JP MORGAN SERIES TRUST
485BPOS, 2000-08-25
Previous: INDUSTRI MATEMATIC INTERNATIONAL CORP, DEF 14A, 2000-08-25
Next: JP MORGAN SERIES TRUST, 485BPOS, EX-99.B11, 2000-08-25



As filed with the U.S. Securities and Exchange Commission on August 25, 2000


                     Registration Nos. 333-11125 and 811-07795


                      U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549

                                     FORM N-1A

         REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


                        POST-EFFECTIVE AMENDMENT NO. 28

                                            AND

            REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

                                AMENDMENT NO. 29

                               J.P. MORGAN SERIES TRUST
                              (formerly JPM Series Trust)
                  (Exact Name of Registrant as Specified in Charter)

               60 State Street, Suite 1300, Boston, Massachusetts 02109
                       (Address of Principal Executive Offices)

          Registrant's Telephone Number, including Area Code: (617) 557-0700

                   Margaret W. Chambers, c/o Funds Distributor, Inc.
               60 State Street, Suite 1300, Boston, Massachusetts 02109
                        (Name and Address of Agent for Service)

      Copy to:      John E. Baumgardner, Jr., Esq.
                          Sullivan & Cromwell
                          125 Broad Street
                          New York, New York 10004


It is proposed that this filing will become effective (check appropriate box):

 [ ]  Immediately  upon filing  pursuant to paragraph  (b) [ X ] on September 1,
2000  pursuant to paragraph  (b) [ ] 60 days after filing  pursuant to paragraph
(a)(i) [ ] on [] pursuant to paragraph  (a)(i) [ ] 75 days after filing pursuant
to paragraph (a)(ii) [] on [ ] pursuant to paragraph (a)(ii) of Rule 485.


<PAGE>

Part A


<PAGE>
--------------------------------------------------------------------------------
                         SEPTEMBER 1, 2000 | PROSPECTUS
--------------------------------------------------------------------------------

J.P. MORGAN INSTITUTIONAL CALIFORNIA BOND FUND




                                               ---------------------------------
                                               Seeking high after-tax return for
                                               California residents by investing
                                               primarily in California Municipal
                                               Securities.


This prospectus  contains  essential  information  for anyone  investing in this
fund. 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
--------------------------------------------------------------------------------


1   | The fund's goal, principal  strategies,  principal risks,  performance and
    expenses


J.P. MORGAN INSTITUTIONAL CALIFORNIA BOND FUND
Fund description .........................................................  1
Investor expenses ........................................................  2


3 |


FIXED INCOME MANAGEMENT APPROACH
J.P. Morgan ..............................................................  3
Who may want to invest ...................................................  3
Fixed income investment process ..........................................  4

5 | Investing in the J.P. Morgan Institutional California Bond Fund

YOUR INVESTMENT
Investing through a financial professional ...............................  5
Investing through an employer-sponsored retirement plan ..................  5
Investing through an IRA or rollover IRA .................................  5
Investing directly .......................................................  5
Opening your account .....................................................  5
Adding to your account ...................................................  5
Selling shares ...........................................................  6
Account and transaction policies .........................................  6
Dividends and distributions ..............................................  7
Tax considerations .......................................................  7

8 | More about risk and the fund's business operations

FUND DETAILS
Business structure .......................................................  8
Management and administration ............................................  8
Risk and reward elements .................................................  9
Investments .............................................................. 11
Financial highlights ..................................................... 13


FOR MORE INFORMATION ............................................  back cover


<PAGE>


J.P. MORGAN INSTITUTIONAL
CALIFORNIA 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 9-12.


[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
Principal Strategies
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 4. 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.

Principal Risks
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 4.  Because the fund  primarily  invests in 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.


<PAGE>

TICKER SYMBOL: JPICX

REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN CALIFORNIA BOND FUND: INSTITUTIONAL SHARES)


PORTFOLIO MANAGEMENT
The  fund's  assets  are  managed  by  J.P.  Morgan,   which  currently  manages
approximately  $369  billion,  including  more than $1.4 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, Benjamin
Thompson,  vice  president,  who joined the team in June of 1999,  and  Kingsley
Wood, Jr., vice president, who has been on the team since January of 2000. Prior
to joining J.P. Morgan, Mr. Thompson was a senior fixed income portfolio manager
at Goldman Sachs,  and Mr. Wood was a senior fixed income  portfolio  manager at
Mercantile Bank & Trust.  Prior to joining  Mercantile in July of 1998, Mr. Wood
was an institutional tax-exempt trader at ABN-AMRO and Kemper Securities.


--------------------------------------------------------------------------------
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.

1 | 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 some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last 3 calendar years.

The table  indicates  some of 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.

<TABLE>
<CAPTION>
Year-by-year total return (%)                                  Shows changes in returns by calendar year(1,2)
--------------------------------------------------------------------------------------------------------------------
                                                                        1997          1998               1999
<S>                                                                     <C>          <C>                <C>
10%
                                                                        7.72          5.60
5%

0%
--------------------------------------------------------------------------------------------------------------------
                                                                                                         (0.61)
(5%)
</TABLE>

[ ] J.P. Morgan California Bond Fund: Institutional Shares


The fund's  year-to-date  total  return as of  6/30/00 is 4.25%.  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 -2.03% (for the quarter ended 6/30/99).


<TABLE>
<CAPTION>


Average annual total return (%)                   Shows performance over time, for period ended December 31, 1999(1)
--------------------------------------------------------------------------------------------------------------------
                                                                                Past 1 yr.         Life of fund
<S>                                                                              <C>                   <C>
J.P. Morgan California Bond Fund: Institutional Shares (after expenses)          (0.61)                4.18
--------------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses)                     (0.06)                4.66
--------------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>

--------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before and after  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                                                              0.40
--------------------------------------------------------------------------------
Total operating expenses                                                    0.70
Fee waiver and
expense reimbursement(4)                                                    0.20
--------------------------------------------------------------------------------
Net expenses(4)                                                             0.50
--------------------------------------------------------------------------------

Expense example(4)
--------------------------------------------------------------------------------
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 period
9/1/00 through 8/31/01 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          204         370         852
--------------------------------------------------------------------------------


(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 shows the fund's expenses for the past fiscal year,  expressed as
    a percentage of average net assets.


(4) Reflects an agreement  dated 9/1/00 by Morgan  Guaranty Trust Company of New
    York,  an affiliate  of J.P.  Morgan,  to  reimburse  the fund to the extent
    operating   expenses  (which  exclude  interest,   taxes  and  extraordinary
    expenses)  exceed  0.50% of the  fund's  average  daily net  assets  through
    8/31/01.


                              J.P. MORGAN INSTITUTIONAL CALIFORNIA BOND FUND | 2
<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 approximately 420 analysts and portfolio
managers  around the world and has  approximately  $369  billion in assets under
management,  including  assets  managed  by  the  funds'  advisor,  J.P.  Morgan
Investment Management Inc.



--------------------------------------------------------------------------------
Who May Want to Invest


The fund is 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 are seeking  income that is exempt from  federal,  state,  and local  personal
  income taxes in California

The fund is not designed for investors who:

o are investing for aggressive long-term growth

o require stability of principal

o are investing through a tax-deferred account such as an IRA











3 |  FIXED INCOME MANAGEMENT APPROACH

<PAGE>


[GRAPHIC OMITTED]
The fund invests across a range of
different types of securities

[GRAPHIC OMITTED]
The fund makes its portfolio decisions
as described earlier in this prospectus

[GRAPHIC OMITTED]
J.P. Morgan uses a disciplined process
to control the fund's sensitivity
to interest rates




<PAGE>


FIXED INCOME INVESTMENT PROCESS
J.P. Morgan seeks to generate an information  advantage through the depth of its
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 fund to
limit exposure to concentrated sources of risk.

J.P. Morgan employs a three-step process that combines sector allocation,
fundamental research for identifying portfolio securities, and duration
management.


Sector  allocation  The sector  allocation  team meets  monthly,  analyzing  the
fundamentals of a broad range of sectors in which the fund may invest.  The team
seeks to enhance  performance and manage risk by underweighting or overweighting
sectors.

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 the fund's goal
and strategy.

Duration  management  Forecasting  teams use  fundamental  economic  factors  to
develop strategic  forecasts of the direction of interest rates.  Based on these
forecasts,   strategists   establish  the  fund's  target  duration,   a  common
measurement  of  a  security's  sensitivity  to  interest  rate  movements.  For
securities  owned by the 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. The fund's duration is generally shorter
than the fund's  average  maturity  because  the  maturity  of a  security  only
measures  the time until  final  payment  is due.  The  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 fund
and make tactical adjustments as necessary.






                                          FIXED INCOME MANAGEMENT APPROACH  | 4

<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 DIRECTLY
Investors may establish  accounts  without the help of an  intermediary by using
the instructions below and at right:


o Determine  the amount  you are  investing.  The  minimum  amount  for  initial
  investments  is $5,000,000 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.  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.

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.


<PAGE>


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.M. Institutional Shareholder Services
  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 the fund.

  By exchange
o     Call the Shareholder Services Agent to effect an exchange.


5 |  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 The 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 fund accepts  telephone orders from all  shareholders.  To
guard against fraud, the fund requires shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if the fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.

Exchanges  You may  exchange  shares in this fund 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.

The fund may alter, limit, or suspend its exchange policy at any time.


Business hours and NAV  calculations  The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The 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). The 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, 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.  The fund has the right to  suspend  redemption  of shares as
permitted by law and to postpone payment of proceeds for up to seven days.


--------------------------------------------------------------------------------
              Shareholder Services Agent
              Morgan Christiana Center
              J.P. Morgan Funds Services - 2/OPS3
              500 Stanton Christiana Road
              Newark, DE 19713
              1-800-766-7722

              Representatives are available 8:00 a.m. to 6:00 p.m. eastern
              time on fund business days.


                                                           YOUR INVESTMENT  | 6

<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 fund sends  monthly  account  statements  as well as
confirmations  after each  purchase  or sale of shares  (except  reinvestments).
Every six months the fund sends out an annual or semi-annual  report  containing
information  on 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), the 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,  the 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 the fund earn dividends on the business day
the  purchase  is  effective,  but not on the  business  day the  redemption  is
effective. The fund distributes capital gains, if any, once a year. However, the
fund  may  make  more or  fewer  payments  in a  given  year,  depending  on its
investment  results and its tax compliance  situation.  The 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 (earned                           Exempt from federal and state
on California tax exempt                           personal income taxes for
securities)                                        California residents only
--------------------------------------------------------------------------------
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 the fund is about to declare a long-term  capital
gains  distribution.  A portion of the fund's returns may be subject to federal,
state,  or local tax, or the  alternative  minimum tax. Every January,  the fund
issues tax information on its  distributions for the previous year. Any investor
for whom the fund does not have a valid taxpayer  identification  number will be
subject to backup  withholding for taxes.  The tax  considerations  described in
this  section  do not  apply  to  tax-deferred  accounts  or  other  non-taxable
entities.  Because each investor's tax circumstances are unique,  please consult
your tax professional about your fund investment.





7 |  YOUR INVESTMENT
<PAGE>



FUND DETAILS
--------------------------------------------------------------------------------


BUSINESS STRUCTURE
The 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 fund and other series of J.P.  Morgan  Series Trust are governed by the same
trustees.  The trustees are responsible for overseeing all business  activities.
The trustees are assisted by Pierpont Group, Inc., which they own and operate on
a cost basis;  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 the 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                             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 the fund.

                                                              FUND DETAILS  |  8



<PAGE>

--------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS

This table  discusses the main elements that make up the fund's overall risk and
reward  characteristics.  It also outlines the fund's  policies  toward  various
investments, including those that are designed to help the fund manage risk.


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Potential risks                       Potential rewards                           Policies to balance risk and reward
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                     <C>
Market conditions


o The fund's share price,          o Bonds have  generally               o Under normal  circumstances the fund plans to remain
  yield,  and total  return  will    outperformed  money  market           fully invested in bonds and other fixed income
 fluctuate in response to          investments over the long               securities as noted in the table on pages 11-12
  bond market movements            term, with less risk than
                                       stocks                              o The fund seeks to limit risk and enhance total return
o The value of most bonds will                                                  or yields through careful management, sector
  fall when  interest  rates       o  Most  bonds  will  rise  in               allocation, individual securities selection,  and
  rise; the longer a bond's             value when interest rates               duration management
  maturity and the lower its           fall
  credit quality,  the more
  its                                                                      o During severe market downturns, the fund has the option
  value typically falls              o  Asset-backed securities and         of  investing  up to 100% of  assets in investment-grade
                                       direct mortgages can offer            short-term securities
o Adverse market conditions            attractive returns
  may from time to time cause                                              o J.P. Morgan monitors interest rate trends, as well as
  the fund to take temporary                                                    geographic and demographic information related to
  defensive positions that are                                                  mortgage-backed securities and mortgage prepayments
  inconsistent with its
  principal investment
  strategies and may hinder
  the fund from achieving its
  investment objective

o Asset-backed
securities (securities   representing
an interest  in, or  secured  by, a
pool of  mortgages  or other  assets
such as receivables) and direct
mortgages could generate capital
losses or periods of low  yields
if  they  are  paid  off
substantially  earlier  or  later  than
  anticipated


o  The fund is non-diversified, which
   means that a relatively high per-
   centage of the fund's assets may
   be invested in a limited number
   of issuers. Therefore, its perfor-
   mance may be more vulnerable to
   changes in the market value of a
   single issuer or a group of issuers

------------------------------------------------------------------------------------------------------------------------------------
Credit quality



o The default of an issuer o Investment-grade  bonds have a o The fund maintains
  its own policies for balancing would leave the fund with lower risk of default
  credit  quality  against  potential  yields  and gains in unpaid  interest  or
  principal light of its investment goals
                                    o  Junk bonds offer higher yields
o Junk bonds (those rated              and higher potential gains           o  J.P. Morgan develops its own ratings of unrated
  BB/Ba or lower) have a                                                      securities and makes a credit quality determination
  higher risk of default, tend                                                for unrated securities
  to be less liquid, and may
  be more difficult to value
------------------------------------------------------------------------------------------------------------------------------------
When-issued and delayed
delivery securities


o When the fund buys securities     o  The fund can take advantage of      o  The fund uses segregated accounts to offset leverage
  before issue or for delayed del-     attractive transaction opportuni-      risk
  ivery, it could be exposed to         ties
  leverage risk if it does not use
  segregated accounts
------------------------------------------------------------------------------------------------------------------------------------
Management choices

o The fund could  underperform its o The fund could outperform its o J.P. Morgan
  focuses its active management on those benchmark due to its sector,  benchmark
  due to these same areas  where it believes  its  commitment  to  research  can
  securities or duration  choices  choices most enhance returns and manage risks
  in a consistent
                                                                              way
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



9  |   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 fund uses derivatives, such as futures and options,
   and options that are used for       underlying positions can reduce       for hedging and for risk management (i.e., to adjust
   hedging the portfolio or spe-       or eliminate losses at low cost       duration or yield curve exposure); risk management may
   cific securities may not fully                                            include management of the fund's exposure relative to
   offset the underlying posi-      o  The fund could make money and         its benchmark; the fund is permitted to enter into
   tions1 and this could result        protect against losses if             futures and options transactions; however, these
   in losses to the fund that          management's analysis proves          transactions result in taxable gains or losses so it is
   would not have otherwise            correct                               expected that the fund will utilize them infrequently
   occurred
                                    o  Derivatives that involve           o  The fund only establishes hedges that it expects will
o  Derivatives  used for risk leverage could generate be highly  correlated with
   underlying  positions  management may not have the  substantial  gains at low
   cost  intended  effects  and o  While  the  fund  may  use  derivatives  that
   incidentally may result in losses or involve  leverage,  it does not use them
   for the specific missed opportunities purpose of leveraging its portfolio


o  The counterparty to a
   derivatives contract could
   default

o  Certain types of derivatives
   involve costs to the fund which
   can reduce returns

o  Derivatives that involve
   leverage could magnify losses

------------------------------------------------------------------------------------------------------------------------------------
 Securities lending


o  When the fund lends a security,  o The 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 the 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   The fund could have difficulty  o   These holdings may offer more      o   The fund may not invest more than 15% of net
    valuing these holdings              attractive yields or potential         assets in illiquid holdings
    precisely                           growth than comparable widely
                                        traded securities                  o   To maintain adequate liquidity to meet
o   The fund could be unable to redemptions,  the fund may hold investment-grade
    sell these holdings at the time short-term  securities (including repurchase
    or price desired agreements and reverse repurchase agreements)
                                                                               and, for temporary or extraordinary purposes,
                                                                               may borrow from banks up to 331/3% of the
                                                                               value of its total assets
------------------------------------------------------------------------------------------------------------------------------------
Short-term trading

o   Increased  trading  would raise o The fund could realize gains in o The fund
    may use  short-term  trading  to take the fund's  transaction  costs a short
    period of time advantage of attractive or unexpected opportunities or to meet demands generated by
o   Increased  short-term  capital o The fund could protect against  shareholder
    activity  gains  distributions  would raise  losses if a bond is  overvalued
    shareholders' income tax and its value later falls liability
------------------------------------------------------------------------------------------------------------------------------------
</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 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  |  10
<PAGE>


--------------------------------------------------------------------------------
Investments
This table discusses the customary types of investments which can be held by the
fund. In each case the related  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.
--------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which gives the lender a lien
on property as security for the loan payment.
--------------------------------------------------------------------------------
Private  placements  Bonds or other  investments  that are sold  directly  to an
institutional investor.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------


Risk related to certain investments held by the fund:

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.


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.

11 | FUND DETAILS

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
<S>                                                                             <C>

O  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

                                              Related Types of Risk
---------------------------------------------------------------------------------------------
credit, interest rate, market, prepayment                                        o
---------------------------------------------------------------------------------------------
credit, liquidity, political                                           o Domestic
                                                                                   Only
---------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, political                    O
---------------------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity, market,              +
natural event, political, prepayment, valuation
---------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, valuation                              O
---------------------------------------------------------------------------------------------
credit                                                                           o
---------------------------------------------------------------------------------------------
credit                                                                           o(1)
---------------------------------------------------------------------------------------------
credit, interest rate, leverage, liquidity, market                               O
---------------------------------------------------------------------------------------------
credit, interest rate, market, natural event, political                          O(2)
---------------------------------------------------------------------------------------------
interest rate                                                                    O
---------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, political, valuation         O
---------------------------------------------------------------------------------------------
</TABLE>


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) All forms of borrowing (including  securities lending and reverse repurchase
    agreements)  in the  aggregate  may not exceed  331/3% of the  fund's  total
    assets.


(2) At  least  65%  of  the  fund's  assets  must  be  in  California  municipal
    securities.


                                                               FUND DETAILS | 12
<PAGE>

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS


The financial  highlights  table is intended to help you  understand  the fund's
financial  performance  for the past four fiscal  periods.  Certain  information
reflects  financial  results for a single fund share.  The total  returns in the
table  represent  the rate that an  investor  would have  earned (or lost) on an
investment   in  the  fund   (assuming   reinvestment   of  all   dividends  and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose reports,  along with the fund's financial statements,  are included in the
fund's annual report, which are available upon request.


--------------------------------------------------------------------------------
J.P. MORGAN CALIFORNIA BOND FUND - INSTITUTIONAL SHARES

<TABLE>
<CAPTION>
Per-share data                              For fiscal periods ended April 30
-----------------------------------------------------------------------------------------------------
                                                     1997(1)        1998         1999         2000
<S>                                                   <C>           <C>          <C>          <C>

Net asset value, beginning of period ($)              10.00         9.90         10.20        10.40
-----------------------------------------------------------------------------------------------------
Income from investment operations:
  Net investment income ($)                            0.16         0.42          0.41         0.42
  Net realized and unrealized gain (loss)
    on investment ($)                                 (0.10)        0.30          0.25        (0.36)
-----------------------------------------------------------------------------------------------------
Total from investment operations ($)                   0.06         0.72          0.66         0.06
-----------------------------------------------------------------------------------------------------
Distributions to shareholders from:
  Net investment income ($)                           (0.16)       (0.42)        (0.41)       (0.42)
  Net realized gain ($)                                  --           --         (0.05)       (0.01)
-----------------------------------------------------------------------------------------------------
Total distributions to shareholders ($)               (0.16)       (0.42)        (0.46)       (0.43)
-----------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                     9.90        10.20         10.40        10.03
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return (%)                                      0.562         7.35          6.55         0.70
-----------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)              14,793       46,280        64,102       84,579
-----------------------------------------------------------------------------------------------------
Ratio to average net assets:
-----------------------------------------------------------------------------------------------------
  Net expenses (%)                                    0.453         0.45          0.49         0.50
-----------------------------------------------------------------------------------------------------
  Net investment income (%)                           4.433         4.11          3.92         4.19
-----------------------------------------------------------------------------------------------------
  Expenses without
  reimbursement (%)                                   3.463         0.79          0.71         0.70
-----------------------------------------------------------------------------------------------------
  Portfolio turnover (%)                                 40           44            40           87
-----------------------------------------------------------------------------------------------------
</TABLE>


(1) The fund commenced operations on 12/23/96.

(2) Not annualized.

(3) Annualized.

13 | FUND DETAILS

<PAGE>

                  THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<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 the fund's  most  recently  completed  fiscal year or
half-year.

Statement of Additional  Information (SAI) Provides a fuller technical and legal
description  of the  fund's  policies,  investment  restrictions,  and  business
structure. This prospectus incorporates 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
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713


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.  (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov.  The
fund's investment company and 1933 Act registration numbers are:

J.P. Morgan Institutional California Bond Fund.......... 811-07795 and 333-11125

J.P. MORGAN MUTUAL FUNDS
AND THE MORGAN TRADITION

The J.P.  Morgan  mutual  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  mutual  funds  offer a broad  array  of  distinctive
opportunities for mutual fund investors.

JPMorgan
--------------------------------------------------------------------------------
J.P. Morgan Series Trust


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

<PAGE>
<PAGE>


--------------------------------------------------------------------------------
                                                  SEPTEMBER 1, 2000 | PROSPECTUS
--------------------------------------------------------------------------------

J.P. MORGAN CALIFORNIA BOND FUND

                                    --------------------------------------------
                                    Seeking high after-tax return for California
                                    residents   by   investing    primarily   in
                                    California municipal securities.

This prospectus  contains  essential  information  for anyone  investing in this
fund. 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
--------------------------------------------------------------------------------


1   | The fund's goal, principal  strategies,  principal risks,  performance and
    expenses

J.P. MORGAN CALIFORNIA BOND FUND
Fund description ............................................................  1
Investor expenses ...........................................................  2


15 |


FIXED INCOME MANAGEMENT APPROACH
J.P. Morgan .................................................................  3
Who may want to invest ......................................................  3
Fixed income investment process .............................................  4


17 | Investing in the J.P. Morgan California Bond Fund


YOUR INVESTMENT
Investing through a financial professional ..................................  5
Investing through an employer-sponsored retirement plan .....................  5
Investing through an IRA or rollover IRA ....................................  5
Investing directly ..........................................................  5
Opening your account ........................................................  5
Adding to your account ......................................................  5
Selling shares ..............................................................  6
Account and transaction policies ............................................  6
Dividends and distributions .................................................  7
Tax considerations ..........................................................  7

20 | More about risk and the fund's business operations

FUND DETAILS
Business structure ..........................................................  8
Management and administration ...............................................  8
Risk and reward elements ....................................................  9
Investments ................................................................. 11
Financial highlights ........................................................ 16


FOR MORE INFORMATION ...............................................  back cover
<PAGE>

J.P. MORGAN CALIFORNIA
BOND FUND                   |  TICKER SYMBOL: JPCBX
--------------------------------------------------------------------------------


[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 11-14.


[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
Principal Strategies
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 4. 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.

Principal Risks
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 4.  Because the fund  primarily  invests in 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.

<PAGE>

REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN CALIFORNIA BOND FUND: SELECT SHARES)


PORTFOLIO MANAGEMENT
The  fund's  assets  are  managed  by  J.P.  Morgan,   which  currently  manages
approximately  $369  billion,  including  more than $1.4 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,  Benjamin
Thompson,  vice  president,  who joined the team in June of 1999,  and  Kingsley
Wood,  Jr.,  vice  president,  who has been with the team since January of 2000.
Prior to joining J.P.  Morgan,  Mr. Thompson was a senior fixed income portfolio
manager at Goldman  Sachs,  and Mr.  Wood was a senior  fixed  income  portfolio
manager at Mercantile Bank & Trust. Prior to joining Mercantile in July of 1998,
Mr.  Wood  was  an  institutional  tax-exempt  trader  at  ABN-AMRO  and  Kemper
Securities.


--------------------------------------------------------------------------------
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.

1 | 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 some of 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  some of 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.

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)
--------------------------------------------------------------------------------
                            1997                  1998                     1999


10%
                            7.61

5%                                                 5.48

0%                                                                        (0.78)
--------------------------------------------------------------------------------
(10%)


[ ] J.P. Morgan California Bond Fund: Select Shares(1) (a separate class of
    shares)


The fund's year-to-date total return as of 6/30/00 is 4.24%. 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 -2.02%
(for the quarter ended 6/30/99).


<TABLE>
<CAPTION>
Average annual total return (%)        Shows performance over time, for period ended December 31, 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
                                                                    Past 1 yr.        Life of fund
<S>                                                                    <C>                  <C>
J.P. Morgan California Bond Fund: Select Shares (a separate class of shares) (after expenses)
                                                                      (0.78)               4.04
------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers 1-16 Year Municipal Bond Index (no expenses)
                                                                      (0.06)               4.66
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

--------------------------------------------------------------------------------
INVESTOR EXPENSES


The expenses of the fund before and after  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                                                              0.55
--------------------------------------------------------------------------------
Total operating expenses                                                    0.85
Fee waiver and expense
reimbursement(4)                                                            0.20
--------------------------------------------------------------------------------
Net expenses(4)                                                             0.65
--------------------------------------------------------------------------------

Expense example(4)
--------------------------------------------------------------------------------
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 period
9/1/00 through 8/31/01 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      251      452      1,030
--------------------------------------------------------------------------------


(1) The fund commenced operations on 4/21/97 and returns reflect the performance
    of the fund from 5/1/97 forward. For the period from 1/1/97 through 4/30/97,
    returns   reflect   performance  of  J.P.   Morgan   California  Bond  Fund:
    Institutional  Shares, a separate class of shares.  Performance  during this
    period reflects  operating  expenses which are 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,  expressed  as a
    percentage of average net assets.

(4) Reflects an agreement  dated 9/1/00 by Morgan  Guaranty Trust Company of New
    York,  an affiliate  of J.P.  Morgan,  to  reimburse  the fund to the extent
    operating   expenses  (which  exclude  interest,   taxes  and  extraordinary
    expenses)  exceed  0.65% of the  fund's  average  daily net  assets  through
    8/31/01.


                                            J.P. MORGAN CALIFORNIA BOND FUND | 2
<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 approximately 420 analysts and portfolio
managers  around the world and has  approximately  $369  billion in assets under
management,  including  assets  managed  by  the  fund's  advisor,  J.P.  Morgan
Investment Management Inc.


Who May Want to Invest
--------------------------------------------------------------------------------
The fund is 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 are seeking  income that is exempt from  federal,  state,  and local  personal
  income taxes in California

The fund is not designed for investors who:

o are investing for aggressive long-term growth

o require stability of principal

o are investing through a tax-deferred account such as an IRA


3 | FIXED INCOME MANAGEMENT APPROACH

<PAGE>

[GRAPHIC OMITTED]
The fund invests across a range of
different types of securities

[GRAPHIC OMITTED]
The fund makes its portfolio decisions
as described earlier in this prospectus

[GRAPHIC OMITTED]
J.P. Morgan uses a disciplined process
to control the fund's sensitivity
to interest rates

<PAGE>

FIXED INCOME INVESTMENT PROCESS


J.P. Morgan seeks to generate an information  advantage through the depth of its
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 fund to limit exposure to concentrated sources of risk.


J.P. Morgan employs a three-step process that combines sector allocation,
fundamental research for identifying portfolio securities, and duration
management.

Sector  allocation  The sector  allocation  team meets  monthly,  analyzing  the
fundamentals of a broad range of sectors in which the fund may invest.  The team
seeks to enhance  performance and manage risk by underweighting or overweighting
sectors.

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 the fund's goal
and strategy.

Duration  management  Forecasting  teams use  fundamental  economic  factors  to
develop strategic  forecasts of the direction of interest rates.  Based on these
forecasts,   strategists   establish  the  fund's  target  duration,   a  common
measurement  of  a  security's  sensitivity  to  interest  rate  movements.  For
securities  owned by the 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. The fund's duration is generally shorter
than the fund's  average  maturity  because  the  maturity  of a  security  only
measures  the time until  final  payment  is due.  The  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 fund
and make tactical adjustments as necessary.

                                            FIXED INCOME MANAGEMENT APPROACH | 4
<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 DIRECTLY
Investors may establish  accounts  without the help of an  intermediary by using
the instructions below and at right:


o Determine  the amount  you are  investing.  The  minimum  amount  for  initial
  investments  in the  fund is  $2,500  and  for  additional  investments  $500,
  although these minimums may be less for some investors.  For more  information
  on minimum investments, call 1-800-521-5411.


o Complete the  application,  indicating how much of your investment you want to
  allocate.  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.

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.
<PAGE>

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: Morgan Guaranty Trust Shareholder Services
Account number: 00073-836
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 the fund.

  By exchange
o Call the Shareholder Services Agent to effect an exchange.

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.

5 | YOUR INVESTMENT
<PAGE>

--------------------------------------------------------------------------------
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 The 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 fund accepts  telephone orders from all  shareholders.  To
guard against fraud, the fund requires shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if the fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.

Exchanges  You may  exchange  shares in this fund 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.

The fund may alter, limit, or suspend its exchange policy at any time.


