU NV(i)(s) 247,668 247,668
-------------- --------------
11,253,397 11,253,397
-------------- --------------
19,900,270 19,900,270
-------------- --------------
CONSUMER STABLE - 3.7%
FOOD & BEVERAGE - 1.8%
15,000 15,000 Ajinomoto Co., Inc.(i)(s) 195,053 195,053
49,000 49,000 Asahi Breweries, Ltd.(i)(s) 499,869 499,869
34,415 34,415 British American Tobacco Plc(i)(s) 262,032 262,032
29,600 29,600 Cadbury Schweppes Plc(i)(s) 204,702 204,702
59,600 59,600 Coca-Cola Co. (The) 3,631,874 3,631,874
83,167 83,167 Foster's Brewing Group Ltd.(i)(s) 218,119 218,119
20,900 20,900 Gallagher Group Plc(i)(s) 132,674 132,674
The Accompanying Notes are an Integral Part of the Financial Statements.
5
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
1,900 1,900 General Mills, Inc. $ 84,669 $ 84,669
2,629 2,629 Groupe Danone(i)(s) 396,411 396,411
7,412 7,412 Heineken Holding NV(i)(s) 313,154 313,154
4,208 4,208 Heineken NV(i)(s) 254,629 254,629
36,700 36,700 Heinz (H.J.) Co. 1,740,956 1,740,956
2,000 2,000 Hershey Foods Corp. 128,750 128,750
11,000 11,000 KAO Corp.(i)(s) 319,790 319,790
7,900 7,900 Keebler Foods Co. 327,356 327,356
24,700 24,700 Kellogg Co. 648,375 648,375
114,916 114,916 Lion Nathan Ltd.(i)(s) 258,827 258,827
808 808 Nestle S.A.(i)(s)+ 1,884,752 1,884,752
17,000 17,000 Nippon Meat Packers, Inc.(i)(s) 231,629 231,629
6,610 6,610 Numico NV(i)(s) 332,641 332,641
27,800 27,800 PepsiCo, Inc. 1,377,838 1,377,838
13,000 13,000 Quaker Oats Co. (The) 1,265,875 1,265,875
24,800 24,800 Reckitt Benckiser Plc(i)(s) 341,532 341,532
28,000 28,000 Snow Brand Milk Products Co.,
Ltd.(i)(s) 96,357 96,357
42,700 42,700 Unilever NV New York Shares(i) 2,687,431 2,687,431
35,900 35,900 Unilever Plc(i)(s) 307,255 307,255
-------------- --------------
18,142,550 18,142,550
-------------- --------------
HOME PRODUCTS - 1.0%
8,200 8,200 Alberto-Culver Co. Cl B 351,063 351,063
16,500 16,500 Clorox Co. 585,750 585,750
17,200 17,200 Estee Lauder Companies, Inc. 753,575 753,575
91,900 91,900 Gillette Co. 3,319,888 3,319,888
69,600 69,600 Procter & Gamble Co. (The) 5,459,249 5,459,249
-------------- --------------
10,469,525 10,469,525
-------------- --------------
TOBACCO - 0.9%
203,800 203,800 Philip Morris Companies Inc. 8,967,199 8,967,199
-------------- --------------
37,579,274 37,579,274
-------------- --------------
ENERGY - 4.4%
ENERGY RESERVES & PRODUCTION - 3.0%
6,500 6,500 Abraxas Petroleum Corp.+ 28,438 28,438
9,100 9,100 Anadarko Petroleum Corp. 646,828 646,828
300 300 Apache Corp. 21,019 21,019
69,500 69,500 Chevron Corp. 5,868,406 5,868,406
3,200 3,200 Devon Energy Corp. 195,104 195,104
3,000 3,000 Evergreen Resources, Inc.+ 115,875 115,875
154,000 154,000 Exxon Mobil Corp. 13,388,375 13,388,375
10,400 10,400 Newfield Exploration Co.+ 493,350 493,350
143,300 143,300 Royal Dutch Petroleum Co. New York
Shares(i) 8,678,606 8,678,606
8,500 8,500 Spinnaker Exploration Co.+ 361,250 361,250
5,900 5,900 Westport Resources Corp.+ 129,431 129,431
300 300 Williams Companies, Inc. (The) 11,981 11,981
-------------- --------------
29,938,663 29,938,663
-------------- --------------
OIL REFINING - 0.3%
5,000 5,000 Conoco Inc. Cl A 143,125 143,125
40,200 40,200 Texaco Inc. 2,497,425 2,497,425
-------------- --------------
2,640,550 2,640,550
-------------- --------------
OIL SERVICES - 1.1%
33,600 33,600 Baker Hughes Inc. 1,396,500 1,396,500
245,982 245,982 BP Amoco Plc(i)(s) 1,984,022 1,984,022
23,426 23,426 Broken Hill Proprietary Co.(i)(s)+ 246,743 246,743
11,900 11,900 Cooper Cameron Corp.+ 786,144 786,144
6,200 6,200 Core Laboratories NV+ 169,338 169,338
2,400 2,400 Diamond Offshore Drilling, Inc. 96,000 96,000
111,211 111,211 ENI SpA(i)(s) 710,013 710,013
6,200 6,200 Global Industries, Ltd.+ 84,863 84,863
48,200 48,200 Global Marine Inc.+ 1,367,675 1,367,675
4,300 4,300 Gulf Island Fabrication, Inc.+ 78,206 78,206
2,600 2,600 Halliburton Co. 94,250 94,250
28,800 28,800 McDermott International, Inc. 309,600 309,600
14,300 14,300 National-Oilwell, Inc.+ 553,231 553,231
22,840 22,840 Repsol YPF S.A.(i)(s) 364,977 364,977
11,482 11,482 Royal Dutch Petroleum Co.(i)(s) 703,516 703,516
11,393 11,393 Total Fina Elf S.A. Cl B(i)(s)+ 1,694,349 1,694,349
-------------- --------------
10,639,427 10,639,427
-------------- --------------
43,218,640 43,218,640
-------------- --------------
FINANCE - 9.5%
BANKS - 5.0%
35,800 35,800 Amsouth Bancorp. 545,950 545,950
35,100 35,100 Australia & New Zealand Banking
Group Ltd.(i)(s) 280,457 280,457
65,709 65,709 Banco Bilbao Vizcaya Argentaria
S.A.(i)(s) 977,831 977,831
58,900 58,900 Bank of America Corp. 2,702,038 2,702,038
36,000 36,000 Bank of Fukuoka Ltd.(i)(s) 153,835 153,835
45,000 45,000 Bank of Tokyo-Mitsubishi, Ltd.(i)(s) 448,030 448,030
100,700 100,700 Bank One Corp. 3,688,137 3,688,137
9,300 9,300 Banknorth Group Inc. 185,419 185,419
26,400 26,400 Barclays Plc(i)(s) 817,040 817,040
11,830 11,830 BNP Paribas(i)(s) 1,038,499 1,038,499
294,600 294,600 Citigroup Inc. 15,043,012 15,043,012
5,700 5,700 City National Corp. 221,231 221,231
20,511 20,511 Commerzbank AG(i)(s) 594,859 594,859
31,900 31,900 Commonwealth Bank of Australia(i)(s) 547,779 547,779
70,246 70,246 Credito Emiliano SpA(i)(s) 307,339 307,339
13,379 13,379 DBS Group Holdings Ltd.(i)(s) 151,227 151,227
17,667 17,667 Dresdner Bank AG(i)(s) 770,474 770,474
111,900 111,900 First Union Corp. 3,112,219 3,112,219
1,000 1,000 Fleet Boston Financial Corp. 37,563 37,563
20,900 20,900 Hang Seng Bank Ltd.(i)(s) 281,350 281,350
8,200 8,200 Hibernia Corp. Cl A 104,550 104,550
136,567 136,567 HSBC Holdings Plc(i)(s) 2,010,422 2,010,422
1,100 1,100 Irwin Financial Corp. 23,306 23,306
38,900 38,900 KeyCorp 1,089,200 1,089,200
42,465 42,465 Lloyds TSB Group Plc(i)(s) 449,070 449,070
101 101 Mizuho Holdings Inc.(i)(s) 626,165 626,165
22,300 22,300 National Commerce Bancorp. 551,925 551,925
The Accompanying Notes are an Integral Part of the Financial Statements.
6
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
10,600 10,600 Net.B@nk, Inc.+ $ 69,563 $ 69,563
7,800 7,800 Pacific Century Financial Corp. 137,963 137,963
35,100 35,100 PNC Bank Corp. 2,564,494 2,564,494
35,600 35,600 Royal Bank of Scotland Plc(i)(s) 841,213 841,213
42,000 42,000 Sumitomo Bank Ltd.(i)(s) 431,401 431,401
65,000 65,000 Sumitomo Trust & Banking Co., Ltd.(i)(s) 442,250 442,250
20,000 20,000 Summit Bancorp 763,750 763,750
8,600 8,600 SunTrust Banks, Inc. 541,800 541,800
160,800 160,800 U.S. Bancorp 4,693,349 4,693,349
10,328 10,328 UBS AG(i)(s) 1,685,749 1,685,749
106,406 106,406 Unicredito Italiano SpA(i)(s) 556,456 556,456
-------------- --------------
49,486,915 49,486,915
-------------- --------------
FINANCIAL SERVICES - 4.0%
7,300 7,300 3I Group Plc(i)(s) 134,987 134,987
1,850 1,850 Aiful Corp.(i)(s) 151,143 151,143
18,200 18,200 Allied Capital Corp. 379,925 379,925
16,400 16,400 American Express Co. 900,975 900,975
9,000 9,000 AmeriCredit Corp.+ 245,250 245,250
13,000 13,000 Amvescap Plc(i)(s) 266,796 266,796
22,100 22,100 AON Corp. 756,925 756,925
44,000 44,000 Capital One Financial Corp. 2,895,750 2,895,750
105,300 105,300 Cendant Corp.+ 1,013,513 1,013,513
32,200 32,200 CIT Group Inc. 648,025 648,025
2,295 2,295 Consors Discount-Broker AG(i)(s)+ 130,146 130,146
21,900 21,900 Countrywide Credit Industries, Inc. 1,100,475 1,100,475
10,300 10,300 Doral Financial Corp. 249,131 249,131
29,800 29,800 Fannie Mae 2,585,150 2,585,150
24,400 24,400 Federal Home Loan Mortgage Corp. 1,680,550 1,680,550
418,400 418,400 General Electric Co. (U.S.) 20,057,049 20,057,049
6,800 6,800 Household International, Inc. 374,000 374,000
18,297 18,297 ING Groep NV(i)(s) 1,461,561 1,461,561
5,000 5,000 MBNA Corp. 184,688 184,688
10,100 10,100 Medallion Financial Corp. 147,713 147,713
13,200 13,200 NextCard Inc.+ 105,600 105,600
54,000 54,000 Nomura Securities Co., Ltd.(i)(s) 971,716 971,716
1,700 1,700 Orix Corp.(i)(s) 170,595 170,595
3,300 3,300 Promise Co., Ltd.(i)(s) 234,063 234,063
59,000 59,000 Providian Financial Corp. 3,392,499 3,392,499
-------------- --------------
40,238,225 40,238,225
-------------- --------------
THRIFTS - 0.5%
5,100 5,100 Bank United Corp. 347,756 347,756
