JP MORGAN SERIES TRUST
497, 2000-11-15
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<PAGE>


THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.

<PAGE>

                SUBJECT TO COMPLETION. DATED NOVEMBER 14, 2000



                                        DECEMBER 12, 2000  |  PROSPECTUS

J.P. MORGAN TAX AWARE SMALL
COMPANY OPPORTUNITIES FUND









                                  ----------------------------------------------
                                  Seeking to provide high after tax total return
                                  through a disciplined management approach
























This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.

As with all mutual funds, the fact that these shares are registered with the
Securities and Exchange Commission does not mean that the Commission approves
them as an investment or guarantees that the information in this prospectus is
correct or adequate. It is a criminal offense to state or suggest otherwise.

Distributed by Funds Distributor, Inc.             JPMORGAN

<PAGE>

CONTENTS
--------------------------------------------------------------------------------


1

The fund's goal, principal strategies, principal risks, and expenses

J.P. MORGAN TAX AWARE SMALL COMPANY OPPORTUNITIES FUND
Fund description ..............................................................1
Investor expenses .............................................................2


3

J.P. Morgan's investment philosophy

U.S. EQUITY MANAGEMENT APPROACH
J.P. Morgan ...................................................................3
J.P. Morgan Tax Aware Small Company Opportunities Fund ........................3
Who may want to invest ........................................................3
Investment process ............................................................4
Tax aware investing at J.P. Morgan ............................................5


6

Investing in the J.P. Morgan Tax Aware Small Company Opportunities Fund

YOUR INVESTMENT
Investing through a financial professional ....................................6
Investing through an employer-sponsored retirement plan .......................6
Investing through an IRA or rollover IRA ......................................6
Investing directly ............................................................6
Opening your account ..........................................................6
Adding to your account ........................................................6
Selling shares ................................................................7
Account and transaction policies ..............................................7
Dividends and distributions ...................................................8
Tax considerations ............................................................8


9

More about risk and the fund's business operations


FUND DETAILS
Business structure ............................................................9
Management and administration .................................................9
Risk and reward elements .....................................................11


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

<PAGE>

J.P. MORGAN TAX AWARE SMALL
COMPANY OPPORTUNITIES FUND
--------------------------------------------------------------------------------
                                            REGISTRANT: J.P. MORGAN SERIES TRUST
                                            (J.P. MORGAN TAX AWARE SMALL COMPANY
                                            OPPORTUNITIES FUND: SELECT SHARES)

[GRAPHIC]
RISK/RETURN SUMMARY

For a more detailed discussion of the fund's investments and its main risks, as
well as fund strategies, please see pages 10-11.

[GRAPHIC]
GOAL

The fund's goal is to seek to provide high after tax total return from a
portfolio of small company growth stocks. This goal can be changed without
shareholder approval.

[GRAPHIC]
INVESTMENT APPROACH
PRINCIPAL STRATEGIES

The fund invests primarily in stocks of small U.S. companies whose market
capitalization is greater than $125 million and less than $2.0 billion when
purchased. While the fund holds stocks in many industries to reduce the impact
of poor performance in any one sector, it tends to emphasize industries with
higher growth potential and does not track the sector weightings of the overall
small company stock market.

In searching for companies, the fund combines the approach described on page 3
with a growth-oriented approach that focuses on each company's business
strategies and its competitive environment. The fund seeks to buy stocks when
they are undervalued or fairly valued and are poised for long-term growth.
Stocks become candidates for sale when they appear overvalued or when the
company is no longer a small-cap company, but the fund may also continue to hold
them if it believes further substantial growth is possible.

To this investment approach the fund adds the element of tax aware investing.
The fund's tax aware investment strategies are described on page 5.

PRINCIPAL RISKS

The value of your investment in the fund will fluctuate in response to movements
in the stock market. Fund performance also will depend on the effectiveness of
J.P. Morgan's research and the management team's stock picking decisions.

Small-cap stocks have historically offered higher long-term growth than medium-
or large-cap stocks, and have also involved higher risks. The fund's small-cap
emphasis means it is likely to be more sensitive to economic news and is likely
to fall further in value during broad market downturns. Because the fund seeks
to outperform the Russell 2000 Growth Index while not tracking its industry
weightings, investors should expect higher volatility compared to this index or
more conservatively managed small-cap funds.

The fund's tax aware strategies may reduce your capital gains, but will not
eliminate them. Maximizing after-tax returns may require trade-offs that reduce
pre-tax returns.

An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money if you sell when the fund's share price is lower
than when you invested.

PORTFOLIO MANAGEMENT

The fund's assets are managed by J.P. Morgan, which currently manages
approximately $373 billion, including more than $200 million using similar
strategies as the fund.

The portfolio management team is led by Marian U. Pardo, managing director,
Saira Durcanin, vice president and CFA, and Carolyn Jones, vice president. Ms.
Pardo has been at J.P. Morgan since 1968, except for five months in 1998 when
she was president of a small investment management firm. Prior to managing the
fund, Ms. Pardo managed small and large cap equity portfolios, equity and
convertible funds, and several institutional portfolios. Ms. Durcanin has been
with J.P. Morgan since July 1995 as a small company equity analyst and portfolio
manager after graduating from the University of Wisconsin with an M.S. in
finance. Ms. Jones has been with J.P. Morgan since July 1998. Prior to managing
this fund, Ms. Jones served as a portfolio manager in J.P. Morgan's private
banking group and as a product specialist at Merrill Lynch Asset Management.

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

BEFORE YOU INVEST

Investors considering the fund should understand that:

- There is no assurance that the fund will meet its investment goal.

- The fund does not represent a complete investment program.


1  |  J.P. MORGAN TAX AWARE SMALL COMPANY OPPORTUNITIES FUND
<PAGE>

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

The estimated 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.

<TABLE>
<CAPTION>
---------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1)(%)
---------------------------------------------
(expenses that are deducted from fund assets)
<S>                               <C>
Management fees                   0.85

Distribution (12b-1) fees         none

Other expenses                    0.59
---------------------------------------------
TOTAL OPERATING EXPENSES          1.44

Fee waiver and expense
reimbursement(2)                  0.04
---------------------------------------------
NET EXPENSES(2)                   1.40
</TABLE>

--------------------------------------------------------------------------------
EXPENSE EXAMPLES(1)
--------------------------------------------------------------------------------
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:
$10,000 initial investment, 5% return each year, net expenses for the period
12/12/00 through 2/28/02 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.
---------------------------------------
                           1 yr. 3 yrs.
YOUR COST($)                143   451
---------------------------------------

(1) This table shows the fund's estimated expenses expressed as a percentage of
    the fund's estimated average net assets.

(2) Reflects an agreement dated 12/12/00 by Morgan Guaranty Trust Company of New
    York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
    to the extent total operating expenses (excluding interest, taxes and
    extraordinary expenses) exceed 1.40% of the fund's average daily net assets
    through 2/28/02.


                      J.P. MORGAN TAX AWARE SMALL COMPANY OPPORTUNITIES FUND | 2
<PAGE>

U.S. EQUITY MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN
Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments and
individuals. Today, J.P. Morgan employs over 430 analysts and portfolio managers
around the world and has approximately $373 billion in assets under management,
including assets managed by the fund's adviser, J.P. Morgan Investment
Management Inc.

J.P. MORGAN TAX AWARE SMALL COMPANY OPPORTUNITIES FUND
The fund invests primarily in U.S. small company stocks. As a shareholder, you
should anticipate risks and rewards beyond those of a typical bond fund or a
typical balanced fund.

--------------------------------------------------------------------------------
WHO MAY WANT TO INVEST

The fund is designed for investors who:

- are pursuing a long-term goal such as retirement

- want to add an investment with growth potential to further diversify a
  portfolio

- want a fund that seeks to outperform the markets in which it invests over the
  long term

- are individuals who could benefit from a strategy that pursues returns from an
  after-tax perspective

The fund is NOT designed for investors who:

- want a fund that pursues market trends or focuses only on particular
  industries or sectors

- require regular income or stability of principal

- are pursuing a short-term goal or investing emergency reserves

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


3  |  U.S. EQUITY MANAGEMENT APPROACH
<PAGE>

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

U.S. EQUITY INVESTMENT PROCESS
The J.P. Morgan U.S. equity funds invest primarily in U.S. stocks. The Tax Aware
Small Company Opportunities Fund does so while seeking to enhance after-tax
returns.

While the fund follows its own strategy, the equity funds as a group share a
single investment philosophy. This philosophy, developed by the fund's advisor,
focuses on stock picking while largely avoiding sector or market-timing
strategies at time of purchase.


