As filed with the U.S. Securities and Exchange Commission on October 21, 1997.
Registration Nos. 333-11125 and 811-07795
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 5
JPM SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 557-0700
John E. Pelletier, c/o Funds Distributor, Inc.
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[X] on December 17, 1997 pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
The Registrant has previously elected to register an indefinite number of shares
of Registrant and any series thereof hereinafter created under the Securities
Act of 1933, as amended, pursuant to Rule 24f-2 under the Investment Company Act
of 1940, as amended. (Incorporated herein from Registrant's registration
statement on Form N-1A as filed on August 29, 1996, Accession No.
0000912057-96-019242.) The Registrant has filed a Rule 24f-2 notice with respect
to California Bond Fund (for its fiscal year ended April 30, 1997) on June 6,
1997. The Registrant expects to file a Rule 24f-2 notice with respect to its
other series as follows: Tax Aware U.S. Equity Fund and Tax Aware Disciplined
Equity Fund (for their fiscal years ending October 31, 1997) on or before
December 30, 1997.
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<PAGE>
JPM SERIES TRUST
CROSS-REFERENCE SHEET
(As Required by Rule 495)
PART A ITEM NUMBER: Prospectus Headings.
1. COVER PAGE: Cover Page.
2. SYNOPSIS: Introduction; Investor Expenses.
3. CONDENSED FINANCIAL INFORMATION: Financial Highlights.
4. GENERAL DESCRIPTION OF REGISTRANT: U.S. Equity Investment Process; Tax
Aware Investing at J.P. Morgan; Goal; Investment Approach; Potential
Risks and Rewards; Business Structure; Risk and Reward Elements.
5. MANAGEMENT OF THE FUND: Cover Page; J.P. Morgan; Portfolio Management;
Management and Administration.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Performance.
6. CAPITAL STOCK AND OTHER SECURITIES: Investing Directly; Account and
Transaction Policies; Dividends and Distributions; Tax Considerations;
Business Structure.
7. PURCHASE OF SECURITIES BEING OFFERED: Introduction; Investing Directly;
Opening an Account; Adding to an Account; Account and Transaction
Policies.
8. REDEMPTION OR REPURCHASE: Selling Shares; Account and Transaction
Policies.
9. PENDING LEGAL PROCEEDINGS: Not Applicable.
PART B ITEM NUMBER: Statement of Additional Information Headings.
10. COVER PAGE: Cover Page.
11. TABLE OF CONTENTS: Table of Contents.
12. GENERAL INFORMATION AND HISTORY: General.
13. INVESTMENT OBJECTIVE AND POLICIES: Investment Objective and Policies;
Additional Investments; Investment Restrictions; Quality and
Diversification Requirements; Appendix A.
14. MANAGEMENT OF THE FUND: Trustees and Officers.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of
Shares.
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<PAGE>
16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Distributor;
Co-Administrator; Services Agent; Custodian and Transfer Agent;
Shareholder Servicing; Eligible Institutions; Independent Accountants;
Expenses.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.
18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares;
Dividends and Distributions.
20. TAX STATUS: Taxes.
21. UNDERWRITERS: Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Data.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C. Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.
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<PAGE>
EXPLANATORY NOTE
This post-effective amendment no. 4 to the Registrant's registration statement
on Form N-1A (File no. 333-11125) is being filed with respect to JPM Pierpont
Shares: Tax Aware Disciplined Equity Fund and JPM Pierpont Shares: Tax Aware
U.S. Equity Fund (the "Funds"), separate series of shares of beneficial
interest of the Registrant, for the purpose of "simplifying" each Fund's
prospectus.
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<PAGE>
DECEMBER 17, 1997 PROSPECTUS
JPM PIERPONT TAX AWARE
DISCIPLINED EQUITY FUND
-----------------------------
Seeking to outperform U.S.
stock markets over the long
term through a disciplined
management approach
IN PROGRESS 10/9/97
This prospectus contains essential information for anyone investing in the fund.
Please read it carefully and keep it for reference.
Shares in the fund are not bank deposits and are not guaranteed or insured by
any bank, government entity, or the FDIC.
As with all mutual funds, the fact that these shares are registered with the
Securities and Exchange Commission does not mean that the commission approves
them as an investment or guarantees that the information in this prospectus is
correct or adequate. It is a criminal offense for anyone to state or suggest
otherwise.
Distributed by Funds Distributor, Inc. JP MORGAN
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
2
- -----
U.S. EQUITY MANAGEMENT APPROACH
U.S. equity investment process . . . . . . . . . . . . . . . . . . . . . 2
Tax aware investing at J.P. Morgan . . . . . . . . . . . . . . . . . . . 3
4
- -----
The fund's goal, investment approach, risks, expenses, and performance
JPM PIERPONT TAX AWARE DISCIPLINED EQUITY FUND
Fund description . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investor expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6
- ------
Investing in the JPM Pierpont Tax Aware Disciplined Equity Fund
YOUR INVESTMENT
Investing through a financial professional . . . . . . . . . . . . . . . 6
Investing through an employer-sponsored retirement plan. . . . . . . . . 6
Investing through an IRA or Rollover IRA . . . . . . . . . . . . . . . . 6
Investing directly . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Opening an account . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Adding to an account . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selling shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Account and transaction policies . . . . . . . . . . . . . . . . . . . . 7
Dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . 8
Tax considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9
- -----
More about risk and the fund' business operations
FUND DETAILS
Business structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management and administration. . . . . . . . . . . . . . . . . . . . . . 9
Risk and reward elements . . . . . . . . . . . . . . . . . . . . . . . . 10
FOR MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . back cover
<PAGE>
INTRODUCTION
- --------------------------------------------------------------------------------
JPM PIERPONT TAX AWARE DISCIPLINED EQUITY FUND
This fund invests primarily in U.S. stocks. As a shareholder, you should
anticipate risks and rewards beyond those of a typical bond fund or a typical
balanced fund.
WHO MAY WANT TO INVEST
The fund is designed for investors who:
- - are pursuing a long-term goal such as retirement
- - want to add a growth investment to further diversify a portfolio
- - want a fund that seeks to consistently outperform the market in which it
invests
- - are individuals that could benefit from a strategy that pursues returns from
an after-tax perspective
The fund is NOT designed for investors who:
- - want a fund that pursues market trends or focuses only on particular
industries or sectors
- - require regular income or stability of principal
- - are pursuing a short-term goal or investing emergency reserves
- - are investing through a tax-deferred account such as an IRA
J.P. MORGAN
Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments, and
individuals. Today, J.P. Morgan employs over 300 analysts and portfolio managers
around the world and has more than $225 billion in assets under management,
including assets managed by the fund's advisor, Morgan Guaranty Trust Company of
New York.
BEFORE YOU INVEST
Investors considering the fund should understand that:
- - The value of the fund's shares will fluctuate over time. You could lose money
if you sell when the fund's share price is lower than when you invested.
- - There is no assurance that the fund will meet its investment goal.
- - Future returns will not necessarily resemble past performance.
1
<PAGE>
U.S. EQUITY MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
The JPM Pierpont Tax Aware Disciplined Equity fund invests primarily in U.S.
stocks while seeking to enhance the after-tax returns of its shareholders.
The investment philosophy, developed by the fund's advisor, focuses on stock
picking while largely avoiding sector or market-timing strategies. Also, under
normal market conditions, the fund will remain fully invested.
U.S. EQUITY INVESTMENT PROCESS
In managing the fund, J.P. Morgan employs a three-step process:
[GRAPHIC]
FPO
J.P. Morgan analysts develop proprietary fundamental research
RESEARCH J.P. Morgan takes an in-depth look at company prospects over a
relatively long period -- often as much as five years -- rather than focusing on
near-term expectations. This approach is designed to provide insight into a
company's real growth potential. J.P. Morgan's in-house research is developed by
an extensive worldwide network of over 120 career analysts. The team of analysts
dedicated to U.S. equities includes more than 20 members, with an average of
over ten years of experience.
[GRAPHIC]
FPO
Stocks in each industry are ranked with the help of models
VALUATION The research findings allow J.P. Morgan to rank the companies in each
industry group according to their relative value. The greater a company's
estimated worth compared to the current market price of its stock, the more
undervalued the company. The valuation rankings are produced with the help of a
variety of models that quantify the research team's findings.
[GRAPHIC]
FPO
Using research and valuations, the fund's management team chooses stocks for its
fund
STOCK SELECTION The fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, the management
team buys stocks that are identified as undervalued and considers selling them
when they appear overvalued. Along with attractive valuation, the fund's
managers often consider a number of other criteria:
- - catalysts that could trigger a rise in a stock's price
- - high potential reward compared to potential risk
- - temporary mispricings caused by market overreactions
2 U.S. EQUITY MANAGEMENT APPROACH
<PAGE>
- --------------------------------------------------------------------------------
TAX AWARE INVESTING AT J.P. MORGAN
The fund is designed to reduce, but not eliminate, capital gains distributions
to shareholders. In doing so, the fund sells securities when the anticipated
performance benefit justifies the resulting tax liability. This strategy often
includes holding securities long enough to avoid higher, short-term capital
gains taxes, selling shares with a higher cost basis first, and offsetting gains
realized in one security by selling another security at a capital loss. The fund
is aided in this process by a tax-sensitive optimization model developed by J.P.
Morgan.
Another feature of the fund is redemptions in kind. If you sell more than a
certain amount of your shares (usually over $500,000, but sometimes less) you
will receive a portfolio of representative stocks rather than cash. This shields
the fund -- and other shareholders -- from tax liabilities that might otherwise
be incurred. At the same time, a redemption in kind gives you greater
flexibility in managing the tax consequences of your redemption and is not
subject to a redemption fee by the fund. However, the stocks you receive will
continue to fluctuate in value after your redemption and you may incur brokerage
or other transaction costs in liquidating them.
U.S. EQUITY MANAGEMENT APPROACH 3
<PAGE>
JPM PIERPONT TAX AWARE
DISCIPLINED EQUITY FUND
- --------------------------------------------------------------------------------
REGISTRANT: JPM SERIES TRUST
(TAX AWARE DISCIPLINED EQUITY FUND:
JPM PIERPONT SHARES)
[GRAPHIC]
GOAL
The fund seeks to provide high total return while being sensitive to the impact
of capital gains taxes on investors' returns.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in large-capitalization U.S. companies. Industry by
industry, the fund's weightings are similar to those of the Standard & Poor's
500 Stock Index (S&P 500). The fund does not look to overweight or underweight
industries.
Within each industry, the fund overweights stocks that are ranked as undervalued
or fairly valued while underweighting or not holding stocks that appear
overvalued. (The process used to rank stocks according to their relative
valuations is described on page 2.)
To this investment approach the fund adds the element of tax aware investing.
The fund's tax aware investment strategies are described on page 2.
[GRAPHIC]
POTENTIAL RISKS AND REWARDS
The value of your investment in the fund will fluctuate in response to movements
in the stock market. Fund performance will also depend on the effectiveness of
J.P. Morgan's research and the management team's stock picking decisions.
By owning a large number of stocks within the S&P 500, with an emphasis on those
that appear undervalued or fairly valued, and by tracking the industry
weightings of that index, the fund seeks returns that modestly but consistently
exceed those of the S&P 500 with virtually the same level of volatility. The
fund's tax aware strategies may reduce your capital gains but will not eliminate
them. Maximizing after-tax returns may require trade offs that reduce pre-tax
returns.
The fund's securities are described in more detail on page 10, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $225
billion, including more than $X billion using the same strategy as the fund.
The portfolio management team is led by Robin B. Chance, vice president, and
Frederic A. Nelson, managing director, who have been on the team since the
fund's inception in January of 1997. Ms. Chance has been at J.P. Morgan since
1987, Mr. Nelson since May of 1994. Prior to managing this fund, both were
responsible for structured equity strategies. Prior to joining Morgan, Mr.
Nelson was a portfolio manager at Bankers Trust.
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The fund's
redemption fee is paid out of the proceeds you receive when you sell applicable
shares; this fee does not apply to in-kind redemptions. The annual fund expenses
shown are deducted from fund assets prior to performance calculations.
Footnotes for this section are shown on next page.
SHAREHOLDER TRANSACTION EXPENSES
REDEMPTION FEES (% OF YOUR PROCEEDS)
- ---------------------------------------------------
Shares held for less than five years 1.00
Shares held five years or longer None
ANNUAL EXPENSES (% OF FUND ASSETS)
- ---------------------------------------------------
Management fees (actual) 0.35
Marketing (12b-1) fees none
Other expenses(2) (after reimbursement) 0.20
- ---------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.55
- ---------------------------------------------------
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged. The first number
assumes that you continued to hold your shares, the second that you sold all
shares at the end of each time period. The example is for comparison only; the
fund's actual return and expenses will be different.
- --------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
YOUR COST($) 6/26 18/28 31/41 69/69
- --------------------------------------------------------------
4 JPM PIERPONT TAX AWARE DISCIPLINED FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for the period
ended September 30, 1997
- --------------------------------------------------------------------------------
Since inception(3)
JPM PIERPONT TAX AWARE DISCIPLINED EQUITY FUND
(after expenses) xx.xx
- --------------------------------------------------------------------------------
S&P 500 INDEX(4)
(no expenses) xx.xx
- --------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns for the period ended
September 30, 1997
- --------------------------------------------------------------------------------
1997
[GRAPH]
40%
20%
0%
(20)%
/ / JPM PIERPONT TAX AWARE DISCIPLINED EQUITY FUND
/ / S&P 500 Index(4)
FINANCIAL HIGHLIGHTS
PER-SHARE DATA For fiscal period ended April 30
- --------------------------------------------------------------------------------
1997(3)
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03
Net realized and unrealized gain
on investments 0.22
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.25
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME ($) XX.XX
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 10.25
- --------------------------------------------------------------------------------
TOTAL RETURN (%) 2.50(6)
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 4,450
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- --------------------------------------------------------------------------------
EXPENSES (%) 0.55(5)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 1.48(5)
- --------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE
TO EXPENSE REIMBURSEMENT (%) 7.50(5)
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE (%) 12(6)
- --------------------------------------------------------------------------------
AVERAGE BROKER COMMISSIONS PER SHARE ($) 0.0283
- --------------------------------------------------------------------------------
(1) This table shows expenses for the fiscal period 1/30/97 (commencement of
operations) through 4/30/97 as a percentage of average net assets, after
reimbursement for ordinary expenses over 0.55%.
(2) Without reimbursement, other expenses and total operating expenses would
have been 7.70% and 8.05% respectively. There is no guarantee that
reimbursement will continue beyond 2/28/98.
(3) The fund commenced operations on 1/30/97.
(4) The S&P 500 Index is an unmanaged index of U.S. stocks widely used as a
measure of overall stock market performance.
(5) Annualized.
(6) Not annualized.
JPM PIERPONT TAX AWARE DISCIPLINED FUND 5
<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------
For your convenience, the JPM Pierpont Funds offer several ways to start and
maintain fund investments.
INVESTING THROUGH A FINANCIAL PROFESSIONAL
If you work with a financial professional, either at J.P. Morgan or elsewhere,
he or she is prepared to handle your planning and transaction needs. Your
financial professional will be able to assist you in establishing your fund
account, executing transactions, and monitoring your investment. If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly. J.P. Morgan may pay fees to financial professionals for services in
connection with fund investments.
INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN
Your fund investments are handled through your plan. Refer to your plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares. J.P. Morgan may pay fees to firms that provide
recordkeeping or other services to your plan.
INVESTING THROUGH AN IRA OR ROLLOVER IRA
Please contact a J.P. Morgan Retirement Services Specialist at 1-888-576-4472
for information on J.P. Morgan's comprehensive IRA services, including lower
minimum investments.
INVESTING DIRECTLY
Investors may establish accounts without the help of an intermediary by using
the instructions below and at right:
- - Determine the amount you are investing. The minimum amount for initial
investments in the fund is $2,500 and for additional investments $500,
although these minimums may be less for some investors. For more information
on minimum investments, call 1-800-521-5411.
- - Complete the application, indicating how much of your investment you want to
allocate to which fund(s). Please apply now for any account privileges you
may want to use in the future, in order to avoid the delays associated with
adding them later on.
- - Mail in your application, making your initial investment as shown below.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.
OPENING AN ACCOUNT
BY CHECK
- - Make out a check for the investment amount payable to JPM Pierpont Funds.
- - Mail the check with your completed application to the Transfer Agent.
BY WIRE
- - Mail your completed application to the Shareholder Services Agent.
- - Call the Shareholder Services Agent to obtain an account number and to place
a purchase order. FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL BE
RETURNED UNINVESTED.
- - After placing your purchase order, instruct your bank to wire the amount of
your investment to:
State Street Bank & Trust Company
ROUTING NUMBER: 011-000-028
CREDIT: JPM Pierpont Funds
ACCOUNT NUMBER: 9904-226-9
FFC: your account number, name of registered owner(s) and fund name
BY EXCHANGE
- - Call the Shareholder Services Agent for an exchange.
ADDING TO AN ACCOUNT
BY CHECK
- - Make out a check for the investment amount payable to JPM Pierpont Funds.
- - Mail the check with a completed investment slip to the Transfer Agent. If you
do not have an investment slip, attach a note indicating your account number
and how much you wish to invest in which fund(s).
BY WIRE
- - Call the Shareholder Services Agent to place a purchase order. FUNDS THAT ARE
WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED.
6 YOUR INVESTMENT
<PAGE>
- --------------------------------------------------------------------------------
- - Once you have placed your purchase order, instruct your bank to wire the
amount of your investment as described on the previous page.
BY EXCHANGE
- - Call the Shareholder Services Agent for an exchange.
SELLING SHARES
BY PHONE
- - Call the Shareholder Services Agent and place your request. Once your request
has been verified, a check for the net amount, payable to the registered
owner(s), will be mailed to the address of record. For checks payable to any
other party or mailed to any other address, please make your request in
writing (see below).
BY WIRE
- - Call the Shareholder Services Agent to verify that the wire redemption
privilege is in place on your account. If it is not, a representative can
help you add it.
- - Place your wire request. If you are transferring money to a non-Morgan
account, you will need to provide the representative with the personal
identification number (PIN) that was provided to you when you opened your
fund account.
IN WRITING
- - Write a letter of instruction that includes the following information: The
name of the registered owner(s) of the account; the account number; the fund
name; the amount you want to sell; and the recipient's name and address or
wire information, if different from those of the account registration.
- - Indicate whether you want the proceeds sent by check or by wire
- - Make sure the letter is signed by an authorized party. The Shareholder
Services Agent may require additional information, such as a signature
guarantee.
- - Mail the letter to the Shareholder Services Agent.
BY EXCHANGE
- - Call the Shareholder Services Agent for an exchange.
ACCOUNT AND TRANSACTION POLICIES
TELEPHONE ORDERS The fund accepts telephone orders from all shareholders. To
guard against fraud, the fund requires shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if the fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.
BUSINESS HOURS AND NAV CALCULATIONS The fund's regular business days and hours
are the same as those of the New York Stock Exchange. The fund calculates its
net asset value per share (NAV) every business day at 4:15 p.m. eastern time.
TIMING OF ORDERS Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until 4:00
p.m. eastern time every business day and are executed the same day, at that
day's NAV. The fund has the right to suspend redemption of shares and to
postpone payment of proceeds for up to seven days or as permitted by law.