20,400 20,400 Dime Bancorp, Inc. 603,075 603,075
10,500 10,500 GreenPoint Financial Corp. 429,844 429,844
8,000 8,000 Sovereign Bancorp Inc. 65,000 65,000
59,600 59,600 Washington Mutual, Inc. 3,162,524 3,162,524
6,500 6,500 Waypoint Financial Corp.+ 71,500 71,500
-------------- --------------
4,679,699 4,679,699
-------------- --------------
94,404,839 94,404,839
-------------- --------------
HEALTH SERVICES & SYSTEMS - 2.0%
MEDICAL PRODUCTS & SUPPLIES - 1.4%
46,000 46,000 Abbott Laboratories 2,228,125 2,228,125
11,500 11,500 Bard (C.R.), Inc. 535,469 535,469
33,100 33,100 Becton Dickinson & Co. 1,146,088 1,146,088
51,600 51,600 Boston Scientific Corp.+ 706,275 706,275
1,000 1,000 Ciphergen Biosystems Inc.+ 13,250 13,250
7,500 7,500 Cyberonics, Inc.+ 174,375 174,375
27,300 27,300 Guidant Corp.+ 1,472,494 1,472,494
9,500 9,500 I-STAT Corp.+ 251,156 251,156
55,700 55,700 Johnson & Johnson 5,851,980 5,851,980
6,500 6,500 Medtronic, Inc. 392,438 392,438
3,600 3,600 Physiometrix, Inc.+ 57,375 57,375
14,600 14,600 St. Jude Medical, Inc.+ 896,988 896,988
10,500 10,500 Staar Surgical Co.+ 131,906 131,906
1,000 1,000 Wilson Greatbatch Technologies Inc.+ 28,250 28,250
-------------- --------------
13,886,169 13,886,169
-------------- --------------
MEDICAL PROVIDERS & SERVICES - 0.6%
2,400 2,400 Accredo Health Inc.+ 120,450 120,450
2,600 2,600 Aetna Inc.+ 106,763 106,763
5,900 5,900 Charles River Laboratories+ 161,513 161,513
4,500 4,500 Deltagen Inc.+ 46,969 46,969
64,600 64,600 HCA - The Healthcare Co. 2,843,045 2,843,045
20,300 20,300 Hooper Holmes, Inc. 224,518 224,518
8,900 8,900 Omnicare, Inc. 192,463 192,463
55,400 55,400 Tenet Healthcare Corp.+ 2,461,837 2,461,837
7,600 7,600 Triad Hospitals Inc.+ 247,475 247,475
-------------- --------------
6,405,033 6,405,033
-------------- --------------
20,291,202 20,291,202
-------------- --------------
INDUSTRIAL CYCLICAL - 7.2%
CHEMICALS - 1.2%
47,400 47,400 Air Products & Chemicals, Inc. 1,943,399 1,943,399
9,600 9,600 Albemarle Corp. 237,600 237,600
18,895 18,895 BASF AG(i)(s) 854,542 854,542
15,493 15,493 Bayer AG(i)(s) 812,688 812,688
57,700 57,700 Dow Chemical Co. 2,113,262 2,113,262
18,120 18,120 GenTek Inc. 298,980 298,980
15,700 15,700 Georgia Gulf Corp. 267,881 267,881
2,800 2,800 Minerals Technologies Inc. 95,725 95,725
208,000 208,000 Mitsubishi Chemical Corp.(i)(s) 548,231 548,231
22,400 22,400 PPG Industries, Inc. 1,037,400 1,037,400
28,800 28,800 Praxair, Inc. 1,278,000 1,278,000
45,400 45,400 Rohm and Haas Co. 1,648,587 1,648,587
943 943 Syngenta AG(i)(s)+ 50,627 50,627
36,000 36,000 Tokuyama Corp.(i)(s) 141,856 141,856
-------------- --------------
11,328,778 11,328,778
-------------- --------------
CONSTRUCTION & REAL PROPERTY - 0.1%
6,000 6,000 Catellus Development Corp.+ 105,000 105,000
8,750 8,750 Elcor Corp. 147,656 147,656
28,000 28,000 Mitsubishi Estate Co. Ltd.(i)(s) 299,124 299,124
The Accompanying Notes are an Integral Part of the Financial Statements.
7
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
90,000 90,000 Nishimatsu Construction Co., Ltd.(i)(s) $ 307,356 $ 307,356
27,000 27,000 Sekisui House, Ltd.(i)(s) 247,067 247,067
6,024 6,024 Vinci S.A.(i)(s) 370,455 370,455
-------------- --------------
1,476,658 1,476,658
-------------- --------------
DEFENSE/AEROSPACE - 0.5%
35,721 35,721 Bae Systems Plc(i)(s) 203,815 203,815
20,000 20,000 Boeing Co. 1,320,000 1,320,000
4,600 4,600 Ectel Ltd.+ 52,613 52,613
13,327 13,327 European Aeronautic Defence and Space
Co.(i)(s)+ 296,044 296,044
4,200 4,200 Goodrich (B.F.) Co. (The) 152,775 152,775
57,900 57,900 Honeywell Inc. 2,739,393 2,739,393
2,800 2,800 Innovative Solutions+ 49,044 49,044
-------------- --------------
4,813,684 4,813,684
-------------- --------------
ELECTRICAL EQUIPMENT - 2.1%
3,903 3,903 ABB Ltd.(i)(s) 416,071 416,071
14,100 14,100 Advanced Fibre Communications, Inc.+ 254,681 254,681
22,500 22,500 Agilent Technologies, Inc.+ 1,231,875 1,231,875
4,068 4,068 Alcatel Optronics(i)(s)+ 179,548 179,548
6,200 6,200 August Technology Corp.+ 80,213 80,213
2,300 2,300 Bruker Daltronics Inc.+ 54,194 54,194
13,500 13,500 C-Cube Microsystems Inc.+ 166,219 166,219
1,700 1,700 Caliper Technologies Corp.+ 79,900 79,900
59,900 59,900 Chubb Plc(s)+ 141,362 141,362
7,800 7,800 CIENA Corp.+ 633,750 633,750
62,200 62,200 Corning Inc. 3,284,937 3,284,937
3,300 3,300 DDi Corp.+ 89,925 89,925
6,600 6,600 Dover Corp. 267,713 267,713
14,400 14,400 Eaton Corp. 1,082,700 1,082,700
38,751 38,751 Ericsson LM Cl B(i)(s) 441,496 441,496
4,600 4,600 Garmin Ltd.+ 90,850 90,850
64,000 64,000 Hitachi, Ltd.(i)(s) 570,508 570,508
1,900 1,900 L-3 Communications Holdings, Inc.+ 146,300 146,300
30,600 30,600 Level 3 Communications, Inc.+ 1,004,063 1,004,063
28,400 28,400 Marconi Plc(i)(s) 304,998 304,998
9,300 9,300 Meade Corp.+ 61,031 61,031
1,800 1,800 Millipore Corp. 113,400 113,400
3,000 3,000 Molecular Devices Corp.+ 205,313 205,313
37,000 37,000 NEC Corp.(i)(s) 677,145 677,145
39,002 39,002 Nokia Oyj(i)(s) 1,739,362 1,739,362
115,200 115,200 Nortel Networks Corp. 3,693,599 3,693,599
5,000 5,000 Omron Corp.(i)(s) 103,984 103,984
7,500 7,500 Oplink Communications Inc.+ 135,469 135,469
3,000 3,000 Polycom, Inc.+ 96,563 96,563
2,900 2,900 Power-One Inc.+ 114,006 114,006
21,400 21,400 QUALCOMM Inc.+ 1,758,812 1,758,812
3,817 3,817 Siemens AG(i)(s) 498,851 498,851
6,800 6,800 Tellabs, Inc.+ 384,200 384,200
2,900 2,900 Transgenomic, Inc.+ 30,450 30,450
1,100 1,100 Ulticom Inc.+ 37,469 37,469
-------------- --------------
20,170,957 20,170,957
-------------- --------------
ENVIRONMENTAL SERVICES - 0.0%(z)
1,800 1,800 Eden Bioscience Corp.+ 53,888 53,888
-------------- --------------
FOREST PRODUCTS & PAPER - 0.4%
15,500 15,500 Buckeye Technologies Inc.+ 217,969 217,969
19,200 19,200 Caraustar Industries Inc. 180,000 180,000
61,463 61,463 CSR Ltd.(i)(s) 159,796 159,796
5,300 5,300 Georgia-Pacific Corp. 164,963 164,963
59,100 59,100 Hanson Plc(i)(s) 405,181 405,181
12,800 12,800 Kimberly-Clark Corp. 904,832 904,832
6,603 6,603 Lafarge S.A.(i)(s) 553,608 553,608
24,800 24,800 Pactiv Corp.+ 306,900 306,900
34,200 34,200 Smurfit-Stone Container Corp.+ 510,863 510,863
49,960 49,960 Stora Enso Oyj R Shares(i)(s) 590,381 590,381
2,900 2,900 Temple-Inland Inc. 155,513 155,513
26,000 26,000 Tostem Corp.(i)(s) 323,065 323,065
-------------- --------------
4,473,071 4,473,071
-------------- --------------
HEAVY ELECTRICAL EQUIPMENT - 0.1%
5,100 5,100 Active Power Inc.+ 111,881 111,881
15,200 15,200 Cooper Industries, Inc.+ 698,250 698,250
7,800 7,800 Emerson Electric Co. 614,738 614,738
-------------- --------------
1,424,869 1,424,869
-------------- --------------
HEAVY MACHINERY - 0.1%
12,200 12,200 Deere & Co. 558,913 558,913
24,000 24,000 Ebara Corp.(i)(s) 260,806 260,806
59,000 59,000 Kubota Corp.(i)(s) 179,790 179,790
17,526 17,526 Smiths Group Plc(s) 211,516 211,516
1,828 1,828 Technip S.A.(i)(s) 265,335 265,335
-------------- --------------
1,476,360 1,476,360
-------------- --------------
INDUSTRIAL PARTS - 1.4%
1,800 1,800 Applied Industrial Technologies, Inc. 37,013 37,013
10,125 10,125 Autoliv, Inc. SDR(i)(s) 158,815 158,815
4,800 4,800 Capstone Turbine Corp.+ 134,400 134,400
27,800 27,800 Caterpillar Inc. 1,315,288 1,315,288
5,100 5,100 Flowserve Corp.+ 109,013 109,013
4,600 4,600 Idex Corp. 152,375 152,375
8,100 8,100 Illinois Tool Works Inc. 482,456 482,456
28,400 28,400 Ingersoll-Rand Co. 1,189,250 1,189,250
14,300 14,300 ITT Industries, Inc. 554,125 554,125
6,400 6,400 Kennametal Inc. 186,400 186,400
6,000 6,000 Mettler-Toledo International, Inc.+ 326,250 326,250
29,000 29,000 Minebea Co., Ltd.(i)(s) 268,669 268,669
15,600 15,600 Parker-Hannifin Corp. 688,350 688,350
9,200 9,200 Shaw Group Inc. (The)+ 460,000 460,000
29,000 29,000 Sumitomo Rubber Industries, Ltd.(i)(s) 121,384 121,384
114,800 114,800 Tyco International Ltd. 6,371,399 6,371,399
6,300 6,300 United Technologies Corp.+ 495,338 495,338
-------------- --------------
13,050,525 13,050,525
-------------- --------------
INDUSTRIAL SERVICES - 0.4%
5,000 5,000 Gatx Corp. 249,375 249,375
The Accompanying Notes are an Integral Part of the Financial Statements.