In managing the fund, J.P. Morgan employs a three-step process:

[GRAPHIC]
J.P. Morgan analysts develop proprietary fundamental research

RESEARCH J.P. Morgan takes an in-depth look at company prospects over a
relatively long period - often as much as five years - rather than focusing on
near-term expectations. This approach is designed to provide insight into a
company's real growth potential. J.P. Morgan's in-house research is developed by
an extensive worldwide network of over 150 career equity analysts. The team of
analysts dedicated to U.S. equities includes more than 20 members, with an
average of over ten years of experience.

[GRAPHIC]
Stocks in each industry are ranked with the help of models

VALUATION The research findings allow J.P. Morgan to rank the companies in each
industry group according to their relative value. The greater a company's
estimated worth compared to the current market price of its stock, the more
undervalued the company. The valuation rankings are produced with the help of a
variety of models that quantify the research team's findings.

[GRAPHIC]
Using research and valuations, the fund's management team chooses stocks for the
fund

STOCK SELECTION The fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, the management
team buys stocks that are identified as undervalued and considers selling them
when they appear overvalued. Along with attractive valuation, the fund's manager
often considers a number of other criteria:

- catalysts that could trigger a rise in a stock's price

- high potential reward compared to potential risk

- temporary mispricings caused by market overreactions


                                             U.S. EQUITY MANAGEMENT APPROACH | 4
<PAGE>

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

TAX AWARE INVESTING AT J.P. MORGAN

The J.P. Morgan Tax Aware Small Company Opportunities Fund is designed to
reduce, but not eliminate, capital gains distributions to shareholders. In doing
so, the fund sells securities when the anticipated performance benefit justifies
the resulting tax liability. This strategy often includes holding securities
long enough to avoid higher, short-term capital gains taxes, selling shares with
a higher cost basis first, and offsetting gains realized in one security by
selling another security at a capital loss. The fund is aided in this process by
a tax-sensitive optimization model developed by J.P. Morgan.

The J.P. Morgan Tax Aware Small Company Opportunities Fund generally intends to
pay redemption proceeds in cash; however, it reserves the right at its sole
discretion to pay redemptions over $250,000 in-kind as a portfolio of
representative stocks rather than cash. An in-kind redemption payment can shield
the fund - and other shareholders - from tax liabilities that might otherwise be
incurred.


5  |  U.S. EQUITY MANAGEMENT APPROACH
<PAGE>

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

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:

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

- Complete the application, indicating how much of your investment you want to
  allocate to which fund(s). Please apply now for any account privileges you may
  want to use in the future, in order to avoid the delays associated with adding
  them later on.

- Mail in your application, making your initial investment as shown 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
- Mail your completed application to the Shareholder Services Agent.

- Call the Shareholder Services Agent to obtain an account number and to place a
  purchase order.
  FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED.

- After placing your purchase order, instruct your bank to wire the amount of
  your investment to:

  Morgan Guaranty Trust Company of New York - Delaware
  ROUTING NUMBER: 031-100-238
  CREDIT: MGT Shareholder Services
  ACCOUNT NUMBER: 000-73-836
  FFC: your account number, name of registered owner(s) and fund name

  BY CHECK
- Make out a check for the investment amount payable to J.P. Morgan Funds.

- Mail the check with your completed application to the Shareholder
  Services Agent

  BY EXCHANGE
- Call the Shareholder Services Agent to effect an exchange.

ADDING TO YOUR ACCOUNT

  BY WIRE
- Call the Shareholder Services Agent to place a purchase order. FUNDS THAT ARE
  WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED.

- Once you have placed your purchase order, instruct your bank to wire the
  amount of your investment as described above.

  BY CHECK
- Make out a check for the investment amount payable to J.P. Morgan Funds.


                                                               FUND DETAILS / 6
<PAGE>


- Mail the check with a completed investment slip to the Shareholder Services
  Agent. If you do not have an investment slip, attach a note indicating your
  account number and how much you wish to invest in which fund(s).

  BY EXCHANGE
- Call the Shareholder Services Agent to effect an exchange.

SELLING SHARES

  BY PHONE -- WIRE PAYMENT
- Call the Shareholder Services Agent to verify that the wire redemption
  privilege is in place on your account. If it is not, a representative can help
  you add it.

- Place your wire request. If you are transferring money to a non-Morgan
  account, you will need to provide the representative with the personal
  identification number (PIN) that was provided to you when you opened your fund
  account.

  BY PHONE -- CHECK PAYMENT
- Call the Shareholder Services Agent and place your request. Once your request
  has been verified, a check for the net amount, payable to the registered
  owner(s), will be mailed to the address of record. For checks payable to any
  other party or mailed to any other address, please make your request in
  writing (see below).

  IN WRITING
- Write a letter of instruction that includes the following information: the
  name of the registered owner(s) of the account; the account number; the fund
  name; the amount you want to sell; and the recipient's name and address or
  wire information, if different from those of the account registration.

- Indicate whether you want any cash proceeds sent by check or by wire.

- Make sure the letter is signed by an authorized party. The Shareholder
  Services Agent may require additional information, such as a signature
  guarantee.

- Mail the letter to the Shareholder Services Agent.

  BY EXCHANGE
- Call the Shareholder Services Agent to effect an exchange.

  REDEMPTION IN KIND
- The fund reserves the right to make redemptions of over $250,000 in securities
  rather than in cash.

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, J.P. Morgan Series Trust, 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 market quotes or pricing services. When these methods are
not available or do not represent a security's value at the time of pricing
(e.g., when an event occurs after the close of trading on a foreign exchange
that would materially impact a security's value at the time the fund calculates
its NAV), the security is valued in accordance with the fund's fair valuation
procedures.



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.

7 / FUND DETAILS
<PAGE>


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.

TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record
when the fund receives your payment, generally the day following execution. When
you sell shares, proceeds are generally available the day following execution
and will be forwarded according to your instructions. In-kind redemptions
(described on page 7) will be available as promptly as is feasible.

When you sell shares that you recently purchased by check, your order will be
executed at the next NAV but the proceeds will not be available until your check
clears. This may take up to 15 days.

STATEMENTS AND REPORTS The fund sends monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months the fund sends out an annual or semi-annual report containing
information on the fund's holdings and a discussion of recent and anticipated
market conditions and fund performance.

ACCOUNTS WITH BELOW-MINIMUM BALANCES If your account balance falls below the
minimum for 30 days as a result of selling shares (and not because of
performance), the fund 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
The fund typically pays income dividends twice a year and makes capital gains
distributions, if any, once per year. However, the fund may make more or fewer
payments in a given year, depending on its investment results and its tax
compliance situation. Dividends and distributions consist of most or all of the
fund's net investment income and net realized capital gains.

Dividends and distributions are reinvested in additional fund shares.
Alternatively, you may instruct your financial professional or J.P. Morgan Funds
Services to have them sent to you by check, credited to a separate account, or
invested in another J.P. Morgan fund.

TAX CONSIDERATIONS
In general, selling shares, 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              Ordinary income
  Short-term capital gains      Ordinary income
  distributions

  Long-term capital gains       Capital gains
  distributions

  Sales or exchanges of         Capital gains or losses
  shares owned for more
  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.

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.

Because each investor's tax circumstances are unique, please consult your tax
professional about your fund investment.

                                                               FUND DETAILS / 8
<PAGE>


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. Fund shareholders are entitled to
one full or fractional vote for each dollar or fraction of a dollar invested.


MANAGEMENT AND ADMINISTRATION
The fund and the other series of the 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 certain 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           0.85% of the fund's
                              average net assets

  ADMINISTRATIVE SERVICES     Fund's pro-rata portion of 0.09%
  (fee shared with Funds      of the first $7 billion of average
  Distributor, Inc.)          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.


9 / FUND DETAILS
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                                                                          /  10
<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
securities, including those that are designed to help the fund manage risk.

--------------------------------------------------------------------------------
POTENTIAL RISKS
--------------------------------------------------------------------------------
MARKET CONDITIONS

-  The fund's share price and performance will fluctuate in response to stock
   market movements

-  Adverse market conditions may from time to time cause the fund to take a
   temporary defensive position that is inconsistent with its principal
   investment strategies and may hinder the fund from achieving its investment
   objective

MANAGEMENT CHOICES

-  The fund could underperform its benchmark due to its securities and asset
   allocation choices

FOREIGN INVESTMENTS

-  Currency exchange rate movements could reduce gains or create losses

-  The fund could lose money because of foreign government actions, political
   instability or lack of adequate and accurate information

DERIVATIVES

  - Derivatives such as futures, options, swaps and forward
    foreign currency contracts that are used for hedging the portfolio or
    specific securities may not fully offset the underlying positions and this
    could result in losses to the fund that would not have otherwise
    occurred(1)

  - Derivatives used for risk management may not have the intended effects and
    may result in losses or missed opportunities

  - The counterparty to a derivatives contract could default

  - Certain types of derivatives involve costs to the fund which can reduce
  returns - Derivatives that involve leverage could magnify losses

--------------------------------------------------------------------------------
POTENTIAL REWARDS
--------------------------------------------------------------------------------
MARKET CONDITIONS

-  Stocks have generally outperformed more stable investments (such as bonds and
   cash equivalents) over the long term

MANAGEMENT CHOICES

-  The fund could outperform its benchmark due to these same choices

FOREIGN INVESTMENTS

-  Favorable exchange rate movements could generate gains or reduce loss

-  Foreign investments, which represent a major portion of the world's
   securities, offer attractive potential performance and opportunities for
   diversification

DERIVATIVES

-  Hedges that correlate well with underlying positions can reduce or eliminate
   losses at low cost

-  The fund could make money and protect against losses if management's analysis
   proves correct

-  Derivatives that involve leverage could generate substantial gains at low
   cost

--------------------------------------------------------------------------------
POLICIES TO BALANCE RISK AND REWARD
--------------------------------------------------------------------------------
MARKET CONDITIONS

-  Under normal circumstances, the fund plans to remain fully invested, with at
   least 65% in stocks; stock investments may include U.S. and foreign common
   stocks, convertible securities, preferred stocks, trust or partnership
   interests, warrants, rights, and investment company securities

-  The fund seeks to limit risk through diversification

-  During severe market downturns, the fund has the option of investing up to
   100% of assets in investment-grade short-term securities

MANAGEMENT CHOICES

-  J.P. Morgan focuses its active management on securities selection, the area
   where it believes its commitment to research can most enhance returns

FOREIGN INVESTMENTS

-  The fund anticipates that its total foreign investments will not exceed 20%
   of assets

-  The fund actively manages the currency exposure of its foreign investments
   and may hedge a portion of its foreign currency exposure into the U.S. dollar
   or other currencies that J.P. Morgan deems more attractive (see also
   "Derivatives")

DERIVATIVES

-  The fund uses derivatives for hedging and for risk management (i.e., to
   establish or adjust exposure to particular securities, markets, or
   currencies); risk management may include management of a fund's exposure
   relative to its benchmark

-  The fund only establishes hedges that it expects will be highly correlated
   with underlying positions

-  While the fund may use derivatives that incidentally involve leverage, it
   does not use them for the specific purpose of leveraging the portfolio


11 / FUND DETAILS
<PAGE>


--------------------------------------------------------------------------------
POTENTIAL RISKS
--------------------------------------------------------------------------------
SECURITIES LENDING

-  When the fund lends a security, there is a risk that the loaned securities
   may not be returned if the borrower defaults

-  The collateral will be subject to the risks of the securities in which it is
   invested

ILLIQUID HOLDINGS

-  The fund could have difficulty valuing these holdings precisely

-  The fund could be unable to sell these holdings at the time or price it
   desires

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

-  When the fund buys securities before issue or for delayed delivery, it could
   be exposed to leverage risk if it does not use segregated accounts

SHORT-TERM TRADING

-  Increased trading would raise the fund's brokerage and related costs

-  Increased short-term capital gains distributions would raise shareholders'
   income tax liability

--------------------------------------------------------------------------------
POTENTIAL REWARDS
--------------------------------------------------------------------------------
SECURITIES LENDING

-  The fund may enhance income through the investment of the collateral received
   from the borrower

ILLIQUID HOLDINGS

-  These holdings may offer more attractive yields or potential growth than
   comparable widely traded securities

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

-  The fund can take advantage of attractive transaction opportunities

SHORT-TERM TRADING

-  The fund could realize gains in a short period of time

-  The fund could protect against losses if a stock is overvalued and its value
   later falls

--------------------------------------------------------------------------------
POLICIES TO BALANCE RISK AND REWARD
--------------------------------------------------------------------------------
SECURITIES LENDING

-  J.P. Morgan maintains a list of approved borrowers

-  The fund receives collateral equal to at least 100% of the current value of
   securities loaned

-  The lending agents indemnify the fund against borrower default

-  J.P. Morgan's collateral investment guidelines limit the quality and duration
   of collateral investment to minimize losses

-  Upon recall, the borrower must return the securities loaned within the normal
   settlement period

ILLIQUID HOLDINGS

  - The fund may not invest more than 15% of net assets in illiquid holdings

  - To maintain adequate liquidity to meet redemptions, the fund may hold
    investment-grade short-term securities (including repurchase agreements)
    and, for temporary or extraordinary purposes, may borrow from banks up to
    33 1/3% of the value of its total assets

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

-  The fund uses segregated accounts to offset leverage risk

SHORT-TERM TRADING

-  The fund generally avoids short-term trading, except to take advantage of
   attractive or unexpected opportunities or to meet demands generated by
   shareholder activity

-  The expected annual portfolio turnover rate for the fund is between 40% and
   80%

(1) A futures contract is an agreement to buy or sell a set quantity of an
    underlying instrument at a future date, or to make or receive a cash payment
    based on the value of a securities index. An option is the right to buy or
    sell a quantity of an underlying instrument at a predetermined price. A swap
    is a privately negotiated agreement to exchange one stream of payments for
    another. A forward foreign currency contract is an obligation to buy or sell
    a given currency on a future date and at a set price.


                                                              FUND DETAILS / 11
<PAGE>


FOR MORE INFORMATION
--------------------------------------------------------------------------------

For investors who want more information on the fund, the following documents are
available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS Contain 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 MUTUAL FUNDS
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036

TELEPHONE: 1-800-521-5411

HEARING IMPAIRED: 1-888-468-4015

E-MAIL: [email protected]

Text-only versions of these documents and this prospectus are available at the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. (for information, call 1-202-942-8090) and may be viewed on-screen or
downloaded from the SEC's Internet site at http://www.sec.gov. Copies also may
be obtained, after paying a duplicating fee, by e-mail request to
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.

The fund's investment company and 1933 Act registration numbers are: 811-07795
and 333-11125.

J.P. MORGAN FUNDS AND THE
MORGAN TRADITION

The J.P. Morgan funds combine a heritage of integrity and financial leadership
with comprehensive and sophisticated analysis and management techniques. Drawing
on J.P. Morgan's extensive experience and depth as an investment manager, the
J.P. Morgan funds offer a broad array of distinctive opportunities for mutual
fund investors.


   [LOGO]
--------------------------------------------------------------------------------
   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

                                                                          IMPR44
<PAGE>







THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION (SAI) IS NOT
COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS SAI IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.








<PAGE>

                SUBJECT TO COMPLETION DATED NOVEMBER 14, 2000

                            J. P. MORGAN SERIES TRUST





             J.P. MORGAN TAX AWARE SMALL COMPANY OPPORTUNITIES FUND
                                 (SELECT SHARES)










                       STATEMENT OF ADDITIONAL INFORMATION
                                December 12, 2000

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS DATED DECEMBER 12, 2000 FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED
FROM TIME TO TIME. THE PROSPECTUS IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST
FROM FUNDS DISTRIBUTOR, INC., 60 STATE STREET, SUITE 1300, BOSTON,
MASSACHUSETTS 02109, ATTENTION: J.P. MORGAN SERIES TRUST (800) 221-7930.

<PAGE>

                                Table of Contents


                                                                         Page

General.....................................................................1
Investment Objective and Policies...........................................1
Investment Restrictions....................................................16
Trustees and Members of the Advisory Board.................................17
Officers...................................................................19
Codes of Ethics............................................................21
Investment Advisor.........................................................21
Distributor................................................................23
Co-Administrator...........................................................23
Services Agent.............................................................24
Custodian and Transfer Agent...............................................24
Shareholder Servicing......................................................24
Financial Professionals....................................................25
Independent Accountants....................................................25
Expenses...................................................................25
Purchase of Shares.........................................................26
Redemption of Shares.......................................................26
Exchange of Shares.........................................................27
Dividends and Distributions................................................27
Net Asset Value............................................................28
Performance Data...........................................................29
Portfolio Transactions.....................................................29
Massachusetts Trust........................................................31
Description of Shares......................................................31
Taxes......................................................................32
Additional Information.....................................................35
Appendix A -- Description of Securities Ratings...........................A-1


                                       -i-
<PAGE>

GENERAL

         J.P. Morgan Tax Aware Small Company Opportunities 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
Trustees of the Trust have authorized the issuance and sale of shares of two
class of the Fund (Select Shares and Institutional Shares). As of the date of
this Statement of Additional Information, the Fund had not commenced
operations.

         This Statement of Additional Information describes the 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 Prospectus (the "Prospectus").
Capitalized terms not otherwise defined in this Statement of Additional
Information have the meanings assigned to them in the Prospectus. The Trust's
executive offices are located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109.

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

         SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY 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 following discussion supplements the information in the
Prospectus regarding the investment objective and policies of the Fund.

         The Fund is designed for investors who are seeking an actively
managed portfolio of equity securities of small companies with high growth
potential, emphasizing growth sectors of the market without undue emphasis on
a specific sector and encompassing a higher degree of risk than some small
company stock portfolios. The Fund's investment objective is to provide high
after tax total return from a portfolio of small company growth stocks. This
investment objective can be changed without shareholder approval.

         The Fund seeks to achieve its investment objective by investing
primarily in common stocks issued by small companies with above-average
long-term earnings growth potential whose market capitalization is greater
than $125 million and less than $2.0 billion when purchased.


                                       -1-
<PAGE>

INVESTMENT PROCESS

         Research: The Advisor's more than 20 domestic equity analysts, each
an industry specialist with an average of over 10 years of experience,
continuously monitor stocks in the small company universe with the aim of
identifying companies that participate in expanding markets or have
competitive advantage that is sustainable over the long term, exhibit
superior potential, sound financial and operating characteristics and can be
purchased at a reasonable price. Frequent reviews of individual companies
focus on the forecasted growth and profitability inputs to the proprietary
valuation analyses. The research goal is to forecast normalized, long-term
earnings and dividends for the most attractive small capitalization growth
companies among those they monitor.

         Valuation: The analysts' forecasts are converted into comparable
expected returns using a proprietary dividend discount model, which
calculates the long-term earnings by comparing a company's current stock
price with its forecasted dividends and earnings. In addition to the dividend
discount model, price/earnings growth, multiples of revenue, estimate
revisions and cash flow analysis are inputs into earnings and growth
forecasts. These valuation tools are used to evaluate the attractiveness of
securities. Within each industry, companies are ranked according to their
relative value.

         Stock Selection: A diversified portfolio is constructed using
disciplined buy and sell rules. The specific names selected reflect the
portfolio manager's judgment concerning the soundness of the underlying
forecasts, the likelihood that the perceived misevaluation will soon be
corrected, and the magnitude of the risks versus the rewards. While the Fund
holds stocks in many industries to reduce the impact of poor performance in
any one sector, it tends to emphasize industries with higher growth potential
and does not track the sector weightings of the overall small company stock
market.

TAX MANAGEMENT TECHNIQUES

         The Fund uses the Advisor's proprietary tax sensitive optimization
model, which is designed to reduce, but not eliminate, the impact of capital
gains taxes on shareholders' after tax total returns. The Fund will try to
minimize the realization of net short-term and long-term capital gains by
matching securities sold at a gain with those sold at a loss to the extent
practicable. In addition, when selling a portfolio security, the Fund will
generally select the highest cost basis shares of the security to reduce the
amount of realized capital gains. Because the gain on securities that have
been held for more than one year is subject to a lower federal income tax
rate, these securities will generally be sold before securities held less
than one year. The use of these tax management techniques will not
necessarily reduce the Fund's portfolio turnover rate or prevent the Fund
from selling securities to the extent warranted by shareholder transactions,
actual or anticipated economic, market or issuer-specific developments or
other investment considerations. However, the annual portfolio turnover rate
of the Fund is generally not expected to exceed 100%.

EQUITY INVESTMENTS

         The Fund invests primarily in equity securities consisting of common
stocks and other securities with equity characteristics such as preferred
stocks, depositary receipts, warrants, rights, convertible securities, trust
or limited partnership interests and equity participations (collectively,
"Equity Securities"). The Equity Securities in which the Fund invests include
those listed on any domestic or foreign securities exchange or traded in the
over-the-counter (OTC) market as well as certain restricted or unlisted
securities.


                                       -2-
<PAGE>

         EQUITY SECURITIES.  The Equity Securities in which the Fund may
invest may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital
structure.

         The convertible securities in which the Fund may invest include any
debt securities or preferred stock which may be converted into common stock
or which carry the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of
shares of common stock, usually of the same company, at specified prices
within a certain period of time.

         The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible
debentures, the holders' claims on assets and earnings are subordinated to
the claims of other creditors, and are senior to the claims of preferred and
common shareholders. In the case of convertible preferred stock, the holders'
claims on assets and earnings are subordinated to the claims of all creditors
and are senior to the claims of common shareholders.

         COMMON STOCK WARRANTS.  The Fund may invest in common stock warrants
that entitle the holder to buy common stock from the issuer of the warrant at
a specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price
fluctuations. As a result, warrants may be more volatile investments than the
underlying common stock.

         Warrants generally do not entitle the holder to dividends or voting
rights with respect to the underlying common stock and do not represent any
rights in the assets of the issuer company. A warrant will expire worthless
if it is not exercised on or prior to the expiration date.

FOREIGN INVESTMENTS

         The Fund does not expect to invest more than 20% of its assets in
foreign securities. Investors should realize that the value of the Fund's
investments in foreign securities may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, limitation on the removal of funds or assets,
or imposition of (or change in) exchange control or tax regulations in those
foreign countries. In addition, changes in government administrations or
economic or monetary policies in the United States or abroad could result in
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect the Fund's operations. Furthermore, the economies of
individual foreign nations may differ from the U.S. economy, whether
favorably or unfavorably, in areas such as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position; it may also be more difficult to obtain and
enforce a judgment against a foreign issuer. Any foreign investments made by
the Fund must be made in compliance with U.S. and foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.

         Generally, investment in securities of foreign issuers involves
somewhat different investment risks from those affecting securities of U.S.
domestic issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements
comparable to those applicable to domestic companies. Dividends and interest
paid by foreign issuers may be subject to withholding and other foreign taxes
which may decrease the net return on foreign investments as compared to
dividends and interest paid to the Fund by domestic companies.

         In addition, while the volume of transactions effected on foreign
stock exchanges has increased in recent years, in most cases it remains
appreciably below that of domestic security exchanges.


                                       -3-
<PAGE>

Accordingly, the Fund's foreign investments may be less liquid and their
prices may be more volatile than comparable investments in securities of U.S.
companies. Moreover, the settlement periods for foreign securities, which are
often longer than those for securities of U.S. issuers, may affect portfolio
liquidity. In buying and selling securities on foreign exchanges, purchasers
normally pay fixed commissions that are generally higher than the negotiated
commissions charged in the United States. In addition, there is generally
less government supervision and regulation of securities exchanges, brokers
and issuers located in foreign countries than in the United States.

         Foreign investments may be made directly in securities of foreign
issuers or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other
similar securities of foreign issuers. ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer
and deposited with the depositary. ADRs include American Depositary Shares
and New York Shares. EDRs are receipts issued by a European financial
institution. GDRs, which are sometimes referred to as Continental Depositary
Receipts ("CDRs") , are securities, typically issued by a non-U.S. financial
institution, that evidence ownership interests in a security or a pool of
securities issued by either a U.S. or foreign issuer. ADRs, EDRs, GDRs and
CDRs may be available for investment through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary. An unsponsored facility may
be established by a depositary without participation by the issuer of the
receipt's underlying security.

         Holders of an unsponsored depositary receipt generally bear all
costs of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited
securities.

         Since investments in foreign securities may involve foreign
currencies, the value of the Fund's assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, including currency blockage. The Fund may enter
into forward commitments for the purchase or sale of foreign currencies in
connection with the settlement of foreign securities transactions or to
manage the Fund's currency exposure related to foreign investments.

         FOREIGN CURRENCY EXCHANGE TRANSACTIONS.  Because the Fund buys and
sells securities and receives interest and dividends in currencies other than
the U.S. dollar, the Fund may enter from time to time into foreign currency
exchange transactions. The Fund either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or uses forward contracts to purchase or sell foreign
currencies. The cost of the Fund's spot currency exchange transactions is
generally the difference between the bid and offer spot rate of the currency
being purchased or sold.

         A foreign currency forward exchange contract is an obligation by the
Fund to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Foreign currency
forward exchange contracts establish an exchange rate at a future date. These
contracts are derivative instruments, as their value derives from the spot
exchange rates of the currencies underlying the contracts. These contracts
are entered into in the interbank market directly between currency traders
(usually large commercial banks) and their customers. A foreign currency
forward exchange contract generally has no deposit requirement, and is traded
at a net price without commission. Neither spot transactions nor foreign
currency forward exchange contracts eliminate fluctuations in the prices of
the Fund's securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.


                                       -4-
<PAGE>

         The Fund may enter into foreign currency forward exchange contracts
in connection with settlements of securities transactions and other
anticipated payments or receipts. In addition, from time to time, the Advisor
may reduce the Fund's foreign currency exposure by entering into forward
foreign currency exchange contracts to sell a foreign currency in exchange
for the U.S. dollar. Forward foreign currency exchange contracts may involve
the purchase or sale of a foreign currency in exchange for U.S. dollars or
may involve two foreign currencies.

         Although these transactions are intended to minimize the risk of
loss due to a decline in the value of the hedged currency, at the same time
they limit any potential gain that might be realized should the value of the
hedged currency increase. In addition, forward contracts that convert a
foreign currency into another foreign currency will cause the Fund to assume
the risk of fluctuations in the value of the currency purchased vis a vis the
hedged currency and the U.S. dollar. The precise matching of the forward
contract amounts and the value of the securities involved will not generally
be possible because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of such
securities between the date the forward contract is entered into and the date
it matures. The projection of currency market movements is extremely
difficult, and the successful execution of a hedging strategy is highly
uncertain.

ADDITIONAL INVESTMENTS

         WHEN-ISSUED AND DELAYED DELIVERY SECURITIES.  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 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.


                                       -5-
<PAGE>

         The Securities and Exchange Commission ("SEC") has granted the Trust
an exemptive order permitting the Fund to invest the Fund's 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,
shareholder servicing fees and administrative 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 segregate securities with its Custodian in an amount
at least equal to its purchase obligations under its reverse repurchase
agreements. All forms of borrowing (including reverse repurchase agreements
and securities lending) are limited in the aggregate and may not exceed
33-1/3% of the Fund's total assets.

         LOANS OF SECURITIES.  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 securities to any officer, Trustee, Member of the Advisory
Board, Director, employee or other affiliate of the Fund or the Trust, the
Advisor or the Distributor, unless otherwise permitted by applicable law. All
forms of borrowing (including reverse repurchase agreements and securities
lending) are limited in the aggregate and may not exceed 33-1/3% of the
Fund's total assets.

         ILLIQUID INVESTMENTS; PRIVATELY PLACED AND CERTAIN UNREGISTERED
SECURITIES.  The Fund may not acquire any illiquid holdings 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 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 Fund. The price the
Fund pays for illiquid holdings or receives upon resale may be lower than the
price paid or received for similar holdings with a more liquid market.
Accordingly, the valuation of these holdings will reflect any limitations on
their liquidity.

         The 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


                                       -6-
<PAGE>

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 holding 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.

MONEY MARKET INSTRUMENTS

         Although the Fund intends, under normal circumstances and to the
extent practicable, to be fully invested in Equity Securities, the Fund may
invest in money market instruments to invest temporary cash balances, to
maintain liquidity to meet redemptions or as a defensive measure during, or
in anticipation of, adverse market conditions. A description of the various
types of money market instruments that may be purchased by the 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 Bank and the U.S. Postal Service, each of which has the
right to borrow from the U.S. Treasury to meet its obligations; (ii)
securities issued by the Federal National Mortgage Association, which are
supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and (iii) obligations of the Federal Farm Credit
System and the Student Loan Marketing Association, each of whose obligations
may be satisfied only by the individual credits of the issuing agency.

         FOREIGN GOVERNMENT OBLIGATIONS.  The Fund may also invest in
short-term  obligations of foreign sovereign governments or of their
agencies, instrumentalities, authorities or political subdivisions. These
securities may be denominated in the U.S. dollar or in another currency. See
"Foreign Investments."

         BANK OBLIGATIONS.  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
assets and are organized under the laws of the United States or any state,
(ii) foreign branches of these banks or of foreign banks of equivalent size
(Euros) and (iii) U.S. branches of foreign banks of equivalent size
(Yankees). The Fund will not invest in obligations for which the Advisor, or
any


                                       -7-
<PAGE>

of its affiliated persons, is the ultimate obligor or accepting bank. The
Fund may also invest in international banking institutions designated or
supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the European Investment Bank, the
Inter-American Development Bank, or the World Bank).

         COMMERCIAL PAPER.  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 JPMIM acting as agent, for
no additional fee, in its capacity as investment advisor to the Fund and as
fiduciary for other clients for whom it exercises investment discretion. The
monies loaned to the borrower come from accounts managed by the Advisor or
its affiliates pursuant to arrangements with such accounts. Interest and
principal payments are credited to such accounts. The Advisor, acting as a
fiduciary on behalf of its clients, 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 the Advisor. 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 Guaranty Trust Company
of New York ("Morgan"), an affiliate of the Advisor, 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 each 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 with
remaining effective maturities of not more than thirteen months, including
without limitation corporate and foreign bonds, asset-backed securities and
other obligations described in this Statement of Additional Information.


                                       -8-
<PAGE>

QUALITY AND DIVERSIFICATION REQUIREMENTS

         The Fund intends to meet the diversification requirements of the
1940 Act. Current 1940 Act diversification requirements require that with
respect to 75% of the assets of the Fund: (1) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government, its agencies and instrumentalities, and
(2) the Fund may not own more than 10% of the outstanding voting securities
of any one issuer. As for the other 25% of the Fund's assets not subject to
the limitation described above, there is no limitation on investment of these
assets under the 1940 Act, so that all of such assets may be invested in
securities of any one issuer. Investments not subject to the limitations
described above could involve an increased risk to the Fund should an issuer,
or a state or its related entities, be unable to make interest or principal
payments or should the market value of such securities decline.

         The Fund also 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." To meet these
requirements, the Fund must diversify its holdings so that, with respect to
50% of the Fund's assets, no more than 5% of its assets are invested in the
securities of any one issuer other than the U.S. Government at the close of
each quarter of the Fund's taxable year. The Fund may, with respect to the
remaining 50% of its assets, invest up to 25% of its assets in the securities
of any one issuer (except this limitation does not apply to U.S. Government
securities).

         The Fund may invest in convertible debt securities, for which there
are no specific quality requirements. In addition, at the time the Fund
invests in any commercial paper, bank obligation or repurchase agreement, the
issuer must have outstanding debt rated A or higher by Moody's or Standard &
Poor's, the issuer's parent corporation, if any, must have outstanding
commercial paper rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if
no such ratings are available, the investment must be of comparable quality
in the Advisor's opinion. At the time the Fund invests in any other
short-term debt securities, they must be rated A or higher by Moody's or
Standard & Poor's, or if unrated, the investment must be of comparable
quality in the Advisor's opinion.

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

OPTIONS AND FUTURES TRANSACTIONS

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

         The Fund may use futures contracts and options for hedging and
risk management purposes. See "Risk Management" below. The Fund 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


                                       -9-
<PAGE>

buying futures contracts, writing puts and calls, and buying calls, tend to
increase market exposure. Options and futures contracts may be combined with
each other or with forward contracts in order to adjust the risk and return
characteristics of 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 specialize 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 limiting its exposure to losses. The 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 the aggregate
premiums paid on all such options and 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.

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

         The features of call options are essentially the same as those of
put options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the instrument underlying the option at the
option's 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.


                                       -10-

<PAGE>

         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 receipt of the premium, the Fund assumes the
obligation to pay the strike price for the instrument underlying the option
if the other party to the option chooses to exercise it. 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, the Fund
must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to post margin as
discussed below.

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

         Writing a call option obligates 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. 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 an 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 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 creditworthiness standards
approved by the Advisor. 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 whom 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.


                                    -11-
<PAGE>

         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 AND OPTIONS ON FUTURES CONTRACTS. The Fund may
purchase or sell (write) futures contracts and purchase or sell (write) 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 and indexes
of equity securities.

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

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

         COMBINED POSITIONS. The Fund is permitted to purchase and write
options in combination with each other, or in combination with futures or
forward contracts, to adjust the risk and return characteristics of the
overall position. For example, 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


                                     -12-
<PAGE>

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 segregate appropriate liquid
assets in the amount prescribed. Securities so segregated 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, 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, such as for the purpose of
attempting to obtain or preserve a particular return or spread at a


                                      -13-
<PAGE>

lower cost than investing directly in an instrument that yields that return
or spread, 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 yield the interest, that the Fund may be required to pay.

         Swap agreements are two-party contracts entered into primarily by
institutional investors 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) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect 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 prespecified notional amount with
prespecified terms with the seller of the option as the counterparty.

         The "notional amount" of the swap transaction is the agreed upon
basis for calculating the obligations that the parties to a swap agreement
have agreed to exchange. An example would be the obligation to pay a floating
rate of interest (e.g., U.S. 3 month LIBOR) on a quarterly basis in exchange
for receipt of 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, the Fund 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, the obligations of the parties will be exchanged on a "net basis". That
is, the two payment streams are netted out in a cash settlement on the
payment date or dates specified in the instrument. 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, floor 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 interest rate swaps, swap transactions tend
to be more volatile than many other types of investments.

         The use of swap transactions involves investment techniques and
risks, which are similar to those, associated with other portfolio security
transactions. If the Advisor is incorrect in its forecasts of market values,
interest rates, currency 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 investment under certain of these instruments when it wishes to
do


                                     -14-
<PAGE>

so. Such occurrences could result in losses to the Fund. The Advisor will,
however, consider such risks and will enter into swap transactions only when
it believes that the risks are not unreasonable.

         The Fund will segregate permissible liquid assets in an amount
sufficient at all times to cover its current obligations under its swap
transactions. 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 the Fund's accrued obligations under the agreement.

         The Fund will not enter into any swap transaction, 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 markets in which 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 documentation. As a result, these markets have become
relatively liquid.

         The liquidity of swap transactions will be determined by the Advisor
based on various factors, including (1) the frequency of trades and
quotations, (2) the number of dealers and prospective purchasers in the
marketplace, (3) dealer undertakings to make a market, (4) the nature of the
instrument (including any demand or tender features) 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 investment). Such determination
will govern whether the instrument will be deemed within the 15% restriction
on investments in securities that are illiquid.

         During the term of a swap, changes in the value of the swap are
recognized as unrealized gains or losses by marking to market to reflect the
market value of the swap. When the swap 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 the Fund's basis in the
contract.

         The federal income tax treatment with respect to swap transactions
may impose limitations on the extent to which the Fund may engage in such
transactions.

RISK MANAGEMENT

         The Fund may employ non-hedging risk management techniques. Risk
management strategies are used to keep the Fund fully invested and to reduce
the transaction costs associated with cash flows into and out of the Fund.
The objective where equity futures are used to "equitize" cash is to match
the notional value of all futures contracts to the Fund's cash balance. The
notional value of futures and of the cash is monitored daily. As the cash is
invested in securities and/or paid out to participants in redemptions, the
Advisor simultaneously adjusts the futures positions. Through such
procedures, the Fund not only gains equity exposure from the use of futures,
but also benefits from increased flexibility in responding to client cash
flow needs. Additionally, because it can be less expensive to trade a list of
securities as a package or program trade rather than as a group of individual
orders, futures provide a means through which transaction costs can be
reduced. 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.

PORTFOLIO TURNOVER


                                     -15-
<PAGE>

         The Fund expects that its annual portfolio turnover rate will range
between 40% and 80%. 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.

INVESTMENT RESTRICTIONS

         The investment restrictions below have been adopted by the Trust
with respect to the Fund. Except where 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 security holders 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 make any investments inconsistent with the Fund's classification
as a diversified investment company under the Investment Company Act of 1940;

2. 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;

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

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

5. 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;

6. 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, and (b) invest in securities
or other instruments issued by issuers that invest in real estate;

7. 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

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


                                     -16-
<PAGE>

         NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Fund and may be changed
by the Trustees. These non-fundamental investment  policies require that the
Fund:

1.  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 that are
illiquid.

2.  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.

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

         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 fundamental investment restrictions regarding
industry concentration, the Advisor may classify issuers by industry in
accordance with classifications set forth in the DIRECTORY OF COMPANIES
FILING ANNUAL REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION or other
sources. In the absence of such classification or if the Advisor 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, the Advisor 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 MEMBERS OF THE ADVISORY BOARD

         The Trustees of the Trust, their business addresses, 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 HEALEY (*) -- Trustee; Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc. ("Pierpont Group") 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.


                                      -17-
<PAGE>

         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 these funds.

----------

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

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

<TABLE>
<CAPTION>
------------------------------------------------------ -------------------------- -------------------------------------
                                                                                  TOTAL TRUSTEE COMPENSATION ACCRUED
                                                                                  BY THE MASTER PORTFOLIOS (*), J.P.
                                                       AGGREGATE TRUSTEE          MORGAN FUNDS, J.P. MORGAN
                                                       COMPENSATION PAID BY THE   INSTITUTIONAL FUNDS AND THE TRUST
NAME OF TRUSTEE                                        TRUST DURING 1999          DURING 1999 (**)
------------------------------------------------------ -------------------------- -------------------------------------
<S>                                                    <C>                        <C>
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 (***)
  Chairman and Chief Executive
  Officer                                              $1,018                     $75,000
------------------------------------------------------ -------------------------- -------------------------------------

Michael P. Mallardi, Trustee                           $1,018                     $75,000
------------------------------------------------------ -------------------------- -------------------------------------
</TABLE>

----------
(*) Includes each portfolio in which a series of J.P. Morgan Funds or J.P.
Morgan Institutional Funds invests. 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, J.P. Morgan Funds,
J.P. Morgan Institutional Funds and the Trust) 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.


                                     -18-
<PAGE>

         The Trustees  decide upon general  policies and are responsible for
overseeing the Trust's and Portfolio'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, J.P. Morgan Funds, J.P. Morgan
Institutional Funds and each Master Portfolio have 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.

ADVISORY BOARD

         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 Trusts 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 the Trust, each of the Master Portfolios, the J.P. Morgan Funds and the
J.P. Morgan Institutional Funds 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 officers conduct
and supervise the business operations of the Trust. The Trust has no
employees.


                                     -19-
<PAGE>

         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 is c/o Pierpont Group Inc.,
461 Fifth Avenue, New York, New York 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. From April 1993 to
January 1995, Mr. Conroy was a Senior Fund Accountant  for Investors Bank &
Trust Company. 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. MORRISSEY; 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. Ms. Pace serves in the Funds  Administration group
as a Manager for the Budgeting and Expense Processing  Group. Prior to
September 1995,  Ms. Pace served as a Fund Administrator  for Morgan Guaranty
Trust Company of New York.  Her address is 60 Wall Street, New York, New York
10260. Her date of birth is March 13, 1966.


                                     -20-
<PAGE>

         GEORGE A. RIO; President and Treasurer. Executive Vice President,
Client Service Director of FDI, since April 1998.  From June 1995 to March
1998,  Mr. Rio was Senior Vice President, Senior Key Account Manager for
Putnam Mutual Funds. From May 1994 to June 1995, Mr. Rio was Director of
Business Development for First Data Corporation. 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 a Manager of the Tax Group in
the Funds Administration group and was responsible for U.S.  mutual fund tax
matters. Prior to September 1995,  Ms. Rotundo served as a Senior Tax Manager
in the Investment Company Services Group of Deloitte & Touche LLP. 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 January 2000. Prior thereto, she was Assistant Vice President
since 1997 and Sales Associate since May 1996 of FDI. From March 1990 to May
1996, she was employed in various mutual fund sales and marketing positions
by the U.S. Trust Company of New York. Her date of birth is December 14, 1961.

CODES OF ETHICS

         The Trust, the Advisor and FDI 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 Fund. Such purchases, however, are subject to
preclearance and other 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 Fund's 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.

         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 $373 billion.

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

         The basis of 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. The Advisor currently


                                     -21-
<PAGE>

employs over 430 research analysts, capital markets researchers, portfolio
managers and traders and has one of the largest research staffs in the money
management industry, in its investment management divisions located in New
York, London, Tokyo, Frankfurt, and Singapore to cover companies, industries
and countries on site. The conclusions of the equity analysts' fundamental
research is quantified into a set of projected returns for individual
companies through the use of a dividend discount model. These returns are
projected for 2 to 5 years to enable analysts to take a longer term view.
These returns, or normalized earnings, are used to establish relative values
among stocks in each industry sector. These values may not be the same as the
markets' current valuations of these companies. This provides the basis for
ranking the attractiveness of the companies in an industry according to five
distinct quintiles or rankings. This ranking is one of the factors considered
in determining the stocks purchased and sold in each sector.

         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. 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."

         Security selection is emphasized as the method to achieve investment
performance superior to the Fund's benchmark, the Russell 2000 Growth Index.

         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, which is a bank holding
company organized under the laws of the State of Delaware.

         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
other investment management affiliates of J.P. Morgan which executes
transactions on behalf of the Fund.

         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 0.85% of the average daily
net assets of the Fund.

         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 and thereafter only if specifically approved
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 without penalty by a vote of a
majority of the 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 Trust. See
"Additional Information."


                                     -22-
<PAGE>

         Under separate agreements, Morgan also provides certain financial,
fund accounting and administrative services to the Trust and the Fund and
shareholder services for 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 and thereafter only if it
is approved at least annually (i) by a vote of the holders of a majority of
the Fund's outstanding shares or by the Trust's 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 Members of the Advisory Board" and "Officers") . The
Distribution Agreement will terminate automatically if assigned by either
party thereto and is terminable at any time without penalty by a vote of a
majority of the Trustees of the Trust, a vote of a majority of the Trustees
who are not "interested persons" of the Trust, or by a vote of (i) 67% or
more of the Fund's outstanding voting securities present at a meeting if the
holders of more than 50% of the Fund's outstanding voting securities are
present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding voting securities, whichever is less. FDI is a wholly owned
indirect subsidiary of Boston Institutional Group, Inc. The principal offices
of FDI are located at 60 State Street, Suite 1300, Boston, Massachusetts
02109.

CO-ADMINISTRATOR

         Under a Co-Administration Agreement with the Trust dated August 1,
1996, 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, as applicable, 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 will 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 certain Trust regulatory documents
and mails certain Trust communications to 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 certain other registered investment companies subject to
similar arrangements with FDI.

SERVICES AGENT


                                     -23-
<PAGE>

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

         Under the Services Agreement, 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 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, the Master Portfolios, and the other investors in the
Master Portfolios for which Morgan provides similar services.

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 and Fund Accounting Agreement with the Trust, BONY is responsible
for holding portfolio securities and cash and maintaining the books of account
and records of the Fund's portfolio transactions.

         State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Trust'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 who are Fund investors 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 Funds' 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 FDI of the gross amount of
purchase orders for Fund shares; and providing other related services.

         Under the Shareholder Servicing Agreement, the Fund has agreed to pay
Morgan a fee for these services at the annual rate of 0.25% with respect to
Select Shares and 0.10% with respect to Institutional


                                     -24-

<PAGE>
Shares (expressed as a percentage of the average daily net assets of Fund
shares). Morgan acts as shareholder servicing agent for all shareholders.

         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 recordkeeping 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 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-based or other
fee for their services. Such charges may vary among financial professionals but
in all cases will be retained by the financial professional and not remitted to
the Fund or 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 Members of the
Advisory Board," "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 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 applicable to the Fund, transfer, registrar and dividend
disbursing costs, the expenses of printing and mailing reports, notices and
proxy statements to Fund shareholders, filing fees


                                     -25-
<PAGE>

under state securities laws, applicable registration fees under foreign
securities laws, custodian fees and brokerage expenses.

         J.P. Morgan has agreed that it will reimburse the Fund as described in
the Prospectus to the extent necessary to maintain the Fund's total operating
expenses at the following annual rates of the Fund's average daily assets. This
limit does not cover interest, taxes and extraordinary expenses.

                  Select Shares: 1.40% until February 28, 2002

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 Morgan or a Financial
Professional include customers of their affiliates and references to
transactions by customers with Morgan or a Financial Professional include
transactions with their affiliates. Only Fund investors who are using the
services of a financial institution acting as shareholder servicing agent
pursuant to an agreement with the Trust on behalf of the Fund may make
transactions in shares of the Fund. All purchase orders must be accepted by the
Distributor.

         The Fund may, at its own option, accept securities in payment for
shares. The securities delivered in such a transaction are valued by the method
described in "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 either by law or liquidity of
market; and (iv) 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 the 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 of the Funds as described in the
Prospectus. The Funds generally intend to pay redemption proceeds in cash;
however, they reserve the right at their sole discretion to pay redemption
over $250,000 in-kind as a portfolio of representative stocks rather than cash.
See below and "Exchange of Shares".

         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 thereon
is restricted as determined by the SEC by rule or regulation, (iii) during
periods in which an emergency, as determined by the SEC, exists that causes
disposal by the Fund of, or evaluation of the net asset value of, its portfolio
securities to be unreasonable or impracticable, or (iv) for such other periods
as the SEC may permit.


                                     -26-


<PAGE>

         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 is in the process of seeking
exemptive relief from the SEC with respect to redemptions in-kind by the Funds.
If the requested relief is granted, each Fund would then be 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.

         In general, the Fund will attempt to select securities for in-kind
redemptions that approximate the overall characteristics of the Fund's
portfolio. The Fund will not distribute illiquid securities to satisfy in-kind
redemptions. For purposes of effecting in-kind redemptions, securities will be
valued in the manner regularly used to value the Fund's portfolio securities.
The Fund will not redeem its shares in-kind in a manner that after giving effect
to the redemption would cause it to violate its investment restrictions or
policies. See the Prospectus for information on redemptions in-kind.

         OTHER REDEMPTION PROCESSING INFORMATION. Redemption requests may not be
processed if the redemption request is not submitted in proper form. A
redemption request is not in proper form unless the Fund has received the
shareholder's certified taxpayer identification number and address. In addition,
if shares were paid for by check and the check has not yet cleared, redemption
proceeds will not be transmitted until the check has cleared, which may take up
to 15 days. The Fund reserves the right to suspend the right of redemption or
postpone the payment of redemption proceeds to the extent permitted by the SEC.
Shareholders may realize taxable gains upon redeeming shares.

         For information regarding redemption orders placed through a financial
professional, please see "Financial Professionals" above.


EXCHANGE OF SHARES

         Subject to the limitations below, an investor may exchange shares from
the Fund into shares of any other J.P. Morgan Series Trust Fund, J.P. Morgan
Institutional Fund or J.P. Morgan 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.
The Trust reserves the right to discontinue, alter or limit the 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.

         The Fund's dividends and distributions are paid in additional shares of
the Fund unless the shareholder elects to have them paid in cash. The tax
effects of dividends and distributions are the same whether they are paid in
shares or cash. Cash dividends and distributions either (1) are credited to the
shareholder's account at J.P. Morgan or at his financial professional or (2), in
the case of certain J.P. Morgan clients, are paid by check mailed in accordance
with the client's instructions.

                                     -27-
<PAGE>
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 (generally 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 also may 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.

         The value of investments listed on a domestic or foreign securities
exchange, including National Association of Securities Dealers Automated
Quotations ("NASDAQ"), other than options on stock indexes, is based on the last
sale prices on the exchange on which the security is principally traded (the
"primary exchange"). If there has been no sale on the primary exchange on the
valuation date, and the spread between bid and asked quotations on the primary
exchange is less than or equal to 10% of the bid price for the security, the
security shall be valued at the average of the closing bid and asked quotations
on the primary exchange. Under all other circumstances (e.g., there is no last
sale on the primary exchange, there are no bid and asked quotations on the
primary exchange, or the spread between bid and asked quotations is greater than
10% of the bid price), the value of the security shall be the last sale price on
the primary exchange up to ten days prior to the valuation date unless, in the
judgment of the portfolio manager, material events or conditions since such last
sale necessitate fair valuation of the security. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security. For purposes of
calculating net asset value all assets and liabilities initially expressed in
foreign currencies will be converted into U.S. dollars at the prevailing
currency rate average on the valuation date.

         Options on stock indexes traded on national securities exchanges are
valued at the close of options trading on such exchanges which is currently 4:10
p.m. New York time. Stock index futures and related options, which are traded on
commodities exchanges, are valued at their last sales price as of the close of
such commodities exchanges which is currently 4:15 p.m., New York time. Options
and futures traded on foreign exchanges are valued at the last sale price
available prior to the calculation of the Fund's net asset value. Securities or
other assets for which market quotations are not readily available (including
certain restricted and illiquid securities) are valued at fair value in
accordance with procedures established by and under the general supervision and
responsibility of the Trustees. Such procedures include the use of independent
pricing services which use prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Short-term investments which mature in
60 days or less are valued at amortized cost if their original maturity was 60
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original maturity when acquired by the Fund was more than 60 days, unless
this is determined not to represent fair value by the Trustees.

         Trading in securities on most foreign markets is normally completed
before the close of trading in U.S. markets and may also take place on days on
which the U.S. markets are closed. If events materially affecting the value of
securities occur between the time when the market in which they are traded
closes and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.


                                     -28-
<PAGE>
PERFORMANCE DATA

         From time to time, the Fund may quote performance in terms of actual
distributions, total return or capital appreciation in reports, sales literature
and advertisements published by the Trust. Shareholders may obtain current
performance information by calling Morgan at (800) 521-5411 for Select Shares.

         Any fees charged by an institution directly to its customers' accounts
in connection with investments in the Funds will not be included in calculations
of total return.

         TOTAL RETURN QUOTATIONS. As required by regulations of the SEC, the
annualized 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
annualized 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.

         GENERAL. The Fund's performance will vary from time to time depending
upon market conditions and its 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.

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

         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 one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (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 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 Objectives and Policies."

                                     -29-
<PAGE>
         In selecting a broker, the Advisor considers a number of factors
including: the price per unit of the security; the broker's reliability for
prompt, accurate confirmations and on-time delivery of securities; the firm's
financial condition; as well as the commissions charged. A broker may be paid a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction if, after considering the foregoing factors,
the Advisor decides that the broker chosen will provide the best execution. The
Advisor monitors the reasonableness of the brokerage commissions paid in light
of the execution received. The Trustees of the Trust review regularly the
reasonableness of commissions and other transaction costs incurred by the Fund
in light of facts and circumstances deemed relevant from time to time, and, in
that connection, will receive reports from the Advisor and published data
concerning transaction costs incurred by institutional investors generally.