Business hours and NAV  calculations  The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The 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). The 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, 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. The fund has the right to suspend
redemption of shares as permitted by law and to postpone payment of proceeds for
up to seven days.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
<S>                                        <C>


Transfer Agent                             Shareholder Services Agent
State Street Bank and Trust Company        Morgan Christiana Center
P.O. Box 8411                              J.P. Morgan Funds Services - 2/OPS3
Boston, MA 02266-8411                      500 Stanton Christiana Road
Attention: J.P. Morgan Funds Services      Newark, DE 19713
                                           1-800-521-5411

                  Representatives are available 8:00 a.m. to 6:00 p.m. eastern
                  time on fund business days.
</TABLE>

                                                             YOUR INVESTMENT | 6
<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 fund sends  monthly  account  statements  as well as
confirmations  after each  purchase  or sale of shares  (except  reinvestments).
Every six months the fund sends out an annual or semi-annual  report  containing
information  on 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), the 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,  the 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 the fund earn dividends on the business day
the  purchase  is  effective,  but not on the  business  day the  redemption  is
effective. The fund distributes capital gains, if any, once a year. However, the
fund  may  make  more or  fewer  payments  in a  given  year,  depending  on its
investment  results and its tax compliance  situation.  The 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 (earned                           Exempt from federal and state
on California tax exempt                           personal income taxes for
securities)                                        California residents only
--------------------------------------------------------------------------------
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 the fund is about to declare a long-term  capital
gains  distribution.  A portion of the fund's returns may be subject to federal,
state,  or local tax, or the  alternative  minimum tax. Every January,  the fund
issues tax information on its  distributions for the previous year. Any investor
for whom the fund does not have a valid taxpayer  identification  number will be
subject to backup  withholding for taxes.  The tax  considerations  described in
this  section  do not  apply  to  tax-deferred  accounts  or  other  non-taxable
entities.  Because each investor's tax circumstances are unique,  please consult
your tax professional about your fund investment.


7 | YOUR INVESTMENT
<PAGE>

FUND DETAILS
--------------------------------------------------------------------------------


BUSINESS STRUCTURE
The 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 fund and other  series of 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 the 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:


--------------------------------------------------------------------------------
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 the fund.

                                                                FUND DETAILS | 8
<PAGE>

--------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS

This table discusses the main elements that make up the fund's overall risk and
reward characteristics. It also outlines the 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 The fund's share price,  yield,            o Bonds have  generally  outperformed   o Under normal circumstances the fund plans 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 pages
  movements                              stocks                                 11-12

o The value of most  bonds  will fall   o Most bonds will rise in value             o The fund seeks to limit risk and enhance total
  when interest rates rise; the          when interest rates fall               return or yields through careful management,
  longer a bond's maturity and the                                              sector allocation, individual securities
  lower its credit quality, the        o Asset-backed securities and            selection, and duration management
  more its value typically falls         direct mortgages can offer
                                         attractive returns                   o During severe market downturns, the fund has the
o Adverse market conditions may                                                 option of investing up to 100% of assets in
  from time to time cause the fund                                                    investment-grade short-term securities
  to take temporary defensive
  positions that are inconsistent                                                 o J.P. Morgan monitors interest rate trends, as
  with its principal investment                                                  well as geographic and demographic information
  strategies and may hinder the                                                    related to mortgage-backed securities and
  fund from achieving its                                                       mortgage prepayments
  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)  and direct  mortgages  could
  generate  capital  losses  or  periods  of low  yields  if they  are  paid off
  substantially earlier or later than anticipated


o The fund is non-diversified,
which means that a relatively
high percentage of the fund's
assets may be invested in a
limited number of issuers.
Therefore, its performance may be
 more vulnerable to changes in the
market value of a single issuer
or a group of issuers


------------------------------------------------------------------------------------------------------------------------------------
Credit quality


o The default of an issuer would       o Investment-grade bonds have a        o The fund maintains its own policies for
  leave the fund with unpaid             lower 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 goals
o Junk bonds (those rated BB/Ba or       and higher potential gains
  lower) have a higher risk of                                                o J.P. Morgan develops its own ratings
of unrated default, tend to be less liquid,                                        securities and makes a credit quality
  and may be more difficult to                                                  determination for unrated securities
  value
------------------------------------------------------------------------------------------------------------------------------------
Management choices

o The fund could underperform its      o The 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
  Potential rewards                                                             risks in a consistent way
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


9 | FUND DETAILS

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Potential risks                        Potentail Awards                       Policies to balance risk and reward
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                    <C>
Derivatives


o Derivatives such as futures and      o Hedges that correlate well with      o The fund uses derivatives, such as futures, and
  options that are used for hedging      underlying positions can reduce        options for hedging and for risk management
  the portfolio or specific              or eliminate losses at low cost        (i.e., to adjust duration or yield curve
  securities may not fully offset                                               exposure); risk management may include
  the underlying positions1 and        o The fund could make money and          management of the fund's exposure relative to
  this could result in losses to         protect against losses if              its benchmark; the fund is permitted to enter
  the fund that would not have           management's analysis proves           into futures and options transactions; however,
  otherwise occurred                     correct                                these transactions result in taxable gains or
                                                                                losses so it is expected that this fund will
o Derivatives used for risk            o Derivatives that involve leverage      utilize them infrequently
  management may not have the            could generate substantial gains
  intended effects and may result        at low cost                          o The fund only establishes hedges that it expects
  in losses or missed opportunities                                             will be highly correlated with underlying positions
o The counterparty to a derivatives
  contract could default                                                      o While the fund may use derivatives that
                                                                                incidentally involve leverage, it does not use
o Certain types of derivatives                                                  them for the specific purpose of leveraging its
  involve costs to the fund which                                               portfolio
  can reduce returns


o Derivatives that involve leverage
  could magnify losses
------------------------------------------------------------------------------------------------------------------------------------
Securities lending

o When the fund lends a security,      o The 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 if      collateral received from the
  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 in                                              o The lending agents indemnify the fund against
  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 The fund could have difficulty       o These holdings may offer more        o The fund may not invest more than 15% of net
  valuing these holdings precisely       attractive yields or potential         assets in illiquid holdings
                                         growth than comparable widely
o The fund could be unable to sell       traded securities                    o To maintain adequate liquidity to meet
  these holdings at the time or                                                 redemptions, the fund may hold investment-grade
  price desired                                                                 short-term securities (including repurchase
                                                                                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 the fund buys securities        o The fund can take advantage of       o The fund uses segregated accounts to offset leverage
  before issue or for delayed            attractive transaction                 risk
  delivery, it could be exposed to       opportunities
  leverage risk if it does not use
  segregated accounts

------------------------------------------------------------------------------------------------------------------------------------
Short-term trading


o Increased  trading  would raise the o The fund could  realize gains in a      o The fund may use short-term trading to take
  fund's transaction costs               short period of time                   advantage of attractive or unexpected
                                                                                opportunities or to meet demands generated by
o Increased short-term capital         o The fund could protect against         shareholder activity
  gains distributions would raise        losses if a bond is overvalued
  shareholders' income tax               and its value later falls
  liability Potential rewards
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) A futures  contract  is an  agreement  to buy or sell a set  quantity  of an
    underlying instrument at a future date, or to make or receive a cash payment
    based on changes in the value of a securities  index. An option is the right
    to  buy  or  sell  a  set  quantity  of  an   underlying   instrument  at  a
    pre-determined  price. A 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 | 10
<PAGE>


--------------------------------------------------------------------------------
Investments
This table discusses the customary types of investments which can be held by the
fund. In each case the related  types of risk are listed on the  following  page
(see below for definitions).This table reads across two pages.


<TABLE>
<CAPTION>
<S>                                                  <C>

------------------------------------------------------------------------------------------------------------------------------------
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.
------------------------------------------------------------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which gives the lender a lien
on property as security for the loan payment.
------------------------------------------------------------------------------------------------------------------------------------
Private  placements  Bonds or other  investments  that are sold  directly  to an
institutional investor.
------------------------------------------------------------------------------------------------------------------------------------
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.
------------------------------------------------------------------------------------------------------------------------------------
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.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



Risk related to certain investments held by the fund:

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.


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.

11 | FUND DETAILS

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
<S>                                                                             <C>

O  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

                                Related Types of Risk

-------------------------------------------------------------------------------------------
credit, interest rate, market, prepayment                                       o
-------------------------------------------------------------------------------------------
credit, liquidity, political                                          o Domestic
                                                                                  Only
-------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, political                   O
-------------------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity, market,             +
natural event, political, prepayment, valuation
-------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, valuation                             O
-------------------------------------------------------------------------------------------
credit                                                                          o
-------------------------------------------------------------------------------------------
credit                                                                          o(1)
-------------------------------------------------------------------------------------------
credit, interest rate, leverage, liquidity, market                              O
-------------------------------------------------------------------------------------------
credit, interest rate, market, natural event, political                         O(2)
-------------------------------------------------------------------------------------------
interest rate                                                                   O
-------------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, political, valuation        O
-------------------------------------------------------------------------------------------
</TABLE>


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) 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.


(2) At  least  65%  of  the  fund's  assets  must  be  in  California  municipal
    securities.


                                                               FUND DETAILS | 12
<PAGE>

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The financial  highlights  table is intended to help you  understand  the fund's
financial  performance  for the past four fiscal  periods.  Certain  information
reflects  financial  results for a single fund share.  The total  returns in the
table  represent  the rate that an  investor  would have  earned (or lost) on an
investment   in  the  fund   (assuming   reinvestment   of  all   dividends  and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose reports,  along with the fund's financial statements,  are included in the
fund's annual report, which are available upon request.

--------------------------------------------------------------------------------
J.P. MORGAN CALIFORNIA BOND FUND-SELECT SHARES
<TABLE>
<CAPTION>
Per-share data                                             For fiscal periods ended April 30
---------------------------------------------------------------------------------------------------
                                                    1997(1)      1998         1999          2000
<S>                                                  <C>          <C>         <C>           <C>

Net asset value, beginning of period ($)            10.00        10.04       10.35         10.57
---------------------------------------------------------------------------------------------------
Income from investment operations:
  Net investment income ($)                          0.01         0.41        0.40          0.41
  Net realized and unrealized gain (loss)
    on investment ($)                                0.04         0.31        0.26         (0.36)
---------------------------------------------------------------------------------------------------
Total from investment operations ($)                 0.05         0.72        0.66          0.05
---------------------------------------------------------------------------------------------------
Distributions to shareholders from:
  Net investment income ($)                         (0.01)       (0.41)      (0.40)        (0.41)
  Net realized gain ($)                                --           --       (0.04)        (0.01)
---------------------------------------------------------------------------------------------------
Total distributions to shareholders ($)             (0.01)       (0.41)      (0.44)        (0.42)
---------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                  10.04        10.35       10.57         10.20
---------------------------------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------------------------------
Total return (%)                                     0.51(2)      7.20        6.43          0.60
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)               302        5,811      17,391        13,811
---------------------------------------------------------------------------------------------------
Ratio to average net assets:
  Net expenses (%)                                   0.62(3)      0.65        0.65          0.65
  -------------------------------------------------------------------------------------------------
  Net investment income (%)                          4.52(3)      3.94        3.76          3.99
  -------------------------------------------------------------------------------------------------
  Expenses without reimbursement (%)                 1.17(3)      1.00        0.87          0.85
  -------------------------------------------------------------------------------------------------
  Portfolio turnover (%)                               40           44          40            87
  -------------------------------------------------------------------------------------------------
</TABLE>


(1) The fund commenced operations on 4/21/97.
(2) Not annualized.
(3) Annualized.

13 | FUND DETAILS
<PAGE>

                  THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY


<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 the fund's  most  recently  completed  fiscal year or
half-year.

Statement of Additional  Information (SAI) Provides a fuller technical and legal
description  of the  fund's  policies,  investment  restrictions,  and  business
structure. This prospectus incorporates the 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
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713


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.  (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov.  The
fund's investment company and 1933 Act registration numbers are:

J.P. Morgan California Bond Fund........................ 811-07795 and 333-11125

J.P. MORGAN MUTUAL FUNDS AND THE MORGAN TRADITION
The J.P.  Morgan  mutual  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,   J.P.   Morgan  mutual  funds  offer  a  broad  array  of  distinctive
opportunities for mutual fund investors.

JPMorgan
--------------------------------------------------------------------------------
J.P. Morgan Series Trust


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


<PAGE>





                            J.P. MORGAN SERIES TRUST





                        J.P. MORGAN CALIFORNIA BOND FUND



                       STATEMENT OF ADDITIONAL INFORMATION




                                SEPTEMBER 1, 2000












THIS  STATEMENT OF  ADDITIONAL  INFORMATION  IS NOT A  PROSPECTUS,  BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES
DATED SEPTEMBER 1, 2000 FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED  FROM TIME TO
TIME.  ADDITIONALLY,  THIS STATEMENT OF ADDITIONAL  INFORMATION  INCORPORATES BY
REFERENCE THE FINANCIAL  STATEMENTS INCLUDED IN THE SHAREHOLDER REPORTS RELATING
TO THE FUND LISTED  ABOVE  DATED APRIL 30,  2000.  THESE  FINANCIAL  STATEMENTS,
INCLUDING  THE  INDEPENDENT   ACCOUNTANTS'   REPORTS  ON  THE  ANNUAL  FINANCIAL
STATEMENTS,  ARE AVAILABLE,  WITHOUT CHARGE UPON REQUEST FROM FUNDS DISTRIBUTOR,
INC., ATTENTION: J.P. MORGAN SERIES TRUST (800)221-7930.



<PAGE>




                              Table of Contents


                                                                       Page


General  . . . . . . . . . . . . . . . . . . .        1
Investment Objective and Policies . . . . . .         1
Investment Restrictions  . . . . . . . . . . .       22
Trustees and Advisory Board Members . . . . . .      24
Officers   . . . . . . . . . . . . . . . . . .  24
Investment Advisor . . . . . . . . . . . . . .       28
Distributor  . . . . . . . . . . . . . . . . .       30
Co-Administrator . . . . . . . . . . . . . . .       31
Services Agent . . . . . . . . . . . . . . . .       31
Custodian and Transfer Agent . . . . . . . . .       32
Shareholder Servicing  . . . . . . . . . . . .       32
Financial Professionals . .. . . . . . . . . .       33
Independent Accountants  . . . . . . . . . . .       34
Expenses . . . . . . . . . . . . . . . . . . .       34
Purchase of Shares . . . . . . . . . . . . . .       34
Redemption of Shares . . . . . . . . . . . . .       35
Exchange of Shares . . . . . . . . . . . . . .       36
Dividends and Distributions  . . . . . . . . .       36
Net Asset Value  . . . . . . . . . . . . . . .       36
Performance Data . . . . . . . . . . . . . . .       37
Portfolio Transactions . . . . . . . . . . . .       39
Massachusetts Trust  . . . . . . . . . . . . .       41
Description of Shares  . . . . . . . . . . . .       41
Taxes  . . . . . . . . . . . . . . . . . . . .       42
Additional Information   . . . . . . . . . . .       45
Financial Statements . . . . . . . . . . . . .       46
Appendix A - Description of Security Ratings .  A-1
Appendix B - Additional Information Concerning
                   California Municipal Securities .  B-1



<PAGE>




GENERAL

         The J.P.  Morgan  California Bond Fund (the "Fund") is a series of J.P.
Morgan Series Trust, an open-end  management  investment  company organized as a
Massachusetts  business  trust  (the  "Trust").  The Fund is a  non-diversified,
open-end  management   investment  company.  The  Trustees  of  the  Trust  have
authorized  the  issuance  and sale of shares of two classes of the Fund (Select
Shares and Institutional Shares).

         This  Statement  of  Additional  Information  describes  the  financial
history, investment objective and policies, management and operation of the Fund
and provides additional  information with respect to the Fund and should be read
in  conjunction  with the Fund's  current  Prospectuses  (each a  "Prospectus").
Capitalized  terms not otherwise  defined  herein have the meanings  accorded to
them in the  Prospectus.  The Fund's  executive  offices are located at 60 State
Street, Suite 1300, Boston, Massachusetts 02109.

     The Fund is advised by J.P. Morgan  Investment  Management Inc. ("JPMIM" or
the "Advisor").

         Investments  in the  Fund  are  not  deposits  or  obligations  of,  or
guaranteed or endorsed by, Morgan Guaranty Trust Company of New York ("Morgan"),
an  affiliate  of the  Advisor,  or any other  bank.  Shares of the Fund are not
federally  insured by the Federal  Deposit  Insurance  Corporation,  the Federal
Reserve Board, or any other  governmental  agency.  An investment in the Fund is
subject to risk that may cause the value of the  investment  to  fluctuate,  and
when the  investment  is  redeemed,  the value  may be higher or lower  than the
amount originally invested by the investor.

INVESTMENT OBJECTIVE AND POLICIES

         The  investment  objective  of the Fund is to provide a high  after-tax
total return for California  residents consistent with moderate risk of capital.
The Fund invests primarily in California  Municipal  Securities (defined below),
the income from which is exempt  from  federal and  California  personal  income
taxes.  It may also invest in other  municipal  securities  that generate income
exempt from federal income tax but not from California  income tax. In addition,
in order to maximize after tax total return, the Fund may invest in taxable debt
obligations to the extent consistent with its objective.

         The following  discussion  supplements  the  information  regarding the
investment objective of the Fund and the policies to be employed to achieve this
objective.

         The Fund is designed for  investors  subject to federal and  California
personal  income taxes who are seeking high after tax return but are not adverse
to  receiving  some  taxable  income and  gains.  The Fund is not  suitable  for
tax-deferred  retirement  or  pension  plans,  including  Individual  Retirement
Accounts  (IRAs),  401(k)  plans and  403(b)  plans.  The Fund is not a complete
investment  program  and there is no  assurance  that the Fund will  achieve its
investment objective.

         The Advisor  actively  manages the Fund's  duration,  the allocation of
securities  across  market  sectors and the  selection of securities to maximize
after tax total  return.  The  Advisor  adjusts the Fund's  duration  based upon
fundamental  economic and capital  markets  research and the Advisor's  interest
rate outlook.  For example, if interest rates are expected to rise, the duration
may be shortened to lessen the Fund's exposure to the expected  decrease in bond
prices.  If  interest  rates are  expected  to remain  stable,  the  Advisor may
lengthen the duration in order to enhance the Fund's yield.


         Under normal market conditions,  the Fund will have a duration of three
to ten years,  although the maturities of individual  portfolio securities may
vary widely.  Duration  measures the price  sensitivity of the Fund's portfolio,
including  expected cash flow under a wide range of interest rate  scenarios.  A
longer duration generally results in greater price volatility. As a result, when
interest rates increase,  the prices of longer duration securities increase more
than the prices of comparable quality securities with a shorter duration.


         The  Advisor  also  attempts  to  enhance  after  tax  total  return by
allocating the Fund's assets among market sectors. Specific securities which the
Advisor  believes are undervalued are selected for purchase within sectors using
advanced  quantitative  tools,  analysis  of credit  risk,  the  expertise  of a
dedicated  trading desk and the judgment of fixed income portfolio  managers and
analysts.


     The Fund may engage in short-term trading to the extent consistent with its
objective.  The annual  portfolio  turnover  rate of the Fund is  generally  not
expected to exceed 40% in a stable interst rate environment.  Portfolio turnover
rates are greatly  dependent on interest rate  fluctuation.  Portfolio  turnover
rates generaly  increase  during periods of rising  interest rates and generally
decrease during periods of falling  interest rates.  Portfolio  transactions may
generate taxable capital gains and result in increased transaction costs.


         Under normal circumstances,  the Fund invests at least 65% of its total
assets in California  municipal bonds. For purposes of this policy,  "California
municipal  bonds" has the same  meaning as  "California  Municipal  Securities,"
which are  obligations of any duration (or maturity)  issued by California,  its
political subdivisions and their agencies, authorities and instrumentalities and
any  other  obligations,  the  interest  from  which is exempt  from  California
personal  income tax. The interest  from many but not all  California  Municipal
Securities  is also exempt from federal  income tax. The Fund may also invest in
debt  obligations  of state and  municipal  issuers  outside of  California.  In
general,  the interest on such  securities is exempt from federal income tax but
subject to  California  income tax. A portion of the Fund's  distributions  from
interest on California  Municipal  Securities and other municipal  securities in
which the Fund  invests may under  certain  circumstances  be subject to federal
alternative minimum tax. See "Taxes".

Tax Exempt Obligations

         Since the Fund invests  primarily in California  Municipal  Securities,
its performance and the ability of California  issuers to meet their obligations
may be affected by  economic,  political,  demographic  or other  conditions  in
California.  As a result,  the value of the  Fund's  shares may  fluctuate  more
widely than the value of shares of a fund  investing in securities of issuers in
multiple states. The ability of state, county or local governments to meet their
obligations  will depend primarily on the availability of tax and other revenues
to those governments and on their general fiscal  conditions.  Constitutional or
statutory restrictions may limit a municipal issuer's power to raise revenues or
increase taxes. The  availability of federal,  state and local aid to issuers of
California  Municipal  Securities  may also affect  their  ability to meet their
obligations.  Payments of principal and interest on revenue bonds will depend on
the economic or fiscal  condition of the issuer or specific  revenue source from
whose  revenues  the  payments  will be made.  Any  reduction  in the  actual or
perceived  ability of an issuer of California  Municipal  Securities to meet its
obligations (including a reduction in the rating of its outstanding  securities)
would probably reduce the market value and marketability of the Fund's portfolio
securities.

         The Fund may invest in municipal  securities  of any maturity and type.
These include both general  obligation  bonds secured by the issuer's  pledge of
its full faith,  credit and taxing  authority  and revenue  bonds  payable  from
specific  revenue  sources,  but  generally  not backed by the  issuer's  taxing
authority.  In addition,  the Fund may invest in all types of  municipal  notes,
including tax, revenue and grant anticipation notes, municipal commercial paper,
and municipal  demand  obligations such as variable rate demand notes and master
demand  obligations.  There  is  no  specific  percentage  limitation  on  these
investments.

         Municipal  Bonds.  Municipal bonds are debt  obligations  issued by the
states,  territories  and  possessions  of the United States and the District of
Columbia,  by their political  subdivisions and by duly constituted  authorities
and   corporations.   For  example,   states,   territories,   possessions   and
municipalities  may issue  municipal  bonds to raise  funds for  various  public
purposes such as airports,  housing,  hospitals,  mass transportation,  schools,
water and sewer works. They may also issue municipal bonds to refund outstanding
obligations and to meet general  operating  expenses.  Public  authorities issue
municipal  bonds to obtain funding for privately  operated  facilities,  such as
housing and pollution control facilities, for industrial facilities or for water
supply, gas, electricity or waste disposal facilities.

         Municipal  bonds may be general  obligation or revenue  bonds.  General
obligation  bonds are secured by the issuer's  pledge of its full faith,  credit
and taxing power for the payment of principal  and  interest.  Revenue bonds are
payable from revenues derived from particular facilities, from the proceeds of a
special  excise  tax or  from  other  specific  revenue  sources.  They  are not
generally payable from the general taxing power of a municipality.

         Municipal Notes. The Fund may also invest in municipal notes of various
types,  including notes issued in anticipation of receipt of taxes, the proceeds
of the sale of bonds,  other  revenues or grant  proceeds,  as well as municipal
commercial paper and municipal  demand  obligations such as variable rate demand
notes and master demand  obligations.  The interest rate on variable rate demand
notes is  adjustable  at periodic  intervals as  specified in the notes.  Master
demand obligations permit the investment of fluctuating  amounts at periodically
adjusted interest rates.  They are governed by agreements  between the municipal
issuer and Morgan acting as agent, for no additional fee. Although master demand
obligations  are not marketable to third parties,  the Fund considers them to be
liquid  because  they are  payable on demand.  There is no  specific  percentage
limitation  on these  investments.  Municipal  notes are  subdivided  into three
categories of short-term  obligations:  municipal  notes,  municipal  commercial
paper and municipal demand obligations.

         Municipal notes are short-term  obligations with a maturity at the time
of  issuance  ranging  from six months to five  years.  The  principal  types of
municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation  notes,  grant  anticipation notes and project notes. Notes sold in
anticipation  of collection of taxes,  a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.

         Municipal  commercial  paper  typically  consists  of  very  short-term
unsecured  negotiable  promissory  notes that are sold to meet seasonal  working
capital or interim  construction  financing  needs of a municipality  or agency.
While  these  obligations  are  intended  to be paid from  general  revenues  or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending  agreements,   note  repurchase  agreements  or  other  credit  facility
agreements offered by banks or institutions.

     Municipal demand  obligations are subdivided into two types:  variable rate
demand notes and master demand obligations.

         Variable  rate demand  notes are tax exempt  municipal  obligations  or
participation  interests that provide for a periodic  adjustment in the interest
rate paid on the notes.  They permit the holder to demand  payment of the notes,
or to demand  purchase  of the notes at a  purchase  price  equal to the  unpaid
principal  balance,  plus accrued  interest  either directly by the issuer or by
drawing on a bank letter of credit or guaranty issued with respect to such note.
The issuer of the municipal  obligation may have a corresponding right to prepay
at its discretion the  outstanding  principal of the note plus accrued  interest
upon notice  comparable to that required for the holder to demand  payment.  The
variable  rate  demand  notes in which the Fund may invest are  payable,  or are
subject to purchase, on demand usually on notice of seven calendar days or less.
The terms of the notes provide that interest  rates are  adjustable at intervals
ranging from daily to six months,  and the  adjustments are based upon the prime
rate of a bank  or  other  appropriate  interest  rate  index  specified  in the
respective  notes.  Variable rate demand notes are valued at amortized  cost; no
value is  assigned  to the  right of the Fund to  receive  the par  value of the
obligation upon demand or notice.

         Master demand  obligations are tax exempt  municipal  obligations  that
provide for a periodic  adjustment  in the  interest  rate paid and permit daily
changes in the amount  borrowed.  The  interest on such  obligations  is, in the
opinion of counsel  for the  borrower,  excluded  from gross  income for federal
income tax  purposes.  Although  there is no secondary  market for master demand
obligations,  such  obligations  are considered by the Fund to be liquid because
they are payable upon demand. The Fund has no specific percentage limitations on
investments in master demand obligations.

         Premium  Securities.  During a period of declining interest rates, many
municipal  securities  in which the Fund  invests  likely will bear coupon rates
higher than current  market  rates,  regardless of whether the  securities  were
initially purchased at a premium. In general, such securities have market values
greater than the principal amounts payable on maturity, which would be reflected
in the net asset  value of the  Fund's  shares.  The  values  of such  "premium"
securities tend to approach the principal amount as they near maturity.

         Puts.  The Fund may purchase  without limit,  municipal  bonds or notes
together  with the right to resell the bonds or notes to the seller at an agreed
price or yield within a specified period prior to the maturity date of the bonds
or notes.  Such a right to resell is  commonly  known as a "put." The  aggregate
price  for bonds or notes  with  puts may be higher  than the price for bonds or
notes without puts.  Consistent with the Fund's investment objective and subject
to the  supervision  of the Trustees,  the purpose of this practice is to permit
the Fund to be fully  invested in tax exempt  securities  while  preserving  the
necessary  liquidity to purchase  securities  on a  when-issued  basis,  to meet
unusually large  redemptions,  and to purchase at a later date securities  other
than those subject to the put. The principal  risk of puts is that the writer of
the put may default on its  obligation to  repurchase.  The Advisor will monitor
each writer's ability to meet its obligations under puts.

         Puts may be  exercised  prior to the  expiration  date in order to fund
obligations to purchase other securities or to meet redemption  requests.  These
obligations may arise during periods in which proceeds from sales of Fund shares
and  from  recent  sales  of  portfolio  securities  are  insufficient  to  meet
obligations or when the funds available are otherwise  allocated for investment.
In addition, puts may be exercised prior to the expiration date in order to take
advantage of alternative  investment  opportunities  or in the event the Advisor
revises its evaluation of the  creditworthiness  of the issuer of the underlying
security. In determining whether to exercise puts prior to their expiration date
and in selecting  which puts to exercise,  the Advisor  considers  the amount of
cash  available to the Fund,  the  expiration  dates of the available  puts, any
future   commitments   for   securities   purchases,    alternative   investment
opportunities,  the  desirability of retaining the underlying  securities in the
Fund's  portfolio and the yield,  quality and maturity  dates of the  underlying
securities.

         The Fund  values  any  municipal  bonds and notes  subject to puts with
remaining  maturities of less than 60 days by the amortized cost method.  If the
Fund were to invest in municipal  bonds and notes with  maturities of 60 days or
more that are subject to puts separate from the underlying securities,  the puts
and the  underlying  securities  would be valued at fair value as  determined in
accordance  with procedures  established by the Board of Trustees.  The Board of
Trustees  would,  in connection  with the  determination  of the value of a put,
consider,  among other factors,  the  creditworthiness of the writer of the put,
the duration of the put, the dates on which or the periods  during which the put
may be exercised and the applicable  rules and  regulations of the SEC. Prior to
investing  in such  securities,  the Fund,  if deemed  necessary  based upon the
advice of counsel,  will apply to the SEC for an exemptive order,  which may not
be granted, relating to the amortized valuation of such securities.

         Since the value of the put is partly  dependent  on the  ability of the
put writer to meet its obligation to  repurchase,  the Fund's policy is to enter
into put transactions only with municipal securities dealers who are approved by
the  Advisor.  Each dealer  will be  approved  on its own merits,  and it is the
Fund's  general  policy to enter into put  transactions  only with those dealers
which are determined to present  minimal credit risks.  In connection  with such
determination,  the Advisor  reviews  regularly  the list of  approved  dealers,
taking into  consideration,  among other things, the ratings,  if available,  of
their equity and debt securities,  their reputation in the municipal  securities
markets, their net worth, their efficiency in consummating  transactions and any
collateral arrangements, such as letters of credit, securing the puts written by
them.  Commercial  bank dealers  normally will be members of the Federal Reserve
System,  and other  dealers  will be  members  of the  National  Association  of
Securities Dealers, Inc. or members of a national securities exchange. Other put
writers  will have  outstanding  debt  rated Aa or better by  Moody's  Investors
Service,  Inc.  ("Moody's")  or AA or better by Standard & Poor's  Ratings Group
("Standard & Poor's"), or will be of comparable quality in the Advisor's opinion
or such  put  writers'  obligations  will be  collateralized  and of  comparable
quality in the Advisor's opinion.  The Trustees have directed the Advisor not to
enter into put transactions with any dealer which in the judgment of the Advisor
become  more than a minimal  credit  risk.  In the  event  that a dealer  should
default on its  obligation to repurchase  an  underlying  security,  the Fund is
unable  to  predict  whether  all or any  portion  of any loss  sustained  could
subsequently be recovered from such dealer.

         Entering  into a put  with  respect  to a tax  exempt  security  may be
treated,  depending  upon the  terms of the put,  as a  taxable  sale of the tax
exempt security by the Fund with the result that,  while the put is outstanding,
the Fund will no longer be treated as the owner of the security and the interest
income derived with respect to the security will be treated as taxable income to
the Fund.