8
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
1,300 1,300 Macnica Inc.(i)(s) $ 99,037 $ 99,037
88,000 88,000 Mitsubishi Corp.(i)(s) 648,827 648,827
15,300 15,300 On Assignment Inc.+ 436,050 436,050
24,838 24,838 Vivendi Environnement(i)(s)+ 1,084,374 1,084,374
25,610 25,610 Vivendi Universal(i)(s) 1,685,532 1,685,532
-------------- --------------
4,203,195 4,203,195
-------------- --------------
MINING & METALS - 0.4%
7,104 7,104 Acerinox S.A.(i)(s) 216,768 216,768
70,300 70,300 Alcoa Inc. 2,355,049 2,355,049
76,200 76,200 Billiton Plc(i) 293,646 293,646
39,900 39,900 Glynwed International Plc(i)(s) 115,022 115,022
294,000 294,000 Kawasaki Steel Corp.(i)(s) 303,783 303,783
8,100 8,100 Mueller Industries, Inc.+ 217,181 217,181
11,000 11,000 Nippon Sheet Glass Co., Ltd.(i)(s) 134,273 134,273
300 300 Phelps Dodge Corp. 16,744 16,744
9,500 9,500 Tokyo Steel Manufacturing Co., Ltd.(i)(s) 42,342 42,342
14,000 14,000 Valmont Industries, Inc. 257,250 257,250
24,836 24,836 WMC Ltd.(i)(s) 105,667 105,667
-------------- --------------
4,057,725 4,057,725
-------------- --------------
MULTI-INDUSTRY - 0.1%
37,600 37,600 Hutchison Whampoa Ltd.(i)(s) 468,801 468,801
10,938 10,938 Johnson Matthey Plc(i)(s) 172,361 172,361
5,184 5,184 Lagardere S.C.A.(i)(s) 300,790 300,790
46,300 46,300 Southcorp Ltd.(i)(s) 125,906 125,906
-------------- --------------
1,067,858 1,067,858
-------------- --------------
RAILROADS - 0.3%
40,100 40,100 Burlington Northern Santa Fe Corp. 1,135,331 1,135,331
24,000 24,000 Nippon Express Co., Ltd.(i)(s) 145,009 145,009
28,300 28,300 Union Pacific Corp. 1,436,225 1,436,225
147 147 West Japan Railway Co.(i)(s) 650,044 650,044
-------------- --------------
3,366,609 3,366,609
-------------- --------------
TRUCKING & SHIPPING & AIR FREIGHT - 0.1%
17,000 17,000 C.H. Robinson Worldwide, Inc. 534,438 534,438
11,800 11,800 FedEx Corp.+ 471,528 471,528
117,000 117,000 Nippon Yusen Kabushiki Kaisha(i)(s) 483,573 483,573
-------------- --------------
1,489,539 1,489,539
-------------- --------------
72,453,716 72,453,716
-------------- --------------
INSURANCE - 2.9%
LIFE & HEALTH INSURANCE - 1.1%
20,900 20,900 Aflac Inc. 1,508,719 1,508,719
29,200 29,200 American General Corp. 2,379,799 2,379,799
16,100 16,100 CIGNA Corp. 2,130,030 2,130,030
19,500 19,500 Lincoln National Corp. 922,594 922,594
12,400 12,400 MetLife, Inc. 434,000 434,000
1,600 1,600 MIIX Group Inc. 12,000 12,000
5,400 5,400 Nationwide Financial Services Inc. 256,500 256,500
11,900 11,900 Protective Life Corp. 383,775 383,775
3,700 3,700 Stancorp Financial Group 176,675 176,675
19,100 19,100 Torchmark Corp. 734,156 734,156
3,201 3,201 Zurich Financial Services AG(i)(s)+ 1,929,884 1,929,884
-------------- --------------
10,868,132 10,868,132
-------------- --------------
PROPERTY AND CASUALTY INSURANCE - 1.8%
5,522 5,522 Allianz AG(i)(s) 2,066,538 2,066,538
52,400 52,400 Allstate Corp. 2,282,674 2,282,674
20,600 20,600 Ambac Financial Group, Inc. 1,201,238 1,201,238
59,000 59,000 American International Group, Inc. 5,815,187 5,815,187
5,000 5,000 American Physicians Capital, Inc.+ 82,813 82,813
25,018 25,018 AMP Ltd.(i)(s) 281,096 281,096
4,600 4,600 Berkley (W.R.) Corp. 217,063 217,063
1,500 1,500 Cincinnati Financial Corp. 59,344 59,344
28,100 28,100 Hartford Financial Services Group Inc. (The) 1,984,563 1,984,563
123,700 123,700 Legal & General Group Plc(i)(s) 340,891 340,891
12,600 12,600 MBIA Inc. 933,975 933,975
20,950 20,950 Mediolanum SpA(i)(s) 266,915 266,915
5,700 5,700 Renaissancere Holdings Ltd. 446,381 446,381
60,727 60,727 Royal & Sun Alliance Insurance Group(i)(s) 519,740 519,740
59,997 59,997 Skandia Forsakrings AB(i)(s) 976,052 976,052
34,000 34,000 Tokio Marine & Fire Insurance Co.,
Ltd.(i)(s) 389,720 389,720
-------------- --------------
17,864,190 17,864,190
-------------- --------------
28,732,322 28,732,322
-------------- --------------
PHARMACEUTICALS - 5.8%
BIOTECHNOLOGY - 0.0%(z)
2,800 2,800 Harvard Bioscience, Inc.+ 27,650 27,650
700 700 Specialty Laboratories, Inc.+ 23,188 23,188
-------------- --------------
50,838 50,838
-------------- --------------
DRUGS - 5.8%
1,500 1,500 3 Dimensional Pharmaceutical, Inc.+ 22,219 22,219
4,000 4,000 Abgenix, Inc.+ 236,250 236,250
1,900 1,900 Adolar Corp.+ 41,800 41,800
13,100 13,100 Akorn Inc.+ 85,969 85,969
34,300 34,300 Alza Corp.+ 1,457,750 1,457,750
56,800 56,800 American Home Products Corp. 3,609,640 3,609,640
19,400 19,400 Amgen Inc.+ 1,240,388 1,240,388
1,500 1,500 Arena Pharmaceuticals, Inc.+ 23,250 23,250
4,100 4,100 Astrazeneca Plc(i)(s) 206,684 206,684
6,600 6,600 Bindley Western Industries Inc. 274,313 274,313
64,300 64,300 Bristol-Myers Squibb Co. 4,754,180 4,754,180
8,300 8,300 Celltech Group Plc(i)(s)+ 146,660 146,660
3,200 3,200 COR Therapeutics, Inc.+ 112,600 112,600
1,200 1,200 Durect Corp.+ 14,400 14,400
3,300 3,300 Enzon, Inc.+ 204,806 204,806
5,100 5,100 Forest Laboratories, Inc. Cl A+ 677,663 677,663
2,000 2,000 Gilead Sciences, Inc.+ 165,875 165,875
94,563 94,563 Glaxosmithkline Plc(i)(s)+ 2,669,516 2,669,516
9,000 9,000 Human Genome Sciences, Inc.+ 623,813 623,813
800 800 IDEC Pharmaceuticals Corp.+ 151,650 151,650
2,000 2,000 Immunogen Inc.+ 42,875 42,875
4,713 4,713 Inhale Therapeutic Systems Inc.Inc.+ 238,007 238,007
6,600 6,600 Isis Pharmaceuticals, Inc.+ 70,125 70,125
25,000 25,000 Ligand Pharmaceuticals Inc. Cl B+ 350,000 350,000
46,400 46,400 Lilly (Eli) & Co. 4,318,100 4,318,100
1,700 1,700 Maxygen Inc.+ 41,650 41,650
The Accompanying Notes are an Integral Part of the Financial Statements.
9
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENTS PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
7,900 7,900 Medarex Inc.+ $ 321,925 $ 321,925
3,600 3,600 MediChem Life Sciences, Inc.+ 16,650 16,650
115,600 115,600 Merck & Co., Inc. 10,823,049 10,823,049
6,700 6,700 Neurocrine Biosciences Inc.+ 221,938 221,938
943 943 Novartis AG(i)(s) 1,667,198 1,667,198
2,357 2,357 Novo Nordisk A/S Cl B(i)(s) 422,486 422,486
23,337 23,337 Nycomed Amersham Plc(i)(s) 194,330 194,330
1,000 1,000 OSI Pharmaceuticals, Inc.+ 80,125 80,125
241,200 241,200 Pfizer, Inc. 11,095,199 11,095,199
58,200 58,200 Pharmacia Corp. 3,550,200 3,550,200
4,791 4,791 POZEN Inc.+ 87,436 87,436
2,200 2,200 Priority Healthcare Corp. Cl B+ 89,788 89,788
119 119 Roche Holding AG(i)(s)+ 1,212,397 1,212,397
5,000 5,000 Sankyo Co. Ltd.(i)(s) 119,965 119,965
7,881 7,881 Schering AG(i)(s) 447,658 447,658
81,200 81,200 Schering-Plough Corp. 4,608,099 4,608,099
21,000 21,000 Takeda Chemical Industries, Ltd.(i)(s) 1,243,082 1,243,082
2,500 2,500 Trimeris Inc.+ 137,188 137,188
4,500 4,500 Vertex Pharmaceuticals, Inc.+ 321,750 321,750
2,000 2,000 Yamanouchi Pharmaceutical Co. Ltd.(i)(s) 86,515 86,515
-------------- --------------
58,527,161 58,527,161
-------------- --------------
58,577,999 58,577,999
-------------- --------------
REAL ESTATE INVESTMENT TRUSTS - 0.2%
REAL ESTATE INVESTMENT TRUST - 0.2%
7,900 7,900 Canary Wharf Group Plc(i)(s)+ 57,524 57,524
5,000 5,000 Centerpoint Properties Corp. 236,250 236,250
7,000 7,000 Cheung Kong Holdings Ltd.(i)(s) 89,520 89,520
38,000 38,000 City Developments(i)(s) 176,413 176,413
11,450 11,450 Cousins Properties Inc. 319,884 319,884
4,700 4,700 General Growth Properties, Inc. 170,081 170,081
4,100 4,100 Manufactured Home Communities, Inc. 118,900 118,900
10,600 10,600 Mission West Properties Inc. 147,075 147,075
9,922 9,922 Post Properties, Inc. 372,695 372,695
60,000 60,000 Sun Hung Kai Properties Ltd.(i)(s) 598,086 598,086
-------------- --------------
2,286,428 2,286,428
-------------- --------------
RETAIL - 3.2%
CLOTHING STORES - 0.5%
28,200 28,200 Abercrombie & Fitch Co. Cl A+ 564,000 564,000
220 220 Compagnie Financiere Richemont AG
A Units(i)(s) 588,522 588,522
37,000 37,000 Gap, Inc. (The) 943,500 943,500
51,200 51,200 Limited., Inc. (The) 873,600 873,600
13,000 13,000 Pacific Sunwear of California, Inc.+ 333,125 333,125
51,900 51,900 TJX Companies, Inc. (The) 1,440,225 1,440,225
-------------- --------------
4,742,972 4,742,972
-------------- --------------
DEPARTMENT STORES - 1.6%
7,995 7,995 Carrefour S.A.(i)(s) 502,174 502,174
34,830 34,830 Dixons Group Plc(i)(s) 116,534 116,534
47,200 47,200 Federated Department Stores, Inc.+ 1,652,000 1,652,000
6,000 6,000 Ito-Yokado Co., Ltd.(i)(s) 299,475 299,475
14,000 14,000 Marui Co., Ltd.(i)(s) 211,471 211,471
32,700 32,700 May Department Stores Co. (The) 1,070,925 1,070,925
60,953 60,953 MFI Furniture Group Plc(i)(s) 62,455 62,455
91,600 91,600 Target Corp. 2,954,100 2,954,100
204,000 204,000 Tesco Plc(i)(s) 831,083 831,083
19,000 19,000 UNY Co., Ltd.(i)(s) 202,977 202,977
157,300 157,300 Wal-Mart Stores, Inc. 8,356,562 8,356,562
-------------- --------------
16,259,756 16,259,756
-------------- --------------
GROCERY STORES - 0.3%
64,200 64,200 Kroger Co. (The)+ 1,737,413 1,737,413
26,700 26,700 Safeway Inc.+ 1,668,750 1,668,750
-------------- --------------
3,406,163 3,406,163
-------------- --------------
SPECIALTY STORES - 0.8%
4,500 4,500 Best Buy Co., Inc.+ 133,031 133,031
2,300 2,300 BJ's Wholesale Club Inc.+ 88,263 88,263
6,200 6,200 Cost Plus, Inc.+ 182,125 182,125
13,700 13,700 Genesco Inc.+ 334,794 334,794
14,900 14,900 Grainger (W.W.), Inc. 543,850 543,850
101,900 101,900 Home Depot, Inc. 4,655,555 4,655,555
37,700 37,700 Lowe's Companies, Inc. 1,677,650 1,677,650
6,700 6,700 School Specialty Inc.+ 134,419 134,419
7,900 7,900 Walgreen Co. 330,319 330,319
-------------- --------------
8,080,006 8,080,006
-------------- --------------
32,488,897 32,488,897
-------------- --------------
SEMICONDUCTORS - 2.6%
SEMICONDUCTOR - 2.6%
2,200 2,200 Advantest Corp.(i)(s) 206,130 206,130
9,960 9,960 Agfa Gevaert NV(i)(s) 237,428 237,428
2,900 2,900 Alliance Fiber Optics Products Inc.+ 17,400 17,400
52,400 52,400 Altera Corp.+ 1,378,775 1,378,775
17,800 17,800 Analog Devices, Inc.+ 911,138 911,138
43,400 43,400 Applied Materials, Inc.+ 1,657,337 1,657,337
11,800 11,800 ARM Holdings Plc(i)(s)+ 89,183 89,183
4,900 4,900 AXT, Inc.+ 162,006 162,006
5,100 5,100 Bookham Technology Plc(i)(s)+ 72,367 72,367
7,100 7,100 Broadcom Corp.+ 596,400 596,400
6,200 6,200 Cypress Semiconductor Corp.+ 122,063 122,063
10,300 10,300 Exar Corp.+ 319,139 319,139
2,700 2,700 Fanuc Ltd.(i)(s) 183,704 183,704
34,000 34,000 Fujitsu Ltd.(i)(s) 501,366 501,366
6,000 6,000 hi/fn, Inc.+ 165,000 165,000
248,200 248,200 Intel Corp. 7,461,512 7,461,512
77,300 77,300 JDS Uniphase Corp.+ 3,222,443 3,222,443
2,200 2,200 JNI Corp.+ 49,913 49,913
12,900 12,900 Lattice Semiconductor Corp.+ 237,038 237,038
26,900 26,900 Linear Technology Corp. 1,244,125 1,244,125
13,300 13,300 Maxim Integrated Products, Inc.+ 635,906 635,906
17,100 17,100 Micron Technology, Inc.+ 607,050 607,050
2,700 2,700 Murata Manufacturing Co., Ltd.(i)(s) 316,813 316,813
9,900 9,900 PMC-Sierra, Inc.+ 778,388 778,388
The Accompanying Notes are an Integral Part of the Financial Statements.
