<PAGE>
AUGUST 2, 1999 | PROSPECTUS
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J.P. MORGAN FIXED INCOME FUNDS
Short Term Bond Fund
Bond Fund
Global Strategic Income Fund
Emerging Markets Debt Fund
Tax Exempt Bond Fund
New York Tax Exempt Bond Fund
California Bond Fund
- -------------------------------------
Seeking high total return or current income by investing primarily in fixed
income securities.
This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.
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 or guarantees that the information in this prospectus is correct or
adequate. It is a criminal offense to state or suggest otherwise.
Distributed by Funds Distributor, Inc.
JPMorgan
<PAGE>
CONTENTS
2 | Each fund's goal, investment approach, risks, expenses, and performance
J.P. MORGAN FIXED INCOME FUNDS
J.P. Morgan Short Term Bond Fund ....................................... 2
J.P. Morgan Bond Fund .................................................. 4
J.P. Morgan Global Strategic Income Fund ............................... 6
J.P. Morgan Emerging Markets Debt Fund ................................. 8
J.P. Morgan Tax Exempt Bond Fund ....................................... 10
J.P. Morgan New York Tax Exempt Bond Fund .............................. 12
J.P. Morgan California Bond Fund ....................................... 14
16 | Principles and techniques common
to the funds in this prospectus
FIXED INCOME MANAGEMENT APPROACH
J.P. Morgan ............................................................ 16
J.P. Morgan fixed income funds ......................................... 16
The spectrum of fixed income funds ..................................... 16
Who may want to invest ................................................. 16
Fixed income investment process ........................................ 17
18 | Investing in the J.P. Morgan
Fixed Income 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
FUND DETAILS
Business structure ..................................................... 21
Management and administration .......................................... 21
Risk and reward elements ............................................... 22
Investments ............................................................ 24
Financial highlights ................................................... 26
FOR MORE INFORMATION ........................................... back cover
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND | TICKER SYMBOL: JPSBX
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REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN SHORT TERM BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return, consistent with low volatility
of principal. This goal can be changed without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, domestic and foreign corporate bonds, private placements,
asset-backed and mortgage-related securities, and money market instruments, that
it believes have the potential to provide a high total return over time. These
securities may be of any maturity, but under normal market conditions the fund's
duration will range between one and three years, similar to that of the Merrill
Lynch 1-3 Year Treasury Index. For a description of duration, please see fixed
income investment process on page 17.
Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. The fund
typically hedges its non-dollar investments back to the U.S. dollar. At least
90% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 75% A or better. No more than 10% of assets may be invested
in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
duration fixed income funds will depend on the success of the investment
process, which is described on page 17.
Although any rise in interest rates is likely to cause a fall in the price of
bonds, the fund's comparatively short duration is designed to help keep its
share price within a relatively narrow range. Because it seeks to minimize risk,
the fund will generally offer less income, and during periods of declining
interest rates, may offer lower total returns than bond funds with longer
durations. Because of the sensitivity of the fund's mortgage related securities
to changes in interest rates, the performance and duration of the fund may be
more volatile than if it did not hold these securities. The fund uses futures
contracts and other derivatives to help manage duration, yield curve exposure,
and credit and spread volatility. To the extent that the fund seeks higher
returns by investing in non-investment-grade bonds, often called junk bonds, it
takes on additional risks, since these bonds are more sensitive to economic news
and their issuers have a less secure financial position. To the extent the fund
invests in foreign securities, it could lose money because of foreign government
actions, political instability, currency fluctuation or lack of adequate and
accurate information. The fund may engage in active and frequent trading,
leading to increased portfolio turnover and the possibility of increased capital
gains. See page 20 for further discussion on the tax treatment of capital gains.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by
J.P. Morgan, which currently manages over $340 billion, including more than $20
billion using similar strategies as the fund.
The portfolio management team is led by Connie J. Plaehn, managing director, who
has been on the team since the fund's inception and has been at J.P. Morgan
since 1984, William G. Tennille, vice president, who joined the team in January
of 1994 and has been at J.P. Morgan since 1992 and Augustus Cheh, vice
president, who has been a fixed income portfolio manager and analyst since
joining J.P. Morgan in 1994.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
2 | J.P. MORGAN SHORT TERM BOND FUND
<PAGE>
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PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Short Term Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 5 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past one year, five years and life of the fund compare to those of the
Merrill Lynch 1-3 Year Treasury Index. This is a widely recognized, unmanaged
index of U.S. Treasury notes and bonds with maturities of 1-3 years used as a
measure of overall short-term bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998
20%
10.58
10%
4.94 6.14 6.84
0.11
0%
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[ ] J.P. Morgan Short Term Bond Fund
The fund's year-to-date total return as of 6/30/99 is 0.60%.
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 3.41% (for the quarter ended 6/30/95); and the
lowest quarterly return was -0.54% (for the quarter ended 3/31/94).
<TABLE>
<CAPTION>
Average annual total return Shows performance over time, for periods ended December 31, 1998
- -------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Life of fund(1)
<S> <C> <C> <C>
J.P. Morgan Short Term Bond Fund (after expenses) 6.84 5.67 5.48
- -------------------------------------------------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index (no expenses) 7.00 5.99 5.86
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.25
Marketing (12b-1) fees none
Other expenses 0.77
- ---------------------------------------------
Total
operating expenses 1.02
Fee waiver and expense
reimbursement(4) 0.42
- ---------------------------------------------
Net expenses 0.60
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 19
months and total operating expenses thereafter and all shares sold at the end of
each time period. The example is for comparison only; the fund's actual return
and your actual costs may be higher or lower.
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1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 61 257 497 1,186
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(1) The fund commenced operations on 7/8/93 and returns reflect performance of
the fund from 7/31/93.
(2) The fund's fiscal year end is 10/31.
(3) The fund has a master/feeder structure as described on page 21. This table
is restated to show the current fee arrangements in effect as of 8/1/98, and
shows the fund's expenses and its share of master portfolio expenses for the
past fiscal year using the current fees as if they had been in effect during
the past fiscal year, before reimbursement, expressed as a percentage of the
fund's average net assets.
(4) Reflects an agreement dated 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
to the extent expenses exceed 0.60%(excluding extraordinary expenses) of the
fund's average daily net assets through 2/28/01.
J.P. MORGAN SHORT TERM BOND FUND | 3
<PAGE>
J.P. MORGAN BOND FUND | TICKER SYMBOL: PPBDX
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REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return consistent with moderate risk of
capital and maintenance of liquidity. This goal can be changed without
shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, corporate bonds, private placements, asset-backed and
mortgage-backed securities, that it believes have the potential to provide a
high total return over time. These securities may be of any maturity, but under
normal market conditions the management team will keep the fund's duration
within one year of that of the Salomon Brothers Broad Investment Grade Bond
Index (currently about five years). For a description of duration, please see
fixed income investment process on page 17.
Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. The fund
typically hedges its non-dollar investments back to the U.S. dollar. At least
75% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 65% A or better. No more than 25% of assets may be invested
in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 17.
To the extent that the fund seeks higher returns by investing in
non-investment-grade bonds, often called junk bonds, it takes on additional
risks, since these bonds are more sensitive to economic news and their issuers
have a less secure financial position. The fund may use futures contracts and
other derivatives to help manage duration, yield curve exposure, and credit and
spread volatility. To the extent the fund invests in foreign securities, it
could lose money because of foreign government actions, political instability,
currency fluctuation or lack of adequate and accurate information. The fund may
engage in active and frequent trading, leading to increased portfolio turnover
and the possibility of increased capital gains. See page 20 for further
discussion on the tax treatment of capital gains.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $25 billion using similar strategies as the fund.
The portfolio management team is led by William G. Tennille, vice president, who
has been at J.P. Morgan since 1992, Connie J. Plaehn, managing director, who has
been at J.P. Morgan since 1984, and John Snyder, vice president, who has been at
J.P. Morgan since 1993. Mr. Tennille and Ms. Plaehn have been on the team since
January of 1994. Mr. Snyder has been a fixed income portfolio manager since
joining J.P. Morgan.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
4 | J.P. MORGAN BOND FUND
<PAGE>
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PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 10 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past one, five and ten years and compare to those of the Salomon
Brothers Broad Investment Grade Bond Index. This is a widely recognized,
unmanaged index of U.S. Treasury and agency securities and investment-grade
mortgage and corporate bonds used as a measure of overall bond market
performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
<TABLE>
<CAPTION>
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
20%
18.17
13.45
10.23 10.09
10%
9.87 9.13
6.53
7.36
3.13
0%
(2.97)
(10%)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[ ] J.P. Morgan Bond Fund
The fund's year-to-date total return as of 6/30/99 is (1.81%).
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 6.25% (for the quarter ended 6/30/95); and the
lowest quarterly return was -2.39% (for the quarter ended 3/31/94).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended
December 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Past 10 yrs.(1)
<S> <C> <C> <C>
J.P. Morgan Bond Fund (after expenses) 7.36 6.74 8.36
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade Bond Index (no expenses) 8.72 7.30 9.31
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of 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 are deducted from fund
assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses 0.40
- ---------------------------------------------
Total annual fund
operating expenses 0.70
- ---------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, total operating expenses
unchanged, and all shares sold at the end of each time period. The example is
for comparison only; the fund's actual return and your actual costs may be
higher or lower.
- ---------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 72 224 390 871
- ---------------------------------------------------------------------
(1) The fund commenced operations on 7/12/93. Returns for the period 3/31/88
through 7/31/93 reflect performance of The Pierpont Bond Fund, the fund's
predecessor, which commenced operations on 3/11/88.
(2) The fund's fiscal year end is 10/31.
(3) The fund has a master/feeder structure as described on page 21. This table
is restated to show the current fee arrangements in effect as of 8/1/98, and
shows the fund's expenses and its share of master portfolio expenses for the
past fiscal year, using the current fees as if they had been in effect
during the past fiscal year, before reimbursement, expressed as a percentage
of the fund's average net assets.
J.P. MORGAN BOND FUND | 5
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC
INCOME FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN GLOBAL STRATEGIC INCOME FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return from a portfolio of fixed income
securities of foreign and domestic issuers. This goal can be changed without
shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests in a wide range of debt securities from the U.S. and other
markets, both developed and emerging. Issuers may include governments,
corporations, financial institutions, and supranational organizations (such as
the World Bank) that the fund believes have the potential to provide a high
total return over time. The fund may invest directly in mortgages and in
mortgage-backed securities. The fund's securities may be of any maturity, but
under normal market conditions its duration will generally be similar to that of
the Lehman Brothers Aggregate Bond Index (currently about four and a half
years). For a description of duration, please see fixed income investment
process on page 17. At least 40% of assets must be invested in securities that,
at the time of purchase, are rated investment-grade (BBB/Baa or better) or are
the unrated equivalent. The balance of assets must be invested in securities
rated B or higher at the time of purchase (or the unrated equivalent), except
that the fund's emerging market component has no minimum quality rating and may
invest without limit in securities that are in the lowest rating categories (or
are the unrated equivalent).
The management team uses the process described on page 17, and also makes
country allocations, based primarily on macro-economic factors. The team uses
the model allocation shown at right as a basis for its sector allocation,
although the actual allocations are adjusted periodically within the indicated
ranges. Within each sector, a dedicated team handles securities selection. The
fund typically hedges its non-dollar investments in developed countries back to
the U.S. dollar.
The fund's share price and total return will vary in response to changes in
global bond markets, interest rates, and currency exchange rates. How well the
fund's performance compares to that of similar fixed income funds will depend on
the success of the investment process. Because of credit and foreign and
emerging markets investment risks, the fund's performance is likely to be more
volatile than that of most fixed income funds. Foreign and emerging market
investment risks include foreign government actions, political instability,
currency fluctuations and lack of adequate and accurate information. To the
extent that the fund seeks higher returns by investing in non-investment-grade
bonds, often called junk bonds, it takes on additional risks, since these bonds
are more sensitive to economic news and their issuers have a less secure
financial position. The fund's mortgage-backed investments involve the risk of
losses due to default or to prepayments that occur earlier or later than
expected. Some investments, including directly owned mortgages, may be illiquid.
The fund has the potential for long-term total returns that exceed those of more
traditional bond funds, but investors should also be prepared for risks that
exceed those of more traditional bond funds. The fund may engage in frequent
trading, leading to increased portfolio turnover and the possibility of
increased capital gains. See page 20 for further discussion on the tax treatment
of capital gains.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
<PAGE>
MODEL SECTOR ALLOCATION
[PIE CHART GRAPHIC]
9% international
non-dollar
(range 0-25%)
35% public/private
mortgages
(range 20-45%)
13% public/private
corporates
(range 5-25%)
16% emerging
markets
(range 0-25%)
27% high yield
corporates
(range 17-37%)
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $3 billion using similar strategies as the fund.
The portfolio management team is led by Mark E. Smith, managing director, who
joined J.P. Morgan in 1994 from Allied Signal, Inc. where he managed fixed
income portfolios and oversaw asset allocation activities. He has been on the
team since the fund's inception.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
6 | J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
<PAGE>
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PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Global Strategic Income Fund.
The bar chart indicates the risks by showing the performance of the fund's
shares during its first complete calendar year of operations.
The table indicates the risks by showing how the fund's average annual returns
for the past one year and life of the fund compare to those of the Lehman
Brothers Aggregate Bond Index. This is a widely recognized, unmanaged index used
as a measure of overall bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Total return (%) Shows changes in returns by calendar year(1,2)
- -------------------------------------------------------------------
1998
20%
10%
2.31
0%
- -------------------------------------------------------------------
[ ] J.P. Morgan Global Strategic Income Fund
The fund's year-to-date total return as of 6/30/99 is (0.14%).
For the period covered by this total return chart, the fund's highest quarterly
return was 3.04% (for the quarter ended 3/31/98); and the lowest quarterly
return was -1.58% (for the quarter ended 9/30/98).
<TABLE>
<CAPTION>
Average annual total return Shows performance over time, for periods ended
December 31, 1998
- -----------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1)
<S> <C> <C>
J.P. Morgan Global Strategic Income Fund (after expenses) 2.31 6.75
- -----------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (no expenses) 8.67 10.91
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.45
Marketing (12b-1) fees none
Other expenses 1.44
- ---------------------------------------------
Total
operating expenses 1.89
Fee waivers and expense
reimbursement (4) 0.89
- ---------------------------------------------
Net expenses 1.00
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 19
months total operating expenses thereafter and all shares sold at the end of
each time period. The example is for comparison only; the fund's actual return
and your actual costs may be higher or lower.
- ---------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 102 454 887 2,094
- ---------------------------------------------------------------------
(1) The fund commenced operations on 11/5/97. For the period 3/31/97 through
11/30/97, returns reflect performance of the J.P. Morgan Institutional
Global Strategic Income Fund (a separate feeder fund investing in the same
master portfolio). These returns reflect lower operating expenses than those
of the fund. Therefore these returns may be higher than the fund's would
have been had it existed during the same period.
(2) The fund's fiscal year end is 10/31.
(3) 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 11/5/97 (commencement of operations) through 10/31/98, before
reimbursement, expressed as a percentage of the fund's average net assets.