Non-Municipal Securities

         The Fund may  invest in bonds and other  debt  securities  of  domestic
issuers to the extent consistent with its investment objective and policies. The
Fund may invest in U.S. Government, bank and corporate debt obligations, as well
as  asset-backed  securities and repurchase  agreements.  The Fund will purchase
such securities only when the Advisor believes that they would enhance the after
tax returns of a shareholder  of the Fund in the highest  federal and California
income  tax  brackets.  Under  normal  circumstances,  the  Fund's  holdings  of
non-municipal  securities and securities of municipal issuers outside California
will not exceed 35% of its total  assets.  A  description  of these  investments
appears below. See "Quality and  Diversification  Requirements." For information
on short-term investments in these securities, see "Money Market Instruments."

         Zero Coupon,  Pay-in-Kind and Deferred Payment Securities.  Zero coupon
securities are securities  that are sold at a discount to par value and on which
interest  payments are not made during the life of the security.  Upon maturity,
the holder is  entitled to receive  the par value of the  security.  Pay-in-kind
securities are securities  that have interest  payable by delivery of additional
securities.  Upon maturity,  the holder is entitled to receive the aggregate par
value of the securities. The Fund accrues income with respect to zero coupon and
pay-in-kind  securities prior to the receipt of cash payments.  Deferred payment
securities  are  securities   that  remain  zero  coupon   securities   until  a
predetermined  date, at which time the stated coupon rate becomes  effective and
interest becomes payable at regular  intervals.  While interest payments are not
made on such securities,  holders of such securities are deemed to have received
"phantom  income."  Because  the  Fund  will  distribute   "phantom  income"  to
shareholders, to the extent that shareholders elect to receive dividends in cash
rather than reinvesting such dividends in additional  shares, the Fund will have
fewer assets with which to purchase income  producing  securities.  Zero coupon,
pay-in-kind  and  deferred   payment   securities  may  be  subject  to  greater
fluctuation  in value  and  lesser  liquidity  in the  event of  adverse  market
conditions  than  comparably  rated  securities  paying cash interest at regular
interest payment periods.

         Asset-Backed Securities. Asset-backed securities directly or indirectly
represent a  participation  interest  in, or are secured by and payable  from, a
stream of payments  generated  by  particular  assets  such as motor  vehicle or
credit card receivables or other asset-backed securities  collateralized by such
assets.  Payments of  principal  and interest  may be  guaranteed  up to certain
amounts  and for a  certain  time  period  by a letter  of  credit  issued  by a
financial institution unaffiliated with the entities issuing the securities. The
asset-backed  securities  in which the Fund may invest are subject to the Fund's
overall credit requirements.  However,  asset-backed securities, in general, are
subject to certain risks.  Most of these risks are related to limited  interests
in  applicable  collateral.  For  example,  credit  card  debt  receivables  are
generally  unsecured and the debtors are entitled to the  protection of a number
of state and federal  consumer  credit laws, many of which give such debtors the
right to set off  certain  amounts  on credit  card debt  thereby  reducing  the
balance  due.  Additionally,  if the letter of credit is  exhausted,  holders of
asset-backed  securities may also experience delays in payments or losses if the
full  amounts  due on  underlying  sales  contracts  are not  realized.  Because
asset-backed  securities  are  relatively  new, the market  experience  in these
securities is limited and the market's ability to sustain  liquidity through all
phases of the market cycle has not been tested.

Money Market Instruments

         The  Fund  may  invest  in  money  market  instruments  to  the  extent
consistent   with  its   investment   objective  and   policies.   Under  normal
circumstances,  the Fund will purchase these securities to invest temporary cash
balances or to maintain  liquidity to meet  withdrawals.  However,  the Fund may
also invest in money market  instruments as a temporary  defensive measure taken
during, or in anticipation of, adverse market  conditions.  A description of the
various  types of money  market  instruments  that may be  purchased by the Fund
appears below. Also see "Quality and Diversification Requirements."

     U.S. Treasury Securities.  The Fund may invest in direct obligations of the
U.S.  Treasury,  including  Treasury  bills,  notes and bonds,  all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.

         Additional  U.S.  Government  Obligations.   The  Fund  may  invest  in
obligations   issued   or   guaranteed   by   U.S.    Government   agencies   or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States.  Securities which are backed by the full faith
and credit of the United States include  obligations of the Government  National
Mortgage  Association,  the Farmers Home  Administration,  and the Export-Import
Bank. In the case of  securities  not backed by the full faith and credit of the
United States,  the Fund must look  principally to the federal agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a  claim   against  the  United  States  itself  in  the  event  the  agency  or
instrumentality does not meet its commitments.  Securities in which the Fund may
invest  that are not backed by the full  faith and  credit of the United  States
include,  but are not  limited  to:  (i)  obligations  of the  Tennessee  Valley
Authority,  the Federal Home Loan  Mortgage  Corporation,  the Federal Home Loan
Banks and the U.S.  Postal  Service,  each of which has the right to borrow from
the U.S. Treasury to meet its obligations; (ii) securities issued by the Federal
National  Mortgage  Association,   which  are  supported  by  the  discretionary
authority of the U.S. Government to purchase the agency's obligations; and (iii)
obligations  of the Federal Farm Credit  System and the Student  Loan  Marketing
Association,  each of whose  obligations may be satisfied only by the individual
credits of the issuing agency.

         Bank  Obligations.  The Fund may invest in negotiable  certificates  of
deposit,  time deposits and bankers'  acceptances of (i) banks, savings and loan
associations  and savings banks which have more than $2 billion in total and are
organized  under  the laws of the  United  States  or any  state,  (ii)  foreign
branches of these banks of  equivalent  size (Euros) and (iii) U.S.  branches of
foreign  banks  of  equivalent  size  (Yankees).  The  Fund  may not  invest  in
obligations of foreign  branches of foreign  banks.  The Fund will not invest in
obligations  for which the Advisor,  or any of its  affiliated  persons,  is the
ultimate obligor or accepting bank.

         Commercial  Paper. The Fund may invest in commercial  paper,  including
master  demand  obligations.  Master demand  obligations  are  obligations  that
provide for a periodic  adjustment  in the  interest  rate paid and permit daily
changes in the amount  borrowed.  Master  demand  obligations  are  governed  by
agreements between the issuer and Morgan acting as agent, for no additional fee.
The monies loaned to the borrower  come from  accounts  managed by Morgan or its
affiliates,  pursuant to arrangements with such accounts. Interest and principal
payments  are  credited  to such  accounts.  Morgan has the right to increase or
decrease the amount  provided to the borrower under an obligation.  The borrower
has the right to pay  without  penalty all or any part of the  principal  amount
then outstanding on an obligation together with interest to the date of payment.
Since these obligations  typically provide that the interest rate is tied to the
Federal  Reserve  commercial  paper  composite  rate,  the rate on master demand
obligations  is subject to change.  Repayment of a master  demand  obligation to
participating accounts depends on the ability of the borrower to pay the accrued
interest  and  principal  of the  obligation  on  demand  which is  continuously
monitored by Morgan. Since master demand obligations  typically are not rated by
credit rating agencies,  the Fund may invest in such unrated obligations only if
at the time of an investment the obligation is determined by the Advisor to have
a credit quality which satisfies the Fund's quality  restrictions.  See "Quality
and  Diversification  Requirements."  Although there is no secondary  market for
master demand  obligations,  such  obligations  are considered by the Fund to be
liquid because they are payable upon demand. The Fund does not have any specific
percentage  limitation  on  investments  in  master  demand  obligations.  It is
possible  that the  issuer of a master  demand  obligation  could be a client of
Morgan to whom Morgan, in its capacity as a commercial bank, has made a loan.

         Repurchase  Agreements.  The Fund may enter into repurchase  agreements
with brokers,  dealers or banks that meet the Advisor's credit guidelines.  In a
repurchase agreement,  the Fund buys a security from a seller that has agreed to
repurchase  the same  security  at a mutually  agreed  upon date and price.  The
resale price normally is in excess of the purchase  price,  reflecting an agreed
upon interest  rate.  This interest rate is effective for the period of time the
Fund is invested in the  agreement  and is not related to the coupon rate on the
underlying  security.  A  repurchase  agreement  may also be  viewed  as a fully
collateralized  loan of money by the Fund to the  seller.  The  period  of these
repurchase  agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in  repurchase  agreements  for more than  thirteen
months. The securities which are subject to repurchase agreements,  however, may
have maturity dates in excess of thirteen  months from the effective date of the
repurchase  agreement.  The Fund will always  receive  securities  as collateral
whose market value is, and during the entire term of the agreement  remains,  at
least equal to 100% of the dollar  amount  invested by the Fund in the agreement
plus accrued  interest,  and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the custodian.  If the seller defaults, the Fund might incur a loss if the value
of the  collateral  securing the repurchase  agreement  declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization  upon  disposal  of the  collateral  by the Fund may be  delayed  or
limited.

         The Fund may make  investments  in  other  debt  securities,  including
without  limitation  corporate  bonds and other  obligations  described  in this
Statement of Additional Information.

Additional Investments

         When-Issued  and Delayed  Delivery  Securities.  The Fund may  purchase
securities on a when-issued or delayed delivery basis. For example,  delivery of
and payment for these  securities  can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase  commitment date or at the time
the settlement date is fixed.  The value of such securities is subject to market
fluctuation and for money market  instruments and other fixed income  securities
no interest  accrues to the Fund until  settlement  takes place. At the time the
Fund makes the  commitment to purchase  securities  on a when-issued  or delayed
delivery  basis, it will record the  transaction,  reflect the value each day of
such securities in determining its net asset value and, if applicable, calculate
the maturity for the purposes of average maturity from that date. At the time of
settlement a when-issued security may be valued at less than the purchase price.
To  facilitate  such  acquisitions,  the Fund will maintain with the custodian a
segregated  account with liquid  assets,  consisting  of cash,  U.S.  Government
securities or other appropriate securities,  in an amount at least equal to such
commitments.  On delivery  dates for such  transactions,  the Fund will meet its
obligations  from  maturities or sales of the securities  held in the segregated
account  and/or from cash flow.  If the Fund  chooses to dispose of the right to
acquire a when-issued  security prior to its acquisition,  it could, as with the
disposition  of any  other  portfolio  obligation,  incur a gain or loss  due to
market  fluctuation.  Also, the Fund may be  disadvantaged if the other party to
the transaction defaults.

         Investment Company Securities. Securities of other investment companies
may be  acquired by the Fund to the extent  permitted  under the 1940 Act or any
order  pursuant  thereto.  These limits  currently  require  that, as determined
immediately  after a purchase is made,  (i) not more than 5% of the value of the
Fund's total  assets will be invested in the  securities  of any one  investment
company,  (ii)  not more  than 10% of the  value  of its  total  assets  will be
invested in the aggregate in securities of investment  companies as a group, and
(iii) not more than 3% of the  outstanding  voting  stock of any one  investment
company will be owned by the Fund,  provided  however,  that the Fund may invest
all of its investable assets in an open-end investment company that has the same
investment  objective  as the  Fund.  As a  shareholder  of  another  investment
company,  the Fund  would  bear,  along with  other  shareholders,  its pro rata
portion of the other investment  company's  expenses,  including  advisory fees.
These  expenses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations.  The Fund has applied
for  exemptive  relief  from the SEC to permit the Fund to invest in  affiliated
investment  companies.  If the requested  relief is granted,  the Fund Portfolio
would  then be  permitted  to invest in  affiliated  funds,  subject  to certain
conditions specified in the applicable order.

     The  Securities  and  Exchange  Commission  ("SEC") has granted the Fund an
exemptive  order  permitting  it to  invest  its  uninvested  cash in any of the
following  affiliated money market funds: J.P. Morgan  Institutional Prime Money
Market Fund, J.P. Morgan Institutional Tax Exempt Money Market Fund, J.P. Morgan
Institutional  Federal Money Market Fund and J.P. Morgan Institutional  Treasury
Money Market Fund.  The order sets the  following  conditions:  (1) the Fund may
invest in one or more of the  permitted  money  market  funds up to an aggregate
limit of 25% of its assets;  and (2) the Advisor will waive and/or reimburse its
advisory fee from the Fund in an amount  sufficient to offset any doubling up of
investment advisory and shareholder servicing fees.

         Reverse  Repurchase  Agreements.   The  Fund  may  enter  into  reverse
repurchase  agreements.  In a  reverse  repurchase  agreement,  a Fund  sells  a
security and agrees to repurchase  the same  security at a mutually  agreed upon
date and  price  reflecting  the  interest  rate  effective  for the term of the
agreement.  For purposes of the 1940 Act a reverse repurchase  agreement is also
considered  as the  borrowing  of money by the Fund  and,  therefore,  a form of
leverage.  Leverage may cause any gains or losses for the Fund to be  magnified.
The Fund will  invest  the  proceeds  of  borrowings  under  reverse  repurchase
agreements. In addition, except for liquidity purposes, the Fund will enter into
a reverse repurchase agreement only when the expected return from the investment
of the  proceeds is greater than the expense of the  transaction.  The Fund will
not invest the  proceeds of a reverse  repurchase  agreement  for a period which
exceeds  the  duration  of the  reverse  repurchase  agreement.  The  Fund  will
establish and maintain  with the custodian a separate  account with a segregated
portfolio of securities in an amount at least equal to its purchase  obligations
under its reverse repurchase agreements.  See "Investment  Restrictions" for the
Fund's limitations on reverse repurchase agreements and bank borrowings.

         Loans  of  Portfolio  Securities.   Subject  to  applicable  investment
restrictions,  the Fund is  permitted to lend  securities  in an amount up to 33
1/3% of the value of the Fund's total assets.  The Fund may lend its  securities
if such loans are secured continuously by cash or equivalent  collateral or by a
letter of credit in favor of the Fund at least equal at all times to 100% of the
market  value of the  securities  loaned,  plus  accrued  interest.  While  such
securities  are on loan,  the  borrower  will pay the Fund any  income  accruing
thereon.  Loans  will be  subject  to  termination  by the  Fund  in the  normal
settlement time,  generally three business days after notice, or by the borrower
on one day's  notice.  Borrowed  securities  must be  returned  when the loan is
terminated.  Any gain or loss in the  market  price of the  borrowed  securities
which occurs  during the term of the loan inures to the Fund and its  respective
investors. The Fund may pay reasonable finders' and custodial fees in connection
with a loan.  In addition,  the Fund will  consider all facts and  circumstances
including the creditworthiness of the borrowing financial  institution,  and the
Fund will not make any  loans in excess of one year.  The Fund will not lend its
securities  to any  officer,  Trustee,  Member of the Advisory  Board,  officer,
employee or other affiliate of the Fund, the Advisor or the Distributor,  unless
otherwise permitted by applicable law. All forms of borrowing (including reverse
repurchase agreements) are limited in the aggregate and may not exceed 331/3% of
the Fund's total assets.

         Illiquid   Investments;   Privately   Placed  and  Other   Unregistered
Securities.  The Fund may not acquire any  illiquid  securities  if, as a result
thereof,  more  than  15%  of  the  Fund's  net  assets  would  be  in  illiquid
investments.  Subject to this  non-fundamental  policy limitation,  the Fund may
acquire investments that are illiquid or have limited liquidity, such as private
placements or investments  that are not  registered  under the Securities Act of
1933, as amended (the "1933 Act"),  and cannot be offered for public sale in the
United  States  without first being  registered  under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at  approximately  the amount at which it is valued by
the Portfolio.  The price the Fund pays for illiquid securities or receives upon
resale may be lower than the price paid or received for similar  securities with
a more liquid market. Accordingly the valuation of these securities will reflect
any limitations on their liquidity.

         The Fund may also purchase Rule 144A securities  sold to  institutional
investors  without  registration  under the 1933 Act.  These  securities  may be
determined to be liquid in accordance with guidelines established by the Advisor
and  approved  by  the  Trustees.   The  Trustees  will  monitor  the  Advisor's
implementation of these guidelines on a periodic basis.

         As to illiquid  investments,  the Fund is subject to a risk that should
the Fund decide to sell them when a ready buyer is not  available at a price the
Fund deems  representative  of their  value,  the value of the Fund's net assets
could be adversely affected. Where an illiquid security must be registered under
the 1933 Act,  before it may be sold,  the Fund may be  obligated  to pay all or
part of the registration  expenses, and a considerable period may elapse between
the time of the  decision to sell and the time the Fund may be permitted to sell
a security under an effective registration statement.  If, during such a period,
adverse  market  conditions  were to  develop,  the  Fund  might  obtain  a less
favorable price than prevailed when it decided to sell.

         Synthetic  Variable  Rate  Instruments.  The Fund may invest in certain
synthetic  variable rate  instruments.  Such instruments  generally  involve the
deposit of a long-term tax exempt bond in a custody or trust arrangement and the
creation of a mechanism to adjust the  long-term  interest rate on the bond to a
variable short-term rate and a right (subject to certain conditions) on the part
of the purchaser to tender it  periodically to a third party at par. Morgan will
review the structure of synthetic  variable rate  instruments to identify credit
and liquidity  risks  (including the conditions  under which the right to tender
the instrument  would no longer be available)  and will monitor those risks.  In
the event that the right to tender the  instrument is no longer  available,  the
risk to the Fund will be that of holding the long-term bond. In the case of some
types of instruments credit enhancement is not provided,  and if certain events,
which may include (a)  default in the  payment of  principal  or interest on the
underlying  bond, (b)  downgrading of the bond below  investment  grade or (c) a
loss of the bond's tax exempt status, occur, then (i) the put will terminate and
(ii) the risk to the Fund will be that of holding a long-term bond.

Quality and Diversification Requirements

         The Fund is registered as a  non-diversified  investment  company which
means  that the Fund is not  limited  by the 1940 Act in the  proportion  of its
assets that may be invested in the  obligations  of a single  issuer.  Thus, the
Fund may  invest a  greater  proportion  of its  assets in the  securities  of a
smaller number of issuers and, as a result,  may be subject to greater risk with
respect to its portfolio  securities.  The Fund,  however,  will comply with the
diversification  requirements  imposed by the Internal  Revenue Code of 1986, as
amended (the "Code"),  for qualification as a regulated  investment company. See
"Taxes".

         It is the current policy of the Fund that under normal circumstances at
least  90% of  total  assets  will  consist  of  securities  that at the time of
purchase  are  rated Baa or better by  Moody's  or BBB or better by  Standard  &
Poor's. The remaining 10% of total assets may be invested in securities that are
rated B or better by Moody's or Standard & Poor's.  See "Below  Investment Grade
Debt" below. In each case, the Fund may invest in securities  which are unrated,
if in  the  Advisor's  opinion,  such  securities  are  of  comparable  quality.
Securities  rated Baa by  Moody's or BBB by  Standard  & Poor's  are  considered
investment grade, but have some speculative characteristics. Securities rated Ba
or B by Moody's and BB or B by Standard & Poor's are below  investment grade and
considered to be  speculative  with regard to payment of interest and principal.
These  standards  must be satisfied at the time an  investment  is made.  If the
quality of the  investment  later  declines,  the Fund may  continue to hold the
investment.

         The Fund invests  principally in a portfolio of "investment  grade" tax
exempt securities. An investment grade bond is rated, on the date of investment,
within the four highest  ratings of Moody's,  currently Aaa, Aa, A and Baa or of
Standard & Poor's, currently AAA, AA, A and BBB, while high grade debt is rated,
on the  date  of the  investment,  within  the  two  highest  of  such  ratings.
Investment grade municipal notes are rated, on the date of investment,  MIG-1 or
MIG-2 by  Standard  &  Poor's  or SP-1 and  SP-2 by  Moody's.  Investment  grade
municipal commercial paper is rated, on the date of investment, Prime 1 or Prime
2 by Moody's and A-1 or A-2 by Standard & Poor's. The Fund may also invest up to
10% of its total assets in securities which are "below  investment  grade." Such
securities must be rated,  on the date of investment,  B or better by Moody's or
Standard  &  Poor's,  or of  comparable  quality.  The Fund may  invest  in debt
securities  which are not rated or other debt  securities to which these ratings
are not  applicable,  if in the opinion of the Advisor,  such  securities are of
comparable quality to the rated securities discussed above. In addition,  at the
time the Fund  invests in any  commercial  paper,  bank  obligation,  repurchase
agreement,  or any other money  market  instruments,  the  investment  must have
received a short term rating of investment grade or better (currently Prime-3 or
better by Moody's or A-3 or better by Standard & Poor's) or the investment  must
have been issued by an issuer that received a short term investment grade rating
or better with respect to a class of investments  or any investment  within that
class that is  comparable  in priority and security  with the  investment  being
purchased by the Fund.  If no such ratings  exists,  the  investment  must be of
comparable investment quality in the Advisor's opinion, but will not be eligible
for  purchase if the issuer or its parent has long term  outstanding  debt rated
below BBB.

         Below Investment Grade Debt.  Certain lower rated securities  purchased
by the Fund,  such as those  rated Ba or B by Moody's  or BB or B by  Standard &
Poor's  (commonly  known as junk  bonds),  may be subject to certain  risks with
respect to the issuing entity's ability to make scheduled  payments of principal
and interest  and to greater  market  fluctuations.  While  generally  providing
higher coupons or interest rates than investments in higher quality  securities,
lower quality fixed income securities  involve greater risk of loss of principal
and income, including the possibility of default or bankruptcy of the issuers of
such securities, and have greater price volatility, especially during periods of
economic uncertainty or change. These lower quality fixed income securities tend
to be  affected  by  economic  changes and  short-term  corporate  and  industry
developments  to a greater  extent than higher quality  securities,  which react
primarily to  fluctuations in the general level of interest rates. To the extent
that the Fund invests in such lower quality  securities,  the achievement of its
investment objective may be more dependent on the Advisor's own credit analysis.

         Lower  quality  fixed  income  securities  are affected by the market's
perception  of  their  credit  quality,   especially  during  times  of  adverse
publicity,  and the  outlook  for  economic  growth.  Economic  downturns  or an
increase  in  interest  rates may cause a higher  incidence  of  default  by the
issuers of these securities,  especially issuers that are highly leveraged.  The
market for these lower quality fixed income  securities is generally less liquid
than the market for  investment  grade fixed income  securities.  It may be more
difficult to sell these lower rated securities to meet redemption  requests,  to
respond to changes in the market,  or to value  accurately the Fund's  portfolio
securities for purposes of determining the Fund's net asset value.  See Appendix
A for more detailed information on these ratings.

         In  determining  suitability  of  investment  in a  particular  unrated
security,  the Advisor takes into consideration asset and debt service coverage,
the purpose of the  financing,  history of the issuer,  existence of other rated
securities of the issuer, and other relevant  conditions,  such as comparability
to other issuers.

Options and Futures Transactions

         The Fund may purchase and sell (a) exchange traded and over-the-counter
(OTC) put and call options on fixed income  securities,  indexes of fixed income
securities and futures contracts on fixed income securities and indexes of fixed
income  securities  and (b) futures  contracts  on fixed income  securities  and
indexes of fixed income  securities.  Each of these  instruments is a derivative
instrument as its value derives from the underlying asset or index.

         The Fund may use  futures  contracts  and  options for hedging and risk
management  purposes.  The Funds may not use futures  contracts  and options for
speculation.

         The Fund may  utilize  options  and  futures  contracts  to manage  its
exposure to changing  interest rates and/or  security  prices.  Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Fund's  investments  against  price  fluctuations.  Other  strategies,
including  buying futures  contracts and buying calls,  tend to increase  market
exposure.  Options and futures contracts may be combined with each other or with
forward contracts in order to adjust the risk and return  characteristics of the
Fund's  overall  strategy  in a manner  deemed  appropriate  to the  Advisor and
consistent  with the Fund's  objective and policies.  Because  combined  options
positions involve multiple trades,  they result in higher  transaction costs and
may be more difficult to open and close out.

         The use of options and futures is a highly  specialized  activity which
involves  investment  strategies and risks different from those  associated with
ordinary portfolio securities  transactions,  and there can be no guarantee that
their use will increase the Fund's return. While the use of these instruments by
the  Fund  may  reduce  certain  risks  associated  with  owning  its  portfolio
securities,  these  techniques  themselves  entail  certain other risks.  If the
Advisor applies a strategy at an inappropriate  time or judges market conditions
or trends  incorrectly,  options  and  futures  strategies  may lower the Fund's
return.  Certain  strategies limit the Fund's  possibilities to realize gains as
well as its  exposure  to losses.  A Fund could  also  experience  losses if the
prices of its options  and futures  positions  were poorly  correlated  with its
other  investments,  or if it could not close out its  positions  because  of an
illiquid  secondary market. In addition,  the Fund will incur transaction costs,
including  trading  commissions  and option  premiums,  in  connection  with its
futures and options  transactions  and these  transactions  could  significantly
increase the Fund's turnover rate.

         The Fund may purchase put and call  options on  securities,  indexes of
securities and futures contracts,  or purchase and sell futures contracts,  only
if such options are written by other persons and if (i) the  aggregate  premiums
paid on all such  options  which are held at any time do not  exceed  20% of the
Fund's net assets,  and (ii) the aggregate margin deposits  required on all such
futures or options thereon held at any time do not exceed 5% of the Fund's total
assets.  In  addition,  the  Fund  will not  purchase  or sell  (write)  futures
contracts, options on futures contracts or commodity options for risk management
purposes if, as a result,  the  aggregate  initial  margin and options  premiums
required to establish  these  positions  exceed 5% of the net asset value of the
Fund.

Options

         Purchasing Put and Call Options.  By purchasing a put option,  the Fund
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed  strike  price.  In return for this  right,  the Fund pays the
current market price for the option (known as the option premium).  Options have
various types of underlying instruments,  including specific securities, indexes
of securities, indexes of securities prices, and futures contracts. The Fund may
terminate its position in a put option it has purchased by allowing it to expire
or by exercising the option.  The Fund may also close out a put option  position
by entering into an  offsetting  transaction,  if a liquid market exits.  If the
option is allowed to expire,  the Fund will lose the entire  premium it paid. If
the Fund  exercises  a put  option on a  security,  it will sell the  instrument
underlying the option at the strike price. If the Fund exercises an option on an
index, settlement is in cash and does not involve the actual sale of securities.
If an  option  is  American  style,  it may be  exercised  on any  day up to its
expiration date. A European style option may be exercised only on its expiration
date.

         The buyer of a typical  put  option can expect to realize a gain if the
underlying  instrument  falls  substantially.  However,  if  the  price  of  the
instrument  underlying  the  option  does not fall  enough to offset the cost of
purchasing  the option,  a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).

         The features of call options are  essentially  the same as those of put
options,  except  that the  purchaser  of a call  option  obtains  the  right to
purchase, rather than sell, the instrument underlying the option at the option's
strike price. A call buyer typically  attempts to participate in potential price
increases of the instrument  underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect to
suffer a loss if security prices do not rise  sufficiently to offset the cost of
the option.

         Selling  (Writing)  Put and Call  Options.  When the Fund  writes a put
option,  it  takes  the  opposite  side of the  transaction  from  the  option's
purchaser.  In return  for the  receipt of the  premium,  the Fund  assumes  the
obligation to pay the strike price for the  instrument  underlying the option if
the party to the option  chooses to exercise  it. The Fund may seek to terminate
its  position  in a put  option it  writes  before  exercise  by  purchasing  an
offsetting  option in the  market at its  current  price.  If the  market is not
liquid for a put option the Fund has written,  however,  it must  continue to be
prepared to pay the strike price while the option is outstanding,  regardless of
price changes, and must continue to post margin as discussed below.

         If the price of the  underlying  instrument  rises,  a put writer would
generally expect to profit,  although its gain would be limited to the amount of
the premium it received.  If security  prices  remain the same over time,  it is
likely that the writer will also profit,  because it should be able to close out
the option at a lower  price.  If security  prices  fall,  the put writer  would
expect to suffer a loss.  This loss should be less than the loss from purchasing
and holding the underlying  instrument  directly,  however,  because the premium
received for writing the option should offset a portion of the decline.

         Writing  a call  option  obligates  the  Fund to sell  or  deliver  the
option's  underlying  instrument in return for the strike price upon exercise of
the option. The  characteristics of writing call options are similar to those of
writing put  options,  except  that  writing  calls  generally  is a  profitable
strategy  if prices  remain  the same or fall.  Through  receipt  of the  option
premium a call writer offsets part of the effect of a price decline. At the same
time,  because  a call  writer  must  be  prepared  to  deliver  the  underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.

         The writer of an exchange  traded put or call option on a security,  an
index of  securities  or a futures  contract  is  required  to  deposit  cash or
securities  or a letter of credit as margin and to make mark to market  payments
of variation margin as the position becomes unprofitable.

         Options on Indexes.  The Fund may purchase or sell put and call options
on any  securities  index  based on  securities  in which  the Fund may  invest.
Options on securities indexes are similar to options on securities,  except that
the exercise of securities index options is settled by cash payment and does not
involve the actual  purchase or sale of securities.  In addition,  these options
are designed to reflect price  fluctuations  in a group of securities or segment
of the securities  market rather than price  fluctuations in a single  security.
The Fund, in purchasing  or selling index  options,  is subject to the risk that
the value of its  portfolio  securities  may not change as much as index because
the Fund's investments generally will not match the composition of an index.

         For a number of  reasons,  a liquid  market  may not exist and thus the
Fund may not be able to close  out an  option  position  that it has  previously
entered into.  When the Fund purchases an OTC option,  it will be relying on its
counterparty  to  perform  its  obligations,  and the Fund may incur  additional
losses if the counterparty is unable to perform.

         Exchange Traded and OTC Options.  All options  purchased or sold by the
Fund will be traded on a  securities  exchange or will be  purchased  or sold by
securities  dealers  (OTC  options)  that  meet the  Advisor's  creditworthiness
standards. While exchange-traded options are obligations of the Options Clearing
Corporation,  in the case of OTC  options,  the Fund  relies on the dealer  from
which it purchased the option to perform if the option is exercised.  Thus, when
the Fund  purchases  an OTC  option,  it  relies  on the  dealer  from  which it
purchased  the option to make or take  delivery  of the  underlying  securities.
Failure by the dealer to do so would  result in the loss of the premium  paid by
the Fund as well as loss of the expected benefit of the transaction.

         Provided that the Fund has arrangements  with certain qualified dealers
who agree that the Fund may  repurchase any option it writes for a maximum price
to be calculated by a predetermined  formula,  the Fund may treat the underlying
securities used to cover written OTC options as liquid.  In these cases, the OTC
option itself would only be  considered  illiquid to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.

Futures Contracts

         When the Fund  purchases  a futures  contract,  it agrees to purchase a
specified quantity of an underlying  instrument at a specified future date or to
make a cash  payment  based on the value of a  securities  index.  When the Fund
sells a  futures  contract,  it  agrees  to  sell a  specified  quantity  of the
underlying  instrument  at a specified  future date or to receive a cash payment
based on the value of a  securities  index.  The price at which the purchase and
sale will take place is fixed when the Fund  enters into the  contract.  Futures
can be held until their  delivery dates or the position can be (and normally is)
closed out before then.  There is no  assurance,  however,  that a liquid market
will exist when the Fund wishes to close out a particular position.

