OCTOBER 1, 1998 PROSPECTUS
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J.P. MORGAN U.S. EQUITY FUNDS
Disciplined Equity Fund
U.S. Equity Fund
U.S. Small Company Fund
U.S. Small Company Opportunities Fund
Tax Aware U.S. Equity Fund
----------------------------------
Seeking to outperform U.S. stock
markets over the long term through
a disciplined management approach
This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.
Shares in these funds 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. JPMORGAN
<PAGE>
CONTENTS
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2
Principles and techniques common
to the funds in this prospectus
- ----------------------------------------
U.S. EQUITY MANAGEMENT APPROACH
U.S. equity investment process . . . . . . . . . . . . . . . . . . . . . . . 2
The spectrum of U.S. equity funds. . . . . . . . . . . . . . . . . . . . . . 3
Tax aware investing at J.P. Morgan . . . . . . . . . . . . . . . . . . . . . 3
4
Each fund's goal, investment approach,
risks, expenses, performance, and
financial highlights
- ----------------------------------------
J.P. MORGAN U.S. EQUITY FUNDS
J.P. Morgan Disciplined Equity Fund. . . . . . . . . . . . . . . . . . . . . 4
J.P. Morgan U.S. Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . 8
J.P. Morgan U.S. Small Company Fund. . . . . . . . . . . . . . . . . . . . 10
J.P. Morgan U.S. Small Company Opportunities Fund. . . . . . . . . . . . . 12
J.P. Morgan Tax Aware U.S. Equity Fund . . . . . . . . . . . . . . . . . . 16
18
Investing in the J.P. Morgan
U.S. Equity Funds
- ----------------------------------------
YOUR INVESTMENT
Investing through a financial professional . . . . . . . . . . . . . . . . 18
Investing through an employer-sponsored retirement plan. . . . . . . . . . 18
Investing through an IRA or rollover IRA . . . . . . . . . . . . . . . . . 18
Investing directly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Opening your account . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Adding to your account . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Selling shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Account and transaction policies . . . . . . . . . . . . . . . . . . . . . 19
Dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . . 20
Tax considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21
More about risk and the funds'
business operations
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FUND DETAILS
Business structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Management and administration. . . . . . . . . . . . . . . . . . . . . . . 21
Risk and reward elements . . . . . . . . . . . . . . . . . . . . . . . . . 22
FOR MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . back cover
<PAGE>
INTRODUCTION
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J.P. MORGAN U.S. EQUITY FUNDS
These funds invest primarily in U.S. stocks either directly or through another
fund. 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 funds are designed for investors who:
- - are pursuing a long-term goal such as retirement
- - want to add an investment with growth potential to further diversify a
portfolio
- - want funds that seek to outperform the markets in which they each invest
over the long term
- - with regard to the Tax Aware Fund, are individuals that could benefit from
a strategy that pursues returns from an after-tax perspective
The funds are NOT designed for investors who:
- - want funds that pursue market trends or focus only on particular industries
or sectors
- - require regular income or stability of principal
- - are pursuing a short-term goal or investing emergency reserves
- - with regard to the Tax Aware Fund, 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 $275 billion in assets under management,
including assets managed by the funds' advisor, J.P. Morgan Investment
Management Inc.
1
<PAGE>
U.S. EQUITY MANAGEMENT APPROACH
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The J.P. Morgan U.S. equity funds invest primarily in U.S. stocks. The
Tax Aware Fund does so while seeking to enhance the after-tax returns of its
shareholders.
While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor, focuses
on stock picking while largely avoiding sector or market-timing strategies.
Also, under normal market conditions, each fund will remain fully invested.
U.S. EQUITY INVESTMENT PROCESS
In managing the funds described in this prospectus, J.P. Morgan employs a
three-step process:
[GRAPHIC]
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]
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]
Using research and valuations,
each fund's management team
chooses stocks for its fund
- ----------------------------------------
STOCK SELECTION Each fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, each
management team buys stocks that are identified as undervalued and considers
selling them when they appear overvalued. Along with attractive valuation, the
funds' 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>
- --------------------------------------------------------------------------------
THE SPECTRUM OF U.S. EQUITY FUNDS
The funds described in this prospectus pursue a range of goals and offer
varying degrees of risk and potential reward. Differences between these
funds include:
- - how much emphasis they give to the most undervalued stocks
- - how closely they follow the industry weightings of their benchmarks
- - how many securities they typically maintain in their portfolios
- - the size or market capitalization of the companies in which they invest
- - whether they focus on before-tax or after-tax returns
The table below shows degrees of the relative risk and return that these funds
potentially offer. These and other distinguishing features of each U.S. equity
fund are described on the following pages.
POTENTIAL RISK AND RETURN (%)
[GRAPH]
- --------------------------------------------------------------------------------
U.S. SMALL COMPANY OPPORTUNITIES FUND
U.S. SMALL COMPANY FUND
TAX AWARE U.S. EQUITY FUND
U.S. EQUITY FUND
DISCIPLINED EQUITY FUND
- --------------------------------------------------------------------------------
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
TAX AWARE INVESTING AT J.P. MORGAN
The Tax Aware 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.
The Tax Aware Fund generally intends to pay redemption proceeds in cash; however
it reserves the right at its sole discretion to pay redemptions over $250,000
in-kind as a portfolio of representative stocks rather than cash. An in-kind
redemption payment can shield the fund -- and other shareholders -- from tax
liabilities that might otherwise be incurred. It is not subject to a redemption
fee by the fund. However, the stocks received will continue to fluctuate in
value after redemption and will be subject to brokerage or other transaction
costs when liquidated.
U.S. EQUITY MANAGEMENT APPROACH 3
<PAGE>
J.P. MORGAN DISCIPLINED EQUITY FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN DISCIPLINED EQUITY FUND)
[GRAPHIC]
GOAL
The fund's goal is to provide a consistently high total return from a broadly
diversified portfolio of equity securities with risk characteristics similar to
the Standard & Poor's 500 Stock Index (S&P 500). This goal can be changed
without shareholder approval.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in large- and medium-capitalization U.S. companies.
Industry by industry, the fund's weightings are similar to those of the S&P 500.
The fund does not look to overweight or underweight industries.
Within each industry, the fund modestly overweights stocks that are ranked as
undervalued or fairly valued while modestly underweighting or not holding stocks
that appear overvalued. (The process used to rank stocks according to their
relative valuations is described on page 2.) Therefore, the fund tends to own a
larger number of stocks within the S&P 500 than the U.S. Equity Fund or the Tax
Aware U.S. Equity Fund.
[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 exceed those of
the S&P 500 over the long term with virtually the same level of volatility.
The fund's securities are described in more detail on page 22, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[GRAPH]
U.S. SMALL COMPANY OPPORTUNITIES FUND
U.S. SMALL COMPANY FUND
TAX AWARE U.S. EQUITY FUND
U.S. EQUITY FUND
DISCIPLINED EQUITY FUND
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $13 billion using the same strategy as the fund.
The portfolio management team is led by James C. Wiess and Timothy J. Devlin,
both vice presidents, who have been on the team since the fund's inception.
Mr. Wiess has been at J.P. Morgan since 1992, and prior to managing this fund
managed other structured equity portfolios for J.P. Morgan. Mr. Devlin has been
at J.P. Morgan since July of 1996, and prior to that time was an equity
portfolio manager at Mitchell Hutchins Asset Management Inc.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
<S> <C>
Management fees (actual) 0.35
Marketing (12b-1) fees none
Other expenses(2)
(after reimbursement) 0.40
- --------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.75
- --------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 8 24 42 93
- --------------------------------------------------------------------------------
</TABLE>
4 J.P. MORGAN DISCIPLINED EQUITY FUND
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERFORMANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs. Since 10/31/89(3)
<S> <C> <C> <C>
J.P. MORGAN INSTITUTIONAL DISCIPLINED EQUITY FUND N/A N/A N/A
(a separate feeder fund investing in the same master portfolio)(4) (after expenses)
- ------------------------------------------------------------------------------------------------------------------------
Private Account Composite (after expense)(5) 32.97 20.26 17.28
- ------------------------------------------------------------------------------------------------------------------------
S&P 500(6) (no expenses) 33.36 20.27 16.89
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL RETURNS (%)Shows changes in returns for periods ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
3 mos. Since inception(7)
<S> <C> <C>
- - J.P. Morgan Institutional Disciplined Equity Fund
(a separate feeder fund investing in the same master portfolio)(4) 2.41 25.79
- - Private Account Composite(5) 2.19 25.20
- - S&P 500(6) 2.87 25.52
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- ------------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - PRIVATE ACCOUNT COMPOSITE(5) (3.24) 30.01 11.42 9.87 1.90 37.47 22.90 32.97
- - S&P 500(6) (3.11) 30.47 7.62 10.08 1.32 37.58 22.96 33.36
</TABLE>
(1) The fund has a master/feeder structure as described on page 21. This table
shows expenses and its share of master portfolio expenses, expressed as a
percentage of average net assets and reflecting reimbursement for ordinary
expenses over 0.75%.
(2) Without reimbursement other expenses and total operating expenses would
have been 2.93% and 3.28%, respectively. This reimbursement arrangement can
be changed or terminated at any time after 9/30/99 at the option of J.P.
Morgan.
(3) The inception date of the Private Account Composite is 10/31/89.
(4) Performance reflects the performance of J.P. Morgan Institutional
Disciplined Equity Fund (a separate feeder fund investing in the same
master portfolio) from 1/31/97 through 12/31/97. Historical performance
information reflects operating expenses which are 0.30% of net assets lower
than those of the fund. Accordingly, performance returns for the fund would
have been lower if an investment had been made in the fund during the same
time periods.
(5) THE PERFORMANCE OF THE PRIVATE ACCOUNT COMPOSITE DOES NOT REPRESENT THE
FUND'S PERFORMANCE AND SHOULD NOT BE INTERPRETED AS INDICATIVE OF THE
FUND'S FUTURE PERFORMANCE. The Composite reflects the historical
performance of discretionary investment management accounts under the
management of the fund's advisor with substantially similar objectives and
policies as the fund. Historical Composite performance information reflects
the deduction of the fund's total expenses of 0.75%. The performance of
accounts in the Composite might have been lower if they were subject to the
extra restrictions imposed on mutual funds. AIMR performance requirements
went into effect 1/1/93 and prior to that date the Composite may not have
included all discretionary accounts.
(6) The S&P 500 is an unmanaged index of U.S. stocks widely used as a measure
of overall stock market performance.
(7) J.P. Morgan Institutional Disciplined Equity Fund commenced operations on
1/3/97 and performance is calculated as of 1/31/97.