(4) Reflects an agreement dated 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
to the extent expenses exceed 1.00%(excluding extraordinary expenses) of the
fund's average daily net assets through 2/28/01.
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND | 7
<PAGE>
J.P. MORGAN EMERGING
MARKETS DEBT FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN EMERGING MARKETS DEBT FUND)
[GRAPHIC OMITTED] RISKS/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return from a portfolio of fixed income
securities of emerging markets issuers. This goal can be changed without
shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in debt securities that it believes have the
potential to provide a high total return from countries whose economies or bond
markets are less developed. This designation currently includes most countries
in the world except Australia, Canada, Hong Kong, Japan, New Zealand, the U.S.,
the United Kingdom, and most Western European countries. Issuers of portfolio
securities may include foreign governments, corporations, and financial
institutions. These securities may be of any maturity and quality, but under
normal market conditions the fund's duration will generally range between three
and five years, similar to that of the Emerging Markets Bond Index Plus. For a
description of duration, please see fixed income investment process on page 17.
The fund does not have any minimum quality rating and may invest without limit
in securities that are rated in the lowest rating categories (or are the unrated
equivalent).
In addition to the investment process described on page 17, the management team
makes country allocation decisions, based primarily on financial and economic
forecasts and other macro-economic factors.
The fund's share price and total return will vary in response to changes in
emerging bond markets, interest rates, and currency exchange rates. How well the
fund's performance compares to that of similar fixed income funds will depend on
the success of the investment process.
Because the fund is non-diversified and may invest more than 5% of its assets in
a single issuer and its primary securities combine the risks of emerging markets
and low credit quality, its performance is likely to be more volatile than that
of other fixed income investments. These risks and fund volatility are likely to
be compounded when the fund concentrates its investments in a small number of
countries. Emerging market investment risks include foreign government actions,
political instability, currency fluctuations and lack of adequate and accurate
information. The fund may engage in active and frequent trading, leading to
increased portfolio turnover and the possibility of increased capital gains. See
page 20 for further discussion on the tax treatment of capital gains. To the
extent that the fund seeks higher returns by investing in non-investment-grade
bonds, often called junk bonds, it takes on additional risks, since these bonds
are more sensitive to economic news and their issuers have a less secure
financial position. Investors should be prepared to ride out periods of negative
return.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $426 million using similar strategies as the fund.
The portfolio management team is led by Michael Cembalest, managing director,
who has been at J.P. Morgan from 1988 to January 1998 and since June 1998, and
Andrew F. Goldberg, vice president, who has been at J.P. Morgan since 1990.
Prior to joining the portfolio management team, Mr. Cembalest was responsible
for sovereign debt analysis in the emerging markets group. From January 1998 to
June 1998, Mr. Cembalest was a portfolio manager at Morgan Stanley. Previously,
Mr. Goldberg oversaw the capital research group's research into fixed income and
derivatives markets.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
8 | J.P. MORGAN EMERGING MARKETS DEBT FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Emerging Markets Debt Fund.
The bar chart indicates the risks by showing the performance of the fund's
shares during it's first complete calendar year of operations.
The table indicates the risks by showing how the fund's average annual returns
for the past year and life of fund compare to those of the Emerging Markets Bond
Index Plus. This is an unmanaged index which tracks total return for external
currency-denominated debt (Brady bonds, loans, Eurobonds and U.S.
dollar-denominated market instruments) in emerging markets.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Total return (%) Shows changes in returns by calendar year(1,2)
- ---------------------------------------------------------------------
1998
10%
0%
(15.93)
(10%)
(20%)
- ---------------------------------------------------------------------
[ ] J.P. Morgan Emerging Market Debt Fund
For the period covered by this total return chart, the fund's highest quarterly
return was 9.50% (for the quarter ended 12/31/98) and the lowest quarterly
return was -21.73% (for the quarter ended 9/30/98).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for period ended
December 31, 1998
- --------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1)
<S> <C> <C>
J.P. Morgan Emerging Market Debt Fund (after expenses) (15.93) (8.04)
- --------------------------------------------------------------------------------------------------
Emerging Markets Bond Index Plus (no expenses) (14.35) (4.08)
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.70
Marketing (12b-1) fees none
Other expenses 1.39
- ---------------------------------------------
Total
operating expenses 2.09
Fee waivers and expense
reimbursement(4) 0.84
- ---------------------------------------------
Net expenses 1.25
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 16
months and total operating expenses thereafter and all shares sold at the end of
each time period. The example is for comparison only; the fund's actual return
and your actual costs may be higher or lower.
- ---------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 127 545 1,019 2,330
- ---------------------------------------------------------------------
(1) The fund commenced operations on 4/17/97 and returns reflect performance of
the fund from 4/30/97.
(2) The fund's fiscal year end is 12/31.
(3) 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 before reimbursement, expressed as a percentage of average
net assets.
(4) Reflects an agreement dated 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
to the extent expenses exceed 1.25%(excluding extraordinary expenses) of the
fund's average daily net assets through 11/28/00.
J.P. MORGAN EMERGING MARKETS DEBT FUND | 9
<PAGE>
J.P. MORGAN TAX EXEMPT
BOND FUND | TICKER SYMBOL: PPTBX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN TAX EXEMPT BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide a high level of current income that is exempt from
federal income tax consistent with moderate risk of capital. This goal can be
changed without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in high quality municipal securities that it believes
have the potential to provide high current income that is free from federal
personal income tax. While the fund's goal is high tax-exempt income, the fund
may invest to a limited extent in taxable securities, including U.S. government,
government agency, corporate, or taxable municipal securities. The fund's
securities may be of any maturity, but under normal market conditions the fund's
duration will generally range between four and seven years, similar to that of
the Lehman Brothers 1-16 Year Municipal Bond Index (currently 5.4 years). For a
description of duration, please see fixed income investment process on page 17.
At least 90% of assets must be invested in securities that, at the time of
purchase, are rated investment-grade (BBB/Baa or better) or are the unrated
equivalent. No more than 10% of assets may be invested in securities rated B or
BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
tax-exempt funds will depend on the success of the investment process, which is
described on page 17.
Investors should be prepared for higher share price volatility than from a tax
exempt fund of shorter duration. The fund's performance could also be affected
by market reaction to proposed tax legislation. To the extent that the fund
seeks higher returns by investing in non-investment-grade bonds, often called
junk bonds, it takes on additional risks, since these bonds are more sensitive
to economic news and their issuers have a less secure financial position.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $5 billion using similar strategies as the fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in June of 1997 and has been at J.P. Morgan since 1987, and
Benjamin Thompson, vice president, who joined the team in June of 1999. Prior to
joining J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager at
Goldman Sachs.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
10 | J.P. MORGAN TAX EXEMPT BOND FUND
<PAGE>
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Tax Exempt Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the fund's last 10 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past one, five and ten years compare to those of the Lehman Brothers
1-16 Year Municipal Bond Index. This is a widely recognized, unmanaged index of
general obligation and revenue bonds with maturities of 1-16 years used as a
measure of overall tax-exempt bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
<TABLE>
<CAPTION>
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
20%
13.40
10.92
10%
8.25 9.58
7.47 7.42
6.87
5.47
3.54
0%
(2.70)
(10%)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[ ] J.P. Morgan Tax Exempt Bond Fund
The fund's year-to-date total return as of 6/30/99 is (1.25%).
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 5.09% (for the quarter ended 3/30/95); and the
lowest quarterly return was -3.08% (for the quarter ended 3/31/94).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended
December 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Past 10 yrs.(1)
<S> <C> <C> <C>
J.P. Morgan Tax Exempt Bond Fund (after expenses) 5.47 5.30 6.94
- -------------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses) 6.25 5.86 N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of 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 are deducted from fund
assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses 0.39
- ---------------------------------------------
Total annual fund
operating expenses 0.69
- ---------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, total operating expenses
unchanged, and all shares sold at the end of each time period. The example is
for comparison only; the fund's actual return and your actual costs may be
higher or lower.
- ---------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 71 221 384 859
- ---------------------------------------------------------------------
(1) The fund commenced operations on 7/12/93. For the period 1/1/88 through
7/31/93 returns reflect performance of The Pierpont Tax Exempt Bond Fund,
the predecessor of the fund, which commenced operations on 10/3/84.
(2) The fund's fiscal year end is 8/31.
(3) The fund has a master/feeder structure as described on page 21. This table
is restated to show the current fee arrangements in effect as of 8/1/98, and
shows the fund's expenses and its share of master portfolio expenses for the
past fiscal year using the current fees as if they had been in effect during
the past fiscal year, expressed as a percentage of the fund's average net
assets.
J.P. MORGAN TAX EXEMPT BOND FUND | 11
<PAGE>
J.P. MORGAN NEW YORK
TAX EXEMPT BOND FUND | TICKER SYMBOL: PPNYX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide a high level of tax exempt income for New York
residents consistent with moderate risk of capital. This goal can be changed
without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in New York municipal securities that it believes
have the potential to provide high current income which is free from federal,
state, and New York City personal income taxes for New York residents. The fund
may also invest to a limited extent in securities of other states or
territories. To the extent that the fund invests in municipal securities of
other states, the income from such securities would be free from federal
personal income taxes for New York residents but would be subject to New York
state and New York City personal income taxes. For non-New York residents, the
income from New York municipal securities is free from federal personal income
taxes only. The fund may also invest in taxable securities. The fund's
securities may be of any maturity, but under normal market conditions the fund's
duration will generally range between three and seven years, similar to that of
the Lehman Brothers 1-16 Year Municipal Bond Index (currently 5.4 years). For a
description of duration, please see fixed income investment process on page 17.
At least 90% of assets must be invested in securities that, at the time of
purchase, are rated investment-grade (BBB/Baa or better) or are the unrated
equivalent. No more than 10% of assets may be invested in securities rated B or
BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 17. Because most of the fund's investments will typically
be from issuers in the State of New York, its performance will be affected by
the fiscal and economic health of that state and its municipalities. The fund is
non-diversified and may invest more than 5% of assets in a single issuer, which
could further concentrate its risks. To the extent that the fund seeks higher
returns by investing in non-investment-grade bonds, often called junk bonds, it
takes on additional risks, since these bonds are more sensitive to economic news
and their issuers have a less secure financial condition.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $5 billion using similar strategies as the fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in June of 1997 and has been at J.P. Morgan since 1987, and
Benjamin Thompson, vice president, who joined the team in June of 1999. Prior to
joining J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager at
Goldman Sachs.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
12 | J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan New York Tax Exempt Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 4 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past year and the life of the fund compare to those of the Lehman
Brothers 1-16 Year Municipal Bond Index. This is a widely recognized, unmanaged
index of general obligation and revenue bonds with maturities of 1-16 years used
as a measure of overall tax-exempt bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
1995 1996 1997 1998
20%
13.03
10%
7.41
3.96 5.39
0%
- --------------------------------------------------------------------------------
[ ] J.P. Morgan New York Tax Exempt Bond Fund
The fund's year-to-date total return as of 6/30/99 is (1.26%).
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 4.80% (for the quarter ended 3/31/95) and the
lowest quarterly return was -0.65% (for the quarter ended 3/31/96).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended
December 31, 1998
- ---------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1)
<S> <C> <C>
J.P. Morgan New York Tax Exempt Bond Fund (after expenses) 5.39 6.36
- ---------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses) 6.25 7.07
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses 0.46
- ---------------------------------------------
Total
operating expenses 0.76
Fee waivers and expense
reimbursement(4) 0.06
- ---------------------------------------------
Net expenses 0.70
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 16
months and total operating expenses thereafter and all shares sold at the end of
each time period. The example is for comparison only; the fund's actual return
and your actual costs may be higher or lower.
- ---------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 72 235 414 935
- ---------------------------------------------------------------------
(1) The fund commenced operations on 4/11/94 and returns reflect performance of
the fund from 4/30/94.
(2) The fund's fiscal year end is 7/31.
(3) The fund has a master/feeder structure as described on page 21. This table
is restated to show the current fee arrangements in effect as of 8/1/98, and
shows the fund's expenses and its share of master portfolio expenses for the
past fiscal year using the current fees as if they had been in effect during
the past fiscal year, before reimbursement, expressed as a percentage of the
fund's average net assets.
(4) Reflects an agreement dated 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
to the extent expenses exceed 0.70% (excluding extraordinary expenses) of
the fund's average daily net assets through 11/28/00.
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND | 13
<PAGE>
J.P. MORGAN CALIFORNIA
BOND FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN CALIFORNIA BOND FUND: SELECT SHARES)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 22-25.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high after-tax total return for California
residents consistent with moderate risk of capital. This goal can be changed
without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in California municipal securities that it believes
have the potential to provide high current income which is free from federal and
state personal income taxes for California residents. Because the fund's goal is
high after-tax total return rather than high tax-exempt income, the fund may
invest to a limited extent in securities of other states or territories. To the
extent that the fund invests in municipal securities of other states, the income
from such securities would be free from federal personal income taxes for
California residents but would be subject to California state personal income
taxes. For non-California residents, the income from California municipal
securities is free from federal personal income taxes only. The fund may also
invest in taxable securities. The fund's securities may be of any maturity, but
under normal market conditions the fund's duration will generally range between
three and ten years, similar to that of the Lehman Brothers 1-16 Year Municipal
Bond Index (currently 5.4 years). For a description of duration, please see
fixed income investment process on page 17. At least 90% of assets must be
invested in securities that, at the time of purchase, are rated investment-grade
(BBB/Baa or better) or are the unrated equivalent. No more than 10% of assets
may be invested in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 17. Because most of the fund's investments will typically
be from issuers in the State of California, its performance will be affected by
the fiscal and economic health of that state and its municipalities. The fund is
non-diversified and may invest more than 5% of assets in a single issuer, which
could further concentrate its risks. To the extent that the fund seeks higher
returns by investing in non-investment-grade bonds, often called junk bonds, it
takes on additional risks, because these bonds are more sensitive to economic
news and their issuers have a less secure financial condition.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $5 billion using similar strategies as the fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in June of 1997 and has been at J.P. Morgan since 1987, and
Benjamin Thompson, vice president, who joined the team in June of 1999. Prior to
joining J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager at
Goldman Sachs.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
14 | J.P. MORGAN CALIFORNIA BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan California Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 2 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past year compare to those of the Lehman Brothers 1-16 Year Municipal
Bond Index. This is a widely recognized, unmanaged index of general obligation
and revenue bonds with maturities of 1-16 years used as a measure of overall
tax-exempt bond market performance.
Total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
1997 1998
10%
7.72
5.48
5%
0%
- --------------------------------------------------------------------------------
[ ] J.P. Morgan California Bond Fund: Select Shares(1) (a separate class of
shares)
The fund's year-to-date total return as of 6/30/99 is (1.29%).
For the period covered by this total return chart, the fund's highest quarterly
return was 3.46% (for the quarter ended 9/30/98) and the lowest quarterly return
was -0.34% (for the quarter ended 3/31/97).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for period ended
December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Past 1 yr.