         When the Fund  purchases a futures  contract,  the value of the futures
contract  tends to  increase  and  decrease  in  tandem  with  the  value of its
underlying  instrument.  Therefore,  purchasing  futures  contracts will tend to
increase the Fund's exposure to positive and negative price  fluctuations in the
underlying  instrument,  much as if it had purchased the  underlying  instrument
directly.  When the Fund sells a futures contract, by contrast, the value of its
futures  position will tend to move in a direction  contrary to the value of the
underlying instrument. Selling futures contracts, therefore, will tend to offset
both  positive and  negative  market price  changes,  much as if the  underlying
instrument had been sold.

         The  purchaser  or seller  of a futures  contract  is not  required  to
deliver or pay for the underlying  instrument  unless the contract is held until
the delivery date.  However,  when the Fund buys or sells a futures  contract it
will be required to deposit  "initial margin" with its custodian in a segregated
account  in the  name of its  futures  broker,  known  as a  futures  commission
merchant  (FCM).  Initial  margin  deposits  are  typically  equal  to  a  small
percentage of the  contract's  value.  If the value of either  party's  position
declines,  that party will be required  to make  additional  "variation  margin"
payments  equal to the  change in value on a daily  basis.  The party that has a
gain may be entitled to receive all or a portion of this amount. The Fund may be
obligated  to  make  payments  of  variation   margin  at  a  time  when  it  is
disadvantageous  to do so.  Furthermore,  it may not always be possible  for the
Fund to close out its futures positions. Until it closes out a futures position,
the Fund will be  obligated  to continue to pay  variation  margin.  Initial and
variation margin payments do not constitute purchasing on margin for purposes of
the Fund's  investment  restrictions.  In the event of the  bankruptcy of an FCM
that holds  margin on behalf of the Fund,  the Fund may be entitled to return of
margin owed to it only in proportion  to the amount  received by the FCM's other
customers, potentially resulting in losses to the Fund.

         The Fund will  segregate  liquid assets in  connection  with its use of
options  and  futures  contracts  to the  extent  required  by the  staff of the
Securities  and Exchange  Commission.  Securities  held in a segregated  account
cannot be sold while the futures contract or option is outstanding,  unless they
are replaced with other  suitable  assets.  As a result,  there is a possibility
that  segregation  of a large  percentage  of the  Fund's  assets  could  impede
portfolio  management or the Fund's ability to meet redemption requests or other
current obligations.

         Options on Futures  Contracts.  The Fund may  purchase and sell put and
call  options,  including  put and call  options on futures  contracts.  Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a  specified  quantity of a  financial  instrument  or an amount of cash
based on the value of a  securities  index.  Currently,  futures  contracts  are
available on various types of fixed income securities, including but not limited
to U.S. Treasury bonds, notes and bills,  Eurodollar certificates of deposit and
on indexes of fixed income securities.

         Unlike a futures contract, which requires the parties to buy and sell a
security  or make a cash  settlement  payment  based on changes  in a  financial
instrument  or  securities  index on an  agreed  date,  an  option  on a futures
contract  entitles  its holder to decide on or before a future  date  whether to
enter into such a contract.  If the holder  decides not to exercise  its option,
the holder may close out the option  position  by  entering  into an  offsetting
transaction  or may decide to let the  option  expire and  forfeit  the  premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial  margin  payments  or daily  payments of cash in the
nature of "variation"  margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.

         The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional  collateral required on any options on futures
contracts  sold by the Fund are paid by the Fund into a segregated  account,  in
the name of the FCM, as  required by the 1940 Act and the SEC's  interpretations
thereunder.

         Combined  Positions.  The  Fund  may  purchase  and  write  options  in
combination  with  each  other,  or  in  combination  with  futures  or  forward
contracts,  to  adjust  the  risk  and  return  characteristics  of the  overall
position.  For  example,  the Fund may  purchase  a put  option and write a call
option on the same  underlying  instrument,  in order to  construct  a  combined
position whose risk and return  characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one  strike  price and  buying a call  option at a lower  price,  in order to
reduce the risk of the written call option in the event of a  substantial  price
increase.  Because combined  options  positions  involve  multiple trades,  they
result in higher  transaction  costs and may be more difficult to open and close
out.
         Correlation  of Price  Changes.  Because there are a limited  number of
types of exchange-traded  options and futures  contracts,  it is likely that the
standardized  options and futures contracts  available will not match the Fund's
current or anticipated  investments  exactly. The Fund may invest in options and
futures  contracts based on securities with different  issuers,  maturities,  or
other  characteristics from the securities in which it typically invests,  which
involves  a risk  that the  options  or  futures  position  will not  track  the
performance of the Fund's other investments.

         Options and futures  contracts  prices can also diverge from the prices
of their underlying  instruments,  even if the underlying  instruments match the
Fund's  investments  well.  Options and futures contracts prices are affected by
such factors as current and anticipated  short term interest  rates,  changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract,  which may not affect security  prices the same way.  Imperfect
correlation  may also result from differing  levels of demand in the options and
futures markets and the securities markets,  from structural  differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation  limits or trading halts.  The Fund may purchase or sell options and
futures  contracts  with a greater or lesser value than the securities it wishes
to  hedge  or  intends  to  purchase  in  order to  attempt  to  compensate  for
differences in volatility between the contract and the securities, although this
may not be  successful in all cases.  If price changes in the Fund's  options or
futures  positions  are  poorly  correlated  with  its  other  investments,  the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.

         Liquidity  of Options and Futures  Contracts.  There is no  assurance a
liquid market will exist for any  particular  option or futures  contract at any
particular  time even if the  contract is traded on an  exchange.  In  addition,
exchanges may establish daily price  fluctuation  limits for options and futures
contracts and may halt trading if a contract's  price moves up or down more than
the limit in a given day. On volatile  trading  days when the price  fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the market for a
contract is not liquid  because of price  fluctuation  limits or  otherwise,  it
could prevent prompt liquidation of unfavorable positions, and could potentially
require  the Fund to continue to hold a position  until  delivery or  expiration
regardless  of  changes in its value.  As a result,  the Fund's  access to other
assets held to cover its options or futures  positions  could also be  impaired.
(See  "Exchange  Traded and OTC Options" above for a discussion of the liquidity
of options not traded on an exchange.)

         Position Limits.  Futures exchanges can limit the number of futures and
options on futures  contracts that can be held or controlled by an entity. If an
adequate  exemption cannot be obtained,  the Fund or the Advisor may be required
to reduce the size of its futures and  options  positions  or may not be able to
trade a certain  futures or options  contract in order to avoid  exceeding  such
limits.

         Asset Coverage for Futures  Contracts and Options  Positions.  Although
the Fund will not be a commodity pool, certain  derivatives  subject the Fund to
the rules of the Commodity Futures Trading  Commission which limit the extent to
which the Fund can  invest in such  derivatives.  The Fund may invest in futures
contracts and options with respect thereto for hedging  purposes  without limit.
However,  the Fund may not  invest  in such  contracts  and  options  for  other
purposes if the sum of the amount of initial  margin  deposits and premiums paid
for unexpired  options with respect to such contracts,  other than for bona fide
hedging  purposes,  exceeds 5% of the  liquidation  value of the Fund's  assets,
after  taking into  account  unrealized  profits and  unrealized  losses on such
contracts and options; provided,  however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation.

         In addition,  the Fund will comply with  guidelines  established by the
SEC with respect to coverage of options and futures  contracts by mutual  funds,
and if the guidelines so require,  will set aside appropriate liquid assets in a
segregated  custodial  account in the amount  prescribed.  Securities  held in a
segregated  account  cannot be sold  while  the  futures  contract  or option is
outstanding,  unless they are replaced with other suitable assets.  As a result,
there is a  possibility  that  segregation  of a large  percentage of the Fund's
assets  could  impede  portfolio  management  or  the  Fund's  ability  to  meet
redemption requests or other current obligations.

         Swaps  and  Related  Swap  Products.   The  Fund  may  engage  in  swap
transactions, including, but not limited to, interest rate, currency, securities
index, basket, specific security and commodity swaps, interest rate caps, floors
and collars and options on interest  rate swaps  (collectively  defined as "swap
transactions").

         The Fund  may  enter  into  swap  transactions  for any  legal  purpose
consistent with its investment  objective and policies,  such as for the purpose
of  attempting  to obtain or preserve a  particular  return or spread at a lower
cost than  obtaining  that return or spread  through  purchases  and/or sales of
instruments in cash markets,  to protect  against  currency  fluctuations,  as a
duration management  technique,  to protect against any increase in the price of
securities the Fund anticipates  purchasing at a later date, or to gain exposure
to certain markets in the most  economical way possible.  The Fund will not sell
interest rate caps, floors or collars if it does not own securities with coupons
which provide the interest that a Fund may be required to pay.

         Swap  agreements  are  two-party  contracts  entered into  primarily by
institutional  counterparties  for periods  ranging  from a few weeks to several
years. In a standard swap transaction, two parties agree to exchange the returns
(or  differentials  in rates of  return)  that  would be earned or  realized  on
specified notional investments or instruments. The gross returns to be exchanged
or  "swapped"  between the parties are  calculated  by  reference to a "notional
amount," i.e., the return on or increase in value of a particular  dollar amount
invested at a particular  interest  rate,  in a particular  foreign  currency or
commodity,  or in a "basket" of securities  representing a particular index. The
purchaser of an interest rate cap or floor, upon payment of a fee, has the right
to receive payments (and the seller of the cap is obligated to make payments) to
the extent a specified  interest  rate exceeds (in the case of a cap) or is less
than (in the case of a floor) a specified level over a specified  period of time
or at specified dates. The purchaser of an interest rate collar, upon payment of
a fee,  has the right to  receive  payments  (and the  seller  of the  collar is
obligated to make  payments) to the extent that a specified  interest rate falls
outside an agreed  upon range over a  specified  period of time or at  specified
dates.  The purchaser of an option on an interest  rate swap,  upon payment of a
fee (either at the time of  purchase or in the form of higher  payments or lower
receipts within an interest rate swap  transaction)  has the right,  but not the
obligation,  to  initiate a new swap  transaction  of a  pre-specified  notional
amount  with  pre-specified   terms  with  the  seller  of  the  option  as  the
counterparty.

         The "notional  amount" of a swap  transaction  is the agreed upon basis
for  calculating  the payments  that the parties  have agreed to  exchange.  For
example,  one swap  counterparty  may agree to pay a floating  rate of  interest
(e.g., 3 month LIBOR)  calculated  based on a $10 million  notional  amount on a
quarterly basis in exchange for receipt of payments calculated based on the same
notional  amount and a fixed rate of interest  on a  semi-annual  basis.  In the
event the Fund is obligated to make  payments more  frequently  than it receives
payments from the other party, it will incur incremental credit exposure to that
swap  counterparty.  This  risk  may be  mitigated  somewhat  by the use of swap
agreements  which call for a net payment to be made by the party with the larger
payment  obligation  when the  obligations  of the parties  fall due on the same
date.  Under most swap  agreements  entered  into by the Fund,  payments  by the
parties will be exchanged on a "net basis", and the Fund will receive or pay, as
the case may be, only the net amount of the two payments.

         The amount of the Fund's potential gain or loss on any swap transaction
is not  subject to any fixed  limit.  Nor is there any fixed limit on the Fund's
potential  loss if it sells a cap or  collar.  If the Fund buys a cap,  floor or
collar,  however,  the Fund's potential loss is limited to the amount of the fee
that it has paid.  When measured  against the initial amount of cash required to
initiate  the  transaction,  which  is  typically  zero  in  the  case  of  most
conventional swap transactions,  swaps, caps, floors and collars tend to be more
volatile than many other types of instruments.

         The  use of  swap  transactions,  caps,  floors  and  collars  involves
investment  techniques and risks which are different from those  associated with
portfolio security transactions. If the Advisor is incorrect in its forecasts of
market values,  interest rates,  and other  applicable  factors,  the investment
performance of the Fund will be less favorable than if these  techniques had not
been used. These instruments are typically not traded on exchanges. Accordingly,
there is a risk that the other  party to certain of these  instruments  will not
perform its obligations to the Fund or that the Fund may be unable to enter into
offsetting  positions to terminate its exposure or liquidate its position  under
certain of these  instruments  when it wishes to do so. Such  occurrences  could
result in losses to the Fund.

           The Advisor  will,  however,  consider such risks and will enter into
swap and other derivatives transactions only when it believes that the risks are
not unreasonable.

         The Fund will maintain  cash or liquid  assets in a segregated  account
with its  custodian  in an amount  sufficient  at all times to cover its current
obligations under its swap transactions,  caps, floors and collars.  If the Fund
enters into a swap  agreement on a net basis,  it will  segregate  assets with a
daily  value at  least  equal  to the  excess,  if any,  of the  Fund's  accrued
obligations  under  the swap  agreement  over  the  accrued  amount  the Fund is
entitled  to  receive  under  the  agreement.  If the  Fund  enters  into a swap
agreement on other than a net basis,  or sells a cap,  floor or collar,  it will
segregate  assets  with a daily  value at least  equal to the full  amount  of a
Fund's accrued obligations under the agreement.

         The Fund will not  enter  into any swap  transaction,  cap,  floor,  or
collar, unless the counterparty to the transaction is deemed creditworthy by the
Advisor.  If a counterparty  defaults,  the Fund may have  contractual  remedies
pursuant to the agreements related to the transaction. The swap markets in which
many types of swap  transactions  are traded have grown  substantially in recent
years, with a large number of banks and investment  banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the markets for certain  types of swaps (e.g.,  interest rate swaps) have become
relatively  liquid.  The markets for some types of caps,  floors and collars are
less liquid.

         The liquidity of swap transactions, caps, floors and collars will be as
set forth in guidelines  established by the Advisor and approved by the Trustees
which are based on various  factors,  including (1) the  availability  of dealer
quotations  and the estimated  transaction  volume for the  instrument,  (2) the
number of dealers and end users for the instrument in the  marketplace,  (3) the
level of market making by dealers in the type of  instrument,  (4) the nature of
the  instrument  (including  any right of a party to terminate it on demand) and
(5) the nature of the marketplace for trades (including the ability to assign or
offset the Fund's  rights and  obligations  relating  to the  instrument).  Such
determination  will govern whether the instrument  will be deemed within the 15%
restriction on investments in securities that are not readily marketable.

          During the term of a swap, cap, floor or collar,  changes in the value
of the  instrument  are  recognized as unrealized  gains or losses by marking to
market to reflect the market value of the  instrument.  When the  instrument  is
terminated,  the  Fund  will  record  a  realized  gain  or  loss  equal  to the
difference,  if any,  between  the  proceeds  from  (or  cost  of)  the  closing
transaction and a Fund's basis in the contract.

         The federal  income tax  treatment  with respect to swap  transactions,
caps,  floors,  and collars may impose limitations on the extent to which a Fund
may engage in such transactions.

Risk Management

         The Fund may employ non-hedging risk management techniques. Examples of
such strategies include synthetically  altering the duration of its portfolio or
the mix of securities in its  portfolio.  For example,  if the Advisor wishes to
extend  maturities in a fixed income  portfolio in order to take advantage of an
anticipated  decline  in  interest  rates,  but does not  wish to  purchase  the
underlying  long-term  securities,  it might cause the Fund to purchase  futures
contracts on long-term  debt  securities.  Similarly,  if the Advisor  wishes to
decrease  exposure to fixed income  securities  or purchase  equities,  it could
cause the Fund to sell futures contracts on debt securities and purchase futures
contracts on a stock index. Such non-hedging risk management  techniques are not
speculative,  but because they involve  leverage  include,  as do all  leveraged
transactions,  the  possibility of losses as well as gains that are greater than
if these techniques involved the purchase and sale of the securities  themselves
rather than their synthetic derivatives.

Special Factors Affecting the Fund

         The Fund intends to invest a high proportion of its assets in municipal
obligations  in  California  Municipal  Securities.   Payment  of  interest  and
preservation of principal is dependent upon the continuing ability of California
issuers  and/or  obligors  of  California  Municipal  Securities  to meet  their
obligations thereunder.

         The fiscal stability of California is related, at least in part, to the
fiscal stability of its localities and authorities. Various California agencies,
authorities  and localities  have issued large amounts of bonds and notes either
guaranteed or supported by California through lease-purchase arrangements, other
contractual  arrangements or moral obligation provisions.  While debt service is
normally paid out of revenues generated by projects of such California agencies,
authorities  and  localities,  in the past the State has had to provide  special
assistance,  in some  cases of a  recurring  nature,  to enable  such  agencies,
authorities  and  localities to meet their  financial  obligations  and, in some
cases,  to  prevent or cure  defaults.  The  presence  of such aid in the future
should  not be  assumed.  To the  extent  that  California  agencies  and  local
governments  require State assistance to meet their financial  obligations,  the
ability  of  California  to meet its own  obligations  as they  become due or to
obtain additional financing could be adversely affected.

         For further information  concerning  California Municipal  Obligations,
see Appendix B to this  Statement  of  Additional  Information.  The summary set
forth above and in Appendix B is based on information from an official statement
of California general obligation  municipal  obligations and does not purport to
be complete.

Portfolio Turnover


         The table below sets forth the Fund's  portfolio  turnover rate. A rate
of 100% indicates that the equivalent of all of the Fund's assets have been sold
and reinvested in a year. High portfolio  turnover may result in the realization
of  substantial  net capital gains or losses.  To the extent that net short term
capital  gains are realized,  any  distributions  resulting  from such gains are
considered ordinary income for federal income tax purposes. See "Taxes" below.


Fund -- For the years ended April 30,  1998,  1999 and 2000:  44%,  40% and 87%,
respectively.

INVESTMENT RESTRICTIONS

         The  investment  restrictions  set forth below have been adopted by the
Fund. Except as otherwise noted, these investment restrictions are "fundamental"
policies  which,  under the 1940 Act,  may not be changed  without the vote of a
majority of the  outstanding  voting  securities of the Fund. A "majority of the
outstanding  voting  securities" is defined in the 1940 Act as the lesser of (a)
67% or more of the voting securities present at a meeting if the holders of more
than 50% of the  outstanding  voting  securities  are present or  represented by
proxy, or (b) more than 50% of the outstanding voting securities. The percentage
limitations  contained  in the  restrictions  below  apply  at the  time  of the
purchase of securities.

         The Fund:

1. May not purchase any security which would cause the Fund to  concentrate  its
investments  in the  securities of issuers  primarily  engaged in any particular
industry except as permitted by the SEC;

2. May not issue senior  securities,  except as permitted  under the  Investment
Company Act of 1940 or any rule, order or interpretation thereunder;

3. May not borrow money, except to the extent permitted by applicable law;

4. May not underwrite securities of other issuers, except to the extent that the
Fund, in disposing of portfolio securities,  may be deemed an underwriter within
the meaning of the 1933 Act;

5. May not purchase or sell real estate, except that, to the extent permitted by
applicable  law,  the Fund may (a)  invest in  securities  or other  instruments
directly or indirectly secured by real estate, (b) invest in securities or other
instruments  issued by issuers  that  invest in real  estate and (c) make direct
investments in mortgages;

6. May not purchase or sell  commodities or commodity  contracts unless acquired
as a result of ownership of  securities or other  instruments  issued by persons
that purchase or sell commodities or commodities  contracts;  but this shall not
prevent the Fund from  purchasing,  selling and entering into financial  futures
contracts (including futures contracts on indices of securities,  interest rates
and  currencies),  options on financial  futures  contracts  (including  futures
contracts on indices of securities,  interest rates and  currencies),  warrants,
swaps,  forward contracts,  foreign currency spot and forward contracts or other
derivative instruments that are not related to physical commodities; and

7. May make loans to other  persons,  in accordance  with the Fund's  investment
objective and policies and to the extent permitted by applicable law.

     Non-Fundamental   Investment  Restrictions.   The  investment  restrictions
described below are not  fundamental  policies of the Fund and may be changed by
its Trustees. These non-fundamental investment policies require that the Fund:

(i) May not acquire any illiquid securities,  such as repurchase agreements with
more than seven days to maturity or fixed time  deposits with a duration of over
seven calendar days, if as a result  thereof,  more than 15% of the market value
of the Fund's net assets would be in investments which are illiquid;

(ii) May not purchase securities on margin,  make short sales of securities,  or
maintain a short position, provided that this restriction shall not be deemed to
be  applicable  to the  purchase  or sale of  when-issued  or  delayed  delivery
securities, or to short sales that are covered in accordance with SEC rules; and

(iii)  May not  acquire  securities  of other  investment  companies,  except as
permitted by the 1940 Act or any order pursuant thereto.

         Notwithstanding  any other  fundamental or  non-fundamental  investment
restriction  or policy,  the Fund  reserves  the right,  without the approval of
shareholders,  to  invest  all of its  assets  in  another  open-end  registered
investment company with substantially the same fundamental investment objective,
restrictions and policies as the Fund.

         There  will  be no  violation  of any  investment  restriction  if that
restriction  is  complied  with  at  the  time  the  relevant  action  is  taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.

         For  purposes  of  the  fundamental  investment  restriction  regarding
industry  concentration,  JPMIM may classify  issuers by industry in  accordance
with  classifications  set forth in the  Directory  of Companies  Filing  Annual
Reports  With The  Securities  and  Exchange  Commission  (the  "SEC")  or other
sources.  In the absence of such  classification  or if JPMIM determines in good
faith based on its own information that the economic characteristics affecting a
particular  issuer  make it more  appropriately  considered  to be  engaged in a
different  industry,  JPMIM may classify an issuer  accordingly.  For  instance,
personal  credit finance  companies and business  credit  finance  companies are
deemed  to be  separate  industries  and  wholly  owned  finance  companies  are
considered  to be in the  industry  of their  parents  if their  activities  are
primarily related to financing the activities of their parents.

TRUSTEES AND ADVISORY BOARD MEMBERS

Trustees


         The Trustees of the Trust, their principal  occupations during the past
five years and dates of birth are set forth  below.  The mailing  address of the
Trustees is c/o Pierpont Group Inc., 461 Fifth Avenue, New York, New York 10017.

     FREDERICK S. ADDY - Trustee;  Retired;  Former Executive Vice President and
Chief  Financial  Officer,  Amoco  Corporation.  His date of birth is January 1,
1932.


     WILLIAM  G.  BURNS -  Trustee;  Retired;  Former  Vice  Chairman  and Chief
Financial Officer, NYNEX. His date of birth is November 2, 1932.

     ARTHUR C.  ESCHENLAUER - Trustee;  Retired;  Former Senior Vice  President,
Morgan Guaranty Trust Company of New York. His date of birth is May 23, 1934.

     MATTHEW HEALEY1 - Trustee, Chairman and Chief Executive Officer;  Chairman,
Pierpont Group, Inc., since prior to 1995. His date of birth is August 23, 1937.

     MICHAEL P. MALLARDI - Trustee;  Retired;  Prior to April 1996,  Senior Vice
President, Capital Cities/ABC, Inc. and President,  Broadcast Group. His date of
birth is March 17, 1934.


         Each Trustee is currently  paid an annual fee of $75,000 for serving as
Trustee of the Trust,  each of the Master  Portfolios (as defined  below),  J.P.
Morgan Funds and J.P. Morgan  Institutional Funds and is reimbursed for expenses
incurred in connection with service as a Trustee.  The Trustees may hold various
other directorships unrelated to the Fund.


     Trustee compensation expenses paid by the Trust for the calendar year ended
December 31, 1999 are set forth below.


<TABLE>
<CAPTION>
<S>                                                    <C>                               <C>

------------------------------------------------- --------------------------- -------------------------------------------

                                                                              TOTAL TRUSTEE COMPENSATION ACCRUED BY THE
                                                                              MASTER PORTFOLIOS(*), J.P. MORGAN  FUNDS,
                                                                              J.P. MORGAN INSTITUTIONAL FUNDS AND THE
                                                  AGGREGATE TRUSTEE           TRUST DURING
                                                  COMPENSATION                1999(**)___________________
                                                  PAID BY THE
NAME OF TRUSTEE                                   TRUST DURING 1999
------------------------------------------------- --------------------------- -------------------------------------------
------------------------------------------------- --------------------------- -------------------------------------------


Frederick S. Addy, Trustee                        $1,018                      $75,000
------------------------------------------------- --------------------------- -------------------------------------------
------------------------------------------------- --------------------------- -------------------------------------------


William G. Burns, Trustee                         $1,018                      $75,000
------------------------------------------------- --------------------------- -------------------------------------------
------------------------------------------------- --------------------------- -------------------------------------------


Arthur C. Eschenlauer, Trustee                    $1,018                      $75,000
------------------------------------------------- --------------------------- -------------------------------------------
------------------------------------------------- --------------------------- -------------------------------------------


Matthew Healey, Trustee(***),                     $1,018                      $75,000
  Chairman and Chief Executive
  Officer
------------------------------------------------- --------------------------- -------------------------------------------
------------------------------------------------- --------------------------- -------------------------------------------

Michael P. Mallardi, Trustee                      $1,018                      $75,000

------------------------------------------------- --------------------------- -------------------------------------------
</TABLE>


(*) The  J.P.  Morgan  Funds  and  J.P.  Morgan  Institutional  Funds  are  each
multi-series  registered  investment  companies  that  are  part  of a  two-tier
(master-feeder)  investment fund structure. Each series of the J.P. Morgan Funds
and J.P.  Morgan  Institutional  Funds is a feeder fund that  invests all of its
investable  assets in one of 19 separate  master  portfolios  (collectively  the
"Master Portfolios") for which JPMIM acts as investment adviser, 14 of which are
registered investment companies.

(**) No investment  company  within the fund complex has a pension or retirement
plan.  Currently  there are 17  investment  companies (14  investment  companies
comprising the Master Portfolios,  the Trust, the J.P. Morgan Funds and the J.P.
Morgan Institutional Funds) in the fund complex.

     (***) During 1999,  Pierpont  Group,  Inc. paid Mr. Healey,  in his role as
Chairman  of  Pierpont  Group,  Inc.,  compensation  in the amount of  $153,800,
contributed  $23,100  to a  defined  contribution  plan on his  behalf  and paid
$17,300 in insurance premiums for his benefit.

     The Trustees  decide upon matters of general policy and are responsible for
overseeing  the Trust's  business  affairs.  The Trust has  entered  into a Fund
Services  Agreement  with  Pierpont  Group,  Inc.  to  assist  the  Trustees  in
exercising their overall  supervisory  responsibilities  over the affairs of the
Trust.  Pierpont Group,  Inc. was organized in July 1989 to provide services for
the J.P. Morgan Family of Funds (formerly the "Pierpont  Family of Funds"),  and
the Trustees are the equal and sole  shareholders  of Pierpont  Group,  Inc. The
Trust has agreed to pay Pierpont Group, Inc. a fee in an amount representing its
reasonable  costs in performing  these  services.  These costs are  periodically
reviewed by the Trustees.  The  principal  offices of Pierpont  Group,  Inc. are
located at 461 Fifth Avenue, New York, New York 10017.


     The aggregate fees paid to Pierpont Group,  Inc. by the Fund for the fiscal
years ended April 30,  1998,  1999 and 2000,  were:  $1,472,  $1,623 and $1,452,
respectively.

Advisory Board Members

         The Trustees determined as of January 26, 2000 to establish an advisory
board and appoint four members  ("Members of the Advisory Board") thereto.  Each
member  serves at the pleasure of the Trustees.  The advisory  board is distinct
from  the  Trustees  and  provides  advice  to the  Trustees  as to  investment,
management and operations of the Trust; but has no power to vote upon any matter
put to a vote of the Trustees.  The advisory board and the members  thereof also
serve each of the Trust, J.P. Morgan Funds, J.P. Morgan  Institutional Funds and
the Master Portfolios. It is also the current intention of the Trustees that the
Members  of the  Advisory  Board  will be  proposed  at the  next  shareholders'
meeting, expected to be held within a year from the date hereof, for election as
Trustees of each of the Trusts and the Master  Portfolios.  The  creation of the
Advisory Board and the  appointment of the members  thereof was designed so that
the Board of Trustees  will  continuously  consist of persons able to assume the
duties of Trustees and be fully  familiar  with the business and affairs of each
of the Trusts and the Master Portfolios, in anticipation of the current Trustees
reaching the mandatory  retirement  age of seventy.  Each member of the Advisory
Board is paid an annual fee of $75,000 for serving in this  capacity for each of
the Trust,  J.P. Morgan Funds,  J.P. Morgan  Institutional  Funds and the Master
Portfolios,  and is  reimbursed  for expenses  incurred in  connection  for such
service.  The members of the Advisory Board may hold various other directorships
unrelated  to these  funds.  The mailing  address of the Members of the Advisory
Board is c/o Pierpont Group,  Inc., 461 Fifth Avenue,  New York, New York 10017.
Their names, principal occupations during the past five years and dates of birth
are set forth below:

Ann  Maynard  Gray - Former  President,  Diversified  Publishing  Group and Vice
President, Capital Cities/ABC, Inc. Her date of birth is August 22, 1945.

John R. Laird --  Retired;  Former  Chief  Executive  Officer,  Shearson  Lehman
Brothers and The Boston Company. His date of birth is June 21, 1942.

Gerard P. Lynch -- Retired;  Former Managing Director,  Morgan Stanley Group and
President and Chief Operating Officer, Morgan Stanley Services, Inc. His date of
birth is October 5, 1936.

James J. Schonbachler -- Retired;  Prior to September,  1998, Managing Director,
Bankers Trust Company and Chief  Executive  Officer and Director,  Bankers Trust
A.G., Zurich and BT Brokerage Corp. His date of birth is January 26, 1943.



Officers

         The Trust's  executive  officers  (listed below),  other than the Chief
Executive  Officer  and the  officers  who are  employees  of the  Advisor,  are
provided and  compensated by Funds  Distributor,  Inc.  ("FDI"),  a wholly owned
indirect  subsidiary of Boston  Institutional  Group,  Inc. The Chief  Executive
Officer receives no compensation in his capacity as an officer of the Trust. The
officers  conduct and supervise the business  operations of the Trust. The Trust
has no employees.

         The officers of the Trust, their principal  occupations during the past
five years and dates of birth are set forth below.  The business address of each
of the officers  unless  otherwise  noted is Funds  Distributor,  Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109.

     MATTHEW HEALEY - Chairman and Chief Executive Officer;  Chairman,  Pierpont
Group,  since  prior to 1995.  His  address c/o  Pierpont  Group Inc.  461 Fifth
Avenue, New York, NY 10017. His date of birth is August 23, 1937.