TRANSFER AGENT SHAREHOLDER SERVICES AGENT
STATE STREET BANK AND TRUST COMPANY J.P. MORGAN FUNDS SERVICES
P.O. Box 8411 522 Fifth Avenue
Boston, MA 02266-8411 New York, NY 10036
Attention: J.P. Morgan Funds Services 1-800-521-5411
Representatives are available 8:00
a.m. to 5:00 p.m. eastern time on
fund business days.
YOUR INVESTMENT 7
<PAGE>
- --------------------------------------------------------------------------------
TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record
when the fund receives your payment, generally the day following execution. When
you sell shares, the proceeds are generally available the day following
execution and will be forwarded according to your instructions. In kind
redemptions (described on page 2) will be available promptly as is feasible.
When you sell shares that you recently purchased by check, your order will be
executed at the next NAV but the proceeds will not be available until your check
clears. This may take up to 15 days.
STATEMENTS AND REPORTS The fund sends monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months the fund sends out an annual or semi-annual report, containing
information on the fund's holdings and a discussion of recent and anticipated
market conditions and fund performance.
ACCOUNTS WITH BELOW-MINIMUM BALANCES If your account balance falls below the
minimum for 30 days as a result of selling shares (and not because of
performance), the fund may request that you buy more shares or close your
account. If your account balance is still below the minimum 60 days after
notification, the fund may close out your account and send the proceeds to the
address of record.
DIVIDENDS AND DISTRIBUTIONS
The fund typically pays income dividends once a year (usually in X) and makes
capital gains distributions, if any, once per year (usually in X). However, the
fund may make more or fewer payments in a given year, depending on its
investment results and its tax compliance situation. These dividends and
distributions consist of most or all of the fund's net investment income and net
realized capital gains.
Dividends and distributions are automatically paid in additional fund shares.
Alternatively, you may instruct your financial professional or J.P. Morgan Funds
Services to have them sent to you by check, credited to a separate account, or
invested in another JPM Pierpont Fund.
TAX CONSIDERATIONS
In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities:
TRANSACTION TAX STATUS
Income dividends Ordinary income
Short-term capital gains Ordinary income
distributions
Long-term capital gains Capital gains
distributions
Sales or exchanges of shares Capital gains or losses
owned for more than one year
Sales or exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject
to special rules
Because long-term capital gains distributions are taxable as capital gains
regardless of how long you have owned your shares, you may want to avoid making
a substantial investment when the fund is about to declare a long-term capital
gains distribution.
Every January, the fund issues tax information on its distributions for the
previous year.
Any investor for whom the fund does not have a valid taxpayer identification
number will be subject to backup withholding for taxes.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
Because each investor's tax circumstances are unique, please consult your tax
professional about your fund investment.
8 YOUR INVESTMENT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
The fund is a series of JPM Series Trust, a Massachusetts business trust. The
fund is one of three series of shares currently offered by the trust.
Information about other series or classes is available by calling 1-800-521-
5411. In the future, the trustees could create other series or share classes,
which would have different expenses. Fund shareholders are entitled to one full
or fractional vote for each dollar or fraction of a dollar invested.
MANAGEMENT AND ADMINISTRATION
The fund and the other series of JPM Series Trust, are governed by the same
trustees. The trustees are responsible for overseeing all business activities.
The trustees are assisted by Pierpont Group, Inc., which they own and operate on
a cost basis. Funds Distributor, as co-administrator, provides fund officers.
J.P. Morgan, as co-administrator, oversees the fund's other service providers.
The fund pays J.P. Morgan the following fees for investment advisory and other
services:
ADVISORY SERVICES 0.35% of the master
portfolio's average net assets
ADMINISTRATIVE SERVICES Master portfolio's and fund's
shared with Funds pro-rata portions of 0.09% of
Distributor, Inc.) the first $7 billion in J.P.
Morgan-advised portfolios, plus
0.04% of average net assets over $7
billion
Shareholder services 0.25% of the fund's average
net assets
FUND DETAILS 9
<PAGE>
- --------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS
This table identifies the main elements that make up the fund's overall risk and
reward characteristics (described on page 2). It also outlines the fund's
policies toward various securities, including those that are designed to
help the fund manage risk.
<TABLE>
<CAPTION>
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
<S> <C> <C>
MARKET CONDITIONS
- - The fund's share price and - Stocks have generally outperformed - Under normal circumstances the fund plans
performance will fluctuate more stable investments (such as to remain fully invested, with at least
in response to stock market bonds and cash equivalents) over 65% in stocks; stock investments may
movements the long term include U.S. and foreign convertible
securities, preferred stocks, trust
or partnership interests, warrants,
rights, and investment company
securities
- The fund seeks to limit risk through
diversification
- During severe market downturns, the fund
has the option of investing up to 100%
of assets in investment-grade short-term
securities
MANAGEMENT CHOICES
- - The fund could underperform - The fund could outperform - J.P. Morgan focuses its active management
its benchmark due to its its benchmark due to these on securities selection, the area where
asset allocation and securities same choices it believes its commitment to research
choices can most enhance returns
FOREIGN INVESTMENTS
- - Currency exchange rate - Favorable exchange rate - The fund anticipates that its total
movements could reduce movements could generate foreign investments will not exceed 5%
gains or create losses gains or reduce losses of assets
- - The fund could lose money - Foreign investments, which - The fund actively manages the currency
because of foreign government represent a major portion of exposure of its foreign investments
actions, political instability, the world's securities, offer relative to its benchmark, and may hedge
or lack of adequate and attractive potential performance into the U.S. dollar from time to time
accurate information and opportunities for (see also "Derivatives")
diversification
DERIVATIVES
- - Derivatives such as futures, - Hedges that correlate well with - The fund uses derivatives for hedging and
options, and foreign currency underlying positions can reduce for risk management (i.e., to establish
forward contracts that are or eliminate losses at low cost or adjust exposure to particular
used for hedging the portfolio securities, markets or currencies); risk
or specific securities may not - The fund could make money and management may include management of the
fully offset the underlying protect against losses if fund's exposure relative to its benchmark
positions(1) management's analysis proves
correct - The fund only establishes hedges that it
- - Derivatives used for risk expects will be highly correlated with
management may not have the - Derivatives that involve leverage underlying positions
intended effects and may result could generate substantial gains
in losses or missed at low cost - While the fund may use derivatives that
opportunities incidentally involve leverage, it does
not use them for the specific purposes
- - Derivatives that involve leverage of leveraging the portfolio
could magnify losses
(1) A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash payment
based on the value of a securities index. An option is the right to buy or
sell securities that is granted in exchange for an agreed-upon sum. A
foreign currency forward contract is an obligation to buy or sell a given
currency on a future date and at a set price.
10 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
ILLIQUID HOLDINGS
- - The fund could have difficulty - These holdings may offer more - The fund may not invest more than 15% of
valuing these holdings precisely attractive yields or potential net assets in illiquid holdings
growth than comparable widely traded
- - The fund could be unable to sell securities - To maintain adequate liquidity, the fund
these holdings at the time or price may hold investment-grade short-term
it desired securities (including repurchase
agreements) and, for temporary or
extraordinary purposes, may borrow from
banks up to 33 1/3% of the value of its
total assets
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
- - When the fund buys securities - The fund can take advantage - The fund uses segregated accounts to cover
before issue or for delayed delivery, of attractive transaction any leverage risk
it could be exposed to leverage risk opportunities
if it does not use segregated accounts
SHORT-TERM TRADING
- - Increased trading would raise the - The fund could realize gains - The fund anticipates a portfolio turnover
fund's brokerage and related costs in a short period of time rate of approximately 100%
- - Increased short-term capital gains - The fund could protect against - The fund generally avoids short-term
distributions would raise shareholders' losses if a stock is overvalued and trading, except to take advantage of
income tax liability its value later falls attractive or unexpected opportunities or
to meet demands generated by shareholder
activity
</TABLE>
FUND DETAILS 11
<PAGE>
FOR MORE INFORMATION
For investors who want more information on the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS Contain performance data, information on portfolio
holdings, and a written analysis of market conditions and fund performance for
the fund's most recently completed fiscal year or half-year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) Provides a fuller technical and legal
description of the fund's policies, investment restrictions, and business
structure. This prospectus incorporates the SAI by reference.
Copies of the current versions of these documents may be obtained by contacting:
JPM PIERPONT TAX AWARE DISCIPLINED EQUITY FUND
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
TELEPHONE: 1-800-521-5411
HEARING IMPAIRED: 1-888-468-4015
EMAIL: [email protected]
Text-only versions of these documents and this prospectus are available from
the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. (1-800-SEC-0330) and may be viewed on-screen or downloaded from
the SEC's Internet site at http://www.sec.gov. The fund's investment company
registration numbers are 811-07795 and 333-11125.
JPM PIERPONT FUNDS AND
THE MORGAN TRADITION
The JPM Pierpont Funds combine a heritage of integrity and financial leadership
with comprehensive, sophisticated analysis and management techniques. Drawing on
J.P. Morgan's extensive experience and depth as an investment manager, the JPM
Pierpont Funds offer a broad array of distinctive opportunities for mutual fund
investors.
JPMORGAN
- --------------------------------------------------------------------------------
JPM PIERPONT FUNDS
ADVISOR DISTRIBUTOR
Morgan Guaranty Trust Company of New York Funds Distributor, Inc.
522 Fifth Avenue 60 State Street
New York, NY 10036 Boston, MA 02109
1-800-521-5411 1-800-221-7930
PROSPPT-9712
<PAGE>
DECEMBER 17, 1997 PROSPECTUS
JPM PIERPONT TAX AWARE U.S. EQUITY FUND
--------------------------------
Seeking to outperform U.S.
stock markets over the long
term through a disciplined
management approach
IN PROGRESS 10/9/97
This prospectus contains essential information for anyone investing in the fund.
Please read it carefully and keep it for reference.
Shares in the fund are not bank deposits and are not guaranteed or insured by
any bank, government entity, or the FDIC.
As with all mutual funds, the fact that these shares are registered with the
Securities and Exchange Commission does not mean that the commission approves
them as an investment or guarantees that the information in this prospectus is
correct or adequate. It is a criminal offense for anyone to state or suggest
otherwise.
Distributed by Funds Distributor, Inc. JP MORGAN
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
2
- -----
U.S. EQUITY MANAGEMENT APPROACH
U.S. equity investment process . . . . . . . . . . . . . . . . . . . . . . 2
Tax aware investing at J.P. Morgan . . . . . . . . . . . . . . . . . . . . 3
4
The fund's goal, investment approach, risks, expenses, and performance
- -----
JPM PIERPONT TAX AWARE DISCIPLINED EQUITY FUND
Fund description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investor expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6
Investing in the JPM Pierpont Tax Aware U.S. Equity Fund
- -----
YOUR INVESTMENT
Investing through a financial professional . . . . . . . . . . . . . . . . 6
Investing through an employer-sponsored retirement plan. . . . . . . . . . 6
Investing through an IRA or Rollover IRA . . . . . . . . . . . . . . . . . 6
Investing directly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Opening an account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Adding to an account . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selling shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Account and transaction policies . . . . . . . . . . . . . . . . . . . . . 7
Dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . . 8
Tax considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9
More about risk and the fund's business operations
- -----
FUND DETAILS
Business structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management and administration. . . . . . . . . . . . . . . . . . . . . . . 9
Risk and reward elements . . . . . . . . . . . . . . . . . . . . . . . . .10
FOR MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . .back cover
<PAGE>
INTRODUCTION
- --------------------------------------------------------------------------------
JPM PIERPONT TAX AWARE U.S. EQUITY FUND
This fund invests primarily in U.S. stocks. As a shareholder, you should
anticipate risks and rewards beyond those of a typical bond fund or a typical
balanced fund.
WHO MAY WANT TO INVEST
The fund is designed for investors who:
- - are pursuing a long-term goal such as retirement
- - want to add a growth investment to further diversify a portfolio
- - want a fund that seeks to consistently outperform the market in which it
invests
- - are individuals that could benefit from a strategy that pursues returns
from an after-tax perspective
The fund is NOT designed for investors who:
- - want a fund that pursues market trends or focuses only on particular
industries or sectors
- - require regular income or stability of principal
- - are pursuing a short-term goal or investing emergency reserves
- - are investing through a tax-deferred account such as an IRA
J.P. MORGAN
Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments, and
individuals. Today, J.P. Morgan employs over 300 analysts and portfolio managers
around the world and has more than $225 billion in assets under management,
including assets managed by the fund's advisor, Morgan Guaranty Trust Company of
New York.
BEFORE YOU INVEST
Investors considering the fund should understand that:
- - The value of the fund's shares will fluctuate over time. You could lose
money if you sell when the fund's share price is lower than when you
invested.
- - There is no assurance that the fund will meet its investment goal.
- - Future returns will not necessarily resemble past performance.
1
<PAGE>
U.S. EQUITY MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
The JPM Pierpont Tax Aware U.S. Equity fund invests primarily in U.S. stocks
while seeking to enhance the after-tax returns of its shareholders.
The investment philosophy, developed by the fund's advisor, focuses on stock
picking while largely avoiding sector or market-timing strategies. Also, under
normal market conditions, the fund will remain fully invested.
U.S. EQUITY INVESTMENT PROCESS
In managing the fund, J.P. Morgan employs a three-step process:
[GRAPHICS]
FPO
J.P. Morgan analysts develop proprietary fundamental research
RESEARCH J.P. Morgan takes an in-depth look at company prospects over a
relatively long period -- often as much as five years -- rather than focusing on
near-term expectations. This approach is designed to provide insight into a
company's real growth potential. J.P. Morgan's in-house research is developed by
an extensive worldwide network of over 120 career analysts. The team of analysts
dedicated to U.S. equities includes more than 20 members, with an average of
over ten years of experience.
[GRAPHICS]
FPO
Stocks in each industry are ranked with the help of models
VALUATION The research findings allow J.P. Morgan to rank the companies in each
industry group according to their relative value. The greater a company's
estimated worth compared to the current market price of its stock, the more
undervalued the company. The valuation rankings are produced with the help of a
variety of models that quantify the research team's findings.
[GRAPHICS]
FPO
Using research and valuations, the fund's management team chooses stocks for its
fund
STOCK SELECTION The fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, the management
team buys stocks that are identified as undervalued and considers selling them
when they appear overvalued. Along with attractive valuation, the fund's
managers often consider a number of other criteria:
- - catalysts that could trigger a rise in a stock's price
- - high potential reward compared to potential risk
- - temporary mispricings caused by market overreactions
2 U.S. EQUITY MANAGEMENT APPROACH
<PAGE>
- --------------------------------------------------------------------------------
TAX AWARE INVESTING AT J.P. MORGAN
The fund is designed to reduce, but not eliminate, capital gains distributions
to shareholders. In doing so, the fund sells securities when the anticipated
performance benefit justifies the resulting tax liability. This strategy often
includes holding securities long enough to avoid higher, short-term capital
gains taxes, selling shares with a higher cost basis first, and offsetting gains
realized in one security by selling another security at a capital loss. The fund
is aided in this process by a tax-sensitive optimization model developed by J.P.
Morgan.
Another feature of the fund is redemptions in kind. If you sell more than a
certain amount of your shares (usually over $250,000, but sometimes less) you
will receive a portfolio of representative stocks rather than cash. This shields
the fund -- and other shareholders -- from tax liabilities that might otherwise
be incurred. At the same time, a redemption in kind gives you greater
flexibility in managing the tax consequences of your redemption and is not
subject to a redemption fee by the fund. However, the stocks you receive will
continue to fluctuate in value after your redemption and you may incur brokerage
or other transaction costs in liquidating them.
U.S. EQUITY MANAGEMENT APPROACH 3
<PAGE>
JPM PIERPONT TAX AWARE U.S. EQUITY FUND
- --------------------------------------------------------------------------------
REGISTRANT: JPM SERIES TRUST
(TAX AWARE U.S. EQUITY FUND:
JPM PIERPONT SHARES)
[GRAPHICS]
GOAL
The fund seeks to provide high total return while being sensitive to the impact
of capital gains taxes on investors' returns.
[GRAPHICS]
INVESTMENT APPROACH
The fund invests primarily in large-capitalization U.S. companies. Industry by
industry, the fund's weightings are similar to those of the Standard & Poor's
500 Stock Index (S&P 500). The fund can moderately underweight or overweight
industries by when it believes it will benefit performance.
Within each industry, the fund focuses on those stocks that are ranked as most
undervalued according to the investment process described on page 2. The fund
generally considers selling stocks that appear overvalued.
To this investment approach the fund adds the element of tax aware investing.
The fund's tax aware investment strategies are described on page 2.
[GRAPHICS]
POTENTIAL RISKS AND REWARDS
The value of your investment in the fund will fluctuate in response
to movements in the stock market. Fund performance will also depend on
the effectiveness of J.P. Morgan's research and the management team's stock
picking decisions.
By emphasizing undervalued stocks, the fund has the potential to produce returns
that exceed those of the S&P 500. At the same time, by controlling the industry
weightings of the fund so they can differ only moderately from the industry
weightings of the S&P 500, the fund seeks to limit its volatility to that of the
overall market, as represented by this index. The fund's tax aware strategies
may reduce your capital gains but will not eliminate them. Maximizing after-tax
returns may require trade offs that reduce pre-tax returns.
The fund's securities are described in more detail on page 10, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $225
billion, including more than $X.X billion using the same strategy as the fund.
The portfolio management team is led by Terry E. Banet, vice president, and
Gordon B. Fowler, managing director, who have been on the team since the fund's
inception in December of 1996. Ms. Banet has been at J.P. Morgan since 1985, Mr.
Fowler since 1981. Prior to managing this fund, Ms. Banet managed tax aware
accounts and helped develop Morgan's tax aware equity process while Mr. Fowler
was responsible for structured equity products for both the institutional and
the private client markets.
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The fund's
redemption fee is paid out of the proceeds you receive when you sell applicable
shares; this fee does not apply to in-kind redemptions. The annual fund expenses
shown are deducted from fund assets prior to performance calculations.
Footnotes for this section are shown on next page.
SHAREHOLDER TRANSACTION EXPENSES
REDEMPTION FEES (% OF YOUR PROCEEDS)
- -----------------------------------------------------
Shares held for less than five years 1.00
Shares held five years or longer None
ANNUAL EXPENSES (% OF FUND ASSETS)
- -----------------------------------------------------
Management fees (actual) 0.45
Marketing (12b-1) fees none
Other expenses(2) (after reimbursement) 0.40
- -----------------------------------------------------
- -----------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.85
- -----------------------------------------------------
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged. The first number
assumes that you continued to hold your shares, the second that you sold all
shares at the end of each time period. The example is for comparison only; the
fund's actual return and expenses will be different.