Life of fund(1)
<S>
<C> <C>
J.P. Morgan California Bond Fund: Select Shares (a separate class of shares) (after expenses)
5.48 6.54
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses)
6.25 7.11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3)(%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses(4) 0.57
- ---------------------------------------------
Total annual fund
operating expenses(4) 0.87
- ---------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, total operating expenses
(before reimbursement) unchanged, and all shares sold at the end of each time
period. The example is for comparison only; the fund's actual return and your
actual costs may be higher or lower.
- ---------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 89 278 482 1,073
- ---------------------------------------------------------------------
(1) The fund commenced operations on 4/21/97 and returns reflect performance of
J.P. Morgan California Bond Fund: Institutional Shares (a separate class of
shares) from 12/31/96 through 12/31/97. Performance during this period
reflects operating expenses which are 0.20% 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
period.
(2) The fund's fiscal year end is 4/30.
(3) This table shows expenses for the past fiscal year before reimbursement,
expressed as a percentage of average net assets.
(4) After reimbursement, other expenses and total operating expenses are 0.35%
and 0.65%, respectively. This reimbursement arrangement can be changed or
terminated at any time at the option of J.P. Morgan.
J.P. MORGAN CALIFORNIA BOND FUND | 15
<PAGE>
FIXED INCOME MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
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 $340 billion in assets under management,
including assets managed by the funds' advisor, J.P. Morgan Investment
Management Inc.
J.P. MORGAN FIXED INCOME FUNDS
These funds invest primarily in bonds and other fixed income securities, either
directly or through a master portfolio (another fund with the same goal). The
funds seek high total return or high current income.
While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor,
emphasizes the potential for consistently enhancing performance while managing
risk.
THE SPECTRUM OF FIXED INCOME FUNDS
The funds described in this prospectus pursue different goals and offer varying
degrees of risk and potential reward. The table below shows degrees of the
relative risk and return that these funds potentially offer. These and other
distinguishing features of each fixed income fund were described on the
preceding pages. Differences among these funds include:
o the types of securities they hold
o the tax status of the income they offer
o the relative emphasis on current income versus total return
Potential risk and return
------------------------------------------------------------------------------
R Emerging Markets Debt Fund -------------------------------------------- o
e |
t |
u Global Strategic Income Fund -------------------------------------o |
r | |
n | |
New York Tax Exempt Bond Fund* --------------------------- oo | |
(a California Bond Fund* | | |
f | | |
t | | |
e Tax Exempt Bond Fund* --------------------------- o | | |
r | | | |
| | | |
t Bond Fund ------------------------------- o | | | |
a | | | | |
x | | | | |
e Short Term Bond Fund ------------ o | | | | |
s) | | | | | |
| | | | | |
--------------------------------------------------------------------------
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
<PAGE>
- --------------------------------------------------------------------------------
Who May Want to Invest
The funds are designed for investors who:
o want to add an income investment to further diversify a portfolio
o want an investment whose risk/return potential is higher than that of money
market funds but generally less than that of stock funds
o want an investment that pays monthly dividends
o with regard to the Tax Exempt Bond Fund, are seeking income that is exempt
from federal personal income tax
o with regard to the state-specific funds, are seeking income that is exempt
from federal, state, and local (if applicable) personal income taxes in New
York or California
The funds are not designed for investors who:
o are investing for aggressive long-term growth
o require stability of principal
o with regard to the Global Strategic Income or Emerging Markets Debt funds, are
not prepared to accept a higher degree of risk than most traditional bond
funds
o with regard to the federal or state tax-exempt funds, are investing through a
tax-deferred account such as an IRA
16 | FIXED INCOME MANAGEMENT APPROACH
<PAGE>
FIXED INCOME INVESTMENT PROCESS
J.P. Morgan seeks to generate an information advantage through the depth of its
global fixed-income research and the sophistication of its analytical systems.
Using a team-oriented approach, J.P. Morgan seeks to gain insights in a broad
range of distinct areas, and when consistent with a fund's investment approach,
takes positions in many different areas, helping the funds to limit exposure to
concentrated sources of risk.
In managing the funds described in this prospectus, J.P. Morgan employs a
three-step process that combines sector allocation, fundamental research for
identifying portfolio securities, and duration management.
[GRAPHIC OMITTED]
The funds invest across a range of
different types of securities
Sector allocation The sector allocation team meets monthly, analyzing the
fundamentals of a broad range of sectors in which a fund may invest. The team
seeks to enhance performance and manage risk by underweighting or overweighting
sectors.
[GRAPHIC OMITTED]
Each fund makes its portfolio decisions
as described earlier in this prospectus
Security selection Relying on the insights of different specialists, including
credit analysts, quantitative researchers, and dedicated fixed income traders,
the portfolio managers make buy and sell decisions according to each fund's goal
and strategy.
[GRAPHIC OMITTED]
J.P. Morgan uses a disciplined process
to control each fund's sensitivity
to interest rates
Duration management Forecasting teams use fundamental economic factors to
develop strategic forecasts of the direction of interest rates. Based on these
forecasts, strategists establish each fund's target duration, a common
measurement of a security's sensitivity to interest rate movements. For
securities owned by a fund, duration measures the average time needed to receive
the present value of all principal and interest payments by analyzing cash flows
and interest rate movements. A fund's duration is generally shorter than a
fund's average maturity because the maturity of a security only measures the
time until final payment is due. Each fund's target duration typically remains
relatively close to the duration of the market as a whole, as represented by the
fund's benchmark. The strategists closely monitor the funds and make tactical
adjustments as necessary.
FIXED INCOME MANAGEMENT APPROACH | 17
<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:
o 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.
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 at right.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.
<PAGE>
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:
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
o Make out a check for the investment amount payable to J.P. Morgan Funds.
o Mail the check with your completed application to the Transfer 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 Funds.
o 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
o Call the Shareholder Services Agent to effect an exchange.
18 | YOUR INVESTMENT
<PAGE>
- --------------------------------------------------------------------------------
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 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 the 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.
Redemption In Kind
o Each fund reserves the right to make redemptions of over $250,000 in
securities rather than in cash.
<PAGE>
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 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 pricing services or market quotes. When
these methods are not available or do not represent a security's value at the
time of pricing (e.g. when an event occurs after the close of trading that would
materially impact a security's value), the security is valued in accordance with
the 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, proceeds are generally available the day following execution
and will be forwarded according to your instructions.
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 declared daily and paid monthly. If an investor's
shares are redeemed during the month, accrued but unpaid dividends are paid with
the redemption proceeds. Shares of a fund earn dividends on the business day the
purchase is effective, but not on the business day the redemption is effective.
Each fund distributes capital gains, if any, once a 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.
<PAGE>
TAX CONSIDERATIONS
In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities for taxable accounts:
- --------------------------------------------------------------------------------
Transaction Tax status
Income dividends from the Exempt from federal, state,
New York Tax Exempt Bond and New York City personal
Fund income taxes for New York
residents only
Income dividends from the Exempt from federal and state
California Bond Fund personal income taxes for
California residents only
Income dividends from the Exempt from federal personal
Tax Exempt Bond Fund income taxes
Income dividends from Ordinary income
all other funds
Short-term capital gains Ordinary income
distributions
Long-term capital gains Capital gains
distributions
Sales or exchanges of Capital gains or
shares owned for more losses
than one year
Sales or exchanges of Gains are treated as ordinary
shares owned for one year income; losses are subject
or less to special rules
- --------------------------------------------------------------------------------
Because long-term capital gains distributions are taxable as capital gains
regardless of how long you have owned your shares, you may want to avoid making
a substantial investment when a fund is about to declare a long-term capital
gains distribution. A portion of the Tax Exempt Bond, New York Tax Exempt Bond
and California Bond funds' returns may be subject to federal, state, or local
tax, or the alternative minimum tax. 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 California Bond Fund) is a series of
J.P. Morgan Funds, a Massachusetts business trust, and 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, each of its feeder funds 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, the feeder fund will withdraw from the master portfolio,
receiving its assets either in cash or securities. Each feeder fund's trustees
would then consider whether it should hire its own investment adviser, invest in
a different master portfolio, or take other action.
The California Bond 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:
<PAGE>
- --------------------------------------------------------------------------------
Advisory services Percentage of the master
portfolio's average net assets
Short Term Bond 0.25%
Bond 0.30%
Global Strategic Income 0.45%
Emerging Markets Debt 0.70%
Tax Exempt Bond 0.30%
New York Tax Exempt Bond 0.30%
Administrative services Master portfolio's and fund's prorata
(fee shared with Funds portions of 0.09% of the first $7
Distributor, Inc.) billion of average net assets in J.P.
Morgan-advised portfolios, plus 0.04%
of average net assets over $7 billion
Shareholder services 0.25% of each fund's average net assets
- --------------------------------------------------------------------------------
The California Bond Fund, subject to the expense reimbursements described
earlier in this prospectus, pays J.P. Morgan the following fees for investment
advisory and other services:
- --------------------------------------------------------------------------------
Advisory services 0.30% of the fund's average
net assets
Administrative services Fund's pro-rata portion of
(fee shared with Funds 0.09% of the first $7 billion of
Distributor, Inc.) average net assets 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
- --------------------------------------------------------------------------------
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 the date January 1, 2000 and dates thereafter.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 date-related 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 fund or generally, the
net asset value of the funds will decline. While the funds cannot predict at
this time the degree of impact, it is possible that foreign markets will be less
prepared than those in the U.S.
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. It also outlines each fund's policies toward various
investments, 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, yield, o Bonds have generally outperformed o Under normal circumstances the
funds plan to
and total return will fluctuate money market investments over the remain fully invested in bonds
and other fixed
in response to bond market long term, with less risk than income securities as noted in
the table on
movements stocks pages
24-25
o The value of most bonds will o The funds seek to limit risk and
enhance total
fall when interest rates rise; o Most bonds will rise in value when return or yields through careful
management,
the longer a bond's maturity interest rates fall sector allocation, individual
securities
and the lower its credit selection, and duration
management
quality, the more its value o Mortgage-backed and
asset-backed
typically falls securities can offer attractive o During severe market downturns,
the funds have
returns the option of investing up to
100% of assets in
o Adverse market conditions may investment-grade short-term
securities
from time to time cause a
fund
to take temporary defensive o J.P. Morgan monitors interest
rate trends, as
positions that are inconsistent well as geographic and
demographic information
with its principal investment related to mortgage-backed
securities and
strategies and may hinder a mortgage
prepayments
fund from achieving
its
investment objective
o Mortgage-backed and asset-backed securities (securities representing an
interest in, or secured by, a pool of mortgages or other assets such as
receivables) could generate capital losses or periods of low yields if
they are paid off substantially
earlier or later than
anticipated
- ------------------------------------------------------------------------------------------------------------------------------------
Credit quality
o The default of an issuer would o Investment-grade bonds have a lower o Each fund maintains its own
policies for
leave a fund with unpaid risk of default balancing credit quality against
potential
interest or principal yields and gains in light of its
investment
o Junk bonds offer higher yields and goals
o Junk bonds (those rated BB/Ba higher potential gains
or lower) have a higher risk of o J.P. Morgan develops its own
ratings of
default, tend to be less unrated securities and makes a
credit quality
liquid, and may be more determination for unrated
securities
difficult to value
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign investments
o A fund could lose money because o Foreign bonds, which represent a o Foreign bonds are a primary
investment only for
of foreign government actions, major portion of the world's fixed the Global Strategic Income and
Emerging
political instability, or lack income securities, offer attractive Markets Debt funds and may be a
significant
of adequate and accurate potential performance and investment for the Short Term
Bond and Bond
information opportunities for diversification funds; the Tax Exempt Bond, New
York Tax Exempt
Bond and California Bond funds
are not
o Currency exchange rate permitted to invest any assets
in foreign bonds
movements could reduce gains
or
create losses o Favorable exchange rate movements o To the extent that a fund
invests in foreign
could generate gains or reduce bonds, it may manage the
currency exposure of
o Currency and investment risks losses its foreign investments relative
to its
tend to be higher in emerging benchmark, and may hedge a
portion of its
markets foreign currency exposure into
the U.S. dollar
o Emerging markets can offer higher from time to time (see also
"Derivatives");
returns these currency management
techniques may not be
available for certain emerging
markets
investments
- ------------------------------------------------------------------------------------------------------------------------------------
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 sector, benchmark due to these same choices those areas where it believes
its commitment to
securities or duration choices research can most enhance
returns and manage
risks in a consistent
way
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22 | FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and reward
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives
o Derivatives such as futures, o Hedges that correlate well with o The funds use derivatives, such
as futures,
options, swaps and forward underlying positions can reduce or options, swaps and forward
foreign currency
foreign currency contracts eliminate losses at low cost contracts, for hedging and for
risk management
that are used for hedging the (i.e., to adjust duration or
yield curve
portfolio or specific o A fund could make money and protect exposure, or to establish or
adjust exposure to
securities may not fully against losses if management's particular securities, markets,
or currencies);
offset the underlying analysis proves correct risk management may include
management of a
positions1 and this could fund's exposure relative to its
benchmark; the
result in losses to the fund o Derivatives that involve leverage Tax Exempt Bond, New York Tax
Exempt Bond and
that would not have otherwise could generate substantial gains at California Bond funds are
permitted to enter
occurred low cost into futures and options
transactions, however,
these transactions result in
taxable gains or
o Derivatives used for risk losses so it is expected that
these funds will
management may not have the utilize them infrequently;
forward foreign
intended effects and may currency contracts are not
permitted to be used
result in losses or missed by the Tax Exempt Bond, New York
Tax Exempt Bond
opportunities and California Bond
funds
o The counterparty to a o The funds only establish hedges
that they expect
derivatives contract could will be highly correlated with
underlying
default
positions
o While the funds may use
derivatives that
o Certain types of derivatives incidentally involve leverage,
they do not use
involve costs to the funds them for the specific purpose of
leveraging
which can reduce returns their
portfolios
o Derivatives that involve
leverage could magnify losses
- ------------------------------------------------------------------------------------------------------------------------------------
Securities lending
o When a fund lends a security, o A fund may enhance income through o J.P. Morgan maintains a list of
approved
there is a risk that the the investment of the collateral
borrowers
loaned securities may not be received from the
borrower
returned if the borrower o The fund receives collateral
equal to at least
defaults 100% of the current value of
securities loaned
o The collateral will be subject o The lending agents indemnify a
fund against
to the risks of the securities borrower
default
in which it is
invested
o J.P. Morgan's collateral
investment guidelines
limit the quality and duration
of collateral
investment to minimize
losses
o Upon recall, the borrower must
return the
securities loaned within the
normal settlement
period
- ------------------------------------------------------------------------------------------------------------------------------------
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
valuing these holdings attractive yields or potential in illiquid
holdings
precisely growth than comparable
widely
traded securities o To maintain adequate liquidity
to meet
o A fund could be unable to sell redemptions, each fund may hold
investment-grade
these holdings at the time or short-term securities (including
repurchase
price desired agreements and reverse purchase
agreements) and,
for temporary or extraordinary
purposes, may
borrow from banks up to 331/3%
of the value of
its total
assets
- ------------------------------------------------------------------------------------------------------------------------------------
When-issued and delayed
delivery securities
o When a fund buys securities o A fund can take advantage of o Each fund uses segregated
accounts to offset
before issue or for delayed attractive transaction leverage
risk
delivery, it could be exposed
opportunities
to leverage risk if it
does
not use segregated
accounts
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term
trading
o Increased trading would raise a o A fund could realize gains in a o The funds generally avoid short-term trading,
fund's transaction costs short period of time except to take advantage of attractive or
unexpected opportunities or to meet demands
o Increased short-term capital o A fund could protect against generated by shareholder activity. The turnover
gains distributions would raise losses if a bond is overvalued rate for each fund is its most recent fiscal year
shareholders' income tax and its value later falls end is as follows: Short Term Bond (381%), Bond
liability (115%), Global Strategic Income (142%), Emerging
Markets Debt (791%), Tax Exempt Bond (16%),
New York Tax Exempt Bond (44%), and
California Bond (40%)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -------------------
(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.