10
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENT PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
29,000 29,000 Ricoh Co., Ltd.(i)(s) $ 535,814 $ 535,814
16,000 16,000 Silicon Image Inc.+ 87,000 87,000
13,409 13,409 Spirent Plc(i)(s) 122,173 122,173
1,000 1,000 TDK Corp.(i)(s) 97,373 97,373
52,900 52,900 Texas Instruments Inc. 2,506,137 2,506,137
31,100 31,100 Xilinx, Inc.+ 1,434,488 1,434,488
-------------- --------------
25,955,609 25,955,609
-------------- --------------
SOFTWARE & SERVICES - 4.3%
COMPUTER SOFTWARE - 3.2%
9,600 9,600 Adobe Systems Inc.+ 558,600 558,600
25,600 25,600 BEA Systems, Inc.+ 1,723,200 1,723,200
8,800 8,800 Certicom Corp.+ 179,300 179,300
6,100 6,100 Citrix Systems, Inc.+ 137,250 137,250
9,700 9,700 click2learn.com, Inc.+ 94,575 94,575
5,000 5,000 Eclipsys Corp.+ 122,500 122,500
37,900 37,900 Gemstar International Group Ltd.+ 1,748,137 1,748,137
7,100 7,100 Informatica Corp.+ 280,894 280,894
58,300 58,300 International Business Machines Corp. 4,955,499 4,955,499
5,000 5,000 Internet Security Systems+ 392,188 392,188
4,700 4,700 Metasolv Software Inc.+ 42,888 42,888
180,200 180,200 Microsoft Corp.+ 7,816,174 7,816,174
14,000 14,000 NCR Corp. 687,750 687,750
292,000 292,000 Oracle Corp.+ 8,486,249 8,486,249
24,200 24,200 Parametric Technology Corp.+ 325,188 325,188
13,600 13,600 Peregrine Systems, Inc.+ 268,600 268,600
2,700 2,700 Precise Software Solutions Ltd.+ 66,825 66,825
3,100 3,100 Rational Software Corp.+ 120,706 120,706
5,900 5,900 SeeBeyond Technology Corp.+ 60,475 60,475
4,700 4,700 Siebel Systems, Inc.+ 317,838 317,838
8,000 8,000 Smart Force Plc ADR(i)+ 300,500 300,500
2,910 2,910 Software AG(i)(s)+ 225,839 225,839
5,300 5,300 Synquest Inc.+ 39,088 39,088
2,800 2,800 Telecommunication Systems Inc.+ 9,450 9,450
3,400 3,400 TIBCO Software Inc.+ 162,988 162,988
8,000 8,000 U.S. Wireless Corp.+ 35,000 35,000
38,000 38,000 Veritas Software Corp.+ 3,324,999 3,324,999
3,200 3,200 Watchguard Tech Inc.+ 101,200 101,200
5,300 5,300 Webtrends Corp.+ 153,369 153,369
4,800 4,800 Wind River Systems, Inc.+ 163,800 163,800
6,900 6,900 Witness Systems Inc.+ 93,150 93,150
-------------- -------------
32,994,219 32,994,219
-------------- -------------
INFORMATION SERVICES - 0.6%
421 421 Adecco S.A.(i)(s) 264,992 264,992
26,000 26,000 Automatic Data Processing, Inc. 1,646,125 1,646,125
37,267 37,267 Autostrade Concessioni e Costruzioni
Autostrade SpA(i)(s) 246,674 246,674
5,000 5,000 Corillian Corp.+ 60,000 60,000
3,100 3,100 Costar Group Inc.+ 73,238 73,238
3,800 3,800 DiamondCluster International, Inc. Cl A 115,900 115,900
6,225 6,225 eFunds Corp.+ 57,192 57,192
1,500 1,500 Exelixis Inc.+ 21,938 21,938
36,757 36,757 Getronics NV(i)(s) 216,035 216,035
5,200 5,200 Getty Images Inc.+ 166,400 166,400
51,200 51,200 Hays Plc(i)(s) 295,193 295,193
1,000 1,000 Hitachi Software Engineering Co., Ltd.(i)(s) 72,680 72,680
6,042 6,042 Intershop Communications AG(i)(s)+ 189,582 189,582
8,040 8,040 Logica Plc(i)(s) 210,157 210,157
4,850 4,850 Obie Media Corp.+ 37,284 37,284
74,300 74,300 QXL.com Ricardo Plc(i)(s)+ 9,988 9,988
11,400 11,400 Railtrack Group Plc(i)(s) 157,506 157,506
15,882 15,882 Reuters Group Plc(i)(s) 268,772 268,772
1,800 1,800 SBA Communications Corp.+ 73,913 73,913
20,100 20,100 Severn Trent Plc(i)(s) 223,367 223,367
250 250 SGS Societe Generale de Surveillance
Holding S.A.(i)(s) 362,542 362,542
2,200 2,200 Softbank Corp.(i)(s) 76,480 76,480
10,500 10,500 Source Information Management Co.+ 39,375 39,375
6,300 6,300 Symyx Technologies Inc.+ 226,800 226,800
27,650 27,650 Tele1 Europe Holding AB(i)(s)+ 133,334 133,334
9,520 9,520 Tietoenator Oyj(i)(s) 270,825 270,825
28 28 TNT Post Group NV(i)(s) 677 677
1,400 1,400 Wireless Facilities, Inc.+ 50,750 50,750
-------------- --------------
5,567,719 5,567,719
-------------- --------------
INTERNET - 0.5%
22,700 22,700 Akamai Technologies, Inc.+ 478,119 478,119
61,600 61,600 America Online, Inc.+ 2,143,679 2,143,679
19,700 19,700 Ameritrade Holding Corp. Cl A+ 137,900 137,900
6,100 6,100 Apropos Technology, Inc.+ 43,463 43,463
2,700 2,700 Clarent Corp.+ 30,544 30,544
11,500 11,500 Digitalthink Inc.+ 196,219 196,219
40,600 40,600 E*trade Group Inc.+ 299,425 299,425
1,500 1,500 E.piphany, Inc.+ 80,906 80,906
8,400 8,400 eBay Inc.+ 277,200 277,200
8,600 8,600 Ibasis Inc.+ 35,475 35,475
1,300 1,300 Inet Technologies Inc.+ 52,650 52,650
2,000 2,000 internet.com Corp.+ 11,875 11,875
1,300 1,300 Interwoven Inc.+ 85,719 85,719
2,950 2,950 Netegrity Inc.+ 160,406 160,406
1,600 1,600 Nuance Communications+ 69,000 69,000
8,500 8,500 Saba Software, Inc.+ 133,875 133,875
1,200 1,200 SafeNet, Inc.+ 56,400 56,400
150,000 150,000 Sunevision Holdings Ltd.(i)(s)+ 54,328 54,328
7,500 7,500 Tumbleweed Communications Corp.+ 128,320 128,320
3,800 3,800 Yahoo! Inc.+ 114,238 114,238
------------- -------------
4,589,741 4,589,741
------------- -------------
43,151,679 43,151,679
------------- -------------
TELECOMMUNICATIONS - 3.5%
TELEPHONE - 2.2%
79,600 79,600 AT&T Corp. 1,378,075 1,378,075
47,300 47,300 BellSouth Corp. 1,936,344 1,936,344
400 400 Ectel Ltd.+ 4,575 4,575
The Accompanying Notes are an Integral Part of the Financial Statements.