     MARGARET W. CHAMBERS - Vice President and Secretary.  Senior Vice President
and General  Counsel of FDI since April,  1998.  From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company,  L.P. From January 1986 to July 1996,  she was an associate  with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.

         MARIE E. CONNOLLY - Vice President and Assistant Treasurer.  President,
Chief Executive  Officer,  Chief Compliance Officer and Director of FDI, Premier
Mutual Fund  Services,  Inc.,  an  affiliate  of FDI  ("Premier  Mutual") and an
officer of certain investment companies  distributed or administered by FDI. Her
date of birth is August 1, 1957.

     DOUGLAS C. CONROY - Vice President and Assistant Treasurer.  Assistant Vice
President   and   Assistant   Department   Manager  of  Treasury   Services  and
Administration of FDI and an officer of certain investment companies distributed
or  administered  by FDI.  Prior to April 1997,  Mr.  Conroy was  Supervisor  of
Treasury  Services  and  Administration  of FDI.  His date of birth is March 31,
1969.


         KAREN  JACOPPO-WOOD  - Vice  President  and Assistant  Secretary.  Vice
President  and  Senior  Counsel  of FDI and an  officer  of  certain  investment
companies  distributed or  administered  by FDI. From June 1994 to January 1996,
Ms. Jacoppo-Wood was a Manager of SEC Registration at Scudder,  Stevens & Clark,
Inc. Her date of birth is December 29, 1966.

     CHRISTOPHER  J.  KELLEY - Vice  President  and  Assistant  Secretary.  Vice
President and Senior Associate  General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996,  Mr.  Kelley was Assistant  Counsel at Forum  Financial
Group. His date of birth is December 24, 1964.

     KATHLEEN  K.  MORRISEY  - Vice  President  and  Assistant  Secretary.  Vice
President  and  Assistant   Secretary  of  FDI.  Manager  of  Treasury  Services
Administration  and an  officer  of  certain  investment  companies  advised  or
administered  by  Montgomery  Asset  Management,  L.P.  and  Dresdner RCM Global
Investors,  Inc., and their  respective  affiliates.  From July 1994 to November
1995, Ms.  Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Her date of birth is July 5, 1972.

     MARY A. NELSON - Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies  distributed or administered by FDI. Her
date of birth is April 22, 1964.

     MARY JO PACE - Assistant Treasurer.  Vice President,  Morgan Guaranty Trust
Company of New York since  1990.  Ms.  Pace  serves in the Funds  Administration
group as a Manager for the Budgeting and Expense  Processing  Group. Her address
is 60 Wall  Street,  New York,  New York  10260.  Her date of birth is March 13,
1966.

     GEORGE A. RIO - President  and  Treasurer.  Executive  Vice  President  and
Client Service  Director of FDI since April 1998.  From June 1995 to March 1998,
Mr. Rio was Senior  Vice  President  and Senior Key  Account  Manager for Putnam
Mutual Funds. His date of birth is January 2, 1955.


     CHRISTINE ROTUNDO - Assistant  Treasurer.  Vice President,  Morgan Guaranty
Trust  Company  of New  York.  Ms.  Rotundo  serves  as  Manager  of  the  Funds
Infrastructure  group and is responsible for the management of special projects.
Prior to  January  2000,  she  served as  Manager  of the Tax Group in the Funds
Administration  group and was responsible for U.S. mutual fund tax matters.  Her
address  is 60 Wall  Street,  New  York,  New York  10260.  Her date of birth is
September 26, 1965.

     ELBA VASQUEZ - Vice  President and Assistant  Secretary.  Vice President of
FDI since February  1999.  Ms. Vasquez served as a Sales  Associate for FDI from
May 1996.  Prior to that she served in various  mutual fund sales and  marketing
positions for U.S.  Trust Company of New York. Her date of birth is December 14,
1961.


CODE OF ETHICS


         The Trust and the Advisor have adopted codes of ethics pursuant to Rule
17j-1 under the 1940 Act. Each of these codes permits  personnel subject to such
code to invest in securities, including securities that may be purchased or held
by the Funds.  Such  purchases,  however,  are subject to procedures  reasonably
necessary to prevent  access  persons from engaging in any unlawful  conduct set
forth in Rule 17j-1.


INVESTMENT ADVISOR

         The  Trust  has  retained  JPMIM  as  Investment   Advisor  to  provide
investment advice and portfolio  management services to the Fund. Subject to the
supervision of the Trustees,  the Advisor makes the Fund's day-to-day investment
decisions,  arranges for the execution of portfolio  transactions  and generally
manages  the Fund's  investments.  Prior to  October  28,  1998,  Morgan was the
Investment  Advisor.  JPMIM,  a wholly  owned  subsidiary  of J.P.  Morgan & Co.
Incorporated  ("J.P.  Morgan"),  is a registered  investment  adviser  under the
Investment Advisers Act of 1940, as amended,  and manages employee benefit funds
of corporations,  labor unions and state and local  governments and the accounts
of other institutional investors, including investment companies. Certain of the
assets of  employee  benefit  accounts  under its  management  are  invested  in
commingled pension trust funds for which Morgan serves as trustee.


         J.P.  Morgan,  through  the  Advisor  and other  subsidiaries,  acts as
investment advisor to individuals,  governments,  corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of approximately $369 billion.


         J.P.  Morgan has a long history of service as adviser,  underwriter and
lender to an extensive  roster of major companies and as a financial  advisor to
national  governments.  The firm,  through its  predecessor  firms,  has been in
business for over a century and has been managing investments since 1913.

         Morgan,  whose principal  offices are at 60 Wall Street,  New York, New
York 10260,  is a New York trust  company which  conducts a general  banking and
trust  business.  Morgan is subject to  regulation by the New York State Banking
Department and is a member bank of the Federal Reserve  System.  Through offices
in New York City and abroad,  Morgan offers a wide range of services,  primarily
to  governmental,   institutional,  corporate  and  high  net  worth  individual
customers in the United States and throughout the world. Morgan is also a wholly
owned  subsidiary of J.P. Morgan and is a bank holding  company  organized under
the laws of the State of Delaware.

         The basis of the Advisor's investment process is fundamental investment
research as the firm  believes  that  fundamentals  should  determine an asset's
value over the long term. J.P. Morgan currently  employs  approximately 420 full
time research  analysts,  capital  market  researchers,  portfolio  managers and
traders  and has one of the  largest  research  staffs in the  money  management
industry.  The Advisor has investment  management divisions located in New York,
London,  Tokyo,  Frankfurt,  and Singapore to cover  companies,  industries  and
countries on site.  The Advisor's  fixed income  investment  process is based on
analysis of real rates,  sector  diversification,  and  quantitative  and credit
analysis.

         The investment  advisory  services the Advisor provides to the Fund are
not exclusive under the terms of the Investment Advisory Agreement.  The Advisor
is free to and does render similar  investment  advisory  services to others. In
addition,  the Advisor  serves as investment  advisor to personal  investors and
other  investment  companies  and acts as  fiduciary  for  trusts,  estates  and
employee  benefit  plans.  Certain  of the assets of trusts  and  estates  under
management  are invested in common  trust funds for which the Advisor  serves as
trustee.  The accounts  which are managed or advised by the Advisor have varying
investment  objectives  and the  Advisor  invests  assets  of such  accounts  in
investments  substantially  similar to, or the same as, those which are expected
to  constitute  the  principal  investments  of  the  Fund.  Such  accounts  are
supervised  by officers  and  employees of the Advisor who may also be acting in
similar capacities for the Fund. See "Portfolio Transactions."

         Sector  weightings  are  generally  similar  to a  benchmark  with  the
emphasis on security selection as the method to achieve  investment  performance
superior to the  benchmark.  The  benchmark  for the Portfolio in which the Fund
invests is currently: Lehman Brothers 1-16 Year Municipal Bond Index.

         The Fund is managed by officers of the Advisor who, in acting for their
clients,  including the Fund, do not discuss their investment decisions with any
personnel of J.P.  Morgan or any personnel of other  divisions of the Advisor or
with any of its  affiliated  persons,  with the exception of certain  investment
management affiliates of J.P. Morgan.

         As compensation for the services  rendered and related expenses such as
salaries  of  advisory  personnel  borne by the  Advisor  under  the  Investment
Advisory  Agreement,  the Fund has  agreed to pay the  Advisor  a fee,  which is
computed daily and may be paid monthly, equal to the annual rate of 0.30% of the
Fund's average daily net assets.


         The advisory fees paid by the Fund to Morgan and JPMIM,  as applicable,
for the fiscal  years  ended  April 30,  1998,  1999 and 2000,  were:  $133,208,
$200,927 and $239,110, respectively.


         The Investment Advisory Agreement between the Advisor and the Trust, on
behalf of the Fund, provides that it will continue in effect for a period of two
years after execution only if specifically  approved  thereafter annually in the
same  manner  as  the  Distribution  Agreement.  See  "Distributor"  below.  The
Investment  Advisory  Agreement will terminate  automatically if assigned and is
terminable  at any time with respect to the Fund without  penalty by a vote of a
majority  of the  Trust's  Trustees or by a vote of the holders of a majority of
the Fund's  outstanding  voting  securities  on 60 days'  written  notice to the
Advisor  and by the  Advisor  on 90  days'  written  notice  to  the  Fund.  See
"Additional Information."

         Under separate  agreements,  Morgan provides  certain  financial,  fund
accounting,  administrative and shareholder services to the Trust. See "Services
Agent" and "Shareholder Servicing" below.

DISTRIBUTOR

         FDI  serves as the  Trust's  exclusive  distributor  and  holds  itself
available to receive  purchase  orders for the Fund's shares.  In that capacity,
FDI has been  granted  the right,  as agent of the Trust,  to solicit and accept
orders for the purchase of the Fund's shares in accordance with the terms of the
Distribution  Agreement  between  the  Trust  and FDI.  Under  the  terms of the
Distribution  Agreement  between FDI and the Trust, FDI receives no compensation
in its capacity as the Fund's distributor.

         The Distribution  Agreement will continue in effect with respect to the
Fund for a period of two years after  execution  only if it is approved at least
annually  thereafter  (i) by a vote of the  holders of a majority  of the Fund's
outstanding  voting  securities  or by its  Trustees  and  (ii)  by a vote  of a
majority  of the  Trustees  of the Trust who are not  "interested  persons"  (as
defined by the 1940 Act) of the parties to the Distribution  Agreement,  cast in
person at a meeting  called  for the  purpose  of voting on such  approval  (see
"Trustees and Advisory Board Members"  "Officers").  The Distribution  Agreement
will  terminate  automatically  if assigned by either  party.  The  Distribution
Agreement  is also  terminable  with  respect  to the Fund at any  time  without
penalty  by a vote of a  majority  of the  Trustees  of the  Trust,  a vote of a
majority of the Trustees who are not "interested  persons" of the Trust, or by a
vote of (i) 67% or more of the Fund's outstanding voting securities present at a
meeting  if the  holders  of more  than  50% of the  Fund's  outstanding  voting
securities  are present or  represented  by proxy,  or (ii) more than 50% of the
Fund's outstanding  voting securities,  whichever is less. The principal offices
of FDI are located at 60 State Street, Suite 1300, Boston,  Massachusetts 02109.
CO-ADMINISTRATOR

         Under a Co-Administration  Agreement with the Trust, FDI also serves as
the Trust's Co-Administrator.  The Co-Administration Agreement may be renewed or
amended  by the  Trustees  without a  shareholder  vote.  The  Co-Administration
Agreement is terminable  at any time without  penalty by a vote of a majority of
the Trustees of the Trust on not more than 60 days' written notice nor less than
30 days' written notice to the other party. The Co-Administrator may subcontract
for the performance of its obligations, provided, however, that unless the Trust
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and  omissions  of any  subcontractor  as it would  for its own acts or
omissions. See "Services Agent" below.

         FDI (i) provides  office space,  equipment  and clerical  personnel for
maintaining the organization  and books and records of the Trust;  (ii) provides
officers  for the  Trust;  (iii)  prepares  and  files  documents  required  for
notification  of  state  securities  administrators;   (iv)  reviews  and  files
marketing  and  sales  literature;  (v)  files  regulatory  documents  and mails
communications  to Trustees,  Members of the Advisory Board and  investors;  and
(vi) maintains related books and records.

         For its services under the  Co-Administration  Agreement,  the Fund has
agreed to pay FDI fees equal to its  allocable  share of an annual  complex-wide
charge of $425,000 plus FDI's  out-of-pocket  expenses.  The amount allocable to
the Fund is based on the ratio of its net assets to the  aggregate net assets of
the Trust and other investment companies subject to similar agreements with FDI.


     The  administrative  fees paid to FDI for the fiscal  years ended April 30,
1998, 1999 and 2000, were: $714, $747 and $616, respectively.


SERVICES AGENT

         The Trust,  on behalf of the Fund,  has entered into an  Administrative
Services  Agreement (the  "Services  Agreement")  with Morgan  pursuant to which
Morgan is responsible  certain  administrative  and related services provided to
the Fund.  The  Services  Agreements  may be  terminated  at any  time,  without
penalty,  by the Trustees or Morgan,  in each case on not more than 60 days' nor
less than 30 days' written notice to the other party.

         Under the Services Agreements,  Morgan provides certain  administrative
and related services to the Fund,  including services related to tax compliance,
preparation of financial statements,  calculation of performance data, oversight
of service providers and certain regulatory and Board of Trustee matters.

         Under the  Services  Agreement,  the Fund has agreed to pay Morgan fees
equal to its allocable share of an annual  complex-wide  charge.  This charge is
calculated daily based on the aggregate net assets of the Fund, the other series
of the Trust and the Master  Portfolios in accordance with the following  annual
schedule:  0.09% of the first $7 billion of their  aggregate  average  daily net
assets,  and 0.04% of their  aggregate  average daily net assets in excess of $7
billion,  less the complex-wide  fees payable to FDI. The portion of this charge
payable by the Fund is determined by the proportionate share that its net assets
bear to the total net assets of the Trust and certain other investment companies
provided administrative services by Morgan.


     The fees paid to Morgan,  as  Services  Agent,  for the fiscal  years ended
April 30, 1998, 1999 and 2000 were: $26,754, $36,727 and $39,930, respectively.


CUSTODIAN AND TRANSFER AGENT


         The Bank of New York  ("BONY"),  One Wall  Street,  New York,  New York
10286,  serves as the Trust's custodian and fund accounting  agent.  Pursuant to
the Custodian Contract, BONY is responsible for holding portfolio securities and
cash and maintaining the books of account and records of portfolio transactions.

         State  Street Bank and Trust  Company  ("State  Street"),  225 Franklin
Street, Boston,  Massachusetts 02110, serves as the Fund's transfer and dividend
disbursing agent. As transfer agent and dividend  disbursing agent, State Street
is responsible for maintaining  account records  detailing the ownership of Fund
shares  and for  crediting  income,  capital  gains and other  changes  in share
ownership to shareholder accounts.


SHAREHOLDER SERVICING

         The  Trust,  on behalf  of the Fund,  has  entered  into a  Shareholder
Servicing  Agreement  with Morgan  pursuant to which Morgan acts as  shareholder
servicing agent for its customers and for other Fund investors who are customers
of a Financial  Professional.  Under this  agreement,  Morgan is responsible for
performing  shareholder account,  administrative and servicing functions,  which
include but are not limited to, answering inquiries regarding account status and
history,  the manner in which  purchases and  redemptions  of Fund shares may be
effected,  and certain other matters pertaining to the Fund; assisting customers
in  designating  and  changing  dividend  options,   account   designations  and
addresses;  providing  necessary  personnel and  facilities  to  coordinate  the
establishment  and  maintenance  of  shareholder  accounts  and records with the
Fund's transfer agent; transmitting purchase and redemption orders to the Fund's
transfer  agent and arranging  for the wiring or other  transfer of funds to and
from  customer  accounts  in  connection  with orders to purchase or redeem Fund
shares; verifying purchase and redemption orders, transfers among and changes in
accounts;  informing the  Distributor of the gross amount of purchase orders for
Fund  shares;  monitoring  the  activities  of the Fund's  transfer  agent;  and
providing other related services.

         Effective  August 1, 1998, under the Shareholder  Servicing  Agreement,
the Fund has agreed to pay Morgan for these  services a fee at an annual rate of
0.25% for Select  Shares and 0.10% for  Institutional  Shares.  These  rates are
expressed as a percentage  of the average  daily net assets of Fund shares owned
by or for shareholders.

         The table  below sets  forth for each  class of shares the  shareholder
servicing fees paid by the Fund to Morgan for the fiscal periods indicated.


Select Shares -- For fiscal years ended April 30, 1998,  1999 and 2000:  $7,131,
$35,787 and $36,500, respectively.

     Institutional Shares -- For the fiscal years ended April 30, 1998, 1999 and
2000: $20,775, $46,812 and $65,103, respectively.


         The Fund may be sold to or  through  financial  intermediaries  who are
customers  of  J.P.  Morgan  ("financial  professionals"),  including  financial
institutions  and  broker-dealers,  that may be paid fees by J.P.  Morgan or its
affiliates  for services  provided to their clients that invest in the Fund. See
"Financial  Professionals"  below.  Organizations that provide record keeping or
other services to certain  employee benefit or retirement plans that include the
Fund as an investment alternative may also be paid a fee.

FINANCIAL PROFESSIONALS

         The   services   provided  by  financial   professionals   may  include
establishing  and  maintaining  shareholder  accounts,  processing  purchase and
redemption  transactions,  arranging  for  bank  wires,  performing  shareholder
subaccounting, answering client inquiries regarding the Trust, assisting clients
in changing  dividend  options,  account  designations and addresses,  providing
periodic  statements  showing the client's account balance and integrating these
statements with those of other  transactions  and balances in the client's other
accounts serviced by the financial professional,  transmitting proxy statements,
periodic reports,  updated prospectuses and other communications to shareholders
and,  with  respect to  meetings of  shareholders,  collecting,  tabulating  and
forwarding  executed proxies and obtaining such other information and performing
such other services as J.P. Morgan or the financial  professional's  clients may
reasonably request and agree upon with the financial professional.

         Although  there  is no  sales  charge  levied  directly  by  the  Fund,
financial  professionals  may  establish  their  own terms  and  conditions  for
providing their services and may charge investors a transaction or other fee for
their services. Such charges may vary among financial professionals and will not
be remitted to the Fund or J.P. Morgan.

         The Fund has  authorized  one or more  brokers to accept  purchase  and
redemption orders on its behalf.  Such brokers are authorized to designate other
intermediaries  to accept  purchase and redemption  orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption  order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. These orders will be priced at the Fund's net asset value next calculated
after they are so accepted.

INDEPENDENT ACCOUNTANTS

         The  independent  accountants  of the Trust are  PricewaterhouseCoopers
LLP,   1177   Avenue   of   the   Americas,    New   York,   New   York   10036.
PricewaterhouseCoopers  LLP conducts an annual audit of the financial statements
of the Fund,  assists in the preparation and/or review of the Fund's federal and
state income tax returns and consults  with the Fund as to matters of accounting
and federal and state income taxation.

EXPENSES

         In addition to the fees payable to Pierpont Group, Inc., JPMIM,  Morgan
and FDI under various  agreements  discussed  under "Trustees and Advisory Board
Members" "Officers,"  "Investment Advisor,"  "Co-Administrator",  "Distributor",
"Services Agent" and "Shareholder  Servicing" above, the Fund is responsible for
usual and  customary  expenses  associated  with the  Trust's  operations.  Such
expenses  include  organization  expenses,  legal  fees,  accounting  and  audit
expenses,  insurance  costs,  the  compensation and expenses of the Trustees and
Members of the Advisory Board,  registration fees under federal securities laws,
extraordinary expenses,  transfer,  registrar and dividend disbursing costs, the
expenses of printing and mailing  reports,  notices and proxy statements to Fund
shareholders,  fees under state  securities  laws,  custodian fees and brokerage
expenses.

         J.P.  Morgan has agreed that it will  reimburse  the Fund until further
notice to the extent  necessary to maintain the Fund's total operating  expenses
(which  include  expenses of the Fund and the  Portfolio)  at the annual rate of
0.50% of the Fund's  average  daily net  assets  with  respect to  Institutional
Shares and 0.65% of the Fund's  average  daily net assets with respect to Select
Shares.

     This  limit  does not  cover  extraordinary  expenses.  This  reimbursement
arrangement can be changed at any time at the option of J.P. Morgan.

         The table  below sets  forth the fees and other  expenses  J.P.  Morgan
reimbursed under the expense  reimbursement  arrangement described above for the
periods indicated.


Select  Shares - For the  fiscal  years  ended  April 30,  1998,  1999 and 2000:
$9,911, $31,561 and $31,087, respectively.

     Institutional  Shares - For the fiscal years ended April 30, 1998, 1999 and
2000: $141,455, $118,189 and $123,536, respectively.


PURCHASE OF SHARES

         Additional Minimum Balance  Information.  If your account balance falls
below the minimum for 30 days as a result of selling  shares (and not because of
performance), the 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,  the Fund  reserves the right to close out your account and
send the proceeds to the address of record.

         Method of  Purchase.  Investors  may open Fund  accounts  and  purchase
shares as described in the  Prospectus.  References in the  Prospectus  and this
Statement of Additional  Information to customers of J.P.  Morgan or a Financial
Professional   include   customers  of  their   affiliates   and  references  to
transactions by customers with J.P. Morgan or a Financial  Professional  include
transactions  with  their  affiliates.  Only  Fund  investors  who are using the
services  of a  financial  institution  acting as  shareholder  servicing  agent
pursuant  to an  agreement  with  the  Trust  on  behalf  of the  Fund  may make
transactions in shares of the Fund.

         The Fund may,  at its own  option,  accept  securities  in payment  for
shares.  The  securities so delivered are valued by the method  described  under
"Net Asset  Value" as of the day the Fund  receives  the  securities.  This is a
taxable  transaction to the  shareholder.  Securities may be accepted in payment
for  shares  only if they  are,  in the  judgment  of the  Advisor,  appropriate
investments for the Fund. In addition, securities accepted in payment for shares
must:  (i) meet the  investment  objective  and  policies  of the Fund;  (ii) be
acquired  by the  Fund  for  investment  and not for  resale;  (iii)  be  liquid
securities  which are not restricted as to transfer;  and (iv) if stock,  have a
value  which is  readily  ascertainable  as  evidenced  by a listing  on a stock
exchange,  OTC market or by readily available market quotations from a dealer in
such  securities.  The Fund  reserves  the  right to accept or reject at its own
option any and all securities offered in payment for its shares.

         Prospective  investors  may purchase  shares with the  assistance  of a
Financial  Professional,  and a Financial Professional may charge the investor a
fee for this service and other services it provides to its customers.

REDEMPTION OF SHARES

         Investors may redeem shares as described in the Prospectus.

         If the  Trust  determines  that it  would  be  detrimental  to the best
interest of the  remaining  shareholders  of the Fund to make payment  wholly or
partly in cash,  payment of the redemption price may be made in whole or in part
by a  distribution  in kind of  securities  from the Fund,  in lieu of cash.  If
shares are  redeemed in kind,  the  redeeming  shareholder  might incur costs in
converting  the assets into cash. The Trust has received  exemptive  relief from
the SEC with respect to  redemptions  in kind by the Fund. The Fund is permitted
to pay redemptions to greater than 5% shareholders in securities, rather than in
cash,  to the extent  permitted  by the SEC and  applicable  law.  The method of
valuing  portfolio  securities  is described  under "Net Asset  Value," and such
valuation will be made as of the same time the redemption price is determined.

         Further  Redemption   Information.   Investors  should  be  aware  that
redemptions  from the Fund may not be processed  if a redemption  request is not
submitted in proper form. To be in proper form,  the Fund must have received the
shareholder's  taxpayer  identification  number and address.  In addition,  if a
shareholder  sends a check  for the  purchase  of Fund  shares  and  shares  are
purchased before the check has cleared,  the transmittal of redemption  proceeds
from the shares will occur upon  clearance  of the check which may take up to 15
days. The Trust, on behalf of the Fund,  reserves the right to suspend the right
of  redemption  and to postpone the date of payment upon  redemption as follows:
(i) for up to seven days,  (ii) during  periods when the New York Stock Exchange
is closed for other than  weekends and holidays or when trading on such Exchange
is  restricted  as  determined  by the SEC by rule or  regulation,  (iii) during
periods in which an  emergency,  as  determined  by the SEC,  exists that causes
disposal by the Fund of, or  evaluation of the net asset value of, its portfolio
securities to be unreasonable or  impracticable,  or (iv) for such other periods
as the SEC may  permit.  For  information  regarding  redemption  orders  placed
through a financial professional, please see "Financial Professionals" above.

EXCHANGE OF SHARES

         An  investor  may  exchange  shares of the Fund for  shares of any J.P.
Morgan Fund,  J.P.  Morgan  Institutional  Fund or J.P. Morgan Series Trust fund
without  charge.  An  exchange  may be made so long as after  the  exchange  the
investor has shares, in each fund in which he or she remains an investor, with a
value of at least that fund's minimum  investment  amount.  Shareholders  should
read the  prospectus  of the fund into  which they are  exchanging  and may only
exchange between fund accounts that are registered in the same name, address and
taxpayer  identification  number.  Shares are exchanged on the basis of relative
net asset value per share. Exchanges are in effect redemptions from one fund and
purchases of another fund and the usual purchase and  redemption  procedures and
requirements  are  applicable to exchanges.  The Fund  generally  intends to pay
redemption proceeds in cash,  however,  since the Fund reserves the right at its
sole  discretion  to pay  redemptions  over  $250,000  in-kind as a portfolio of
representative  stocks rather than in cash,  the Fund reserves the right to deny
an  exchange  request in excess of that  amount.  See  "Redemption  of  Shares".
Shareholders  subject to federal income tax who exchange  shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes.  Shares of the fund to be acquired are purchased for  settlement  when
the  proceeds  from  redemption  become  available.  In the case of investors in
certain  states,  state  securities  laws may restrict the  availability  of the
exchange privilege.  The Fund reserves the right to discontinue,  alter or limit
its exchange privilege at any time.

DIVIDENDS AND DISTRIBUTIONS

         The Fund  declares and pays  dividends and  distributions  as described
under "Dividends and Distributions" in the prospectus.

         Dividends  and  capital  gains  distributions  paid  by  the  Fund  are
automatically reinvested in additional shares of the Fund unless the shareholder
has elected to have them paid in cash. Dividends and distributions to be paid in
cash are  credited to the  shareholder's  account at Morgan or at his  financial
professional or, in the case of certain Morgan customers, are mailed by check in
accordance  with the  customer's  instructions.  The Fund  reserves the right to
discontinue, alter or limit the automatic reinvestment privilege at any time.

         If a shareholder has elected to receive  dividends  and/or capital gain
distributions  in cash and the  postal or other  delivery  service  is unable to
deliver  checks to the  shareholder's  address  of  record,  such  shareholder's
distribution  option will  automatically be converted to having all dividend and
other distributions  reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.

NET ASSET VALUE

         The Fund  computes  its net asset  value  separately  for each class of
shares  outstanding  once daily as of the close of trading on the New York Stock
Exchange  (normally 4:00 p.m. eastern time) on each business day as described in
the  Prospectus.  The  net  asset  value  will  not be  computed  on the day the
following  legal holidays are observed:  New Year's Day, Martin Luther King, Jr.
Day,  Presidents' Day, Good Friday,  Memorial Day,  Independence Day, Labor Day,
Thanksgiving  Day, and Christmas  Day. On days when U.S.  trading  markets close
early in  observance  of these  holidays,  the Fund will close for purchases and
redemptions  at the  same  time.  The  Fund may also  close  for  purchases  and
redemptions at such other times as may be determined by the Board of Trustees to
the extent  permitted  by  applicable  law. The days on which net asset value is
determined are the Fund's business days.


         Portfolio  securities  with a maturity of 60 days or more are generally
valued using bid quotations  readily  available from and supplied daily by third
party pricing services or brokers. If such prices are not supplied by the Fund's
third  party  pricing  services,  or  brokers,  such  securities  are  priced in
accordance  with fair value  procedures  adopted by the Trustees.  All portfolio
securities  with a  remaining  maturity  of less than 60 days are  valued by the
amortized cost method.


PERFORMANCE DATA

         From time to time,  the Fund may quote  performance  in terms of yield,
tax equivalent yield, actual distributions, total return or capital appreciation
in reports, sales literature and advertisements  published by the Trust. Current
performance  information  for the Fund may be  obtained  by  calling  the number
provided on the cover page of this Statement of Additional Information. See also
the Prospectus.

         Comparative  performance  information  may be used from time to time in
advertising the Fund's shares,  including  appropriate  market indices including
the benchmarks  indicated under  "Investment  Advisor" above or data from Lipper
Analytical  Services,  Inc., Micropal,  Inc., Ibbotson  Associates,  Morningstar
Inc., the Dow Jones Industrial Average and other industry publications.

         The  classes  of  shares  of the Fund may  bear  different  shareholder
servicing fees and other expenses, which may cause the performance of a class to
differ from the  performance of another class.  Performance  quotations  will be
computed  separately for each class of the Fund's shares. Any fees charged by an
institution  directly to its customers'  accounts in connection with investments
in the Fund will not be included in calculations of total return or yield.

         Yield Quotations. As required by regulations of the SEC, the annualized
yield for the Fund's Select and Institutional shares is computed by dividing net
investment income per share earned during a 30-day period by the net asset value
on the last day of the period.  The average  daily number of shares  outstanding
during the period that are eligible to receive  dividends is used in determining
the net investment income per share. Income is computed by totaling the interest
earned on all debt  obligations  during  the period  and  subtracting  from that
amount the total of all  recurring  expenses  incurred  during the  period.  The
30-day yield is then annualized on a bond-equivalent  basis assuming semi-annual
reinvestment and compounding of net investment income. Annualized tax-equivalent
yield reflects the approximate  annualized yield that a taxable  investment must
earn for shareholders at specified  federal and California  income tax levels to
produce an after-tax yield equivalent to the annualized tax-exempt yield.

         Below  is set  forth  historical  yield  information  for  the  periods
indicated:


     Select Shares: (April 30, 2000): 30-day yield: 4.40%; 30-day tax equivalent
yield at 39.6%; tax rate: (7.28%).

     Institutional  Shares:  (April 30, 2000):  30-day yield:  4.54%; 30-day tax
equivalent yield at 39.6%; tax rate: (7.52%).


         Total Return  Quotations.  The Fund may  advertise  "total  return" and
non-standardized total return data. The total return shows what an investment in
the Fund would have  earned over a  specified  period of time (one,  five or ten
years  or  since  commencement  of  operations,   if  less)  assuming  that  all
distributions  and  dividends by the Fund were  reinvested  on the  reinvestment
dates during the period and less all recurring  fees. This method of calculating
total return is required by  regulations of the SEC. Total return data similarly
calculated, unless otherwise indicated, over other specified periods of time may
also be used. All performance  figures are based on historical  earnings and are
not intended to indicate future performance.