FUND DETAILS | 23
<PAGE>
- --------------------------------------------------------------------------------
Investments
This table discusses the customary types of investments which can be held by
each fund. In each case the principal types of risk are listed on the following
page (see below for definitions).This table reads across two pages.
- --------------------------------------------------------------------------------
Asset-backed securities Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
- --------------------------------------------------------------------------------
Bank obligations Negotiable certificates of deposit, time deposits and bankers'
acceptances of domestic and foreign issuers.
- --------------------------------------------------------------------------------
Commercial paper Unsecured short term debt issued by domestic and foreign banks
or corporations. These securities are usually discounted and are rated by S&P or
Moody's.
- --------------------------------------------------------------------------------
Convertible securities Domestic and foreign debt securities that can be
converted into equity securities at a future time and price.
- --------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic and foreign industrial, utility,
banking, and other financial institutions.
- --------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which gives the lender a lien
on property as security for the loan payment.
- --------------------------------------------------------------------------------
Mortgage-backed securities Domestic and foreign securities (such as Ginnie Maes,
Freddie Macs, Fannie Maes) which represent interests in pools of mortgages,
whereby the principal and interest paid every month is passed through to the
holder of the securities.
- --------------------------------------------------------------------------------
Mortgage dollar rolls The purchase of mortgage-backed securities with the
promise to purchase similar securities upon the maturity of the original
security. Segregated accounts are used to offset leverage risk.
- --------------------------------------------------------------------------------
Participation interests Interests that represent a share of bank debt or similar
securities or obligations.
- --------------------------------------------------------------------------------
Private placements Bonds or other investments that are sold directly to an
institutional investor.
- --------------------------------------------------------------------------------
REITs and other real-estate related instruments Securities of issuers that
invest in real estate or are secured by real estate.
- --------------------------------------------------------------------------------
Repurchase agreements Contracts whereby the fund agrees to purchase a security
and resell it to the seller on a particular date and at a specific price.
- --------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby the fund sells a security and
agrees to repurchase it from the buyer on a particular date and at a specific
price. Considered a form of borrowing.
- --------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of supranational organizations Dollar- or
non-dollar-denominated securities issued by foreign governments or supranational
organizations. Brady bonds are issued in connection with debt restructurings.
- --------------------------------------------------------------------------------
Swaps Contractual agreement whereby a party agrees to exchange periodic payments
with a counterparty. Segregated accounts are used to offset leverage risk.
- --------------------------------------------------------------------------------
Synthetic variable rate instruments Debt instruments whereby the issuer agrees
to exchange one security for another in order to change the maturity or quality
of a security in the fund.
- --------------------------------------------------------------------------------
Tax exempt municipal securities Securities, generally issued as general
obligation and revenue bonds, whose interest is exempt from federal taxation and
state and/or local taxes in the state where the securities were issued.
- --------------------------------------------------------------------------------
U.S. government securities Debt instruments (Treasury bills, notes, and bonds)
guaranteed by the U.S. government for the timely payment of principal and
interest.
- --------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred payment securities Domestic and foreign
securities offering non-cash or delayed-cash payment.Their prices are typically
more volatile than those of some other debt instruments and involve certain
special tax considerations.
- -------------------------------------------------------------------------------
<PAGE>
Risk related to certain investments held by J.P. Morgan fixed income funds:
Credit risk The risk a financial obligation will not be met by the issuer of a
security or the counterparty to a contract, resulting in a loss to the
purchaser.
Currency risk The risk currency exchange rate fluctuations may reduce gains or
increase losses on foreign investments.
Environmental risk The risk that an owner or operator of real estate may be
liable for the costs associated with hazardous or toxic substances located on
the property.
Extension risk The risk a rise in interest rates will extend the life of a
mortgage-backed security to a date later than the anticipated prepayment date,
causing the value of the investment to fall.
Interest rate risk The risk a change in interest rates will adversely affect the
value of an investment. The value of fixed income securities generally moves in
the opposite direction of interest rates (decreases when interest rates rise and
increases when interest rates fall).
Leverage risk The risk of gains or losses disproportionately higher than the
amount invested.
Liquidity risk The risk the holder may not be able to sell the security at the
time or price it desires.
24 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
* Permitted (and if applicable, percentage limitation) percentage of total
assets - bold percentage of net assets - italic
o Permitted, but not typically used + Permitted, but no current intention of use
- -- Not permitted
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term
Global Strategic
Principal Types of Risk Bond Bond
Income
<S> <C> <C>
<C>
- ------------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market, prepayment * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, liquidity, political *(1) *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political * *
o
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation * 25% * 25%
o
Foreign Foreign
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation * 25% * 25%
*
Foreign
Foreign
- ------------------------------------------------------------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity, market, * *
*
natural event, political, prepayment, valuation
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, extension, interest rate, leverage, market, political, * *
*
prepayment
- ------------------------------------------------------------------------------------------------------------------------------------
currency, extension, interest rate, leverage, liquidity, market, political, * 33 1/3% * 33 1/3% *
33 1/3%
prepayment
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, extension, interest rate, liquidity, political, prepayment * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, valuation * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, natural event, prepayment, valuation * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit *(3) *(3)
*(3)
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, market, political * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, leverage, market, political * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, leverage, liquidity, market -- --
- --
- ------------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market, natural event, political o o
- --
- ------------------------------------------------------------------------------------------------------------------------------------
interest rate * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation * *
*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Emerging Markets Tax
Exempt
Principal Types of Risk Debt
Bond
<S> <C>
<C>
- ------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market, prepayment o
o
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, liquidity, political * o
Domestic
Only
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political o
*
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation *
- --
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation *
- --
- -----------------------------------------------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity, market, +
+
natural event, political, prepayment, valuation
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, extension, interest rate, leverage, market, political, o
- --
prepayment
- ------------------------------------------------------------------------------------------------------------------------
currency, extension, interest rate, leverage, liquidity, market, political, --
- --
prepayment
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, extension, interest rate, liquidity, political, prepayment *
- --
- ------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, valuation *
*
- ------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, natural event, prepayment, valuation --
- --
- ------------------------------------------------------------------------------------------------------------------------
credit *
o
- ------------------------------------------------------------------------------------------------------------------------
credit *(3)
o(3)
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, market, political *
- --
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, leverage, market, political *
*
- ------------------------------------------------------------------------------------------------------------------------
credit, interest rate, leverage, liquidity, market --
*
- ------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market, natural event, political --
*(2)
- ------------------------------------------------------------------------------------------------------------------------
interest rate *
*
- ------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation *
*
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
New York Tax
Principal Types of Risk Exempt Bond
California Bond
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market, prepayment o
o
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, liquidity, political o Domestic o
Domestic
Only Only
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political * *
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation -- --
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation -- --
- ----------------------------------------------------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity, market, + +
natural event, political, prepayment, valuation
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, extension, interest rate, leverage, market, political, -- --
prepayment
- ----------------------------------------------------------------------------------------------------------------------------
currency, extension, interest rate, leverage, liquidity, market, political, -- --
prepayment
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, extension, interest rate, liquidity, political, prepayment -- --
- ----------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, valuation * *
- ----------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, natural event, prepayment, valuation --
- --
- ----------------------------------------------------------------------------------------------------------------------------
credit o
o
- ----------------------------------------------------------------------------------------------------------------------------
credit o(3)
o(3)
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, market, political --
- --
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, leverage, market, political -- --
- ----------------------------------------------------------------------------------------------------------------------------
credit, interest rate, leverage, liquidity, market * *
- ----------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market, natural event, political *(2) *(2)
- ----------------------------------------------------------------------------------------------------------------------------
interest rate * *
- ----------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation * *
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Market risk The risk that when the market as a whole declines, the value of a
specific investment will decline proportionately. This systematic risk is common
to all investments and the mutual funds that purchase them.
Natural event risk The risk a natural disaster, such as a hurricane or similar
event, will cause severe economic losses and default in payments by the issuer
of the security.
Political risk The risk governmental policies or other political actions will
negatively impact the value of the investment.
Prepayment risk The risk declining interest rates will result in unexpected
prepayments, causing the value of the investment to fall.
Valuation risk The risk the estimated value of a security does not match the
actual amount that can be realized if the security is sold.
(1) For each of the Short Term Bond and Bond funds, all foreign securities in
the aggregate may not exceed 25% of such fund's assets.
(2) At least 65% of assets must be in tax exempt securities (for New York Tax
Exempt Bond and California Bond funds, the 65% must be in New York or
California municipal securities, respectively).
(3) All forms of borrowing (including securities lending and reverse repurchase
agreements) in the aggregate may not exceed 33 1/3 of the fund's total
assets.
FUND DETAILS | 25
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each fund's
financial performance for the past one through five fiscal years or periods, as
applicable. Certain information reflects financial results for a single fund
share. The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends and distributions). Except where noted, this information has been
audited by PricewaterhouseCoopers LLP, whose reports, along with each fund's
financial statements, are included in the respective fund's annual report, which
are available upon request.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN SHORT TERM BOND FUND
Per-share data For periods ended
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 10/31/95 10/31/96 10/31/97
10/31/98 4/30/99
(unaudited)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 9.99 9.60 9.84 9.86
9.85 9.98
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.45 0.57 0.53 0.58
0.56 0.26
Net realized and unrealized gain (loss)
on investment and foreign currency contracts
and transactions ($) (0.39) 0.24 0.02 (0.01)
0.13 (0.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.06 0.81 0.55 0.57
0.69 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.45) (0.57) (0.53) (0.58)
(0.56) (0.26)
Net realized gain ($) -- -- -- --
- -- (0.05)
Total distributions to shareholders ($) (0.45) (0.57) (0.53) (0.58)
(0.56) (0.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.60 9.84 9.86 9.85
9.98 9.84
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) 0.61 8.70 5.77 5.98
7.24 1.691
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 6,008 10,330 8,207 14,519
30,984 39,350
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.69 0.67 0.62 0.50
0.50 0.542
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.49 5.88 5.42 5.94
5.66 5.552
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without reimbursement (%) 2.05 1.48 1.61 1.38
0.98 0.812
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not annualized. (2) Annualized.
26 | FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN BOND FUND
Per-share data For periods ended
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 10/31/95 10/31/96 10/31/97
10/31/98 4/30/99
(unaudited)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 11.00 9.64 10.41 10.30
10.42 10.59
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.55 0.64 0.62 0.66
0.65 0.30
Net realized and unrealized gain (loss)
on investment and foreign currency contracts
and transactions ($) (0.91) 0.77 (0.11) 0.18
0.17 (0.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) (0.36) 1.41 0.51 0.84
0.82 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.55) (0.64) (0.62) (0.65)
(0.65) (0.30)
Net realized gain ($) (0.45) -- -- (0.07)
- -- (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (1.00) (0.64) (0.62) (0.72)
(0.65) (0.41)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.64 10.41 10.30 10.42
10.59 10.26
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) (3.50) 15.10 5.13 8.58
8.06 0.801
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 112,049 143,004 149,207 169,233
216,285 206,197
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses (%) 0.78 0.69 0.66 0.68
0.66 0.69(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 5.43 6.40 6.08 6.41
6.14 5.79(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without reimbursement (%) 0.79 0.69 0.66 0.68
0.66 0.69(2)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not annualized.
(2) Annualized.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
Per-share data For periods ended
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/98(1) 4/30/99
(unaudited)
<S>
<C> <C>
Net asset value, beginning of period ($)
10.21 9.77
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($)
0.70 0.31
Net realized and unrealized loss
on investment and foreign currency transactions
and translations ($)
(0.49) 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($)
0.21 0.41
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($)
(0.63) (0.28)
Return of capital
(0.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($)
(0.65) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($)
9.77 9.90
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%)
1.97(2) 4.23
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)
10,166 10,153
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses (%)
1.00(3) 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%)
6.24(3) 6.27
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without reimbursement (%)
1.89(3) 1.57
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund commenced operations on 11/5/97. (2) Not annualized.
(3) Annualized.
FUND DETAILS | 27
<PAGE>
- --------------------------------------------------------------------------------
J.P. MORGAN EMERGING MARKETS DEBT FUND
Per-share data For fiscal periods ended December 31
- --------------------------------------------------------------------------------
1997(1) 1998
Net asset value, beginning of period ($) 10.00 9.76
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.58 1.15
Net realized and unrealized loss
on investment and foreign currency ($) (0.05) (2.64)
- --------------------------------------------------------------------------------
Total from investment operations ($) 0.53 (1.49)
- --------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.58) (0.81)
Excess of net investment income ($) (0.02) (0.16)
Net realized gain ($) (0.17) --
- --------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.77) (0.97)
- --------------------------------------------------------------------------------
Net asset value, end of period ($) 9.76 7.30
- --------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------
Total return (%) 5.47(2) (15.93)
- --------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 11,978 19,313
- --------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 1.25(3) 1.25
- --------------------------------------------------------------------------------
Net investment income (%) 9.71(3) 10.05
- --------------------------------------------------------------------------------
Expenses without reimbursement (%) 2.40(3) 2.09
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 4/17/97.
(2) Not annualized.
(3) Annualized.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN TAX EXEMPT BOND FUND
Per-share data For periods ended
- ------------------------------------------------------------------------------------------------------------------------------------
8/31/94 8/31/95 8/31/96 8/31/97
8/31/98 2/28/99
(unaudited)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 12.04 11.45 11.73 11.63
11.85 12.15
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.51 0.55 0.55 0.55
0.54 0.26
Net realized and unrealized gain (loss)
on investment ($) (0.35) 0.29 (0.08) 0.24
0.30 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.16 0.84 0.47 0.79
0.84 0.28
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.51) (0.55) (0.55) (0.55)
(0.54) (0.26)
Net realized gain ($) (0.24) (0.01) (0.02) (0.02)
(0.00)(1) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.75) (0.56) (0.57) (0.57)
(0.54) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 11.45 11.73 11.63 11.85
12.15 12.15
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) 1.35 7.63 4.01 6.95
7.21 2.29(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 392,460 352,005 369,987 401,007
439,225 463,097
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.71 0.71 0.64 0.64
0.64 0.67(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.39 4.87 4.67 4.67
4.44 4.23(3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Less than $0.01 per share.