J.P. MORGAN DISCIPLINED EQUITY FUND 5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
PER-SHARE DATA For fiscal period ended May 31
- --------------------------------------------------------------------------------
1998(1)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 12.98
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ($) 0.03
Net realized and unrealized gain
on investments ($) 1.96
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 1.99
- --------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.02)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.02)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 14.95
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
TOTAL RETURN (%) 15.33(2)
- --------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 18,037
- --------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.75(3)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 1.00(3)
- --------------------------------------------------------------------------------
EXPENSES WITHOUT REIMBURSEMENT (%) 3.28(3)
- --------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by PricewaterhouseCoopers LLP,
the fund's independent accountants.
(1) The fund commenced operations on 12/31/97.
(2) Not annualized.
(3) Annualized.
6 J.P. MORGAN DISCIPLINED EQUITY FUND
<PAGE>
- --------------------------------------------------------------------------------
(THIS PAGE IS INTENTIONALLY LEFT BLANK)
7
<PAGE>
J.P. MORGAN U.S. EQUITY FUND TICKER SYMBOL: PPEQX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN U.S. EQUITY FUND)
[GRAPHIC]
GOAL
The fund's goal is to provide high total return from a portfolio of
selected equity securities. This goal can be changed without shareholder
approval.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in large- and medium-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 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.
[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 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 securities are described in more detail on page 22, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[GRAPH]
U.S. SMALL COMPANY OPPORTUNITIES FUND
U.S. SMALL COMPANY FUND
TAX AWARE U.S. EQUITY FUND
U.S. EQUITY FUND
DISCIPLINED EQUITY FUND
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $12.5 billion using the same strategy as the fund.
The portfolio management team is led by William M. Riegel, Jr., managing
director, who has been on the team since 1993 and has been at J.P. Morgan since
1979, and Henry D. Cavanna, managing director, who joined the team in February
of 1998, and has been at J.P. Morgan since 1971. Both served as managers of U.S.
equity portfolios prior to managing the fund.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1)(%)
<S> <C>
Management fees (actual) 0.40
Marketing (12b-1) fees none
Other expenses 0.38
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.78
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 8 25 43 97
- --------------------------------------------------------------------------------
</TABLE>
8 J.P. Morgan U.S. Equity Fund
<PAGE>
PERFORMANCE (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs. 10 yrs. Since inception(2)
<S> <C> <C> <C> <C>
J.P. Morgan U.S. Equity Fund(2) (after expenses) 28.41 17.84 17.55 16.31
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500(3) (no expenses) 33.36 20.27 18.05 17.32
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- ------------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. MORGAN U.S. EQUITY FUND(2) 14.12 31.43 1.38 34.12 8.73 11.02 (0.61) 32.48 21.06 28.41
S&P 500(3) 16.61 31.69 (3.11) 30.47 7.62 10.08 1.32 37.58 22.96 33.36
<CAPTION>
FINANCIAL HIGHLIGHTS
PER-SHARE DATA For fiscal years ended May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 12.04 14.54 16.51 18.21 19.02 19.30 19.38 19.42 22.15 24.63
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.46 0.44 0.44 0.37 0.38 0.27 0.32 0.38 0.25 0.18
Net realized and unrealized gain
(loss) on investments ($) 2.49 2.20 1.90 2.13 1.35 1.32 2.17 4.23 4.72 5.92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 2.95 2.64 2.34 2.50 1.73 1.59 2.49 4.61 4.97 6.10
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.45) (0.44) (0.45) (0.40) (0.36) (0.29) (0.28) (0.29) (0.36) (0.23)
Net realized gains ($) -- (0.23) (0.19) (1.29) (1.09) (1.22) (2.17) (1.59) (2.13) (4.84)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.45) (0.67) (0.64) (1.69) (1.45) (1.51) (2.45) (1.88) (2.49) (5.07)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ($) 14.54 16.51 18.21 19.02 19.30 19.38 19.42 22.15 24.63 25.66
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 25.12 18.75 14.81 14.60 10.02 8.54 15.11 25.18 25.00 28.35
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR ($ thousands) 27,677 40,032 55,144 109,246 202,474 231,306 259,338 330,014 362,603 448,144
- ------------------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 1.00 0.93 0.91 0.90 0.90 0.90 0.90 0.81 0.80 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 3.52 2.97 2.81 2.16 2.20 1.43 1.74 1.87 1.13 0.71
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES WITHOUT REIMBURSEMENT (%) 1.45 1.34 1.29 1.09 0.98 0.93 0.91 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER (%) 18 23 43 99 60 10(4) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights for the fiscal years ended May 31, 1994 through May 31,
1998 have been audited by PricewaterhouseCoopers LLP, the fund's independent
accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets.
(2) The fund commenced operations on 7/18/93 and returns reflect performance of
The Pierpont Equity Fund, the fund's predecessor, prior to that date. The
Pierpont Equity Fund commenced operations on 6/27/85 and performance is
calculated as of 6/30/85.
(3) The S&P 500 is an unmanaged index of U.S. stocks widely used as a measure
of overall stock market performance.
(4) Portfolio turnover reflects the period 6/1/93 to 7/18/93 and has not been
annualized. In July, 1993 the fund's predecessor contributed all of its
investable assets to The U.S. Equity Portfolio.
J.P. MORGAN U.S. EQUITY FUND 9
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND TICKER SYMBOL: PPCAX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN U.S. SMALL COMPANY FUND)
[GRAPHIC]
GOAL
The fund's goal is to provide high total return from a portfolio of small
company stocks. This goal can be changed without shareholder approval.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in small and medium sized U.S. companies whose market
capitalizations are greater than $110 million and less than $2.5 billion.
Industry by industry, the fund's weightings are similar to those of the Russell
2000 Index. The fund can moderately underweight or overweight industries 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 process described on page 2. The fund
generally considers selling stocks that appear overvalued or have grown into
large-cap stocks.
[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.
Small-cap stocks have historically offered higher long-term growth than
large-cap stocks, and have also involved higher risks. The fund's small-cap
emphasis means it is likely to be more sensitive to economic news and is likely
to fall further in value during broad market downturns. The fund pursues returns
that exceed those of the Russell 2000 Index while seeking to limit its
volatility relative to this index.
The fund's securities are described in more detail on page 22, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[GRAPH]
Return
U.S. Small Company Opportunities
U.S. Small Company Fund
Tax Aware U.S. Equity Fund
U.S. Equity Fund
Disciplined Equity Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $2.4 billion using the same strategy as the fund.
The portfolio management team is led by Denise Higgins, Candice Eggerss and
Stephen J. Rich, all vice presidents. Ms. Higgins joined the team in January of
1998 and has been with J.P. Morgan since 1994. Prior to managing the fund, Ms.
Higgins served as a balanced and equity portfolio manager and member of the U.S.
asset allocation committee, and prior to 1994, was a mid-to-small cap portfolio
manager at Lord Abbett & Company. Ms. Eggerss has been with J.P. Morgan since
May of 1996 as a member of the U.S. small company portfolio management team and
from June of 1993 to May of 1996 held a similar position with Weiss, Peck and
Greer. Mr. Rich joined the team in January of 1997 and has been at J.P. Morgan
since 1991, and prior to managing the fund held positions in J.P. Morgan's
structured equity and balanced/equity groups.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
<S> <C>
Management fees (actual) 0.60
Marketing (12b-1) fees none
Other expenses 0.43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1.03
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 11 33 57 126
- --------------------------------------------------------------------------------
</TABLE>
10 J.P. MORGAN U.S. SMALL COMPANY FUND
<PAGE>
PERFORMANCE (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs. 10 yrs. Since inception(2)
<S> <C> <C> <C> <C>
J.P. MORGAN U.S. SMALL COMPANY FUND(2) (after expenses) 22.75 14.84 15.45 14.38
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSELL 2500 INDEX(3) (no expenses) 24.36 17.59 16.94 14.89
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSELL 2000 INDEX(3) (no expenses) 22.36 16.41 15.76 13.04
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- ------------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. MORGAN U.S. SMALL COMPANY FUND(2) 13.67 29.01 (24.34) 59.59 18.98 8.58 (5.89) 31.86 20.75 22.75
Russell 2500 Index(3) 22.73 19.43 (14.88) 46.70 16.19 16.54 (1.06) 31.70 19.03 24.36
Russell 2000 Index(3) 22.36
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
PER-SHARE DATA For fiscal years ended May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 12.91 16.83 18.68 17.98 20.03 25.12 21.40 22.02 26.20 26.04
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(4) ($) (0.03) (0.03) (0.02) (0.04) (0.01) 0.20 0.22 0.26 0.18 0.11
Net realized and unrealized gain
on investment ($) 3.95 1.88 (0.33) 2.09 5.10 0.19 2.13 6.96 2.00 5.58
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 3.92 1.85 (0.35) 2.05 5.09 0.39 2.35 7.22 2.18 5.69
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) -- -- -- -- -- (0.09) (0.21) (0.26) (0.21) (0.14)
Net realized gain ($) -- -- (0.35) -- -- (4.02) (1.52) (2.78) (2.13) (3.91)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) -- -- (0.35) -- -- (4.11) (1.73) (3.04) (2.34) (4.05)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 16.83 18.68 17.98 20.03 25.12 21.40 22.02 26.20 26.04 27.68
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 30.36 10.99 (1.90) 11.40 25.41 1.14 12.28 35.48 9.49 23.37
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 42,403 47,921 58,859 97,548 186,887 204,445 179,130 220,917 237,985 261,804
- ------------------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 1.00 0.93 0.91 0.90 0.90 0.90 0.90 0.90 0.90 0.97
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (%) (0.23) (0.18) (0.15) (0.25) (0.06) 0.75 1.02 1.10 0.71 0.39
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES WITHOUT REIMBURSEMENT (%) 1.36 1.25 1.22 1.03 0.95 1.10 1.12 1.03 1.03 1.03
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER (%) .38 .66 .56 .58 .50 .14(5) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights for the fiscal years ended May 31, 1994 through May 31,
1998 have been audited by PricewaterhouseCoopers LLP, the fund's independent
accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses,
expressed as a percentage of the fund's average net assets for the past
fiscal year.
(2) The fund commenced operations on 7/19/93 and returns reflect performance of
The Capital Appreciation Fund, the fund's predecessor, prior to that date.
The Capital Appreciation Fund commenced operations on 6/27/85 and
performance is calculated as of 6/30/85.
(3) Effective 3/1/98, the fund's benchmark changed from the Russell 2500 Index,
a widely recognized, unmanaged index used primarily to measure the
performance of small- to medium-cap U.S. stocks, to the Russell 2000 Index,
a widely recognized, unmanaged index used primarly to measure the
performance of small-cap U.S. stocks. The Russell 2000 Index represents the
returns of small-cap stocks only, better captures that universe's
performance and fits more neatly into an investor's asset allocation model.