         As required by  regulations of the SEC, the average annual total return
of the Fund for a period is computed by assuming a hypothetical  initial payment
of $1,000. It is then assumed that all of the dividends and distributions by the
Fund over the period are  reinvested.  It is then assumed that at the end of the
period,  the entire amount is redeemed.  The average annual total return is then
calculated by  determining  the annual rate required for the initial  payment to
grow to the amount which would have been received upon redemption.

         Aggregate total returns,  reflecting the cumulative  percentage  change
over a measuring period, may also be calculated.

         Historical performance for periods prior to the establishment of Select
Shares of the Fund will be that of the Institutional Shares of the Fund and will
be presented in  accordance  with  applicable  SEC staff  interpretations.  Such
historical  performance  information may reflect  operating  expenses which were
lower than  those  associated  with  holding  Select  Shares.  Accordingly,  the
historical yield and historical returns for the Select Shares may be higher than
would have occurred if an investment had been made during the indicated  periods
in Institutional Shares of the Fund.

         Below is set forth historical  return  information for the Fund for the
periods indicated:


     Select  Shares:  (April 30, 2000):  Average  annual total  return,  1 year:
(0.60%); average annual total return, 5 years: N/A; average annual total return,
commencement of operations  (April 21, 1997) to period end:  (5.13%);  aggregate
total return, 1 year:  (0.60%);  aggregate total return, 5 years: N/A; aggregate
total  return,  commencement  of  operations  (April  21,  1997) to period  end:
(15.37%).

     Institutional  Shares:  (April 30, 2000):  Average  annual total return,  1
year:  (0.70%);  average annual total return, 5 years: N/A; average annual total
return,  commencement of operations  (December 23, 1996) to period end: (4.48%);
aggregate total return, 1 year:  (0.70%);  aggregate total return, 5 years: N/A;
aggregate total return, commencement of operations (December 23, 1996) to period
end: (15.83%).


         General.  The Fund's  performance will vary from time to time depending
upon  market  conditions,  the  composition  of  the  portfolio,  and  operating
expenses. Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the future.
In addition,  because performance will fluctuate, it may not provide a basis for
comparing  an  investment  in the  Fund  with  certain  bank  deposits  or other
investments that pay a fixed yield or return for a stated period of time.

         From time to time,  the Fund may, in addition to any other  permissible
information,  include the  following  types of  information  in  advertisements,
supplemental  sales literature and reports to  shareholders:  (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost  averaging);  (2)  discussions  of general  economic
trends;  (3)  presentations of statistical data to supplement such  discussions;
(4)  descriptions  of past or anticipated  portfolio  holdings for the Fund; (5)
descriptions  of  investment  strategies  for  the  Fund;  (6)  descriptions  or
comparisons  of various  savings and  investment  products  (including,  but not
limited to, qualified  retirement plans and individual stocks and bonds),  which
may or may  not  include  the  Fund;  (7)  comparisons  of  investment  products
(including  the  Fund)  with  relevant  markets  or  industry  indices  or other
appropriate  benchmarks;   (8)  discussions  of  fund  rankings  or  ratings  by
recognized  rating  organizations;  and (9)  discussions of various  statistical
methods  quantifying the Fund's volatility  relative to its benchmark or to past
performance,  including  risk  adjusted  measures.  The Fund  may  also  include
calculations,   such  as  hypothetical   compounding  examples,  which  describe
hypothetical  investment  results  in  such  communications.   Such  performance
examples will be based on an express set of  assumptions  and are not indicative
of the performance of the Fund.

PORTFOLIO TRANSACTIONS

     The  Advisor  places  orders  for the Fund for all  purchases  and sales of
portfolio  securities,  enters  into  repurchase  agreements  and may enter into
reverse  repurchase  agreements  and execute  loans of portfolio  securities  on
behalf of the Fund. See "Investment Objective and Policies."

         Fixed  income and debt  securities  and  municipal  bonds and notes are
generally  traded at a net price with dealers  acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings,  securities are purchased at a
fixed  price  which  includes  an amount  of  compensation  to the  underwriter,
generally referred to as the underwriter's  concession or discount. On occasion,
certain  securities may be purchased  directly from an issuer,  in which case no
commissions or discounts are paid.

         Portfolio  transactions for the Fund will be undertaken  principally to
accomplish the Fund's objective in relation to expected movements in the general
level of interest rates.  The Fund may engage in short-term  trading  consistent
with  its  objective.  See  "Investment  Objective  and  Policies  --  Portfolio
Turnover".

         In connection  with  portfolio  transactions  for the Fund, the Advisor
intends to seek the best execution on a competitive basis for both purchases and
sales of securities.

         Subject to the overriding  objective of obtaining the best execution of
orders, the Advisor may allocate a portion of the Fund's brokerage  transactions
to affiliates of the Advisor.  Under the 1940 Act,  persons  affiliated with the
Fund and persons  who are  affiliated  with such  persons  are  prohibited  from
dealing with the Fund as principal in the purchase and sale of securities unless
a permissive order allowing such transactions is obtained from the SEC. However,
affiliated   persons  of  the  Fund  may  serve  as  its  broker  in  listed  or
over-the-counter  transactions conducted on an agency basis provided that, among
other  things,  the fee or  commission  received  by such  affiliated  broker is
reasonable and fair compared to the fee or commission received by non-affiliated
brokers in connection with comparable transactions. In addition, the Fund may no
purchase securities during the existence of any underwriting  syndicate for such
securities  of which the  Advisor  or an  affiliate  is a member or in a private
placement in which the Advisor or an affiliate  serves as placement agent except
pursuant to procedures  adopted by the Board of Trustees of the Fund that either
comply with rules adopted by the SEC or with interpretations of the SEC's staff.

         Investment  decisions  made  by the  Advisor  are the  product  of many
factors in addition to basic suitability for the particular fund or other client
in  question.  Thus,  a  particular  security  may be bought or sold for certain
clients  even though it could have been bought or sold for other  clients at the
same time. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the same security.  The Fund may only
sell a security to other  portfolios  or accounts  managed by the Advisor or its
affiliates in accordance with procedures adopted by the Trustees.

         It also  sometimes  happens  that  two or more  clients  simultaneously
purchase or sell the same  security.  On those  occasions when the Advisor deems
the purchase or sale of a security to be in the best  interests of the Fund,  as
well as other clients including other Funds, the Advisor to the extent permitted
by applicable laws and regulations,  may, but is not obligated to, aggregate the
securities  to be sold  or  purchased  for the  Fund  with  those  to be sold or
purchased for other clients in order to obtain best  execution,  including lower
brokerage  commissions  if  appropriate.   In  such  event,  allocation  of  the
securities  so  purchased  or  sold  as well  as any  expenses  incurred  in the
transaction  will be made by the Advisor in the manner it  considers  to be most
equitable and consistent with the Advisor's  fiduciary  obligations to the Fund.
In some instances, this procedure might adversely affect the Fund.

MASSACHUSETTS TRUST

         The Trust is a  "Massachusetts  business  trust" of which the Fund is a
separate and distinct  series.  A copy of the Declaration of Trust for the Trust
is on file in the office of the Secretary of The Commonwealth of  Massachusetts.
Under  Massachusetts  law,  shareholders  of such a  trust  may,  under  certain
circumstances,  be held personally liable as partners for the obligations of the
trust.  However, the Trust's Declaration of Trust provides that the shareholders
will not be subject to any personal liability for the acts or obligations of any
Fund and that every written  agreement,  obligation,  instrument or  undertaking
made on behalf  of any Fund will  contain a  provision  to the  effect  that the
shareholders are not personally liable thereunder.

         Effective  January 1, 1998, the name of the Trust was changed from "JPM
Series Trust" to "J.P.  Morgan Series  Trust";  the name of the Fund was changed
from "California Bond Fund" to "J.P. Morgan California Bond Fund"; and the names
of the shares changed from "JPM Pierpont Shares" and "JPM Institutional  Shares"
to  "Select  Shares"  and  "Institutional  Shares",  respectively.  The  Trust's
Declaration  of Trust further  provides that no Trustee,  Member of the Advisory
Board,  officer,  employee,  or agent of the Trust is liable to the Fund or to a
shareholder,  and  that no  Trustee,  Member  of the  Advisory  Board,  officer,
employee, or agent is liable to any third persons in connection with the affairs
of the Fund,  except as such  liability may arise from his or its own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or its duties
to such third  persons  ("disabling  conduct").  It also provides that all third
persons must look solely to Fund property for  satisfaction of claims arising in
connection  with the  affairs  of the Fund.  The  Trust's  Declaration  of Trust
provides that a Trustee,  Member of the Advisory Board,  officer,  employee,  or
agent is entitled to be indemnified against all liability in connection with the
affairs of the Fund, except liabilities arising from disabling conduct.

         The Trust shall  continue  without  limitation  of time  subject to the
provisions in the Declaration of Trust  concerning  termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.

DESCRIPTION OF SHARES

         The Trust is an open-end  management  investment company organized as a
Massachusetts  business trust in which the Fund  represents a separate series of
shares of beneficial interest. See "Massachusetts Trust."

         The  Declaration  of Trust  permits the  Trustees to issue an unlimited
number of full and  fractional  shares  ($0.001 par value) of one or more series
and classes  within any series and to divide or combine the shares of any series
without changing the  proportionate  beneficial  interest of each shareholder in
the Fund.

         Each share represents an equal  proportional  interest in the Fund with
each other share of the same class.  Upon  liquidation of the Fund,  holders are
entitled  to  share  pro  rata in the  net  assets  of the  Fund  available  for
distribution  to such  shareholders.  Shares of the Fund have no  preemptive  or
conversion  rights.  The rights of redemption  and exchange are described in the
Prospectus and elsewhere in this Statement of Additional Information.

         The  shareholders  of the Trust are entitled to one full or  fractional
vote for each dollar or fraction of a dollar invested in shares.  Subject to the
1940 Act,  the  Trustees  have the power to alter  the  number  and the terms of
office of the Trustees,  to lengthen their own terms,  or to make their terms of
unlimited duration,  subject to certain removal procedures, and to appoint their
own successors,  provided, however, that immediately after such appointment, the
requisite majority of the Trustees must have been elected by the shareholders of
the Trust.  The voting rights of shareholders are not cumulative so that holders
of more than 50% of the shares  voting can, if they  choose,  elect all Trustees
being selected while the shareholders of the remaining shares would be unable to
elect any  Trustees.  It is the  intention of the Trust not to hold  meetings of
shareholders annually. The Trustees may call meetings of shareholders for action
by  shareholder  vote as may be  required  by either the 1940 Act or the Trust's
Declaration of Trust.

         Shareholders  of the Trust  have the  right,  upon the  declaration  in
writing or vote of  shareholders  whose shares  represent  two-thirds of the net
asset value of the Trust, to remove a Trustee.  The Trustees will call a meeting
of  shareholders to vote on removal of a Trustee upon the written request of the
shareholders whose shares represent 10% of the net asset value of the Trust. The
Trustees are also required, under certain circumstances,  to assist shareholders
in communicating with other shareholders.

         For  information  relating to  mandatory  redemption  of Fund shares or
their redemption at the option of the Trust under certain circumstances, see the
Prospectus.


         As of July 31, 2000, the following owned of record or, to the knowledge
of management, beneficially owned more than 5% of the outstanding shares of:

     Select Shares: - Morgan as Agent for J.S. Farrand (14.98%); Morgan as Agent
for G.S. Fuller IRA (13.49%); Morgan as Agent for R.B. Kital (10.08%); Morgan as
Agent for C. G. Emerling (7.04%);  Morgan as Agent for Kitaj Trust (6.60%);  and
P. Padddon c/o Amplicon Inc. (5.49%).

     Institutional  Shares:  - J.P.  Morgan FSB as Agent for E. Kanowsky  Living
Trust (5.92%).

         The address of each owner listed above is c/o JPMIM,  522 Fifth Avenue,
New  York,  New York  10036.  As of the  date of this  Statement  of  Additional
Information  the officers,  Trustees and Member of the Advisory Board as a group
owned less than 1% of the beneficial shares of the Fund.

TAXES

         The following  discussion of tax  consequences is based on U.S. federal
tax laws in  effect on the date of this  Statement  of  Additional  Information.
These  laws  and   regulations   are  subject  to  change  by   legislative   or
administrative action, possibly on a retroactive basis.

         The Fund  intends  to  qualify  and  remain  qualified  as a  regulated
investment  company under  Subchapter M of the Code.  As a regulated  investment
company, the Fund must, among other things, (a) derive at least 90% of its gross
income from  dividends,  interest,  payments  with respect to loans of stock and
securities,  gains from the sale or other  disposition  of stock,  securities or
foreign  currency  and other  income  (including  but not  limited to gains from
options, futures, and forward contracts) derived with respect to its business of
investing in such stock,  securities or foreign currency;  and (b) diversify its
holdings  so that,  at the end of each fiscal  quarter,  (i) at least 50% of the
value of the  Fund's  total  assets  is  represented  by cash,  U.S.  Government
securities,  investments  in other  regulated  investment  companies  and  other
securities  limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets,  and 10% of the outstanding  voting securities of
such  issuer,  and (ii) not more than 25% of the  value of its  total  assets is
invested in the securities of any one issuer (other than U.S.
Government   securities  or  the  securities  of  other   regulated   investment
companies).

         As a  regulated  investment  company,  the  Fund  (as  opposed  to  its
shareholders)  will not be subject to federal income taxes on the net investment
income and capital gains that it distributes to its shareholders,  provided that
at least 90% of its net investment  income and realized net  short-term  capital
gains  in  excess  of net  long-term  capital  losses  for the  taxable  year is
distributed.

         Under  the  Code,  the Fund will be  subject  to a 4%  excise  tax on a
portion of its  undistributed  income if it fails to meet  certain  distribution
requirements  by the  end  of the  calendar  year.  The  Fund  intends  to  make
distributions  in a timely manner and accordingly  does not expect to be subject
to the excise tax.

         For federal  income tax  purposes,  dividends  that are declared by the
Fund in  October,  November  or  December  as of a record date in such month and
actually paid in January of the  following  year will be treated as if they were
paid on  December  31 of the  year  declared.  Therefore,  such  dividends  will
generally be taxable to a shareholder in the year declared  rather than the year
paid.

         The Fund  intends to qualify to pay  exempt-interest  dividends  to its
shareholders  by having,  at the close of each quarter of its taxable  year,  at
least 50% of the value of its total assets consist of tax exempt securities.  An
exempt-interest dividend is that part of dividend distributions made by the Fund
which  consists  of  interest  received  by the Fund on tax  exempt  securities.
Shareholders   will  not  incur  any  federal   income  tax  on  the  amount  of
exempt-interest  dividends  received  by them  from  the  Fund  (other  than the
alternative  minimum  tax in  certain  circumstances).  In  view  of the  Fund's
investment policies,  it is expected that a substantial portion of all dividends
will be  exempt-interest  dividends,  although  the Fund  may from  time to time
realize and  distribute  net  short-term  capital  gains and may invest  limited
amounts in taxable securities under certain circumstances.

         Distributions  of net  investment  income  (other than  exempt-interest
dividends) and realized net short-term  capital gains in excess of net long-term
capital  losses are generally  taxable to  shareholders  of the Fund as ordinary
income whether such  distributions are taken in cash or reinvested in additional
shares. The Fund generally pays a monthly dividend.  If dividend payments exceed
income earned by the Fund, the over distribution would be considered a return of
capital  rather than a dividend  payment.  The Fund intends to pay  dividends in
such a  manner  so as to  minimize  the  possibility  of a  return  of  capital.
Distributions of net long-term  capital gains (i.e., net long-term capital gains
in excess of net short-term  capital  losses) are taxable to shareholders of the
Fund as long-term  capital gains,  regardless of whether such  distributions are
taken in cash or reinvested in  additional  shares and  regardless of how long a
shareholder has held shares in the Fund. In general,  long-term  capital gain of
an individual shareholder will be subject to a 20% rate of tax.

         Gains or losses on sales of  portfolio  securities  will be  treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where,  if  applicable,  a put is acquired or a
call  option is  written  thereon  or the  straddle  rules  described  below are
otherwise  applicable.  Other gains or losses on the sale of securities  will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination  of options on  securities  will be treated as gains and losses from
the sale of securities. If an option written by the Fund lapses or is terminated
through a closing  transaction,  such as a repurchase  by the Fund of the option
from its  holder,  the Fund will  realize  a  short-term  capital  gain or loss,
depending on whether the premium  income is greater or less than the amount paid
by the Fund in the closing transaction.  If securities are purchased by the Fund
pursuant to the exercise of a put option  written by it, the Fund will  subtract
the premium received from its cost basis in the securities purchased.

         Any  distribution  of net investment  income or capital gains will have
the effect of reducing the net asset value of Fund shares held by a  shareholder
by the same amount as the distribution.  If the net asset value of the shares is
reduced  below a  shareholder's  cost as a result  of such a  distribution,  the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described  above.  Investors should thus consider the consequences
of  purchasing  shares in the Fund  shortly  before the Fund  declares a sizable
dividend distribution.


         For  federal  income  tax  purposes,   the  Fund  had  a  capital  loss
carryforward  at April 30, 2000 of  $663,336,  all of which  expires in the year
2008To the extent that this capital loss is used to offset future capital gains,
it is probable that gains to offset will not be distributed to shareholders.


         Any gain or loss realized on the  redemption or exchange of Fund shares
by a shareholder  who is not a dealer in securities will be treated as long-term
capital  gain or loss if the shares  have been held for more than one year,  and
otherwise  as  short-term  capital  gain or loss.  Long-term  capital gain of an
individual  holder is  subject  to maximum  tax rate of 20%.  However,  any loss
realized by a shareholder  upon the redemption or exchange of shares in the Fund
held for six months or less (i) will be treated as a long-term  capital  loss to
the  extent  of  any  long-term  capital  gain  distributions  received  by  the
shareholder  with respect to such  shares,  and (ii) will be  disallowed  to the
extent of any exempt-interest dividends received by the shareholder with respect
to such  shares.  In  addition,  no loss will be  allowed on the  redemption  or
exchange of shares of the Fund, if within a period  beginning 30 days before the
date of such  redemption  or  exchange  and ending 30 days after such date,  the
shareholder acquires (such as through dividend reinvestment) securities that are
substantially  identical to shares of the Fund.  Investors  are urged to consult
their tax advisors  concerning the limitations on the  deductibility  of capital
losses.

         Certain  options and futures held by the Fund at the end of each fiscal
year will be required to be "marked to market" for federal  income tax  purposes
-- i.e.,  treated as having been sold at market  value.  For options and futures
contracts,  60% of any gain or loss  recognized  on these  deemed  sales  and on
actual  dispositions  will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term  capital gain or loss  regardless of how
long the Fund has held such options or futures.

         If a correct and  certified  taxpayer  identification  number is not on
file, the Fund is required,  subject to certain  exemptions,  to withhold 31% of
certain payments made or distributions declared to non-corporate shareholders.

         State and Local Taxes.  The Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business.  In addition,
the treatment of the Fund and its shareholders in those states which have income
tax laws  might  differ  from  treatment  under  the  federal  income  tax laws.
Shareholders  should consult their own tax advisors with respect to any state or
local taxes.

         Other  Taxation.  Under current law,  neither the Trust nor the Fund is
liable for any income or franchise  tax in The  Commonwealth  of  Massachusetts,
provided that the Fund  continues to qualify as a regulated  investment  company
under Subchapter M of the Code.

ADDITIONAL INFORMATION

         Telephone calls to the Fund, J.P. Morgan or a Financial Professional as
shareholder servicing agent may be tape recorded. With respect to the securities
offered hereby,  this Statement of Additional  Information and the Prospectus do
not contain all the information included in the Trust's  registration  statement
filed  with  the SEC  under  the 1933 Act and the  Trust's  and the  Portfolio's
registration  statements  filed  under the 1940 Act.  Pursuant  to the rules and
regulations of the SEC,  certain  portions have been omitted.  The  registration
statement  including the exhibits filed  therewith may be examined at the office
of the SEC in Washington, D.C.

         Statements  contained in this Statement of Additional  Information  and
the Prospectus concerning the contents of any contract or other document are not
necessarily  complete,  and in each  instance,  reference is made to the copy of
such  contract  or  other  document  filed  as  an  exhibit  to  the  applicable
Registration  Statements.  Each such  statement  is qualified in all respects by
such reference.

         No dealer, salesman or any other person has been authorized to give any
information or to make any  representations,  other than those  contained in the
Prospectus and this Statement of Additional Information,  in connection with the
offer  contained  therein  and,  if given or made,  such  other  information  or
representations  must not be relied upon as having been authorized by any of the
Trust,  the  Fund or the  Distributor.  The  Prospectus  and this  Statement  of
Additional  Information  do  not  constitute  an  offer  by the  Fund  or by the
Distributor  to sell or solicit any offer to buy any of the  securities  offered
hereby in any  jurisdiction to any person to whom it is unlawful for the Fund or
the Distributor to make such offer in such jurisdictions.

FINANCIAL STATEMENTS


         The    financial    statements    and    the    report    thereon    of
PricewaterhouseCoopers  LLP are  incorporated  herein by reference to the Fund's
April  30,  2000  annual  report  filing  made  with  the SEC on July  10,  2000
(Accession  Number   0000912057-00-031244).   These  financial   statements  are
available  without charge upon request by calling J.P.  Morgan Funds Services at
(800)  521-5411 for the Select Shares and (800)  766-7722 for the  Institutional
Shares.





<PAGE>

APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA      - Debt rated AAA have the highest ratings assigned by Standard & Poor's
         to a debt  obligation.  Capacity to pay interest and repay principal is
         extremely strong.

AA       - Debt rated AA have a very strong  capacity to pay  interest and repay
         principal  and differ  from the  highest  rated  issues only in a small
         degree.

A        - Debt  rated  A have a  strong  capacity  to pay  interest  and  repay
         principal  although they are somewhat more  susceptible  to the adverse
         effects of changes in circumstances  and economic  conditions than debt
         in higher rated categories.

BBB      - Debt rated BBB are  regarded  as having an  adequate  capacity to pay
         interest and repay  principal.  Whereas they normally  exhibit adequate
         protection   parameters,   adverse  economic   conditions  or  changing
         circumstances  are more  likely to lead to a weakened  capacity  to pay
         interest and repay principal for debt in this category than for debt in
         higher rated categories.

BB       - Debt rated BB are regarded as having less near-term  vulnerability to
         default than other speculative issues. However, they face major ongoing
         uncertainties  or exposure to adverse  business,  financial or economic
         conditions  which  could lead to  inadequate  capacity  to meet  timely
         interest and principal payments.

B        -  An  obligation  rated  B  is  more  vulnerable  to  nonpayment  than
         obligations  rated BB, but the obligor  currently  has the  capacity to
         meet its financial  commitment  on the  obligation.  Adverse  business,
         financial,  or economic  conditions  will likely  impair the  obligor's
         capacity  or  willingness  to  meet  its  financial  commitment  on the
         obligation.

CCC      - An obligation rated CCC is currently vulnerable to nonpayment, and is
         dependent upon favorable business,  financial,  and economic conditions
         for the obligor to meet its financial commitment on the obligation.  In
         the event of adverse business,  financial, or economic conditions,  the
         obligor  is not  likely  to have the  capacity  to meet  its  financial
         commitment on the obligation.

CC - An obligation rated CC is currently highly vulnerable to nonpayment.

C        - The C rating  may be used to  cover a  situation  where a  bankruptcy
         petition has been filed or similar action has been taken,  but payments
         on this obligation are being continued.



<PAGE>


Commercial Paper, including Tax Exempt

A        - Issues  assigned  this  highest  rating  are  regarded  as having the
         greatest  capacity  for timely  payment.  Issues in this  category  are
         further  refined  with the  designations  1, 2, and 3 to  indicate  the
         relative degree of safety.

A-1 - This  designation  indicates  that the degree of safety  regarding  timely
payment is very strong.

A-2 - This  designation  indicates  that the degree of safety  regarding  timely
payment is satisfactory.

A-3 - This  designation  indicates  that the degree of safety  regarding  timely
payment is adequate.

Short-Term Tax-Exempt Notes

SP-1              - The short-term tax-exempt note rating of SP-1 is the highest
                  rating  assigned by Standard & Poor's and has a very strong or
                  strong  capacity to pay principal  and interest.  Those issues
                  determined to possess overwhelming safety  characteristics are
                  given a "plus" (+) designation.

     SP-2 - The  short-term  tax-exempt  note rating of SP-2 has a  satisfactory
capacity to pay principal and interest. MOODY'S

Corporate and Municipal Bonds

Aaa      - Bonds which are rated Aaa are judged to be of the best quality.  They
         carry the smallest degree of investment risk and are generally referred
         to as "gilt edge." Interest  payments are protected by a large or by an
         exceptionally  stable margin and principal is secure. While the various
         protective  elements  are  likely to  change,  such  changes  as can be
         visualized  are  most  unlikely  to  impair  the  fundamentally  strong
         position of such issues.

Aa       - Bonds  which are rated Aa are  judged  to be of high  quality  by all
         standards. Together with the Aaa group they comprise what are generally
         known as high  grade  bonds.  They are rated  lower than the best bonds
         because  margins of protection may not be as large as in Aaa securities
         or  fluctuation of protective  elements may be of greater  amplitude or
         there may be other  elements  present  which  make the long term  risks
         appear somewhat larger than in Aaa securities.

A        - Bonds which are rated A possess many favorable investment  attributes
         and are to be  considered  as upper medium grade  obligations.  Factors
         giving  security to principal and interest are considered  adequate but
         elements may be present  which suggest a  susceptibility  to impairment
         sometime in the future.

Baa      - Bonds which are rated Baa are considered as medium grade obligations,
         i.e., they are neither highly  protected nor poorly  secured.  Interest
         payments and  principal  security  appear  adequate for the present but
         certain protective elements may be lacking or may be characteristically
         unreliable over any great length of time.  Such bonds lack  outstanding
         investment characteristics and in fact have speculative characteristics
         as well.

Ba       - Bonds  which are rated Ba are  judged to have  speculative  elements;
         their future cannot be considered as well-assured. Often the protection
         of interest and principal  payments may be very  moderate,  and thereby
         not well  safeguarded  during  both good and bad times over the future.
         Uncertainty of position characterizes bonds in this class.

B        -  Bonds  which  are  rated B  generally  lack  characteristics  of the
         desirable  investment.  Assurance of interest and principal payments or
         of  maintenance  of other terms of the contract over any long period of
         time may be small.

Caa      - Bonds which are rated Caa are of poor standing. Such issues may be in
         default  or there may be present  elements  of danger  with  respect to
         principal or interest.

Ca       - Bonds which are rated Ca represent  obligations which are speculative
         in a high degree. Such issues are often in default or have other marked
         shortcomings.

C        - Bonds  which  are  rated C are the  lowest  rated  class of bonds and
         issues so rated can be regarded as having  extremely  poor prospects of
         ever attaining any real investment standing.

Commercial Paper, including Tax Exempt

Prime-1           - Issuers rated Prime-1 (or related  supporting  institutions)
                  have  a  superior   capacity  for   repayment  of   short-term
                  promissory   obligations.   Prime-1  repayment  capacity  will
                  normally be evidenced by the following characteristics:

     - Leading market positions in well established industries.  - High rates of
return on funds employed. - Conservative capitalization structures with moderate
reliance  on debt and  ample  asset  protection.  - Broad  margins  in  earnings
coverage of fixed financial  charges and high internal cash  generation.  - Well
established  access to a range of  financial  markets  and  assured  sources  of
alternate liquidity.

Prime-2           Issuers  rated  Prime-2 (or  supporting  institutions)  have a
                  strong  ability  for  repayment  of  senior   short-term  debt
                  obligations.  This will  normally be  evidenced by many of the
                  characteristics  cited above but to a lesser degree.  Earnings
                  trends and coverage  ratios,  while sound, may be more subject
                  to  variation.  Capitalization  characteristics,  while  still
                  appropriate,  may be more  affected  by  external  conditions.
                  Ample alternate liquidity is maintained.

Prime-3           Issuers rated  Prime-3 (or  supporting  institutions)  have an
                  acceptable   ability  for   repayment  of  senior   short-term
                  obligations. The effect of industry characteristics and market
                  compositions may be more  pronounced.  Variability in earnings
                  and  profitability  may result in changes in the level of debt
                  protection   measurements  and  may  require  relatively  high
                  financial   leverage.    Adequate   alternate   liquidity   is
                  maintained.

Short-Term Tax Exempt Notes

MIG-1             - The short-term  tax-exempt  note rating MIG-1 is the highest
                  rating  assigned  by Moody's  for notes  judged to be the best
                  quality.  Notes with this rating enjoy strong  protection from
                  established  cash flows of funds for their  servicing  or from
                  established   and   broad-based   access  to  the  market  for
                  refinancing, or both.

     MIG-2 -  MIG-2  rated  notes  are of  high  quality  but  with  margins  of
protection not as large as MIG-1.


<PAGE>



APPENDIX B

Additional Information Concerning California Municipal Securities


         The following  information  is a summary of special  factors  affecting
investments  in  California  Municipal  Securities.  It does not purport to be a
complete  description  and is  based on  information  drawn  from  the  Official
Statement  issued by the State of  California  (the "State") for its public bond
issue on December 1, 1999.  While the Fund has not  independently  verified this
information, it has no reason to believe that such information is not correct in
all material respects.

State Finances

The Budget Process

         The State's fiscal year begins on July 1 and ends on June 30. The State
operates on a budget basis, using a modified accrual system of accounting,  with
revenues  credited in the period in which they are  measurable and available and
expenditures  debited in the period in which the  corresponding  liabilities are
incurred.

         The annual  budget is  proposed  by the  Governor by January 10 of each
year for the next fiscal year (the  "Governor's  Budget").  Under State law, the
annual proposed  Governor's Budget cannot provide for projected  expenditures in
excess of projected  revenues and balances  available  from prior fiscal  years.
Following the submission of the Governor's  Budget, the Legislature takes up the
proposal.

         Under the State Constitution, money may be drawn from the Treasury only
through  an  appropriation  made  by  law.  The  primary  source  of the  annual
expenditure  authorizations is the Budget Act as approved by the Legislature and
signed by the Governor. The Budget Act must be approved by a two-thirds majority
vote of each House of the  Legislature.  The  Governor  may reduce or  eliminate
specific line items in the Budget Act or any other  appropriations  bill without
vetoing  the entire  bill.  Such  individual  line-item  vetoes  are  subject to
override by a two-thirds majority vote of each House of the Legislature.