11
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENT PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
14,300 14,300 FLAG Telecom Holdings Ltd.+ $ 89,375 $ 89,375
67,000 67,000 Global Crossing Ltd.+ 958,938 958,938
6,600 6,600 ITXC Corp.+ 45,788 45,788
104,800 104,800 Qwest Communications International Inc.+ 4,296,799 4,296,799
149,400 149,400 SBC Communications Inc.+ 7,133,849 7,133,849
75,148 75,148 Telenor ASA(i)(s)+ 327,231 327,231
61,700 61,700 Telstra Corp. Ltd.(i)(s) 220,203 220,203
6,600 6,600 Turnstone Systems Inc.+ 49,088 49,088
100,100 100,100 Verizon Communications 5,017,512 5,017,512
1,300 1,300 Williams Communications Group Inc.+ 15,275 15,275
74,200 74,200 WorldCom, Inc.+ 1,043,438 1,043,438
------------- -------------
22,516,490 22,516,490
------------- -------------
WIRELESS TELECOMMUNICATIONS - 1.3%
1,100 1,100 Boston Communications Group, Inc.+ 30,663 30,663
19,600 19,600 British Telecommunications Plc(i)(s) 167,456 167,456
8,152 8,152 Cable & Wireless Plc(i)(s) 109,952 109,952
7,793 7,793 Carrier1 International S.A.(i)(s)+ 139,017 139,017
42,000 42,000 China Mobile (Hong Kong) Ltd.(i)(s)+ 229,388 229,388
14 14 DDI Corp.(i)(s) 67,548 67,548
14,320 14,320 Deutsche Telekom AG(i)(s) 431,576 431,576
87,900 87,900 Nextel Communications, Inc.+ 2,175,524 2,175,524
188 188 Nippon Telegraph and Telephone Corp.(i)(s) 1,354,851 1,354,851
59,581 59,581 Royal KPN NV(i)(s) 685,816 685,816
75,500 75,500 SmarTone Telecommunications
Holding Ltd.(i)(s) 108,896 108,896
24,600 24,600 Sonera Oyj(i)(s) 445,761 445,761
76,400 76,400 Sprint Corp. (PCS Group)+ 1,561,425 1,561,425
12,799 12,799 Telecel-Comunicacoes
Pessoais, S.A.(i)(s)+ 139,394 139,394
7,653 7,653 Telecom Corp. of New Zealand(i)(s) 16,289 16,289
70,351 70,351 Telecom Italia SpA(i)(s) 778,082 778,082
84,523 84,523 Telefonica S.A.(i)(s)+ 1,396,681 1,396,681
841,957 841,957 Vodafone Group Plc(i)(s) 3,087,384 3,087,384
-------------- --------------
12,925,703 12,925,703
-------------- --------------
35,442,193 35,442,193
-------------- --------------
UTILITIES - 1.8%
ELECTRICAL UTILITY - 1.4%
15,300 15,300 Ameren Corp. 708,581 708,581
17,600 17,600 Cinergy Corp. 618,200 618,200
14,000 14,000 Cleco Corp. 766,500 766,500
35,700 35,700 CMS Energy Corp.+ 1,131,244 1,131,244
14,800 14,800 Consolidated Edison, Inc. 569,800 569,800
18,100 18,100 DTE Energy Co. 704,769 704,769
8,200 8,200 Dynegy Inc. Cl A 459,713 459,713
57,200 57,200 Entergy Corp. 2,420,274 2,420,274
14,800 14,800 FPL Group, Inc. 1,061,900 1,061,900
12,800 12,800 GPU Inc. 471,200 471,200
107,500 107,500 Hong Kong Electric Holdings Ltd.(i)(s) 396,928 396,928
32,500 32,500 PG&E Corp. 650,000 650,000
11,900 11,900 Pinnacle West Capital Corp. 566,738 566,738
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENT PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
25,500 25,500 Progress Energy, Inc. $ 1,254,281 $ 1,254,281
6,100 6,100 Reliant Energy, Inc. 264,206 264,206
24,700 24,700 Texas Utilities Co. 1,094,519 1,094,519
12,300 12,300 Wisconsin Energy Corp. 277,519 277,519
20,300 20,300 XCEL Energy Inc. 589,969 589,969
-------------- --------------
14,006,341 14,006,341
-------------- --------------
GAS & WATER UTILITIES - 0.4%
10,600 10,600 Atmos Energy Corp. 258,375 258,375
82,911 82,911 BG Group Plc(i)(s) 324,461 324,461
56,000 56,000 British Energy Plc(i)(s) 215,803 215,803
12,707 12,707 E.ON AG(i)(s) 773,086 773,086
48,851 48,851 Iberdrola S.A.(i)(s) 612,300 612,300
5,700 5,700 Kinder Morgan, Inc. 297,469 297,469
21,300 21,300 NiSource Inc. 654,975 654,975
89,000 89,000 Osaka Gas Co., Ltd.(i)(s) 270,429 270,429
49,600 49,600 ScottishPower Plc(i)(s) 391,910 391,910
15,500 15,500 Tokyo Electric Power Co.(i)(s) 384,785 384,785
78,000 78,000 Tokyo Gas Co., Ltd.(i)(s) 230,858 230,858
-------------- --------------
4,414,451 4,414,451
-------------- --------------
18,420,792 18,420,792
-------------- --------------
TOTAL COMMON STOCKS 598,789,839 598,789,839
(Cost $520,756,620) -------------- --------------
CORPORATE BONDS - 5.2%
CONSUMER SERVICES - 1.0%
MEDIA - 1.0%
$ 750,000 $ 750,000 Adelphia Communications Corp., 9.38%,
11/15/09 660,000 660,000
825,000 825,000 AT&T Corp. - Liberty Media Group, 8.25%,
2/1/30 756,599 756,599
1,850,000 1,850,000 Clear Channel Communications, 7.65%,
9/15/10 1,867,039 1,867,039
1,000,000 1,000,000 Comcast Cable Communications, 6.20%,
11/15/08 960,820 960,820
1,000,000 1,000,000 Lamar Media Corp., 8.63%, 9/15/07 1,000,000 1,000,000
1,850,000 1,850,000 TCI Communications Inc., 7.88%, 2/15/26 1,737,409 1,737,409
2,500,000 2,500,000 Time Warner Inc., 8.11%, 8/15/06 2,676,175 2,676,175
-------------- --------------
9,658,042 9,658,042
-------------- --------------
ENERGY - 0.6%
ENERGY RESERVES & PRODUCTION - 0.1%
1,425,000 1,425,000 Amerada Hess Corp., 7.88%, 10/1/29 1,494,013 1,494,013
--------------
OIL SERVICES - 0.5%
2,000,000 2,000,000 Dynegy Holdings Inc., 6.88%, 7/15/02 2,003,480 2,003,480
705,000 705,000 Dynegy Holdings Inc., 7.45%, 7/15/06 719,156 719,156
2,000,000 2,000,000 Phillips Petroleum Co., 8.75%, 5/25/10 2,288,480 2,288,480
--------------
5,011,116
--------------
6,505,129
--------------
The Accompanying Notes are an Integral Part of the Financial Statements.
12
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENT PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCE - 2.1%
BANKS - 1.0%
$ 560,000 $ 560,000 Bank One Capital III, 8.75%, 9/1/30 $ 553,347 $ 553,347
1,600,000 1,600,000 Capital One Bank, 8.25%, 6/15/05 1,623,088 1,623,088
3,000,000 3,000,000 Citigroup Inc., 7.25%, 10/1/10 3,102,870 3,102,870
1,250,000 1,250,000 FCB/SC Capital Trust I, 8.25%, 3/15/28 1,096,238 1,096,238
3,195,000 3,195,000 First Union National Bank,
7.80%, 8/18/10 3,296,026 3,296,026
------------- -------------
9,671,569 9,671,569
------------- -------------
FINANCIAL SERVICES - 1.1%
640,000 640,000 Comdisco, Inc., 6.38%, 11/30/01 582,400 582,400
2,000,000 2,000,000 ERAC USA Finance Co., 144A, 6.38%,
5/15/03 1,954,180 1,954,180
2,485,000 2,485,000 Ford Motor Credit Co., 7.88%, 6/15/10 2,556,245 2,556,245
2,000,000 2,000,000 Household Finance Corp., 8.00%, 7/15/10 2,120,180 2,120,180
750,000 750,000 McKesson Financial of Canada, 144A, 6.55%,
11/1/02 725,205 725,205
396,603 396,603 Oil Purchase Co., 144A, 7.10%, 4/30/02 376,773 376,773
530,000 530,000 Provident Financing Trust I, 7.41%, 3/15/38 385,893 385,893
1,810,000 1,810,000 St. George Funding Co. LLC, 144A, 8.49%,
12/31/49 1,547,622 1,547,622
1,785,000 1,785,000 UBS Preferred Funding Trust I, VRN, 8.62%,
10/29/49 1,879,605 1,879,605
------------- -------------
12,128,103 12,128,103
------------- -------------
21,799,672 21,799,672
------------- -------------
INDUSTRIAL CYCLICAL - 0.5%
CHEMICALS - 0.2%
1,590,000 1,590,000 Rohm & Haas Co., 7.85%, 7/15/29 1,605,900 1,605,900
------------- -------------
INDUSTRIAL SERVICES - 0.1%
845,000 845,000 Comdisco Inc., 9.50%, 8/15/03 667,550 667,550
------------- -------------
RAILROADS - 0.1%
1,750,000 1,750,000 Union Pacific Corp., 5.78%, 10/15/01 1,736,438 1,736,438
TRUCKING & SHIPPING & AIR FREIGHT - 0.1%
200,000 200,000 Atlantic Express, 10.75%, 2/1/04 151,000 151,000
802,903 802,903 FedEx Corp., Series 1999-1,
Class C, 8.25%, 1/15/19 862,542 862,542
-------------- ---------------
1,013,542 1,013,542
-------------- ---------------
5,023,430 5,023,430
-------------- ---------------
RETAIL - 0.1%
GROCERY STORES - 0.1%
995,000 995,000 Kroger Co., 8.00%, 9/15/29 1,027,745 1,027,745
-------------- ---------------
SEMICONDUCTORS - 0.1%
SEMICONDUCTOR - 0.1%
750,000 750,000 Charter Communications Holdings, LLC,
8.25%, 4/1/07 682,500 682,500
-------------- ---------------
TELECOMMUNICATIONS - 0.6%
TELEPHONE - 0.6%
1,500,000 1,500,000 AT&T Corp., 6.00%, 3/15/09 1,341,690 1,341,690
1,985,000 1,985,000 COX Communications Inc., 7.75%, 11/1/10 2,054,852 2,054,852
1,300,000 1,300,000 Qwest Capital Funding Inc., 6.25%, 7/15/05 1,268,280 1,268,280
835,000 835,000 Williams Communications Group, 10.70%,
10/1/07 642,950 642,950
-------------- --------------
5,307,772 5,307,772
UTILITIES - 0.2%
ELECTRICAL UTILITY - 0.2%
1,600,000 1,600,000 Dominion Resources Inc., Series 2000 A,
8.13%, 6/15/10 1,729,456 1,729,456
-------------- --------------
TOTAL CORPORATE BONDS 51,733,746 51,733,746
(Cost $51,680,506) -------------- --------------
FOREIGN CORPORATE BONDS - 1.3%
FINANCE - 0.3%
BANKS - 0.1%
1,000,000 1,000,000 Royal Bank of Scotland Group
Plc, 7.82%, 11/29/49 1,020,160 1,020,160
-------------- --------------
FINANCIAL SERVICES - 0.2%
1,445,000 1,445,000 HSBC Capital Funding LP, VRN, 144A,
10.18%, 12/29/49 1,659,192 1,659,192
-------------- --------------
2,679,352 2,679,352
-------------- --------------
INSURANCE - 0.2%
LIFE & HEALTH INSURANCE - 0.2%
2,155,000 2,155,000 Axa, 8.60%, 12/15/30 2,225,641 2,225,641
-------------- --------------
SOFTWARE & SERVICES - 0.2%
INFORMATION SERVICES - 0.2%
1,770,000 1,770,000 Marconi Corp. Plc, 8.38%, 9/15/30 1,611,638 1,611,638
-------------- --------------
TELECOMMUNICATIONS - 0.6%
TELEPHONE - 0.6%
1,170,000 1,170,000 Deutsche Telekom International Finance BV,
7.75%, 6/15/05 1,190,229 1,190,229
2,000,000 2,000,000 Deutsche Telekom International Finance BV,
8.00%, 6/15/10 2,031,320 2,031,320
770,000 770,000 Global Crossing Holding Ltd., 9.13%,
11/15/06 731,500 731,500
1,250,000 1,250,000 Koninklijke KPN NV, 144A, 8.38%, 10/1/30 1,143,688 1,143,688
1,000,000 1,000,000 Telefonica Europe BV, 7.75%, 9/15/10 1,012,600 1,012,600
-------------- --------------
6,109,337 6,109,337
-------------- --------------
TOTAL FOREIGN CORPORATE BONDS 12,625,968 12,625,968
(Cost $12,620,270) -------------- --------------
MORTGAGE PASS THRU - 8.2%
6,495,000 6,495,000 FHLMC, 6.90%, 12/1/10 6,721,312 6,721,312
3,384,747 3,384,747 FNMA, 6.50%, 3/1/28 3,340,339 3,340,339
2,145,030 2,145,030 FNMA, 6.00%, 12/1/28 2,077,311 2,077,311
108,203 108,203 FNMA, 6.00%, 1/1/29 104,787 104,787
1,085,000 1,085,000 FNMA, 7.13%, 1/15/30 1,214,516 1,214,516
The Accompanying Notes are an Integral Part of the Financial Statements.