         Research services provided by brokers to whom the Advisor has allocated
brokerage business in the past include economic statistics and forecasting
services, industry and company analyses, portfolio strategy services,
quantitative data, and consulting services from economists, political analysts
and electronic trading tools. Research services furnished by brokers are used
for the benefit of all the Advisor's clients and not solely or necessarily for
the benefit of the Fund. The Advisor believes that the value of research
services received is not determinable and does not significantly reduce its
expenses. The Fund does not reduce its fee to the Advisor by any amount that
might be attributable to the value of such services.

         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 Trust that either
comply with rules adopted by the SEC or with interpretations of the SEC's staff.

         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 customers, 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 customers 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 its fiduciary obligations to
the Fund. In some instances, this procedure might adversely affect the Fund.

         If the Fund effects a closing purchase transaction with respect to an
option written by it, normally such transaction will be executed by the same
broker-dealer who executed the sale of the option. The writing of options by the
Fund will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class which may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options, which the Fund may write, may be affected by options written by the
Advisor for other investment advisory clients. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.


                                     -30-
<PAGE>
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
shall not be subject to any personal liability for the acts or obligations of
the Fund and that every written agreement, obligation, instrument or undertaking
made on behalf of the Fund shall contain a provision to the effect that the
shareholders are not personally liable thereunder.

         The Trust's Declaration of Trust further provides that no Trustee,
Members of the Advisory Board, officer, employee or agent of the Trust is liable
to the Fund or to a shareholder, and that no Trustee, Members 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 shall 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, Members 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.

DESCRIPTION OF SHARES

         The Fund represents a separate  series of shares of beneficial
interest of the Trust. Fund shares are further divided into separate classes.
See "Massachusetts Trust."

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

         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 shareholders of the Trust are entitled to one vote for each dollar
of net asset value (or a proportionate fractional vote in respect of a
fractional dollar amount), on matters on which shares of the Fund shall be
entitled to vote. Subject to the 1940 Act, the Trustees have the power to alter
the number and the terms of office of the Trustees, to lengthen their own terms,
or to make their terms of unlimited duration, subject to certain removal
procedures, and to appoint their own successors. However, immediately after such
appointment, the requisite majority of the Trustees must have been elected by
the shareholders of the Trust. The voting rights of shareholders are not
cumulative. The Trust does not intend to hold annual meetings of shareholders.
The Trustees may call meetings of shareholders for action by shareholder vote if
required by either the 1940 Act or the Trust's Declaration of Trust.

         Shareholders of the Trust have the right, upon the declaration in
writing or vote of shareholders whose shares represent two-thirds of the net
asset value of the Trust, to remove a Trustee. The Trustees will call a meeting
of shareholders to vote on removal of a Trustee upon the written request of the


                                    -31-
<PAGE>
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
"Redemption of Shares."

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 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 quarter of its taxable year, (i) at least 50% of the value of the
Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of 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 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 gain that it distributes to its shareholders, provided that
at least 90% of its net investment income and realized net short-term capital
gain in excess of net long-term capital loss for the taxable year is distributed
in accordance with the Code's timing requirements.

         Under the Code, the Fund will be subject to a 4% excise tax on a
portion of its undistributed taxable income and capital gains if it fails to
meet certain distribution requirements by the end of the calendar year. 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 be
taxable to a shareholder in the year declared rather than the year paid.

         Distributions of net investment income, certain foreign currency gains,
and realized net short-term capital gain in excess of net long-term capital loss
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 expects that a portion of these distributions to corporate shareholders
will be eligible for the dividends-received deduction, subject to applicable
limitations under the Code. If dividend payments exceed income earned by 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 gain (i.e., net long-term capital gain in excess of net short-term
capital loss) are taxable to shareholders of the Fund as long-term capital gain,
regardless of whether such distributions are taken in cash or reinvested in
additional shares and


                                     -32-
<PAGE>

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. Except as described below, 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 consider the consequences of
purchasing shares in the Fund shortly before the Fund declares a sizable
dividend distribution.

         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 a 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 will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the shareholder
with respect to such shares. In addition, no loss will be allowed on the
redemption or exchange of shares of the Fund, if within a period beginning 30
days before the date of such redemption or exchange and ending 30 days after
such date, the shareholder acquires (such as through dividend reinvestment)
securities that are substantially identical to shares of the Fund. Investors are
urged to consult their tax advisors concerning the limitations on the
deductibility of capital losses.

         Under the Code, gains or losses attributable to disposition of foreign
currency or to certain foreign currency contracts, or to fluctuations in
exchange rates between the time the Fund accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such income or pays such liabilities, are generally
treated as ordinary income or loss. Similarly, gains or losses on the
disposition of debt securities held by the Fund, if any, denominated in foreign
currency, to the extent attributable to fluctuations in exchange rates between
the acquisition and disposition dates are also treated as ordinary income or
loss.

         Forward currency contracts, options and futures contracts entered into
by the Fund may create "straddles" for U.S. federal income tax purposes and this
may affect the character and timing of gains or losses realized by the Fund on
forward currency contracts, options and futures contracts or on the underlying
securities.

         Certain options, futures and foreign currency contracts held by the
Fund at the end of each taxable 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


                                     -33-

<PAGE>
remainder will be treated as short-term capital gain or loss regardless of
how long the Fund has held such options or futures. However, gain or loss
recognized on certain foreign currency contracts will be treated as ordinary
income or loss.

         The Fund may invest in Equity Securities of foreign issuers. If the
Fund purchases shares in certain foreign corporations (referred to as passive
foreign investment companies ("PFICs") under the Code), it may be subject to
federal income tax on a portion of any "excess distribution" from such
foreign corporation, including any gain from the disposition of such shares
In addition, certain interest charges may be imposed on the Fund as a result
of such excess distributions. Alternatively, the Fund may in some cases be
permitted to include each year in its income and distribute to shareholders a
pro rata portion of the foreign investment fund's income, whether or not
distributed to the Fund.

         The Fund will be permitted to "mark-to-market" any marketable stock
held by it in a PFIC. The Fund will include in income each year an amount equal
to its share of the excess, if any, of the fair market value of the PFIC stock
as of the close of the taxable year over the adjusted basis of such stock. The
Fund would be allowed a deduction for its share of the excess, if any, of the
adjusted basis of the PFIC stock over its fair market value as of the close of
the taxable year, but only to the extent of any net mark-to-market gains with
respect to the stock included by the Fund for prior taxable years.

         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.

         FOREIGN SHAREHOLDERS. Dividends of net investment income and
distributions of realized net short-term gain in excess of net long-term loss to
a shareholder who, as to the United States, is a nonresident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Under United States
Treasury regulations that will generally apply to such dividends paid after
December 31, 2000, (the "Final Withholding Regulations"), you must satisfy
certain certification requirements in order to claim the benefit of a lower
treaty rate. In addition, in the case of Fund shares held by a foreign
partnership, the certification requirement generally will also apply to the
partners of the partnership and the partnership must provide certain
information. The Final Withholding Regulations also provide look-through rules
for tiered partnerships.

         If you are eligible for a reduced rate of United States withholding tax
under a tax treaty, you may obtain a refund or any amounts withheld in excess of
that rate by filing a refund claim with the United States Internal Revenue
Service. Distributions treated as long - term capital gains to foreign
shareholders will not be subject to U.S. tax unless the distributions are
effectively connected with the shareholder's trade or business in the United
States or, in the case of a shareholder who is a nonresident alien individual,
the shareholder was present in the United States for more than 182 days during
the taxable year and certain other conditions are met.

         In the case of a foreign shareholder who is a nonresident alien
individual or foreign entity, the Fund may be required to withhold U.S. federal
income tax as "backup withholding" at the rate of 31% from distributions treated
as long-term capital gains and from the proceeds of redemptions, exchanges or
other dispositions of Fund shares unless such foreign shareholder provides IRS
Form W-8BEN (or satisfies certain documentary evidence requirements for
establishing that it is a non-U.S. holder for U.S. federal income tax purposes).
Transfers by gift of shares of the Fund by a foreign shareholder who is a
nonresident alien individual will not be subject to U.S. federal gift tax, but
the value of shares of the Fund


                                     -34-
<PAGE>
held by such a shareholder at his or her death will be includible in his or her
gross estate for U.S. federal estate tax purposes.

         FOREIGN TAXES. It is expected that the Funds may be subject to foreign
withholding taxes or other foreign taxes with respect to income (possibly
including, in some cases, capital gains) received from sources within foreign
countries.

         STATE AND LOCAL TAXES. 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. The Trust is organized as a Massachusetts business
trust and, 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, 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 Registration Statements
filed under the 1940 Act. Pursuant to the rules and regulations of the SEC,
certain portions have been omitted. The Registration Statements 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.


                                     -35-
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES 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.

COMMERCIAL PAPER
________________

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.

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.


                                      A-1
<PAGE>
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.

COMMERCIAL PAPER
________________

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.

                                      A-2



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