         Appropriations  also may be  included  in  legislation  other  than the
Budget Act.  Bills  containing  appropriations  (except  for K-12 and  community
college  ("K-14")  education) must be approved by a two-thirds  majority vote in
each House of the  Legislature and be signed by the Governor.  Bills  containing
K-14  education  appropriations  require  a  simple  majority  vote.  Continuing
appropriations, available without regard to fiscal year, also may be provided by
statute or the State  Constitution.  There is litigation  pending concerning the
validity of such continuing appropriations. See "Litigation" below.

         Funds  necessary  to meet an  appropriation  need  not be in the  State
Treasury at the time such appropriation is enacted; revenues may be appropriated
in anticipation of their receipt.

The General Fund

         The moneys of the State are  segregated  into the General Fund and over
900 special funds,  including  bond,  trust and pension funds.  The General Fund
consists of revenues  received by the State  Treasury and not required by law to
be credited to any other fund, as well as earnings from the  investment of State
moneys  not  allocable  to  another  fund.  The  General  Fund is the  principal
operating fund for the majority of governmental activities and is the depository
of most of the major  revenue  sources of the  State.  The  General  Fund may be
expended as a consequence of  appropriation  measures enacted by the Legislature
and  approved by the  Governor,  as well as  appropriations  pursuant to various
constitutional authorizations and initiative statutes.

The Special Fund for Economic Uncertainties

         The Special  Fund for  Economic  Uncertainties  ("SFEU") is funded with
General Fund revenues and was  established to protect the State from  unforeseen
revenue reductions and/or unanticipated  expenditure  increases.  Amounts in the
SFEU may be transferred by the State  Controller as necessary to meet cash needs
of the General  Fund.  The State  Controller  is  required  to return  moneys so
transferred  without payment of interest as soon as there are sufficient  moneys
in the General  Fund. At the time of signing of the 1999 Budget Act, on June 29,
1999, the Department of Finance projected the SFEU would have a balance of about
$1.932  billion at June 30, 1999,  compared to the original  budgeted  amount of
$1.1 billion. The 1999 Budget Act projects a balance in the SFEU of $880 million
at June 30, 2000. See "Current State Budget" below.

Inter-Fund Borrowings

         Inter-fund  borrowing  has been used for many  years to meet  temporary
imbalances  of receipts and  disbursements  in the General  Fund. As of June 30,
1999,  the General  Fund had no  outstanding  loans from the SFEU,  General Fund
special  accounts or other special funds. At the November 1998 election,  voters
approved  Proposition  2. This  proposition  requires  the General Fund to repay
loans  made from  certain  transportation  special  accounts  (such as the State
Highway  Account) at least once per fiscal year, or up to 30 days after adoption
of the  annual  budget  act.  Since  the  General  Fund  may  reborrow  from the
transportation accounts soon after the annual repayment is made, the proposition
is not expected to have any adverse impact on the State's cash flow.

Welfare Reform

         Congress  passed and the  President  signed  (on  August 22,  1996) the
Personal  Responsibility  and Work Opportunity  Reconciliation Act of 1996 (P.L.
104-193, the "Welfare Reform Law") fundamentally  reforming the nation's welfare
system.  Among  its many  provisions,  the  Welfare  Reform  Law  includes:  (1)
conversion  of Aid to  Families  with  Dependent  Children  from an  entitlement
program to a block grant titled Temporary  Assistance for Needy Families (TANF),
with time limits on TANF recipients,  work requirements and other changes;  (ii)
provisions  denying  certain  federal  welfare  and  public  benefits  to  legal
noncitizens  (this  provision  has been  amended  by  subsequent  federal  law),
allowing states to elect to deny additional  benefits  (including TANF) to legal
noncitizens,  and generally  denying almost all benefits to illegal  immigrants;
and (iii) changes in the Food Stamp program, including reducing maximum benefits
and imposing work requirements.

         California's  response  to the federal  welfare  reforms is embodied in
Chapter 270,  Statutes of 1997 and is called  California  Work  Opportunity  and
Responsibility to Kids  ("CalWORKs"),  which replaced the former Aid to Families
with  Dependent  Children  (AFDC) and  Greater  Avenues to  Independence  (GAIN)
programs,  effective  January 1, 1998.  Consistent  with the Welfare Reform Law,
CalWORKs  contains new time limits on receipt of welfare aid,  both  lifetime as
well as for any  current  period on aid.  The  centerpiece  of  CalWORKs  is the
linkage of eligibility to work participation requirements. Administration of the
new  CalWORKs  program is largely at the county  level,  and  counties are given
financial incentives for success in this program.

         The long-term  impact of the Welfare Reform Law and CalWORKs  cannot be
determined  until  there  has been  more  experience  and  until an  independent
evaluation  of  the  CalWORKs  program  is  completed.  In the  short-term,  the
implementation  of the  CalWORKs  program has  continued  the trend of declining
welfare caseloads. The CalWORKs caseload trend is projected to have been 646,000
in 1998-99  and to be 602,000 in 1999-00,  down from a high of 921,000  cases in
1994-95.

         The 1999 Budget Act proposes  expenditures which will continue to meet,
but not exceed,  the  federally-required  $2.9 billion combined State and county
maintenance-of-effort   requirement.  Total  CalWORKs-related  expenditures  are
estimated to be $7.3 billion for 1998-99 and $7.3 billion for 1999-00, including
child care transfer amounts for the Department of Education.

Local Governments

         The primary units of local  government in California  are the counties,
ranging in  population  from  1,200 in Alpine  County to over  9,600,000  in Los
Angeles  County.  Counties  are  responsible  for the  provision  of many  basic
services,  including indigent health care,  welfare,  jails and public safety in
unincorporated areas. There also are about 470 incorporated cities and thousands
of special  districts  formed for  education,  utility and other  services.  The
fiscal condition of local  governments has been constrained  since the enactment
of  "Proposition  13" in 1978,  which  reduced and limited the future  growth of
property taxes and limited the ability of local  governments to impose  "special
taxes" (those devoted to a specific purpose) without  two-thirds voter approval.
Counties,  in  particular,  have had fewer  options to raise  revenues than many
other  local  government  entities,  and have been  required  to  maintain  many
services.

         In the  aftermath of  Proposition  13, the State  provided aid to local
governments  from the General  Fund to make up some of the loss of property  tax
moneys,  including  taking over the  principal  responsibility  for funding K-12
schools and community colleges. During the recession, the Legislature eliminated
most of the remaining  components of post-Proposition 13 aid to local government
entities other than K-14 education districts by requiring cities and counties to
transfer some of their property tax revenues to school districts.  However,  the
Legislature also provided  additional  funding sources (such as sales taxes) and
reduced  certain  mandates for local  services.  Since then,  the State also has
provided  additional  funding to counties and cities  through  such  programs as
health and welfare realignment,  welfare reform, trial court restructuring,  the
COPs program  supporting  local public  safety  departments,  and various  other
measures.

         The 1999 Budget Act includes a $150 million  one-time  subvention  from
the General Fund to local  agencies  for relief from the 1992 and 1993  property
tax  shifts.  Legislation  has been  passed,  subject to voter  approval  at the
election  in  November  2000,  to  provide  a more  permanent  payment  to local
governments  to offset the property  tax shift.  In  addition,  legislation  was
enacted in 1999 to provide  annually up to $50 million relief to cities based on
1997-98 costs of jail booking and processing fees paid to counties.

         Historically,  funding for the State's  trial court  system was divided
between the State and the  counties.  However,  Chapter  850,  Statutes of 1997,
implemented a restructuring  of the State's trial court funding system.  Funding
for the courts,  with the  exception  of costs for  facilities,  local  judicial
benefits,  and revenue  collection,  was  consolidated  at the State level.  The
county  contribution for both their general fund and fine and penalty amounts is
capped at the  1994-95  level and  becomes  part of the Trial  Court Trust Fund,
which supports all trial court operations.  The State assumed responsibility for
future growth in trial court funding.  The  consolidation of funding is intended
to streamline the operation of the courts,  provide a dedicated  revenue source,
and relieve fiscal  pressure on the counties.  Beginning in 1998-99,  the county
general fund  contribution for court operations is reduced by $300 million,  and
cities will retain $62 million in fine and penalty revenue  previously  remitted
to the State.  The General Fund  reimbursed the $362 million revenue loss to the
Trial Court Trust Fund. The 1999 Budget Act includes funds to further reduce the
county General Fund contribution by an additional $96 million by reducing by 100
percent the contributions of the next 18 smallest counties and by 10 percent the
General Fund contribution of the remaining 21 counties.

         The entire statewide welfare system has been changed in response to the
change in federal  welfare law  enacted in 1996 (see  "Welfare  Reform"  above).
Under the CalWORKs program,  counties are given flexibility to develop their own
plans,  consistent  with State law, to implement  the program and to  administer
many of its elements, and their costs for administrative and supportive services
are capped at the 1996-97 levels.  Counties also are given financial  incentives
if, at the individual  county level or statewide,  the CalWORKs program produces
savings associated with specified standards.  Counties will still be required to
provide  "general  assistance"  aid to certain persons who cannot obtain welfare
from other programs.

         In 1996,  voters approved  Proposition 218, entitled the "Right to Vote
on  Taxes  Act,"  which  incorporates  new  Articles  XIII C and XIII D into the
California  Constitution.  These new provisions place limitations on the ability
of local government agencies to impose or raise various taxes, fees, charges and
assessments  without  voter  approval.  Certain  "general  taxes"  imposed after
January  1, 1995 must be  approved  by voters in order to remain in  effect.  In
addition,  Article XIII C clarifies  the right of local voters to reduce  taxes,
fees, assessments or charges through local initiatives. Proposition 218 does not
affect the State or its ability to levy or collect taxes.

State Appropriations Limit

         The State is  subject  to an annual  appropriations  limit  imposed  by
Article  XIII B of the State  Constitution  (the  "Appropriations  Limit").  The
Appropriations  Limit does not  restrict  appropriations  to pay debt service on
voter-authorized bonds.

         Article  XIII B  prohibits  the  State  from  spending  "appropriations
subject to limitation" in excess of the  Appropriations  Limit.  "Appropriations
subject to limitation,"  with respect to the State, are  authorizations to spend
"proceeds of taxes,"  which  consist of tax  revenues,  and certain other funds,
including proceeds from regulatory  licenses,  user charges or other fees to the
extent that such proceeds  exceed "the cost  reasonably  borne by that entity in
providing the  regulation,  product or service," but "proceeds of taxes" exclude
most state  subventions  to local  governments,  tax  refunds  and some  benefit
payments such as unemployment  insurance.  No limit is imposed on appropriations
of funds which are not "proceeds of taxes," such as  reasonable  user charges or
fees and certain other non-tax funds.

         Not included in the  Appropriations  Limit are  appropriations  for the
debt  service  costs of bonds  existing  or  authorized  by January 1, 1979,  or
subsequently  authorized by the voters,  appropriations  required to comply with
mandates  of courts or the  federal  government,  appropriations  for  qualified
capital outlay projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle  weight fees above January 1, 1990 levels,  and
appropriation  of certain special taxes imposed by initiative  (e.g.,  cigarette
and  tobacco  taxes).  The  Appropriations  Limit  may be  exceeded  in cases of
emergency.
         The State's Appropriations Limit in each year is based on the limit for
the prior  year,  adjusted  annually  for  changes in state per capita  personal
income  and  changes in  population,  and  adjusted,  when  applicable,  for any
transfer of financial  responsibility  of providing  services to or from another
unit of government or any transfer of the financial source for the provisions of
services from tax proceeds to non tax  proceeds.  The  measurement  of change in
population is a blended  average of statewide  overall  population  growth,  and
change in attendance at local K-14 school districts. The Appropriations Limit is
tested over consecutive  two-year periods. Any excess of the aggregate "proceeds
of taxes" received over such two-year  period above the combined  Appropriations
Limits for those two years is divided equally  between  transfers to K-14 school
districts and refunds to taxpayers.

         The  Legislature  has enacted  legislation to implement  Article XIII B
which  defines  certain  terms used in Article XIII B and sets forth the methods
for determining the  Appropriations  Limit.  California  Government Code Section
7912  requires  an estimate  of the  Appropriations  Limit to be included in the
Governor's  Budget,  and  thereafter  to be subject to the  budget  process  and
established in the Budget Act.

         The following table shows the State's Appropriations Limit for the past
four fiscal  years and the  current  fiscal  year.  As of the  enactment  of the
1999-2000 Budget, the Department of Finance projects the State's  Appropriations
Subject to  Limitations  will be $6.1 billion  under the State's  Appropriations
Limit in Fiscal Year 1999-00.

State Appropriations Limit
(Millions)
<TABLE>
<CAPTION>
<S>                                            <C>              <C>          <C>                <C>       <C>

                                           Fiscal Years
                                           1995-96         1996-97        1997-98        1998-99*       1999-00*
------------------------------------------

------------------------------------------
State Appropriations Limit                 $39,309         $42,002        $44,778        $47,573        $50,673
------------------------------------------
Appropriations Subject to Limit            (34,186)        (35,103)       (40,743)       (42,674)       (44,528)
                                           --------        --------       --------       --------       --------
------------------------------------------

------------------------------------------
Amount (Over)/Under Limit                  $5,123          $6,899         $4,035         $4,899         $6,145
                                           ======          ======         ======         ======         ======
------------------------------------------
</TABLE>

---------------------
* Estimated/Projected

SOURCE: State of California, Department of Finance.

Proposition 98

         On November 8, 1988,  voters of the State  approved  Proposition  98, a
combined initiative  constitutional  amendment and statute called the "Classroom
Instructional  Improvement and Accountability Act." Proposition 98 changed State
funding of public  education below the university level and the operation of the
State  Appropriations  Limit,  primarily by guaranteeing  K-14 schools a minimum
share of General Fund revenues. Under Proposition 98 (as modified by Proposition
111, which was enacted on June 5, 1990), K-14 schools are guaranteed the greater
of (a) in general,  a fixed percent of General Fund revenues ("Test 1"), (b) the
amount  appropriated to K-14 schools in the prior year,  adjusted for changes in
the cost of living  (measured  as in Article  XIII B by  reference  to State per
capita personal  income) and enrollment  ("Test 2"), or (c) a third test,  which
would  replace  Test 2 in any year  when the  percentage  growth  in per  capita
General Fund  revenues  from the prior year plus one half of one percent is less
than the percentage growth in State per capita personal income ("Test 3"). Under
Test 3, schools would receive the amount appropriated in the prior year adjusted
for  changes  in  enrollment  and per  capita  General  Fund  revenues,  plus an
additional  small  adjustment  factor.  If  Test  3 is  used  in any  year,  the
difference  between Test 3 and Test 2 would  become a "credit" to schools  which
would be the basis of  payments  in future  years when per capita  General  Fund
revenue growth exceeds per capita  personal income growth.  Legislation  adopted
prior  to the end of the  1988-89  Fiscal  Year,  implementing  Proposition  98,
determined the K-14 schools'  funding  guarantee under Test 1 to be 40.3 percent
of the General Fund tax revenues, based on 1986-87 appropriations. However, that
percent  has  been  adjusted  to  approximately  35  percent  to  account  for a
subsequent  redirection of local property taxes, since such redirection directly
affects the share of General Fund revenues to schools.

         Proposition  98 permits  the  Legislature  by  two-thirds  vote of both
Houses,  with the Governor's  concurrence,  to suspend the K-14 schools' minimum
funding formula for a one-year period.  Proposition 98 also contains  provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools. See "State Finances--State Appropriations Limit" above.

         During the  recession  in the early 1990s,  General  Fund  revenues for
several  years  were  less  than  originally  projected,  so that  the  original
Proposition  98  appropriations  turned  out  to  be  higher  than  the  minimum
percentage provided in the law. The Legislature  responded to these developments
by designating the "extra"  Proposition 98 payments in one year as a "loan" from
future years'  Proposition 98  entitlements,  and also intended that the "extra"
payments  would not be included  in the  Proposition  98 "base" for  calculating
future years'  entitlements.  By implementing  these actions,  per-pupil funding
from Proposition 98 sources stayed almost constant at approximately  $4,200 from
Fiscal Year 1991-92 to Fiscal Year 1993-94.

         In 1992,  a lawsuit  was filed,  California  Teachers'  Association  v.
Gould,  which challenged the validity of these off-budget  loans. The settlement
of this case,  finalized in July 1996,  provides,  among other things, that both
the State and K-14 schools  share in the  repayment  of prior  years'  emergency
loans to  schools.  Of the total $1.76  billion in loans,  the State is repaying
$935 million by  forgiveness  of the amount owed,  while schools will repay $825
million.  The State share of the repayment will be reflected as an appropriation
above the current  Proposition  98 base  calculation.  The schools' share of the
repayment  will  count  as  appropriations  that  count  toward  satisfying  the
Proposition  98  guarantee,  or from "below" the current  base.  Repayments  are
spread over the  eight-year  period of 1994-95  through  2001-02 to mitigate any
adverse fiscal impact.

         Substantially  increased  General Fund  revenues,  above initial budget
projections,  in the fiscal  years  1994-95  through  1998-99  have  resulted in
retroactive  increases in Proposition 98  appropriations  from subsequent fiscal
years' budgets. Because of the State's increasing revenues, per-pupil funding at
the K-12 level has  increased  by about 44 percent  from the level in place from
1991-92  through  1993-94.  A significant  amount of the "extra"  Proposition 98
monies  in  the  last  few  years  has  been  allocated  to  special   programs,
particularly an initiative to allow each classroom with respect to grades K-3 to
have no more than 20 pupils by the end of the  1997-98  school  year.  Since the
State expects General Fund revenue growth to continue in 1999-00, there also are
new initiatives to increase school safety,  improve schools'  accountability for
pupil  performance,  provide  additional  textbooks  to schools,  fund  deferred
maintenance   projects,   increase  beginning  teacher's  salaries  and  provide
performance  incentives  to  teachers.  See "Current  State  Budget" for further
discussion of education funding.

Prior Fiscal Years' Financial Results

          The State's  financial  condition  improved markedly during the fiscal
years starting in 1995-96,  with a combination of better than expected revenues,
slowdown in growth of social welfare programs,  and continued spending restraint
based on  actions  taken in  earlier  years.  The  State's  cash  position  also
improved,  and no external deficit  borrowing  occurred over the end of the last
four fiscal  years.  The last  borrowing to spread out the repayment of a budget
deficit over the end of a fiscal year was $4.0  billion of revenue  anticipation
warrants issued in July 1994 and which matured in April 1996.

          The State economy grew strongly  during the fiscal years  beginning in
1995-96  and, as a result,  the General Fund took in  substantially  greater tax
revenues  (around  $2.2  billion in  1995-96,  $1.6  billion in 1996-97 and $2.4
billion in 1997-98 and $1.0 billion in 1998-99) than were initially planned when
the budgets were  enacted.  The  accumulated  budget  deficit from the recession
years was finally  eliminated  with the  repayment  of the revenue  anticipation
warrants in April 1996.  These  additional funds were largely directed to school
spending as mandated  by  Proposition  98, to make up  shortfalls  from  reduced
federal  health and  welfare aid in 1995-96  and  1996-97  and  particularly  in
1998-99 to fund new program incentives.

          The following  were major  features of the 1998 Budget Act and certain
additional fiscal bills enacted before the end of the legislative session:

          1. The most significant feature of the 1998-99 budget was agreement on
a total of $1.4  billion  of tax cuts.  The  central  element  was a bill  which
provided for a phased-in reduction of the Vehicle License Fee ("VLF"). Since the
VLF is  transferred to cities and counties under existing law, the bill provided
for the General Fund to replace the lost revenues.  Starting on January 1, 1999,
the VLF has  been  reduced  by 25  percent,  at a cost  to the  General  Fund of
approximately  $500  million  in the  1998-99  Fiscal  Year and about $1 billion
annually thereafter.

          In  addition  to the cut in VLF,  the  1998-99  budget  included  both
temporary and permanent  increases in the personal  income tax dependent  credit
($612  million  General  Fund  cost in  1998-99,  but less in future  years),  a
nonrefundable  renters tax credit ($133 million),  and various targeted business
tax credits ($106 million).

          2.  Proposition  98 funding  for K-14  schools was  increased  by $1.7
billion in General Fund moneys over revised  1997-98  levels,  over $300 million
higher than the minimum  Proposition 98 guarantee.  Of the 1998-99 funds,  major
new programs included money for instructional  and library  materials,  deferred
maintenance, support for increasing the school year to 180 days and reduction of
class sizes in Grade 9. The Budget also  included  $250  million as repayment of
prior  years'  loans to schools,  as part of the  settlement  of the  California
Teachers'  Association v. Gould lawsuit.  See "State  Finances - Proposition 98"
above.

          3.  Funding for higher  education  increased  substantially  above the
actual 1997-98  level.  General Fund support was increased by $340 million (15.6
percent) for the  University of California  and $267 million (14.1  percent) for
the California State University system. In addition,  Community Colleges funding
increased by $300 million (6.6 percent).

          4. The Budget  included  increased  funding  for  health,  welfare and
social services programs. A 4.9 percent grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years.

          5. Funding for the judiciary and criminal justice  programs  increased
by about 11 percent over 1997-98,  primarily to reflect  increased State support
for local trial courts and rising prison population.

          6. Major  legislation  enacted  after the 1998 Budget Act included new
funding  for  resources  projects,  a share of the  purchase  of the  Headwaters
Forest,  funding  for the  Infrastructure  and  Economic  Development  Bank ($50
million) and funding for the  construction  of local jails.  The State  realized
savings of $433  million  from a reduction  in the State's  contribution  to the
State Teacher's Retirement System in 1998-99.

          The revised 1999-2000 Governor's Budget, released on May 14, 1999 (the
"1999 May Revision"),  reported that stronger than expected economic  conditions
in the  State for the  latter  part of 1998 and into 1999  would  produce  total
1998-99 General Fund revenues of about $57.9 billion,  almost $1.0 billion above
the 1998 Budget Act estimates  and $1.6 billion  above the initial  estimates in
the January 1999-2000 Governor's Budget. The 1999 May Revision projected 1998-99
General Fund  expenditures of $58.6 billion,  about $400 million higher than the
January 1999-2000  Governor's Budget estimate.  Some of this additional  revenue
will be  directed  to K-14  schools  pursuant  to  Proposition  98. The 1999 May
Revision  projected a balance in the SFEU at June 30, 1999 of approximately $1.9
billion, $1.3 billion higher than estimated in January 1999.

Current State Budget

          The discussion below of the 1999-00 Fiscal Year budget is based on the
State's  estimates and projections of revenues and  expenditures for the current
fiscal year and must not be construed as statements of fact. These estimates and
projections  are based upon  various  assumptions  as updated in the 1999 Budget
Act,  which may be affected  by  numerous  factors,  including  future  economic
conditions in the State and the nation,  and there can be no assurance  that the
estimates will be achieved.

1999-2000 Fiscal Year Budget

         On January 8, 1999, the Governor  released a proposed budget for Fiscal
Year 1999-00 (the "January  Governor's  Budget").  The January Governor's Budget
generally reported that General Fund revenues for Fiscal Year 1998-99 and Fiscal
Year 1999-00 would be lower than earlier  projections  (primarily  due to weaker
overseas economic conditions perceived in late 1998), while some caseloads would
be higher than earlier projections. The January Governor's Budget proposed $60.5
billion of General Fund expenditures in Fiscal Year 1999-00, with a $415 million
SFEU reserve at June 30, 2000.

         The 1999 May Revision showed an additional $4.3 billion of revenues for
combined fiscal years 1998-99 and 1999-00.  The final Budget Bill was adopted by
the  Legislature  on June 16,  1999,  and was signed by the Governor on June 29,
1999 (the "1999 Budget  Act"),  meeting the  Constitutional  deadline for budget
enactment for only the second time in the 1990's.

         The final 1999 Budget Act estimated General Fund revenues and transfers
of $63.0 billion,  and contained  expenditures  totaling $63.7 billion after the
Governor  used  the  line-item  veto  to  reduce  the  legislative  Budget  Bill
expenditures  by $581 million  (both  General Fund and Special  Fund).  The 1999
Budget Act also contained  expenditures  of $16.1 billion from special funds and
$1.5 billion from bond funds. The  Administration  estimated that the SFEU would
have a balance at June 30,  2000,  of about $880  million.  Not included in this
amount was an additional  $300 million which (after the  Governor's  vetoes) was
"set aside" to provide funds for employee salary  increases (to be negotiated in
bargaining with employee unions), and for litigation  reserves.  The 1999 Budget
Act anticipates normal cash flow borrowing during the fiscal year.

         The principal features of the 1999 Budget Act include the following:

         1.  Proposition  98 funding  for K-12  schools  was  increased  by $1.6
billion in General  Fund moneys over  revised  1998-99  levels,  $108.6  million
higher than the minimum  Proposition 98 guarantee.  Of the 1999-00 funds,  major
new programs  included  money for reading  improvement,  new  textbooks,  school
safety,  improving teacher quality,  funding teacher bonuses,  providing greater
accountability  for school  performance,  increasing  preschool and after school
care programs and funding deferred maintenance of school facilities.  The Budget
also  includes  $310 million as  repayment of prior years' loans to schools,  as
part of the settlement of the California Teachers' Association v.
Gould lawsuit. See also "State Finances - Proposition 98" above.

         2.  Funding  for higher  education  increased  substantially  above the
actual  1998-99  level.  General Fund support was increased by $184 million (7.3
percent) for the University of California and $126 million (5.9 percent) for the
California  State University  system.  In addition,  Community  Colleges funding
increased by $324.3 million (6.6 percent). As a result, undergraduate fees at UC
and CSU will be reduced for the second consecutive year, and the per-unit charge
at Community Colleges will be reduced by $1.

         3. The Budget  included  increased  funding of nearly $600  million for
health and human services.

         4. About $800  million  from the General  Fund will be directed  toward
infrastructure  costs,  including  $425  million in  additional  funding for the
Infrastructure  Bank,  initial  planning  costs for a new prison in the  Central
Valley,  additional  equipment  for train  and ferry  service,  and  payment  of
deferred maintenance for state parks.

         5. The  Legislature  enacted  a  one-year  additional  reduction  of 10
percent of the VLF for calendar  year 2000, at a General Fund cost of about $250
million in each of Fiscal Year  1999-00 and Fiscal Year  2000-01 to make up lost
funding  to  local  governments.  Conversion  of this  one-time  reduction  to a
permanent  cut will  remain  subject  to the  revenue  tests in the  legislation
adopted last year.  Several other targeted tax cuts,  primarily for  businesses,
also were approved at a cost of $54 million in Fiscal Year 1999-00.

         6. A one-time appropriation of $150 million, to be split between cities
and  counties,  was made to offset  property tax shifts during the early 1990's.
Additionally,  an ongoing $50 million was appropriated as a subvention to cities
for jail  booking or  processing  fees  charged by counties  when an  individual
arrested by city personnel is taken to a county detention facility.


Economy and Population

Introduction

         California's  economy,  the largest  among the 50 states and one of the
largest  in  the  world,  has  major  components  in  high  technology,   trade,
entertainment,  agriculture,  manufacturing, tourism, construction and services.
Since 1994,  California's economy has been performing strongly after suffering a
deep recession between 1990-94.




Population and Labor Force

     The State's July 1, 1998 population of over 33.4 million  represented  over
12 percent of the total United States population.

         California's  population is concentrated  in metropolitan  areas. As of
the April 1, 1990 census, 96 percent resided in the 23 Metropolitan  Statistical
Areas in the State.  As of July 1, 1998, the 5-county Los Angeles area accounted
for 49 percent of the State's population,  with over 16.0 million residents, and
the 10-county San Francisco Bay Area  represented 21 percent,  with a population
of over 7.0 million.

         The following table shows California's population data for 1994 through
1998.

Population 1994-98
<TABLE>
<CAPTION>
<S>                       <C>                  <C>                <C>             <C>               <C>

                                         % Increase                             % Increase
                                         Over                                   Over                California
                      California         Preceding           United States      Preceding           as % of
Year                  Population(a)      Year                Population(a)      Year                United States

1994                  31,790,000         0.9                 260,292,000        1.0                 12.2
1995                  32,063,000         0.9                 262,761,000        0.9                 12.2
1996                  32,383,000         1.0                 265,179,000        0.9                 12.2
1997                  32,957,000         1.8                 267,636,000        0.9                 12.3
1998                  33,494,000         1.6                 270,029,000        0.9                 12.4

--------------------
</TABLE>

(a) Population as of July 1.

     SOURCE:  U.S.  Department  of  Commerce,  Bureau  of the  Census;  State of
California, Department of Finance.

         The following table presents civilian labor force data for the resident
population, age 16 and over, for the years 1993 to 1998.

Labor Force
1993-98

<TABLE>
<CAPTION>
<S>                            <C>                                                      <C>

                Labor Force Trends (Thousands)                        Unemployment Rate (%)

                Labor                                                                       United
Year            Force              Employment                         California            States

1993            15,359             13,918                             9.4                   6.9
1994            15,450             14,122                             8.6                   6.1
1995            15,412             14,203                             7.8                   5.6
1996            15,511             14,391                             7.2                   5.4
1997            15,941             14,937                             6.3                   4.9
1998            16,330             15,361                             5.9                   4.5
-----------------
</TABLE>

SOURCE:  State of California, Employment Development Department.



<PAGE>


Employment, Income, Construction and Export Growth

         The  following  table  shows  California's  nonagricultural  employment
distribution and growth for 1990 and 1998.

Payroll Employment By Major Sector
1990 and 1998

<TABLE>
<CAPTION>
<S>                                          <C>               <C>                      <C>             <C>

                                      Employment                                     % Distribution
                                      (Thousands)                                    of      Employment
Industry Sector                             1990             1998                        1990            1998
---------------                             ----             ----                        ----            ----
Mining..........................                     39               25                    0.3              0.2
Construction....................                    605              602                    4.8              4.4
Manufacturing...................
     Nondurable Goods...........                    721              729                    5.7              5.4
     High Technology............                    686              534                    5.4              3.9
     Other Durable goods........                    690              697                    5.4              5.1
Transportation and Utilities....                    624              694                    4.9              5.1
Wholesale and Retail Trade                        3,002            3,122                   23.7             23.0
Finance, Insurance
     and Real Estate............                    825              798                    6.5              5.9
Services........................                  3,395            4,220                   26.8             31.1
Government
     Federal....................                    362              269                    2.9              2.0
     State and Local............                  1,713            1,894                   13.5             13.9
                                                  -----            -----                   ----             ----
     TOTAL
     NONAGRICULTURAL............                 12,662           13,584                  100              100
                                                 ======           ======                  ===              ===
</TABLE>

     SOURCE: State of California, Employment Development Department and State of
California, Department of Finance.