(4) Based on shares outstanding at the beginning and end of each fiscal period
except for the fiscal year ended 5/31/91, where average shares outstanding
were used.
(5) Portfolio turnover reflects the period 6/1/93 to 7/18/93 and has not been
annualized. In July, 1993 the Fund's predecessor contributed all of its
investable assets to The U.S. Small Company Portfolio.
J.P. MORGAN U.S. SMALL COMPANY FUND 11
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND)
[GRAPHIC]
GOAL
The fund's goal is to provide long-term growth from a portfolio of small company
growth stocks. This goal can be changed without shareholder approval.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in stocks of small U.S. companies whose
market capitalization is greater than $150 million and less than $1.25 billion
when purchased. While the fund holds stocks in many industries to reduce the
impact of poor performance in any one sector, it tends to emphasize industries
with higher growth potential and does not track the sector weightings of the
overall small company stock market.
In searching for companies, the fund combines the approach described on page 2
with a growth-oriented approach that focuses on each company's business
strategies and its competitive environment. The fund seeks to buy stocks when
they are undervalued or fairly valued and are poised for long-term growth.
Stocks become candidates for sale when they appear overvalued or when the
company is no longer a small-cap company, but the fund may also continue to hold
them if it believes further substantial growth is possible.
[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.
Small-cap stocks have historically offered higher long-term growth than medium-
or large-cap stocks, and have also involved higher risks. The fund's small-cap
emphasis means it is likely to be more sensitive to economic news and is likely
to fall further in value during broad market downturns. Because the fund seeks
to outperform the Russell 2000 Growth Index while not tracking its industry
weightings, investors should expect higher volatility compared to this index or
to more conservatively managed small-cap funds.
The fund's securities are described in more detail on page 22, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
Return
U.S. Small Company Opportunities Fund
U.S. Small Company
Tax Aware U.S. Equity Fund
U.S. Equity Fund
Disciplined Equity Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $2.4 billion using the same strategy as the fund.
The portfolio management team is led by Candice Eggerss, vice president, and
Saira Malik, associate. Ms. Eggerss has been with J.P. Morgan since May of 1996
as a member of the U.S. small company portfolio management team, and from June
of 1993 to May of 1996 held a similar position with Weiss, Peck & Greer. Ms.
Malik has been with J.P. Morgan since July of 1995 as a small company equity
analyst and portfolio manager after graduating from the University of Wisconsin
with an M.S. in finance.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
<S> <C>
Management fees (actual) 0.60
Marketing (12b-1) fees none
Other expenses 0.65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1.25
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 13 40 69 151
- --------------------------------------------------------------------------------
</TABLE>
12 J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE (unaudited)
AVERAGE ANNUAL TOTAL RETURN Shows performance over time, for periods ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1 yr. 3 yrs. Since 8/31/94(2)
<S> <C> <C> <C>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND (after expenses) n/a n/a n/a
- ------------------------------------------------------------------------------------------------------------------------------------
PRIVATE ACCOUNT Composite(3) (after expenses) 28.60 31.10 27.00
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX(4) (no expenses) 12.86 18.06 16.00
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL RETURNS (%) Shows changes in returns for period ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
3 mos. Since inception(5)
<S> <C> <C>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND (3.19) 15.18
PRIVATE ACCOUNT COMPOSITE(3) (1.70) 15.11
RUSSELL 2000 GROWTH INDEX(4) (8.20) 7.34
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1996 1997
<S> <C> <C> <C>
PRIVATE ACCOUNT COMPOSITE(3) 41.61 23.90 28.60
RUSSELL 2000 GROWTH INDEX(4) 31.04 11.26 12.86
</TABLE>
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the fiscal period ended 5/31/98, expressed as a percentage of average net
assets.
(2) The inception date of the Private Account Composite is 8/31/94.
(3) THE PERFORMANCE OF THE PRIVATE ACCOUNT COMPOSITE DOES NOT REPRESENT THE
FUND'S PERFORMANCE AND SHOULD NOT BE INTERPRETED AS INDICATIVE OF THE
FUND'S FUTURE PERFORMANCE. The Composite reflects the historical
performance of all discretionary investment management accounts under the
management of the fund's advisor with substantially similar objectives and
policies as the fund. Historical Composite performance information reflects
the deduction of the fund's total expenses of 1.25%. The performance of
accounts in the Composite might have been lower if they were subject to the
extra restrictions imposed on mutual funds.
(4) The Russell 2000 Growth Index is an unmanaged index of small,
growth-oriented U.S. stocks.
(5) The fund commenced operations on 6/16/97 and performance is calculated as
of 6/30/97.
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND 13
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
PER-SHARE DATA For fiscal period ended May 31
- --------------------------------------------------------------------------------
1998(1)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ($) (0.02)
Net realized and unrealized gain on investment ($) 2.59
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 2.57
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 12.57
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
TOTAL RETURN (%) 25.70(2)
- --------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ THOUSANDS) 188,932
- --------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 1.19(3)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (%) (0.37)(3)
- --------------------------------------------------------------------------------
EXPENSES WITHOUT REIMBURSEMENT (%) 1.25(3)
- --------------------------------------------------------------------------------
</TABLE>
The financial highlights above have been audited by PricewaterhouseCoopers LLP,
the fund's independent accountants.
(1) The fund commenced operations on 6/16/97.
(2) Not annualized.
(3) Annualized.
14 J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
<PAGE>
- -------------------------------------------------------------------------------
(THIS PAGE IS INTENTIONALLY LEFT BLANK)
15
<PAGE>
J.P. MORGAN TAX AWARE
U.S. EQUITY FUND TICKER SYMBOL: JPTAX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN TAX AWARE U.S. EQUITY FUND:
SELECT SHARES)
[GRAPHIC]
GOAL
The fund's goal is to provide high after tax total return from a portfolio of
selected equity securities. This goal can be changed without shareholder
approval.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in large- and medium-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 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 3.
[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 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 22, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[GRAPH]
U.S. Small Company Opportunities Fund
U.S. Small Company Fund
Return
Tax Aware U.S. Equity Fund
U.S. Equity Fund
Disciplined Equity Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $12.5 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.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
REDEMPTION FEES (% OF YOUR CASH PROCEEDS)
- --------------------------------------------------------------------------------
<S> <C>
Shares held for less than five years 1.00
Shares held five years or longer none
ANNUAL EXPENSES(1) (% 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
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged. The first number
assumes that you continued to hold your shares, the second that you sold all
shares for cash at the end of each time period. The example is for comparison
only; the fund's actual return and expenses will be different.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 9/19 27/37 47/47 105/105
- --------------------------------------------------------------------------------
</TABLE>
16 J.P. MORGAN TAX AWARE U.S. EQUITY FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for the period
ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception(3)
<S> <C>
J.P. MORGAN TAX AWARE U.S. EQUITY FUND (AFTER EXPENSES) 30.52
- --------------------------------------------------------------------------------
S&P 500(4) (no expenses) 33.36
- --------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
1997(3)
<S> <C>
/ / J.P. MORGAN TAX AWARE U.S. EQUITY FUND 30.52
/ / S&P 500(4) 33.36
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal periods ended
- --------------------------------------------------------------------------------
10/31/97(3) 4/30/98
(unaudited)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00 12.57
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.06 0.03
Net realized and unrealized gain
on investments ($) 2.52 2.65
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 2.58 2.68
- --------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.01) (0.07)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 12.57 15.18
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
TOTAL RETURN (%) 25.83(5) 21.42(5)
- --------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 25,649 58,740
- --------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.85(6) 0.85(6)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 0.70(6) 0.59(6)
- --------------------------------------------------------------------------------
EXPENSES WITHOUT REIMBURSEMENT (%) 2.16(6) 1.20(6)
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE (%) 23(6) 20(2)
- --------------------------------------------------------------------------------
AVERAGE BROKER COMMISSIONS PER SHARE ($) 0.0321 0.0315
- --------------------------------------------------------------------------------
The financial highlights for the fiscal period ended 10/31/97 have been audited
by PricewaterhouseCoopers LLP, the fund's independent accountants.
</TABLE>
(1) This table shows expenses for the fiscal period ended 10/31/97, expressed
as a percentage of average net assets and reflecting reimbursement for
ordinary expenses over 0.85%.
(2) Without reimbursement, other expenses and total operating expenses would
have been 1.71% and 2.16%, respectively, on an annualized basis. This
reimbursement arrangement can be changed or terminated at any time after
2/28/99 at the option of J.P. Morgan.
(3) The fund commenced operations on 12/18/96 and performance is calculated as
of 12/31/96.
(4) The S&P 500 is an unmanaged index of U.S. stocks widely used as a measure
of overall stock market performance.
(5) Not annualized.
(6) Annualized.
17 J.P. MORGAN TAX AWARE U.S. EQUITY FUND
<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------
For your convenience, the J.P. Morgan Funds offer several ways to start and add
to 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.
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.
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:
- - Choose a fund (or funds) and determine the amount you are investing. The
minimum amount for initial investments in a 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 on the
right.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.
OPENING YOUR ACCOUNT
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: J.P. Morgan Funds
ACCOUNT NUMBER: 9904-226-9
FFC: your account number, name of registered owner(s) and fund name.
BY CHECK
- - Make out a check for the investment amount payable to J.P. Morgan Funds
- - Mail the check with your completed application to the Transfer Agent.
BY EXCHANGE
- - Call the Shareholder Services Agent to effect an exchange.
ADDING TO YOUR ACCOUNT
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 your bank to wire the
amount of your investment as described above.
BY CHECK
- - Make out a check for the investment amount payable to J.P. Morgan 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 EXCHANGE
- - Call the Shareholder Services Agent to effect an exchange.
18 YOUR INVESTMENT
<PAGE>
- --------------------------------------------------------------------------------
SELLING SHARES
BY PHONE - WIRE PAYMENT
- - 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.
BY PHONE - CHECK PAYMENT
- - Call the Shareholder Services Agent and place your request. Once your
request has been verified, a check for the net cash 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).
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 any cash 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 to effect an exchange.
ACCOUNT AND TRANSACTION POLICIES
TELEPHONE ORDERS The funds accept telephone orders from all shareholders. To
guard against fraud, the funds require shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if a fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.
EXCHANGES You may exchange shares in these funds for shares in any other J.P.
Morgan or J.P. Morgan Institutional mutual fund at no charge (subject to the
securities laws of your state). When making exchanges, it is important to
observe any applicable minimums. Keep in mind that for tax purposes an exchange
is considered a sale.
A fund may alter, limit, or suspend its exchange policy at any time.
BUSINESS DAYS AND NAV CALCULATIONS The funds' regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). Each fund calculate
its net asset value per share (NAV) every business day as of the close of
trading on the NYSE (normally 4:00 p.m. eastern time). Each fund's securities
are typically priced using market quotes or pricing services. When these methods
are not available or do not represent a security's value at the time of pricing,
the security is valued in accordance with a fund's fair valuation procedures.
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 the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. A 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 19
<PAGE>
- --------------------------------------------------------------------------------
TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record
when a fund receives your payment, generally the day following execution. When
you sell shares, cash proceeds are generally available the day following
execution and will be forwarded according to your instructions. In-kind
redemptions (described on page 3) will be available as 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 funds send monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months each fund sends out an annual or semi-annual report containing
information on its 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), each fund reserves the right to request that you buy more shares
or close your account. If your account balance is still below the minimum 60
days after notification, each fund reserves the right to close out your account
and send the proceeds to the address of record.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are typically paid four times a year for the Disciplined
Equity, U.S. Equity and Tax Aware funds; and twice a year for the U.S. Small
Company and U.S. Small Company Opportunities funds. Each fund typically makes
capital gains distributions, if any, once per year. However, a fund may make
more or fewer payments in a given year, depending on its investment results and
its tax compliance situation. Each fund's dividends and distributions consist of
most or all of its net investment income and net realized capital gains.
Dividends and distributions are reinvested 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 J.P. Morgan Fund.
TAX CONSIDERATIONS
In general, selling shares for cash, exchanging shares, and receiving
distributions (whether reinvested or taken in cash) are all taxable events.
These transactions typically create the following tax liabilities for taxable
accounts:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
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 a fund is about to declare a long-term capital
gains distribution.
Every January, each fund issues tax information on its distributions for the
previous year.
Any investor for whom a 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.
20 YOUR INVESTMENT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
As noted earlier, each fund (except the Tax Aware Fund) is a "feeder" fund that
invests in a master portfolio. (Except where indicated, this prospectus uses the
term "the fund" to mean the feeder fund and its master portfolio taken
together.)
Each master portfolio accepts investments from other feeder funds, and all the
feeders of a given master portfolio bear the portfolio's expenses in proportion
to their assets. However, each feeder can set its own transaction minimums,
fund-specific expenses, and other conditions. This means that one feeder could
offer access to the same master portfolio on more attractive terms, or could
experience better performance, than another feeder. Information about other
feeders is available by calling 1-800-521-5411. Generally, when a master
portfolio seeks a vote, its feeder fund will hold a shareholder meeting and cast
its vote proportionately, as instructed by its shareholders. Fund shareholders
are entitled to one full or fractional vote for each dollar or fraction of a
dollar invested.
Each feeder fund and its master portfolio expect to maintain consistent goals,
but if they do not, a fund will withdraw from its master portfolio, receiving
its assets either in cash or securities. Each feeder fund's trustees would then
consider whether a fund should hire its own investment adviser, invest in a
different master portfolio, or take other action.
The Tax Aware Fund is a series of J.P. Morgan Series Trust, a Massachusetts
business 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.
MANAGEMENT AND ADMINISTRATION
The feeder funds described in this prospectus, their corresponding master
portfolios, and J.P. Morgan Series Trust, are all 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; costs are shared by all funds governed by these trustees. Funds
Distributor, Inc., as co-administrator, along with J.P. Morgan, provides fund
officers. J.P. Morgan, as co-administrator, oversees each fund's other service
providers.
J.P. Morgan, subject to the expense reimbursements described earlier in this
prospectus, receives the following fees for investment advisory and other
services:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
ADVISORY SERVICES Percentage of the master portfolio's
average net assets
Disciplined Equity 0.35%
U.S. Equity 0.40%
U.S. Small Company 0.60%
U.S. Small Company 0.60%
Opportunities
- --------------------------------------------------------------------------------
ADMINISTRATIVE SERVICES Master portfolio's and fund's pro-
(fee shared with Funds rata portions of 0.09% of the
Distributor, Inc.) 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
- --------------------------------------------------------------------------------
</TABLE>
The Tax Aware Fund, subject to the expense reimbursements described earlier in
this prospectus, pays J.P. Morgan the following fees for investment advisory and
other services:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
ADVISORY SERVICES 0.45% of the fund's average
net assets
- --------------------------------------------------------------------------------
ADMINISTRATIVE SERVICES Fund's pro-rata portion of 0.09%
(fee shared with Funds of the first $7 billion in
Distributor, Inc.) 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
- --------------------------------------------------------------------------------
</TABLE>
J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.
YEAR 2000 Fund operations and shareholders could be adversely affected if the
computer systems used by J.P. Morgan, the funds' other service providers and
other entities with computer systems linked to the funds do not properly process
and calculate January 1, 2000 and after date-related information. J.P. Morgan
is working to avoid these problems and to obtain assurances from other service
providers that they are taking similar steps. However, it is not certain that
these actions will be sufficient to prevent these problems from adversely
impacting fund operations and shareholders. In addition, to the extent that
operations of issuers of securities held by the funds are impaired by
date-related problems or prices of securities decline as a result of real or
perceived date-related problems of issuers held by the funds or generally, the
net asset value of the funds will decline.
FUND DETAILS 21
<PAGE>
RISK AND REWARD ELEMENTS
This table discusses the main elements that make up each fund's overall risk and
reward characteristics (described on pages 4-17). It also outlines each fund's
policies toward various securities, including those that are designed to help
certain funds manage risk.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
MARKET CONDITIONS
- - Each fund's share - Stocks have generally - Under normal circumstances the
price and performance will outperformed more stable funds plan to remain fully invested,
fluctuate in response to investments (such as with at least 65% in stocks; stock
stock market movements bonds and cash equivalents) investments may include U.S. and
over the long term foreign common stocks, convertible
securities, preferred stocks, trust
- - Adverse market or partnership interests, warrants,
conditions may from time to rights, and investment company
time cause a fund to take securities
temporary defensive
positions that are - The funds seek to limit risk
inconsistent with its through diversification
principal investment
strategies and may hinder a - During severe market downturns,
fund from achieving its the funds have the option of
investment objective investing up to 100% of assets in
investment-grade short-term securities
- ----------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT CHOICES
- - A fund could - A fund could - J.P. Morgan focuses its active
underperform its benchmark outperform its benchmark management on securities selection,
due to its securities and due to these same choices the area where it believes its
asset allocation choices commitment to research can most
enhance returns
- ----------------------------------------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
- - Currency exchange rate - Favorable exchange - Each Fund anticipates that its
movements could reduce rate movements could total foreign investments will not
gains or create losses generate gains or reduce exceed 20% of assets
losses
- - A fund could lose - Each fund actively manages the
money because of foreign - Foreign investments, currency exposure of its foreign
government actions, which represent a major investments relative to its
political instability, or portion of the world's benchmark, and may hedge back into
lack of adequate and securities, offer the U.S. dollar from time to time
accurate information attractive potential (see also "Derivatives")
performance and
opportunities for
diversification
- ----------------------------------------------------------------------------------------------------------------------------------
DERIVATIVES
- - Derivatives such as - Hedges that correlate - The funds use derivatives for
futures, options, swaps, well with underlying hedging and for risk management
and forward foreign positions can reduce or (i.e., to establish or adjust
currency contracts that are eliminate losses at low exposure to particular securities,
used for hedging the cost markets or currencies); risk
portfolio or specific management may include management of
securities may not fully - A fund could make a fund's exposure relative to its
offset the underlying money and protect against benchmark (swaps and forward foreign
positions(1) losses if management's currency contracts are not permitted
analysis proves correct to be used by the Tax Aware Fund; the
- - Derivatives used for U.S. Small Company Opportunities Fund
risk management may not - Derivatives that is permitted to use derivatives,
have the intended effects involve leverage could however, it has no current intention
and may result in losses or generate substantial gains to do so)
missed opportunities at low cost
- The funds only establish hedges
- - The counterparty to a that they expect will be highly
derivatives contract could correlated with underlying positions
default
- While the funds may use
- - Derivatives that derivatives that incidentally involve
involve leverage could leverage, they do not use them for
magnify losses the specific purpose of leveraging
their portfolios
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 changes in the value of a securities index. An option is the right to
buy or sell a set quantity of an underlying instrument at a pre-determined
price. A swap is a privately negotiated agreement to exchange one stream of
payments for another. A forward foreign currency contract is an obligation to
buy or sell a given currency on a future date and at a set price.
22 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
ILLIQUID HOLDINGS
- - A fund could have - These holdings may - No fund may invest more than 15%
difficulty valuing these offer more attractive of net assets in illiquid holdings
holdings precisely yields or potential growth
than comparable widely - To maintain adequate liquidity
- - A fund could be unable traded securities to meet redemptions, each fund may
to sell these holdings at hold investment-grade short-term
the time or price it desires securities (including repurchase
agreements) and, for temporary or
extraordinary purposes, may borrow
from banks up to 33 1/3% of the value
of its assets
- ----------------------------------------------------------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
- - When a fund buys - A fund can take - Each fund uses segregated
securities before issue or advantage of attractive accounts to offset leverage risk
for delayed delivery, it transaction opportunities
could be exposed to
leverage risk if it does
not use segregated accounts
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TRADING
- - Increased trading - A fund could realize - Each Fund anticipates a
would raise a fund's gains in a short period of portfolio turnover rate of
brokerage and related costs time approximately 100%
- - Increased short-term - A fund could protect - The funds generally avoid
capital gains distributions against losses if a stock short-term trading, except to take
would raise shareholders' is overvalued and its value advantage of attractive or unexpected
income tax liability later falls opportunities or to meet demands
generated by shareholder activity
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FUND DETAILS 23
<PAGE>
FOR MORE INFORMATION
For investors who want more information on these funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS Contain financial statements, performance data,
information on portfolio holdings, and a written analysis of market conditions
and fund performance for a fund's most recently completed fiscal year or
half-year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) Provides a fuller technical and legal
description of a fund's policies, investment restrictions, and business
structure. This prospectus incorporates each fund's SAI by reference.
Copies of the current versions of these documents, along with other information
about the funds, may be obtained by contacting:
J.P. MORGAN FUNDS
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, upon
payment of a duplicating fee, 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. Each
fund's investment company and 1933 Act registration numbers are:
J.P. Morgan Disciplined Equity Fund. . . . . . . . . . 811-07340 and 033-54632
J.P. Morgan U.S. Equity Fund . . . . . . . . . . . . . 811-07340 and 033-54632
J.P. Morgan U.S. Small Company Fund. . . . . . . . . . 811-07340 and 033-54632
J.P. Morgan U.S. Small Company Opportunities Fund. . . 811-07340 and 033-54632
J.P. Morgan Tax Aware U.S. Equity Fund . . . . . . . . 811-07795 and 333-11125
J.P. MORGAN FUNDS AND THE MORGAN TRADITION
The J.P. Morgan 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 J.P.
Morgan Funds offer a broad array of distinctive opportunities for mutual fund
investors.
JPMORGAN
- --------------------------------------------------------------------------------
J.P. MORGAN FUNDS
ADVISOR DISTRIBUTOR
J.P. Morgan Investment Management Inc. Funds Distributor, Inc.
522 Fifth Avenue 60 State Street
New York, NY 10036 Boston, MA 02109
1-800-521-5411 1-800-221-7930
REQCP-9810
<PAGE>
================================================================================
OCTOBER 1, 1998 | PROSPECTUS
================================================================================
J.P. MORGAN INSTITUTIONAL
U.S. EQUITY FUNDS
Disciplined Equity Fund
U.S. Equity Fund
U.S. Small Company Fund
Tax Aware Disciplined Equity Fund
=======================================
Seeking to outperform U.S. stock
markets over the long term through a
disciplined management approach
This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.
Shares in these funds 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
<TABLE>
================================================================================================================================
<S> <C> <C>
2 | U.S. EQUITY MANAGEMENT APPROACH
U.S. equity investment process ....................................... 2
Principles and techniques common
to the funds in this prospectus The spectrum of U.S. equity funds .................................... 3
Tax aware investing at J.P. Morgan ................................... 3
4 | J.P. MORGAN INSTITUTIONAL U.S. EQUITY FUNDS
Each fund's goal, investment approach, J.P. Morgan Institutional Disciplined Equity Fund .................... 4
risks, expenses, performance and
financial highlights J.P. Morgan Institutional U.S. Equity Fund ........................... 8
J.P. Morgan Institutional U.S. Small Company Fund .................... 10
J.P. Morgan Institutional Tax Aware Disciplined Equity Fund .......... 12
14 | YOUR INVESTMENT
Investing in the J.P. Morgan Investing through a financial professional ........................... 14
Institutional U.S. Equity Funds
Investing through an employer-sponsored retirement plan .............. 14
Investing through an IRA or rollover IRA ............................. 14
Investing directly ................................................... 14
Opening your account ................................................. 14
Adding to your account ............................................... 14
Selling shares ....................................................... 15
Account and transaction policies ..................................... 15
Dividends and distributions .......................................... 16
Tax considerations ................................................... 16
17 | FUND DETAILS
More about risk and the funds' Business structure ................................................... 17
business operations
Management and administration ........................................ 17
Risk and reward elements ............................................. 18
FOR MORE INFORMATION ......................................... back cover
</TABLE>
<PAGE>
INTRODUCTION
================================================================================
J.P. MORGAN INSTITUTIONAL U.S. EQUITY FUNDS
These funds invest primarily in U.S. stocks either directly or through another
fund. 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 funds are designed for investors who:
o are pursuing a long-term goal such as retirement
o want to add an investment with growth potential to further diversify a
portfolio
o want funds that seek to outperform the markets in which they each invest
over the long term
o with regard to the Tax Aware Fund, are individuals that could benefit from
a strategy that pursues returns from an after-tax perspective
The funds are not designed for investors who:
o want funds that pursue market trends or focus only on particular
industries or sectors
o require regular income or stability of principal
o are pursuing a short-term goal or investing emergency reserves
o with regard to the Tax Aware Fund, 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 $275 billion in assets under management,
including assets managed by the funds' advisor, J.P. Morgan Investment
Management Inc.
================================================================================
Before you invest
Investors considering these funds should understand that:
o The value of each fund's shares will fluctuate over time. You could lose
money if you sell when your fund's share price is lower than when you
invested.
o There is no assurance that these funds will meet their investment goals.
o Future returns will not necessarily resemble past performance.
o These funds (except for the Tax Aware Fund) invest in another fund with an
identical goal -- the master portfolio. The Tax Aware Fund invests
directly in individual securities.
|
| 1
|
<PAGE>
U.S. EQUITY MANAGEMENT APPROACH
================================================================================
[GRAPHIC OMITTED]
J.P. Morgan analysts develop proprietary
fundamental research
[GRAPHIC OMITTED]
Stocks in each industry are ranked
with the help of models
[GRAPHIC OMITTED]
Using research and valuations,
each fund's management team
chooses stocks for its fund
The J.P. Morgan Institutional U.S. equity funds invest primarily in U.S. stocks.
The Tax Aware Fund does so while seeking to enhance the after-tax returns of its
shareholders.
While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor, focuses
on stock picking while largely avoiding sector or market-timing strategies.
Also, under normal market conditions, each fund will remain fully invested.
U.S. EQUITY INVESTMENT PROCESS
In managing the funds described in this prospectus, J.P. Morgan employs a
three-step process:
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.
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.
Stock selection Each fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, each
management team buys stocks that are identified as undervalued and considers
selling them when they appear overvalued. Along with attractive valuation, the
funds' managers often consider a number of other criteria:
o catalysts that could trigger a rise in a stock's price
o high potential reward compared to potential risk
o temporary mispricings caused by market overreactions
|
2 | U.S. EQUITY MANAGEMENT APPROACH
|
<PAGE>
================================================================================
THE SPECTRUM OF U.S. EQUITY FUNDS
The funds described in this prospectus pursue a range of goals and offer varying
degrees of risk and potential reward. Differences between these funds include:
o how much emphasis they give to the most undervalued stocks
o how closely they follow the industry weightings of their benchmarks
o how many securities they typically maintain in their portfolios
o the size or market capitalization of the companies in which they invest
o whether they focus on before-tax or after-tax returns
The table below shows degrees of the relative risk and return that these funds
potentially offer. These and other distinguishing features of each U.S. equity
fund are described on the following pages.
- ------------------------------
Potential risk and return
- --------------------------------------------------------------------------------
[CHART OMITTED]
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
TAX AWARE INVESTING AT J.P. MORGAN
The Tax Aware 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.
The Tax Aware Fund generally intends to pay redemption proceeds in cash; however
it reserves the right at its sole discretion to pay redemptions over $500,000
in-kind as a portfolio of representative stocks rather than cash. An in-kind
redemption payment can shield the fund -- and other shareholders -- from tax
liabilities that might otherwise be incurred. It is not subject to a redemption
fee by the fund. However, the stocks received will continue to fluctuate in
value after redemption and will be subject to brokerage or other transaction
costs when liquidated.
|
U.S. EQUITY MANAGEMENT APPROACH | 3
|
<PAGE>
J.P. MORGAN INSTITUTIONAL
DISCIPLINED EQUITY FUND
================================================================================
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL DISCIPLINED
EQUITY FUND)
[GRAPHIC] GOAL
The fund's goal is to provide a consistently high total return from a broadly
diversified portfolio of equity securities with risk characteristics similar to
the Standard & Poor's 500 Stock Index (S&P 500). This goal can be changed
without shareholder approval.
[GRAPHIC] INVESTMENT APPROACH
The fund invests primarily in large- and medium-capitalization U.S. companies.
Industry by industry, the fund's weightings are similar to those of the S&P 500.
The fund does not look to overweight or underweight industries.
Within each industry, the fund modestly overweights stocks that are ranked as
undervalued or fairly valued while modestly underweighting or not holding stocks
that appear overvalued. (The process used to rank stocks according to their
relative valuations is described on page 2.) Therefore, the fund tends to own a
larger number of stocks within the S&P 500 than the U.S. Equity Fund.
[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 exceed those of
the S&P 500 over the long term with virtually the same level of volatility.
The fund's securities are described in more detail on page 18, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[CHART OMITTED]
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $13 billion using the same strategy as the fund.
The portfolio management team is led by James C. Wiess and Timothy J. Devlin,
both vice presidents, who have been on the team since the fund's inception in
January of 1997. Mr. Wiess has been at J.P. Morgan since 1992, and prior to
managing this fund managed other structured equity portfolios for J.P. Morgan.
Mr. Devlin has been at J.P. Morgan since July of 1996, and prior to that time
was an equity portfolio manager at Mitchell Hutchins Asset Management Inc.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
- -----------------------------------------
Annual fund operating expenses/1/ (%)
- -----------------------------------------
Management fees (actual) 0.35
Marketing (12b-1) fees none
Other expenses/2/
(after reimbursement) 0.10
=========================================
Total operating expenses/2/
(after reimbursement) 0.45
- -----------------------------------------
- --------------------------------------------------------------------------------
Expense example
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
- ----------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 5 14 25 57
- ----------------------------------------------------
Footnotes for this section are shown on next page.
|
4 | J.P. MORGAN INSTITUTIONAL DISCIPLINED EQUITY FUND
|
<PAGE>
================================================================================
PERFORMANCE (unaudited)
<TABLE>
<CAPTION>
- ------------------------------
Average annual total return (%) Shows performance over time, for periods ended December 31, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 yr. 5 yrs. Since 10/31/89(/3/)
J.P. Morgan Institutional Disciplined Equity Fund (after expenses) n/a n/a n/a
- --------------------------------------------------------------------------------------------------------------------
Private Account Composite (after expense)/4/ 33.37 20.61 17.63
- --------------------------------------------------------------------------------------------------------------------
S&P 500/5/ (no expenses) 33.36 20.27 16.89
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
- ------------------------------
Total returns (%) Shows changes in returns for periods ended December 31, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3 mos. Since inception/6/
J.P. Morgan Institutional Disciplined Equity Fund 2.41 25.79
Private Account Composite/4/ 2.26 25.54
S&P 500/5/ 2.87 25.52
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
- -------------------------------
Year-by-year total return (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997
Private Account Composite/4/ (2.94) 30.39 11.75 10.20 2.21 37.87 23.26 33.37
S&P 500/5/ (3.11) 30.47 7.62 10.08 1.32 37.58 22.96 33.36
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The fund has a master/feeder structure as described on page 17. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets and reflecting reimbursement for ordinary expenses over 0.45%.
/2/ Without reimbursement, other expenses and total operating expenses would
have been 0.37% and 0.72%, respectively. This reimbursement arrangement
can be changed or terminated at any time at the option of J.P. Morgan.
/3/ The inception date of the Private Account Composite is 10/31/89.
/4/ The performance of the Private Account Composite does not represent the
fund's performance and should not be interpreted as indicative of the
fund's future performance. The Composite reflects the historical
performance of discretionary investment management accounts under the
management of the fund's advisor with substantially similar objectives and
policies as the fund. Historical Composite performance information
reflects the deduction of the fund's total expenses of 0.45%. The
performance of accounts in the Composite might have been lower if they
were subject to the extra restrictions imposed on mutual funds. AIMR
performance requirements went into effect 1/1/93 and prior to that date
the Composite may not have included all discretionary accounts.
/5/ The S&P 500 is an unmanaged index of U.S. stocks widely used as a measure
of overall stock market performance.
/6/ The fund commenced operations on 1/3/97 and performance is calculated as
of 1/31/97.
|
J.P. MORGAN INSTITUTIONAL DISCIPLINED EQUITY FUND | 5
|
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- ---------------------------------
Per-share data For fiscal periods ended May 31
- --------------------------------------------------------------------------------
1997/1/ 1998
Net asset value, beginning of period ($) 10.00 11.47
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.04 0.12
Net realized and unrealized gain
on investment ($) 1.43 3.62
================================================================================
Total from investment operations ($) 1.47 3.74
- --------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) -- (0.12)
Net realized gains (loss) ($) -- (0.13)
================================================================================
Total distributions ($) -- (0.25)
- --------------------------------------------------------------------------------
Net asset value, end of period ($) 11.47 14.96
- --------------------------------------------------------------------------------
- ---------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------
Total return (%) 14.70/2/ 32.98
- --------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 49,726 296,191
- --------------------------------------------------------------------------------
Ratio to average net assets:
- --------------------------------------------------------------------------------
Expenses (%) 0.45/3/ 0.45
- --------------------------------------------------------------------------------
Net investment income (%) 1.58/3/ 1.27
- --------------------------------------------------------------------------------
Expenses without reimbursement (%) 1.34/3/ 0.72
- --------------------------------------------------------------------------------
The Financial Highlights above have been audited by PricewaterhouseCoopers LLP,
the fund's independent accountants.
/1/ The fund commenced operations on 1/3/97.
/2/ Not annualized.
/3/ Annualized.
|
6 | J.P. MORGAN INSTITUTIONAL DISCIPLINED EQUITY FUND
|
<PAGE>
================================================================================
(THIS PAGE IS INTENTIONALLY LEFT BLANK)
|
| 7
|
<PAGE>
J.P. MORGAN INSTITUTIONAL
U.S. EQUITY FUND TICKER SYMBOL: JMUEX
================================================================================
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL U.S. EQUITY
FUND)
[GRAPHIC] GOAL
The fund's goal is to provide high total return from a portfolio of selected
equity securities. This goal can be changed without shareholder approval.
[GRAPHIC] INVESTMENT APPROACH
The fund invests primarily in large- and medium-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 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.
[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 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 securities are described in more detail on page 18, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[CHART OMITTED]
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $12.5 billion using the same strategy as the fund.
The portfolio management team is led by William M. Riegel, Jr., managing
director, who has been on the team since 1993 and has been at J.P. Morgan since
1979, and Henry D. Cavanna, managing director, who joined the team in February
of 1998, and has been at J.P. Morgan since 1971. Both served as managers of U.S.
equity portfolios prior to managing the fund.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
- -----------------------------------------
Annual fund operating expenses/1/ (%)
- -----------------------------------------
Management fees (actual) 0.40
Marketing (12b-1) fees none
Other expenses/2/
(after reimbursement) 0.20
=========================================
Total operating expenses/2/
(after reimbursement) 0.60
- -----------------------------------------
- --------------------------------------------------------------------------------
Expense example
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
- --------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 6 19 33 75
- --------------------------------------------------------------
Footnotes for this section are shown on next page
|
8 | J.P. MORGAN INSTITUTIONAL U.S. EQUITY FUND
|
<PAGE>
================================================================================
PERFORMANCE (unaudited)
<TABLE>
<CAPTION>
- ---------------------------------
Average annual total (%) Shows performance over time, for periods ended December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 yr. 5 yrs. 10 yrs. Since Inception/3/
J.P. Morgan Institutional U.S. Equity Fund/3/ (after expenses) 28.58 18.04 17.65 16.39
- -----------------------------------------------------------------------------------------------------------------------------------
S&P 500/4/ (no expenses) 33.36 20.27 18.05 17.34
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
- -------------------------------
Year-by-year total return (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional U.S. Equity Fund 14.12 31.43 1.38 34.12 8.73 11.06 (0.32) 32.83 21.22 28.58
S&P 500/4/ 16.61 31.69 (3.11) 30.47 7.62 10.08 1.32 37.58 22.96 33.36
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------
Per-share data For fiscal periods ended May 31
- -----------------------------------------------------------------------------------------------
1994/3/ 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 10.92 12.10 14.00 15.66
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.08 0.18 0.27 0.17 0.15
Net realized and unrealized gain (loss)
on investments ($) 0.88 1.42 2.66 3.02 3.81
================================================================================================
Total from investment operations ($) 0.96 1.60 2.93 3.19 3.96
- -----------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.04) (0.14) (0.20) (0.25) (0.18)
Net realized gains ($) -- (0.28) (0.83) (1.28) (2.71)
================================================================================================
Total distributions ($) (0.04) (0.42) (1.03) (1.53) (2.89)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period ($) 10.92 12.10 14.00 15.66 16.73
- -----------------------------------------------------------------------------------------------
- -----------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------
Total return (%) 9.61/5/ 15.40 25.43 25.21 28.53
- -----------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 47,473 172,497 221,368 329,776 378,988
- -----------------------------------------------------------------------------------------------
Ratio to average net assets:
Expenses (%) 0.60/6/ 0.60 0.60 0.60 0.60
- -----------------------------------------------------------------------------------------------
Net investment income (%) 1.74/6/ 2.07 2.08 1.33 0.89
- -----------------------------------------------------------------------------------------------
Expenses without reimbursement (%) 1.03/6/ 0.71 0.62 0.65 0.63
- -----------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by PricewaterhouseCoopers LLP,
the fund's independent accountants.
/1/ The fund has a master/feeder structure as described on page 17. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets and reflecting reimbursement for ordinary expenses over 0.60%.
/2/ Without reimbursement, other expenses and total operating expenses would
have been 0.23% and 0.63%, respectively. This reimbursement arrangement
can be changed or terminated at any time at the option of J.P. Morgan.
/3/ The fund commenced operations on 7/19/93 and commenced public investment
operations on 9/17/93 and returns reflect performance of The Pierpont
Equity Fund, the fund's predecessor, prior to that date. The Pierpont
Equity Fund commenced operations on 6/27/85 and performance is calculated
as of 6/30/85.
/4/ The S&P 500 is an unmanaged index of U.S. stocks widely used as a measure
of overall stock market performance.
/5/ Not annualized.
/6/ Annualized.
|
J.P. MORGAN INSTITUTIONAL U.S. EQUITY FUND | 9
|
<PAGE>
J.P. MORGAN INSTITUTIONAL
U.S. SMALL COMPANY FUND TICKER SYMBOL: JUSSX
================================================================================
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL U.S. SMALL
COMPANY FUND)
[GRAPHIC] GOAL
The fund's goal is to provide high total return from a portfolio of small
company stocks. This goal can be changed without shareholder approval.
[GRAPHIC] INVESTMENT APPROACH
The fund invests primarily in small and medium sized U.S. companies whose market
capitalizations are greater than $110 million and less than $2.5 billion.
Industry by industry, the fund's weightings are similar to those of the Russell
2000 Index. The fund can moderately underweight or overweight industries 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 process described on page 2. The fund generally
considers selling stocks that appear overvalued or have grown into large-cap
stocks.
[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.
Small-cap stocks have historically offered higher long-term growth than
large-cap stocks, and have also involved higher risks. The fund's small-cap
emphasis means it is likely to be more sensitive to economic news and is likely
to fall further in value during broad market downturns. The fund pursues returns
that exceed those of the Russell 2000 Index while seeking to limit its
volatility relative to this index.
The fund's securities are described in more detail on page 18, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[CHART OMITTED]
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $2.4 billion using the same strategy as the fund.
The portfolio management team is led by Denise Higgins, Candice Eggerss and
Stephen J. Rich, all vice presidents. Ms. Higgins joined the team in January of
1998 and has been with J.P. Morgan since 1994. Prior to managing the fund, Ms.
Higgins served as a balanced and equity portfolio manager and member of the U.S.
asset allocation committee, and prior to 1994 was a mid-to-small cap portfolio
manager at Lord Abbett & Company. Ms. Eggerss has been with J.P. Morgan since
May of 1996 as a member of the U.S. small company portfolio management team and
from June of 1993 to May of 1996 held a similar position with Weiss, Peck and
Greer. Mr. Rich joined the team in January of 1997 and has been at J.P. Morgan
since 1991, and prior to managing the fund held positions in J.P. Morgan's
structured equity and balanced/equity groups.
- --------------------------------------------------------------------------------
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, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
- -----------------------------------------
Annual fund operating expenses/1/ (%)
- -----------------------------------------
Management fees (actual) 0.60
Marketing (12b-1) fees none
Other expenses/2/
(after reimbursement) 0.20
=========================================
Total operating expenses/2/
(after reimbursement) 0.80
- -----------------------------------------
- --------------------------------------------------------------------------------
Expense example
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
- ----------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 8 26 44 99
- ----------------------------------------------------------------
Footnotes for this section are shown on next page
|
10 | J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
|
<PAGE>
================================================================================
PERFORMANCE (unaudited)
<TABLE>
<CAPTION>
- ---------------------------------
Average annual total return (%) Shows performance over time, for periods ended December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 yr. 5 yrs. 10 yrs. Since Inception/3/
J.P. Morgan Institutional U.S. Small Company Fund/3) (after expenses) 22.70 14.87 15.47 14.40
- -----------------------------------------------------------------------------------------------------------------------------------
Russell 2500 Index/4/ (no expenses) 24.36 17.59 16.94 14.89
- -----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index/4/ (no expenses) 22.36 16.41 15.76 13.04
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
- -------------------------------
Year-by-year total return (%) Shows changes in returns by calendar year
- ----------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional U.S. Small Company Fund 13.67 29.01 (24.34) 59.59 18.98 8.59 (5.81) 31.88 20.84 22.70
Russell 2500 Index/4/ 22.73 19.43 (14.88) 46.70 16.19 16.54 (1.06) 31.70 19.03 24.36
Russell 2000 Index/4/ 22.36
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------
Per-share data For fiscal periods ended May 31
- -------------------------------------------------------------------------------------------------
1994/3/ 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 10.03 11.16 13.97 14.09
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ($) 0.04 0.10 0.13 0.10 0.09
Net realized and unrealized gain
on investment ($) -- 1.12 3.66 1.07 3.04
=================================================================================================
Total from investment operations ($) 0.04 1.22 3.79 1.17 3.13
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income ($) (0.01) (0.09) (0.12) (0.13) (0.08)
Net realized gain ($) -- -- (0.86) (0.92) (1.84)
=================================================================================================
Total distributions ($) (0.01) (0.09) (0.98) (1.05) (1.92)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 10.03 11.16 13.97 14.09 15.30
- -------------------------------------------------------------------------------------------------
- ------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------
Total return (%) 0.42/5/ 12.26 35.60 9.44 23.55
- -------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 74,141 149,279 291,931 401,797 420,413
- -------------------------------------------------------------------------------------------------
Ratio to average net assets:
Expenses (%) 0.80/6/ 0.80 0.80 0.80 0.80
- -------------------------------------------------------------------------------------------------
Net investment income (loss) (%) 0.93/6/ 1.14 1.20 0.81 0.55
- -------------------------------------------------------------------------------------------------
Expenses without reimbursement and including
interest expense (%) 1.07/6/ 0.91 0.83 0.85 0.85
- -------------------------------------------------------------------------------------------------
Interest expense (%) -- -- -- -- 0.00/7/
- -------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by PricewaterhouseCoopers LLP,
the fund's independent accountants.
/1/ The fund has a master/feeder structure as described on page 17. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets and reflecting reimbursement for ordinary expenses over 0.80%.
/2/ Without reimbursement, other expenses and total operating expenses would
have been 0.25% and 0.85%, respectively. This reimbursement arrangement
can be changed or terminated at any time at the option of J.P. Morgan.
/3/ The fund commenced operations on 7/19/93 and commenced public investment
operations on 11/4/93 and returns reflect performance of The Capital
Appreciation Fund, the fund's predecessor, prior to that date. The Capital
Appreciation Fund commenced operations on 6/27/85 and performance is
calculated as of 6/30/85.
/4/ Effective 3/1/98, the fund's benchmark changed from the Russell 2500
Index, a widely recognized, unmanaged index used primarily to measure the
performance of small- to medium- cap U.S. stocks, to the Russell 2000
Index, a widely recognized, unmanaged index used primarily to measure the
performance of small-cap U.S. stocks. The Russell 2000 Index represents
the returns of small-cap stocks only, better captures that universe's
performance and fits more neatly into an investor's asset allocation
model.
/5/ Not annualized.
/6/ Annualized.
/7/ Less than 0.01%.
|
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND | 11
|
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE
DISCIPLINED EQUITY FUND
================================================================================
REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND:
INSTITUTIONAL SHARES)
[GRAPHIC] GOAL
The fund's goal is to provide a consistently high after tax total return from a
broadly diversified portfolio of equity securities with risk characteristics
similar to the Standard & Poor's 500 Stock Index (S&P 500). This goal can be
changed without shareholder approval.
[GRAPHIC] INVESTMENT APPROACH
The fund invests primarily in large- and medium-capitalization U.S. companies.
Industry by industry, the fund's weightings are similar to those of the S&P 500.
The fund does not look to overweight or underweight industries.
Within each industry, the fund modestly overweights stocks that are ranked as
undervalued or fairly valued while modestly underweighting or not holding stocks
that appear overvalued. (The process used to rank stocks according to their
relative valuations is described on page 2.) Therefore, the fund tends to own a
larger number of stocks within the S&P 500 than the U.S. Equity Fund.
To this investment approach the fund adds the element of tax aware investing.
The fund's tax aware investment strategies are described on page 3.
[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 exceed those of
the S&P 500 over the long term 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 18, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.
POTENTIAL RISK AND RETURN
[CHART OMITTED]
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $275
billion, including more than $13 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.
- -----------------------------------------
Shareholder transaction expenses
- -----------------------------------------
Redemption fees (% of your cash proceeds)
- -----------------------------------------
Shares held for less than
five years 1.00
Shares held five years or longer none
Annual expenses/1/ (% 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: $1,000
initial investment, 5% annual total return, expenses unchanged. The first number
assumes that you continued to hold your shares, the second that you sold all
shares for cash at the end of each time period. The example is for comparison
only; the fund's actual return and expenses will be different.
- ----------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 6/16 18/28 31/31 69/69
- ----------------------------------------------------------
Footnotes for this section are shown on next page.
|
12 | J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
|
<PAGE>
================================================================================
PERFORMANCE (unaudited)
<TABLE>
<CAPTION>
- ---------------------------------
Average annual total return (%) Shows performance over time, for periods ended December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Since inception/3/
J.P. Morgan Institutional Tax Aware Disciplined Equity Fund (after expenses) 27.78
- -----------------------------------------------------------------------------------------------------------------------------------
S&P 500/4/) (no expenses) 25.52
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
- ------------------------------
Total return (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------
1997/3/
J.P. Morgan Institutional Tax Aware Disciplined Equity Fund 27.78
S&P 500/4/ 25.52
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FINANCIAL HIGHLIGHTS
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Per-share data For fiscal periods ended
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10/31/97(/3/) 4/30/98
(unaudited)
Net asset value, beginning of period ($) 10.00 12.08
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Income from investment operations:
Net investment income ($) 0.06 0.06
Net realized and unrealized gain
on investments ($) 2.02 2.72
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Total from investment operations ($) 2.08 2.78
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Less distributions to shareholders from:
Net investment income ($) -- (0.10)
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Net asset value, end of period ($) 12.08 14.76
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- -----------------------------
Ratios and supplemental data
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Total return (%) 20.80/5/ 23.18/5/
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Net assets, end of period ($ thousands) 12,026 67,198
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Ratio to average net assets:
Expenses (%) 0.55/6/ 0.55/6/
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Net investment income (%) 1.19/6/ 1.02/6/
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Expenses without reimbursement (%) 4.59/6/ 1.22/6/
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Portfolio turnover rate (%) 35/5/ 12/5/
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Average broker commissions per share ($) 0.0261 0.0235
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The financial highlights for the fiscal period ended 10/31/97 have been audited
by PricewaterhouseCoopers LLP, the fund's independent accountants.
/1/ This table shows expenses for the fiscal period ended 10/31/97, expressed
as a percentage of average net assets and reflecting reimbursement for
ordinary expenses over 0.55%.
/2/ Without reimbursement, other expenses and total operating expenses would
have been 4.24% and 4.59%, respectively, on an annualized basis. This
reimbursement arrangement can be changed or terminated at any time after
2/28/99 at the option of J.P. Morgan.
/3/ The fund commenced operations on 1/30/97 and performance is calculated as
of 1/31/97.
/4/ The S&P 500 is an unmanaged index of U.S. stocks widely used as a measure
of overall stock market performance.
/5/ Not annualized.
/6/ Annualized.
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J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND | 13
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YOUR INVESTMENT
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For your convenience, the J.P. Morgan Institutional Funds offer several ways to
start and add to 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.
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.
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:
o Choose a fund (or funds) and determine the amount you are investing. The
minimum amount for initial investments is $1,000,000 for the Disciplined
Equity and U.S. Small Company funds and $3,000,000 for the U.S Equity and
Tax Aware funds and for additional investments $25,000, although these
minimums may be less for some investors. For more information on minimum
investments, call 1-800-766-7722.
o 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.
o Mail in your application, making your initial investment as shown on the
right.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-766-7722.
OPENING YOUR ACCOUNT
By wire
o Mail your completed application to the Shareholder Services Agent.
o 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.
o After placing your purchase order, instruct your bank to wire the amount
of your investment to:
Morgan Guaranty Trust Company of New York
Routing number: 021-000-238
Credit: J.P. Morgan Institutional Funds
Account number: 001-57-689
FFC: your account number, name of registered owner(s) and fund name
By check
o Make out a check for the investment amount payable to J.P. Morgan
Institutional Funds.
o Mail the check with your completed application to the Shareholder Services
Agent.
By exchange
o Call the Shareholder Services Agent to effect an exchange.
ADDING TO YOUR ACCOUNT
By wire
o Call the Shareholder Services Agent to place a purchase order. Funds that
are wired without a purchase order will be returned uninvested.
o Once you have placed your purchase order, instruct your bank to wire the
amount of your investment as described above.
By check
o Make out a check for the investment amount payable to J.P. Morgan
Institutional Funds.
o Mail the check with a completed investment slip to the Shareholder
Services 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 exchange
o Call the Shareholder Services Agent to effect an exchange.
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14 | YOUR INVESTMENT
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SELLING SHARES
By phone - wire payment
o 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.
o 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.
By phone - check payment
o Call the Shareholder Services Agent and place your request. Once your
request has been verified, a check for the net cash 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).
In writing
o 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.
o Indicate whether you want any cash proceeds sent by check or by wire.
o Make sure the letter is signed by an authorized party. The Shareholder
Services Agent may require additional information, such as a signature
guarantee.
o Mail the letter to the Shareholder Services Agent.
By exchange
o Call the Shareholder Services Agent to effect an exchange.
ACCOUNT AND TRANSACTION POLICIES
Telephone orders The funds accept telephone orders from all shareholders. To
guard against fraud, the funds require shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if a fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.
Exchanges You may exchange shares in these funds for shares in any other J.P.
Morgan Institutional or J.P. Morgan mutual fund at no charge (subject to the
securities laws of your state). When making exchanges, it is important to
observe any applicable minimums. Keep in mind that for tax purposes an exchange
is considered a sale.
A fund may alter, limit, or suspend its exchange policy at any time.
Business hours and NAV calculations The funds' regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). Each fund
calculates its net asset value per share (NAV) every business day as of the
close of trading on the NYSE (normally 4:00 p.m. eastern time). Each fund's
securities are typically priced using market quotes or pricing services. When
these methods are not available or do not represent a security's value at the
time of pricing, the security is valued in accordance with a fund's fair
valuation procedures.
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 the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. A 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.
================================================================================
Shareholder Services Agent
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
1-800-766-7722
Representatives are available 8:00 a.m. to 5:00 p.m. eastern
time on fund business days.
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YOUR INVESTMENT | 15
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Timing of settlements When you buy shares, you will become the owner of record
when a fund receives your payment, generally the day following execution. When
you sell shares, cash proceeds are generally available the day following
execution and will be forwarded according to your instructions. In-kind
redemptions (described on page 3) will be available as 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 funds send monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months each fund sends out an annual or semi-annual report containing
information on its 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), each fund reserves the right to request that you buy more shares
or close your account. If your account balance is still below the minimum 60
days after notification, each fund reserves the right to close out your account
and send the proceeds to the address of record.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are typically paid four times a year for the Disciplined
Equity, U.S. Equity and Tax Aware funds; and twice a year for the U.S. Small
Company Fund. Each fund typically makes capital gains distributions, if any,
once per year. However, a fund may make more or fewer payments in a given year,
depending on its investment results and its tax compliance situation. Each
fund's dividends and distributions consist of most or all of its net investment
income and net realized capital gains.
Dividends and distributions are reinvested 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 J.P. Morgan Institutional Fund.
TAX CONSIDERATIONS
In general, selling shares for cash, exchanging shares, and receiving
distributions (whether reinvested or taken in cash) are all taxable events.
These transactions typically create the following tax liabilities for taxable
accounts:
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Transaction | Tax status
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Income dividends Ordinary income
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Short-term capital gains Ordinary income
distributions
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Long-term capital gains Capital gains
distributions
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Sales or exchanges of shares Capital gains or losses
owned for more than one year
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Sales or exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject
to special rules
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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 a fund is about to declare a long-term capital
gains distribution.
Every January, each fund issues tax information on its distributions for the
previous year.
Any investor for whom a 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.
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16 | YOUR INVESTMENT
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FUND DETAILS
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BUSINESS STRUCTURE
As noted earlier, each fund (except the Tax Aware Fund) is a "feeder" fund that
invests in a master portfolio. (Except where indicated, this prospectus uses the
term "the fund" to mean the feeder fund and its master portfolio taken
together.)
Each master portfolio accepts investments from other feeder funds, and all the
feeders of a given master portfolio bear the portfolio's expenses in proportion
to their assets. However, each feeder can set its own transaction minimums,
fund-specific expenses, and other conditions. This means that one feeder could
offer access to the same master portfolio on more attractive terms, or could
experience better performance, than another feeder. Information about other
feeders is available by calling 1-800-766-7722. Generally, when a master
portfolio seeks a vote, its feeder fund will hold a shareholder meeting and cast
its vote proportionately, as instructed by its shareholders. Fund shareholders
are entitled to one full or fractional vote for each dollar or fraction of a
dollar invested.
Each feeder fund and its master portfolio expect to maintain consistent goals,
but if they do not, a fund will withdraw from its master portfolio, receiving
its assets either in cash or securities. Each feeder fund's trustees would then
consider whether a fund should hire its own investment adviser, invest in a
different master portfolio, or take other action.
The Tax Aware Fund is a series of J.P. Morgan Series Trust, a Massachusetts
business trust. Information about other series or classes is available by
calling 1-800-766-7722. In the future, the trustees could create other series or
share classes, which would have different expenses.
MANAGEMENT AND ADMINISTRATION
The feeder funds described in this prospectus, their corresponding master
portfolios, and J.P. Morgan Series Trust, are all 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; costs are shared by all funds governed by these trustees. Funds
Distributor, Inc., as co-administrator, along with J.P. Morgan, provides fund
officers. J.P. Morgan, as co-administrator, oversees each fund's other service
providers.
J.P. Morgan, subject to the expense reimbursements described earlier in this
prospectus, receives the following fees for investment advisory and other
services:
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Advisory services Percentage of the master
portfolio's average net assets
Disciplined Equity 0.35%
U.S. Equity 0.40%
U.S. Small Company 0.60%
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Administrative services Master portfolio's and fund's pro-
(fee shared with Funds rata portions of 0.09% of the
Distributor, Inc.) first $7 billion in J.P. Morgan-
advised portfolios, plus 0.04%
of average net assets over
$7 billion
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Shareholder services 0.10% of the fund's average
net assets
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The Tax Aware Fund, subject to the expense reimbursements described earlier in
this prospectus, pays J.P. Morgan the following fees for investment advisory and
other services:
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Advisory services 0.35% of the fund's average
net assets
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Administrative services Fund's pro-rata portion of 0.09%
(fee shared with Funds of the first $7 billion in
Distributor, Inc.) J.P. Morgan-advised portfolios,
plus 0.04% of average
net assets over $7 billion
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Shareholder services 0.25% of the fund's average
net assets
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J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.
Year 2000 Fund operations and shareholders could be adversely affected if the
computer systems used by J.P. Morgan, the funds' other service providers and
other entities with computer systems linked to the funds do not properly process
and calculate January 1, 2000 and after date-related information. J.P. Morgan is
working to avoid these problems and to obtain assurances from other service
providers that they are taking similar steps. However, it is not certain that
these actions will be sufficient to prevent these problems from adversely
impacting fund operations and shareholders. In addition, to the extent that
operations of issuers of securities held by the funds are impaired by
date-related problems or prices of securities decline as a result of real or
perceived date-related problems of issuers held by the funds or generally, the
net asset value of the funds will decline.
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FUND DETAILS | 17
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RISK AND REWARD ELEMENTS
This table discusses the main elements that make up each fund's overall risk and
reward characteristics (described on pages 4-13). It also outlines each fund's
policies toward various securities, including those that are designed to help
certain funds manage risk.
<TABLE>
<CAPTION>
====================================================================================================================================
Potential risks | Potential rewards | Policies to balance risk and reward
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Market conditions
o Each fund's share price and o Stocks have generally o Under normal circumstances the funds plan to remain
performance will fluctuate in outperformed more stable fully invested, with at least 65% in stocks; stock
response to stock market investments (such as bonds and investments may include U.S. and foreign common
movements cash equivalents) over the long stocks, convertible securities, preferred stocks,
term trust or partnership interests, warrants, rights, and
o Adverse market conditions may investment company securities
from time to time cause a
fund to take temporary o The funds seek to limit risk through diversification
defensive positions that are
inconsistent with its o During severe market downturns, the funds have the
principal investment option of investing up to 100% of assets in
strategies and may hinder a investment-grade short-term securities
fund from achieving its
investment objective
- ------------------------------------------------------------------------------------------------------------------------------------
Management choices
o A fund could underperform its o A fund could outperform its o J.P. Morgan focuses its active management on
benchmark due to its benchmark due to these same securities selection, the area where it believes its
securities and asset choices commitment to research can most enhance returns
allocation choices
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Foreign investments
o Currency exchange rate o Favorable exchange rate o Each fund anticipates that its total foreign
movements could reduce gains movements could generate gains investments will not exceed 20% of assets
or create losses or reduce losses
o Each fund actively manages the currency exposure of
o A fund could lose money o Foreign investments, which its foreign investments relative to its benchmark, and
because of foreign government represent a major portion of may hedge back into the U.S. dollar from time to time
actions, political the world's securities, offer (see also "Derivatives")
instability, or lack of attractive potential
adequate and accurate performance and opportunities
information for diversification
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives
o Derivatives such as futures, o Hedges that correlate well o The funds use derivatives for hedging and for risk
options, swaps and forward with underlying positions can management (i.e., to establish or adjust exposure to
foreign currency contracts reduce or eliminate losses at particular securities, markets or currencies); risk
that are used for hedging the low cost management may include management of a fund's exposure
portfolio or specific relative to its benchmark (swaps and forward foreign
securities may not fully o A fund could make money and currency contracts are not permitted to be used by the
offset the underlying protect against losses if Tax Aware Fund)
positions/1/ management's analysis proves
correct o The funds only establish hedges that they expect will
o Derivatives used for risk be highly correlated with underlying positions
management may not have the o Derivatives that involve
intended effects and may leverage could generate o While the funds may use derivatives that incidentally
result in losses or missed substantial gains at low cost involve leverage, they do not use them for the
opportunities specific purpose of leveraging their portfolios
o The counterparty to a
derivatives contract could
default
o Derivatives that involve
leverage could magnify losses
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</TABLE>
/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 changes in the value of a securities index. An option is the right
to buy or sell a set quantity of an underlying instrument at a pre-
determined price. A swap is a privately negotiated agreement to exchange one
stream of payments for another. A forward foreign currency contract is an
obligation to buy or sell a given currency on a future date and at a set
price.
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18 | FUND DETAILS
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<TABLE>
<CAPTION>
====================================================================================================================================
Potential risks | Potential rewards | Policies to balance risk and reward
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<S> <C> <C>
Illiquid holdings
o A fund could have difficulty o These holdings may offer more o No fund may invest more than 15% of net assets in
valuing these holdings attractive yields or potential illiquid holdings
precisely growth than comparable widely
traded securities o To maintain adequate liquidity to meet redemptions,
o A fund could be unable to sell each fund may hold investment-grade short-term
these holdings at the time or securities (including repurchase agreements) and, for
price it desires temporary or extraordinary purposes, may borrow from
banks up to 33 1/3% of the value of its assets
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When-issued and delayed delivery
securities
o When a fund buys securities o A fund can take advantage of o Each fund uses segregated accounts to offset leverage
before issue or for delayed attractive transaction risk
delivery, it could be exposed opportunities
to leverage risk if it does
not use segregated accounts
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Short-term trading
o Increased trading would raise o A fund could realize gains o Each Fund anticipates a portfolio turnover rate of
a fund's brokerage and related in a short period of time approximately 100%
costs
o A fund could protect against o The funds generally avoid short-term trading, except
o Increased short-term capital losses if a stock is to take advantage of attractive or unexpected
gains distributions would overvalued and its value later opportunities or to meet demands generated by
raise shareholders' income tax falls shareholder activity
liability
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</TABLE>
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FOR MORE INFORMATION
================================================================================
For investors who want more information on these funds, the following documents
are available free upon request:
Annual/Semi-annual Reports Contain financial statements, performance data,
information on portfolio holdings, and a written analysis of market conditions
and fund performance for a fund's most recently completed fiscal year or
half-year.
Statement of Additional Information (SAI) Provides a fuller technical and legal
description of a fund's policies, investment restrictions, and business
structure. This prospectus incorporates each fund's SAI by reference.
Copies of the current versions of these documents, along with other information
about the funds, may be obtained by contacting:
J.P. Morgan Institutional Funds
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
Telephone: 1-800-766-7722
Hearing impaired: 1-888-468-4015
Email: [email protected]
Text-only versions of these documents and this prospectus are available, upon
payment of a duplicating fee, 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. Each
fund's investment company and 1933 Act registration numbers are:
J.P. Morgan Institutional Disciplined Equity Fund ...... 811-07342 and 033-54642
J.P. Morgan Institutional U.S. Equity Fund ............. 811-07342 and 033-54642
J.P. Morgan Institutional U.S. Small Company Fund ...... 811-07342 and 033-54642
J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund .............................. 811-07795 and 333-11125
J.P. MORGAN INSTITUTIONAL FUNDS AND THE MORGAN TRADITION
The J.P. Morgan Institutional 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 J.P. Morgan Institutional Funds offer a broad array of
distinctive opportunities for mutual fund investors.
JPMorgan
================================================================================
J.P. Morgan Institutional Funds |
Advisor Distributor
J.P. Morgan Investment Management Inc. Funds Distributor, Inc.
522 Fifth Avenue 60 State Street
New York, NY 10036 Boston, MA 02109
1-800-766-7722 1-800-221-7930
IEQCP-9810