(2) Not annualized.
(3) Annualized.
28 | FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
Per-share data For fiscal periods ended March 31
- ------------------------------------------------------------------------------------------------------------------------------------
1995(1) 1996 1997 1998 1999
<S> <C> <C> <C> <C>
<C>
Net asset value, beginning of period ($) 10.00 10.11 10.34 10.28
10.62
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.40 0.46 0.46 0.46
0.42
Net realized and unrealized gain (loss)
on investment ($) 0.11 0.26 (0.03) 0.40
0.14
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.51 0.72 0.43 0.86
0.56
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.40) (0.46) (0.46) (0.46)
(0.42)
Net realized gain ($) -- (0.03) (0.03) (0.06)
(0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.40) (0.49) (0.49) (0.52)
(0.52)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 10.11 10.34 10.28 10.62
10.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) 5.26(2) 7.16 4.19 8.49
5.39
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 38,137 50,523 56,198 85,161
119,152
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.75(3) 0.75 0.75 0.71
0.70
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.31(3) 4.43 4.44 4.33
3.95
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without reimbursement (%) 0.97(3) 0.79 0.81 0.77
0.74
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund commenced operations on 4/11/94. (2) Not annualized.
(3) Annualized.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN CALIFORNIA BOND FUND
Per-share data For fiscal periods ended April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997(1) 1998
1999
<S> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 10.04 10.35
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.01 0.41 0.40
Net realized and unrealized gain (loss)
on investment ($) 0.04 0.31 0.26
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.05 0.72 0.66
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.01) (0.41) (0.40)
Net realized gain ($) -- -- (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.01) (0.41) (0.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 10.04 10.35 10.57
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) 0.51(2) 7.20 6.43
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 302 5,811 17,391
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.62(3) 0.65 0.65
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.52(3) 3.94 3.76
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without reimbursement (%) 1.17(3) 1.00 0.87
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 40 44 40
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund commenced operations on 4/21/97.
(2) Not annualized.
(3) Annualized.
FUND DETAILS | 29
<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 fund, 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. The
funds' investment company and 1933 Act registration numbers are:
J.P. Morgan Short Term Bond Fund ...................... 811-07340 and 033-54632
J.P. Morgan Bond Fund ................................. 811-07340 and 033-54632
J.P. Morgan Global Strategic Income Fund .............. 811-07340 and 033-54632
J.P. Morgan Emerging Markets Debt Fund ................ 811-07340 and 033-54632
J.P. Morgan Tax Exempt Bond Fund ...................... 811-07340 and 033-54632
J.P. Morgan New York Tax Exempt Bond Fund ............. 811-07340 and 033-54632
J.P. Morgan California Bond 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
IM0379
<PAGE>
AUGUST 2, 1999 | PROSPECTUS
- --------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL
FIXED INCOME FUNDS
Short Term Bond Fund
Bond Fund
Global Strategic Income Fund
Tax Exempt Bond Fund
New York Tax Exempt Bond Fund
California Bond Fund
- ------------------------------------
Seeking high total return or current
income by investing primarily in
fixed income securities.
This prospectus contains essential information for anyone investing in these
funds.
Please read it carefully and keep it for reference.
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 or guarantees that the information in this prospectus is correct or
adequate.
It is a criminal offense to state or suggest otherwise.
Distributed by Funds Distributor, Inc.
JPMorgan
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
2 | Each fund's goal, investment approach,
risks, expenses, and performance
J.P. MORGAN INSTITUTIONAL FIXED INCOME FUNDS
J.P. Morgan Institutional Short Term Bond Fund .............. 2
J.P. Morgan Institutional Bond Fund ......................... 4
J.P. Morgan Institutional Global Strategic Income Fund ...... 6
J.P. Morgan Institutional Tax Exempt Bond Fund .............. 8
J.P. Morgan Institutional New York Tax Exempt Bond Fund ..... 10
J.P. Morgan Institutional California Bond Fund .............. 12
14 | Principles and techniques common
to the funds in this prospectus
FIXED INCOME MANAGEMENT APPROACH
J.P. Morgan ................................................. 14
J.P. Morgan Institutional fixed income funds ................ 14
The spectrum of fixed income funds .......................... 14
Who may want to invest ...................................... 14
Fixed income investment process ............................. 15
16 | Investing in the J.P. Morgan
Institutional Fixed Income funds
YOUR INVESTMENT
Investing through a financial professional .................. 16
Investing through an employer-sponsored retirement plan ..... 16
Investing through an IRA or rollover IRA .................... 16
Investing directly .......................................... 16
Opening your account ........................................ 16
Adding to your account ...................................... 16
Selling shares .............................................. 17
Account and transaction policies ............................ 17
Dividends and distributions ................................. 18
Tax considerations .......................................... 18
19 | More about risk and the funds'
business operations
FUND DETAILS
Business structure .......................................... 19
Management and administration ............................... 19
Risk and reward elements .................................... 20
Investments ................................................. 22
Financial highlights ........................................ 24
FOR MORE INFORMATION back cover
<PAGE>
J.P. MORGAN INSTITUTIONAL
SHORT TERM BOND FUND | TICKER SYMBOL: JMSBX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL SHORT TERM BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 20-23.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return, consistent with low volatility
of principal. This goal can be changed without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, domestic and foreign corporate bonds, private placements,
asset-backed and mortgage-related securities, and money market instruments, that
it believes have the potential to provide a high total return over time. These
securities may be of any maturity, but under normal market conditions the fund's
duration will range between one and three years, similar to that of the Merrill
Lynch 1-3 Year Treasury Index. For a description of duration, please see fixed
income investment process on page 15.
Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. The fund
typically hedges its non-dollar investments back to the U.S. dollar. At least
90% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 75% A or better. No more than 10% of assets may be invested
in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
duration fixed income funds will depend on the success of the investment
process, which is described on page 15.
Although any rise in interest rates is likely to cause a fall in the price of
bonds, the fund's comparatively short duration is designed to help keep its
share price within a relatively narrow range. Because it seeks to minimize risk,
the fund will generally offer less income, and during periods of declining
interest rates, may offer lower total returns than bond funds with longer
durations. Because of the sensitivity of the fund's mortgage related securities
to changes in interest rates, the performance and duration of the fund may be
more volatile than if it did not hold these securities. The fund uses futures
contracts and other derivatives to help manage duration, yield curve exposure,
and credit and spread volatility. To the extent that the fund seeks higher
returns by investing in non-investment-grade bonds, often called junk bonds, it
takes on additional risks, since these bonds are more sensitive to economic news
and their issuers have a less secure financial position. To the extent the fund
invests in foreign securities, it could lose money because of foreign government
actions, political instability, currency fluctuation or lack of adequate and
accurate information. The fund may engage in active and frequent trading,
leading to increased portfolio turnover and the possibility of increased capital
gains. See page 18 for further discussion on the tax treatment of capital gains.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $20 billion using similar strategies as the fund.
The portfolio management team is led by Connie J. Plaehn, managing director, who
has been on the team since the fund's inception and has been at J.P. Morgan
since 1984, William G. Tennille, vice president, who joined the team in January
1994 and has been at J.P. Morgan since 1992 and Augustus Cheh, vice president,
who has been a fixed income portfolio manager and analyst since joining J.P.
Morgan in 1994.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
2 | J.P. MORGAN INSTITUTIONAL SHORT TERM BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Short Term Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 5 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past one year, five years and life of the fund compare to those of the
Merrill Lynch 1-3 Year Treasury Index. This is a widely recognized, unmanaged
index of U.S. Treasury notes and bonds with maturities of 1-3 years used as a
measure of overall short-term bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998
20%
10.80
10%
0.36 5.10 6.40 7.04
0%
[_] J.P. Morgan Institutional Short Term Bond Fund
The fund's year-to-date total return as of 6/30/99 is 0.73%.
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 3.36% (for the quarter ended 6/30/95); and the
lowest quarterly return was -0.47% (for the quarter ended 3/31/94).
<TABLE>
<CAPTION>
Average annual total return Shows performance over time, for periods ended December 31, 1998
- ----------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Life of fund(1)
<S> <C> <C> <C>
J.P. Morgan Institutional Short Term Bond Fund (after expenses) 7.04 5.89 5.68
- ----------------------------------------------------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index (no expenses) 7.00 5.99 5.86
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.25
Marketing (12b-1) fees none
Other expenses 0.39
- --------------------------------------------------------------------
Total
operating expenses 0.64
Fee waiver and expense
reimbursement(4) 0.34
- --------------------------------------------------------------------
Net expenses 0.30
- --------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 19
months and total operating expenses thereafter, and all shares sold at the end
of each time period. The example is for comparison only; the fund's actual
return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 31 150 302 746
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 9/13/93. For the period 7/31/93 through
9/30/93, returns reflect performance of the Pierpont Short Term Bond Fund.
(2) The fund's fiscal year end is 10/31.
(3) The fund has a master/feeder structure as described on page 19. This table
is restated to show the current fee arrangements in effect as of 8/1/98,
and shows the fund's expenses and its share of master portfolio expenses
for the past fiscal year using the current fees as if they had been in
effect during the past fiscal year, before reimbursement, expressed as a
percentage of the fund's average net assets.
(4) Reflects an agreement dated 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the
fund to the extent expenses exceed 0.30% (excluding extraordinary expenses)
of the fund's average daily net assets through 2/28/01.
J.P. MORGAN INSTITUTIONAL SHORT TERM BOND FUND | 3
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND | TICKER SYMBOL: JMIBX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 20-23.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return consistent with moderate risk of
capital and maintenance of liquidity. This goal can be changed without
shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, corporate bonds, private placements, asset-backed and
mortgage-backed securities, that it believes have the potential to provide a
high total return over time. These securities may be of any maturity, but under
normal market conditions the management team will keep the fund's duration
within one year of that of the Salomon Brothers Broad Investment Grade Bond
Index (currently about five years). For a description of duration, please see
fixed income investment process on page 15.
Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. The fund
typically hedges its non-dollar investments back to the U.S. dollar. At least
75% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 65% A or better. No more than 25% of assets may be invested
in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 15.
To the extent that the fund seeks higher returns by investing in
non-investment-grade bonds, often called junk bonds, it takes on additional
risks, since these bonds are more sensitive to economic news and their issuers
have a less secure financial position. The fund may use futures contracts and
other derivatives to help manage duration, yield curve exposure, and credit and
spread volatility. To the extent the fund invests in foreign securities, it
could lose money because of foreign government actions, political instability,
currency fluctuation or lack of adequate and accurate information. The fund may
engage in active and frequent trading, leading to increased portfolio turnover
and the possibility of increased capital gains. See page 18 for further
discussion on the tax treatment of capital gains.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $25 billion using similar strategies as the fund.
The portfolio management team is led by William G. Tennille, vice president, who
has been at J.P. Morgan since 1992, Connie J. Plaehn, managing director, who has
been at J.P. Morgan since 1984, and John Snyder, vice president, who has been at
J.P. Morgan since 1993. Mr. Tennille and Ms. Plaehn have been on the team since
January 1994. Mr. Snyder has been a fixed income portfolio manager since joining
J.P. Morgan.
- --------------------------------------------------------------------------------
BEFORE YOU INVEST
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
4 | J.P. MORGAN INSTITUTIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 10 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past one, five and ten years compare to those of the Salomon Brothers
Broad Investment Grade Bond Index. This is a widely recognized, unmanaged index
of U.S. Treasury and agency securities and investment-grade mortgage and
corporate bonds used as a measure of overall bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
1989 1990 1991 1992 1993 1994 1995 1996
1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
20%
18.42
10.23 10.09 13.45
10%
6.53 9.88
9.29 7.54
3.30
0%
(2.68)
(10%)
</TABLE>
[_} J.P. Morgan Institutional Bond Fund
The fund's year-to-date total return as of 6/30/99 is -1.74%.
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 6.30% (for the quarter ended 6/30/95); and the
lowest quarterly return was -2.38% (for the quarter ended 3/31/94).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Past 10yrs.(1)
<S> <C> <C> <C>
J.P. Morgan Institutional Bond Fund (after expenses) 7.54 6.95 8.48
- -------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade Bond Index (no expenses) 8.72 7.30 9.31
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses 0.22
- --------------------------------------------------------------------
Total
operating expenses 0.52
Fee waiver and expense reimbursement(4) 0.02
- --------------------------------------------------------------------
Net expenses 0.50
- --------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 19
months and total operating expenses thereafter, and all shares sold at the end
of each time period. The example is for comparison only; the fund's actual
return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 51 163 288 650
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 7/26/93. Returns for the period 3/31/88
through 7/31/93 reflect performance of The Pierpont Bond Fund, the fund's
predecessor, which commenced operations on 3/11/88.
(2) The fund's fiscal year end is 10/31.
(3) The fund has a master/feeder structure as described on page 19. This table
is restated to show the current fee arrangements in effect as of 8/1/98,
and shows the fund's expenses and its share of master portfolio expenses
for the past fiscal year using the current fees as if they had been in
effect during the past fiscal year, before reimbursement, expressed as a
percentage of the fund's average net assets.
(4) Reflects an agreement date 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the
fund to extent expenses exceed 0.50% (excluding extraordinary expenses) of
the fund's average daily net assets through 2/28/01.
J.P. MORGAN INSTITUTIONAL BOND FUND | 5
<PAGE>
J.P. MORGAN INSTITUTIONAL
GLOBAL STRATEGIC INCOME FUND | TICKER SYMBOL: JPIGX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 20-23.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high total return from a portfolio of fixed income
securities of foreign and domestic issuers. This goal can be changed without
shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests in a wide range of debt securities from the U.S. and other
markets, both developed and emerging. Issuers may include governments,
corporations, financial institutions, and supranational organizations (such as
the World Bank), that the fund believes have the potential to provide a high
total return over time. The fund may invest directly in mortgages and in
mortgage-backed securities. The fund's securities may be of any maturity, but
under normal market conditions its duration will generally be similar to that of
the Lehman Brothers Aggregate Bond Index (currently about four and a half
years). For a description of duration, please see fixed income investment
process on page 15. At least 40% of assets must be invested in securities that,
at the time of purchase, are rated investment-grade (BBB/Baa or better) or are
the unrated equivalent. The balance of assets must be invested in securities
rated B or higher at the time of purchase (or the unrated equivalent), except
that the fund's emerging market component has no minimum quality rating and may
invest without limit in securities that are in the lowest rating categories (or
are the unrated equivalent).
The management team uses the process described on page 15, and also makes
country allocations, based primarily on macro-economic factors. The team uses
the model allocation shown at right as a basis for its sector allocation,
although the actual allocations are adjusted periodically within the indicated
ranges. Within each sector, a dedicated team handles securities selection. The
fund typically hedges its non-dollar investments in developed countries back to
the U.S. dollar.