- ---------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
YOUR COST($) 9/29 27/37 47/57 105/105
- ---------------------------------------------------
4 JPM PIERPONT TAX AWARE U.S. EQUITY FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for the period ended September 30, 1997
- -------------------------------------------------------------------------------------------------------
Since inception(3)
<S> <C>
JPM PIERPONT TAX AWARE U.S. EQUITY FUND (after expenses) XX.XX
S&P 500 INDEX(4) (no expenses) XX.XX
<CAPTION>
Year-by-year total return (%) Shows changes in returns for the period ended September 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C>
[GRAPH]
1997
40%
20%
0%
(20)%
- - JPM Pierpont Tax Aware U.S. Equity Fund - S&P 500 Index(4)
</TABLE>
FINANCIAL HIGHLIGHTS
PER-SHARE DATA For fiscal period ended April 30
- --------------------------------------------------------------------------------
1997(3)
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.03
Net realized and unrealized gain
on investments ($) 0.87
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.90
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME ($) (0.01)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 10.89
- --------------------------------------------------------------------------------
TOTAL RETURN (%) 9.02(6)
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 13,763
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- --------------------------------------------------------------------------------
EXPENSES (%) 0.85(5)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 0.81(5)
- --------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 2.20(5)
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE (%) .16(6)
- --------------------------------------------------------------------------------
AVERAGE BROKER COMMISSIONS PER SHARE ($) 0.0300
- --------------------------------------------------------------------------------
(1) This table shows expenses for the fiscal period 12/18/96 (commencement of
operations) through 4/30/97 as a percentage of average net assets, after
reimbursement for ordinary expenses over 0.85%.
(2) Without reimbursement, other expenses and total operating expenses would
have been 2.60% and 3.05% respectively. There is no guarantee that
reimbursement will continue beyond 2/28/98.
(3) The fund commenced operations on 12/18/96.
(4) The S&P 500 Index is an unmanaged index of U.S. stocks widely used as a
measure of overall stock market performance.
(5) Annualized.
(6) Not annualized.
JPM PIERPONT TAX AWARE U.S. EQUITY FUND 5
<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------
For your convenience, the JPM Pierpont Funds offer several ways to start and
maintain fund investments.
INVESTING THROUGH A FINANCIAL PROFESSIONAL
If you work with a financial professional, either at J.P. Morgan or elsewhere,
he or she is prepared to handle your planning and transaction needs. Your
financial professional will be able to assist you in establishing your fund
account, executing transactions, and monitoring your investment. If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly. J.P. Morgan may pay fees to financial professionals for
services in connection with fund investments.
INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN
Your fund investments are handled through your plan. Refer to your plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares. J.P. Morgan may pay fees to firms that provide
recordkeeping or other services to your plan.
INVESTING THROUGH AN IRA OR ROLLOVER IRA
Please contact a J.P. Morgan Retirement Services Specialist at 1-888-576-4472
for information on J.P. Morgan's comprehensive IRA services, including lower
minimum investments.
INVESTING DIRECTLY
Investors may establish accounts without the help of an intermediary by using
the instructions below and at right:
- - Determine the amount you are investing. The minimum amount for initial
investments in the fund is $2,500 and for additional investments $500,
although these minimums may be less for some investors. For more
information on minimum investments, call 1-800-521-5411.
- - Complete the application, indicating how much of your investment you want
to allocate to which fund(s). Please apply now for any account privileges
you may want to use in the future, in order to avoid the delays associated
with adding them later on.
- - Mail in your application, making your initial investment as shown below.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.
OPENING AN ACCOUNT
BY CHECK
- - Make out a check for the investment amount payable to JPM Pierpont Funds.
- - Mail the check with your completed application to the Transfer Agent.
BY WIRE
- - Mail your completed application to the Shareholder Services Agent.
- - Call the Shareholder Services Agent to obtain an account number and to
place a purchase order. FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL
BE RETURNED UNINVESTED.
- - After placing your purchase order, instruct your bank to wire the amount of
your investment to:
State Street Bank & Trust Company
ROUTING NUMBER: 011-000-028
CREDIT: JPM Pierpont Funds
ACCOUNT NUMBER: 9904-226-9
FFC: your account number, name of registered owner(s) and fund name
BY EXCHANGE
- - Call the Shareholder Services Agent for an exchange.
ADDING TO AN ACCOUNT
BY CHECK
- - Make out a check for the investment amount payable to JPM Pierpont Funds.
- - Mail the check with a completed investment slip to the Transfer Agent. If
you do not have an investment slip, attach a note indicating your account
number and how much you wish to invest in which fund(s).
BY WIRE
- - Call the Shareholder Services Agent to place a purchase order. FUNDS THAT
ARE WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED.
- - Once you have placed your purchase order, instruct
6 YOUR INVESTMENT
<PAGE>
your bank to wire the amount of your investment as described on the
previous page.
BY EXCHANGE
- - Call the Shareholder Services Agent for an exchange.
SELLING SHARES
BY PHONE
- - Call the Shareholder Services Agent and place your request. Once your
request has been verified, a check for the net amount, payable to the
registered owner(s), will be mailed to the address of record. For checks
payable to any other party or mailed to any other address, please make your
request in writing (see below).
BY WIRE
- - Call the Shareholder Services Agent to verify that the wire redemption
privilege is in place on your account. If it is not, a representative can
help you add it.
- - Place your wire request. If you are transferring money to a non-Morgan
account, you will need to provide the representative with the personal
identification number (PIN) that was provided to you when you opened your
fund account.
IN WRITING
- - Write a letter of instruction that includes the following information: The
name of the registered owner(s) of the account; the account number; the
fund name; the amount you want to sell; and the recipient's name and
address or wire information, if different from those of the account
registration.
- - Indicate whether you want the proceeds sent by check or by wire.
- - Make sure the letter is signed by an authorized party. The Shareholder
Services Agent may require additional information, such as a signature
guarantee.
- - Mail the letter to the Shareholder Services Agent.
BY EXCHANGE
- - Call the Shareholder Services Agent for an exchange.
ACCOUNT AND TRANSACTION POLICIES
TELEPHONE ORDERS The fund accepts telephone orders from all shareholders. To
guard against fraud, the fund requires shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if the fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.
BUSINESS HOURS AND NAV CALCULATIONS The fund's regular business days and hours
are the same as those of the New York Stock Exchange. The fund calculates its
net asset value per share (NAV) every business day at 4:15 p.m. eastern time.
TIMING OF ORDERS Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until 4:00
p.m. eastern time every business day and are executed the same day, at that
day's NAV. The fund has the right to suspend redemption of shares and to
postpone payment of proceeds for up to seven days or as permitted by law.
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TRANSFER AGENT SHAREHOLDER SERVICES AGENT
STATE STREET BANK AND TRUST COMPANY J.P. MORGAN FUNDS SERVICES
P.O. Box 8411 522 Fifth Avenue
Boston, MA 02266-8411 New York, NY 10036
Attention: J.P. Morgan Funds Services 1-800-521-5411
Representatives are available 8:00
a.m. to 5:00 p.m. eastern time on
fund business days.
YOUR INVESTMENT 7
<PAGE>
TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record
when the fund receives your payment, generally the day following execution. When
you sell shares, the proceeds are generally available the day following
execution and will be forwarded according to your instructions. In kind
redemptions (described on page 2) will be available as promptly as feasible.
When you sell shares that you recently purchased by check, your order will be
executed at the next NAV but the proceeds will not be available until your check
clears. This may take up to 15 days.
STATEMENTS AND REPORTS The fund sends monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months the fund sends out an annual or semi-annual report, containing
information on the fund's holdings and a discussion of recent and anticipated
market conditions and fund performance.
ACCOUNTS WITH BELOW-MINIMUM BALANCES If your account balance falls below the
minimum for 30 days as a result of selling shares (and not because of
performance), the fund may request that you buy more shares or close your
account. If your account balance is still below the minimum 60 days after
notification, the fund may close out your account and send the proceeds to the
address of record.
DIVIDENDS AND DISTRIBUTIONS
The fund typically pays income dividends once a year (usually in X) and makes
capital gains distributions, if any, once per year (usually in X). However, the
fund may make more or fewer payments in a given year, depending on its
investment results and its tax compliance situation. These dividends and
distributions consist of most or all of the fund's net investment income and net
realized capital gains.
Dividends and distributions are automatically paid in additional fund shares.
Alternatively, you may instruct your financial professional or J.P. Morgan Funds
Services to have them sent to you by check, credited to a separate account, or
invested in another JPM Pierpont Fund.
TAX CONSIDERATIONS
In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities:
TRANSACTION TAX STATUS
Income dividends Ordinary income
Short-term capital gains Ordinary income
distributions
Long-term capital gains Capital gains
distributions
Sales or exchanges of shares Capital gains or losses
owned for more than one year
Sales or exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject to
special rules
Because long-term capital gains distributions are taxable as capital gains
regardless of how long you have owned your shares, you may want to avoid making
a substantial investment when the fund is about to declare a long-term capital
gains distribution.
Every January, the fund issues tax information on its distributions for the
previous year.
Any investor for whom the fund does not have a valid taxpayer identification
number will be subject to backup withholding for taxes.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
Because each investor's tax circumstances are unique, please consult your tax
professional about your fund investment.
8 YOUR INVESTMENT
<PAGE>
FUND DETAILS
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BUSINESS STRUCTURE
The fund is a series of JPM Series Trust, a Massachusetts business trust. The
fund is one of three series of shares currently offered by the trust.
Information about other series or classes is available by calling
1-800-521-5411. In the future, the trustees could create other series or share
classes, which would have different expenses. Fund shareholders are entitled to
one full or fractional vote for each dollar or fraction of a dollar invested.
MANAGEMENT AND ADMINISTRATION
The fund and the other series of JPM Series Trust are governed by the same
trustees. The trustees are responsible for overseeing business activities. The
trustees are assisted by Pierpont Group, Inc., which they own and operate on a
cost basis. Funds Distributor, as co-administrator, provides fund officers. J.P.
Morgan, as co-administrator, oversees the fund's other service providers.
The fund pays J.P. Morgan the following fees for investment advisory and other
services:
ADVISORY SERVICES 0.45% of the master portfolio's average
net assets
ADMINISTRATIVE SERVICES Master portfolio's and fund's
shared with Funds pro-rata portions of 0.09% of
Distributor, Inc.) the first $7 billion in J.P. Morgan-
advised portfolios, plus 0.04% of
average net assets over $7 billion
SHAREHOLDER SERVICES 0.25% of the fund's average net assets
FUND DETAILS 9
<PAGE>
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RISK AND REWARD ELEMENTS
This table identifies the main elements that make up the fund's overall risk and
reward characteristics (described on page 2). It also outlines the fund's
policies toward various securities, including those that are designed to
help the fund manage risk.
<TABLE>
<CAPTION>
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
<S> <C> <C>
MARKET CONDITIONS
- - The fund's share price and - Stocks have generally outperformed - Under normal circumstances the fund plans
performance will fluctuate more stable investments (such as to remain fully invested, with at least
in response to stock market bonds and cash equivalents) over 65% in stocks; stock investments may
movements the long term include U.S. and foreign convertible
securities, preferred stocks, trust
or partnership interests, warrants,
rights, and investment company
securities
- The fund seeks to limit risk through
diversification
- During severe market downturns, the fund
has the option of investing up to 100%
of assets in investment-grade short-term
securities
MANAGEMENT CHOICES
- - The fund could underperform - The fund could outperform - J.P. Morgan focuses its active management
its benchmark due to its its benchmark due to these on securities selection, the area where
asset allocation and securities same choices it believes its commitment to research
choices can most enhance returns
FOREIGN INVESTMENTS
- - Currency exchange rate - Favorable exchange rate - The fund anticipates that its total
movements could reduce movements could generate foreign investments will not exceed 5%
gains or create losses gains or reduce losses of assets
- - The fund could lose money - Foreign investments, which - The fund actively manages the currency
because of foreign government represent a major portion of exposure of its foreign investments
actions, political instability, the world's securities, offer relative to its benchmark, and may hedge
or lack of adequate and attractive potential performance into the U.S. dollar from time to time
accurate information and opportunities for (see also "Derivatives")
diversification
DERIVATIVES
- - Derivatives such as futures, - Hedges that correlate well with - The fund uses derivatives for hedging and
options, and foreign currency underlying positions can reduce for risk management (i.e., to establish
forward contracts that are or eliminate losses at low cost or adjust exposure to particular
used for hedging the portfolio securities, markets or currencies); risk
or specific securities may not - The fund could make money and management may include management of the
fully offset the underlying protect against losses if fund's exposure relative to its benchmark
positions(1) management's analysis proves
correct - The fund only establishes hedges that it
- - Derivatives used for risk expects will be highly correlated with
management may not have the - Derivatives that involve leverage underlying positions
intended effects and may result could generate substantial gains
in losses or missed at low cost - While the fund may use derivatives that
opportunities incidentally involve leverage, it does
not use them for the specific purposes
- - Derivatives that involve leverage of leveraging the portfolio
could magnify losses
(1) A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash payment
based on the value of a securities index. An option is the right to buy or
sell securities that is granted in exchange for an agreed-upon sum. A
foreign currency forward contract is an obligation to buy or sell a given
currency on a future date and at a set price.
10 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
ILLIQUID HOLDINGS
- - The fund could have difficulty - These holdings may offer more - The fund may not invest more than 15% of
valuing these holdings precisely attractive yields or potential net assets in illiquid holdings
growth than comparable widely traded
- - The fund could be unable to sell securities - To maintain adequate liquidity, the fund
these holdings at the time or price may hold investment-grade short-term
it desired securities (including repurchase
agreements) and, for temporary or
extraordinary purposes, may borrow from
banks up to 331/3% of the value of its
total assets
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
- - When the fund buys securities - The fund can take advantage - The fund uses segregated accounts to cover
before issue or for delayed delivery, of attractive transaction any leverage risk
it could be exposed to leverage risk opportunities
if it does not use segregated accounts
SHORT-TERM TRADING
- - Increased trading would raise the - The fund could realize gains - The fund anticipates a portfolio turnover
fund's brokerage and related costs in a short period of time rate of approximately 100%
- - Increased short-term capital gains - The fund could protect against - The fund generally avoids short-term
distributions would raise shareholders' losses if a stock is overvalued and trading, except to take advantage of
income tax liability its value later falls attractive or unexpected opportunities or
to meet demands generated by shareholder
activity
</TABLE>
FUND DETAILS 11
<PAGE>
For More Information
For investors who want more information on the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS Contain performance data, information on portfolio
holdings, and a written analysis of market conditions and fund performance for
the fund's most recently completed fiscal year or half-year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) Provides a fuller technical and legal
description of the fund's policies, investment restrictions, and business
structure. This prospectus incorporates the SAI by reference.
Copies of the current versions of these documents may be obtained by contacting:
JPM PIERPONT TAX AWARE U.S. EQUITY FUND
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
TELEPHONE: 1-800-521-5411
HEARING IMPAIRED: 1-888-468-4015
EMAIL: [email protected]
Text-only versions of these documents and this prospectus are available from
the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. (1-800-SEC-0330) and may be viewed on-screen or downloaded from
the SEC's Internet site at http://www.sec.gov. The fund's investment company
registration numbers are 811-07795 and 333-11125.
JPM PIERPONT FUNDS AND THE MORGAN TRADITION
The JPM Pierpont Funds combine a heritage of integrity and financial leadership
with comprehensive, sophisticated analysis and management techniques. Drawing on
J.P. Morgan's extensive experience and depth as an investment manager, the JPM
Pierpont Funds offer a broad array of distinctive opportunities for mutual fund
investors.
JPMORGAN
- --------------------------------------------------------------------------------
JPM PIERPONT FUNDS
ADVISOR DISTRIBUTOR
Morgan Guaranty Trust Company of New York Funds Distributor, Inc.
522 Fifth Avenue 60 State Street
New York, NY 10036 Boston, MA 02109
1-800-521-5411 1-800-221-7930
<PAGE>
JPM SERIES TRUST
TAX AWARE DISCIPLINED EQUITY FUND
TAX AWARE U.S. EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
December 17, 1997
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
FOR THE FUND OR FUNDS LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO TIME, WHICH MAY
BE OBTAINED UPON REQUEST FROM FUNDS DISTRIBUTOR, INC., 60 STATE STREET, SUITE
1300, BOSTON, MASSACHUSETTS 02109, ATTENTION: JPM SERIES TRUST (800) 221-7930.
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Table of Contents
Page
General................................. 1
Investment Objectives and Policies...... 1
Investment Restrictions................. 13
Trustees and Officers................... 16
Investment Advisor...................... 20
Distributor............................. 23
Co-Administrator........................ 23
Services Agent.......................... 24
Custodian and Transfer Agent............ 25
Shareholder Servicing................... 25
Financial Professionals................. 26
Independent Accountants................. 27
Expenses................................ 27
Purchase of Shares...................... 27
Redemption of Shares.................... 28
Dividends and Distributions............. 28
Net Asset Value......................... 29
Performance Data........................ 30
Portfolio Transactions.................. 31
Massachusetts Trust..................... 33
Description of Shares................... 33
Taxes................................... 34
Additional Information.................. 38
Financial Statements.................... 38
Appendix A - Description of Securities
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<PAGE>
GENERAL
Each of Tax Aware Disciplined Equity Fund (the "Disciplined Equity
Fund") and Tax Aware U.S. Equity Fund (the " U.S. Equity Fund", and together
with the Disciplined Equity Fund, the "Equity Funds") is a series of JPM Series
Trust, an open-end management investment company organized as a Massachusetts
business trust (the "Trust"). The Equity Funds are referred to collectively as
the "Funds." The Trustees of the Trust have authorized the issuance and sale of
shares of one class of each Equity Fund (JPM Pierpont Shares).
This Statement of Additional Information provides additional
information with respect to the Funds and should be read in conjunction with the
applicable current prospectus (the "Prospectus"). Capitalized terms not
otherwise defined herein have the meanings assigned to them in the Prospectus.
The Trust's executive offices are located at 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Shares of the Funds are not deposits or obligations of, or guaranteed
or endorsed by, Morgan or any other bank. Shares of the Funds are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other governmental agency. An investment in the Funds is subject to risk
that may cause the value of the investment to fluctuate, and the time it is
redeemed, be higher or lower than the amount originally invested.
INVESTMENT OBJECTIVES AND POLICIES
The following discussion supplements the information in the Prospectus
regarding the investment objective and policies of each Fund.
The Tax Aware Disciplined Equity Fund is designed for investors seeking
enhanced total return relative to that of large and medium sized companies,
typically represented by the S&P 500 Index. The Disciplined Equity Fund's
investment objective is to provide high total return from a broadly diversified
portfolio of equity securities.
The Fund invests primarily in a diversified portfolio of common stocks
and other equity securities. Under normal circumstances, the Fund expects to
invest at least 65% of its total assets in such securities.
Investment Process for the Tax Aware Disciplined Equity Fund
Research: Morgan's more than 20 domestic equity analysts, each an
industry specialist with an average of over 10 years of experience, follow
approximately 600 medium and large capitalization U.S. companies. Their research
goal is to forecast intermediate-term earnings and prospective dividend growth
rates for the companies that they cover.
Valuation: The analysts' forecasts are converted into comparable expected
returns using a proprietary dividend discount model, which calculates the
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intermediate-term earnings by comparing a company's current stock price with its
forecasted dividends and earnings. Within each sector, companies are ranked
according to their relative value and grouped into quintiles: those with the
highest expected returns (Quintile 1) are deemed the most undervalued relative
to their long-term earnings power, while those with the lowest expected returns
(Quintile 5) are deemed the most overvalued.
Stock Selection: A broadly diversified portfolio is constructed using
disciplined buy and sell rules. Purchases are allocated among stocks in the
first three quintiles. A stock that falls into the fourth and fifth quintiles
generally becomes a candidate for sale, either because its price has risen or
its fundamentals have deteriorated. The Fund's sector weightings are matched to
those of the S&P 500 Index, reflecting Morgan's belief that its research has the
potential to add value at the individual stock level, but not at the sector
level. Morgan also controls the Fund's exposure to style and theme bets and
maintains near-market security weightings in individual security holdings. This
process results in an investment portfolio containing approximately 300 stocks.
The Tax Aware U.S. Equity Fund is designed for investors who want an
actively managed portfolio of selected equity securities that seeks to
outperform the S&P 500 Index. The U.S. Equity Fund's investment objective is to
provide a high total return from a portfolio of selected equity securities.
In normal circumstances, at least 65% of the Fund's net assets will be
invested in equity securities consisting of common stocks and other securities
with equity characteristics comprised of preferred stock, warrants, rights,
convertible securities, trust certifications, limited partnership interests and
equity participations (collectively, "Equity Securities"). The Fund's primary
equity investments are the common stock of large sized U.S. corporations and, to
a limited extent, similar securities of foreign corporations.
Investment Process for the Tax Aware U.S. Equity Fund
Research: Morgan's more than 20 domestic equity analysts, each an
industry specialist with an average of over 10 years of experience, follow
approximately 700 predominantly large- and medium-sized U.S. companies --
approximately 500 of which form the universe for the Fund's investments. Their
research goal is to forecast normalized, longer term earnings and dividends for
the companies that they cover. In doing this, they may work in concert with
Morgan's international equity analysts in order to gain a broader perspective
for evaluating industries and companies in today's global economy.
Valuation: The analysts' forecasts are converted into comparable
expected returns using a proprietary dividend discount model, which calculates
the long-term earnings by comparing a company's current stock price with its
forecasted dividends and earnings. Within each sector, companies are ranked
according to their relative value and grouped into quintiles: those with the
highest expected returns (Quintile 1) are deemed the most undervalued relative
to their long-term earnings power, while those with the lowest expected returns
(Quintile 5) are deemed the most overvalued.
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Stock Selection: A diversified portfolio is constructed using
disciplined buy and sell rules. Purchases are concentrated among first-quintile
stocks; the specific names selected reflect the portfolio manager's judgment
concerning the soundness of the underlying forecasts, the likelihood that the
perceived misvaluation will be corrected within a reasonable time frame, and the
magnitude of the risks versus the rewards. Once a stock falls into the third
quintile -- because its price has risen or its fundamentals have deteriorated --
it generally becomes a candidate for sale. The portfolio manager seeks to hold
sector weightings close to those of the S&P 500 Index, reflecting Morgan's
belief that its research has the potential to add value at the individual stock
level, but not at the sector level. Sector neutrality is also seen as a way to
help protect the portfolio from macroeconomic risks, and --together with
diversification -- represents an important element of Morgan's risk control
strategy. A dedicated trading desk handles all transactions for the Fund.
Tax Management Techniques
The Funds use Morgan's proprietary tax sensitive optimization model
which is designed to reduce, but not eliminate, the impact of capital gains
taxes on shareholders' after tax total returns. Each Fund will try to minimize
the realization of net short-term and long-term capital gains by matching
securities sold at a gain with those sold at a loss to the extent practicable.
In addition, when selling a portfolio security, each Fund will generally select
the highest cost basis shares of the security to reduce the amount of realized
capital gains. Because the gain on securities that have been held for more than
one year is subject to a lower federal income tax rate, these securities will
generally be sold before securities held less than one year. The use of these
tax management techniques will not necessarily reduce a Fund's portfolio
turnover rate or prevent the Funds from selling securities to the extent
warranted by shareholder transactions, actual or anticipated economic, market or
issuer-specific developments or other investment considerations. However, the
annual portfolio turnover rate of each Fund is generally not expected to exceed
100%.
Money Market Instruments
Although the Funds intend, under normal circumstances and to the extent
practicable, to be fully invested in equity securities, each Fund may invest in
money market instruments to the extent consistent with its investment objective
and policies. The Funds may invest in money market instruments to invest
temporary cash balances, to maintain liquidity to meet redemptions or as a
defensive measure during, or in anticipation of, adverse market conditions. A
description of the various types of money market instruments that may be
purchased by the Funds appears below. See "Quality and Diversification
Requirements."
U.S. Treasury Securities. Each of the Funds may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, all
of which are backed as to principal and interest payments by the full faith and
credit of the United States.
Additional U.S. Government Obligations. Each of the Funds may invest in
obligations issued or guaranteed by U.S. Government agencies or
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instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. Securities which are backed by the full faith
and credit of the United States include obligations of the Government National
Mortgage Association, the Farmers Home Administration, and the Export-Import
Bank. In the case of securities not backed by the full faith and credit of the
United States, each Fund must look principally to the federal agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitments. Securities in which each Fund may
invest that are not backed by the full faith and credit of the United States
include, but are not limited to: (i) obligations of the Tennessee Valley
Authority, the Federal Home Loan Mortgage Corporation, the Federal Home Loan
Banks and the U.S. Postal Service, each of which has the right to borrow from
the U.S. Treasury to meet its obligations; (ii) securities issued by the Federal
National Mortgage Association, which are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and (iii)
obligations of the Federal Farm Credit System and the Student Loan Marketing
Association, each of whose obligations may be satisfied only by the individual
credits of the issuing agency.
Foreign Government Obligations. Each of the Funds, subject to its
applicable investment policies, may also invest in short-term obligations of
foreign sovereign governments or of their agencies, instrumentalities,
authorities or political subdivisions. These securities may be denominated in
the U.S. dollar or in another currency. See "Foreign Investments."
Bank Obligations. Unless otherwise noted below, each of the Funds may
invest in negotiable certificates of deposit, time deposits and bankers'
acceptances of (i) banks, savings and loan associations and savings banks which
have more than $2 billion in total assets and are organized under the laws of
the United States or any state, (ii) foreign branches of these banks or of
foreign banks of equivalent size (Euros) and (iii) U.S. branches of foreign
banks of equivalent size (Yankees). The Funds will not invest in obligations for
which Morgan Guaranty Trust Company of New York, the Funds' investment advisor
("Morgan" or the "Advisor"), or any of its affiliated persons, is the ultimate
obligor or accepting bank. Each of the Equity Funds may also invest in
obligations of international banking institutions designated or supported by
national governments to promote economic reconstruction, development or trade
between nations (e.g., the European Investment Bank, the Inter-American
Development Bank, or the World Bank).
Commercial Paper. Each of the Funds may invest in commercial paper,
including master demand obligations. Master demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no additional fee,
in its capacity as investment advisor to the Funds and as fiduciary for other
clients for whom it exercises investment discretion. The monies loaned to the
borrower come from accounts managed by Morgan or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. Morgan, acting as a fiduciary on behalf of its clients, has
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the right to increase or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty all or any part of
the principal amount then outstanding on an obligation together with interest to
the date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change.
Repayment of a master demand obligation to participating accounts
depends on the ability of the borrower to pay the accrued interest and principal
of the obligation on demand, which is continuously monitored by Morgan. Since
master demand obligations typically are not rated by credit rating agencies, the
Funds may invest in such unrated obligations only if, at the time of investment,
the obligation is determined by Morgan to have a credit quality which satisfies
the Fund's quality restrictions. See "Quality and Diversification Requirements."
Although there is no secondary market for master demand obligations, such
obligations are considered by the Funds to be liquid because they are payable
upon demand. The Funds do not have any specific percentage limitation on
investments in master demand obligations. It is possible that the issuer of a
master demand obligation could be a client of Morgan to whom Morgan, in its
capacity as a commercial bank, has made a loan.
Repurchase Agreements. Each of the Funds may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Trust's Trustees. In a repurchase agreement, a Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The resale price normally is in excess of
the purchase price, reflecting an agreed upon interest rate. This interest rate
is effective for the period of time the agreement is in effect and is not
related to the coupon rate on the underlying security. A repurchase agreement
may also be viewed as a fully collateralized loan of money by a Fund to the
seller. The period of these repurchase agreements will usually be short, from
overnight to one week, and at no time will the Funds invest in repurchase
agreements for more than thirteen months. The securities which are subject to
repurchase agreements, however, may have maturity dates in excess of thirteen
months from the effective date of the repurchase agreement. The Funds will
always receive securities as collateral whose market value is, and during the
entire term of the agreement remains, at least equal to 100% of the dollar
amount invested by the Funds in each agreement plus accrued interest, and the
Funds will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the seller
defaults, a Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization upon disposal
of the collateral by a Fund may be delayed or limited.
Other Debt Securities. Each of the Funds may invest in other debt
securities with remaining effective maturities of not more than thirteen months
and other obligations described in this Statement of Additional Information.
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Equity Investments
The Equity Funds invest primarily in equity securities consisting of
exchange-traded, OTC and unlisted common and preferred stocks, warrants, rights,
convertible securities, trust certificates, limited partnership interests and
equity participations of U.S. companies and, to a lesser extent, foreign
companies ("Equity Securities"). A discussion of the various types of equity
investments which may be purchased by the Equity Funds appears below. See
"Quality and Diversification Requirements."
Equity Securities. The Equity Securities in which the Equity Funds may
invest may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
The convertible securities in which the Equity Funds may invest include
any debt securities or preferred stock which may be converted into common stock
or which carry the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time.
The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holders' claims on assets and earnings are subordinated to the claims of
other creditors and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors and are
senior to the claims of common shareholders.
Common Stock Warrants
The Equity Funds may invest in common stock warrants that entitle the
holder to buy common stock from the issuer at a specific price (the strike
price) for a specific period of time. The market price of warrants may be
substantially lower than the current market price of the underlying common
stock, yet warrants are subject to similar price fluctuations. As a result,
warrants may be more volatile investments than the underlying common stock.
Warrants generally do not entitle the holder to dividends or voting
rights with respect to the underlying common stock and do not represent any
rights in the assets of the issuer company. A warrant will expire worthless if
it is not exercised prior to the expiration date.
Foreign Investments
The Funds may invest in certain foreign securities. The Tax Aware U.S.
Equity Fund may invest in equity securities of foreign corporations included in
the S&P 500 Index or listed on a national securities exchange. The Fund may
invest in equity securities of foreign issuers that are listed on a national
securities exchange or denominated or principally traded in the U.S. dollar. The
Funds do not expect to invest more than 5%, respectively, of their total assets
at the time of purchase in securities of foreign issuers.
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Investors should realize that the value of the Funds' investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of fund securities and could favorably or unfavorably affect the
Funds' operations. Furthermore, the economies of individual foreign nations may
differ from the U.S. economy, whether favorably or unfavorably, in areas such as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position; it may also be more
difficult to obtain and enforce a judgment against a foreign issuer. Any foreign
investments made by the Funds must be made in compliance with U.S. and foreign
currency restrictions and tax laws restricting the amounts and types of foreign
investments.
Foreign investments may be made directly in securities of foreign
issuers or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other
similar securities of foreign issuers. ADRs are securities, typically issued by
a U.S. financial institution (a "depositary"), that evidence ownership interests
in a security or a pool of securities issued by a foreign issuer and deposited
with the depositary. ADRs include American Depositary Shares and New York
Shares. EDRs are receipts issued by a European financial institution. GDRs,
which are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
securities, typically issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by either a
U.S. or foreign issuer. ADRs, EDRs, GDRs and CDRs may be available for
investment through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security.
Holders of an unsponsored depositary receipt generally bear all costs
of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
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Depository Receipts
Depository receipts are typically issued by a U.S. or foreign bank or
trust company and evidence ownership of underlying securities of a U.S. or
foreign issuer. Unsponsored programs are organized independently and without the
cooperation of the issuer of the underlying securities. As a result, available
information concerning the issuer may not be as current as for sponsored
depositary instruments, and their prices may be more volatile than if they were
sponsored by the issuers of the underlying securities.
Since investments in foreign securities may involve foreign currencies,
the value of a Fund's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Funds may enter into forward
commitments for the purchase or sale of foreign currencies in connection with
the settlement of foreign securities transactions or to manage the Funds'
currency exposure related to foreign investments.
Foreign Currency Exchange Transactions
Because the Funds may buy and sell securities and receive interest and
dividends in currencies other than the U.S. dollar, the Funds may enter from
time to time into foreign currency exchange transactions. The Funds either enter
into these transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market or uses forward contracts to purchase or
sell foreign currencies. The cost of a Fund's spot currency exchange
transactions is generally the difference between the bid and offer spot rate of
the currency being purchased or sold.
A foreign currency forward exchange contract is an obligation by a Fund
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Foreign currency forward exchange
contracts establish an exchange rate at a future date. These contracts are
derivative instruments, as their value derives from the spot exchange rates of
the currencies underlying the contract. These contracts are entered into in the
interbank market directly between currency traders (usually large commercial
banks) and their customers. A foreign currency forward exchange contract
generally has no deposit requirement and is traded at a net price without
commission. Neither spot transactions nor forward foreign currency exchange
contracts eliminate fluctuations in the prices of a Fund's securities or in
foreign exchange rates, or prevent loss if the prices of these securities should
decline.
A Fund may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. A Fund may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Fund would enter into
a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
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for another foreign currency. The Funds only enter into forward contracts to
sell a foreign currency in exchange for another foreign currency if the Advisor
expects the foreign currency purchased to appreciate against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they
limit any potential gain that might be realized should the value of the hedged
currency increase. In addition, forward contracts that convert a foreign
currency into another foreign currency will cause a Fund to assume the risk of
fluctuations in the value of the currency purchased vis a vis the hedged
currency and the U.S. dollar. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies will change as
a consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
Additional Investments
When-Issued and Delayed Delivery Securities. Each of the Funds may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and no interest accrues to a Fund until
settlement takes place. At the time a Fund makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction, reflect the value each day of such securities in determining its
net asset value, and calculate the maturity for the purposes of average maturity
from that date. At the time of settlement a when-issued security may be valued
at less than the purchase price. To facilitate such acquisitions, each Fund will
maintain with the Custodian a segregated account with liquid assets, consisting
of cash or other liquid assets, in an amount at least equal to such commitments.
If a Fund chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation.
Reverse Repurchase Agreements. Each of the Funds may enter into reverse
repurchase agreements. In a reverse repurchase agreement, a Fund sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, a reverse repurchase agreement may
be deemed to be a borrowing of money by the Fund and, therefore, a form of
leverage. The Funds will invest the proceeds of borrowings under reverse
repurchase agreements. In addition, a Fund will enter into a reverse repurchase
agreement only when the expected return to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. A Fund may not
enter into reverse repurchase agreements exceeding in the aggregate one-third of
the market value of its total assets less liabilities (other than reverse
repurchase agreements and other borrowings). See "Investment Restrictions."
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Loans of Portfolio Securities. Each of the Funds may lend its
securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Fund at least equal at all
times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, the borrower will pay the Fund any
income accruing thereon. Loans will be subject to termination by the Funds in
the normal settlement time, generally three business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to a Fund and its
respective shareholders. The Funds may pay reasonable finders' and custodial
fees in connection with a loan. In addition, a Fund will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and no Fund will make any loans in excess of one year. The Funds
will not lend their securities to any officer, Trustee, Director, employee or
other affiliate of the Funds, Morgan or the Funds' distributor, unless otherwise
permitted by applicable law.
Privately Placed and Certain Unregistered Securities. Each Fund may
invest up to 15% of its net assets in illiquid holdings, including certain
restricted and private placement holdings. The price a Fund pays for illiquid
securities or receives upon resale may be lower than the price paid or received
for similar holdings with a more liquid market. Accordingly, the valuation of
these holdings will reflect any limitations on their liquidity. The Funds may
also purchase Rule 144A securities eligible for resale to institutional
investors without registration under the Securities Act of 1933. These
securities may be determined to be liquid in accordance with guidelines
established by Morgan and approved by the Trustees. The Trustees will monitor
Morgan's implementation of these guidelines on a periodic basis.
As to illiquid investments, these restricted holdings are subject to
the risk that the Fund will not be able to sell them at a price the Fund deems
representative of their value. If a restricted holding must be registered under
the Securities Act of 1933, as amended (the "1933 Act"), before it may be sold,
a Fund may be obligated to pay all or part of the registration expenses. Also, a
considerable period may elapse between the time of the decision to sell and the
time the Fund is permitted to sell a holding under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
a Fund might obtain a less favorable price than prevailed when it decided to
sell.
Quality and Diversification Requirements
Each of the Funds intends to meet the diversification requirements of
the 1940 Act. To meet these requirements, 75% of the assets of these Funds is
subject to the following fundamental limitations: (1) the Fund may not invest
more than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government, its agencies and instrumentalities, and (2)
the Fund may not own more than 10% of the outstanding voting securities of any
one issuer. As for the other 25% of the Fund's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
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any one issuer. Investments not subject to the limitations described above could
involve an increased risk to a Fund should an issuer, or a state or its related
entities, be unable to make interest or principal payments or should the market
value of such securities decline.
The Funds will also comply with the diversification requirements imposed by
the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as
a regulated investment company. See "Taxes."
The Funds may invest in convertible debt securities, for which there
are no specific quality requirements. In addition, at the time a Fund invests in
any commercial paper, bank obligation or repurchase agreement, the issuer must
have outstanding debt rated A or higher by Moody's or Standard & Poor's, the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no such ratings are
available, the investment must be of comparable quality in the Advisor's
opinion. At the time a Fund invests in any other short-term debt securities,
they must be rated A or higher by Moody's or Standard & Poor's, or if unrated,
the investment must be of comparable quality in the Advisor's opinion.
In determining suitability of investment in a particular unrated
security, the Advisor takes into consideration asset and debt service coverage,
the purpose of the financing, history of the issuer, existence of other rated
securities of the issuer, and other relevant conditions, such as comparability
to other issuers.
Options and Futures Transactions
Each of the Funds may (a) purchase and sell exchange traded and
over-the-counter (OTC) put and call options on equity securities or indexes of
equity securities, (b) purchase and sell futures contracts on indexes of equity
securities and (c) purchase and sell put and call options on futures contracts
on indexes of equity securities. Each of these instruments is a derivative
instrument as its value derives from the underlying asset or index.
Each Fund may use futures contracts and options for hedging and risk
management purposes. See "Risk Management" below. The Funds may not use futures
contracts and options for speculation.
Each Fund may utilize options and futures contracts to manage its
exposure to changing interest rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge a Fund's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and return
characteristics of a Fund's overall strategy in a manner deemed appropriate to
the Advisor and consistent with the Fund's objective and policies. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
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The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase a Fund's return. While the use of these instruments by a
Fund may reduce certain risks associated with owning its portfolio securities,
these techniques themselves entail certain other risks. If the Advisor applies a
strategy at an inappropriate time or judges market conditions or trends
incorrectly, options and futures strategies may lower a Fund's return. Certain
strategies limit a Fund's possibilities to realize gains as well as limiting its
exposure to losses. A Fund could also experience losses if the prices of its
options and futures positions were poorly correlated with its other investments,
or if it could not close out its positions because of an illiquid secondary
market. In addition, a Fund will incur transaction costs, including trading
commissions and option premiums, in connection with its futures and options
transactions and these transactions could significantly increase the Fund's
turnover rate.
Each Fund may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Fund's net assets, and (ii) the aggregate margin deposits required on all such
futures or options thereon held at any time do not exceed 5% of the Fund's total
assets.
Options
Purchasing Put and Call Options. By purchasing a put option, a Fund obtains the
right (but not the obligation) to sell the instrument underlying the option at a
fixed strike price. In return for this right, the Fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indexes of securities,
indexes of securities prices, and futures contracts. A Fund may terminate its
position in a put option it has purchased by allowing it to expire or by
exercising the option. A Fund may also close out a put option position by
entering into an offsetting transaction, if a liquid market exists. If the
option is allowed to expire, a Fund will lose the entire premium it paid. If a
Fund exercises a put option on a security, it will sell the instrument
underlying the option at the strike price. If a Fund exercises an option on an
index, settlement is in cash and does not involve the actual sale of securities.
If an option is American style, it may be exercised on any day up to its
expiration date. A European style option may be exercised only on its expiration
date.
The buyer of a typical put option can expect to realize a gain if the
price of the underlying instrument falls substantially. However, if the price of
the instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the instrument underlying the option at the option's
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strike price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect to
suffer a loss if security prices do not rise sufficiently to offset the cost of
the option.
Selling (Writing) Put and Call Options. When a Fund writes a put
option, it takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the Fund assumes the obligation
to pay the strike price for the instrument underlying the option if the other
party to the option chooses to exercise it. A Fund may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a put
option the Fund has written, however, the Fund must continue to be prepared to
pay the strike price while the option is outstanding, regardless of price
changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates a Fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an
index of securities or a futures contract is required to deposit cash or
securities or a letter of credit as margin and to make mark to market payments
of variation margin as the position becomes unprofitable.
Options on Indexes. Options on securities indexes are similar to
options on securities, except that the exercise of securities index options is
settled by cash payment and does not involve the actual purchase or sale of
securities. In addition, these options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. A Fund, in purchasing or selling
index options, is subject to the risk that the value of its portfolio securities
may not change as much as an index because the Fund's investments generally will
not match the composition of an index.
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For a number of reasons, a liquid market may not exist and thus a Fund
may not be able to close out an option position that it has previously entered
into. When a Fund purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Fund may incur additional
losses if the counterparty is unable to perform.
Exchange Traded and OTC Options. All options purchased or sold by the
Funds will be traded on a securities exchange or will be purchased or sold by
securities dealers (OTC options) that meet creditworthiness standards approved
by the Funds' Board of Trustees. While exchange-traded options are obligations
of the Options Clearing Corporation, in the case of OTC options, a Fund relies
on the dealer from which it purchased the option to perform if the option is
exercised. Thus, when a Fund purchases an OTC option, it relies on the dealer
from which it purchased the option to make or take delivery of the underlying
securities. Failure by the dealer to do so would result in the loss of the
premium paid by a Fund as well as loss of the expected benefit of the
transaction.
Provided that a Fund has arrangements with certain qualified dealers
who agree that the Fund may repurchase any option it writes for a maximum price
to be calculated by a predetermined formula, a Fund may treat the underlying
securities used to cover written OTC options as liquid. In these cases, the OTC
option itself would only be considered illiquid to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
Futures Contracts and Options on Futures Contracts. The Funds may
purchase or sell (write) futures contracts and purchase put and call options,
including put and call options on futures contracts. In addition, the may sell
(write) put and call options, including options on futures. Futures contracts
obligate the buyer to take and the seller to make delivery at a future date of a
specified quantity of a financial instrument or an amount of cash based on the
value of a securities index. Currently, futures contracts are available on
various types of fixed income securities, including but not limited to U.S.
Treasury bonds, notes and bills, Eurodollar certificates of deposit and on
indexes of fixed income securities and indexes of equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
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contracts sold by a Fund are paid by the Fund into a segregated account, in the
name of the Futures Commission Merchant, as required by the 1940 Act and the
SEC's interpretations thereunder.
Combined Positions. The Funds are permitted to purchase and write
options in combination with each other, or in combination with futures or
forward contracts, to adjust the risk and return characteristics of the overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
Correlation of Price Changes. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match a Fund's
current or anticipated investments exactly. A Fund may invest in options and
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match a
Fund's investments well. Options and futures contracts prices are affected by
such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
Liquidity of Options and Futures Contracts. There is no assurance a
liquid market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a Fund
to enter into new positions or close out existing positions. If the market for a
contract
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is not liquid because of price fluctuation limits or otherwise, it could prevent
prompt liquidation of unfavorable positions, and could potentially require a
Fund to continue to hold a position until delivery or expiration regardless of
changes in its value. As a result, a Fund's access to other assets held to cover
its options or futures positions could also be impaired. (See "Exchange Traded
and OTC Options" above for a discussion of the liquidity of options not traded
on an exchange.)
Position Limits. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, a Fund or the Advisor may be required to
reduce the size of its futures and options positions or may not be able to trade
a certain futures or options contract in order to avoid exceeding such limits.
Asset Coverage for Futures Contracts and Options Positions. The Funds
intend to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which a Fund can commit assets to
initial margin deposits and option premiums. In addition, the Funds will comply
with guidelines established by the SEC with respect to coverage of options and
futures contracts by mutual funds, and if the guidelines so require, will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a large
percentage of a Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
Risk Management
The Funds may employ non-hedging risk management techniques. Examples
of such strategies include using futures and options to alter the duration or
beta of a Fund's portfolio or the mix of securities in a Fund's portfolio. For
example, if Morgan wishes to extend maturities in the California Fund's
portfolio in order to take advantage of an anticipated decline in interest
rates, but does not wish to purchase the underlying long-term securities, it
might cause the Fund to purchase futures contracts on long-term debt securities.
Similarly, if Morgan wishes to reduce a Fund's exposure to fixed income
securities and purchase equities, it could cause the Fund to sell futures
contracts on debt securities and purchase futures contracts on a stock index.
Such non-hedging risk management techniques are not speculative, but may involve
leverage. Leverage magnifies the gains and losses experienced by the Fund as a
result of market fluctuations.
Portfolio Turnover
The Funds' expected portfolio turnover rates are set forth below. A
rate of 100% indicates that the equivalent of all of a Fund's assets have been
sold and reinvested in a year. High portfolio turnover may result in the
realization of substantial net capital gains or losses. To the extent that net
short term capital gains are realized, any distributions resulting from such
gains are considered ordinary income for federal income tax purposes. See
"Taxes" below.
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JPM Pierpont Shares: Tax Aware Disciplined Equity Fund -- For the period January
30, 1997 (commencement of operations) through April 30, 1997 (unaudited): 12%.
For the fiscal year ended October 31, 1997: ____%.
JPM Pierpont Shares: Tax Aware U.S. Equity Fund -- For the period December 18,
1996 (commencement of operations) through April 30, 1997 (unaudited): 16%. For
the fiscal year ended October 31, 1997: ____%.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by the
Trust with respect to each Fund. Except as otherwise noted, these investment
restrictions are "fundamental" policies which, under the 1940 Act, may not be
changed without the vote of a majority of the outstanding voting securities of
the Funds. A "majority of the outstanding voting securities" is defined in the
1940 Act as the lesser of (a) 67% or more of the voting securities present at a
meeting if the holders of more than 50% of the outstanding voting securities are
present or represented by proxy, or (b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the restrictions below apply
at the time of purchasing securities to the market value of a Fund's assets.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof are amended or modified, each Fund may not:
1. Purchase any security if, as a result, more than 25% of its total
assets would be invested in the securities of issuers in any single
industry. This limitation shall not apply to securities issued or
guaranteed as to principal or interest by the U.S. Government, its
agencies or instrumentalities.
2. Issue senior securities. For purposes of this restriction, borrowing
money in accordance with paragraph 3 below, making loans in accordance
with paragraph 8 below, the issuance of shares of beneficial interest
in multiple classes or series, the purchase or sale of options,
futures contracts, forward commitments, swaps and transactions in
repurchase agreements are not deemed to be senior securities.
3. Borrow money, except in amounts not to exceed one third of the Fund's
total assets (including the amount borrowed) (i) from banks for
temporary or short-term purposes or for the clearance of transactions,
(ii) in connection with the redemption of Fund shares or to finance
failed settlements of portfolio trades without immediately liquidating
portfolio securities or other assets, (iii) in order to fulfill
commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets and (iv)
pursuant to reverse repurchase agreements entered into by the Fund.
4. Underwrite the securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund
may be deemed to be an underwriter under the 1933 Act.
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5. Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Fund as a result of the ownership of
securities.
6. Purchase securities on margin (except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities).
7. Purchase or sell commodities or commodity contracts, except the Fund
may purchase and sell financial futures contracts, options on
financial futures contracts and warrants and may enter into swap and
forward commitment transactions.
8. Make loans, except that the Fund (1) may lend portfolio securities
with a value not exceeding one-third of the Fund's total assets, (2)
enter into repurchase agreements, and (3) purchase all or a portion of
an issue of debt securities (including privately issued debt
securities), bank loan participation interests, bank certificates of
deposit, bankers' acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the
securities.
9. In the case of each Equity Fund, with respect to 75% of its total
assets, purchase securities of an issuer (other than the U.S.
Government, its agencies, instrumentalities or authorities or
repurchase agreements collateralized by U.S. Government securities),
if:
a. such purchase would cause more than 5% of the Fund's total
assets to be invested in the securities of such issuer; or
b. such purchase would cause the Fund to hold more than 10% of
the outstanding voting securities of such issuer.
For purposes of fundamental investment restriction (1) regarding
industry concentration, Morgan may classify issuers by industry in accordance
with classifications set forth in the Directory of Companies Filing Annual
Reports With The Securities and Exchange Commission or other sources. In the
absence of such classification or if Morgan determines in good faith based on
its own information that the economic characteristics affecting a particular
issuer make it more appropriately considered to be engaged in a different
industry, Morgan may classify an issuer accordingly. For instance, personal
credit finance companies and business credit finance companies are deemed to be
separate industries and wholly owned finance companies are considered to be in
the industry of their parents if their activities are primarily related to
financing the activities of their parents.
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As a matter of non-fundamental policy, which may be changed by the
Trustees without shareholder approval, each Fund may not:
A. Make short sales of securities unless either (a) after giving
effect to any such short sale, the total market value of all
securities sold short would not exceed 25% of the Fund's net
assets or (b) at all times during which a short position is
open the Fund owns (or has the right to obtain through the
conversion or exchange of other securities) an equal amount of
such securities.
B. Acquire securities of other investment companies, except as
permitted by the 1940 Act or any rule, order or interpretation
thereunder, or in connection with a merger, consolidation,
reorganization, acquisition of assets or an offer of exchange.
C. Acquire any illiquid securities, such as repurchase agreements
with more than seven days to maturity or fixed time deposits
with a duration of over seven calendar days, if as a result
thereof, more than 15% of the market value of the Fund's total
assets would be in investments that are illiquid.
Notwithstanding any other fundamental or non-fundamental investment
restriction or policy, each Fund reserves the right, without the approval of
shareholders, to invest all of its assets in another open-end registered
investment company with substantially the same fundamental investment objective,
restrictions and policies as the Fund.
If any percentage restriction described above is adhered to at the time
of investment, a subsequent increase or decrease in the percentage resulting
from a change in the value of a Fund's assets will not constitute a violation of
the restriction.
TRUSTEES AND OFFICERS
Trustees
The Trustees of the Trust, their principal occupations during the past
five years, business addresses and dates of birth are set forth below.
FREDERICK S. ADDY--Trustee; Retired; Executive Vice President and Chief
Financial Officer since prior to April 1994, Amoco Corporation. His address is
5300 Arbutus Cove, Austin, TX 78746, and his date of birth is January 1, 1932.
WILLIAM G. BURNS--Trustee; Retired, Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779,
and his date of birth is November 2, 1932.
ARTHUR C. ESCHENLAUER--Trustee; Retired; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. His address is 14 Alta Vista Drive,
RD #2, Princeton, NJ 08540, and his date of birth is May 23, 1934.
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MATTHEW HEALEY (*)--Trustee, Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc., since prior to 1992. His address is Pine Tree
Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL 33436, and his date of
birth is August 23, 1937.
MICHAEL P. MALLARDI--Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group since prior to April 1996. His
address is 10 Charnwood Drive, Suffern, NY 10910, and his date of birth is March
17, 1934.
- ------------------------
(*) Mr. Healey is an "interested person" of the Trust and the Advisor as that
term is defined in the 1940 Act.
Each Trustee is currently paid an annual fee of $75,000 (adjusted as of
April 1, 1997) for serving as Trustee of the Trust, each of the Master
Portfolios (as defined below), The JPM Institutional Funds and The JPM Pierpont
Funds and is reimbursed for expenses incurred in connection with service as a
Trustee. The Trustees may hold various other directorships unrelated to these
funds.
Trustee compensation expenses accrued by the Trust for the calendar
year ended December 31, 1996 is set forth below.
AGGREGATE TOTAL TRUSTEE COMPENSATION
TRUSTEE ACCRUED BY THE MASTER
COMPENSATION PORTFOLIOS (*), THE JPM
ACCRUED BY THE INSTITUTIONAL FUNDS, THE JPM
TRUST DURING PIERPONT FUNDS AND THE TRUST
NAME OF TRUSTEE 1996 DURING 1996 (***)
Frederick S. Addy, Trustee $0 $65,000
William G. Burns, Trustee $0 $65,000
Arthur C. Eschenlauer, Trustee $0 $65,000
Matthew Healey, Trustee (**) $0 $65,000
Chairman and Chief Executive
Officer
Michael P. Mallardi, Trustee $0 $65,000
(*) The JPM Pierpont Funds and The JPM Institutional Funds are each multi-
series registered investment companies that are part of a two-tier (master-
feeder) investment fund structure. Each series of The JPM Pierpont Funds and The
JPM Institutional Funds is a feeder fund that invests all of its investable
assets in one of 24 separate master portfolios (collectively the "Master
Portfolios"), 15 of which are registered investment companies.
(**) During 1996, Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
of Pierpont Group, Inc., compensation in the amount of $140,000, contributed
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$21,000 to a defined contribution plan on his behalf and paid $21,500 in
insurance premiums for his benefit.
(***) No investment company within the fund complex has a pension or retirement
plan.
The Trustees, in addition to reviewing actions of the Trust's various
service providers, decide upon matters of general policy. The Trust has entered
into a Fund Services Agreement with Pierpont Group, Inc. to assist the Trustees
in exercising their overall supervisory responsibilities over the affairs of the
Trust. Pierpont Group, Inc. was organized in July 1989 to provide services for
The Pierpont Family of Funds, and the Trustees are the equal and sole
shareholders of Pierpont Group, Inc. The Trust has agreed to pay Pierpont Group,
Inc. a fee in an amount representing its reasonable costs in performing these
services to the Trust and certain other registered investment companies subject
to similar agreements with Pierpont Group, Inc. These costs are periodically
reviewed by the Trustees.
The aggregate fees paid to Pierpont Group, Inc. by each Fund during the
indicated fiscal periods are set forth below:
Tax Aware Disciplined Equity Fund -- For the period January 30, 1997
(commencement of operations) through April 30, 1997 (unaudited): $22. For the
fiscal year ended October 31, 1997: ____%.
Tax Aware U.S. Equity Fund -- For the period December 18, 1996 (commencement of
operations) through April 30, 1997 (unaudited): $100. For the fiscal year ended
October 31, 1997: ____%.
Officers
The Trust's executive officers (listed below), other than the Chief
Executive Officer, are provided and compensated by Funds Distributor, Inc.
("FDI"), a wholly owned indirect subsidiary of Boston Institutional Group, Inc.
The Chief Executive Officer receives no compensation in his capacity as an
officer of the Trust. The officers conduct and supervise the business operations
of the Trust. The Trust has no employees.
The officers of the Trust, their principal occupations during the past
five years and dates of birth are set forth below. The business address of each
of the officers unless otherwise noted is Funds Distributor, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1992. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. His date of birth is August 23, 1937.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President, Chief
Executive Officer, Chief Compliance Officer and Director of FDI, Premier Mutual
Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an officer of
certain investment companies advised or administered by the Dreyfus Corporation
("Dreyfus") or its affiliates. From December 1991 to July 1994, she
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was President and Chief Compliance Officer of FDI. Her date of birth is August
1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant Vice
President and Manager of Treasury Services and Administration of FDI and an
officer of certain investment companies advised or administered by Dreyfus or
its affiliates. Prior to April 1997, Mr. Conroy was Supervisor of Treasury
Services and Administration of FDI. From April 1993 to January 1995, Mr. Conroy
was a Senior Fund Accountant for Investors Bank & Trust Company. Prior to March
1993, Mr. Conroy was employed as a fund accountant at The Boston Company, Inc.
His date of birth is March 31, 1969.
RICHARD W. INGRAM; President and Treasurer. Executive Vice President
and Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or Harris Trust and
Savings Bank ("Harris") or their respective affiliates. Prior to April 1997, Mr.
Ingram was Senior Vice President and Director of Client Service and Treasury
Administration of FDI. From March 1994 to November 1995, Mr. Ingram was Vice
President and Division Manager of First Data Investor Services Group, Inc. From
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc. His date of birth is
September 15, 1955.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant Vice
President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity Funds,
Inc., Waterhouse Investors Cash Management Fund, Inc. and Harris or their
respective affiliates. From June 1994 to January 1996, Ms. Jacoppo-Wood was a
Manager, SEC Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994,
Ms. Jacoppo-Wood was a senior paralegal at The Boston Company Advisors, Inc.
("TBCA"). Her date of birth is December 29, 1966.
ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Vice President
and Senior Counsel of FDI and Premier Mutual and an officer of RCM Capital
Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund,
Inc. and certain investment companies advised or administered by Dreyfus or
Harris or their respective affiliates. Prior to August 1996, Ms. Keeley was
Assistant Vice President and Counsel of FDI and Premier Mutual. Prior to
September 1995, Ms. Keeley was enrolled at Fordham University School of Law and
received her JD in May 1995. Address: 200 Park Avenue, New York, New York 10166.
Her date of birth is September 14, 1969.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI and Premier Mutual and an officer
of Waterhouse Investors Cash Management Fund, Inc. and certain investment
companies advised or administered by Harris or its affiliates. From April 1994
to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial Group. From
1992 to 1994, Mr. Kelley was employed by Putnam Investments in legal and
compliance capacities. His date of birth is December 24, 1964.
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MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual, an
officer of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors
Cash Management Fund, Inc. and certain investment companies advised or
administered by Dreyfus or Harris or their respective affiliates. From 1989 to
1994, Ms. Nelson was an Assistant Vice President and Client Manager for The
Boston Company, Inc. Her date of birth is April 22, 1964.
MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior Vice
President and Director of Strategic Client Initiatives for FDI since December
1996. From December 1989 through November 1996, Mr. Petrucelli was employed with
GE Investments where he held various financial, business development and
compliance positions. He also served as Treasurer of the GE Funds and as
Director of GE Investment Services. Address: 200 Park Avenue, New York, New
York, 10166. His date of birth is May 18, 1961.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Executive Vice
President, Treasurer and Chief Financial Officer, Chief Administrative Officer
and Director Of FDI. Senior Vice President, Treasurer and Chief Financial
Officer, Chief Administrative Officer and Director of Premier Mutual and an
officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or its Affiliates. Prior
to April 1997, Mr. Tower was Senior Vice President, Treasurer and Chief
Financial Officer, Chief Administrative Officer and Director of FDI. From July
1988 to November 1993, Mr. Tower was Financial Manager of The Boston Company,
Inc. His date of birth is June 13, 1962.
INVESTMENT ADVISOR
The Trust has retained Morgan as Investment Advisor to provide
investment advice and portfolio management services to the Funds. Subject to the
supervision of the Trustees, Morgan makes the Funds' day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Funds' investments. The investment advisor to the Funds is Morgan
(Morgan Guaranty Trust Company of New York), a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of the State of Delaware. Morgan, whose principal offices are at
60 Wall Street, New York, New York 10260, is a New York trust company which
conducts a general banking and trust business. The Advisor is subject to
regulation by the New York State Banking Department and is a member bank of the
Federal Reserve System. Through offices in New York City and abroad, Morgan
offers a wide range of services, primarily to governmental, institutional,
corporate and high net worth individual customers in the United States and
throughout the world.
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J.P. Morgan, through Morgan and other subsidiaries, acts as investment
advisor to individuals, governments, corporations, employee benefit plans,
mutual funds and other institutional investors with combined assets under
management of more than $225 billion.
J.P. Morgan has a long history of service as an advisor, underwriter
and lender to an extensive roster of major companies and as a financial advisor
to national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
The basis of Morgan's investment process is fundamental investment
research because the firm believes that fundamentals should determine an asset's
value over the long term. Morgan currently employs over 100 full time research
analysts, among the largest research staffs in the money management industry, in
its investment management divisions located in New York, London, Tokyo,
Frankfurt, Melbourne and Singapore to cover companies, industries and countries
on site. In addition, the investment management divisions employ approximately
300 capital market researchers, portfolio managers and traders. The conclusions
of the equity analysts' fundamental research is quantified into a set of
projected returns for individual companies through the use of a dividend
discount model. These returns are projected for 2 to 5 years to enable analysts
to take a longer term view. These returns, or normalized earnings, are used to
establish relative values among stocks in each industrial sector. These values
may not be the same as the markets' current valuations of these companies. This
provides the basis for ranking the attractiveness of the companies in an
industry according to five distinct quintiles or rankings. This ranking is one
of the factors considered in determining the stocks purchased and sold in each
sector. Morgan's fixed income investment process is based on analysis of real
rates, sector diversification and quantitative and credit analysis.
The investment advisory services Morgan provides to the Funds are not
exclusive under the terms of the Investment Advisory Agreement. Morgan is free
to and does render similar investment advisory services to others. Morgan serves
as investment advisor to personal investors and other investment companies and
acts as fiduciary for trusts, estates and employee benefit plans. Certain of the
assets of trusts and estates under management are invested in common trust funds
for which Morgan serves as trustee. The accounts which are managed or advised by
Morgan have varying investment objectives and Morgan invests assets of such
accounts in investments substantially similar to, or the same as, those which
are expected to constitute the principal investments of the Funds. Such accounts
are supervised by officers and employees of Morgan who may also be acting in
similar capacities for the Funds. See "Portfolio Transactions."
Sector weightings are generally similar to a benchmark with the emphasis
on security selection as the method to achieve investment performance superior
to the benchmark. The benchmarks for the Funds are currently: Disciplined
Equity Fund -- S&P 500; U.S. Equity Fund -- S&P 500.
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary
of J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940 and manages employee benefit funds of corporations, labor unions and
state and local governments and the accounts of other institutional investors,
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including investment companies. Certain of the assets of employee benefit
accounts under its management are invested in commingled pension trust funds for
which Morgan serves as trustee. J.P. Morgan Investment Management Inc. advises
Morgan on investment of the commingled pension trust funds.
The Funds are managed by officers of Morgan who, in acting for their
clients, including the Funds, do not discuss their investment decisions with any
personnel of J.P. Morgan or any personnel of other divisions of Morgan or with
any of its affiliated persons, with the exception of J.P. Morgan Investment
Management Inc.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Advisory
Agreements, the Funds have agreed to pay the Advisor a fee, which is computed
daily and may be paid monthly, equal to the annual rates of each Fund's average
daily net assets shown below.
Tax Aware Disciplined Equity Fund: 0.35%
Tax Aware U.S. Equity Fund: 0.45%
The table below sets forth for each Fund listed the advisory fees paid
to the Advisor for the fiscal periods indicated. See "Expenses" below for
applicable expense limitations.
Tax Aware Disciplined Equity Fund --For the period January 30, 1997
(commencement of operations) through April 30, 1997 (unaudited): $3,028. For the
fiscal year ended October 31, 1997: ____%.
Tax Aware U.S. Equity Fund -- For the period December 18, 1996 (commencement of
operations) through April 30, 1997 (unaudited): $16,337. For the fiscal year
ended October 31, 1997: ____%.
The Investment Advisory Agreement between Morgan and the Trust, on
behalf of each Fund, provides that it will continue in effect for a period of
two years after execution only if specifically approved thereafter annually in
the same manner as the Distribution Agreement. See "Distributor" below. The
Investment Advisory Agreement will terminate automatically if assigned and is
terminable at any time with respect to a Fund without penalty by a vote of a
majority of the Trust's Trustees or by a vote of the holders of a majority of
the Fund's outstanding voting securities on 60 days' written notice to Morgan
and by Morgan on 90 days' written notice to the Fund. See "Additional
Information."
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as Morgan from engaging in the business of underwriting or
distributing securities. The Board of Governors of the Federal Reserve System
has issued an interpretation to the effect that under these laws a bank holding
company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company that continuously issues shares, such as the Trust. The
interpretation does not prohibit a holding company or a subsidiary thereof from
acting as
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investment advisor, administrator, shareholder servicing agent or custodian to
such an investment company. The Advisor believes that it may perform the
services for the Funds contemplated by the Investment Advisory Agreement without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the interpretation of
relevant federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. However, it is possible
that future changes in either federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further judicial or administrative decisions and interpretations of present and
future statutes and regulations, might prevent the Advisor from continuing to
perform such services for the Funds.
If the Advisor were prohibited from acting as investment advisor to any
Fund, it is expected that the Trustees of the Trust would recommend to
shareholders that they approve the Fund's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Under separate agreements, Morgan also provides certain financial, fund
accounting, administrative and shareholder services to the Trust. See "Services
Agent" and "Shareholder Servicing" below.
DISTRIBUTOR
FDI serves as the Trust's exclusive distributor and holds itself
available to receive purchase orders for each Fund's shares. In that capacity,
FDI has been granted the right, as agent of the Trust, to solicit and accept
orders for the purchase of each Fund's shares in accordance with the terms of
the Distribution Agreement between the Trust and FDI. Under the terms of the
Distribution Agreement between FDI and the Trust, FDI receives no compensation
in its capacity as the Funds' distributor.
The Distribution Agreement will continue in effect with respect to each
Fund for a period of two years after execution only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding voting securities or by its Trustees and (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval (see
"Trustees and Officers"). The Distribution Agreement will terminate
automatically if assigned by either party. The Distribution Agreement is also
terminable with respect to a Fund at any time without penalty by a vote of a
majority of the Trustees of the Trust, a vote of a majority of the Trustees who
are not "interested persons" of the Trust, or by a vote of (i) 67% or more of
the Fund's outstanding voting securities present at a meeting if the holders of
more than 50% of the Fund's outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding voting
securities, whichever is less. FDI is a wholly owned indirect subsidiary of
Boston Institutional Group, Inc. The principal offices of FDI are located at 60
State Street, Suite 1300, Boston, Massachusetts 02109.
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CO-ADMINISTRATOR
Under a Co-Administration Agreement with the Trust, FDI also serves as
the Trust's Co-Administrator. The Co-Administration Agreement may be renewed or
amended by the Trustees without a shareholder vote. The Co-Administration
Agreement is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust on not more than 60 days' written notice nor less than
30 days' written notice to the other party. The Co-Administrator may subcontract
for the performance of its obligations, provided, however, that unless the Trust
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and omissions of any subcontractor as it would for its own acts or
omissions. See "Services Agent" below.
FDI (i) provides office space, equipment and clerical personnel for
maintaining the organization and books and records of the Funds; (ii) provides
officers for the Trust; (iii) prepares and files documents required for
notification of state securities administrators; (iv) reviews and files
marketing and sales literature; (v) files regulatory documents and mails
communications to Trustees and investors; and (vi) maintains related books and
records.
For its services under the Co-Administration Agreement, each Fund has
agreed to pay FDI fees equal to its allocable share of an annual complex-wide
charge of $425,000 plus FDI's out-of-pocket expenses. The amount allocable to
each Fund is based on the ratio of the Fund's net assets to the aggregate net
assets of the Trust and certain other registered investment companies subject to
similar arrangements with FDI.
The table below sets forth for each Fund listed the administrative fees
paid to FDI for the fiscal periods indicated. See "Expenses" below for
applicable expense limitations.
Tax Aware Disciplined Equity Fund: -- For the period January 30, 1997
(commencement of operations) through April 30, 1997 (unaudited): $17. For the
fiscal year ended October 31, 1997: ____%.
Tax Aware U.S. Equity Fund: -- For the period December 18, 1996 (commencement of
operations) through April 30, 1997 (unaudited): $73. For the fiscal year ended
October 31, 1997: ____%.
SERVICES AGENT
The Trust, on behalf of each Fund, has entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan pursuant to which
Morgan is responsible for certain administrative and related services provided
to each Fund. The Services Agreement may be terminated at any time, without
penalty, by the Trustees or Morgan, in each case on not more than 60 days' nor
less than 30 days' written notice to the other party.
Under the Services Agreements, Morgan provides certain administrative
and related services to the Fund and the Portfolio, including services related
to tax compliance, preparation of financial statements, calculation of
performance data,
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oversight of service providers and certain regulatory and Board of Trustee
matters.
Under the Services Agreement, each Fund has agreed to pay Morgan fees
equal to its allocable share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Funds and the Master
Portfolios in accordance with the following annual schedule: 0.09% of the first
$7 billion of their aggregate average daily net assets, and 0.04% of their
aggregate average daily net assets in excess of $7 billion, less the
complex-wide fees payable to FDI. The portion of this charge payable by each
Fund is determined by the proportionate share that its net assets bear to the
total net assets of the Trust and the other investment companies provided
administrative services by Morgan.
The table below sets forth for each Fund listed the fees paid to
Morgan, net of fee waivers and reimbursements, as Services Agent. See "Expenses"
below for applicable expense limitations.
Tax Aware Disciplined Equity Fund: -- For the period January 30, 1997
(commencement of operations) through April 30, 1997 (unaudited): $341. For the
fiscal year ended October 31, 1997: ____%.
Tax Aware U.S. Equity Fund: -- For the period December 18, 1996 (commencement of
operations) through April 30, 1997 (unaudited): $1,377. For the fiscal year
ended October 31, 1997: ____%.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Trust's custodian and fund
accounting, transfer and dividend disbursing agent. Pursuant to the Custodian
Contract with the Trust, State Street is responsible for maintaining the books
and records of each Fund's portfolio transactions and holding portfolio
securities and cash. The Custodian maintains portfolio transaction records. As
transfer agent and dividend disbursing agent, State Street is responsible for
maintaining account records detailing the ownership of Fund shares and for
crediting income, capital gains and other changes in share ownership to
shareholder accounts.
SHAREHOLDER SERVICING
The Trust on behalf of each of the Funds has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for Fund shareholders. Under this agreement, Morgan is
responsible for performing, directly or through an agent, shareholder account
administrative and servicing functions, which include but are not limited to
answering inquiries regarding account status and history, the manner in which
purchases and redemptions of Fund shares may be effected, and certain other
matters pertaining to a Fund; assisting customers in designating and changing
dividend options, account designations and addresses; providing necessary
personnel and facilities to coordinate the establishment and maintenance of
shareholder accounts and records with the Funds' transfer agent; transmitting
purchase and redemption orders to the Funds' transfer agent and arranging for
the
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wiring or other transfer of funds to and from customer accounts in connection
with orders to purchase or redeem Fund shares; verifying purchase and redemption
orders, transfers among and changes in accounts; informing FDI of the gross
amount of purchase orders for Fund shares; and providing other related services.
Under the Shareholder Servicing Agreement, each Fund has agreed to pay
Morgan for these services a fee at the following annual rates (expressed as a
percentage of the average daily net asset values of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder servicing agent): JPM
Pierpont Shares: Tax Aware Disciplined Equity Fund: 0.25%; JPM Pierpont Shares:
Tax Aware U.S. Equity Fund: 0.25%. Morgan acts as shareholder servicing agent
for all shareholders.
The table below sets forth for each Fund listed the shareholder
servicing fees paid by each Fund to Morgan, net of fee waivers and
reimbursements, for the fiscal periods indicated. See "Expenses" below for
applicable expense limitations.
JPM Pierpont Shares: Tax Aware Disciplined Equity Fund: -- For the period
January 30, 1997 (commencement of operations) through April 30, 1997
(unaudited): $2,163. For the fiscal year ended October 31, 1997: ____%.
JPM Pierpont Shares: Tax Aware U.S. Equity Fund: -- For the period December 18,
1996 (commencement of operations) through April 30, 1997 (unaudited): $9,076.
For the fiscal year ended October 31, 1997: ____%.
As discussed under "Investment Advisor," the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
and for providing administrative services to the Funds under the Services
Agreement, may raise issues under these laws. However, Morgan believes that it
may properly perform these services and the other activities described in the
Prospectus without violating the Glass-Steagall Act or other applicable banking
laws or regulations.
If Morgan were prohibited from providing any of the services under the
Shareholder Servicing Agreement and the Services Agreement, the Trustees would
seek an alternative provider of such services. In such event, changes in the
operation of the Funds might occur and a shareholder might no longer be able to
avail himself or herself of any services then being provided to shareholders by
Morgan.
The Funds may be sold to or through financial intermediaries who are
customers of Morgan ("financial professionals"), including financial
institutions and broker-dealers, that may be paid fees by Morgan or its
affiliates for services provided to their clients that invest in the Funds. See
"Financial Professionals" below. Organizations that provide recordkeeping or
other services to certain employee benefit or retirement plans that includes the
Funds as an investment alternative may also be paid a fee.
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FINANCIAL PROFESSIONALS
The services provided by financial professionals may include
establishing and maintaining shareholder accounts, processing purchase and
redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the financial professional, transmitting proxy statements,
periodic reports, updated prospectuses and other communications to shareholders
and, with respect to meetings of shareholders, collecting, tabulating and
forwarding executed proxies and obtaining such other information and performing
such other services as Morgan or the financial professional's clients may
reasonably request and agree upon with the financial professional.
Although there is no sales charge levied directly by the Funds,
financial professionals may establish their own terms and conditions for
providing their services and may charge investors a transaction-based or other
fee for their services. Such charges may vary among financial professionals but
in all cases will be retained by the financial professional and not remitted to
the Fund or Morgan.
INDEPENDENT ACCOUNTANTS
The independent accountants of the Trust are Price Waterhouse LLP, 1177
Avenue of the Americas, New York, New York 10036. Price Waterhouse LLP conducts
an annual audit of the financial statements of each of the Funds, assists in the
preparation and/or review of each of the Fund's federal and state income tax
returns and consults with the Funds as to matters of accounting and federal and
state income taxation.
EXPENSES
In addition to the fees payable to Pierpont Group, Inc., Morgan and FDI
under various agreements discussed under "Trustees and Officers," "Investment
Advisor," "Co-Administrator" "Services Agent" and "Shareholder Servicing" above,
the Funds are responsible for usual and customary expenses associated with the
Trust's operations. Such expenses include organization expenses, legal fees,
accounting and audit expenses, insurance costs, the compensation and expenses of
the Trustees, registration fees under federal securities laws, extraordinary
expenses, transfer, registrar and dividend disbursing costs, the expenses of
printing and mailing reports, notices and proxy statements to Fund shareholders,
fees under state securities laws, custodian fees and brokerage expenses.
PURCHASE OF SHARES
Method of Purchase. Investors may open accounts with the Fund only
through the Distributor. All purchase transactions in Fund accounts are
processed by Morgan as shareholder servicing agent and the Fund is authorized to
accept any instructions relating to a Fund account from Morgan as shareholder
servicing agent for the customer. All purchase orders must be accepted by the
Distributor.
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Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Funds
reserves the right to determine the purchase orders that it will accept.
References in the Prospectus and this Statement of Additional
Information to customers of Morgan or a financial professional include customers
of their affiliates and references to transactions by customers with Morgan or a
financial professional include transactions with their affiliates. Only Fund
investors who are using the services of a financial institution acting as
shareholder servicing agent pursuant to an agreement with the Trust on behalf of
the Fund may make transactions in shares of the Fund.
Each Fund may, at its own option, accept securities in payment for
shares. The securities so delivered are valued by the method described under
"Net Asset Value" as of the day the Fund receives the securities. This is a
taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of Morgan, appropriate investments
for the Fund. In addition, securities accepted in payment for shares must: (i)
meet the investment objective and policies of the acquiring Fund; (ii) be
acquired by the applicable Fund for investment and not for resale; (iii) be
liquid securities which are not restricted as to transfer; and (iv) if stock,
have a value which is readily ascertainable as evidenced by a listing on a stock
exchange, OTC market or by readily available market quotations from a dealer in
such securities. Each Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.
Prospective investors may purchase shares with the assistance of a
Financial Professional and the Financial Professional may charge the investor a
fee for this service and other services it provides to its customers. Morgan may
pay fees to financial professionals for services in connection with fund
investments.
REDEMPTION OF SHARES
The Trust, on behalf of each Fund, reserves the right to suspend the
right of redemption and to postpone the date of payment upon redemption as
follows: (i) for up to seven days, (ii) during periods when the New York Stock
Exchange is closed for other than weekends and holidays or when trading thereon
is restricted as determined by the SEC by rule or regulation, (iii) during
periods in which an emergency, as determined by the SEC, exists that causes
disposal by the Fund of, or evaluation of the net asset value of, its portfolio
securities to be unreasonable or impracticable, or (iv) for such other periods
as the SEC may permit.
Redemption In-Kind. Each Fund intends whenever feasible to pay
redemption proceeds by an in-kind distribution of portfolio securities to the
extent that the amount of the redemption exceeds, for the Disciplined Equity
Fund, $500,000 and for the U.S. Equity Fund, $250,000. Although the Funds
generally intend to pay redemptions equal to or less than these respective
amounts in cash, they reserve the right to pay such redemptions in-kind. The
Funds are not permitted
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to make in-kind distributions of redemption proceeds to shareholders who hold
more than 5% of the outstanding shares of a Fund in the absence of an exemptive
order from the SEC. Each Fund has applied to the SEC for such an order but there
can be no assurance that the order will be granted. In general, a Fund will
attempt to select securities for in-kind redemptions that approximate the
overall characteristics of the Fund's portfolio. A Fund will not distribute
illiquid securities to satisfy in-kind redemptions. For purposes of effecting
in-kind redemptions, securities will be valued in the manner regularly used to
value a Fund's portfolio securities. A Fund will not redeem its shares in-kind
in a manner that after giving effect to the redemption would cause it to violate
its investment restrictions or policies. A shareholder who receives an in-kind
distribution of redemption proceeds may incur brokerage or other transaction
costs in liquidating the distributed securities. There is also a risk that the
securities distributed in-kind may decline in value before they can be sold by
the redeeming shareholder. Although an in-kind redemption will not cause a Fund
to realize capital gains or losses, redeeming shareholders may realize taxable
capital gains or losses based on the difference between the cost basis and
redemption price of their shares. No redemption fee will be imposed on the
amount of any shares redeemed in-kind. The method of valuing portfolio
securities is described under "Net Asset Value," and such valuation will be made
as of the same time the redemption price is determined.