13
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- ------------------------------------------- ------------------------------------------------
PRO PRO FORMA PRO PRO
FORMA SHARES/ FORMA FORMA
ACTUAL ADJUSTMENT PRINCIPAL ACTUAL ADJUSTMENTS VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
$10,335,000 $10,335,000 FNMA, TBA, 7.00%, 1/1/16 $ 10,444,861 $ 10,444,861
10,432,000 10,432,000 FNMA, TBA, 7.50%, 1/1/30 10,585,246 10,585,246
1,960,000 1,960,000 FNMA, TBA, 6.00%, 1/1/31 1,897,535 1,897,535
28,925,000 28,925,000 FNMA, TBA, 7.00%, 1/1/31 28,970,124 28,970,124
233,139 233,139 GNMA, 8.50%, 6/15/27 240,497 240,497
664,662 664,662 GNMA, 8.50%, 9/15/27 685,639 685,639
692,567 692,567 GNMA, 8.50%, 9/15/27 714,424 714,424
7,423,616 7,423,616 GNMA, 6.50%, 12/15/28 7,340,101 7,340,101
7,855,000 7,855,000 GNMA, TBA, 7.00%, 1/1/31 7,889,405 7,889,405
-------------- --------------
TOTAL MORTGAGE PASS THRU 82,226,097 82,226,097
(Cost $81,095,787) -------------- --------------
PREFERRED STOCKS - 0.1%
CONSUMER SERVICES - 0.1%
LEISURE - 0.0%(z)
2,100 2,100 AMCV Capital Trust I, 7.00%, 2/15/15 58,275 58,275
-------------- --------------
MEDIA - 0.1%
64,500 64,500 News Corp. Ltd.(i)(s) 458,743 458,743
-------------- --------------
TOTAL PREFERRED STOCKS 517,018 517,018
(Cost $489,147) -------------- --------------
SOVEREIGN GOVERNMENTS AND AGENCIES - 0.5%
ARGENTINA - 0.1%
$ 252,000 $ 252,000 Republic of Argentina, 7.63%, 3/27/01 229,068 229,068
390,000 390,000 Republic of Argentina, 11.75%, 4/7/09 362,700 362,700
417,600 417,600 Republic of Argentina FRB, 7.63%, 3/30/01 379,598 379,598
365,000 365,000 Republic of Argentina, Series BGL5, 11.38%,
1/30/17 325,215 325,215
-------------- --------------
1,296,581 1,296,581
-------------- --------------
BRAZIL - 0.3%
350,000 350,000 Federal Republic of Brazil, 14.50%, 10/15/09 385,000 385,000
708,061 708,061 Federal Republic of Brazil, 4.50%, 4/15/14 547,419 547,419
775,000 775,000 Federal Republic of Brazil, 11.00%, 8/17/40 631,237 631,237
425,000 425,000 Federal Republic of Brazil Discount Bonds,
Series 30 Year ZL, 7.63%, 4/15/01 324,063 324,063
-------------- --------------
1,887,719 1,887,719
-------------- --------------
BULGARIA - 0.0%(z)
195,000 195,000 Bulgaria Government International Bond
Discount Bonds, VRN, 7.75%, 1/28/01 148,200 148,200
-------------- --------------
COLOMBIA - 0.0%(z)
385,000 385,000 Republic of Colombia, 9.75%, 4/23/09 323,400 323,400
-------------- --------------
MEXICO - 0.0%(z)
155,000 155,000 United Mexican States, 9.88%, 2/1/10 166,780 166,780
175,000 175,000 United Mexican States, Series XW, 10.38%,
2/17/09 191,450 191,450
-------------- --------------
358,230 358,230
-------------- --------------
PERU - 0.0%(z)
95,000 95,000 Peru PDI, 4.50%, 3/7/17 61,275 61,275
-------------- --------------
QATAR - 0.0%(z)
225,000 225,000 State of Qatar, 144A, 9.75%, 6/15/30 225,000 225,000
-------------- --------------
RUSSIA - 0.1%
390,000 390,000 Russian Federation, 12.75%, 6/24/28 322,725 322,725
870,000 870,000 Russian Federation, 2.50%, 3/31/30 325,163 325,163
450,000 450,000 Russian Federation, VRN, 8.25%, 3/31/10 280,688 280,688
-------------- --------------
928,576 928,576
-------------- --------------
TURKEY - 0.0%(z)
175,000 175,000 Republic of Turkey, 12.38%, 6/15/09 162,750 162,750
-------------- --------------
TOTAL SOVEREIGN GOVERNMENTS AND AGENCIES 5,391,731 5,391,731
(Cost $5,372,606) -------------- --------------
U.S. GOVERNMENT AGENCY SECURITIES - 2.4%
10,260,000 10,260,000 FHLMC, 6.88%, 9/15/10 10,925,258 10,925,258
7,460,000 7,460,000 FNMA, 7.00%, 7/15/05 7,829,494 7,829,494
4,740,000 4,740,000 FNMA, 7.13%, 6/15/10 5,123,656 5,123,656
-------------- --------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES 23,878,408 23,878,408
(Cost $22,771,418) -------------- --------------
U.S. TREASURY SECURITIES - 4.7%
1,235,000 1,235,000 U.S. Treasury Bonds, 8.88%, 2/15/19 1,697,162 1,697,162
3,845,000 3,845,000 U.S. Treasury Bonds, 8.00%, 11/15/21 4,975,661 4,975,661
12,650,000 12,650,000 U.S. Treasury Bonds, 6.00%, 2/15/26 13,329,938 13,329,938
1,100,000 1,100,000 U.S. Treasury Bonds, 6.75%, 8/15/26 1,272,909 1,272,909
12,360,000 12,360,000 U.S. Treasury Bonds, 6.50%, 11/15/26 13,881,763 13,881,763
3,165,000 3,165,000 U.S. Treasury Bonds, 5.25%, 2/15/29 3,031,975 3,031,975
4,000,000 4,000,000 U.S. Treasury Notes, 6.13%, 12/31/01 4,022,480 4,022,480
640,000 640,000 U.S. Treasury Notes, 6.00%, 8/15/04 658,099 658,099
660,000 660,000 U.S. Treasury Notes, 5.75%, 8/15/10 691,660 691,660
9,170,000 9,170,000 U.S. Treasury Notes, PO, 5.63%, 11/15/15(y) 4,016,735 4,016,735
-------------- --------------
TOTAL U.S. TREASURY SECURITIES 47,578,382 47,578,382
(Cost $43,544,855) -------------- --------------
SHORT-TERM INVESTMENTS - 7.3%
INVESTMENT COMPANIES - 7.3%
Pro Forma Pro Forma Pro Forma Pro Forma
Shares/Principal Amount Adjustments Shares/Principal Amount Value Adjustments Value
- ----------------------------------------------------------------------------------------------------------------------------------
6,472,260 (516,618) 5,955,642 Hamilton Money Fund 6,472,260 (516,618)(a) 5,955,642
67,411,956 J.P. Morgan Institutional
Prime Money Market Fund(a)* 67,411,956
-----------------------------------------
73,884,216 (516,618) 73,367,598
-----------------------------------------
(a) Reflects the redemption in short term securities of the J.P. Morgan
Diversified Fund - Advisor Series
The Accompanying Notes are an Integral Part of the Financial Statements.
14
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 2000
Pro Forma
Value
Combined
J.P. Morgan
Pro Forma Pro Forma Pro Forma Diversified
Shares/Principal Amount Adjustments Shares/Principal Amount Value Adjustments Fund
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 0.0%(z)
$ 490,000 $ 490,000 U.S. Treasury Bills,
5.84%, 3/22/01(s)(y) $ 483,880 $ 483,880
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS 74,368,096 (516,618) 73,851,478
(Cost $73,851,194) -------------- --------- --------------
TOTAL INVESTMENT SECURITIES - 100.0% $1,003,024,892 (516,618) $1,002,508,274
(Cost $914,943,106) ============== ========= ==============
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
VALUE AT UNREALIZED
CONTRACTS SETTLEMENT CONTRACTUAL DECEMBER 31, APPRECIATION
TO BUY DATE VALUE 2000 (DEPRECIATION)
- ------------------------------------------------------------------------------------
343,092,340 JPY for
3,470,000 EUR 3/21/01 $ 3,268,960 $ 3,043,414 $(225,546)
17,111,801 EUR 3/21/01 15,432,151 16,120,401 688,250
660,000 GBP 3/21/01 982,707 987,181 4,474
72,965,200 JPY 3/21/01 670,000 647,241 (22,759)
10,216,658 SEK 3/21/01 1,069,827 1,088,294 18,467
--------------------------------------------------
$21,423,645 $21,886,531 $ 462,886
==================================================
VALUE AT UNREALIZED
CONTRACTS SETTLEMENT CONTRACTUAL DECEMBER 31, APPRECIATION
TO BUY DATE VALUE 2000 (DEPRECIATION)
- ------------------------------------------------------------------------------------
1,000,000 AUD 3/21/01 $ 546,080 $ 555,990 $ (9,910)
5,124,320 CHF 3/21/01 3,033,937 3,183,543 (149,606)
3,750,000 EUR 3/21/01 3,406,587 3,532,738 (126,151)
805,374 GBP 3/21/01 1,168,300 1,204,621 (36,321)
615,947,814 JPY 3/21/01 5,614,839 5,463,789 151,050
--------------------------------------------------
$13,769,743 $13,940,681 $(170,938)
==================================================
FUTURES CONTRACTS
UNREALIZED
EXPIRATION UNDERLYING FACE APPRECIATION
PURCHASED DATE AMOUNT AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------
164 Dow Jones Stoxx 50 March 2001 $ 7,409,332 $ (20,222)
217 US Two Year Note March 2001 44,084,908 394,589
338 US Five Year Note March 2001 35,004,125 788,350
-----------------------------------
$86,498,365 $1,162,717
===================================
Unrealized
Expiration Underlying Face Appreciation
Sold Date Amount at Value (Depreciation)
- -------------------------------------------------------------------------------
1 FTSE 100 Index March 2001 $ 92,621 $ 2,499
7 SPI 200 Index March 2001 315,539 (2,857)
5 Topix Index March 2001 561,515 (12,024)
36 0US Ten Year Note March 2001 37,749,377 (800,776)
43 US Long Bond March 2001 4,498,875 (120,838)
-----------------------------------
$43,217,927 $(933,996)
===================================
COMMON STOCKS COUNTRIES % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
Australia 0.2%
Finland 0.3%
France 0.9%
Germany 0.8%
Hong Kong 0.2%
Italy 0.3%
Japan 2.3%
Netherlands 0.6%
Singapore 0.1%
Spain 0.4%
Sweden 0.2%
Switzerland 1.0%
United Kingdom 2.2%
United States 50.1%
FOREIGN BONDS & SOVEREIGN
GOVERNMENTS COUNTRIES % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
Argentina 0.1%
Bermuda 0.1%
Brazil 0.3%
Russia 0.1%
France 0.2%
Netherlands 0.5%
United Kingdom 0.5%
ADR - American Depositary Receipt
FRB - Floating Rate Bond
PO - Principal Only
SDR - Swedish Depository Receipt
SEQ - Sequential Payer
TBA - Securities purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal
amount and maturity will be determined upon settlement.
VRN - Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average maturity.
144A - Securities restricted for resale to Qualified Institutional Buyers
(a) Money market mutual fund registered under the Investment Co. Act of 1940,
as amended, and advised by J.P. Morgan Investment Management, Inc.
(i) Foreign security
(s) Security is fully or partially segregated with custodian as collateral for
futures or with brokers as initial margin for futures contracts.
(y) Yield to maturity
(z) Category is less than 0.05% of total investment securities.
+ Non-income producing security
* The adviser has agreed to reimburse its advisory fee from the portfolio in
an amount to offset any doubling of investment advisory and shareholder
servicing fees.
The Accompanying Notes are an Integral Part of the Financial Statements.