The fund's share price and total return vary in response to changes in global
bond markets, interest rates, and currency exchange rates. How well the fund's
performance compares to that of similar fixed income funds will depend on the
success of the investment process. Because of credit and foreign and emerging
markets investment risks, the fund's performance is likely to be more volatile
than that of most fixed income funds. Foreign and emerging market investment
risks include foreign government actions, political instability, currency
fluctuations and lack of adequate and accurate information. To the extent that
the fund seeks higher returns by investing in non-investment-grade bonds, often
called junk bonds, it takes on additional risks, since these bonds are more
sensitive to economic news and their issuers have a less secure financial
position. The fund's mortgage-backed investments involve the risk of losses due
to default or to prepayments that occur earlier or later than expected. Some
investments, including directly owned mortgages, may be illiquid. The fund has
the potential for long-term total returns that exceed those of more traditional
bond funds, but investors should also be prepared for risks that exceed those of
more traditional bond funds. The fund may engage in active and frequent trading,
leading to increased portfolio turnover and the possibility of increased capital
gains. See page 18 for further discussion on the tax treatment of capital gains.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
<PAGE>
MODEL SECTOR ALLOCATION
9% international
non-dollar
(range 0-25%)
35% public/private
mortgages
(range 20-45%)
13% public/private
corporates
(range 5-25%)
16% emerging
markets
(range 0-25%)
27% high yield
corporates
(range 17-37%)
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $3 billion using similar strategies as the fund.
The portfolio management team is led by Mark E. Smith, managing director, who
joined J.P. Morgan in 1994 from Allied Signal, Inc. where he managed fixed
income portfolios and oversaw asset allocation activities. He has been on the
team since the fund's inception.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
6 | J.P. MORGAN INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Global Strategic Income Fund.
The bar chart indicates the risks by showing the performance of the fund's
shares during its first complete calendar year of operations.
The table indicates the risks by showing how the fund's average annual returns
for the past one year and life of the fund compare to those of the Lehman
Brothers Aggregate Bond Index. This is a widely recognized, unmanaged index used
as a measure of overall bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
- --------------------------------------------------------------------------------
Total return (%) Shows changes in returns by calendar year(1,2)
1998
20%
10%
2.59
0%
[_] J.P. Morgan Institutional Global Strategic Income Fund
The fund's year-to-date total return as of 6/30/99 is 0.01%.
For the period covered by this total return chart, the fund's highest quarterly
return was 3.13% (for the quarter ended 3/31/98); and the lowest quarterly
return was -1.45% (for the quarter ended 9/30/98).
<TABLE>
<CAPTION>
Average annual total return Shows performance over time, for periods ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1)
<S> <C> <C>
J.P. Morgan Institutional Global Strategic Income Fund (after expenses) 2.59 7.00
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (no expenses) 8.67 10.91
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.45
Marketing (12b-1) fees none
Other expenses 0.38
- --------------------------------------------------------------------
Total
operating expenses 0.83
Fee waiver and expense reimbursement (4) 0.18
- --------------------------------------------------------------------
Net expenses 0.65
- --------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 19
months and total operating expenses thereafter, and all shares sold at the end
of each time period. The example is for comparison only; the fund's actual
return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 66 236 432 998
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 3/14/97 and performance is calculated as
of 3/31/97.
(2) The fund's fiscal year is 10/31.
(3) The fund has a master/feeder structure as described on page 19. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year before reimbursement, expressed as a percentage of the
fund's average net assets.
(4) Reflects an agreement date 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the
fund to extent expenses exceed 0.65% (excluding extraordinary expenses) of
the fund's average daily net assets through 2/28/01.
J.P. MORGAN INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND | 7
<PAGE>
J.P. MORGAN INSTITUTIONAL
TAX EXEMPT BOND FUND | TICKER SYMBOL: JITBX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL TAX EXEMPT BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 20-23.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide a high level of current income that is exempt from
federal income tax consistent with moderate risk of capital. This goal can be
changed without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in high quality municipal securities that it believes
have the potential to provide current income that is free from federal personal
income tax. While the fund's goal is high tax-exempt income, the fund may invest
to a limited extent in taxable securities, including U.S. government, government
agency, corporate, or taxable municipal securities. The fund's securities may be
of any maturity, but under normal market conditions the fund's duration will
generally range between four and seven years, similar to that of the Lehman
Brothers 1-16 Year Municipal Bond Index (currently 5.4 years). For a description
of duration, please see fixed income investment process on page 15. At least 90%
of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent. No
more than 10% of assets may be invested in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
tax-exempt funds will depend on the success of the investment process, which is
described on page 15.
Investors should be prepared for higher share price volatility than from a tax
exempt fund of shorter duration. The fund's performance could also be affected
by market reaction to proposed tax legislation. To the extent that the fund
seeks higher returns by investing in non-investment-grade bonds, often called
junk bonds, it takes on additional risks, since these bonds are more sensitive
to economic news and their issuers have a less secure financial position.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $5 billion using similar strategies as the fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in May 1997 and has been at J.P. Morgan since 1987, and Benjamin
Thompson, vice president, who joined the team in June of 1999. Prior to joining
J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager at Goldman
Sachs.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
8 | J.P. MORGAN INSTITUTIONAL TAX EXEMPT BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Tax Exempt Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the fund's last 10 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past one, five and ten years compare to those of the Lehman Brothers
1-16 Year Municipal Bond Index. This is a widely recognized, unmanaged index of
general obligation and revenue bonds with maturities of 1-16 years used as a
measure of overall tax-exempt bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
<TABLE>
<CAPTION>
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996
1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
20%
13.50
10.92
10%
8.25 9.58
6.87 7.47 7.58
3.71 5.65
0%
(2.53)
(10%)
</TABLE>
[_] J.P. Morgan Institutional Tax Exempt Bond Fund
The fund's year-to-date total return as of 6/30/99 is -1.24%.
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 5.16% (for the quarter ended 3/31/95); and the
lowest quarterly return was -3.08% (for the quarter ended 3/31/94).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended December 31, 1998
- -----------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Past 10 yrs.(1)
<S> <C> <C> <C>
J.P. Morgan Institutional Tax Exempt Bond Fund (after expenses) 5.65 5.45 7.02
- -----------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses) 6.25 5.86 N/A
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses 0.28
- --------------------------------------------------------------------
Total
operating expenses 0.58
Fee waiver and expense reimbursement(4) 0.08
- --------------------------------------------------------------------
Net expenses 0.50
- --------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 16
months and total operating expenses thereafter, and all shares sold at the end
of each time period. The example is for comparison only; the fund's actual
return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 51 175 313 715
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 7/12/93. For the period 1/1/88 through
7/31/93 returns reflect performance of The Pierpont Tax Exempt Bond Fund,
the predecessor of the fund, which commenced operations on 10/3/84.
(2) The fund's fiscal year end is 8/31.
(3) The fund has a master/feeder structure as described on page 19. This table
is restated to show the current fee arrangements in effect as of 8/1/98,
and shows the fund's expenses and its share of master portfolio expenses
for the past fiscal year using the current fees as if they had been in
effect during the past fiscal year, before reimbursement, expressed as a
percentage of the fund's average net assets.
(4) Reflects an agreement date 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the
fund to extent expenses exceed 0.50% (excluding extraordinary expenses) of
the fund's average daily net assets through 11/28/00.
J.P. MORGAN INSTITUTIONAL TAX EXEMPT BOND FUND | 9
<PAGE>
J.P. MORGAN INSTITUTIONAL NEW YORK
TAX EXEMPT BOND FUND | TICKER SYMBOL: JPNTX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 20-23.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide a high level of tax exempt income for New York
residents consistent with moderate risk of capital. This goal can be changed
without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in New York municipal securities that it believes
have the potential to provide high current income which is free from federal,
state, and New York City personal income taxes for New York residents. The fund
may also invest to a limited extent in securities of other states or
territories. To the extent that the fund invests in municipal securities of
other states, the income from such securities would be free from federal
personal income taxes for New York residents but would be subject to New York
State and New York City personal income taxes. For non-New York residents, the
income from New York municipal securities is free from federal personal income
taxes only. The fund may also invest in taxable securities. The fund's
securities may be of any maturity, but under normal market conditions the fund's
duration will generally range between three and seven years, similar to that of
the Lehman Brothers 1-16 Year Municipal Bond Index (currently 5.4 years). For a
description of duration, please see fixed income investment process on page 15.
At least 90% of assets must be invested in securities that, at the time of
purchase, are rated investment-grade (BBB/Baa or better) or are the unrated
equivalent. No more than 10% of assets may be invested in securities rated B or
BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 15. Because most of the fund's investments will typically
be from issuers in the State of New York, its performance will be affected by
the fiscal and economic health of that state and its municipalities. The fund is
non-diversified and may invest more than 5% of assets in a single issuer, which
could further concentrate its risks. To the extent that the fund seeks higher
returns by investing in non-investment-grade bonds, often called junk bonds, it
takes on additional risks, since these bonds are more sensitive to economic news
and their issuers have a less secure financial condition.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $5 billion using similar strategies as the fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in June of 1997 and has been at J.P. Morgan since 1987, and
Benjamin Thompson, vice president, who joined the team in June of 1999. Prior to
joining J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager at
Goldman Sachs.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
10 | J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional New York Tax Exempt Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 4 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past year and the life of the fund compare to those of the Lehman
Brothers 1-16 Year Municipal Bond Index. This is a widely recognized, unmanaged
index of general obligation and revenue bonds with maturities of 1-16 years used
as a measure of overall tax-exempt bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
1995 1996 1997 1998
20%
13.28
10%
7.68
4.21 5.61
0%
[_] J.P. Morgan Institutional New York Tax Exempt Bond Fund
The fund's year-to-date total return as of 6/30/99 is -1.26%.
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 4.86% (for the quarter ended 3/31/95) and the
lowest quarterly return was -0.59% (for the quarter ended 3/31/96).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1)
<S> <C> <C>
J.P. Morgan Institutional New York Tax Exempt Bond Fund (after expenses) 5.61 6.63
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses) 6.25 7.07
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses 0.28
- ----------------------------------------------------------------------
Total
operating expenses 0.58
Fee waiver and expense reimbursement(4) 0.08
- ----------------------------------------------------------------------
Net expenses 0.50
- ----------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the first 16
months and total operating expenses thereafter, and all shares sold at the end
of each time period. The example is for comparison only; the fund's actual
return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 51 175 313 715
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 4/11/94, and returns reflect performance
of the fund from 4/30/94.
(2) The fund's fiscal year end is 3/31.
(3) The fund has a master/feeder structure as described on page 19. This table
is restated to show the current fee arrangements in effect as of 8/1/98,
and shows the fund's expenses and its share of master portfolio expenses
for the past fiscal year using the current fees as if they had been in
effect during the past fiscal year, before reimbursement, expressed as a
percentage of the fund's average net assets.
(4) Reflects an agreement date 7/30/99 by Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the
fund to extent expenses exceed 0.50% (excluding extraordinary expenses) of
the fund's average daily net assets through 11/28/00.
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND | 11
<PAGE>
J.P. MORGAN INSTITUTIONAL
CALIFORNIA BOND FUND | TICKER SYMBOL: JPICX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN CALIFORNIA BOND FUND: INSTITUTIONAL SHARES)
[GRAPHIC OMITTED] RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 20-23.
[GRAPHIC OMITTED] GOAL
The fund's goal is to provide high after-tax total return for California
residents consistent with moderate risk of capital. This goal can be changed
without shareholder approval.
[GRAPHIC OMITTED] INVESTMENT APPROACH
The fund invests primarily in California municipal securities that it believes
have the potential to provide high current income which is free from federal and
state personal income taxes for California residents. Because the fund's goal is
high after-tax total return rather than high tax-exempt income, the fund may
invest to a limited extent in securities of other states or territories. To the
extent that the fund invests in municipal securities of other states, the income
from such securities would be free from federal personal income taxes for
California residents but would be subject to California state personal income
taxes. For non-California residents, the income from California municipal
securities is free from federal personal income taxes only. The fund may also
invest in taxable securities. The fund's securities may be of any maturity, but
under normal market conditions the fund's duration will generally range between
three and ten years, similar to that of the Lehman Brothers 1-16 Year Municipal
Bond Index (currently 5.4 years). For a description of duration, please see
fixed income investment process on page 15. At least 90% of assets must be
invested in securities that, at the time of purchase, are rated investment-grade
(BBB/Baa or better) or are the unrated equivalent. No more than 10% of assets
may be invested in securities rated B or BB.
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 15. Because most of the fund's investments will typically
be from issuers in the State of California, its performance will be affected by
the fiscal and economic health of that state and its municipalities. The fund is
non-diversified and may invest more than 5% of assets in a single issuer, which
could further concentrate its risks. To the extent that the fund seeks higher
returns by investing in non-investment-grade bonds, often called junk bonds, it
takes on additional risks, because these bonds are more sensitive to economic
news and their issuers have a less secure financial condition.
An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $340
billion, including more than $5 billion using similar strategies as the fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in June of 1997 and has been at J.P. Morgan since 1987, and
Benjamin Thompson, vice president, who joined the team in June of 1999. Prior to
joining J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager at
Goldman Sachs.
- --------------------------------------------------------------------------------
Before you invest
Investors considering the fund should understand that:
o There is no assurance that the fund will meet its investment goal.
o The fund does not represent a complete investment program.
12 | J.P. MORGAN INSTITUTIONAL CALIFORNIA BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional California Bond Fund.
The bar chart indicates the risks by showing changes in the performance of the
fund's shares from year to year for each of the last 2 calendar years.
The table indicates the risks by showing how the fund's average annual returns
for the past year and life of fund compare to those of the Lehman Brothers 1-16
Year Municipal Bond Index. This is a widely recognized, unmanaged index of
general obligation and revenue bonds with maturities of 1-16 years used as a
measure of overall tax-exempt bond market performance.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
1997 1998
10%
7.72 5.60
5%
0%
(5%)
[_] J.P. Morgan California Bond Fund: Institutional Shares
The fund's year-to-date total return as of 6/30/99 is -1.17%.
For the period covered by this year-by-year total return chart, the fund's
highest quarterly return was 3.44% (for the quarter ended 9/30/98) and the
lowest quarterly return was -0.34% (for the quarter ended 3/31/97).
<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for period ended December 31, 1998
- ---------------------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1)
<S> <C> <C>
J.P. Morgan California Bond Fund: Institutional Shares (after expenses) 5.60 6.66
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses) 6.25 7.11
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before reimbursement 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 after
reimbursement are deducted from fund assets prior to performance calculations.
Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees 0.30
Marketing (12b-1) fees none
Other expenses(4) 0.42
- --------------------------------------------------------------------
Total annual fund
operating expenses(4) 0.72
- --------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, total operating expenses
(before reimbursement) unchanged, and all shares sold at the end of each time
period. The example is for comparison only; the fund's actual return and your
actual costs may be higher or lower.
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
Your cost($) 74 230 401 894
- --------------------------------------------------------------------------------
(1) The fund commenced operations on 12/23/96, and returns reflect performance
of the fund from 12/31/96.
(2) The fund's fiscal year end is 4/30.
(3) This table is restated to show the current fee arrangements in effect as of
8/1/98, and shows expenses for the past fiscal year using the current fees
as if they had been in effect during the past fiscal year, before
reimbursement, expressed as a percentage of average net assets.
(4) After reimbursement, other expenses and total operating expenses are 0.20%
and 0.50%, respectively. This reimbursement arrangement can be changed or
terminated at any time at the option of J.P. Morgan.
J.P. MORGAN INSTITUTIONAL CALIFORNIA BOND FUND | 13
<PAGE>
FIXED INCOME MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
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 $340 billion in assets under management,
including assets managed by the funds' advisor, J.P. Morgan Investment
Management Inc.
J.P. MORGAN INSTITUTIONAL FIXED INCOME FUNDS
These funds invest primarily in bonds and other fixed income securities, either
directly or through a master portfolio (another fund with the same goal). The
funds seek high total return or high current income.
While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor,
emphasizes the potential for consistently enhancing performance while managing
risk.
THE SPECTRUM OF FIXED INCOME FUNDS
The funds described in this prospectus pursue different goals and offer varying
degrees of risk and potential reward. The table below shows degrees of the
relative risk and return that these funds potentially offer. These and other
distinguishing features of each fixed income fund were described on the
preceding pages. Differences among these funds include:
o the types of securities they hold
o the tax status of the income they offer
o the relative emphasis on current income versus total return
Potential risk and return
R
e ---------------------------------------------------------------------------
t Global Strategic Income Fund ------------------------------------------ o
u |
r |
n New York Tax Exempt Bond Fund* --------------------------- o |
California Bond Fund* | |
(a | |
f | |
t Tax Exempt Bond Fund* --------------------------- o | |
e | | |
r | | |
Bond Fund ------------------------------- o | | |
t | | | |
a | | | |
x Short Term Bond Fund ------------ o | | | |
e | | | | |
s) | | | | |
---------------------------------------------------------------------------
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
<PAGE>
WHO MAY WANT TO INVEST
The funds are designed for investors who:
o want to add an income investment to further diversify a portfolio
o want an investment whose risk/return potential is higher than that of money
market funds but generally less than that of stock funds
o want an investment that pays monthly dividends
o with regard to the Tax Exempt Bond Fund, are seeking income that is exempt
from federal personal income tax
o with regard to the state-specific funds, are seeking income that is exempt
from federal, state, and local (if applicable) personal income taxes in New
York or California
The funds are not designed for investors who:
o are investing for aggressive long-term growth
o require stability of principal
o with regard to the Global Strategic Income Fund, are not prepared to accept
a higher degree of risk than most traditional bond funds
o with regard to the federal or state tax-exempt funds, are investing through
a tax-deferred account such as an IRA
14 | FIXED INCOME MANAGEMENT APPROACH
<PAGE>
- --------------------------------------------------------------------------------
FIXED INCOME INVESTMENT PROCESS
J.P. Morgan seeks to generate an information advantage through the depth of its
global fixed-income research and the sophistication of its analytical systems.
Using a team-oriented approach, J.P. Morgan seeks to gain insights in a broad
range of distinct areas and takes positions in many different areas, helping the
funds to limit exposure to concentrated sources of risk.
In managing the funds described in this prospectus, J.P. Morgan employs a
three-step process that combines sector allocation, fundamental research for
identifying portfolio securities, and duration management.
[GRAPHIC OMITTED]
The funds invest across a range of
different types of securities
Sector allocation The sector allocation team meets monthly, analyzing the
fundamentals of a broad range of sectors in which a fund may invest. The team
seeks to enhance performance and manage risk by underweighting or overweighting
sectors.
[GRAPHIC OMITTED]
Each fund makes its portfolio decisions
as described earlier in this prospectus
Security selection Relying on the insights of different specialists, including
credit analysts, quantitative researchers, and dedicated fixed income traders,
the portfolio managers make buy and sell decisions according to each fund's goal
and strategy.
[GRAPHIC OMITTED]
J.P. Morgan uses a disciplined process
to control each fund's sensitivity
to interest rates
Duration management Forecasting teams use fundamental economic factors to
develop strategic forecasts of the direction of interest rates. Based on these
forecasts, strategists establish each fund's target duration, a common
measurement of a security's sensitivity to interest rate movements. For
securities owned by a fund, duration measures the average time needed to receive
the present value of all principal and interest payments by analyzing cash flows
and interest rate movements. A fund's duration is generally shorter than a
fund's average maturity because the maturity of a security only measures the
time until final payment is due. Each fund's target duration typically remains
relatively close to the duration of the market as a whole, as represented by the
fund's benchmark. The strategists closely monitor the funds and make tactical
adjustments as necessary.
FIXED INCOME MANAGEMENT APPROACH | 15
<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------
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 $5,000,000 for the Short Term
Bond, Bond, Tax Exempt Bond, New York Tax Exempt Bond and California Bond
funds and $1,000,000 for the Global Strategic Income Fund 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 at right.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-766-7722.
<PAGE>
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-Delaware
Routing number: 031-100-238
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.
16 | YOUR INVESTMENT
<PAGE>
- --------------------------------------------------------------------------------
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 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 the 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.
Redemption In Kind
o Each fund reserves the right to make redemptions of over $250,000 in
securities rather than in cash.
<PAGE>
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 pricing services or market quotes. When
these methods are not available or do not represent a security's value at the
time of pricing (e.g. when an event occurs after the close of trading that would
materially impact a security's value), the security is valued in accordance with
the 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.
YOUR INVESTMENT | 17
<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, proceeds are generally available the day following execution
and will be forwarded according to your instructions.
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 declared daily and paid monthly. If an investor's
shares are redeemed during the month, accrued but unpaid dividends are paid with
the redemption proceeds. Shares of a fund earn dividends on the business day the
purchase is effective, but not on the business day the redemption is effective.
Each fund distributes capital gains, if any, once a 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.
<PAGE>
TAX CONSIDERATIONS
In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities for taxable accounts:
- --------------------------------------------------------------------------------
Transaction Tax status
Income dividends from the Exempt from federal, state,
New York Tax Exempt Bond and New York City personal
Fund income taxes for New York
residents only
Income dividends from the Exempt from federal and state
California Bond Fund personal income taxes for
California residents only
Income dividends from the Exempt from federal personal
Tax Exempt Bond Fund income taxes
Income dividends from Ordinary income
all other funds
Short-term capital gains Ordinary income
distributions
Long-term capital gains Capital gains
distributions
Sales or exchanges of Capital gains or
shares owned for more losses
than one year
Sales or exchanges of Gains are treated as ordinary
shares owned for one year income; losses are subject
or less to special rules
- --------------------------------------------------------------------------------
Because long-term capital gains distributions are taxable as capital gains
regardless of how long you have owned your shares, you may want to avoid making
a substantial investment when a fund is about to declare a long-term capital
gains distribution. A portion of the Tax Exempt Bond, New York Tax Exempt Bond
and California Bond funds' returns may be subject to federal, state, or local
tax, or the alternative minimum tax. 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.
18 | YOUR INVESTMENT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
As noted earlier, each fund (except the California Bond Fund) is a series of
J.P. Morgan Institutional Funds, a Massachusetts business trust, and 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, each of its feeder funds 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, the feeder fund will withdraw from the master portfolio,
receiving its assets either in cash or securities. Each feeder fund's trustees
would then consider whether it should hire its own investment adviser, invest in
a different master portfolio, or take other action.
The California Bond 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:
<PAGE>
- --------------------------------------------------------------------------------
Advisory services Percentage of the master
portfolio's average net assets
Short Term Bond 0.25%
Bond 0.30%
Global Strategic Income 0.45%
Tax Exempt Bond 0.30%
New York Tax Exempt Bond 0.30%
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 0.10% of each fund's average
net assets
- --------------------------------------------------------------------------------
The California Bond Fund, subject to the expense reimbursements described
earlier in this prospectus, pays J.P. Morgan the following fees for investment
advisory and other services:
- --------------------------------------------------------------------------------
Advisory services 0.30% of the fund's average
net assets
Administrative services Fund's pro-rata portion of 0.09%
(fee shared with of the first $7 billion of average
Funds Distributor, Inc.) net assets in J.P. Morgan-advised
portfolios, plus 0.04% of average
assets over $7 billion
Shareholder services 0.10% of the fund's average
net assets
- --------------------------------------------------------------------------------
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 the date January 1, 2000 and dates thereafter. 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 date-related 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 fund or generally, the
net asset value of the funds will decline. While the funds cannot predict at
this time the degree of impact, it is possible that foreign markets will be less
prepared than those in the U.S.
FUND DETAILS | 19
<PAGE>
- --------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS
This table discusses the main elements that make up each fund's overall risk and
reward characteristics. It also outlines each fund's policies toward various
investments, including those that are designed to help certain funds manage
risk.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
- ------------------------------------------------------------------------------------------------------------------------------------
Market conditions
<S> <C> <C>
o Each fund's share price, yield, o Bonds have generally o Under normal circumstances the funds plan to
and total return will fluctuate outperformed money market remain fully invested in bonds and other fixed
in response to bond market investments over the long term, income securities as noted in the table on pages
movements with less risk than stocks
22-23
o The value of most bonds will o Most bonds will rise in value o The funds seek to limit risk and enhance total
fall when interest rates rise; when interest rates fall return or yields through careful management,
the longer a bond's maturity and sector allocation, individual securities
the lower its credit quality, o Mortgage-backed and asset-backed selection, and duration management
the more its value typically securities can offer attractive
falls returns o During severe market downturns, the funds have
the option of investing up to 100% of assets in
o Adverse market conditions may investment-grade short-term securities
from time to time cause a fund
to take temporary defensive o J.P. Morgan monitors interest rate trends, as
positions that are inconsistent well as geographic and demographic information
with its principal investment related to mortgage-backed securities and
strategies and may hinder a fund mortgage prepayments
from achieving its investment
objective
o Mortgage-backed and asset-backed
securities (securities
representing an interest in, or
secured by, a pool of mortgages
or other assets such as
receivables) could generate
capital losses or periods of low
yields if they are paid off
substantially earlier or later
than anticipated
- ------------------------------------------------------------------------------------------------------------------------------------
Credit quality
o The default of an issuer would o Investment-grade bonds have a o Each fund maintains its own policies for
leave a fund with unpaid lower risk of default balancing credit quality against potential yields
interest or principal and gains in light of its investment goals
o Junk bonds offer higher yields
o Junk bonds (those rated BB/Ba or and higher potential gains o J.P. Morgan develops its own ratings of unrated
lower) have a higher risk of securities and makes a credit quality
default, tend to be less liquid, determination for unrated securities
and may be more difficult to
value
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign investments
o A fund could lose money because o Foreign bonds, which represent a o Foreign bonds are a primary investment only for
of foreign government actions, major portion of the world's the Global Strategic Income fund and may be a
political instability, or lack fixed income securities, offer significant investment for the Short Term Bond
of adequate and accurate attractive potential performance and Bond funds; the Tax Exempt Bond, New York Tax
information and opportunities for Exempt Bond and California Bond funds are not
diversification permitted to invest any assets in foreign bonds
o Currency exchange rate movements
could reduce gains or create o Favorable exchange rate o To the extent that a fund invests in foreign
losses movements could generate gains bonds, it may manage the currency exposure of its
or reduce losses foreign investments relative to its benchmark,
o Currency and investment risks and may hedge a portion of its foreign currency
tend to be higher in emerging o Emerging markets can offer exposure into the U.S. dollar from time to time
markets higher returns (see also "Derivatives"); these currency
management techniques may not be available for
certain emerging markets investments
- ------------------------------------------------------------------------------------------------------------------------------------
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
before issue or for delayed attractive transaction leverage risk
delivery, it could be exposed to opportunities
leverage risk if it does not use
segregated accounts
</TABLE>
20 | FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
- ------------------------------------------------------------------------------------------------------------------------------------
Management choices
<S> <C> <C>
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 sector, benchmark due to these same those areas where it believes its commitment to
securities or duration choices choices research can most enhance returns and manage
risks in a consistent way
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives
o Derivatives such as futures, o Hedges that correlate well with o The funds use derivatives, such as futures,
options, swaps and forward underlying positions can reduce options, swaps and forward foreign currency
foreign currency contracts that or eliminate losses at low cost contracts for hedging and for risk management
are used for hedging the (i.e., to adjust duration or yield curve
portfolio or specific securities o A fund could make money and exposure, or to establish or adjust exposure to
may not fully offset the protect against losses if particular securities, markets, or currencies);
underlying positionso and this management's analysis proves risk management may include management of a
could result in losses to the correct fund's exposure relative to its benchmark; the
fund that would not have Tax Exempt Bond, New York Tax Exempt Bond and
otherwise occurred o Derivatives that involve California Bond funds are permitted to enter
leverage could generate into futures and options transactions, however,
o Derivatives used for risk substantial gains at low cost these transactions result in taxable gains or
management may not have the losses so it is expected that these funds will
intended effects and may result utilize them infrequently; forward foreign
in losses or missed currency contracts are not permitted to be used
opportunities by the Tax Exempt Bond, New York Tax Exempt
Bond and California Bond funds
o The counterparty to a
derivatives contract could o The funds only establish hedges that they
default expect will be highly correlated with
underlying positions
o Certain types of derivatives
involve costs to the funds which o While the funds may use derivatives that
can reduce returns incidentally involve leverage, they do not use
them for the specific purpose of leveraging
o Derivatives that involve their portfolios
leverage could magnify
losses
- ------------------------------------------------------------------------------------------------------------------------------------
Securities
lending
o When a fund lends a security, o A fund may enhance income o J.P. Morgan maintains a list of approved
there is a risk that the loaned through the investment of the borrowers
securities may not be returned collateral received from the
if the borrower defaults borrower o The fund receives collateral equal to at least
100% of the current value of securities loaned
o The collateral will be subject
to the risks of the securities o The lending agents indemnify a fund against
in which it is invested borrower default
o J.P. Morgan's collateral investment guidelines
limit the quality and duration of collateral
investment to minimize losses
o Upon recall, the borrower must return the
securities loaned within the normal settlement
period
- ------------------------------------------------------------------------------------------------------------------------------------
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
valuing these holdings precisely attractive yields or potential in illiquid holdings
growth than comparable widely
o A fund could be unable to sell traded securities o To maintain adequate liquidity to meet
these holdings at the time or redemptions, each fund may hold
price desired investment-grade short-term securities
(including repurchase agreements and reverse
repurchase agreements) and, for temporary or
extraordinary purposes, may borrow from banks
up to 33 1/3% of the value of its total assets
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term
trading
o Increased trading would raise a o A fund could realize gains in a o The funds generally avoid short-term trading,
fund's transaction costs short period of time except to take advantage of attractive or
unexpected opportunities or to meet demands
o Increased short-term capital o A fund could protect against generated by shareholder activity. The turnover
gains distributions would raise losses if a bond is overvalued rate for each fund is its most recent fiscal year
shareholders' income tax and its value later falls end is as follows: Short Term Bond (381%), Bond
liability (115%), Global Strategic Income (142%), Tax
Exempt Bond (16%), New York Tax Exempt Bond
(44%), and California Bond (40%)
</TABLE>
<PAGE>
- -------------------
(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.
FUND DETAILS | 21
<PAGE>
- --------------------------------------------------------------------------------
Investments
This table discusses the customary types of investments which can be held by
each fund. In each case the principal types of risk are listed on the following
page (see below for definitions).This table reads across two pages.