Other Redemption Processing Information. Redemption requests may not be
processed if the redemption request is not submitted in proper form. A
redemption request is not in proper form unless the Fund has received the
shareholder's certified taxpayer identification number and address. In addition,
if shares were paid for by check and the check has not yet cleared, redemption
proceeds will not be transmitted until the check has cleared, which may take up
to 15 days. The Fund reserves the right to suspend the right of redemption or
postpone the payment of redemption proceeds to the extent permitted by the SEC.
Shareholders may realize taxable gains upon redeeming shares.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's net investment income and realized net capital gains, if
any, will be distributed at least annually. Dividends and distributions will be
payable to shareholders of record on the record date. If investors purchase JPM
Pierpont Shares shortly before the record date of a dividend or distribution,
they may be subject to adverse tax consequences as described in Taxes.
A Fund's dividends and distributions are paid in additional JPM
Pierpont shares unless the shareholder elects to have them paid in cash. The tax
effects of dividends and distributions are the same whether they are paid in
shares or cash. Cash dividends and distributions either (1) are credited to the
shareholder's account at Morgan or at his financial professional or (2) in the
case of certain Morgan clients, are paid by a check mailed in accordance with
the client's instructions.
NET ASSET VALUE
Each of the Funds computes its net asset value separately for each
class of shares outstanding once daily at 4:15 P.M. New York time on Monday
through
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Friday. The net asset value will not be computed on the day the following legal
holidays are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The Funds may also close for purchases and redemptions at
such other times as may be determined by the Board of Trustees to the extent
permitted by applicable law. The days on which net asset value is determined are
the Funds' business days.
Equity Funds. The value of investments listed on a domestic securities
exchange, other than options on stock indices, is based on the last sale prices
at the close of regular trading on the New York Stock Exchange (normally 4:00
P.M., New York time) or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on such exchange. Unlisted
securities are valued at the average of the quoted bid and asked prices in the
OTC market. The value of each security for which readily available market
quotations exist is based on a decision as to the broadest and most
representative market for such security. For purposes of calculating net asset
value all assets and liabilities initially expressed in foreign currencies will
be converted into U.S. dollars at the prevailing market rates available at the
time of valuation.
Options on stock indexes traded on national securities exchanges are
valued at the close of options trading on such exchanges which is currently 4:10
P.M., New York time. Stock index futures and related options, which are traded
on commodities exchanges, are valued at their last sales price as of the close
of such commodities exchanges which is currently 4:15 P.M., New York time.
Securities or other assets for which market quotations are not readily available
are valued at fair value in accordance with procedures established by and under
the general supervision and responsibility of the Trustees. Such procedures
include the use of independent pricing services which use prices based upon
yields or prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Short-term
investments which mature in 60 days or less are valued at amortized cost if
their original maturity was 60 days or less, or by amortizing their value on the
61st day prior to maturity, if their original maturity when acquired by the Fund
was more than 60 days, unless this is determined not to represent fair value by
the Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of tax
equivalent yield actual distributions, total return or capital appreciation for
the various Fund classes in reports, sales literature and advertisements
published by the Trust. Current performance information may be obtained by
calling Morgan at (800) 766-7722.
The classes of shares of each Fund may bear different shareholder
servicing fees and other expenses, which may cause the performance of a class to
differ from the performance of another class. Performance quotations will be
computed separately for each class of a Fund's shares. Any fees charged by an
institution directly to its customers' accounts in connection with investments
in the Funds will not be included in calculations of total return.
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Total Return Quotations. The average annual total return of each Fund's
class(es) for a period is computed by assuming a hypothetical initial payment of
$1,000. It is then assumed that all of the dividends and distributions by the
Fund over the period are reinvested. It is then assumed that at the end of the
period, the entire amount is redeemed. The average annual total return is then
calculated by determining the annual rate required for the initial payment to
grow to the amount which would have been received upon redemption.
Aggregate total returns, reflecting the cumulative percentage change
over a measuring period, may also be calculated.
Below is set forth historical return information for the Funds for the
periods indicated:
JPM Pierpont Shares: Tax Aware Disciplined Equity Fund (10/31/97): Average
annual total return, 1 year: ____; average annual total return, 5 years: N/A;
average annual total return, commencement of operations to period end: 2.50%;
aggregate total return, 1 year: N/A; aggregate total return, 5 years: N/A;
aggregate total return, commencement of operations to period end: 2.50%.
JPM Pierpont Shares: Tax Aware U.S. Equity Fund (10/31/97): Average annual total
return, 1 year: ____; average annual total return, 5 years: N/A; average annual
total return, commencement of operations to period end: 9.02%; aggregate total
return, 1 year: N/A; aggregate total return, 5 years: N/A; aggregate total
return, commencement of operations to period end: 9.02%.
General. Performance will vary from time to time depending upon market
conditions, the composition of the portfolio, and operating expenses.
Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in a Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.
Comparative performance information may be used from time to time in
advertising shares of the Funds, including data from Lipper Analytical Services,
Inc., Micropal, Inc., Ibbotson Associates, Morningstar Inc., the S&P 500, Lehman
Brothers 1- to 16-Year Municipal Bond Index, the Dow Jones Industrial Average,
the Frank Russell Indexes and other industry publications.
PORTFOLIO TRANSACTIONS
Morgan places orders for all Funds 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 all
the Funds. See "Investment Objectives and Policies."
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
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profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On occasion,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
In connection with portfolio transactions for the Equity Funds, the
overriding objective is to obtain the best execution of purchase and sale
orders.
In selecting a broker, Morgan considers a number of factors including:
the price per unit of the security; the broker's reliability for prompt,
accurate confirmations and on-time delivery of securities; the broker's
financial condition; and the commissions charged. A broker may be paid a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction if, after considering the foregoing factors,
Morgan decides that the broker chosen will provide the best execution. Morgan
monitors the reasonableness of the brokerage commissions paid in light of the
execution received. The Trust's Trustees review regularly the reasonableness of
commissions and other transaction costs incurred by the Funds in light of facts
and circumstances deemed relevant from time to time and, in that connection,
will receive reports from Morgan and published data concerning transaction costs
incurred by institutional investors generally.
Research services provided by brokers to which Morgan has allocated
brokerage business in the past include economic statistics and forecasting
services, industry and company analyses, portfolio strategy services,
quantitative data, and consulting services from economists and political
analysts. Research services furnished by brokers are used for the benefit of all
of Morgan's clients and not solely or necessarily for the benefit of an
individual Fund. Morgan believes that the value of research services received is
not determinable and does not significantly reduce its expenses. The Funds do
not reduce their fee to Morgan by any amount that might be attributable to the
value of such services.
The Equity Funds paid the following approximate brokerage commissions
for the indicated fiscal periods:
Tax Aware Disciplined Equity Fund (for the period January 30, 1997 (commencement
of operations) through April 30, 1997) (unaudited): $878. For the fiscal year
ended October 31, 1997: $____.
Tax Aware U.S. Equity Fund (for the period December 18, 1996 (commencement of
operations) through April 30, 1997) (unaudited): $792. For the fiscal year ended
October 31, 1997: $____.
Subject to the overriding objective of obtaining the best execution of
orders, Morgan may allocate a portion of a Fund's brokerage transactions to
affiliates of Morgan. In order for affiliates of Morgan to effect any portfolio
transactions for a Fund, the commissions, fees or other remuneration received by
such affiliates must be reasonable and fair compared to the commissions, fees,
or other remuneration paid to other brokers in connection with comparable
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transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. Furthermore, the Trust's
Trustees, including a majority of the Trustees who are not "interested persons,"
have adopted procedures which are reasonably designed to provide that any
commissions, fees, or other remuneration paid to such affiliates are consistent
with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to
or through Morgan or FDI or any "affiliated person" (as defined in the 1940 Act)
thereof when such entities are acting as principals, except to the extent
permitted by law. In addition, the Funds will not purchase securities from any
underwriting group of which Morgan or an affiliate of Morgan is a member, except
to the extent permitted by law.
Investment decisions made by Morgan 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 Funds may only sell
a security to each other or to other accounts managed by Morgan 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 Morgan deems the
purchase or sale of a security to be in the best interests of a Fund, as well as
other clients including other Funds, Morgan to the extent permitted by
applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for a 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 Morgan in the manner it considers to be most equitable and consistent
with Morgan's fiduciary obligations to a Fund. In some instances, this procedure
might adversely affect a Fund.
MASSACHUSETTS TRUST
The Trust is a "Massachusetts business trust" of which each Fund is a
separate and distinct series. A copy of the Declaration of Trust for the Trust
is on file in the office of the Secretary of The Commonwealth of Massachusetts.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. However, the Trust's Declaration of Trust provides that the shareholders
will not be subject to any personal liability for the acts or obligations of any
Fund and that every written agreement, obligation, instrument or undertaking
made on behalf of any Fund will contain a provision to the effect that the
shareholders are not personally liable thereunder.
Effective May 12, 1997, the name of the U.S. Equity Fund was changed
from "Tax Aware Equity Fund" to "Tax Aware U.S. Equity Fund".
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The Trust's Declaration of Trust further provides that no Trustee,
officer, employee, or agent of the Trust is liable to a Fund or to a
shareholder, and that no Trustee, officer, employee, or agent is liable to any
third persons in connection with the affairs of a Fund, except as such liability
may arise from his or its own bad faith, willful misfeasance, gross negligence
or reckless disregard of his or its duties to such third persons ("disabling
conduct"). It also provides that all third persons must look solely to Fund
property for satisfaction of claims arising in connection with the affairs of a
Fund. The Trust's Declaration of Trust provides that a Trustee, officer,
employee, or agent is entitled to be indemnified against all liability in
connection with the affairs of a Fund, except liabilities arising from disabling
conduct.
DESCRIPTION OF SHARES
Each Fund represents a separate series of shares of beneficial interest of
the Trust. Fund shares are further divided into separate classes. See
"Massachusetts Trust."
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares of any series
without changing the proportionate beneficial interest of each shareholder in a
Fund. To date, JPM Pierpont Shares of each Equity Fund described in this
Statement of Additional Information have been authorized and are currently
available for sale to the public.
Each share represents an equal proportional interest in a Fund with
each other share of the same class. Upon liquidation of a Fund, holders are
entitled to share pro rata in the net assets of a Fund available for
distribution to such shareholders. Shares of a Fund have no preemptive or
conversion rights.
The shareholders of the Trust are entitled to one full or fractional
vote for each dollar or fraction of a dollar invested in shares. Subject to the
1940 Act, the Trustees have the power to alter the number and the terms of
office of the Trustees, to lengthen their own terms, or to make their terms of
unlimited duration, subject to certain removal procedures, and to appoint their
own successors. However, immediately after such appointment, the requisite
majority of the Trustees must have been elected by the shareholders of the
Trust. The voting rights of shareholders are not cumulative. The Trust does not
intend to hold annual meetings of shareholders. The Trustees may call meetings
of shareholders for action by shareholder vote if required by either the 1940
Act or the Trust's Declaration of Trust.
Shareholders of the Trust have the right, upon the declaration in
writing or vote of shareholders whose shares represent two-thirds of the net
asset value of the Trust, to remove a Trustee. The Trustees will call a meeting
of shareholders to vote on removal of a Trustee upon the written request of the
shareholders whose shares represent 10% of the net asset value of the Trust. The
Trustees are also required, under certain circumstances, to assist shareholders
in communicating with other shareholders.
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As of October 1, 1997, the following owned of record or, to the
knowledge of management, beneficially owned more than 5% of the outstanding
shares of:
JPM Pierpont Shares: Tax Aware Disciplined Equity Fund -- A. Lledo Perez
(9.25%); Morgan as agent for P. Conde (5.74%); Morgan as agent for T. Andrew
McWethy Nordal and M. McWethy (8.20%); Morgan as agent for J.E. Young (13.18%).
The address of each owner listed above is c/o Morgan, 522 Fifth Avenue,
New York, New York 10036. As of the date of this Statement of Additional
Information the officers and Trustees as a group owned less than 1% of the
beneficial shares of each Fund.
TAXES
The following discussion of tax consequences is based on U.S. federal tax
laws in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action.
Each Fund intends to qualify and remain qualified as a regulated investment
company under Subchapter M of the Code. As a regulated investment company, a
Fund must, among other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock, securities or foreign
currency and other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months, or foreign
currencies (or options, futures or forward contracts on foreign currencies) held
less than three months, but only if such currencies (or options, futures or
forward contracts on foreign currencies) are not directly related to a Fund's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities); and (c)diversify its holdings so that, at
the end of each fiscal quarter, (i) at least 50% of the value of the Fund's
total assets is represented by cash, U.S. Government securities, investments in
other regulated investment companies and other securities limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's total assets, and
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies). Effective July 1, 1998, the 30% of gross income
test described in paragraph (b) above will no longer apply to the Funds.
As a regulated investment company, a Fund (as opposed to its shareholders) will
not be subject to federal income taxes on the net investment income and capital
gains that it distributes to its shareholders, provided that at least 90% of its
net investment income and realized net short-term capital gains in excess of net
long-term capital losses for the taxable year is distributed in accordance with
the Code's requirements.
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Under the Code, a Fund will be subject to a 4% excise tax on a portion of
its undistributed taxable income and capital gains if it fails to meet certain
distribution requirements by the end of the calendar year. Each Fund intends to
make distributions in a timely manner and accordingly does not expect to be
subject to the excise tax.
For federal income tax purposes, dividends that are declared by a Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
Distributions of net investment income, certain foreign currency gains, and
realized net short-term capital gain in excess of net long-term capital loss
(other than exempt interest dividends) are generally taxable to shareholders of
the Funds as ordinary income whether such distributions are taken in cash or
reinvested in additional shares. The Funds expect that a portion of these
distributions to corporate shareholders will be eligible for the
dividends-received deduction subject to applicable limitations under the Code.
If dividend payments exceed income earned by a Fund, the over distribution would
be considered a return of capital rather than a dividend payment. The Funds
intend to pay dividends in such a manner so as to minimize the possibility of a
return of capital. Distributions of net long-term capital gain (i.e., net
long-term capital gain in excess of net short-term capital loss) are taxable to
shareholders of a Fund as long-term capital gain, regardless of whether such
distributions are taken in cash or reinvested in additional shares and
regardless of how long a shareholder has held shares in the Fund. As a result of
the enactment of the Taxpayer Relief Act of 1997 (the "Act"), long-term capital
gain of an individual is generally subject to a maximum rate of 28% in respect
of a capital asset held directly by such individual for more than one year but
not more than eighteen months, and the maximum rate is reduced to 20% in respect
of a capital asset held in excess of 18 months. The Act authorizes the Treasury
department to promulgate regulations that would apply these rules in the case of
long-term capital gain distributions made by a Fund. In addition, no loss will
be allowed on the redemption or exchange of shares of a Fund if, within a period
beginning 30 days before the date of such redemption or exchange and ending 30
days after such date, the shareholder acquires (such as through dividend
reinvestment) securities that are substantially identical to shares of the Fund.
Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where, if applicable, a put is acquired or a
call option is written thereon or the straddle rules described below are
otherwise applicable. Other gains or losses on the sale of securities will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will be treated as gains and losses from
the sale of securities. Except as described below, if an option written by a
Fund lapses or is terminated through a closing transaction, such as a repurchase
by the Fund of the option from its holder, the Fund will realize a short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount paid by the Fund in the closing transaction. If securities are
purchased by a Fund pursuant to the exercise of a put option written by it, the
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Fund will subtract the premium received from its cost basis in the securities
purchased.
Any distribution of net investment income or capital gains will have the
effect of reducing the net asset value of Fund shares held by a shareholder by
the same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect to
such shares. In addition, no loss will be allowed on the redemption or exchange
of shares of the Fund, if within a period beginning 30 days before the date of
such redemption or exchange and ending 30 days after such date, the shareholder
acquires (such as through dividend reinvestment) securities that are
substantially identical to shares of the Fund.
Under the Code, gains or losses attributable to disposition of foreign
currency or to certain foreign currency contracts, or to fluctuations in
exchange rates between the time a Fund accrues income or receivables or expenses
or other liabilities denominated in a foreign currency and the time a Fund
actually collects such income or pays such liabilities, are generally treated as
ordinary income or ordinary loss. Similarly, gains or losses on the disposition
of debt securities held by a Fund, if any, denominated in foreign currency, to
the extent attributable to fluctuations in exchange rates between the
acquisition and disposition dates are also treated as ordinary income or loss.
Forward currency contracts, options and futures contracts entered into by a
Fund may create "straddles" for U.S. federal income tax purposes and this may
affect the character and timing of gains or losses realized by the Fund on
forward currency contracts, options and futures contracts or on the underlying
securities. Certain straddles treated as short sales for tax purposes may also
result in the loss of the holding period of underlying securities for purposes
of the 30% of gross income test described above, and therefore, a Fund's ability
to enter into forward currency contracts, options and futures contracts may be
limited, under current law. Effective as of July 1, 1998, the 30% of gross
income test will no longer apply to the Funds.
Certain options, futures and foreign currency contracts held by a Fund at
the end of each taxable fiscal year will be required to be "marked to market"
for federal income tax purposes -- i.e., treated as having been sold at market
value. For options and futures contracts, 60% of any gain or loss recognized on
these deemed sales and on actual dispositions will be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss regardless of how long the Fund has held such options or futures.
However, gain
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or loss recognized on certain foreign currency contracts will be treated as
ordinary income.
The Equity Funds may invest in Equity Securities of foreign issuers. If a
Fund purchases shares in certain foreign investment funds (referred to as
passive foreign investment companies ("PFICs") under the Code), the Fund may be
subject to federal income tax on a portion of an "excess distribution" from such
foreign investment fund, including any gain from the disposition of such shares,
even though such income may have to be distributed as a taxable dividend by the
Fund to its shareholders. In addition, certain interest charges may be imposed
on a Fund as a result of such distributions. Alternatively, a Fund may in
certain circumstances include each year in its income and distribute to
shareholders a pro rata portion of the PFIC's income, whether or not distributed
to the Fund.
For taxable years of the Funds beginning after 1997, the Funds will be
permitted to "mark to market" any marketable stock held by a Fund in a PFIC. If
a Fund made such an election, it would include in income each year an amount
equal to its share of the excess, if any, of the fair market value of the PFIC
stock as of the close of the taxable year over the adjusted basis of such stock.
The Fund would be allowed a deduction for its share of the excess, if any, of
the adjusted basis of the PFIC stock over its fair market value as of the close
of the taxable year, but only to the extent of any net mark-to-market gains with
respect to the stock included by the Fund for prior taxable years.
Foreign Shareholders. Dividends of net investment income and distributions
of realized net short-term gain in excess of net long-term loss to a shareholder
who, as to the United States, is a nonresident alien individual, fiduciary of a
foreign trust or estate, foreign corporation or foreign partnership (a "foreign
shareholder") will be subject to U.S. withholding tax at the rate of 30% (or
lower treaty rate) unless the dividends are effectively connected with a U.S.
trade or business of the shareholder, in which case the dividends will be
subject to tax on a net income basis at the graduated rates applicable to U.S.
individuals or domestic corporations. Distributions treated as long term capital
gains to foreign shareholders will not be subject to U.S. tax unless the
distributions are effectively connected with the shareholder's trade or business
in the United States or, in the case of a shareholder who is a nonresident alien
individual, the shareholder was present in the United States for more than 182
days during the taxable year and certain other conditions are met.
If a correct and certified taxpayer identification number is not on file,
the Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
In the case of a foreign shareholder who is a nonresident alien individual
or foreign entity, a Fund may be required to withhold U.S. federal income tax as
"backup withholding" at the rate of 31% from distributions treated as long-term
capital gains from the proceeds of redemptions, exchanges or other dispositions
of Fund shares unless IRS Form W-8 is provided. Transfers by gift of shares of a
Fund by a foreign shareholder who is a nonresident alien individual will not be
subject to U.S. federal gift tax, but the value of shares of the Fund held by
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such a shareholder at his or her death will be includible in his or her gross
estate for U.S. federal estate tax purposes.
Foreign Taxes. It is expected that the Funds may be subject to foreign
withholding taxes or other foreign taxes with respect to income (possibly
including, in some cases, capital gains) received from sources within foreign
countries.
State and Local Taxes. Each Fund may be subject to state or local taxes in
jurisdictions in which the Fund is deemed to be doing business. In addition, the
treatment of a Fund and its shareholders in those states which have income tax
laws might differ from treatment under the federal income tax laws. Shareholders
should consult their own tax advisors with respect to any state or local taxes.
Other Taxation. The Trust is organized as a Massachusetts business Trust
and, under current law, neither the Trust nor any Fund is liable for any income
or franchise tax in The Commonwealth of Massachusetts, provided that each Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code.
ADDITIONAL INFORMATION
Telephone calls to the Funds, Morgan or State Street may be tape recorded.
With respect to the securities offered hereby, this Statement of Additional
Information and the Prospectus do not contain all the information included in
the Trust's registration statement filed with the SEC under the 1933 Act and the
Trust's registration statement filed under the 1940 Act. Pursuant to the rules
and regulations of the SEC, certain portions have been omitted. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in this Statement of Additional Information and the
Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectus and this Statement of Additional Information, in connection with the
offer contained therein and, if given or made, such other information or
representations must not be relied upon as having been authorized by any of the
Trust, the Funds or FDI. The Prospectus and this Statement of Additional
Information do not constitute an offer by any Fund or by FDI to sell or solicit
any offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful for the Fund or FDI to make such offer in such
jurisdictions.
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FINANCIAL STATEMENTS
The following financial statements of the Tax Aware Disciplined Equity
Fund and the Tax Aware U.S. Equity Fund are incorporated herein by reference
from their respective semi-annual reports dated April 30, 1997 made with the SEC
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder. Any of the
following financial reports are available without charge upon request by calling
J.P. Morgan Fund Services at (800) 521-5411 for JPM Pierpont Shares: Tax Aware
Disciplined Equity Fund and JPM Pierpont Shares: Tax Aware U.S. Equity Fund. The
audited statement of assets and liabilities and the reports thereon of Price
Waterhouse LLP for the U.S. Equity Fund and the Disciplined Equity Fund as of
November 4, 1996 are attached hereto.
Date of Semi-Annual Date of Annual
Report; Date Semi- Report; Date Annual
Annual Report Filed; Report Filed; and
Name of Fund and Accession Number Accession Number
- ------------------------------- ----------------------- ---------------------
Tax Aware Disciplined Equity 04/30/97 N/A
Fund 06/19/97
0000912057-97-020764
Tax Aware U.S. Equity Fund 04/30/97 N/A
06/19/97
0000912057-97-020765
- ------------------------------- ----------------------- ---------------------
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APPENDIX A
Description of Securities Ratings
STANDARD & POOR'S
Corporate and Municipal Bonds
AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB-B - Debt rated BB and B is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Commercial Paper, including Tax Exempt
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
Short-Term Tax-Exempt Notes
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest rating
assigned by Standard & Poor's and has a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory capacity
to pay principal and interest.
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MOODY'S
Corporate and Municipal Bonds
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Commercial Paper, including Tax Exempt
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
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- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - Well established access to a range of financial markets and assured sources
of alternate liquidity.
Short-Term Tax Exempt Notes
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes with this
rating enjoy strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.
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PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are included in Part A:
Financial Highlights:
JPM Pierpont Shares: Tax Aware Disciplined Equity Fund (unaudited)
JPM Pierpont Shares: Tax Aware U.S. Equity Fund (unaudited)
The following financial statements are included in Part B:
Tax Aware Disciplined Equity Fund:
Statement of Assets and Liabilities at November 4, 1996
Report of Independent Accountants
Tax Aware U.S. Equity Fund:
Statement of Assets and Liabilities at November 4, 1996
Report of Independent Accountants
The following financial statements are incorporated by reference into
Part B:
Tax Aware Disciplined Equity Fund: Schedule of Investments at April 30,
1997 (unaudited)
Statement of Assets and Liabilities at April 30, 1997 (unaudited)
Statement of Operations for the fiscal period ended
April 30, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1997 (unaudited)
Tax Aware U.S. Equity Fund:
Schedule of Investments at April 30, 1997 (unaudited)
Statement of Assets and Liabilities at April 30, 1997 (unaudited)
Statement of Operations for the fiscal period ended
April 30, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements April 30, 1997 (unaudited)
(b) Exhibits
1 Declaration of Trust.(1)
1(a) Amendment No. 1 to Declaration of Trust, Amended and Restated
Establishment and Designation of Series and Classes of Shares.(2)
1(b) Amendment No. 2 to Declaration of Trust, Second Amended and Restated
Establishment and Designation of Series and Classes of Shares.(4)
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2 Restated By-Laws.(2)
5 Form of Investment Advisory Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan").(2)
6 Form of Distribution Agreement between Registrant and Funds Distributor,
Inc. ("FDI").(2)
8 Form of Custodian Contract between Registrant and State Street Bank and
Trust Company ("State Street").(2)
9(a) Form of Co-Administration Agreement between Registrant and FDI.(2)
9(b) Form of Administrative Services Agreement between Registrant and
Morgan.(2)
9(c) Form of Transfer Agency and Service Agreement between Registrant and
State Street.(2)
9(d) Form of Shareholder Servicing Agreement between Registrant and
Morgan.(2)
11 Consents of independent accountants.(5)
13 Purchase agreement with respect to Registrant's initial shares.(2)
16 Schedule for computation of performance quotations.(2)
19 Powers of attorney.(6)
20 18f-3 Plan.(3)
27.1 Financial data schedule.(5)
27.2 Financial data schedule.(5)
- -------------------
(1) Incorporated herein from Registrant's registration statement on Form
N-1A as filed on August 29, 1996 (Accession No. 0000912057-96-019242).
(2) Incorporated herein from Registrant's registration statement on Form
N-1A as filed on November 8, 1996 (Accession No. 0001016964-96-000034).
(3) Incorporated herein from Registrant's registration statement on Form
N-1A as filed on February 10, 1997 (Accession No. 0001016964-97-000014).
(4) Incorporated herein from Registrant's registration statement on Form
N-1A as filed on June 19, 1997 (Accession No. 0001016964-97-000117).
(5) To be filed by amendment.
(6) Filed herewith.
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ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class: Shares of Beneficial Interest (par value $0.001)
As of October 14, 1997
Tax Aware Disciplined Equity Fund: JPM Pierpont Shares: 82
Tax Aware U.S. Equity Fund: JPM Pierpont Shares: 141
California Bond Fund: JPM Pierpont Shares: 8
California Bond Fund: JPM Institutional Shares: 36
ITEM 27. 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 SEC such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, trustee,
officer, or controlling person of the Registrant and the principal underwriter
in connection with the successful defense of any action, suite or proceeding) is
asserted against the Registrant by such director, trustee, officer or
controlling person or principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Morgan is a New York trust company which is a wholly owned subsidiary of
J.P. Morgan & Co. Incorporated. Morgan conducts a general banking and trust
business.
To the knowledge of the Registrant, none of the directors, except those
set forth below, or executive officers of Morgan is or has been during the past
two fiscal years engaged in any other business, profession, vocation or
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employment of a substantial nature, except that certain officers and directors
of Morgan also hold various positions with, and engage in business for, J.P.
Morgan & Co. Incorporated, which owns all the outstanding stock of Morgan. Set
forth below are the names, addresses, and principal business of each director of
Morgan who is engaged in another business, profession, vocation or employment of
a substantial nature.
Paul A. Allaire: Chairman and Chief Executive Officer, Xerox Corporation
(office imaging systems). His address is Xerox Corporation, P.O. Box 1600,
800 Long Ridge Road, Stamford, CT 06904.
Riley P. Bechtel: Chairman and Chief Executive Officer, Bechtel Group,
Inc. (architectural design and construction). His address is Bechtel Group,
Inc., P.O. Box 193965, San Francisco, CA 94119-3965.
Martin Feldstein: President and Chief Executive Officer, National Bureau
of Economic Research, Inc. (national research institution). His address is
National Bureau of Economic Research, Inc., 1050 Massachusetts Avenue,
Cambridge, MA 02138-5398.
Ellen V. Futter: President, American Museum of Natural History (not-for-
profit organization). Her address is American Museum of Natural History,
Central Park West at 79th Street, New York, NY 10024.
Hanna H. Gray: President Emeritus and Harry Pratt Judson Distinguished
Service Professor of History, The University of Chicago (academic
institution). Her address is The University of Chicago, Department of History,
1126 East 59th Street, Chicago, IL 60637.
James R. Houghton: Retired Chairman of the Board, Corning Incorporated
(glass products). His address is R.D. #2 Spencer Hill Road, Corning, NY 14830.
James L. Ketelsen: Retired Chairman and Chief Executive Officer,
Tenneco Inc. (oil, pipe-lines, and manufacturing). His address is 10 South
Briar Hollow 7, Houston, TX 77027.
John A. Krol: President and Chief Executive Officer, E.I. du Pont de
Nemours and Company (chemicals and energy company). His address is E.I. du
Pont de Nemours and Company, 1007 Market Street, Wilmington, DE 19898.
Lee R. Raymond: Chairman of the Board and Chief Executive Officer, Exxon
Corporation (oil, natural gas, and other petroleum products). His address is
Exxon Corporation, 5959 Las Colinas Boulevard, Irving, TX 75039-2298.
Richard D. Simmons: Retired; Former President, The Washington Post
Company and International Herald Tribune (newspapers). His address is P.O. Box
242, Sperryville, VA 22740.
Douglas C. Yearley: Chairman, President and Chief Executive Officer,
Phelps Dodge Corporation (chemicals). His address is Phelps Dodge Corporation,
2600 N. Central Avenue, Phoenix, AZ 85004-3014.
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ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FDI, located at 60 State Street, Suite 1300, Boston, Massachusetts 02109, is
the principal underwriter of the Registrant's shares. FDI is an indirectly
wholly owned subsidiary of Boston Institutional Group, Inc., a holding company,
all of whose outstanding shares are owned by key employees. FDI is a
broker-dealer registered under the Securities Exchange Act of 1934, as amended.
FDI acts as principal underwriter of the following investment companies other
than the Registrant:
BJB Investment Funds
Burridge Funds
Foreign Fund, Inc.
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
H.T. Insight Funds, Inc. d/b/a
Harris Insight Funds
LKCM Fund
Monetta Fund, Inc.
Monetta Trust
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
The Skyline Funds
St. Clair Money Market Fund
Waterhouse Investors Cash Management Funds, Inc.
The JPM Institutional Funds
The JPM Pierpont Funds
JPM Series Trust II
FDI does not act as depositor or investment adviser of any investment companies.
(b) The following is a list of officers, directors and partners of FDI. The
principal address of all officers and directors is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Name; Positions and Offices with Underwriter; Position and Offices with
Registrant:
Marie E. Connolly; Director, President and Chief Executive Officer; Vice
President and Assistant Treasurer
Richard W. Ingram; Senior Vice President; President and Treasurer
John E. Pelletier; Senior Vice President and General Counsel; Vice President
and Secretary
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Donald R. Roberson; Senior Vice President; None
John F. Tower III; Senior Vice President, Chief Financial Officer and
Treasurer; Vice President and Assistant Treasurer
Rui M. Moura; First Vice President; None
Bernard A. Whalen; First Vice President; None
John W. Gomez; Chairman and Director; None
William J. Nutt; Director; None
The information required by this Item 29 with respect to each director and
officer of FDI is incorporated herein by reference to Schedule A of Form BD
filed by FDI pursuant to the Securities Exchange Act of 1934 (SEC File No.
20518).
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended (the "1940 Act"), and
the Rules thereunder will be maintained at the offices of:
Morgan Guaranty Trust Company of New York: 60 Wall Street, New York, New York
10260-0060, 9 West 57th Street, New York, New York 10019 or 522 Fifth Avenue,
New York, New York 10036 (records relating to its functions as investment
advisor, shareholder servicing agent and administrative services agent).
State Street Bank and Trust Company: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 (records relating to its functions as custodian, transfer
agent and dividend disbursing agent).
Funds Distributor, Inc.: 60 State Street, Suite 1300, Boston, Massachusetts
02109 (records relating to its functions as distributor and co-administrator).
Pierpont Group, Inc.: 461 Fifth Avenue, New York, New York 10017 (records
relating to its assisting the Trustees in carrying out their duties in
supervising the Registrant's affairs).
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall furnish
each person to whom a prospectus is delivered with a copy of the
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Registrant's latest annual report to shareholders upon request and
without charge.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940 Act
as though such provisions of the 1940 Act were applicable to the
Registrant, except that the request referred to in the second full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value of shares held by such requesting
shareholders.
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C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Boston and Commonwealth of Massachusetts on the 20th day of October,
1997.
JPM SERIES TRUST
By /s/ Richard W. Ingram
-----------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on October 20, 1997.
/s/ Richard W. Ingram
- ------------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer)
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/ Richard W. Ingram
----------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney filed herewith.
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C-8
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ------------- ----------------------
EX-99.B18 Powers of Attorney
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C-9
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy,
Christopher J. Kelley, Michael S. Petrucelli, Jacqueline Henning and Lenore J.
McCabe, and each of them, with full powers of substitution as his true and
lawful attorneys and agents to execute in his name and on his behalf in any
and all capacities (i) the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by The JPM Pierpont Funds, The JPM Institutional
Funds or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
in any separate registered investment company (each such separate registered
investment company, a "Portfolio") in which The JPM Pierpont Funds or The JPM
Institutional Funds invest, in either case with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended; and (iii) any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable each Trust and Portfolio to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission and the
corporate, securities or Blue Sky laws of any state or other jurisdiction, and
the undersigned hereby ratifies and confirms as his own act and deed any and
all acts that such attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th
day of October, 1997 in Southampton, Bermuda.
/s/ Frederick S. Addy
Frederick S. Addy
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<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy,
Christopher J. Kelley, Michael S. Petrucelli, Jacqueline Henning and Lenore J.
McCabe, and each of them, with full powers of substitution as his true and
lawful attorneys and agents to execute in his name and on his behalf in any
and all capacities (i) the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by The JPM Pierpont Funds, The JPM Institutional
Funds or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
in any separate registered investment company (each such separate registered
investment company, a "Portfolio") in which The JPM Pierpont Funds or The JPM
Institutional Funds invest, in either case with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended; and (iii) any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable each Trust and Portfolio to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission and the
corporate, securities or Blue Sky laws of any state or other jurisdiction, and
the undersigned hereby ratifies and confirms as his own act and deed any and
all acts that such attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th
day of October, 1997 in Southampton, Bermuda.
/s/ William G. Burns
William G. Burns
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<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy,
Christopher J. Kelley, Michael S. Petrucelli, Jacqueline Henning and Lenore J.
McCabe, and each of them, with full powers of substitution as his true and
lawful attorneys and agents to execute in his name and on his behalf in any
and all capacities (i) the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by The JPM Pierpont Funds, The JPM Institutional
Funds or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
in any separate registered investment company (each such separate registered
investment company, a "Portfolio") in which The JPM Pierpont Funds or The JPM
Institutional Funds invest, in either case with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended; and (iii) any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable each Trust and Portfolio to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission and the
corporate, securities or Blue Sky laws of any state or other jurisdiction, and
the undersigned hereby ratifies and confirms as his own act and deed any and
all acts that such attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th
day of October, 1997 in Southampton, Bermuda.
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
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<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Keeley, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher J. Kelley, Michael
S. Petrucelli, Jacqueline Henning and Lenore J. McCabe, and each of them, with
full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments thereto, filed
by The JPM Pierpont Funds, The JPM Institutional Funds or JPM Series Trust (each
a "Trust"); (ii) the Registration Statement(s), and any and all amendments
thereto, filed by any other investor in any separate registered investment
company (each such separate registered investment company, a "Portfolio") in
which The JPM Pierpont Funds or The JPM Institutional Funds invest, in either
case with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended; and (iii)
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable each Trust and Portfolio to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission and the corporate, securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th
day of October, 1997 in Southampton, Bermuda.
/s/ Matthew Healey
Matthew Healey
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<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard
W. Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy,
Christopher J. Kelley, Michael S. Petrucelli, Jacqueline Henning and Lenore J.
McCabe, and each of them, with full powers of substitution as his true and
lawful attorneys and agents to execute in his name and on his behalf in any
and all capacities (i) the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by The JPM Pierpont Funds, The JPM Institutional
Funds or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other investor
in any separate registered investment company (each such separate registered
investment company, a "Portfolio") in which The JPM Pierpont Funds or The JPM
Institutional Funds invest, in either case with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended; and (iii) any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable each Trust and Portfolio to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission and the
corporate, securities or Blue Sky laws of any state or other jurisdiction, and
the undersigned hereby ratifies and confirms as his own act and deed any and
all acts that such attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th
day of October, 1997 in Southampton, Bermuda.
/s/ Michael P. Mallardi
Michael P. Mallardi
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<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Keeley, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy, Christopher J. Kelley, Michael
S. Petrucelli, Jacqueline Henning and Lenore J. McCabe, and each of them, with
full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments thereto, filed
by The JPM Pierpont Funds, The JPM Institutional Funds or JPM Series Trust (each
a "Trust"); (ii) the Registration Statement(s), and any and all amendments
thereto, filed by any other investor in any separate registered investment
company (each such separate registered investment company, a "Portfolio") in
which The JPM Pierpont Funds or The JPM Institutional Funds invest, in either
case with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended; and (iii)
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable each Trust and Portfolio to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission and the corporate, securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th
day of October, 1997 in Southampton, Bermuda.
/s/ Richard W. Ingram
Richard W. Ingram