15
J.P. MORGAN INSTITUTIONAL DIVERSIFIED FUND / J.P. MORGAN DIVERSIFIED FUND /
THE DIVERSIFIED PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2000 (UNAUDITED)
J.P. MORGAN
INSTITUTIONAL J.P. MORGAN THE DIVERSIFIED
DIVERSIFIED FUND DIVERSIFIED FUND PORTFOLIO
ASSETS:
Investment securities, at value (cost $915,459,724) $ - $ - $1,003,024,892
Investment in The Diversified Portfolio, at value 621,015,940 327,543,617 -
Foreign currency, at value (cost $1,260,223) - - 1,284,829
Receivable for Investments Sold - - 6,163,051
Dividend and Interest Receivable - - 4,413,075
Unrealized Appreciation of Forward Foreign Currency Contracts - - 862,241
Receivable for Expense Reimbursements 166,312 - 28,103
Foreign Tax Reclaim Receivable - - 199,715
Variation Margin Receivable - - 81,933
Prepaid Trustees' Fees and Expenses 825 449 -
Prepaid Expenses and Other Assets 764 497 1,381
----------------------------------------------------
Total Assets 621,183,841 327,544,563 1,016,059,220
----------------------------------------------------
LIABILITIES:
Payable for Investments Purchased - - 65,347,875
Unrealized Depreciation of Forward Currency Contracts - - 570,293
Advisory Fee Payable - - 461,335
Due to Custodian - - 392,754
Shareholder Servicing Fee Payable 56,178 69,118 -
Administrative Services Fee Payable 13,378 6,584 19,975
Fund Services Fee Payable 420 204 625
Administration Fee Payable 278 117 602
Accrued Expenses and Other Liabilities 56,323 27,438 189,586
----------------------------------------------------
Total Liabilities 126,577 103,461 66,983,045
----------------------------------------------------
NET ASSETS:
Paid-in Capital 566,703,076 300,662,569 -
Undistributed (Distributions in Excess of ) Net Investment Income 113,630 108,846 -
Accumulated Net Realized Loss on Investment (4,860,001) (2,343,139) -
Net Unrealized Appreciation (Depreciation) on Investment 59,100,559 29,012,826 -
----------------------------------------------------
Net Assets $621,057,264 $327,441,102 $ 949,076,175
====================================================
Shares of Beneficial Interest Outstanding 45,376,091 21,535,238
Net Assets Value Per Share $ 13.69 $ 15.20
PRO FORMA WITH REORGANIZATION
JP MORGAN DIVERSIFIED FUND
Shares Outstanding
Select
Institutional
Net Asset Value Per Share
Select
Institutional
====================================================
PRO FORMA
ADJUSTMENTS PRO FORMA COMBINED
ASSETS:
Investment securities, at value (cost $915,459,724) $ (516,618) (d) $1,002,508,274
Investment in The Diversified Portfolio, at value (948,559,557) (a) -
Foreign currency, at value (cost $1,260,223) - 1,284,829
Receivable for Investments Sold - 6,163,051
Dividend and Interest Receivable - 4,413,075
Unrealized Appreciation of Forward Foreign Currency Contracts - 862,241
Receivable for Expense Reimbursements - 194,415
Foreign Tax Reclaim Receivable - 199,715
Variation Margin Receivable - 81,933
Prepaid Trustees' Fees and Expenses - 1,274
Prepaid Expenses and Other Assets - 2,642
----------------------------------------------
Total Assets (949,076,175) 1,015,711,449
----------------------------------------------
LIABILITIES:
Payable for Investments Purchased - 65,347,875
Unrealized Depreciation of Forward Currency Contracts - 570,293
Advisory Fee Payable - 461,335
Due to Custodian - 392,754
Shareholder Servicing Fee Payable - 125,296
Administrative Services Fee Payable - 39,937
Fund Services Fee Payable - 1,249
Administration Fee Payable - 997
Accrued Expenses and Other Liabilities - 273,347
----------------------------------------------
Total Liabilities - 67,213,083
----------------------------------------------
NET ASSETS:
Paid-in Capital - 867,365,645
Undistributed (Distributions in Excess of ) Net Investment Income - 222,476
Accumulated Net Realized Loss on Investment - (7,203,140)
Net Unrealized Appreciation (Depreciation) on Investment - 88,113,385
----------------------------------------------
Net Assets $(949,076,175) $ 948,498,366
==============================================
Shares of Beneficial Interest Outstanding (66,911,329) (c) -
Net Assets Value Per Share
PRO FORMA WITH REORGANIZATION
J.P. MORGAN INSTITUTIONAL DIVERSIFIED FUND
Shares Outstanding
Select 23,923,715 (b) 23,923,715
Institutional 45,376,091 (b) 45,376,091
Net Asset Value Per Share
Select 13.69
Institutional 13.69
==============================================
(a) Elimination of investment in master portfolio from the feeder funds.
(b) The difference in number of shares outstanding due to the Reorganization.
(c) Reallocation of feeder funds beneficial interest to Select, and
Institutional due to the Reorganization.
(d) Reflects the redemption in short term securities of the J.P. Morgan
Diversified Fund - Advisor Series.
See Notes to Pro Forma Financial Statements.
16
J.P. MORGAN INSTITUTIONAL DIVERSIFIED FUND/J.P. MORGAN DIVERSIFIED FUND/
THE DIVERSIFIED PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2000
(UNAUDITED)
J.P. MORGAN J.P. MORGAN DIVERSIFIED
INSTITUTIONAL DIVERSIFIED PORTFOLIO
DIVERSIFIED FUND FUND
INCOME:
Allocated Investment Income From Portfolio $ 21,237,481 $11,570,669 $ -
Interest Income - - 24,757,499
Dividend Income from Affiliated Investments - - 132,435
Dividend Income - - 7,983,387
Allocated Portfolio Expenses (4,074,411) (2,248,676) -
---------------------------------------------------------------
Investment Income 17,163,070 9,321,993 32,873,321
---------------------------------------------------------------
EXPENSES:
Advisory Fee - - 5,360,752
Shareholder Servicing Fee 648,890 881,280 -
Administrative Services Fee 156,638 85,117 241,804
Custodian Fees and Expenses - - 958,910
Registration Fees 40,185 52,154 -
Transfer Agent Fees 17,850 40,616 -
Professional Fees 11,997 13,373 48,314
Financial and Fund Accounting Services Fee 25,206 25,206 -
Printing Expenses 9,091 22,969 18,908
Fund Services Fee 9,550 5,198 14,753
Trustees' Fees and Expenses 9,234 4,426 14,056
Administration Fee 7,049 3,834 6,584
Insurance Expense - - 1,752
Miscellaneous 32,785 26,027 -
---------------------------------------------------------------
Total Expenses 968,475 1,160,200 6,665,833
---------------------------------------------------------------
Less: Amounts Waived
Less: Reimbursement of Expenses (823,580) (181) (278,379)
---------------------------------------------------------------
---------------------------------------------------------------
Net Expenses 144,895 1,160,019 6,387,454
---------------------------------------------------------------
---------------------------------------------------------------
Net Investment Income 17,018,175 8,161,974 26,485,867
---------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Investment Transactions 2,652,282 1,385,001 3,648,818
Futures Contracts (516,468)
Foreign Currency Contracts and Transactions 909,024
Investments
Net realized loss 2,652,282 1,385,001 4,041,374
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
Investments (46,244,555) (24,141,375) (69,107,859)
Futures Contracts (1,635,358)
Foreign Currency Contracts and Transactions 353,753
Change in net unrealized depreciation (46,244,555) (24,141,375) (70,389,464)
---------------------------------------------------------------
Net decrease in net assets from operations $ (26,574,098) $ (14,594,400) $ (39,862,223)
===============================================================
PROFORMA PROFORMA
ADJUSTMENTS COMBINED
JP MORGAN
DIVERSIFIED
FUND
INCOME:
Allocated Investment Income From Portfolio $ (32,808,150)(c) $ -
Interest Income (3,324)(g) 24,754,175
Dividend Income from Affiliated Investments - 132,435
Dividend Income - 7,983,387
Allocated Portfolio Expenses 6,323,087 (b) -
---------------- ------------------
Investment Income (26,488,387) 32,869,997
---------------- ------------------
EXPENSES:
Advisory Fee (578)(g) 5,360,174
Shareholder Servicing Fee 1,530,170
Administrative Services Fee 1,014,248 (a) 1,497,807
Custodian Fees and Expenses (15,000)(d) 943,910
Registration Fees 92,339
Transfer Agent Fees 58,466
Professional Fees (22,600)(d) 51,084
Financial and Fund Accounting Services Fee (5,000)(d) 45,412
Printing Expenses (7,000)(d) 43,968
Fund Services Fee 29,501
Trustees' Fees and Expenses 27,716
Administration Fee 17,467
Insurance Expense 1,752
Miscellaneous 58,812
-
---------------- ------------------
Total Expenses 964,070 9,758,578
---------------- ------------------
Less: Amounts Waived (964,070)(a) (964,070)
Less: Reimbursement of Expenses (246,411)(a) (1,348,551)
---------------- ------------------
---------------- ------------------
Net Expenses (246,411) 7,445,957
---------------- ------------------
---------------- ------------------
Net Investment Income (26,241,976) 25,424,040
---------------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Investment Transactions (4,037,283)(e) 3,648,818
Futures Contracts (516,468)
Foreign Currency Contracts and Transactions 909,024
Investments
Net realized loss (4,037,283) 4,041,374
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
Investments 70,385,930(e) (69,107,859)
Futures Contracts (1,635,358)
Foreign Currency Contracts and Transactions 353,753
Change in net unrealized depreciation 70,385,930 (70,389,464)
---------------- ------------------
Net decrease in net assets from operations $ 40,106,671 $ (40,924,050)
================ ==================
(a) Reflects adjustments to investment advisory fee, administrative fees and
shareholder servicing fees and/or related waivers based on the surviving
fund's revised fee schedule.
(b) Reflects the elimination of master portfolio expenses which have been
disclosed under feeder expenses.
(c) Reallocation of investments income to feeder funds
(d) Reduction reflects the estimated benefit of combining operations.
(e) Reallocation of realized and unrealized loss to feeder funds.
(g) Reflects the elimination of J.P. Morgan Diversified Fund - Advisor Series
allocated expenses/income.
See Notes to Pro Forma Financial Statements
17
J.P. MORGAN INSTITUTIONAL DIVERSIFIED FUND/J.P. MORGAN
DIVERSIFIED FUND/THE DIVERSIFIED PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF COMBINATION:
The Pro Forma Combining Statement of Assets and Liabilities, Statement of
Operations and Schedule of Investments ("Pro Forma Statements") reflect the
accounts of The Diversified Portfolio ("Master Portfolio"), J.P. Morgan
Institutional Diversified Fund ("Institutional Fund"), and the J.P. Morgan
Diversified Fund ("Diversified Fund"), (collectively the "feeder funds" of the
Master Portfolio) as if the proposed Reorganization occurred as of and for the
twelve months ended December 31, 2000.
The Pro Forma Statements give effect to the proposed transfer of all assets and
liabilities of Diversified Fund, and the Master Portfolio in exchange for shares
in Institutional Fund. The Pro Forma Statements should be read in conjunction
with the historical financial statements of each Fund, which have been
incorporated by reference in their respective Statements of Additional
Information.
2. SHARES OF BENEFICIAL INTEREST:
The existing shares of Institutional Fund would be renamed Institutional Shares,
and the existing shares of Diversified Fund would be renamed Select Class
Shares. The net asset values per share for Select Shares would be identical to
the closing net asset value per share for the Institutional Shares immediately
prior to the reorganization.
Under the proposed Reorganization, each shareholder of Diversified Fund would
receive shares of Institutional Fund with a value equal to their holding in
their respective funds. Holders of Diversified Fund will receive Select Class
Shares in the Institutional Fund. Therefore, as a result of the proposed
Reorganization, current shareholders of Diversified Fund will become
shareholders of Institutional Fund.
The Pro Forma net asset value per share assumes the issuance of additional
shares of Institutional Fund, which would have been issued on December 31, 2000
in connection with the proposed Reorganization. The amount of additional shares
assumed to be issued was calculated based on the December 31, 2000 net assets of
Diversified Fund and the net asset values per share of Institutional Fund.
Select Class Shares
Increase in Shares Issued 23,923,715
Net Assets 12/31/00 327,441,102
Pro Forma Net Asset Value 12/31/00 13.69
3. PRO FORMA OPERATIONS:
The Pro Forma Statement of Operations assumes similar rates of gross investment
income for the investments of each Fund. Accordingly, the combined gross
investment income is equal to the sum of each Fund's gross investment income.
Certain expenses have been adjusted to reflect the expected expenses of the
combined entity including the change in administration fee and the now expected
expense cap. The pro forma investment advisory,
shareholder servicing and distribution fees of the combined Fund are based on
the fee schedule in effect for the surviving fund at the combined level of
average net assets for the twelve months ended December 31, 2000.
FORM N-14
PART C - OTHER INFORMATION
Item 15. Indemnification.
---------------
Reference is made to Section 5.3 of Registrant's Declaration of Trust
and Section 5 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain
expenses in connection with the defense of claims, demands, actions, suits, or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to directors,
trustees, officers and controlling persons of the Registrant and the principal
underwriter pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, trustee, officer, or controlling person of the
Registrant and the principal underwriter in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant by
such director, trustee, officer or controlling person or principal underwriter
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Item 16. Exhibits.
---------------
1 Declaration of Trust.
(a) Declaration of Trust, as amended, was filed as Exhibit No. 1
to Post-Effective Amendment No. 25 to the Registrant's Registration Statement
on Form N-1A (File No. 033-54642) (the "Registration Statement") filed on
September 26, 1996 (Accession Number 0000912057-96-021281).
(b) Amendment No. 5 to Declaration of Trust; Amendment and Fifth
Amended and Restated Establishment and Designation of Series of Shares of
Beneficial Interest. Incorporated herein by reference to Post-Effective
Amendment No. 29 to the Registration Statement filed on December 26, 1996
(Accession Number 0001016964-96-000061).
Part C-1
(c) Amendment No. 6 to Declaration of Trust; Amendment and Sixth
Amended and Restated Establishment and Designation of Series of Shares of
Beneficial Interest was filed as Exhibit No. 1(b) to Post-Effective Amendment
No. 31 to the Registration Statement on February 28, 1997 (Accession Number
0001016964-97-000041).
(d) Amendment No. 7 to Declaration of Trust; Amendment and
Seventh Amended and Restated Establishment and Designation of Series of Shares
of Beneficial Interest was filed as Exhibit No. 1(c) to Post-Effective
Amendment No. 32 to the Registration Statement on April 15, 1997 (Accession
Number 0001016964-97-000053).
(e) Amendment No. 8 to Declaration of Trust; Amendment and
Eighth Amended and Restated Establishment and Designation of Series of Shares
of Beneficial Interest was filed as Exhibit No. l(d) to Post-Effective
Amendment No. 40 to the Registration Statement on October 9, 1997 (Accession
Number 0001016964-97-000158).
(f) Amendment No. 9 to Declaration of Trust; Amendment and Ninth
Amended and Restated Establishment and Designation of Series of Shares of
Beneficial Interest was filed as Exhibit No. l(e) to Post-Effective Amendment
No. 50 to the Registration Statement on December 29, 1997 (Accession Number
0001041455-97-000014).
(g) Amendment No. 10 to Declaration of Trust; Amendment and
Tenth Amended and Restated Establishment and Designation of Series of Shares
of Beneficial Interest and change voting procedures to dollar-based voting was
filed as Exhibit No. (a)6 to Post-Effective Amendment No. 60 to the
Registration Statement on December 31, 1998 (Accession Number
0001041455-98-000097).
(h) Amendment No. 11 to Declaration of Trust. Incorporated
herein by reference to Post-Effective Amendment No. 63 to the Registration
Statement filed on April 29, 1999 (Accession Number 00001041455-99-000041).
(i) Amendment No. 12 to Declaration of Trust. Incorporated
herein by reference to Post-Effective Amendment No. 72 to the Registration
Statement filed on April 3, 2000 (Accession Number 0001041455-00-000084).
(j) Amendment No. 13 to Declaration of Trust, incorporated
herein by reference to Post-Effective Amendment No. 78 to the Registration
Statement filed on August 1, 2000 (Accession Number 0000894088-00-000008).
(k) Amendment No.14 to Declaration of Trust incorporated herein
by reference to Post-Effective Amendment No. 78 to the Registration Statement
filed on August 1, 2000 (Accession Number 0000894088-00-000008).
2 By-laws.
(a) Restated By-Laws of Registrant. Incorporated herein by
reference to Post-Effective Amendment No. 29 to the Registration Statement
filed on December 26, 1996 (Accession Number 0001016964-96-000061).
Part C-2
(b) Amendment to Restated By-laws of Registrant. Incorporated
herein by reference to Post-Effective Amendment No. 71 to the Registration
Statement filed on February 28, 2000 (Accession Number 0001041455-00-000056).
3 Not Applicable
4 Agreement and Plan of Reorganization filed herewith as
Appendix A to the Combined Prospectus/Proxy Statement.
5 Not Applicable
6 Not Applicable
7 Distribution and Sub-Administration Agreement filed
herewith.
8 Not Applicable
9 Custodian Agreement
(a) Custodian Contract between Registrant and State Street Bank
and Trust Company ("State Street"). Incorporated herein by reference to
Post-Effective Amendment No. 29 to the Registration Statement filed on
December 26, 1996 (Accession Number 0001016964-96-000061).
(b) Custodian Contract between Registrant and The Bank of New
York. Incorporated herein by reference to Post-Effective Amendment No. 71 to
the Registration Statement filed on February 28, 2000 (Accession Number
0001041455-00-000056).
10 None.
11 None.
12 Opinion and Consent of Simpson Thacher & Bartlett as to Tax
Consequences to be filed by Amendment.
13 Material Contracts.
(a) Co-Administration Agreement between Registrant and FDI.
Incorporated herein by reference to Post-Effective Amendment No. 29 to the
Registration Statement filed on December 26, 1996 (Accession Number
0001016964-96-000061).
(b) Restated Shareholder Servicing Agreement between Registrant
and Morgan Guaranty Trust Company of New York ("Morgan Guaranty") filed as
Exhibit (h)2 to Post Effective Amendment No. 54 to the Registration Statement
on August 25, 1998 (Accession No. 0001041455-98-000053).
Part C-3
(c) Transfer Agency and Service Agreement between Registrant and
State Street. Incorporated herein by reference to Post-Effective Amendment No.
29 to the Registration Statement filed on December 26,1996 (Accession Number
0001016964-96-000061).
(d) Restated Administrative Services Agreement between
Registrant and Morgan Guaranty. Incorporated herein by reference to
Post-Effective Amendment No. 29 to the Registration Statement filed on
December 26, 1996 (Accession Number 0001016964-96-000061).
(e) Fund Services Agreement, as amended, between Registrant and
Pierpont Group, Inc. Incorporated herein by reference to Post-Effective
Amendment No. 29 to the Registration Statement filed on December 26, 1996
(Accession Number 0001016964-96-000061).
(f) Service Plan with respect to Registrant's Service Money
Market Funds. Incorporated herein by reference to Post-Effective Amendment No.
33 to the Registration Statement filed on April 30, 1997 (Accession Number
00001016964-97-000059).
(g) Service Plan with respect to Registrant's Small Company Fund
Advisor Series, Small Company Opportunities Fund -- Advisor Series,
International Equity Fund --Advisor Series, International Opportunities Fund
- -- Advisor Series, U.S. Equity Fund -- Advisor Series, Diversified Fund --
Advisor Series incorporated herein by reference to Post-Effective Amendment
No. 78 to the Registration Statement filed on August 1, 2000 (Accession Number
0000894088-00-000008).
(h) Amended Service Plan with respect to Registrant's
Disciplined Equity -- Advisor series and Direct Prime Money Market Funds.
Incorporated herein by reference to Post-Effective Amendment No. 72 to the
Registration Statement filed on April 3, 2000 (Accession Number
0001041455-00-000084).
(i) Amended Service Plan with respect to Registrant's J.P.
Morgan Prime Cash Management Fund. Incorporated herein by reference to
Post-Effective Amendment No. 75 to Registration Statement filed on May 17,
2000 (Accession Number 0001041455-00-000122).
(j) Form of Administration Agreement filed herewith.
14 Consent of PricewaterhouseCoopers LLP.
15 None
16 Powers of Attorney filed herewith.
17(a) Form of Proxy Card.
17(b) Preliminary Prospectus for the Surviving Fund filed
herewith.
17(c) Prospectus for the Merging Fund Incorporated herein by
reference to Registration Statement on Form N-14 filed on
April 13, 2001 (Accession Number 0000912057-01-508685).
Part C-4
17(d) Preliminary Statement of Additional Information for the
Surviving Fund filed Incorporated herein by reference to
Registration Statement on Form N-14 filed on April 13, 2001
(Accession Number 0000912057-01-508685).
17(e) Statement of Additional Information for the Merging Fund
Incorporated herein by reference to Registration Statement
on Form N-14 filed on April 13, 2001 (Accession Number
0000912057-01-508685).
17(f) Annual Report of the Surviving Fund (including the Annual
Report of the Master Portfolio) dated June 30, 2000
Incorporated herein by reference to Registration Statement
on Form N-14 filed on April 13, 2001 (Accession Number
0000912057-01-508685).
17(g) Semi-Annual Report of the Surviving Fund (including the
Semi-Annual Report of the Master Portfolio) dated December 31,
2000 Incorporated herein by reference to Registration
Statement on Form N-14 filed on April 13, 2001 (Accession
Number 0000912057-01-508685).
17(h) Annual Report of the Merging Fund (including the Annual Report
of the Master Portfolio) dated June 30, 2000 Incorporated
herein by reference to Registration Statement on Form N-14
filed on April 13, 2001 (Accession Number
0000912057-01-508685).
17(i) Semi-Annual Report of the Merging Fund (including the
Semi-Annual Report of the Master Portfolio) dated December 31,
2000 Incorporated herein by reference to Registration
Statement on Form N-14 filed on April 13, 2001 (Accession
Number 0000912057-01-508685).
Item 17. Undertakings.
---------------
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which
is part of this registration statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended (the "1933 Act"), the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering of them.
Part C-5
SIGNATURES
As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of New York and the
State of New York, on the 11th day of May, 2001.
J.P. MORGAN INSTITUTIONAL FUNDS
Registrant
By: /s/ Joseph J. Bertini
-----------------------------------------
Joseph J. Bertini
Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on May 13, 2001.
George Rio*
- ------------------------------------
George Rio
President and Treasurer
Matthew Healey*
- ------------------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer)
Frederick S. Addy*
- ------------------------------------
Frederick S. Addy
Trustee
William G. Burns*
- ---------------------------
William G. Burns
Trustee
Arthur C. Eschenlauer*
- ---------------------------
Arthur C. Eschenlauer
Trustee
Michael P. Mallardi*
- ------------------------------------
Michael P. Mallardi
Trustee
*By /s/ Joseph J. Bertini
-----------------------------------
Joseph J. Bertini
as attorney-in-fact pursuant to a power of attorney.
EXHIBITS
ITEM DESCRIPTION
- ---- -----------
(7) Form of Distribution Agreement.
(13) (j) Form of Administration Agreement.
(16) Powers of Attorney.
(17) (a) Form of Proxy Card.
(b) Preliminary Prospectus for the Surviving Fund.
(d) Preliminary Statement of Additional Information for
Surviving Fund.