- --------------------------------------------------------------------------------
Asset-backed securities Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
- --------------------------------------------------------------------------------
Bank obligations Negotiable certificates of deposit, time deposits and bankers'
acceptances of domestic and foreign issuers.
- --------------------------------------------------------------------------------
Commercial paper Unsecured short term debt issued by domestic and foreign banks
or corporations. These securities are usually discounted and are rated by S&P
or Moody's.
- --------------------------------------------------------------------------------
Convertible securities Domestic and foreign debt securities that can be
converted into equity securities at a future time and price.
- --------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic and foreign industrial, utility,
banking, and other financial institutions.
- --------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which gives the lender a
lien on property as security for the loan payment.
- --------------------------------------------------------------------------------
Mortgage-backed securities Domestic and foreign securities (such as Ginnie
Maes, Freddie Macs, Fannie Maes) which represent interests in pools of
mortgages, whereby the principal and interest paid every month is passed through
to the holder of the securities.
- --------------------------------------------------------------------------------
Mortgage dollar rolls The purchase of mortgage-backed securities with the
promise to purchase similar securities upon the maturity of the original
security. Segregated accounts are used to offset leverage risk.
- --------------------------------------------------------------------------------
Participation interests Interests that represent a share of bank debt or
similar securities or obligations.
- --------------------------------------------------------------------------------
Private placements Bonds or other investments that are sold directly to an
institutional investor.
- --------------------------------------------------------------------------------
REITs and other real-estate related instruments Securities of issuers that
invest in real estate or are secured by real estate.
- --------------------------------------------------------------------------------
Repurchase agreements Contracts whereby the fund agrees to purchase a security
and resell it to the seller on a particular date and at a specific price.
- --------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby the fund sells a security and
agrees to repurchase it from the buyer on a particular date and at a specific
price. Considered a form of borrowing.
- --------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of supranational organizations Dollar- or
non-dollar-denominated securities issued by foreign governments or supranational
organizations. Brady bonds are issued in connection with debt restructurings.
- --------------------------------------------------------------------------------
Swaps Contractual agreement whereby a party agrees to exchange periodic
payments with a counterparty. Segregated accounts are used to offset leverage
risk.
- --------------------------------------------------------------------------------
Synthetic variable rate instruments Debt instruments whereby the issuer agrees
to exchange one security for another in order to change the maturity or quality
of a security in the fund.
- --------------------------------------------------------------------------------
Tax exempt municipal securities Securities, generally issued as general
obligation and revenue bonds, whose interest is exempt from federal taxation and
state and/or local taxes in the state where the securities were issued.
- --------------------------------------------------------------------------------
U.S. government securities Debt instruments (Treasury bills, notes, and bonds)
guaranteed by the U.S. government for the timely payment of principal and
interest.
- --------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred payment securities Domestic and foreign
securities offering non-cash or delayed-cash payment. Their prices are typically
more volatile than those of some other debt instruments and involve certain
special tax considerations.
- --------------------------------------------------------------------------------
<PAGE>
Risk related to certain investments held by J.P. Morgan Institutional fixed
income funds:
Credit risk The risk a financial obligation will not be met by the issuer of a
security or the counterparty to a contract, resulting in a loss to the
purchaser.
Currency risk The risk currency exchange rate fluctuations may reduce gains or
increase losses on foreign investments.
Environmental risk The risk that an owner or operator of real estate may be
liable for the costs associated with hazardous or toxic substances located on
the property.
Extension risk The risk a rise in interest rates will extend the life of a
mortgage-backed security to a date later than the anticipated prepayment date,
causing the value of the investment to fall.
Interest rate risk The risk a change in interest rates will adversely affect
the value of an investment. The value of fixed income securities generally moves
in the opposite direction of interest rates (decreases when interest rates rise
and increases when interest rates fall).
Leverage risk The risk of gains or losses disproportionately higher than the
amount invested.
22 | FUND DETAILS
<PAGE>
* Permitted (and if applicable, percentage limitation)
percentage of total assets - bold
percentage of net assets - italic
o Permitted, but not typically used
+ Permitted, but no current intention of use
- -- Not permitted
Principal Types of Risk
<TABLE>
<CAPTION>
Short Global Tax New York
Term Strategic Exempt Tax
Exempt California
Bond Bond Income Bond
Bond Bond
<S> <C> <C> <C> <C>
<C> <C>
credit, interest rate, market, prepayment * * * o
o o
credit, currency, liquidity, political *(1) *(1) o oDomestic
oDomestic oDomestic
Only
Only Only
credit, currency, interest rate, liquidity, market,
political * * o *
* *
credit, currency, interest rate, liquidity, market, 25% 25%
political, valuation * Foreign * Foreign o --
- -- --
credit, currency, interest rate, liquidity, market, 25% 25%
political, valuation * Foreign * Foreign * --
- -- --
credit, environmental, extension, interest rate,
liquidity, market, natural event, political,
prepayment, valuation * * * +
+ +
credit, currency, extension, interest rate, leverage,
market, political, prepayment * * * --
- -- --
currency, extension, interest rate, leverage,
liquidity, market, political, prepayment *33 1/3% *33 1/3% *33 1/3% --
- -- --
credit, currency, extension, interest rate,
liquidity, political, prepayment * * * --
- -- --
credit, interest rate, liquidity, market, valuation * * * *
* *
credit, interest rate, liquidity, market, natural
event, prepayment, valuation * * * --
- -- --
credit * * * o
o o
credit *(3) *(3) *(3) O(3)
O(3) O(3)
credit, currency, interest rate, market, political * * * --
- -- --
credit, currency, interest rate, leverage, market,
political * * * *
- -- --
credit, interest rate, leverage, liquidity, market -- -- -- *
* *
credit, interest rate, market, natural event,
political o o -- *(2)
*(2) *(2)
interest rate * * * *
* *
credit, currency, interest rate, liquidity, market,
political, valuation * * * *
* *
</TABLE>
<PAGE>
Liquidity risk The risk the holder may not be able to sell the security at the
time or price it desires.
Market risk The risk that when the market as a whole declines, the value of a
specific investment will decline proportionately. This systematic risk is common
to all investments and the mutual funds that purchase them.
Natural event risk The risk a natural disaster, such as a hurricane or similar
event, will cause severe economic losses and default in payments by the issuer
of the security.
Political risk The risk governmental policies or other political actions will
negatively impact the value of the investment.
Prepayment risk The risk declining interest rates will result in unexpected
prepayments, causing the value of the investment to fall.
Valuation risk The risk the estimated value of a security does not match the
actual amount that can be realized if the security is sold.
(1) For each of the Short Term Bond and Bond funds, all foreign securities in
the aggregate may not exceed 25% of such fund's assets.
(2) At least 65% of assets must be in tax exempt securities (for New York Tax
Exempt Bond and California Bond funds, the 65% must be in New York or
California municipal securities, respectively).
(3) All forms of borrowing (including securities lending and reverse repurchase
agreements) in the aggregate may not exceed 33 1/3% of the fund's total
assets.
FUND DETAILS | 23
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each fund's
financial performance for the past one through five fiscal years or periods, as
applicable. Certain information reflects financial results for a single fund
share. The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends and distributions). Except where noted, this information has been
audited by PricewaterhouseCoopers LLP, whose reports, along with each fund's
financial statements, are included in the respective fund's annual report, which
are available upon request.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL SHORT TERM BOND FUND
Per-share data For periods ended
- -----------------------------------------------------------------------------------------------------------------------------------
10/31/94 10/31/95 10/31/96 10/31/97
10/31/98 4/30/99
(unaudited)
<S> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 9.99 9.60 9.83 9.85
9.84 9.96
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.47 0.58 0.55 0.61
0.59 0.27
Net realized and unrealized gain (loss)
on investment and foreign currency contracts
and transactions($) (0.39) 0.24 0.02 (0.01)
0.12 (0.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.08 0.82 0.57 0.60
0.71 0.18
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.47) (0.59) (0.55) (0.61)
(0.59) (0.27)
Net realized gain ($) -- -- -- --
- -- (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.47) (0.59) (0.55) (0.61)
(0.59) (0.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.60 9.83 9.85 9.84
9.96 9.83
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) 0.87 8.81 6.01 6.27
7.40 1.87(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 47,679 18,916 17,810 27,375
232,986 243,292
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.45 0.45 0.37 0.25
0.25 0.27(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.96 6.09 5.69 6.19
5.84 5.49(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without
reimbursement (%) 0.78 0.67 1.37 0.96
0.62 0.52(2)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not annualized.
(2) Annualized.
24 | FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL BOND FUND
Per-share data For periods ended
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 10/31/95 10/31/96 10/31/97
10/31/98 4/30/99
(unaudited)
<S> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 10.14 9.23 9.98 9.84
10.01 10.10
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.55 0.63 0.61 0.65
0.64 0.29
Net realized and unrealized gain (loss)
on investment and foreign currency contracts
and transactions ($) (0.88) 0.75 (0.11) 0.18
0.15 (0.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) (0.33) 1.38 0.50 0.83
0.79 0.09
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.55) (0.63) (0.61) (0.64)
(0.63) (0.29)
Net realized gain ($) (0.03) .-- (0.03) (0.02)
(0.07) (0.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.58) (0.63) (0.64) (0.66)
(0.70) (0.41)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.23 9.98 9.84 10.01
10.10 9.78
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) (3.33) 15.50 5.21 8.78
8.18 0.94(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 253,174 438,610 836,066 912,054
1,001,411 1,099,383
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.50 0.47 0.50 0.50
0.49 0.50(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 6.00 6.62 6.28 6.59
6.32 5.99(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without
reimbursement (%) 0.69 0.52 0.53 0.50
0.50 0.50(2)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not annualized.
(2) Annualized.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
Per-share data For periods ended
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/97(1)
10/31/98 4/30/99
(unaudited)
<S> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 10.00
10.16 9.72
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.46
0.75 0.31
Net realized and unrealized gain (loss)
on investment and foreign currency transactions ($) 0.15
(0.45) 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.61
0.30 0.43
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.45)
(0.70) (0.30)
Net realized gain ($) --
(0.02) --
Return of capital --
(0.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.45)
(0.74) (0.30)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 10.16
9.72 9.85
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (%) 6.15(2)
2.91 4.45(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 105,051
223,700 265,865
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.65(3)
0.65 0.65(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 7.12(3)
6.59 6.65(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without
reimbursement (%) 1.18(3)
0.83 0.78(3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund commenced operations on 3/17/97.
(2) Not annualized.
(3) Annualized.
FUND DETAILS| 25
<PAGE>
- --------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL TAX EXEMPT BOND FUND
<TABLE>
<CAPTION>
Per-share data For periods ended
- ----------------------------------------------------------------------------------------------------------------------------------
8/31/94 8/31/95 8/31/96 8/31/97
8/31/98 2/28/99
(unaudited)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period ($) 10.07 9.75 10.01 9.92
10.12 10.38
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.48 0.49 0.48 0.48
0.47 0.23
Net realized and unrealized gain (loss)
on investment ($) (0.32) 0.26 (0.07) 0.20
0.26 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.16 0.75 0.41 0.68
0.73 0.24
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.48) (0.49) (0.48) (0.48)
(0.47) (0.23)
Net realized gain ($) -- -- (0.02) (0.00)(1)
- -- (0.00)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.48) (0.49) (0.50) (0.48)
(0.47) (0.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.75 10.01 9.92 10.12
10.38 10.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return (%) 1.61 8.00 4.13 7.06
7.37 2.34(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 16,415 59,867 121,131 201,614
316,594 399,656
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.50 0.50 0.50 0.50
0.50 0.50(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.70 5.09 4.82 4.83
4.58 4.41(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses without
reimbursement (%) 1.98 0.71 0.60 0.56
0.53 0.52(3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Less than $0.01 per share.
(2) Not annualized.
(3) Annualized.
- --------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
<TABLE>
<CAPTION>
Per-share data For fiscal periods ended March 31
- -----------------------------------------------------------------------------------------------------------------------
1995(1) 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 10.11 10.34 10.31 10.67
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.42 0.49 0.48 0.48 0.45
Net realized and unrealized gain (loss)
on investment ($) 0.11 0.25 (0.02) 0.40 0.13
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations ($) 0.53 0.74 0.46 0.88 0.58
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.42) (0.49) (0.48) (0.48) (0.45)
Net realized gain ($) -- (0.02) (0.01) (0.04) (0.08)
- -----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.42) (0.51) (0.49) (0.52) (0.53)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 10.11 10.34 10.31 10.67 10.72
- -----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return (%) 5.49(2) 7.40 4.54 8.64 5.51
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 20,621 47,926 90,792 111,418 204,986
- -----------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net expenses (%) 0.50(3) 0.50 0.50 0.50 0.50
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (%) 4.65(3) 4.67 4.70 4.54 4.15
- -----------------------------------------------------------------------------------------------------------------------
Expenses without
reimbursement (%) 1.05(3) 0.67 0.64 0.59 0.57
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund commenced operations on 4/11/94.
(2) Not annualized.
(3) Annualized.
26 | FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL CALIFORNIA BOND FUND
Per-share data For fiscal periods ended April 30
- -----------------------------------------------------------------------------------------------
1997(1) 1998 1999
<S> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 9.90 10.20
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.16 0.42 0.41
Net realized and unrealized gain (loss)
on investment ($) (0.10) 0.30 0.25
- -----------------------------------------------------------------------------------------------
Total from investment operations ($) 0.06 0.72 0.66
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.16) (0.42) (0.41)
Net realized gain ($) -- -- (0.05)
- -----------------------------------------------------------------------------------------------
Total distributions to shareholders ($) (0.16) (0.42) (0.46)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.90 10.20 10.40
- -----------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return (%) 0.56(2) 7.35 6.55
- -----------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 14,793 46,280 64,102
- -----------------------------------------------------------------------------------------------
Ratio to average net assets:
- -----------------------------------------------------------------------------------------------
Net expenses (%) 0.45(3) 0.45 0.49
- -----------------------------------------------------------------------------------------------
Net investment income (%) 4.43(3) 4.11 3.92
- -----------------------------------------------------------------------------------------------
Expenses without
reimbursement (%) 3.46(3) 0.79 0.71
- -----------------------------------------------------------------------------------------------
Portfolio turnover (%) 40 44 40
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) The fund commenced operations on 12/23/96.
(2) Not annualized.
(3) Annualized.
FUND DETAILS | 27
<PAGE>
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<PAGE>
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<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 fund, 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. The
funds' investment company and 1933 Act registration numbers are:
J.P. Morgan Institutional Short Term Bond Fund ............. 811-07342 and
033-54642
J.P. Morgan Institutional Bond Fund ........................ 811-07342 and
033-54642
J.P. Morgan Institutional Global Strategic Income Fund ..... 811-07342 and
033-54642
J.P. Morgan Institutional Tax Exempt Bond Fund ............. 811-07342 and
033-54642
J.P. Morgan Institutional New York Tax Exempt Bond Fund .... 811-07342 and
033-54642
J.P. Morgan Institutional California Bond 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
im0380