         The  following  tables show  California's  total and per capita  income
patterns for selected years.

             Total Personal Income 1993-98
             California
                                                                  California
                                                                     % of
Year                    Millions        % Change                     U.S.
----                    --------        --------                     ----
1993                         $698,130          2.0*                      12.8
1994a                         718,321          2.9                       12.5
1995                          754,269          5.0                       12.4
1996                          798,020          5.8                       12.5
1997                          846,017          6.0                       12.5
1998b                         904,444          6.9                       12.7

*    Change from prior year.
a Reflects Northridge earthquake,  which caused an estimated $15 billion drop in
personal income. b Estimated by the State of California, Department of Finance.
Note: Omits income for government employees overseas.

SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.




                               Per Capita Personal Income 1993-98

                                                                 California
                                               United           % of
Year              California       % Change    States  % Change  U.S.
----              ----------       --------    ------  --------  ----
1993     .......        $22,388    1.0*     $21,220    3.3*     105.5
1994a    .......         22,899    2.3       22,056    3.9      103.8
1995     .......         23,901    4.4       23,063    4.6      103.6
1996     .......         25,050    4.8       24,169    4.8      103.6
1997     .......         26,218    4.7       25,298    4.7      103.6
1998     .......        27,116b    3.4      26,368c    4.2      102.8

     * Change from prior year a Reflects Northridge earthquake,  which caused an
estimated  $15 billion  drop in  personal  income.  b Estimated  by the State of
California,  Department  of  Finance.  c  Estimated  by the U.S.  Department  of
Commerce, Bureau of Economic Analysis.

SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.

Litigation

         The State is a party to numerous legal  proceedings.  The following are
the more  significant  lawsuits  pending  against the State,  as reported by the
Office of the Attorney General.

         On December 24, 1997, a consortium of California  counties filed a test
claim with the  Commission  on State  Mandates  asking the  Commission  on State
Mandates to determine  whether the  property  tax shift from  counties to school
districts beginning in 1993-94 is a reimbursable state mandated cost. See "State
Finances - Local  Governments"  above.  The test claim was heard on October  29,
1998, and the Commission on State Mandates found in favor of the State. In March
1999,  Sonoma County filed suit in the Superior Court to overturn the Commission
on State  Mandate's  decision.  In October 1999, a Sonoma County  Superior Court
Judge ruled in favor of the  County.  The State will  continue  to contest  this
lawsuit.  Should the courts ultimately find in favor of the counties, the impact
to the State General Fund could be as high as $10.0 billion. In addition,  there
would be an annual  Proposition  98 General Fund cost of at least $3.75 billion.
This cost would grow in accordance with the annual assessed value growth rate.

         On June 24, 1998,  plaintiffs in Howard Jarvis Taxpayers Association et
al. v. Kathleen Connell filed a complaint for certain declaratory and injunctive
relief  challenging the authority of the State  Controller to make payments from
the State Treasury in the absence of a state budget. On July 21, 1998, the trial
court issued a preliminary  injunction  prohibiting  the State  Controller  from
paying  moneys from the State  Treasury  for fiscal year  1998-99,  with certain
limited  exceptions,   in  the  absence  of  a  state  budget.  The  preliminary
injunction,  among other things, prohibited the State Controller from making any
payments  pursuant to any  continuing  appropriation.  On July 22 and 27,  1998,
various  employee  unions which had  intervened  in the case  appealed the trial
court's  preliminary  injunction  and  asked  the  Court of  Appeal  to stay the
preliminary  injunction.  On July 28,  1998,  the  Court of Appeal  granted  the
unions'  requests  and stayed the  preliminary  injunction  pending the Court of
Appeal's  decision on the merits of the appeal.  On August 5, 1998, the Court of
Appeal denied the  plaintiffs'  request to reconsider the stay. Also on July 22,
1998, the State  Controller  asked the  California  Supreme Court to immediately
stay the trial court's preliminary injunction and to overrule the order granting
the  preliminary  injunction on the merits.  On July 29, 1998, the Supreme Court
transferred the State  Controller's  request to the Court of Appeal. The matters
are now pending before the Court of Appeal. Briefs have been submitted;  no date
has yet been set for oral argument.

         The State is involved in a lawsuit, Thomas Hayes v. Commission on State
Mandates,  related to state-mandated costs. The action involves an appeal by the
Director of Finance  from a 1984  decision  by the State  Board of Control  (now
succeeded by the  Commission  on State  Mandates  (COSM)).  The Board of Control
decided in favor of local school districts' claims for reimbursement for special
education  programs for handicapped  students.  The case then was brought to the
trial court by the State and later remanded to the COSM for redetermination. The
COSM  since has  expanded  the claim to  include  supplemental  claims  filed by
several other institutions. To date, the Legislature has not appropriated funds.
The liability to the State, if all potentially  eligible school districts pursue
timely  claims,  has been estimated by the Department of Finance at more than $1
billion.  The  Commission on State  Mandates  issued a decision in December 1998
determining  that a small number of components of the State's special  education
program are state mandated local costs. The administrative  proceeding is in the
"parameters  and guidelines"  stage where the commission is considering  whether
and to what extent the costs  associated  with the state mandated  components of
the  special  education  program  are  offset by funds  that the  State  already
allocates to that program.  The State's position is that all costs are offset by
existing  funding.  The State  has the  option  to seek  judicial  review of the
mandate finding.

         In Capitola Land v. Anderson and other related state and federal cases,
plaintiffs  sought payments from the State under the  AFDC-Foster  Care program.
Judgment was rendered  against the State in Capitola,  which the State  appealed
and  lost.  The  State  then  filed a state  plan  amendment  with  the  federal
Department of Health and Human  Services  ("DHHS") to enable the State to comply
with the Capitola ruling and receive federal funding.  The DHHS denied the state
plan amendment, and the State has filed suit against DHHS. The State Legislature
enacted a statute that conditioned  State compliance with the Capitola  judgment
on receipt of federal  funding  (50%  contribution).  The State then  refused to
implement the Capitola  judgment  based on the new statute.  Certain  plaintiffs
moved for an order of contempt against the State, which was granted by the trial
court,  but was stayed and  annulled  by the Court of  Appeal.  The  plaintiffs'
petition for review was denied by the  California  Supreme Court.  However,  the
State continues to pursue federal  funding in federal court.  If, as a result of
this  litigation,  compliance  with the  Capitola  judgment is required  and the
judgment is applied  retroactively,  liability  to the State  could  exceed $200
million.

          In  January  1997,  California   experienced  major  flooding  in  six
different areas with  preliminary  estimates of property damage of approximately
$1.6 to $2.0  billion.  A  substantial  number of  plaintiffs  have  joined suit
against the State, local agencies, and private companies and contractors seeking
compensation for the damages they suffered as a result of the 1997 flooding. The
State is vigorously defending the action.

         In Just Say No to Tobacco Dough  Campaign v. State of  California,  the
petitioners  challenge  the  appropriation  of  approximately  $166  million  of
Proposition 99 funds in the Cigarette and Tobacco Products Surtax Fund for years
ended June 30, 1990, through June 30, 1995, for related disease research. If the
State  loses,  the General  Fund and funds from other  sources  would be used to
reimburse the Cigarette and Tobacco  Products  Surtax Fund, an agency fund,  for
approximately  $166  million.  However,  the  superior  court issued an order in
December 1998 granting the State's  demurrer to the entire action and dismissing
the case.  The superior  court  thereafter  reconsidered  its ruling and allowed
plaintiffs  to  amend  their  complaint.  The  State  demurred  to  the  amended
complaint.  In July 1999, the court again sustained the State's  demurrer to the
amended  complaint  and  issued  a  judgment  dismissing  the  case.  Plaintiffs
appealed.  The matter will be briefed and will be  scheduled  for oral  argument
before the court.

         The State is a  defendant  in Ceridian  Corporation  v.  Franchise  Tax
Board,  a suit which  challenges  the validity of two sections of the California
Tax Laws.  The first  relates to deduction  from  corporate  taxes for dividends
received from  insurance  companies to the extent the insurance  companies  have
California activities. The second relates to corporate deduction of dividends to
the extent the earnings of the  dividend  paying  corporation  have already been
included in the measure of their  California  tax. On August 13, 1998, the court
issued a judgment against the Franchise Tax Board on both issues.  The Franchise
Tax Board has appealed the judgment.  Briefing is underway.  If both sections of
the  California tax law are  invalidated  and all dividends  become  deductible,
General  Fund  collections  in the  future  would  be  reduced  annually  in the
$200-$250 million range for all taxpayers.

         The State is  involved  in a lawsuit  related to  contamination  at the
Stringfellow  toxic  waste  site.  In  United  States,  People  of the  State of
California v. J.B. Stringfellow,  Jr., et al., the State is seeking recovery for
past costs of cleanup of the site, a declaration that the defendants are jointly
and severally liable for future costs, and an injunction  ordering completion of
the cleanup. However, the defendants have filed a counterclaim against the State
for alleged  negligent  acts,  resulting  in  significant  findings of liability
against the State as owner, operator, and generator of wastes taken to the site.
The State has appealed the rulings.  Present estimates of the cleanup range from
$400 million to $600 million.  Potential  State liability falls within this same
range.  However,  all or a portion of any  judgment  against  the State could be
satisfied by recoveries from the State's insurance carriers. The State has filed
a suit against  certain of these carriers and trial is currently set for January
16, 2001.

         The  State is a  defendant  in a  coordinated  action  involving  3,000
plaintiffs  seeking  recovery  for  damages  caused by the Yuba  River  flood of
February  1986.  The trial court found  liability  in inverse  condemnation  and
awarded  damages of $500,000 to a sample of  plaintiffs.  The State's  potential
liability to the remaining  plaintiffs ranges from $800 million to $1.5 billion.
In 1992,  the State and plaintiffs  filed appeals.  In August 1999, the Court of
Appeal issued a decision  reversing the trial court's judgment against the State
and remanding the case for retrial on the inverse  condemnation cause of action.
Plaintiffs have petitioned the California Supreme Court for review.

         The State is a  defendant  in a statewide  action,  Emily Q., et al. v.
Belshe,  et al., in which  plaintiffs seek to compel a change in early screening
procedures for children with mental health needs.  A preliminary  injunction was
issued, requiring changes in the screening procedures.  The Department of Health
Services, in conjunction with the Department of Mental Health, is in the process
of complying with the injunction.  No hearing has been scheduled on the petition
for permanent  injunction.  The Department of Mental Health estimates the annual
cost  to  the  State  for  implementation  of  a  permanent   injunction  to  be
approximately $13 million.

         Plaintiffs in County of San Bernardino v. Barlow  Respiratory  Hospital
and related  actions seek mandamus relief  requiring the State to  retroactively
increase out-patient Medi-Cal reimbursement rates. Plaintiffs have estimated the
damages to be several hundred million dollars. The State is vigorously defending
these cases,  as well as related  federal cases  addressing  the  calculation of
Medi-Cal reimbursement rates in the future.

     The State is involved in two refund actions, Cigarettes Cheaper!, et al. v.
Board of  Equalization,  et al.  and  California  Assn.  Of Retail  Tobacconists
(CART),   et  al.  v.  Board  of  Equalization,   et  al.,  that  challenge  the
constitutionality of Proposition 10, approved by the voters in 1998.  Plaintiffs
allege that Proposition 10, which increases the excise tax on tobacco  products,
violates 11 sections of the California  Constitution  and related  provisions of
law. Plaintiffs Cigarettes Cheaper! seek declaratory and injunctive relief and a
refund of over $4  million.  The CART case filed by retail  tobacconists  in San
Diego seeks a refund of $5 million.  The State is  vigorously  contesting  these
cases.  If the statute is declared  unconstitutional,  exposure  may include the
entire $750 million collected annually with interest.

         The State is involved in two cases challenging the constitutionality of
the interest offset  provisions of the Revenue and Taxation Code.  Plaintiffs in
F. W.  Woolworth Co. and Kinney Shoe  Corporation  v. Franchise Tax Board seek a
refund  of over $15  million.  The  Woolworth  case was  tried in July  1995 and
judgment  was entered for the  Franchise  Tax Board.  The judgment was upheld on
appeal and the plaintiffs'  petition for review in the California  Supreme Court
was denied. On June 7, 1999,  plaintiffs filed a petition for writ of certiorari
in the United States Supreme Court. The Franchise Tax Board filed its opposition
to the petition for writ of certiorari on August 5, 1999.

         Hunt-Wesson,  Inc. v.  Franchise  Tax Board was tried in February  1997
with  judgment  for the  taxpayer.  The  judgment  was  reversed  on appeal  and
plaintiffs  petition for review in the California  Supreme Court was denied.  On
September  28, 1999,  the United States  Supreme  Court  granted the  taxpayer's
petition for writ of certiorari.  The Franchise Tax Board  estimates that if the
interest-offset  provisions  are  declared  unconstitutional,  the result  would
involve potential reduction of state revenues in the $90 million range annually,
with past year collection and interest exposure of $500 million.

         Guy F.  Atkinson  Company of  California  v.  Franchise  Tax Board is a
corporation  tax refund  action  involving  the solar  energy  system tax credit
provided for under the Revenue and Taxation  Code. The case went to trial in May
1998 and the trial court  entered  judgment in favor of the Franchise Tax Board.
The taxpayer has filed an appeal to the California  Court of Appeal and briefing
is due to be completed in October 1999.  The Franchise Tax Board  estimates that
the cost would be $150  million  annually if the  plaintiff  prevails.  Allowing
refunds for all open years would entail a refund of at least $500 million.

         Jordan,  et al. v. Department of Motor Vehicles,  et al. and Josephs v.
Zolin, et al.  challenge the validity of the Vehicle Smog Impact Fee, a $300 fee
which is collected by the Department of Motor Vehicles from vehicle  registrants
when  a  vehicle  without  a  California  new-vehicle   certification  is  first
registered in California.  The Jordan  plaintiffs  contend that the fee violates
the  interstate  commerce  and equal  protection  clauses of the  United  States
Constitution as well as Article XIX of the State Constitution.  The Josephs case
is a class  action  civil  rights  case  brought  against the current and former
directors of the  Department of Motor  Vehicles in their  individual  capacities
claiming the  collection of the Vehicle Smog Impact Fee violates the  interstate
commerce, equal protection,  and privileges and immunities clauses of the United
States Constitution.  In October 1999, the Court of Appeals upheld a trial court
judgment for the  plaintiffs  in the Jordan case,  and the State has declined to
appeal further. Although refunds through the court actions could be limited by a
three-year  statute of  limitations,  with a potential  liability  of about $350
million,  the  Governor  has  proposed  refunding  fees  collected  back  to the
initiation  of these  fees in 1990.  The  exposure  to the State if the fees are
refunded in full could be up to $800 million.

         Craig Brown, et al. v. Department of Health and Human Services,  et al.
is a Federal Mandate Proceeding.  In fiscal years 1991-92 and 1992-93, the State
used credits from three Public Employees  Retirement System accounts in place of
General  Fund  employer  pension  contributions.  The DHHS has  determined  that
federally  funded  programs were  overcharged in these fiscal years because they
did not  receive  the  pension  credits  the State  programs  received  and that
California  owes the federal  government $120 million for  overpayments  plus an
additional  $80 million in interest  through  mid 1999.  The DHHS Grant  Appeals
Board upheld this  determination.  The present case is aimed at overturning  the
DHHS  determination.  On June 6, 1999,  the court ruled  against the State.  The
State has appealed to the Ninth  Circuit.  The estimated  potential loss is over
$220  million  which  would be  payable  from  the  General  Fund or,  possibly,
recovered  by the federal  government  through  offsets  against  current  grant
payments to the State.

         PTI,  Inc.,  et  al.  v.  Philip  Morris,  et al.  was  filed  by  five
distributors in the cigarette import/re-entry business,  seeking to overturn the
tobacco Master  Settlement  Agreement  ("MSA") entered between 46 states and the
tobacco  industry in November  1998. See "State  Finances - Tobacco  Litigation"
above.  The  primary  focus  of the  complaint  is  the  provision  of  the  MSA
encouraging  participating states to adopt a statute requiring  nonparticipating
manufacturers  to  either  become  participating  manufacturers  and  share  the
financial  obligations  under  the  MSA or pay  money  into an  escrow  account.
Plaintiffs seek  compensatory  and punitive  damages against the State and State
officials  and an order  placing  tobacco  settlement  funds  into a trust to be
administered  by the court for the  treatment  of  medical  expenses  of persons
injured by tobacco  products.  A motion to dismiss the  complaint  is  currently
scheduled  for hearing in  February  2000.  The  potential  fiscal  impact of an
adverse  ruling is largely  unknown,  but could  exceed  the full  amount of the
settlement  (estimated to be $1 billion annually,  of which 50% will go directly
to the  State's  General  Fund and the  other 50%  directly  to the  State's  58
counties and 4 largest cities).

         Arnett v. California Public Employees  Retirement  System,  et. al. was
filed by seven former  employees of the State of California  and local  agencies
seeking back wages, damages and injunctive relief.  Plaintiffs are former public
safety  members who began  employment  after the age of 40 and are recipients of
Industrial Disability  Retirement ("IDR") benefits.  Plaintiffs contend that the
formula  which  determines  the amount of IDR benefits  violates the federal Age
Discrimination in Employment Act of 1967. Plaintiffs contend that, but for their
ages at hire, they would receive increased monthly IDR benefits similar to their
younger  counterparts who began  employment  before the age of 40. On August 17,
1999, the Ninth Circuit Court of Appeals reversed the District Court's dismissal
of the complaint for failure to state a claim. The State may seek further review
in the United States Supreme Court. However, the case has now been remanded back
to the District  Court and trial will most likely occur in December 2000. In the
event of an unfavorable result, CalPERS has estimated the liability to the State
as approximately $315.5 million.

Year 2000-Related Information Technology

         The State's  reliance on information  technology in every aspect of its
operations made year 2000-related ("Y2K") information technology ("IT") issues a
high priority for the State. The Department of Information  Technology ("DOIT"),
an independent  office reporting  directly to the Governor,  was responsible for
ensuring the State's  information  technology  processes  were fully  functional
before the year 2000.

         The DOIT estimates total Y2K costs identified by the departments  under
its  supervision  at about $357  million.  These  costs are part of much  larger
overall IT costs  incurred  annually by the State,  including  costs incurred by
certain independent State entities, such as the judiciary, the Legislature,  the
University of California and California  State University  System.  Furthermore,
cost estimates for embedded systems only apply to the subset of embedded systems
posing the highest  risk to essential  programs.  For fiscal year  1999-00,  the
Legislature  created a fund of $33.5 million  ($13.5  million  General Fund) for
unanticipated Y2K costs, which can be increased if necessary.


--------
     1 Mr. Healey is an "interested  person" (as defined in the 1940 Act) of the
Trust.



<PAGE>



Part C
ITEM 23.  EXHIBITS.

 (a) Declaration of Trust.(1)

 (a)1  Amendment  No.  1 to  Declaration  of  Trust,  Amended  and  Restated
Establishment  and  Designation  of Series and  Classes of Shares of  Beneficial
Interest.(2)

 (a)2 Amendment No. 2 to  Declaration of Trust,  Second Amended and Restated
Establishment  and  Designation  of Series and  Classes of Shares of  Beneficial
Interest.(4)

 (a)3 Amendment No. 3 to  Declaration  of Trust,  Third Amended and Restated
Establishment  and  Designation  of Series and  Classes of Shares of  Beneficial
Interest.(6)

 (a)4 Amendment No. 4 to  Declaration of Trust,  Fourth Amended and Restated
Establishment  and  Designation  of Series and  Classes of Shares of  Beneficial
Interest.(8)

 (a)5 Amendment No. 5 to  Declaration  of Trust,  Fifth Amended and Restated
Establishment  and  Designation  of Series and  Classes of Shares of  Beneficial
Interest.(10)

 (a)6 Amendment No. 6 to  Declaration of Trust.
 (a)7 Amendment No. 7 to Declaration of Trust.
 (a)8 Amendment No. 8 to Declaration of Trust.

 (b)  Restated By-Laws.(2)

 (b)(1) Amendment to Restated By-Laws of Registrant. (12)

     (d) Amended  Investment  Advisory  Agreement  between  Registrant  and J.P.
Morgan Investment Management Inc. ("JPMIM").(9)

(d)1 Amended  Investment  Advisory  Agreement  between  Registrant  and J.P.
Morgan Investment Management Inc.

(e)  Form  of   Distribution   Agreement   between   Registrant  and  Funds
Distributor, Inc. ("FDI").(2)

(g) Form of Custodian Contract between Registrant and State Street Bank and
Trust Company ("State Street").(2)

(g)2 Custodian  Contract  between  Registrant  and Bank of New  York.(12)

 (h)1 Form of Co-Administration Agreement between Registrant and FDI.(2)

(h)2 Form of  Administrative  Services  Agreement  between  Registrant  and
Morgan Guaranty Trust Company of New York ("Morgan").(2)

(h)3 Form of Transfer Agency and Service Agreement  between  Registrant and
State Street.(2)

(h)4 Form of Restated  Shareholder  Servicing  Agreement between Registrant
and Morgan.(9)

(h)5 Form of Shareholder  Servicing  Agreement between Registrant
and Morgan.

(j) Consent of independent accountants.

(l) Purchase agreement with respect to Registrant's initial shares.(2)

(n) Financial Data Schedules (not applicable)

(o)1 18f-3 Plan for J.P. Morgan California Bond Fund.(3)

(o)2 18f-3 Plan for J.P. Morgan Global 50 Fund. (7)

(o)3 18f-3 Plan for J.P.  Morgan Tax Aware  Enhanced  Income  Fund (11)

(p)(1) Code of  Ethics  for J.P.  Morgan Series Trust. (13)

(p)(2) Code of Ethics for J.P.  Morgan  Investment  Management  Inc. (13)

(p)(3) Code of Ethics for Funds Distributor Inc. (13)

      -------------------
(1)  Incorporated herein from Registrant's  registration  statement on Form N-1A
     as filed on August 29, 1996 (Accession No.
     0000912057-96-019242).

(2)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on November 8, 1996 (Accession No.
      0001016964-96-000034).

(3)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on February 10, 1997 (Accession No.
      0001016964-97-000014).

(4)    Incorporated herein from Registrant's registration statement on Form N-1A
       as filed on June 19, 1997 (Accession No.
       0001016964-97-000117).

(5)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on October 21, 1997 (Accession No.
      0001042058-97-000005).

(6)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on January 2, 1998 (Accession No.0001041455-98-000012).

(7)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on March 2, 1998 (Accession No.
      0001042058-98-000030).

(8)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on July 28, 1998 (Accession No.
      0001041455-98-000039).

(9)   Incorporated herein from Registrant's  registration statement on Form N-1A
      as filed on August 25, 1998 (Accession No.
      0001041455-98-000054).

(10)    Incorporated  herein from  Registrant's  registration  statement on Form
        N-1A as filed on December 30, 1998(Accession No. 0001041455-98-000054).

(11)    Incorporated  herein from  Registrant's  registration  statement on Form
        N-1A as filed on February 1, 1999 (Accession No.
        0000899681-99-000024).

(12)    Incorporated  herein from  Registrant's  registration  statement on Form
        N-1A as filed on February 28, 2000 (Accession No. 0001041455-00-000052).

(13)    Incorporated  herein from  Registrant's  registration  statement on Form
        N-1A as filed on April 17, 2000 (Accession No.
        0001041455-00-000096).

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.

               Not applicable.

ITEM 25. INDEMNIFICATION.

 Reference  is made to  Section  5.3 of  Registrant's  Declaration  of Trust and
Section 5 of Registrant's Distribution Agreement.

 Registrant,  its Trustees and officers are insured against certain  expenses in
connection with the defense of claims, demands,  actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.

Insofar as indemnification  for liabilities  arising under the Securities Act of
1933,  as amended (the "1933 Act"),  may be  permitted to  directors,  trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the  foregoing  provisions  or otherwise,  the  Registrant  has been
advised that in the opinion of the SEC such  indemnification  is against  public
policy as expressed  in the 1933 Act and is,  therefore,  unenforceable.  In the
event that a claim for indemnification  against such liabilities (other than the
payment by the Registrant of expenses  incurred or paid by a director,  trustee,
officer,  or controlling person of the Registrant and the principal  underwriter
in connection with the successful defense of any action, suite or proceeding) is
asserted  against  the  Registrant  by  such  director,   trustee,   officer  or
controlling person or principal  underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy  as  expressed  in the  1933  Act  and  will  be  governed  by the  final
adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.

         JPMIM is a registered  investment adviser under the Investment Advisers
Act of 1940, as amended,  and is a wholly owned  subsidiary of J.P. Morgan & Co.
Incorporated. JPMIM manages employee benefit funds of corporations, labor unions
and  state  and  local  governments  and the  accounts  of  other  institutional
investors, including investment companies.

         To the knowledge of the Registrant, none of the directors, except those
set forth below, or executive  officers of JPMIM, is or has been during the past
two  fiscal  years  engaged  in any  other  business,  profession,  vocation  or
employment of a substantial  nature,  except that certain officers and directors
of JPMIM also hold various  positions  with,  and engage in business  for,  J.P.
Morgan & Co. Incorporated, which owns all the outstanding stock of JPMIM.

ITEM 27. PRINCIPAL UNDERWRITERS.

     (a)  Funds   Distributor,   Inc.  (the   "Distributor")  is  the  principal
underwriter of the Registrant's shares.

     Funds  Distributor,  Inc. acts as principal  underwriter  for the following
investment companies other than the Registrant:

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Funds
J.P. Morgan Institutional Funds
J.P. Morgan Series Trust II
LaSalle Partners Funds, Inc.
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
Orbitex Group of Funds
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.

     Funds Distributor,  Inc. does not act as depositor or investment adviser to
any of the investment companies.

     Funds  Distributor,  Inc. is registered  with the  Securities  and Exchange
Commission as a  broker-dealer  and is a member of the National  Association  of
Securities Dealers. Funds Distributor, Inc. is located at 60 State Street, Suite
1300,  Boston,  Massachusetts  02109.  Funds  Distributor,  Inc.  is an indirect
wholly-owned  subsidiary of Boston  Institutional Group, Inc., a holding company
all of whose outstanding shares are owned by key employees.

(b)
 The  following is a list of the executive  officers,  directors and partners of
Funds Distributor, Inc.:

Director, President and Chief Executive Officer:     Marie E. Connolly
Executive Vice President:                            George Rio
Executive Vice President:                            Donald R. Roberson
Executive Vice President:                            William S. Nichols
Director, Senior Vice President, Treasurer and
  Chief Financial Officer:                           Joseph F. Tower, III
Senior Vice President, General Counsel, Chief
  Compliance Officer, Secretary and Clerk            Margaret M. Chambers
Senior Vice President:                               Paula R. David
Senior Vice President:                               Judith K. Benson
Senior Vice President:                               Gary S. MacDonald
Director, Chairman of the Board, Executive
   Vice President                                    William J. Nutt

(c) Not applicable

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

         All accounts,  books and other  documents  required to be maintained by
Section  31(a) of the  Investment  Company  Act of 1940,  as amended  (the "1940
Act"), and the Rules thereunder will be maintained at the offices of:

     Morgan  Guaranty  Trust  Company  of New York and  J.P.  Morgan  Investment
Management  Inc.: 60 Wall Street,  New York,  New York  10260-0060,  9 West 57th
Street,  New York, New York 10019 or 522 Fifth Avenue,  New York, New York 10036
(records relating to its functions as investment advisor,  shareholder servicing
agent and administrative services agent).

     The Bank of New York,  1 Wall  Street,  New York,  New York 10086  (records
relating to its functions as custodian and fund accounting agent).

     State Street Bank and Trust  Company:  1776 Heritage  Drive,  North Quincy,
Massachusetts  02171 (records  relating to its functions as custodian,  transfer
agent and dividend disbursing agent).

     Funds Distributor, Inc.: 60 State Street, Suite 1300, Boston, Massachusetts
02109 (records relating to its functions as distributor and co-administrator).

     Pierpont Group,  Inc.: 461 Fifth Avenue,  New York, New York 10017 (records
relating  to its  assisting  the  Trustees  in  carrying  out  their  duties  in
supervising the Registrant's affairs).

ITEM 29. MANAGEMENT SERVICES.

               Not applicable.

ITEM 30. UNDERTAKINGS.

      (a)      If the  information  called  for  by  Item  5A of  Form  N-1A  is
               contained  in the  latest  annual  report  to  shareholders,  the
               Registrant  shall  furnish  each person to whom a  prospectus  is
               delivered with a copy of the Registrant's latest annual report to
               shareholders upon request and without charge.

      (b)      The  Registrant  undertakes  to comply with Section  16(c) of the
               1940  Act  as  though  such  provisions  of  the  1940  Act  were
               applicable to the Registrant, except that the request referred to
               in the  second  full  paragraph  thereof  may  only  be  made  by
               shareholders  who  hold  in the  aggregate  at  least  10% of the
               outstanding shares of the Registrant, regardless of the net asset
               value of shares held by such requesting shareholders.

<PAGE>


                                   SIGNATURES

     Pursuant  to  the  requirements  of the  Securities  Act of  1933  and  the
Investment  Company Act of 1940, the  Registrant  certifies that it meets all of
the requirements for  effectiveness  of this  registration  statement under rule
485(b)  under the  Securities  Act and has duly  caused  this  Amendment  to the
Registration  Statement  to be signed on its  behalf  caused  this  registration
statement  to  be  signed  on  its  behalf  by  the  undersigned,  thereto  duly
authorized,  in the City of New  York  and  State of New York on the 25th day of
August, 2000.

J.P. MORGAN SERIES TRUST


By       /s/ Elba Vasquez
         ---------------------------------------
         Elba Vasquez
         Vice President and Assistant Secretary

Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement  has been  signed  below by the  following  persons in the  capacities
indicated on August 25, 2000.

/s/ George A. Rio
------------------------------
George A. Rio
President and Treasurer
Officer of the Portfolios

Matthew Healey*
-----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer)

Frederick S. Addy*
------------------------------
Frederick S. Addy
Trustee

William G. Burns*
------------------------------
William G. Burns
Trustee

Arthur C. Eschenlauer*
------------------------------
Arthur C. Eschenlauer
Trustee

Michael P. Mallardi*
------------------------------
Michael P. Mallardi
Trustee


*By      /s/ Elba Vasquez
         ----------------------------
         Elba Vasquez
         as attorney-in-fact pursuant to a power of attorney.

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit
-------------    ------------------------
Ex-99 (j) Independent Auditors Consent




© 2019 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission