JP MORGAN SERIES TRUST
485BPOS, 2000-06-28
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As filed with the U.S. Securities and Exchange Commission on June 28, 2000


                     Registration Nos. 333-11125 and 811-07795

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

                                     FORM N-1A

         REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933



                        POST-EFFECTIVE AMENDMENT NO. 24


                                            AND

            REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940


                                AMENDMENT NO. 25


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

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

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

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

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


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


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



<PAGE>

--------------------------------------------------------------------------------
                           JUNE 28, 2000 | PROSPECTUS
--------------------------------------------------------------------------------


J.P. MORGAN INSTITUTIONAL
ENHANCED INCOME FUND

                                  ----------------------------------------------
                                  Seeking high current  income  consistent  with
                                  principal preservation by investing in taxable
                                  fixed income securities.

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

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

Distributed by Funds Distributor, Inc.

                                                                        JPMorgan
<PAGE>

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

<PAGE>

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

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

J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND
Fund description.............................................................. 1
Investor expenses............................................................. 2

3 |

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

5 | Investing in the J.P. Morgan Institutional Enhanced Income Fund

YOUR INVESTMENT
Investing through a financial professional.................................... 5
Investing directly............................................................ 5
Opening your account.......................................................... 5
Adding to your account........................................................ 5
Selling shares................................................................ 6
Account and transaction policies.............................................. 6
Dividends and distributions................................................... 7
Tax considerations............................................................ 7

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

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

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

J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND
--------------------------------------------------------------------------------
                        REGISTRANT: J.P. MORGAN SERIES TRUST
                        (J.P. MORGAN ENHANCED INCOME FUND: INSTITUTIONAL SHARES)

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY

For a more detailed  discussion of the fund's  investments and their main risks,
as well as fund strategies, please see pages 9-12.

[GRAPHIC OMITTED]
GOAL

The fund's goal is to provide  high current  income  consistent  with  principal
preservation. This goal can be changed without shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH

Principal Strategies


The fund invests in taxable fixed income securities,  including U.S.  government
and agency  securities,  domestic and foreign corporate bonds,  asset-backed and
mortgage-related  securities,  and money market  instruments,  that J.P.  Morgan
believes have the potential to provide high current income. These securities may
be of any maturity,  but under normal market conditions the fund's duration will
range between three and eighteen  months.  Also,  the fund may use interest rate
swaps,  futures  contracts  and  options to help  manage  duration,  yield curve
exposure, and credit and spread volatility. The fund's investment strategies are
described  on page 3. For a  description  of  duration,  please see fixed income
investment process on page 4.


Up to 25% of the fund's assets may be invested in foreign securities. All of the
securities  purchased  by the  fund,  at the  time of  purchase,  must be  rated
investment  grade  (BBB/Baa or better) by a  nationally  recognized  statistical
rating  organization  or the  unrated  equivalent,  including  at  least  75% in
securities rated A or better.

Principal Risks

The fund's  share  price and total  return  will vary in  response to changes in
interest  rates.  How well the fund's  performance  compares  to that of similar
fixed income funds will depend on the success of the investment  process,  which
is described on page 4.


Although  any rise in  interest  rates is likely to cause a fall in the price of
fixed income securities,  the fund's comparatively short duration is designed to
help keep its share price within a relatively narrow range.  Because it seeks to
minimize risk, the fund will generally  offer less income and, during periods of
declining  interest rates,  may offer lower total returns than funds with longer
durations. The fund's asset-backed and mortgage-backed  investments involve risk
of losses due to  prepayments  that occur earlier or later than  expected,  and,
like any bond, due to default. Because of the sensitivity of the fund's mortgage
related securities to changes in interest rates, the performance and duration of
the fund may be more  volatile  than if it did not hold  these  securities.  The
fund's  investments  in  interest  rate  swaps,  futures  contracts  and options
involve,  among others, credit and leverage risk, as described on pages 9-12. To
the extent the fund invests in foreign  securities,  it could lose money because
of foreign government actions,  political instability,  currency fluctuations or
lack of adequate and accurate information.


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  $376  billion,  including  more than $61  billion  using  similar
strategies as the fund.

     The portfolio  management team is led by Abigail J. Feder,  vice president,
who joined J.P. Morgan from Morgan Stanley Dean Witter Investment  Management in
2000 where she served as a fixed income  portfolio  manager,  and John  Donohue,
vice president,  who joined J.P. Morgan in 1997.  Prior to joining J.P.  Morgan,
Mr. Donohue served as an institutional money market portfolio manager at Goldman
Sachs.


--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

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

o     The fund does not represent a complete investment program.


1 | J.P. MORGAN INSTITUTIONAL ENHANCED INCOME 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.


--------------------------------------------------------------------------------
Annual fund operating expenses(1) (%)
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------
Management fees(2)                                                          0.25
Marketing (12b-1) fees                                                      none
Other expenses                                                              0.23
================================================================================
Total operating expenses                                                    0.48
Fee waiver and
expense reimbursement(2)                                                    0.23
================================================================================
Net expenses(2)                                                             0.25
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
Expense example(2)
--------------------------------------------------------------------------------


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
6/28/00 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($)                                                     26        123
--------------------------------------------------------------------------------


(1)   This table shows the fund's  estimated  expenses  for the  current  fiscal
      period ending 10/31/00,  expressed as a percentage of the fund's estimated
      average net assets.


(2)   Reflects an agreement  dated 6/28/00 by Morgan  Guaranty  Trust Company of
      New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
      fees and expenses (excluding  extraordinary  expenses) exceed 0.25% of the
      fund's average daily net assets through 2/28/02.



                              J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND | 2
<PAGE>

FIXED INCOME MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN


Known for its commitment to proprietary research and its disciplined  investment
strategies,  J.P. Morgan is the asset management  choice for many of the world's
most  respected   corporations,   financial   institutions,   governments,   and
individuals. Today, J.P. Morgan employs approximately 380 analysts and portfolio
managers  around the world and has  approximately  $376  billion in assets under
management,  including  assets  managed  by  the  fund's  advisor,  J.P.  Morgan
Investment Management Inc.


--------------------------------------------------------------------------------
Who may want to invest

The fund is designed for investors who:

o     want an  investment  whose  risk/return  potential  is higher than that of
      money market funds but  generally  less than that of longer  duration bond
      funds

The fund is not designed for investors who:

o     are investing for aggressive long-term growth


3 | FIXED INCOME MANAGEMENT APPROACH
<PAGE>

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

FIXED INCOME INVESTMENT PROCESS

J.P. Morgan seeks to generate an information  advantage through the depth of its
global  fixed-income  research and the sophistication of its analytical systems.
Using a  team-oriented  approach,  J.P. Morgan seeks to gain insights in a broad
range of distinct areas and takes positions in many different areas, helping the
fund to limit exposure to concentrated sources of risk.

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

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

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

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

Security selection Relying on the insights of different  specialists,  including
credit analysts,  quantitative researchers,  and dedicated fixed income traders,
the portfolio managers make buy and sell decisions  according to the fund's goal
and strategy.

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

Duration  management  Forecasting  teams use  fundamental  economic  factors  to
develop strategic  forecasts of the direction of interest rates.  Based on these
forecasts,   strategists   establish  the  fund's  target  duration,   a  common
measurement  of  a  security's  sensitivity  to  interest  rate  movements.  For
securities  owned by the fund,  duration  measures  the  average  time needed to
receive the present value of all  principal  and interest  payments by analyzing
cash flows and interest rate movements.  The fund's duration may be shorter than
the fund's average maturity because the maturity of a security only measures the
time until final payment is due. The fund's target  duration  typically  remains
relatively  short,  between three and eighteen months.  The strategists  closely
monitor the fund and make tactical adjustments as necessary.


                                            FIXED INCOME MANAGEMENT APPROACH | 4
<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------

For your convenience,  the J.P. Morgan Institutional Funds offer several ways to
start and add to fund investments.

INVESTING THROUGH A FINANCIAL PROFESSIONAL

If you work with a financial  professional,  either at J.P. Morgan or elsewhere,
he or she is  prepared to handle  your  planning  and  transaction  needs.  Your
financial  professional  will be able to assist  you in  establishing  your fund
account,  executing transactions,  and monitoring your investment.  If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly.

INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN

Your  fund  investments  are  handled  through  your  plan.  Refer to your  plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares.

INVESTING THROUGH AN IRA OR ROLLOVER IRA

Please contact a J.P. Morgan  Retirement  Services  Specialist at 1-888-576-4472
for information on J.P.  Morgan's  comprehensive  IRA services,  including lower
minimum investments.

INVESTING DIRECTLY

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

o     Determine  the amount you are  investing.  The minimum  amount for initial
      investments is $1,000,000 and for additional investments $25,000, although
      these  minimums may be less for some  investors.  For more  information on
      minimum investments, call 1-800-766-7722.

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

o     Mail in your  application,  making  your  initial  investment  as shown at
      right.

For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-766-7722.

OPENING YOUR ACCOUNT

      By wire

o     Mail your completed application to the Shareholder Services Agent.

O     Call the  Shareholder  Services  Agent to obtain an account  number and to
      place a purchase order. Funds that are wired without a purchase order will
      be returned uninvested.

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

      Morgan Guaranty Trust Company of New York-Delaware
      Routing number: 031-100-238
      Credit: J.P. Morgan Institutional Funds
      Account number: 001-57-689
      FFC: your account number, name of registered owner(s) and fund name

      By check

o     Make out a check for the investment amount payable to J.P. Morgan
      Institutional Funds.

o     Mail the check with your completed application to the Shareholder Services
      Agent.

      By exchange

o     Call the Shareholder Services Agent to effect an exchange.

ADDING TO YOUR ACCOUNT

      By wire

o     Call the Shareholder  Services Agent to place a purchase order. Funds that
      are wired without a purchase order will be returned uninvested.

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

      By check

o     Make out a check for the investment amount payable to J.P. Morgan
      Institutional Funds.

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

      By exchange

o     Call the Shareholder Services Agent to effect an exchange.


5 | YOUR INVESTMENT
<PAGE>

SELLING SHARES

      By phone -- wire payment

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

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

      By phone -- check payment

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

      In writing

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

O Indicate whether you want the proceeds sent by check or by wire.

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

O Mail the letter to the Shareholder Services Agent.

      By exchange

O Call the Shareholder Services Agent to effect an exchange.

      Redemption in kind

O     The Fund  reserves  the  right to make  redemptions  of over  $250,000  in
      securities rather than in cash.

ACCOUNT AND TRANSACTION POLICIES

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

Exchanges  You may  exchange  shares in this fund for  shares in any other  J.P.
Morgan  Institutional  or J.P.  Morgan mutual fund at no charge  (subject to the
securities  laws of your  state).  When making  exchanges,  it is  important  to
observe any applicable minimums.  Keep in mind that for tax purposes an exchange
is considered a sale.

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

Business hours and NAV  calculations  The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The fund calculates
its net asset  value  per  share  (NAV)  every  business  day as of the close of
trading on the NYSE (normally 4:00 p.m. eastern time). The fund's securities are
typically priced using pricing services or market quotes. When these methods are
not  available  or do not  represent a  security's  value at the time of pricing
(e.g.,  when an event occurs  after the close of trading  that would  materially
impact a security's value), the security is valued in accordance with the fund's
fair valuation procedures.

Timing  of orders  Orders to buy or sell  shares  are  executed  at the next NAV
calculated  after the order has been  accepted.  Orders are  accepted  until the
close of trading on the NYSE every  business  day and are executed the same day,
at that day's NAV.  The fund has the right to  suspend  redemption  of shares as
permitted by law and to postpone payment of proceeds for up to seven days.

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


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


Representatives are available 8:00 a.m. to 5:00 p.m. eastern time on fund
business days.


                                                             YOUR INVESTMENT | 6
<PAGE>

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

Timing of settlements  When you buy shares,  you will become the owner of record
when 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.

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 may close out your account and send the proceeds to
the address of record.

DIVIDENDS AND DISTRIBUTIONS

The fund typically declares income dividends daily and pays them monthly.  If an
investor's  shares are redeemed during the month,  accrued but unpaid  dividends
are paid with the redemption proceeds.  Shares of the fund earn dividends on the
business  day  the  purchase  is  effective,  but  not on the  business  day the
redemption is effective.  The fund  distributes  capital  gains,  if any, once a
year.  However,  the fund  may make  more or  fewer  payments  in a given  year,
depending on its  investment  results and its tax  compliance  situation.  These
dividends and distributions  consist of most or all of the fund's net investment
income and net realized capital gains.

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

TAX CONSIDERATIONS

In general,  selling  shares,  exchanging  shares,  and receiving  distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities:

--------------------------------------------------------------------------------
Transaction                             Tax status

Income dividends                        Ordinary income

Short-term capital gains                Ordinary income
distributions

Long-term capital gains                 Capital gains
distributions

Sales or exchanges of                   Capital gains or
shares owned for more                   losses
than one year

Sales or exchanges of                   Gains are treated as ordinary
shares owned for one year               income; losses are subject
or less                                 to special rules

Because  long-term  capital  gains  distributions  are taxable as capital  gains
regardless of how long you have owned your shares,  you may want to avoid making
a substantial  investment when the fund is about to declare a long-term  capital
gains distribution.

Every  January,  the fund issues tax  information on its  distributions  for the
previous year.

Any  investor  for whom the fund does not have a valid  taxpayer  identification
number will be subject to backup withholding for taxes.

The tax  considerations  described in this section do not apply to  tax-deferred
accounts or other non-taxable entities.

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


7 | YOUR INVESTMENT
<PAGE>

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

BUSINESS STRUCTURE

The fund is a series of J.P.  Morgan  Series  Trust,  a  Massachusetts  business
trust.  Information  about  other  series or  classes  is  available  by calling
1-800-766-7722.  In the future,  the trustees could create other series or share
classes, which would have different expenses.

MANAGEMENT AND ADMINISTRATION

The fund and the other  series of J.P.  Morgan  Series Trust are governed by the
same  trustees.  The  trustees  are  responsible  for  overseeing  all  business
activities.  The trustees are assisted by Pierpont Group,  Inc.,  which they own
and  operate on a cost  basis;  costs are shared by all funds  governed by these
trustees. Funds Distributor, Inc., as co-administrator,  along with J.P. Morgan,
provides fund officers.  J.P. Morgan, as  co-administrator,  oversees the fund's
other service providers.

--------------------------------------------------------------------------------
Advisory services                       0.25% of the fund's average net
                                        assets

Administrative services                 Fund's pro-rata portion of
(fee shared with Funds                  0.09% of the first $7 billion
Distributor, Inc.)                      of average net assets in
                                        J.P. Morgan-advised portfolios,
                                        plus 0.04% of average net assets
                                        over $7 billion

Shareholder services                    0.10% of the fund's average
                                        net assets

J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in the fund.


                                                                FUND DETAILS | 8
<PAGE>

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

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






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


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


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

Management choices

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

Credit quality

o     The default of an issuer    o     Investment-grade bonds       o     The fund maintains its own policies for balancing credit
      would leave the fund with         have a lower risk of               quality against potential yields and gains in light of
      unpaid interest or                default                            its investment goal
      principal
                                                                     o     J.P. Morgan develops its own ratings of unrated
                                                                           securities and makes a credit quality determination for
                                                                           unrated securities

Short-term trading

o     Increased trading would     o     The fund could realize       o     The fund uses short-term trading to take advantage of
      raise the fund's                  gains in a short period            attractive or unexpected opportunities or to meet
      transaction costs                 of time                            demands generated by shareholder activity

o     Increased short-term        o     The fund could protect
      capital gains                     against losses if a bond
      distributions would raise         is overvalued and its
      shareholders' income tax          value later falls
      liability
</TABLE>


9 | FUND DETAILS
<PAGE>

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

o     The fund could lose money   o     Foreign bonds, which         o     Foreign bonds may be a significant investment (25% of
      because of foreign                represent a major portion          assets) for the fund
      government actions,               of the world's fixed
      political instability, or         income securities, offer     o     To the extent that the fund invests in foreign bonds, it
      lack of adequate and              attractive potential               will hedge its currency exposure into the U.S. dollar
      accurate information              performance and                    (see also "Derivatives")
                                        opportunities for
o     Currency exchange rate            diversification
      movements could reduce
      gains or create losses      o     Favorable exchange rate
                                        movements could generate
                                        gains or reduce losses

Derivatives

o     Derivatives such as         o     Hedges that correlate        o     The fund uses derivatives such as futures, options,
      futures, options, swaps           well with underlying               swaps and forward foreign currency contracts for hedging
      and forward foreign               positions can reduce or            and for risk management (i.e., to adjust duration or to
      currency contracts that           eliminate losses at low            establish or adjust exposure to particular securities,
      are used for hedging the          cost                               markets, or currencies)
      portfolio or specific
      securities may not fully    o     The fund could make money    o     The fund only establishes hedges that it expects will be
      offset the underlying             and protect against                highly correlated with underlying positions
      positions(1) and this could       losses if management's
      result in losses to the           analysis proves correct      o     While the fund may use derivatives that incidentally
      fund that would not have                                             involve leverage, it does not use them for the specific
      otherwise occurred          o     Derivatives that involve           purpose of leveraging the portfolio
                                        leverage could generate
o     Derivatives used for risk         substantial gains at low
      management may not have           cost
      the intended effects and
      may result in losses or
      missed opportunities

o     The counterparty to a
      derivatives contract
      could default

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

o     Derivatives that involve
      leverage could magnify
      losses

Securities lending

o     When a fund lends a         o     The fund may enhance         o     J.P. Morgan maintains a list of approved borrowers
      security, there is a risk         income through the
      that the loaned                   investment of the            o     The fund receives collateral equal to at least 100% of
      securities may not be             collateral received from           the current value of securities loaned
      returned if the borrower          the borrower
      defaults                                                       o     The lending agents indemnify a fund against borrower
                                                                           default
o     The collateral will be
      subject to the risks of                                        o     J.P. Morgan's collateral investment guidelines limit the
      the securities in which                                              quality and duration of collateral investment to
      it is invested                                                       minimize losses

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

Illiquid holdings

o     The fund could have         o     These holdings may offer     o     The fund may not invest more than 15% of net assets in
      difficulty valuing these          more attractive yields or          illiquid holdings
      holdings precisely                potential growth than
                                        comparable widely traded     o     To maintain adequate liquidity to meet redemptions, the
o     The  fund  could be  unable       securities                         fund  may  hold  investment-grade short-term  securities
     to sell these  holdings at                                            (including  repurchase agreements) and, for temporary or
     the time or price desired                                             extraordinary purposes, may borrow from banks up to
                                                                           33 1/3% of the value of its total assets

When-issued and delayed
delivery securities

o     When the fund buys          o     The fund can take            o     The fund uses segregated accounts to offset leverage
      securities before issue           advantage of attractive            risk
      or for delayed delivery,          transaction opportunities
      it could be exposed to
      leverage risk if it does
      not use segregated
      accounts
</TABLE>

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

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

--------------------------------------------------------------------------------
Investments
--------------------------------------------------------------------------------


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


                                         0     Permitted - bold

                                         *     Permitted, but not typically used

<TABLE>
<CAPTION>

                                                                                    Related Types of Risk
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                                       <C>
------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities Interests in a stream of payments from specific assets,
such as auto or credit card receivables.                                            credit, interest rate, market, prepayment O
------------------------------------------------------------------------------------------------------------------------------------
Bank obligations Negotiable certificates of deposit, time deposits and bankers'
acceptances of domestic and foreign issuers.                                        credit, currency, liquidity, political    O(1)
------------------------------------------------------------------------------------------------------------------------------------
Commercial paper Unsecured short term debt issued by domestic and foreign banks     credit, currency, interest rate,
or corporations. These securities are usually discounted and are rated by S&P or    liquidity, market, political              O(1)
Moody's.
------------------------------------------------------------------------------------------------------------------------------------
Convertible securities Domestic and foreign debt securities that can be             credit, currency, interest rate,
converted into equity securities at a future time and price.                        liquidity, market, political, valuation   O(1)
------------------------------------------------------------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic and foreign industrial, utility,        credit, currency, interest rate,
banking, and other financial institutions.                                          liquidity, market, political, valuation   O(1)
------------------------------------------------------------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which gives the lender a lien
credit, environmental,  extension, on property as security for the loan payment.
interest rate, liquidity, market,
                                                                                    natural event, political, prepayment,
                                                                                    valuation                                 O
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities Domestic and foreign securities (such as Ginnie Maes,
credit, currency, extension, interest
Freddie Macs, Fannie Maes) which represent interests in pools of mortgages,         rate, leverage, market, political,
whereby the principal and interest paid every month is passed through to the        prepayment                                O(1)
holder of the securities.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage dollar rolls The sale of domestic and foreign mortgage-backed              credit, currency, extension, interest
securities with the promise to purchase similar securities at a later date.         rate, leverage, liquidity, market,
Segregated accounts are used to offset leverage risk.                               political, prepayment                     O(1,2)
------------------------------------------------------------------------------------------------------------------------------------
Participation interests Interests that represent a share of bank debt or similar    credit, currency, extension, interest
securities or obligations.                                                          rate, liquidity, political, prepayment    O(1)
------------------------------------------------------------------------------------------------------------------------------------
Private placements Bonds or other investments that are sold directly to an          credit, interest rate, liquidity,
institutional investor.                                                             market, valuation                         O
------------------------------------------------------------------------------------------------------------------------------------
REITs and other real-estate related instruments Securities of issuers that          credit, environmental, interest rate,
invest in real estate or are secured by real estate.                                liquidity, market, natural event,
                                                                                    prepayment, valuation                     O
------------------------------------------------------------------------------------------------------------------------------------
Repurchase  agreements  Contracts whereby the fund agrees to purchase a security
credit O and resell it to to the seller on a  particular  date and at a specific
price.
------------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby the fund sells a security and       credit                                    O(2)
agrees to repurchase it from the buyer on a particular date and at a specific
price. Considered a form of borrowing.
------------------------------------------------------------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of supranational organizations Dollar- or     credit, currency, interest rate,
non-dollar-denominated securities issued by foreign governments or supranational
market, political O(1) organizations.  Brady bonds are issued in connection with
debt restructurings.
------------------------------------------------------------------------------------------------------------------------------------
Swaps Contractual agreement whereby a party agrees to exchange periodic payments    credit, currency, interest rate,
with a counterparty. Segregated accounts are used to offset leverage risk.          leverage, market, political               O(1)
------------------------------------------------------------------------------------------------------------------------------------
Tax exempt municipal securities Securities, generally issued as general             credit, interest rate, market, natural
obligation and revenue bonds, whose interest is exempt from federal taxation and
event,  political * state and/or  local taxes in the state where the  securities
were issued.
------------------------------------------------------------------------------------------------------------------------------------
U.S. government securities Debt instruments (Treasury bills, notes, and bonds)      interest rate                             O
guaranteed by the U.S. government for the timely payment of principal and
interest.
------------------------------------------------------------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred payment securities Domestic and foreign      credit, currency, interest rate,
securities offering non-cash or delayed-cash payment. Their prices are typically    liquidity, market, political, valuation   O(1)
more  volatile  than those of some other debt  instruments  and involve  certain
special tax considerations.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Risk related to certain investments held by J.P. Morgan fixed income funds:

Credit risk The risk a financial  obligation  will not be met by the issuer of a
security  or  the  counterparty  to a  contract,  resulting  in a  loss  to  the
purchaser.

Currency risk The risk currency  exchange rate  fluctuations may reduce gains or
increase losses on foreign investments.

Environmental  risk The risk that an owner or  operator  of real  estate  may be
liable for the costs  associated with hazardous or toxic  substances  located on
the property.

Extension  risk The risk a rise in  interest  rates  will  extend  the life of a
mortgage-backed  security to a date later than the anticipated  prepayment date,
causing the value of the investment to fall.

Interest rate risk The risk a change in interest rates will adversely affect the
value of an investment.  The value of fixed income securities generally moves in
the opposite direction of interest rates (decreases when interest rates rise and
increases when interest rates fall).

Leverage  risk The risk of gains or losses  disproportionately  higher  than the
amount invested.

Liquidity  risk The risk the holder may not be able to sell the  security at the
time or price it desires.

Market  risk The risk that when the market as a whole  declines,  the value of a
specific investment will decline proportionately. This systematic risk is common
to all investments and the mutual funds that purchase them.

Natural event risk The risk a natural  disaster,  such as a hurricane or similar
event,  will cause severe  economic losses and default in payments by the issuer
of the security.

Political risk The risk  governmental  policies or other political  actions will
negatively impact the value of the investment.

Prepayment  risk The risk  declining  interest  rates will result in  unexpected
prepayments, causing the value of the investment to fall.

Valuation  risk The risk the  estimated  value of a security  does not match the
actual amount that can be realized if the security is sold.

(1)   All foreign securities in the aggregate may not exceed 25% of the fund's
      assets.

(2)   All forms of borrowing  (including  securities  lending,  mortgage  dollar
      rolls and reverse repurchase  agreements) are limited in the aggregate and
      may not exceed 33 1/3% of the fund's total assets.


11 & 12 | FUND DETAILS
<PAGE>

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

                     (THIS PAGE IS INTENTIONALLY LEFT BLANK)
<PAGE>

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

                     (THIS PAGE IS INTENTIONALLY LEFT BLANK)
<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 Institutional Enhanced Income Fund
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713


Telephone: 1-800-766-7722Hearing impaired: 1-888-468-4015

Email: [email protected]

Text-only  versions of these documents and this  prospectus are available,  upon
payment of a duplicating  fee, from the Public  Reference Room of the Securities
and Exchange Commission in Washington,  D.C.  (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov.  The
fund's  investment  company and 1933 Act registration  numbers are 811-07795 and
333-11125.

J.P. MORGAN INSTITUTIONAL FUNDS AND THE MORGAN TRADITION

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

JPMorgan
--------------------------------------------------------------------------------
J.P. Morgan Institutional Funds

Advisor                                          Distributor
J.P. Morgan Investment Management Inc.           Funds Distributor, Inc.
522 Fifth Avenue                                 60 State Street
New York, NY 10036                               Boston, MA 02109
1-800-766-7722                                   1-800-221-7930

                                                                          IMPR27




<PAGE>


--------------------------------------------------------------------------------
                                                      JUNE 28, 2000 | PROSPECTUS
--------------------------------------------------------------------------------


J.P. MORGAN
ENHANCED INCOME FUND

                                  ----------------------------------------------
                                  Seeking high current income consistent with
                                  principal preservation by investing in taxable
                                  fixed income securities.

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

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

Distributed by Funds Distributor, Inc.

                                                                        JPMorgan
<PAGE>

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

<PAGE>

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

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

J.P. MORGAN ENHANCED INCOME FUND
Fund description.............................................................. 1
Investor expenses............................................................. 2

3 |

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

5 | Investing in the J.P. Morgan Enhanced Income Fund

YOUR INVESTMENT
Investing through a financial professional.................................... 5
Investing directly............................................................ 5
Opening your account.......................................................... 5
Adding to your account........................................................ 5
Selling shares................................................................ 6
Account and transaction policies.............................................. 6
Dividends and distributions................................................... 7
Tax considerations............................................................ 7

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

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

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

J.P. MORGAN ENHANCED INCOME FUND
--------------------------------------------------------------------------------
                               REGISTRANT: J.P. MORGAN SERIES TRUST
                               (J.P. MORGAN ENHANCED INCOME FUND: SELECT SHARES)

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY

For a more detailed  discussion of the fund's  investments and their main risks,
as well as fund strategies, please see pages 9-12.

[GRAPHIC OMITTED]
GOAL

The fund's goal is to provide  high current  income  consistent  with  principal
preservation. This goal can be changed without shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH

Principal Strategies


The fund invests in taxable fixed income securities,  including U.S.  government
and agency  securities,  domestic and foreign corporate bonds,  asset-backed and
mortgage-related  securities,  and money market  instruments,  that J.P.  Morgan
believes have the potential to provide high current income. These securities may
be of any maturity,  but under normal market conditions the fund's duration will
range between three and eighteen  months.  Also,  the fund may use interest rate
swaps,  futures  contracts  and  options to help  manage  duration,  yield curve
exposure, and credit and spread volatility. The fund's investment strategies are
described  on page 3. For a  description  of  duration,  please see fixed income
investment process on page 4.


Up to 25% of the fund's assets may be invested in foreign securities. All of the
securities  purchased  by the  fund,  at the  time of  purchase,  must be  rated
investment  grade  (BBB/Baa or better) by a  nationally  recognized  statistical
rating  organization  or the  unrated  equivalent,  including  at  least  75% in
securities rated A or better.

Principal Risks

The fund's  share  price and total  return  will vary in  response to changes in
interest  rates.  How well the fund's  performance  compares  to that of similar
fixed income funds will depend on the success of the investment  process,  which
is described on page 4.


Although  any rise in  interest  rates is likely to cause a fall in the price of
fixed income securities,  the fund's comparatively short duration is designed to
help keep its share price within a relatively narrow range.  Because it seeks to
minimize risk, the fund will generally  offer less income and, during periods of
declining  interest rates,  may offer lower total returns than funds with longer
durations. The fund's asset-backed and mortgage-backed  investments involve risk
of losses due to prepayments that occur earlier or later than expected and, like
any bond,  due to default.  Because of the  sensitivity  of the fund's  mortgage
related securities to changes in interest rates, the performance and duration of
the fund may be more  volatile  than if it did not hold  these  securities.  The
fund's  investments  in  interest  rate  swaps,  futures  contracts  and options
involve,  among others, credit and leverage risk, as described on pages 9-12. To
the extent the fund invests in foreign  securities,  it could lose money because
of foreign government actions,  political instability,  currency fluctuations or
lack of adequate and accurate information.


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  $376  billion,  including  more than $61  billion  using  similar
strategies as the fund.

     The portfolio  management team is led by Abigail J. Feder,  vice president,
who joined J.P. Morgan from Morgan Stanley Dean Witter Investment  Management in
2000 where she served as a fixed income  portfolio  manager,  and John  Donohue,
vice president,  who joined J.P. Morgan in 1997.  Prior to joining J.P.  Morgan,
Mr. Donohue served as an institutional money market portfolio manager at Goldman
Sachs.


--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

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

o The fund does not represent a complete investment program.


1 | J.P. MORGAN ENHANCED INCOME 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.


--------------------------------------------------------------------------------
Annual fund operating expenses(1) (%)
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------
Management fees(2)                                                          0.25
Marketing (12b-1) fees                                                      none
Other expenses                                                              0.41
================================================================================
Total operating expenses                                                    0.66
Fee waiver and expense reimbursement(2)                                     0.26
================================================================================
Net expenses(2)                                                             0.40
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
Expense example(2)
--------------------------------------------------------------------------------


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
6/28/00 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($)                                           41                  176
--------------------------------------------------------------------------------


(1)   This table shows the fund's  estimated  expenses  for the  current  fiscal
      period ending 10/31/00,  expressed as a percentage of the fund's estimated
      average net assets.


(2)   Reflects an agreement  dated 6/28/00 by Morgan  Guaranty  Trust Company of
      New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
      fees and expenses (excluding  extraordinary  expenses) exceed 0.40% of the
      fund's average daily net assets through 2/28/02.



                                            J.P. MORGAN ENHANCED INCOME FUND | 2
<PAGE>

FIXED INCOME MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN


Known for its commitment to proprietary research and its disciplined  investment
strategies,  J.P. Morgan is the asset management  choice for many of the world's
most  respected   corporations,   financial   institutions,   governments,   and
individuals. Today, J.P. Morgan employs over 380 analysts and portfolio managers
around the world and has approximately  $376 billion in assets under management,
including  assets  managed  by  the  fund's  advisor,   J.P.  Morgan  Investment
Management Inc.


--------------------------------------------------------------------------------
Who may want to invest

The fund is designed for investors who:

o want an investment  whose  risk/return  potential is higher than that of money
  market funds but generally less than that of longer duration bond funds

The fund is not designed for investors who:

o are investing for aggressive long-term growth


3 | FIXED INCOME MANAGEMENT APPROACH
<PAGE>

FIXED INCOME INVESTMENT PROCESS

J.P. Morgan seeks to generate an information  advantage through the depth of its
global  fixed-income  research and the sophistication of its analytical systems.
Using a  team-oriented  approach,  J.P. Morgan seeks to gain insights in a broad
range of distinct areas and takes positions in many different areas, helping the
fund to limit exposure to concentrated sources of risk.

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

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

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

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

Security selection Relying on the insights of different  specialists,  including
credit analysts,  quantitative researchers,  and dedicated fixed income traders,
the portfolio managers make buy and sell decisions  according to the fund's goal
and strategy.

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

Duration  management  Forecasting  teams use  fundamental  economic  factors  to
develop strategic  forecasts of the direction of interest rates.  Based on these
forecasts,   strategists   establish  the  fund's  target  duration,   a  common
measurement  of  a  security's  sensitivity  to  interest  rate  movements.  For
securities  owned by the fund,  duration  measures  the  average  time needed to
receive the present value of all  principal  and interest  payments by analyzing
cash flows and interest rate movements.  The fund's duration may be shorter than
the fund's average maturity because the maturity of a security only measures the
time until final payment is due. The fund's target  duration  typically  remains
relatively  short,  between three and eighteen months.  The strategists  closely
monitor the fund and make tactical adjustments as necessary.


                                            FIXED INCOME MANAGEMENT APPROACH | 4
<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------

For your convenience,  the J.P. Morgan Funds offer several ways to start and add
to fund investments.

INVESTING THROUGH A FINANCIAL PROFESSIONAL

If you work with a financial  professional,  either at J.P. Morgan or elsewhere,
he or she is  prepared to handle  your  planning  and  transaction  needs.  Your
financial  professional  will be able to assist  you in  establishing  your fund
account,  executing transactions,  and monitoring your investment.  If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly.

INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN

Your  fund  investments  are  handled  through  your  plan.  Refer to your  plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares.

INVESTING THROUGH AN IRA OR ROLLOVER IRA

Please contact a J.P. Morgan  Retirement  Services  Specialist at 1-888-576-4472
for information on J.P.  Morgan's  comprehensive  IRA services,  including lower
minimum investments.

INVESTING DIRECTLY

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

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

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

o Mail in your application, making your initial investment as shown at right.

For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.

OPENING YOUR ACCOUNT

  By wire

o Mail your completed application to the Shareholder Services Agent.

o Call the Shareholder Services Agent to obtain an account number and to place a
  purchase order. Funds that are wired without a purchase order will be returned
  uninvested.

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

  State Street Bank & Trust Company
  Routing number: 011-000-028
  Credit: J.P. Morgan Funds
  Account number: 9904-226-9
  FFC: your account number, name of registered owner(s) and fund name

  By check

o Make out a check for the investment amount payable to J.P. Morgan Funds.

o Mail the check with your  completed  application to the  Shareholder  Services
  Agent.

  By exchange

o Call the Shareholder Services Agent to effect an exchange.

ADDING TO YOUR ACCOUNT

  By wire

o Call the Shareholder  Services Agent to place a purchase order. Funds that are
  wired without a purchase order will be returned uninvested.

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

  By check

o Make out a check for the investment amount payable to J.P. Morgan Funds.

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

  By exchange

o Call the Shareholder Services Agent to effect an exchange.


5 | YOUR INVESTMENT
<PAGE>

--------------------------------------------------------------------------------
SELLING SHARES

  By phone -- wire payment

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

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

  By phone -- check payment

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

  In writing

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

o Indicate whether you want the proceeds sent by check or by wire.

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

o Mail the letter to the Shareholder Services Agent.

  By exchange

o Call the Shareholder Services Agent to effect an exchange.

  Redemption in kind

o The Fund reserves the right to make redemptions of over $250,000 in securities
  rather than in cash.

ACCOUNT AND TRANSACTION POLICIES

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

Exchanges  You may  exchange  shares in this fund for  shares in any other  J.P.
Morgan or J.P.  Morgan  Institutional  mutual fund at no charge  (subject to the
securities  laws of your  state).  When making  exchanges,  it is  important  to
observe any applicable minimums.  Keep in mind that for tax purposes an exchange
is considered a sale.

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

Business hours and NAV  calculations  The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The fund calculates
its net asset  value  per  share  (NAV)  every  business  day as of the close of
trading on the NYSE (normally 4:00 p.m. eastern time). The fund's securities are
typically priced using pricing services or market quotes. When these methods are
not  available  or do not  represent a  security's  value at the time of pricing
(e.g.,  when an event occurs  after the close of trading  that would  materially
impact a security's value), the security is valued in accordance with the fund's
fair valuation procedures.

Timing  of orders  Orders to buy or sell  shares  are  executed  at the next NAV
calculated  after the order has been  accepted.  Orders are  accepted  until the
close of trading on the NYSE every  business  day and are executed the same day,
at that day's NAV.  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.


--------------------------------------------------------------------------------
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 5:00 p.m. eastern time on fund
business days.


                                                             YOUR INVESTMENT | 6
<PAGE>

--------------------------------------------------------------------------------
Timing of settlements  When you buy shares,  you will become the owner of record
when 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.  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 may close out your account and send the proceeds to
the address of record.

DIVIDENDS AND DISTRIBUTIONS

The fund typically declares income dividends daily and pays them monthly.  If an
investor's  shares are redeemed during the month,  accrued but unpaid  dividends
are paid with the redemption proceeds.  Shares of the fund earn dividends on the
business  day  the  purchase  is  effective,  but  not on the  business  day the
redemption is effective.  The fund  distributes  capital  gains,  if any, once a
year.  However,  the fund  may make  more or  fewer  payments  in a given  year,
depending on its  investment  results and its tax  compliance  situation.  These
dividends and distributions  consist of most or all of the fund's net investment
income and net realized capital gains.

Dividends  and   distributions   are  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:

--------------------------------------------------------------------------------
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
shares owned for more                   losses
than one year

Sales or exchanges of                   Gains are treated as ordinary
shares owned for one year               income; losses are subject
or less                                 to special rules

Because  long-term  capital  gains  distributions  are taxable as capital  gains
regardless of how long you have owned your shares,  you may want to avoid making
a substantial  investment when the fund is about to declare a long-term  capital
gains distribution.

Every  January,  the fund issues tax  information on its  distributions  for the
previous year.

Any  investor  for whom the fund does not have a valid  taxpayer  identification
number will be subject to backup withholding for taxes.

The tax  considerations  described in this section do not apply to  tax-deferred
accounts or other non-taxable entities.

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


7 | YOUR INVESTMENT
<PAGE>

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

BUSINESS STRUCTURE

The fund is a series of J.P.  Morgan  Series  Trust,  a  Massachusetts  business
trust.  Information  about  other  series or  classes  is  available  by calling
1-800-521-5411.  In the future,  the trustees could create other series or share
classes, which would have different expenses.

MANAGEMENT AND ADMINISTRATION

The fund and the other  series of J.P.  Morgan  Series Trust are governed by the
same  trustees.  The  trustees  are  responsible  for  overseeing  all  business
activities.  The trustees are assisted by Pierpont Group,  Inc.,  which they own
and  operate on a cost  basis;  costs are shared by all funds  governed by these
trustees. Funds Distributor, Inc., as co-administrator,  along with J.P. Morgan,
provides fund officers.  J.P. Morgan, as  co-administrator,  oversees the fund's
other service providers.

--------------------------------------------------------------------------------
Advisory services                0.25% of the fund's average net
                                 assets

Administrative services          Fund's pro-rata portion of
(fee shared with Funds           0.09% of the first $7 billion
Distributor, Inc.)               of average net assets in
                                 J.P. Morgan-advised portfolios,
                                 plus 0.04% of average net assets
                                 over $7 billion

Shareholder services             0.25% of the fund's average
                                 net assets

J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in the fund.


                                                                FUND DETAILS | 8
<PAGE>

RISK AND REWARD ELEMENTS

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

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

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

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

Management choices

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

Credit quality

o The default of an issuer    o  Investment-grade  bonds have    o The fund maintains its own policies for balancing credit quality
  would leave the fund with         a lower risk of default        against potential yields and gains in light of its investment
  unpaid interest or principal                                     goals

                                                                  o J.P. Morgan develops its own ratings of unrated securities and
                                                                    makes a credit quality determination for unrated securities

Short-term trading

o  Increased  trading  would  o The fund  could  realize  gains   o The fund uses short-term trading to take advantage of attractive
  raise the fund's transaction      in a short period of time       or unexpected opportunities or to meet demands generated by
  costs                                                             shareholder activity

o Increased  short-term  capital o The fund could  protect  gains  distributions
  would against losses if a bond is raise  shareholders'  income  overvalued and
  its value tax liability later falls

</TABLE>


9 | FUND DETAILS

<PAGE>

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

o The fund could lose money       o Foreign bonds, which          o Foreign bonds may be a significant investment (25% of assets)
  because of foreign                represent a major portion of    for the fund
  government actions,               the world's fixed income
  political instability, or         securities, offer attractive  o To the extent that the fund invests in foreign bonds, it will
  lack of adequate and              potential performance and       hedge its currency exposure into the U.S. dollar (see also
  accurate information              opportunities for               "Derivatives")
                                    diversification
o Currency exchange rate
  movements could reduce gains    o Favorable exchange rate
  or create losses                  movements could generate
                                    gains or reduce losses

Derivatives

o  Derivatives  such as futures,  o Hedges that  correlate  well o The fund uses derivatives such as futures, options, swaps and
  options, swaps and forward        with underlying positions       forward foreign currency contracts for hedging and for risk
  foreign currency contracts        can reduce or eliminate         management (i.e., to adjust duration or to establish or adjust
  that are used for hedging         losses at low cost              exposure to particular securities, markets, or currencies)
  the portfolio or specific
  securities may not fully        o The fund could make money     o The fund only establishes hedges that it expects will be highly
  offset the underlying             and protect against losses      correlated with underlying positions
  positions(1) and this could       if management's analysis
  result in losses to the fund      proves correct                o While the fund may use derivatives that incidentally involve
  that would not have                                               leverage, it does not use them for the specific purpose of
  otherwise occurred              o Derivatives that involve        leveraging the portfolio
                                    leverage could generate
o Derivatives used for risk         substantial gains at low
  management may not have the       cost
  intended effects and may
  result in losses or missed
  opportunities

o The counterparty to a
  derivatives contract could
  default

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

o Derivatives that involve
  leverage could magnify
  losses

Securities lending

o When a fund lends a             o The fund may enhance income   o J.P. Morgan maintains a list of approved borrowers
  security, there is a risk         through the investment of
  that the loaned securities        the collateral received from  o The fund receives collateral equal to at least 100% of the
  may not be returned if the        the borrower                    current value of securities loaned
  borrower defaults
                                                                  o The lending agents indemnify a fund against borrower default
o The collateral will be
  subject to the risks of the                                     o J.P. Morgan's collateral investment guidelines limit the quality
  securities in which it is                                         and duration of collateral investment to minimize losses
  invested
                                                                  o Upon recall, the borrower must return the securities loaned
                                                                    within the normal settlement period

Illiquid holdings

o The fund could have             o These holdings may offer      o The fund may not invest more than 15% of net assets in illiquid
  difficulty valuing these          more attractive yields or holdings
  holdings precisely                potential growth than
                                    comparable widely traded      o To maintain adequate liquidity to meet redemptions, the fund may
o The fund could be unable to       securities                      hold investment-grade short-term securities (including
  sell these holdings at the                                        repurchase agreements) and, for temporary or extraordinary
  time or price desired                                             purposes, may borrow from banks up to 33 1/3% of the value of
                                                                    its total assets

When-issued and delayed
delivery securities

o When the fund buys              o The fund can take advantage   o The fund uses segregated accounts to offset leverage risk
  securities before issue or        of attractive transaction
  for delayed delivery, it          opportunities
  could be exposed to leverage
  risk if it does not use
  segregated accounts

</TABLE>

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

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

--------------------------------------------------------------------------------
Investments
--------------------------------------------------------------------------------


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


                                         0     Permitted - bold

                                         *     Permitted, but not typically used

<TABLE>
<CAPTION>

                                                                                    Related Types of Risk
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                                                    <C>
Asset-backed securities Interests in a stream of payments      credit, interest rate, market,  prepayment                      0
from specific assets, such as auto or credit card
receivables.
------------------------------------------------------------------------------------------------------------------------------------
Bank obligations Negotiable certificates of deposit, time      credit, currency, liquidity, political                         0(1)
deposits and bankers' acceptances of domestic and foreign
issuers.
------------------------------------------------------------------------------------------------------------------------------------
Commercial paper Unsecured short term debt issued by           credit, currency, interest rate, liquidity, market,            0(1)
domestic and foreign banks or corporations. These              political
securities are usually discounted and are rated by S&P or
Moody's.
------------------------------------------------------------------------------------------------------------------------------------
Convertible securities Domestic and foreign debt securities    credit, currency, interest rate, liquidity, market,            0(1)
that can be converted into equity securities at a future       political, valuation
time and price.
------------------------------------------------------------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic and foreign        credit, currency, interest rate, liquidity, market,            0(1)
industrial, utility, banking, and other financial              political, valuation
institutions.
------------------------------------------------------------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which       credit, environmental,extension,  interest rate, liquidity,    0
gives the lender a lien on property as security for the        market, natural event, political, prepayment, valuation
loan payment.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities Domestic and foreign securities     credit, currency, extension, interest rate, leverage,          0(1)
(such as Ginnie Maes, Freddie Macs, Fannie Maes) which         market, political, prepayment
represent interests in pools of mortgages, whereby the
principal and interest paid every month is passed through
to the holder of the securities.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage dollar rolls The sale of domestic and foreign         credit, currency, extension, interest rate, leverage,          0(1,2)
mortgage-backed securities with the promise to purchase        liquidity, market, political, prepayment
similar securities at a later date. Segregated accounts are
used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Participation interests Interests that represent a share of    credit, currency, extension, interest rate, liquidity,         0(1)
bank debt or similar securities or obligations.                political, prepayment
------------------------------------------------------------------------------------------------------------------------------------
Private  placements Bonds or other  investments  that are sold  credit,  interest rate, liquidity, market, valuation            0
directly to an institutional investor.
------------------------------------------------------------------------------------------------------------------------------------
REITs and other real-estate related instruments Securities      credit, environmental,  interest rate,  liquidity,  market,     0
of issuers that invest in real estate or are secured by         natural event, prepayment, valuation
real estate.
------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements Contracts whereby the fund agrees to      credit                                                         0
purchase a security and resell it to to the seller on a
particular date and at a specific price.
------------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby the fund        credit                                                         0(2)
sells a security and agrees to repurchase it from the buyer
on a particular date and at a specific price. Considered a
form of borrowing.
------------------------------------------------------------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of supranational         credit, currency, interest rate, market, political             0(1)
organizations Dollar- or non-dollar-denominated securities
issued by foreign governments or supranational
organizations. Brady bonds are issued in connection with
debt restructurings.
------------------------------------------------------------------------------------------------------------------------------------
Swaps Contractual agreement whereby a party agrees to          credit, currency, interest rate, leverage, market,             0(1)
exchange periodic payments with a counterparty. Segregated     political
accounts are used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Tax exempt municipal securities Securities, generally          credit, interest rate, market, natural event, political        *
issued as general  obligation and revenue  bonds,  whose
interest is exempt from federal  taxation and state
and/or local taxes in the state where the securities
were issued.
------------------------------------------------------------------------------------------------------------------------------------
U.S. government securities Debt instruments (Treasury          interest rate                                                  0
bills, notes, and bonds) guaranteed by the U.S. government
for the timely payment of principal and interest.
------------------------------------------------------------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred payment securities      credit, currency, interest rate, liquidity, market,            0(1)
Domestic and foreign securities offering non-cash or           political, valuation
delayed-cash  payment.  Their prices are  typically
more volatile than those of some other debt instruments
and involve certain special tax considerations.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Risk related to certain investments held by J.P. Morgan fixed income funds:

Credit risk The risk a financial  obligation  will not be met by the issuer of a
security  or  the  counterparty  to a  contract,  resulting  in a  loss  to  the
purchaser.

Currency risk The risk currency  exchange rate  fluctuations may reduce gains or
increase losses on foreign investments.

Environmental  risk The risk that an owner or  operator  of real  estate  may be
liable for the costs  associated with hazardous or toxic  substances  located on
the property.

Extension  risk The risk a rise in  interest  rates  will  extend  the life of a
mortgage-backed  security to a date later than the anticipated  prepayment date,
causing the value of the investment to fall.

Interest rate risk The risk a change in interest rates will adversely affect the
value of an investment.  The value of fixed income securities generally moves in
the opposite direction of interest rates (decreases when interest rates rise and
increases when interest rates fall).

Leverage  risk The risk of gains or losses  disproportionately  higher  than the
amount invested.

Liquidity  risk The risk the holder may not be able to sell the  security at the
time or price it desires.

Market  risk The risk that when the market as a whole  declines,  the value of a
specific investment will decline proportionately. This systematic risk is common
to all investments and the mutual funds that purchase them.

Natural event risk The risk a natural  disaster,  such as a hurricane or similar
event,  will cause severe  economic losses and default in payments by the issuer
of the security.

Political risk The risk  governmental  policies or other political  actions will
negatively impact the value of the investment.

Prepayment  risk The risk  declining  interest  rates will result in  unexpected
prepayments, causing the value of the investment to fall.

Valuation  risk The risk the  estimated  value of a security  does not match the
actual amount that can be realized if the security is sold.

(1)   All foreign securities in the aggregate may not exceed 25% of the fund's
      assets.

(2)   All forms of borrowing  (including  securities  lending,  mortgage  dollar
      rolls and reverse repurchase  agreements) are limited in the aggregate and
      may not exceed 33 1/3% of the fund's total assets.


11 & 12 | FUND DETAILS
<PAGE>

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

                     (THIS PAGE IS INTENTIONALLY LEFT BLANK)

<PAGE>

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

                     (THIS PAGE IS INTENTIONALLY LEFT BLANK)

<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 Enhanced Income Fund
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713


Telephone: 1-800-521-5411

Hearing impaired: 1-888-468-4015

Email: [email protected]

Text-only  versions of these documents and this  prospectus are available,  upon
payment of a duplicating  fee, from the Public  Reference Room of the Securities
and Exchange Commission in Washington,  D.C.  (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov.  The
fund's  investment  company and 1933 Act registration  numbers are 811-07795 and
333-11125.

J.P. MORGAN FUNDS AND THE MORGAN TRADITION

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

JPMorgan
--------------------------------------------------------------------------------
J.P. Morgan Funds

Advisor                                          Distributor
J.P. Morgan Investment Management Inc.           Funds Distributor, Inc.
522 Fifth Avenue                                 60 State Street
New York, NY 10036                               Boston, MA 02109
1-800-521-5411                                   1-800-221-7930

                                                                          IMPR27



<PAGE>



--------------------------------------------------------------------------------
                                                      JUNE 28, 2000 | PROSPECTUS
--------------------------------------------------------------------------------


J.P. MORGAN INSTITUTIONAL
ENHANCED INCOME FUND - ULTRA

                                  ----------------------------------------------
                   Seeking high current income consistent with
                 principal preservation by investing in taxable
                            fixed income securities.

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

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

Distributed by Funds Distributor, Inc.

                                                                        JPMorgan
<PAGE>

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

<PAGE>

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

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

J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND - ULTRA
Fund description.............................................................. 1
Investor expenses............................................................. 2

3 |

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

5 | Investing in the J.P. Morgan Enhanced Income Fund - Ultra

YOUR INVESTMENT
Investing through a financial professional.................................... 5
Investing directly............................................................ 5
Opening your account.......................................................... 5
Adding to your account........................................................ 5
Selling shares................................................................ 6
Account and transaction policies.............................................. 6
Dividends and distributions................................................... 7
Tax considerations............................................................ 7

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

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

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

J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND - ULTRA
--------------------------------------------------------------------------------
                                REGISTRANT: J.P. MORGAN SERIES TRUST
                                (J.P. MORGAN ENHANCED INCOME FUND: ULTRA SHARES)

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY

For a more detailed  discussion of the fund's  investments and their main risks,
as well as fund strategies, please see pages 9-12.

[GRAPHIC OMITTED]
GOAL

The fund's goal is to provide  high current  income  consistent  with  principal
preservation. This goal can be changed without shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH

Principal Strategies


The fund invests in taxable fixed income securities,  including U.S.  government
and agency  securities,  domestic and foreign corporate bonds,  asset-backed and
mortgage-related  securities,  and money market  instruments,  that J.P.  Morgan
believes have the potential to provide high current income. These securities may
be of any maturity,  but under normal market conditions the fund's duration will
range between three and eighteen  months.  Also,  the fund may use interest rate
swaps,  futures  contracts  and  options to help  manage  duration,  yield curve
exposure, and credit and spread volatility. The fund's investment strategies are
described  on page 3. For a  description  of  duration,  please see fixed income
investment process on page 4.


Up to 25% of the fund's assets may be invested in foreign securities. All of the
securities  purchased  by the  fund,  at the  time of  purchase,  must be  rated
investment  grade  (BBB/Baa or better) by a  nationally  recognized  statistical
rating  organization  or the  unrated  equivalent,  including  at  least  75% in
securities rated A or better.

Principal Risks

The fund's  share  price and total  return  will vary in  response to changes in
interest  rates.  How well the fund's  performance  compares  to that of similar
fixed income funds will depend on the success of the investment  process,  which
is described on page 4.


Although  any rise in  interest  rates is likely to cause a fall in the price of
fixed income securities,  the fund's comparatively short duration is designed to
help keep its share price within a relatively narrow range.  Because it seeks to
minimize risk, the fund will generally  offer less income and, during periods of
declining  interest rates,  may offer lower total returns than funds with longer
durations. The fund's asset-backed and mortgage-backed  investments involve risk
of losses due to prepayments that occur earlier or later than expected and, like
any bond,  due to default.  Because of the  sensitivity  of the fund's  mortgage
related securities to changes in interest rates, the performance and duration of
the fund may be more  volatile  than if it did not hold  these  securities.  The
fund's  investments  in interest  rate  swaps,  futures,  contracts  and options
involve,  among others, credit and leverage risk, as described on pages 9-12. To
the extent the fund invests in foreign  securities,  it could lose money because
of foreign government actions,  political instability,  currency fluctuations or
lack of adequate and accurate information.


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  $376  billion,  including  more than $61  billion  using  similar
strategies as the fund.

     The portfolio  management team is led by Abigail J. Feder,  vice president,
who joined J.P. Morgan from Morgan Stanley Dean Witter Investment  Management in
2000 where she served as a fixed income  portfolio  manager,  and John  Donohue,
vice president,  who joined J.P. Morgan in 1997.  Prior to joining J.P.  Morgan,
Mr. Donohue served as an institutional money market portfolio manager at Goldman
Sachs.


--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

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

o     The fund does not represent a complete investment program.


1 | J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND - ULTRA
<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.


--------------------------------------------------------------------------------
Annual fund operating expenses(1) (%)
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------
Management fees(2)                                                          0.25
Marketing (12b-1) fees                                                      none
Other expenses(2)                                                           0.21
================================================================================
Total operating expenses                                                    0.46
Fee waiver and
expense reimbursement(2)                                                    0.31
================================================================================
Net expenses(2)                                                             0.15
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
Expense example(2)
--------------------------------------------------------------------------------


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
6/28/00 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($)                                                     15        105
--------------------------------------------------------------------------------


(1)   This table shows the fund's  estimated  expenses  for the  current  fiscal
      period ending 10/31/00,  expressed as a percentage of the fund's estimated
      average net assets.


(2)   Reflects an agreement  dated 6/28/00 by Morgan  Guaranty  Trust Company of
      New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
      fees and expenses (excluding  extraordinary  expenses) exceed 0.15% of the
      fund's average daily net assets through 2/28/02.



                      J.P. MORGAN INSTITUTIONAL ENHANCED INCOME FUND - ULTRA | 2
<PAGE>

FIXED INCOME MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN


Known for its commitment to proprietary research and its disciplined  investment
strategies,  J.P. Morgan is the asset management  choice for many of the world's
most  respected   corporations,   financial   institutions,   governments,   and
individuals. Today, J.P. Morgan employs approximately 380 analysts and portfolio
managers  around the world and has  approximately  $376  billion in assets under
management,  including  assets  managed  by  the  fund's  advisor,  J.P.  Morgan
Investment Management Inc.


--------------------------------------------------------------------------------
Who may want to invest

The fund is designed for investors who:

o     want an  investment  whose  risk/return  potential  is higher than that of
      money market funds but  generally  less than that of longer  duration bond
      funds

The fund is not designed for investors who:

o     are investing for aggressive long-term growth


3 | FIXED INCOME MANAGEMENT APPROACH
<PAGE>

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

FIXED INCOME INVESTMENT PROCESS

J.P. Morgan seeks to generate an information  advantage through the depth of its
global  fixed-income  research and the sophistication of its analytical systems.
Using a  team-oriented  approach,  J.P. Morgan seeks to gain insights in a broad
range of distinct areas and takes positions in many different areas, helping the
fund to limit exposure to concentrated sources of risk.

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

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

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

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

Security selection Relying on the insights of different  specialists,  including
credit analysts,  quantitative researchers,  and dedicated fixed income traders,
the portfolio managers make buy and sell decisions  according to the fund's goal
and strategy.

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

Duration  management  Forecasting  teams use  fundamental  economic  factors  to
develop strategic  forecasts of the direction of interest rates.  Based on these
forecasts,   strategists   establish  the  fund's  target  duration,   a  common
measurement  of  a  security's  sensitivity  to  interest  rate  movements.  For
securities  owned by the fund,  duration  measures  the  average  time needed to
receive the present value of all  principal  and interest  payments by analyzing
cash flows and interest rate movements.  The fund's duration may be shorter than
the fund's average maturity because the maturity of a security only measures the
time until final payment is due. The fund's target  duration  typically  remains
relatively  short,  between three and eighteen months.  The strategists  closely
monitor the fund and make tactical adjustments as necessary.


                                            FIXED INCOME MANAGEMENT APPROACH | 4
<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------

For your convenience,  the J.P. Morgan Institutional Funds offer several ways to
start and add to fund investments.


INVESTING THROUGH A FINANCIAL PROFESSIONAL

If you work with a financial  professional,  either at J.P. Morgan or elsewhere,
he or she is  prepared to handle  your  planning  and  transaction  needs.  Your
financial  professional  will be able to assist  you in  establishing  your fund
account,  executing transactions,  and monitoring your investment.  If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly.

INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN

Your  fund  investments  are  handled  through  your  plan.  Refer to your  plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares.

INVESTING THROUGH AN IRA OR ROLLOVER IRA

Please contact a J.P. Morgan  Retirement  Services  Specialist at 1-888-576-4472
for information on J.P. Morgan's  compre-hensive  IRA services,  including lower
minimum investments.

INVESTING DIRECTLY

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

o     Determine  the amount you are  investing.  The minimum  amount for initial
      investments  is  $50,000,000  and  for  additional   investments  $25,000,
      although  these  minimums  may  be  less  for  some  investors.  For  more
      information on minimum investments, call 1-800-766-7722.

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

o     Mail in your  application,  making  your  initial  investment  as shown at
      right.

For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-766-7722.

OPENING YOUR ACCOUNT

      By wire

o     Mail your completed application to the Shareholder Services Agent.

o     Call the  Shareholder  Services  Agent to obtain an account  number and to
      place a purchase order. Funds that are wired without a purchase order will
      be returned uninvested.

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

      Morgan Guaranty Trust Company of New York-Delaware
      Routing number: 031-100-238
      Credit: J.P. Morgan Institutional Funds
      Account number: 001-57-689
      FFC: your account number, name of registered owner(s) and fund name

      By check

o     Make out a check for the investment amount payable to J.P. Morgan
      Institutional Funds.

o     Mail the check with your completed application to the Shareholder Services
      Agent.

      By exchange

o     Call the Shareholder Services Agent to effect an exchange.

ADDING TO YOUR ACCOUNT

      By wire

o     Call the Shareholder  Services Agent to place a purchase order. Funds that
      are wired without a purchase order will be returned uninvested.

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

      By check

o     Make out a check for the investment amount payable to J.P. Morgan
      Institutional Funds.

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

      By exchange

o     Call the Shareholder Services Agent to effect an exchange.


5 | YOUR INVESTMENT
<PAGE>

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

SELLING SHARES

      By phone -- wire payment

o     privilege is in place on your account. If it is not, a representative can
      help you add it.

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

      By phone -- check payment

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

      In writing

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

o     Indicate whether you want the proceeds sent by check or by wire.

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

o     Mail the letter to the Shareholder Services Agent.

      By exchange

o     Call the Shareholder Services Agent to effect an exchange.

      Redemption in kind

o     The Fund  reserves  the  right to make  redemptions  of over  $250,000  in
      securities rather than in cash.

ACCOUNT AND TRANSACTION POLICIES

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

Exchanges  You may  exchange  shares in this fund for  shares in any other  J.P.
Morgan  Institutional  or J.P.  Morgan mutual fund at no charge  (subject to the
securities  laws of your  state).  When making  exchanges,  it is  important  to
observe any applicable minimums.  Keep in mind that for tax purposes an exchange
is considered a sale.

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

Business hours and NAV  calculations  The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The fund calculates
its net asset  value  per  share  (NAV)  every  business  day as of the close of
trading on the NYSE (normally 4:00 p.m. eastern time). The fund's securities are
typically priced using pricing services or market quotes. When these methods are
not  available  or do not  represent a  security's  value at the time of pricing
(e.g.,  when an event occurs  after the close of trading  that would  materially
impact a security's value), the security is valued in accordance with the fund's
fair valuation procedures.

Timing  of orders  Orders to buy or sell  shares  are  executed  at the next NAV
calculated  after the order has been  accepted.  Orders are  accepted  until the
close of trading on the NYSE every  business  day and are executed the same day,
at that day's NAV.  The fund has the right to  suspend  redemption  of shares as
permitted by law and to postpone payment of proceeds for up to seven days.


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


Representatives are available 8:00 a.m. to 5:00 p.m. eastern time on fund
business days.


                                                             YOUR INVESTMENT | 6
<PAGE>

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

Timing of settlements  When you buy shares,  you will become the owner of record
when 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.

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 may close out your account and send the proceeds to
the address of record.

DIVIDENDS AND DISTRIBUTIONS

The fund typically declares income dividends daily and pays them monthly.  If an
investor's  shares are redeemed during the month,  accrued but unpaid  dividends
are paid with the redemption proceeds.  Shares of the fund earn dividends on the
business  day  the  purchase  is  effective,  but  not on the  business  day the
redemption is effective.  The fund  distributes  capital  gains,  if any, once a
year.  However,  the fund  may make  more or  fewer  payments  in a given  year,
depending on its  investment  results and its tax  compliance  situation.  These
dividends and distributions  consist of most or all of the fund's net investment
income and net realized capital gains.

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

TAX CONSIDERATIONS

In general,  selling  shares,  exchanging  shares,  and receiving  distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities:

--------------------------------------------------------------------------------
Transaction                             Tax status

Income dividends                        Ordinary income

Short-term capital gains                Ordinary income
distributions

Long-term capital gains                 Capital gains
distributions

Sales or exchanges of                   Capital gains or
shares owned for more                   losses
than one year

Sales or exchanges of                   Gains are treated as ordinary
shares owned for one year               income; losses are subject
or less                                 to special rules

Because  long-term  capital  gains  distributions  are taxable as capital  gains
regardless of how long you have owned your shares,  you may want to avoid making
a substantial  investment when the fund is about to declare a long-term  capital
gains distribution.

Every  January,  the fund issues tax  information on its  distributions  for the
previous year.

Any  investor  for whom the fund does not have a valid  taxpayer  identification
number will be subject to backup withholding for taxes.

The tax  considerations  described in this section do not apply to  tax-deferred
accounts or other non-taxable entities.

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


7 | YOUR INVESTMENT
<PAGE>

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

BUSINESS STRUCTURE

The fund is a series of J.P.  Morgan  Series  Trust,  a  Massachusetts  business
trust.  Information  about  other  series or  classes  is  available  by calling
1-800-766-7722.  In the future,  the trustees could create other series or share
classes, which would have different expenses.

MANAGEMENT AND ADMINISTRATION

The fund and the other  series of J.P.  Morgan  Series Trust are governed by the
same  trustees.  The  trustees  are  responsible  for  overseeing  all  business
activities.  The trustees are assisted by Pierpont Group,  Inc.,  which they own
and  operate on a cost  basis;  costs are shared by all funds  governed by these
trustees. Funds Distributor, Inc., as co-administrator,  along with J.P. Morgan,
provides fund officers.  J.P. Morgan, as  co-administrator,  oversees the fund's
other service providers.

--------------------------------------------------------------------------------
Advisory services                       0.25% of the fund's average net
                                        assets

Administrative services                 Fund's pro-rata portion of
(fee shared with Funds                  0.09% of the first $7 billion
Distributor, Inc.)                      of average net assets in
                                        J.P. Morgan-advised portfolios,
                                        plus 0.04% of average net assets
                                        over $7 billion

Shareholder services                    0.05% of the fund's average
                                        net assets

J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in the fund.


                                                                FUND DETAILS | 8
<PAGE>

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

RISK AND REWARD ELEMENTS

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

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

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

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

Management choices

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

Credit quality

o     The default of an issuer      o     Investment-grade bonds     o     The fund maintains its own policies for balancing
      would leave the fund with           have a lower risk of             credit quality against potential yields and gains in
      unpaid interest or                  default                          light of its investment goals
     principal
                                                                     o     J.P. Morgan develops its own ratings of unrated
                                                                           securities and makes a credit quality determination for
                                                                           unrated securities

Short-term trading

o     Increased trading would       o     The fund could realize     o     The fund uses short-term trading to take advantage of
      raise the fund's                    gains in a short period          attractive or unexpected opportunities or to meet
      transaction costs                   of time                          demands generated by shareholder activity

o     Increased short-term          o     The fund could protect
      capital gains                       against losses if a bond
      distributions would raise           is overvalued and its
      shareholders' income tax            value later falls
      liability
</TABLE>


9 | FUND DETAILS
<PAGE>

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

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

o     The fund could lose money     o     Foreign bonds, which       o     Foreign bonds may be a significant investment (25% of
      because of foreign                  represent a major portion        assets) for the fund
      government actions,                 of the world's fixed
      political instability, or           income securities, offer   o     To the extent that the fund invests in foreign bonds, it
      lack of adequate and                attractive potential             will hedge its currency exposure into the U.S. dollar
      accurate information                performance and                  (see also "Derivatives")
                                          opportunities for
o     Currency exchange rate              diversification
      movements could reduce
      gains or create losses        o     Favorable exchange rate
                                          movements could generate
                                          gains or reduce losses

Derivatives

o     Derivatives such as           o     Hedges that correlate      o     The fund uses derivatives such as futures, options,
      futures, options, swaps             well with underlying             swaps and forward foreign currency contracts for hedging
      and forward foreign                 positions can reduce or          and for risk management (i.e., to adjust duration or to
      currency contracts that             eliminate losses at low          establish or adjust exposure to particular securities,
      are used for hedging the            cost                             markets, or currencies)
      portfolio or specific
      securities may not fully      o     The fund could make money  o     The fund only establishes hedges that it expects will be
      offset the underlying               and protect against              highly correlated with underlying positions
      positions(1) and this could         losses if management's
      result in losses to the             analysis proves correct    o     While the fund may use derivatives that incidentally
      fund that would not have                                             involve leverage, it does not use them for the specific
      otherwise occurred            o     Derivatives that involve         purpose of leveraging the portfolio
                                          leverage could generate
o     Derivatives used for risk           substantial gains at low
      management may not have             cost
      the intended effects and
      may result in losses or
      missed opportunities

o     The counterparty to a
      derivatives contract
      could default

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

o     Derivatives that involve
      leverage could magnify
      losses

Securities lending

o     When a fund lends a           o     The fund may enhance       o     J.P. Morgan maintains a list of approved borrowers
      security, there is a risk           income through the
      that the loaned                     investment of the          o     The fund receives collateral equal to at least 100% of
      securities may not be               collateral received from         the current value of securities loaned
      returned if the borrower            the borrower
      defaults                                                       o     The lending agents indemnify a fund against borrower
                                                                           default
o     The collateral will be
      subject to the risks of                                        o     J.P. Morgan's collateral investment guidelines limit the
      the securities in which                                              quality and duration of collateral investment to
      it is invested                                                       minimize losses

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

Illiquid holdings

o     The fund could have           o     These holdings may offer   o     The fund may not invest more than 15% of net assets in
      difficulty valuing these            more attractive yields or        illiquid holdings
      holdings precisely                  potential growth than
                                          comparable widely traded   o     To maintain adequate liquidity to meet redemptions, the
o     The fund could be unable            securities                       fund may hold investment-grade short-term securities
      to sell these holdings at                                            (including repurchase agreements) and, for temporary or
      the time or price desired                                            extraordinary purposes, may borrow from banks up to
                                                                           33 1/3% of the value of its total assets
When-issued and delayed
delivery securities

o     When the fund buys            o     The fund can take          o     The fund uses segregated accounts to offset leverage
      securities before issue             advantage of attractive risk
      or for delayed delivery,            transaction opportunities
      it could be exposed to
      leverage risk if it does
      not use segregated
      accounts
</TABLE>

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

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

--------------------------------------------------------------------------------
Investments
--------------------------------------------------------------------------------


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


                                         0     Permitted - bold

                                         *     Permitted, but not typically used

<TABLE>
<CAPTION>

                                                                                    Related Types of Risk
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                                               <C>
------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities Interests in a stream of
payments from specific assets,                         credit, interest rate, market, prepayment              O
such as auto or credit card receivables.
------------------------------------------------------------------------------------------------------------------------------------
Bank obligations Negotiable certificates of
deposit, time deposits and bankers'                    credit, currency, liquidity, political                 O(1)
acceptances of domestic and foreign issuers.
------------------------------------------------------------------------------------------------------------------------------------
Commercial paper Unsecured short term debt
issued by domestic and foreign banks                   credit, currency, interest rate,
or corporations. These securities are usually          liquidity, market, liquidity, market,
discounted and are rated by S&P or                     political                                              O(1)
Moody's.
------------------------------------------------------------------------------------------------------------------------------------
Convertible securities Domestic and foreign
debt securities that can be                            credit, currency, interest rate,
converted into equity securities at a future           liquidity, market, political,
time and price.                                        valuation                                              O(1)
------------------------------------------------------------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic
and foreign industrial, utility,                       credit, currency, interest rate,
banking, and other financial institutions.             liquidity, market, political, valuation                O(1)
------------------------------------------------------------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt
instrument which gives the lender a lien               rate, liquidity, market, natural event,
credit, environmental,  extension, interest            political, prepayment, valuation                       O
on property as security for the loan
payment.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities Domestic and
foreign securities (such as Ginnie Maes,
Freddie Macs, Fannie Maes) which represent             credit, currency, extension, interest
interests in pools of mortgages,                       rate, leverage, market, political,
whereby the principal and interest paid                prepayment
every month is passed through to the                                                                           O(1)
holder of the securities.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage dollar rolls The sale of domestic
and foreign mortgage-backed                            credit, currency, extension, interest
securities with the promise to purchase                rate, leverage, liquidity,
similar securities at a later date.                    market, political, prepayment                           O(1,2)
Segregated accounts are used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Participation interests Interests that
represent a share of bank debt or similar              credit, currency, extension, interest
securities or obligations.                             rate, liquidity, political, prepayment                 O(1)
------------------------------------------------------------------------------------------------------------------------------------
Private placements Bonds or other investments
that are sold directly to an                           credit, interest rate, liquidity, market,
institutional investor.                                valuation                                               O
------------------------------------------------------------------------------------------------------------------------------------
REITs and other real-estate related instruments
Securities of issuers that                              credit, environmental, interest rate,
invest in real estate or are secured by real estate.    liquidity, market, natural event, valuation            O
------------------------------------------------------------------------------------------------------------------------------------
Repurchase  agreements  Contracts whereby the
fund agrees to purchase a security                      credit                                                  O
and resell it to to the seller on a  particular
date and at a specific price.
------------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby
the fund sells a security and                            credit                                               O(2)
agrees to repurchase it from the buyer on a
particular date and at a specific price.
Considered a form of borrowing.
------------------------------------------------------------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of
supranational organizations Dollar- or                 credit, currency, interest rate, market,
non-dollar-denominated securities issued               political                                              O(1)
by foreign governments or supranational
organizations. Brady bonds are issued in
connection with debt restructurings.
------------------------------------------------------------------------------------------------------------------------------------
Swaps Contractual agreement whereby a party
agrees to exchange periodic payments                   credit, currency, interest rate,
with a counterparty. Segregated accounts are           leverage, market, political                            O(1)
used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Tax exempt municipal securities Securities,
generally issued as general                            credit, interest rate, market, natural
obligation and revenue bonds, whose interest is        event, political                                       *
exempt from federal taxation and state and/or
local taxes in the state where the securities were issued.
------------------------------------------------------------------------------------------------------------------------------------
U.S. government securities Debt instruments
(Treasury bills, notes, and bonds)                     interest rate                                           O
guaranteed by the U.S. government for the
timely payment of principal and interest.
------------------------------------------------------------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred
payment securities Domestic and foreign           credit, currency, interest rate,
securities offering non-cash or delayed-cash      liquidity, market, political, valuation                     O(1)
payment. Their prices are typically
more  volatile  than those of some other debt
instruments  and involve  certain
special tax considerations.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Risk related to certain investments held by J.P. Morgan fixed income funds:

Credit risk The risk a financial  obligation  will not be met by the issuer of a
security  or  the  counterparty  to a  contract,  resulting  in a  loss  to  the
purchaser.

Currency risk The risk currency  exchange rate  fluctuations may reduce gains or
increase losses on foreign investments.

Environmental  risk The risk that an owner or  operator  of real  estate  may be
liable for the costs  associated with hazardous or toxic  substances  located on
the property.

Extension  risk The risk a rise in  interest  rates  will  extend  the life of a
mortgage-backed  security to a date later than the anticipated  prepayment date,
causing the value of the investment to fall.

Interest rate risk The risk a change in interest rates will adversely affect the
value of an investment.  The value of fixed income securities generally moves in
the opposite direction of interest rates (decreases when interest rates rise and
increases when interest rates fall).

Leverage  risk The risk of gains or losses  disproportionately  higher  than the
amount invested.

Liquidity  risk The risk the holder may not be able to sell the  security at the
time or price it desires.

Market  risk The risk that when the market as a whole  declines,  the value of a
specific investment will decline proportionately. This systematic risk is common
to all investments and the mutual funds that purchase them.

Natural event risk The risk a natural  disaster,  such as a hurricane or similar
event,  will cause severe  economic losses and default in payments by the issuer
of the security.

Political risk The risk  governmental  policies or other political  actions will
negatively impact the value of the investment.

Prepayment  risk The risk  declining  interest  rates will result in  unexpected
prepayments, causing the value of the investment to fall.

Valuation  risk The risk the  estimated  value of a security  does not match the
actual amount that can be realized if the security is sold.

(1)   All foreign securities in the aggregate may not exceed 25% of the fund's
      assets.

(2)   All forms of borrowing  (including  securities  lending,  mortgage  dollar
      rolls and reverse repurchase  agreements) are limited in the aggregate and
      may not exceed 33 1/3% of the fund's total assets.


11 & 12 | FUND DETAILS
<PAGE>

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<PAGE>

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<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 Institutional Enhanced Income Fund - Ultra
Morgan Christiana C enter
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713


Telephone: 1-800-766-7722

Hearing impaired: 1-888-468-4015

Email: [email protected]

Text-only  versions of these documents and this  prospectus are available,  upon
payment of a duplicating  fee, from the Public  Reference Room of the Securities
and Exchange Commission in Washington,  D.C.  (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov.  The
fund's  investment  company and 1933 Act registration  numbers are 811-07795 and
333-11125.

J.P. MORGAN INSTITUTIONAL FUNDS AND THE MORGAN TRADITION

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

JPMorgan
--------------------------------------------------------------------------------
J.P. Morgan Institutional Funds

Advisor                                          Distributor
J.P. Morgan Investment Management Inc.           Funds Distributor, Inc.
522 Fifth Avenue                                 60 State Street
New York, NY 10036                               Boston, MA 02109
1-800-766-7722                                   1-800-221-7930

                                                                          IMPR29



<PAGE>



                            J.P. MORGAN SERIES TRUST


                        J.P. MORGAN ENHANCED INCOME FUND


                       STATEMENT OF ADDITIONAL INFORMATION







                                  JUNE 28, 2000










THIS  STATEMENT  OF  ADDITIONAL  INFORMATION  IS NOT A  PROSPECTUS  BUT CONTAINS
ADDITIONAL  INFORMATION  WHICH  SHOULD BE READ IN  CONJUNCTION  WITH THE  FUND'S
PROSPECTUSES  DATED JUNE 28, 2000, AS SUPPLEMENTED FROM TIME TO TIME. THE FUND'S
PROSPECTUSES ARE 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------------------------------------------------------------------29
TRUSTEES AND MEMBERS OF THE ADVISORY
BOARD-------------------------------------------------------------------------29
OFFICERS----------------------------------------------------------------------29
INVESTMENT
ADVISOR-----------------------------------------------------------------------33
DISTRIBUTOR-------------------------------------------------------------------37
CO-ADMINISTRATOR--------------------------------------------------------------38
SERVICES
AGENT-------------------------------------------------------------------------38
CUSTODIAN AND TRANSFER
AGENT-------------------------------------------------------------------------39
SHAREHOLDER
SERVICING---------------------------------------------------------------------39
FINANCIAL
PROFESSIONALS-----------------------------------------------------------------40
INDEPENDENT
ACCOUNTANTS-------------------------------------------------------------------41
EXPENSES----------------------------------------------------------------------41
PURCHASE OF
SHARES------------------------------------------------------------------------41
REDEMPTION OF
SHARES------------------------------------------------------------------------42
EXCHANGE OF
SHARES------------------------------------------------------------------------43
DIVIDENDS AND
DISTRIBUTIONS-----------------------------------------------------------------44
NET ASSET
VALUE-------------------------------------------------------------------------44
PERFORMANCE
DATA--------------------------------------------------------------------------45
PORTFOLIO
TRANSACTIONS------------------------------------------------------------------46
MASSACHUSETTS
TRUST-------------------------------------------------------------------------48
DESCRIPTION OF
SHARES------------------------------------------------------------------------48
TAXES-------------------------------------------------------------------------49
ADDITIONAL
INFORMATION-------------------------------------------------------------------53
APPENDIX A - DESCRIPTION OF SECURITY
RATINGS-----------------------------------------------------------------------54




<PAGE>



GENERAL

         J.P.  Morgan  Enhanced  Income  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").  To date, the Trustees of the Trust
have authorized the issuance of three classes of  shares--Institutional  Shares,
Select Shares and Ultra Shares.

         This   Statement  of   Additional   Information   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 herein have the meanings assigned to them in the Prospectus. The Trust's
executive  offices  are  located  at  60  State  Street,   Suite  1300,  Boston,
Massachusetts 02109.

     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 at the time it is redeemed,  be
higher or lower than the amount originally invested.

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  seeking  high  current  income,
consistent with principal  preservation.  The Fund primarily  invests in taxable
fixed income,  including  U.S.  government and agency  securities,  domestic and
foreign corporate bonds, asset-backed and mortgage-related securities, and money
market instruments, that the Advisor believes have the potential to provide high
current income.


Investment Process for the Fund

         Duration  Management.  Duration  will  be  actively  managed  based  on
internal  economic  research,  forecasts of interest rates and their volatility,
and the shape of the yield curve. The portfolio's  duration will generally range
between 90 days to 18 months.

         Sector  Allocation.  The Advisor's Fixed Income Group recommends sector
allocation strategies.  Within each sector, the Advisor utilizes option adjusted
spread  analysis as one measure of sector  attractiveness.  Current spreads also
are judged against their historical norm. The Advisor utilizes market and credit
research to assess fair value and the likelihood of sector  spreads  widening or
narrowing.

         Security  Selection.  The Advisor  utilizes  its  extensive  credit and
quantitative research,  portfolio management and trading capabilities across all
fixed income  markets to select  securities.  Securities  will be selected based
upon the issuer's  ability to return  principal at a rate offering an attractive
return when compared to similar securities available in the marketplace.

         The  various  types of  securities  in which  the Fund may  invest  are
described below.

Corporate Bonds and Other Debt Securities

         The Fund may invest in bonds and other debt  securities of domestic and
foreign  issuers to the extent  consistent  with its  investment  objective  and
policies.  A description of these  investments  appears below.  See "Quality and
Diversification  Requirements."  For  information  on short-term  investments in
these securities, see "Money Market Instruments."

         Mortgage-Backed  Securities.  The Fund may  invest  in  mortgage-backed
securities. Each mortgage pool underlying mortgage-backed securities consists of
mortgage loans evidenced by promissory notes secured by first mortgages or first
deeds of trust or other similar  security  instruments  creating a first lien on
owner  occupied  and  non-owner  occupied  one-unit  to  four-unit   residential
properties, multifamily (i.e., five or more) properties, agriculture properties,
commercial properties and mixed use properties.  The investment  characteristics
of adjustable  and fixed rate  mortgage-backed  securities  differ from those of
traditional fixed income securities.  The major differences  include the payment
of interest  and  principal on  mortgage-backed  securities  on a more  frequent
(usually  monthly) schedule and the possibility that principal may be prepaid at
any time due to prepayments  on the  underlying  mortgage loans or other assets.
These differences can result in significantly greater price and yield volatility
than is the case with traditional fixed income securities. As a result, a faster
than expected prepayment rate will reduce both the market value and the yield to
maturity  from those which were  anticipated.  A prepayment  rate that is slower
than expected will have the opposite effect of increasing  yield to maturity and
market value.

         Government Guaranteed Mortgage-Backed  Securities.  Government National
Mortgage Association mortgage-backed  certificates ("Ginnie Maes") are supported
by the full faith and credit of the United States. Certain other U.S. Government
securities,  issued or  guaranteed by federal  agencies or government  sponsored
enterprises,  are not  supported  by the full  faith and  credit  of the  United
States,  but may be supported by the right of the issuer to borrow from the U.S.
Treasury.  These securities include obligations of instrumentalities such as the
Federal Home Loan Mortgage Corporation ("Freddie Macs") and the Federal National
Mortgage  Association  ("Fannie Maes").  No assurance can be given that the U.S.
Government   will  provide   financial   support  to  these  federal   agencies,
authorities,  instrumentalities  and  government  sponsored  enterprises  in the
future.

         There  are  several  types  of  guaranteed  mortgage-backed  securities
currently available, including guaranteed mortgage pass-through certificates and
multiple  class  securities,  which  include  guaranteed  real  estate  mortgage
investment conduit  certificates  ("REMIC  Certificates"),  other collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities.

         Mortgage   pass-through   securities  are  fixed  or  adjustable   rate
mortgage-backed  securities  which  provide  for  monthly  payments  that  are a
"pass-through"  of the monthly  interest and principal  payments  (including any
prepayments) made by the individual  borrowers on the pooled mortgage loans, net
of any  fees or  other  amounts  paid  to any  guarantor,  administrator  and/or
servicer of the underlying mortgage loans.

         Multiple class securities include CMOs and REMIC Certificates issued by
U.S. Government agencies,  instrumentalities  (such as Fannie Mae) and sponsored
enterprises (such as Freddie Mac) or by trusts formed by private originators of,
or  investors  in,  mortgage  loans,  including  savings and loan  associations,
mortgage bankers,  commercial banks,  insurance companies,  investment banks and
special  purpose  subsidiaries  of the  foregoing.  In  general,  CMOs  are debt
obligations  of a legal entity that are  collateralized  by, and multiple  class
mortgage-backed  securities  represent direct ownership  interests in, a pool of
mortgage loans or mortgaged-backed  securities and payments on which are used to
make payments on the CMOs or multiple class mortgage-backed securities.

         CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie
Mac are  types of  multiple  class  mortgage-backed  securities.  Investors  may
purchase beneficial  interests in REMICs, which are known as "regular" interests
or "residual" interests. The Fund does not intend to purchase residual interests
in REMICs. The REMIC Certificates  represent beneficial ownership interests in a
REMIC trust,  generally  consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage-backed securities (the "Mortgage Assets"). The
obligations of Fannie Mae and Freddie Mac under their respective guaranty of the
REMIC  Certificates  are  obligations  solely of  Fannie  Mae and  Freddie  Mac,
respectively.

         CMOs and REMIC Certificates are issued in multiple classes.  Each class
of CMOs or REMIC Certificates,  often referred to as a "tranche," is issued at a
specific  adjustable  or fixed  interest rate and must be fully retired no later
than its final distribution date. Principal prepayments on the assets underlying
the CMOs or REMIC  Certificates  may cause some or all of the classes of CMOs or
REMIC  Certificates  to  be  retired  substantially  earlier  than  their  final
scheduled  distribution  dates.  Generally,  interest  is paid or accrues on all
classes of CMOs or REMIC Certificates on a monthly basis.

         Stripped   Mortgage-Backed    Securities.    Stripped   mortgage-backed
securities  ("SMBS") are derivative  multiclass mortgage  securities,  issued or
guaranteed  by the U.S.  Government,  its  agencies or  instrumentalities  or by
private issuers. Although the market for such securities is increasingly liquid,
privately  issued  SMBS may not be  readily  marketable  and will be  considered
illiquid  for  purposes  of the Fund's  limitation  on  investments  in illiquid
securities.  The  Advisor  may  determine  that SMBS  which are U.S.  Government
securities  are liquid for purposes of the Fund's  limitation on  investments in
illiquid  securities  in  accordance  with  procedures  adopted  by the Board of
Trustees.  The  market  value of the  class  consisting  entirely  of  principal
payments  generally  is  unusually  volatile  in response to changes in interest
rates.  The yields on a class of SMBS that  receives all or most of the interest
from mortgage assets are generally higher than prevailing market yields on other
mortgage-backed  securities  because  their cash flow patterns are more volatile
and  there is a  greater  risk  that the  initial  investment  will not be fully
recouped.

         Mortgages  (directly  held). The Fund may invest directly in mortgages.
Mortgages are debt instruments secured by real property.  Unlike mortgage-backed
securities, which generally represent an interest in a pool of mortgages, direct
investments  in mortgages  involve  prepayment and credit risks of an individual
issuer and real property.  Consequently,  these  investments  require  different
investment and credit analysis by the Advisor.

         The  directly  placed  mortgages  in which the Fund invests may include
residential mortgages, multifamily mortgages, mortgages on cooperative apartment
buildings,  commercial  mortgages,  and  sale-leasebacks.  These investments are
backed by assets such as office  buildings,  shopping  centers,  retail  stores,
warehouses,  apartment buildings and single-family  dwellings. In the event that
the Fund  forecloses  on any  non-performing  mortgage,  and  acquires  a direct
interest in the real property,  the Fund will be subject to the risks  generally
associated with the ownership of real property. There may be fluctuations in the
market value of the foreclosed  property and its occupancy rates, rent schedules
and operating expenses.  There may also be adverse changes in local, regional or
general  economic  conditions,  deterioration  of the real estate market and the
financial  circumstances of tenants and sellers,  unfavorable changes in zoning,
building  environmental  and other laws,  increased real property taxes,  rising
interest rates,  reduced availability and increased cost of mortgage borrowings,
the need for  unanticipated  renovations,  unexpected  increases  in the cost of
energy,  environmental  factors,  acts of God and other factors which are beyond
the control of the Fund or the  Advisor.  Hazardous or toxic  substances  may be
present on, at or under the mortgaged property and adversely affect the value of
the property. In addition, the owners of property containing such substances may
be held responsible, under various laws, for containing, monitoring, removing or
cleaning up such substances.  The presence of such substances may also provide a
basis for other claims by third parties.  Costs of clean-up or of liabilities to
third parties may exceed the value of the property. In addition, these risks may
be  uninsurable.  In light of these and similar  risks,  it may be impossible to
dispose profitably of properties in foreclosure.

         Auction Rate  Securities.  Auction rate  securities  consist of auction
rate  municipal  securities  and auction  rate  preferred  securities  issued by
closed-end  investment companies that invest primarily in municipal  securities.
Provided  that the auction  mechanism is  successful,  auction  rate  securities
usually  permit the holder to sell the  securities in an auction at par value at
specified intervals.  The dividend is reset by "Dutch" auction in which bids are
made by broker-dealers and other institutions for a certain amount of securities
at a specified minimum yield. The dividend rate set by the auction is the lowest
interest or dividend  rate that covers all  securities  offered for sale.  While
this process is designed to permit  auction rate  securities to be traded at par
value,  there is the risk that an auction will fail due to  insufficient  demand
for the securities.

         The  fund's  investments  in  auction  rate  preferred   securities  of
closed-end  funds are  subject  to  limitations  on  investments  in other  U.S.
registered investment companies, which limitations are prescribed under the 1940
Act. These limitations  include  prohibitions  against acquiring more than 3% of
the voting securities of any other such investment  company,  and investing more
than 5% of the fund's assets in securities of any one such investment company or
more than 10% of its assets in securities of all such investment companies.  The
fund will indirectly bear its proportionate share of any management fees paid by
such  closed-end  funds in addition to the advisory fee payable  directly by the
fund.

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

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

         Corporate Fixed Income Securities.  The Fund may invest in publicly and
privately issued debt obligations of U.S. and non-U.S.  corporations,  including
obligations of industrial,  utility,  banking and other financial issuers. These
securities  are subject to the risk of an issuer's  inability to meet  principal
and  interest  payments  on the  obligation  and may  also be  subject  to price
volatility due to such factors as market  interest rates,  market  perception of
the creditworthiness of the issuer and general market liquidity.

Money Market Instruments

         The  Fund  may  invest  in  money  market  instruments  to  the  extent
consistent   with  its   investment   objective  and   policies.   Under  normal
circumstances,  the Fund  will  purchase  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.   See  "Quality  and   Diversification
Requirements."

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

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

     Foreign  Government  Obligations.  The  Fund,  subject  to  its  investment
policies,  may also  invest  in  short-term  obligations  of  foreign  sovereign
governments or of their  agencies,  instrumentalities,  authorities or political
subdivisions.  These  securities  may be  denominated  in the U.S.  dollar or in
another currency. See "Foreign Investments."

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

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


Municipal Obligations

     In certain  circumstances,  the Fund may  invest in tax exempt and  taxable
municipal  obligations  to the  extent  consistent  with the  Fund's  investment
objective  and  policies.  A  description  of the  various  types of tax  exempt
obligations  which may be purchased by the Fund appears below.  See "Quality and
Diversification Requirements."

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

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

         Municipal Notes. The Fund also may invest in municipal notes of various
types,  including notes issued in anticipation of receipt of taxes, the proceeds
of the sale of bonds,  other  revenues or grant  proceeds,  as well as municipal
commercial paper and municipal  demand  obligations such as variable rate demand
notes and master demand obligations.

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

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

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


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

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


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

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

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

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

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

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

Foreign Investments


         The  Fund  may  invest  up to 25% of its  total  assets  at the time of
purchase,  in fixed income securities of foreign issuers. Any foreign commercial
paper the Fund invests in must not be subject to foreign  withholding tax at the
time of purchase


         Foreign  investments  may be made  directly  in  securities  of foreign
issuers  or in the  form of  American  Depository  Receipts  ("ADRs"),  European
Depository  Receipts ("EDRs") and Global  Depository  Receipts ("GDRs") or other
similar securities of foreign issuers. ADRs are securities typically issued by a
U.S. financial institution (a "depository") that evidence ownership interests in
a security or a pool of securities issued by a foreign issuer and deposited with
the depository.  ADRs include  American  Depository  Shares and New York Shares.
EDRs are receipts issued by a European  financial  institution.  GDRs (sometimes
referred  to  as  Continental   Depository  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
depository,  whereas an unsponsored  facility may be established by a depository
without participation by the issuer of the receipt's underlying security.

         Holders of an unsponsored  depository  receipt generally bear all costs
of  the  unsponsored  facility.   The  depository  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  voting
rights to the holders of the receipts with respect to the deposited securities.

         Investment  in  securities  of foreign  issuers and in  obligations  of
foreign branches of domestic banks 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 a Fund by domestic companies.

         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.

         In  addition,  while the  volume of  transactions  effected  on foreign
exchanges has increased in recent  years,  in most cases it remains  appreciably
below that of  domestic  security  exchanges.  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 addition, there is generally
less government supervision and regulation of securities exchanges,  brokers and
issuers located in foreign countries than in the United States.

         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.

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

         The Fund may enter into foreign  currency  exchange  transactions in an
attempt to protect  against changes in foreign  currency  exchange rates between
the  trade  and  settlement  dates  of  specific   securities   transactions  or
anticipated  securities  transactions.  The  Fund may also  enter  into  forward
contracts  to hedge  against a change in foreign  currency  exchange  rates that
would  cause a  decline  in the value of  existing  investments  denominated  or
principally traded in a foreign currency.  To do this, the Fund would enter into
a forward  contract to sell the  foreign  currency  in which the  investment  is
denominated  or principally  traded in exchange for U.S.  dollars or in exchange
for another foreign currency. The Fund will only enter into forward contracts to
sell a foreign  currency for another foreign currency if the Advisor expects the
foreign currency purchased to appreciate against the U.S. dollar.

         Although these  transactions  are intended to minimize the risk of loss
due to a decline  in the  value of the  hedged  currency,  at the same time they
limit any potential  gain that might be realized  should the value of the hedged
currency  increase.  In  addition,  forward  contracts  that  convert  a foreign
currency into another foreign currency will cause the Fund to assume the risk of
fluctuations in the value of the currency  purchased against 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.

         Sovereign Fixed Income Securities.  The Fund may invest in fixed income
securities  issued  or  guaranteed  by a  foreign  sovereign  government  or its
agencies,  authorities or political subdivisions.  Investment in sovereign fixed
income  securities  involves special risks not present in corporate fixed income
securities.  The issuer of the sovereign  debt or the  governmental  authorities
that  control  the  repayment  of the debt may be unable or  unwilling  to repay
principal or interest  when due,  and the Fund may have limited  recourse in the
event of a default. During periods of economic uncertainty, the market prices of
sovereign debt, and the Fund's net asset value, may be more volatile than prices
of  U.S.  debt  obligations.   In  the  past,  certain  foreign  countries  have
encountered difficulties in servicing their debt obligations,  withheld payments
of principal and interest and declared moratoria on the payment of principal and
interest on their sovereign debts.

         A sovereign debtor's  willingness or ability to repay principal and pay
interest in a timely  manner may be affected by, among other  factors,  its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient  foreign exchange,  the relative size of the debt service burden, the
sovereign  debtor's  policy  toward  international  lenders and local  political
constraints.  Sovereign debtors may also be dependent on expected  disbursements
from foreign  governments,  multilateral  agencies and other  entities to reduce
principal  and  interest  arrearages  on their debt.  The failure of a sovereign
debtor to  implement  economic  reforms,  achieve  specified  levels of economic
performance  or  repay  principal  or  interest  when  due  may  result  in  the
cancellation of third-party  commitments to lend funds to the sovereign  debtor,
which may further  impair such debtor's  ability or  willingness  to service its
debts.

         Brady Bonds.  The Fund may invest in Brady bonds,  which are securities
created  through the  exchange of existing  commercial  bank loans to public and
private  entities in certain  emerging  markets for new bonds in connection with
debt  restructurings.  Brady bonds have been issued since 1989 and do not have a
long payment history.  In light of the history of defaults of countries  issuing
Brady bonds on their  commercial  bank loans,  investments in Brady bonds may be
viewed as speculative.  Brady bonds may be fully or partially  collateralized or
uncollateralized,  are issued in various  currencies  (but primarily the dollar)
and are  actively  traded  in  over-the-counter  secondary  markets.  Incomplete
collateralization  of  interest  or  principal  payment  obligations  results in
increased credit risk. Dollar-denominated  collateralized Brady bonds, which may
be fixed-rate bonds or floating-rate bonds, are generally collateralized by U.S.
Treasury zero coupon bonds having the same maturity as the Brady bonds.

         Obligations  of  Supranational   Entities.   The  Fund  may  invest  in
obligations of  supranational  entities  designated or supported by governmental
entities to promote economic  reconstruction or development and of international
banking  institutions  and related  government  agencies.  Examples  include the
International  Bank for  Reconstruction  and Development (the "World Bank"), the
European  Coal  and  Steel  Community,   the  Asian  Development  Bank  and  the
Inter-American  Development Bank. Each supranational entity's lending activities
are limited to a percentage of its total capital  (including  "callable capital"
contributed by its governmental members at the entity's call),  reserves and net
income.  There is no assurance that  participating  governments  will be able or
willing  to  honor  their  commitments  to  make  capital   contributions  to  a
supranational entity.

Investing in Emerging Markets

         The Fund also may  invest  in  countries  with  emerging  economies  or
securities markets.  Political and economic structures in many of such countries
may  be  undergoing  significant  evolution  and  rapid  development,  and  such
countries may lack the social,  political and economic stability  characteristic
of more  developed  countries.  Certain of such  countries  may have in the past
failed to recognize  private  property rights and have at times  nationalized or
expropriated the assets of private  companies.  As a result, the risks described
above, including the risks of nationalization or expropriation of assets, may be
heightened.  In addition,  unanticipated  political or social  developments  may
affect  the  values  of the  Fund's  investments  in  those  countries  and  the
availability to the Fund of additional investments in those countries. The small
size and inexperience of the securities markets in certain of such countries and
the limited  volume of trading in  securities  in those  countries  may make the
Fund's investments in such countries illiquid and more volatile than investments
in more developed  countries,  and the Fund may be required to establish special
custodial or other  arrangements  before  making  certain  investments  in those
countries.  There may be little  financial or accounting  information  available
with  respect to issuers  located  in certain of such  countries,  and it may be
difficult as a result to assess the value or prospects of an  investment in such
issuers.

         Transaction  costs in emerging markets may be higher than in the United
States and other  developed  securities  markets.  As legal  systems in emerging
markets develop,  foreign investors may be adversely  affected by new or amended
laws  and  regulations  or  may  not be  able  to  obtain  swift  and  equitable
enforcement of existing law.

Additional Investments

         Convertible  Securities.  The Fund may invest in convertible securities
of domestic and foreign  issuers.  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.

         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 no  interest  will  accrue 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  and
reflect  the value  each day of such  securities  in  determining  its net asset
value. 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
or other liquid assets, in an amount at least equal to such commitments.  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 fund obligation)
incur  a  gain  or  loss  due to  market  fluctuation.  Also,  the  Fund  may be
disadvantaged if the other party to the transaction defaults.

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

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


         Reverse  Repurchase  Agreements.   The  Fund  may  enter  into  reverse
repurchase  agreements.  In a reverse  repurchase  agreement,  the Fund  sells a
security and agrees to repurchase  the same  security at a mutually  agreed upon
date and  price  reflecting  the  interest  rate  effective  for the term of the
agreement.  For purposes of the 1940 Act a reverse repurchase  agreement is also
considered  as the  borrowing  of money by the Fund  and,  therefore,  a form of
leverage.  Leverage may cause any gains or losses for the Fund to be  magnified.
The Fund will  invest  the  proceeds  of  borrowings  under  reverse  repurchase
agreements. In addition, except for liquidity purposes, the Fund will enter into
a reverse repurchase agreement only when the expected return from the investment
of the  proceeds is greater than the expense of the  transaction.  The Fund will
not invest the  proceeds of a reverse  repurchase  agreement  for a period which
exceeds  the  duration  of the  reverse  repurchase  agreement.  The  Fund  will
establish and maintain  with the custodian a separate  account with a segregated
portfolio of securities in an amount at least equal to its purchase  obligations
under its  reverse  repurchase  agreements.  All forms of  borrowing  (including
reverse repurchase agreements, securities lending and mortgage dollar rolls) are
limited in the aggregate and may not exceed  33-1/3% of the Fund's total assets.
See "Investment Restrictions".

         Mortgage  Dollar  Roll  Transactions.  The Fund may engage in  mortgage
dollar  roll  transactions  with  respect to mortgage  securities  issued by the
Government  National  Mortgage   Association,   the  Federal  National  Mortgage
Association and the Federal Home Loan Mortgage Corporation. In a mortgage dollar
roll transaction,  the Fund sells a mortgage backed security and  simultaneously
agrees to repurchase a similar  security on a specified future date at an agreed
upon price. During the roll period, the Fund will not be entitled to receive any
interest or principal paid on the securities  sold. The Fund is compensated  for
the lost interest on the  securities  sold by the  difference  between the sales
price and the lower price for the future  repurchase  as well as by the interest
earned  on the  reinvestment  of the  sales  proceeds.  The  Fund  may  also  be
compensated by receipt of a commitment fee. When the Fund enters into a mortgage
dollar roll  transaction,  liquid assets in an amount  sufficient to pay for the
future  repurchase  are  segregated  with the  custodian.  Mortgage  dollar roll
transactions are considered  reverse  repurchase  agreements for purposes of the
Fund's  investment  restrictions.  All  forms of  borrowing  (including  reverse
repurchase agreements, securities lending and mortgage dollar rolls) are limited
in the aggregate and may not exceed 33-1/3% of the Fund's total assets.

         Loans  of  Portfolio  Securities.  The  Fund is  permitted  to 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
that occurs  during the term of the loan  inures to the Fund and its  respective
shareholders.  The  Fund  may pay  reasonable  finders'  and  custodial  fees in
connection  with a loan.  In  addition,  the Fund  will  consider  all facts and
circumstances   before   entering   into  such  an   agreement,   including  the
creditworthiness of the borrowing financial  institution,  and the Fund will not
make any loans in excess of one year.  The Fund will not lend its  securities to
any officer,  Trustee,  Member of Advisory  Board,  Director,  employee or other
affiliate of the Fund, the Advisor or the Fund's  distributor,  unless otherwise
permitted  by  applicable  law.  All  forms  of  borrowing   (including  reverse
repurchase agreements, securities lending and mortgage dollar rolls) are limited
in the aggregate and may not exceed 33-1/3% of the Fund's total assets.


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

         As to illiquid  investments,  these restricted  holdings are subject to
the risk that the Fund  will not be able to sell them at a price the Fund  deems
representative of their value. If a restricted  holding must be registered under
the 1933 Act,  before it may be sold,  the Fund may be  obligated  to pay all or
part of the  registration  expenses.  Also,  a  considerable  period  may elapse
between the time of the  decision to sell and the time the Fund is  permitted to
sell a holding  under an  effective  registration  statement.  If during  such a
period adverse market  conditions were to develop,  the Fund might obtain a less
favorable price than prevailed when it decided to sell.

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."

         If the assets and revenues of an agency, authority,  instrumentality or
other political  subdivision are separate from those of the government  creating
the  subdivision and the obligation is backed only by the assets and revenues of
the subdivision,  such subdivision is regarded as the sole issuer. Similarly, in
the case of an industrial  development revenue bond or pollution control revenue
bond,   if  the  bond  is  backed  only  by  the  assets  and  revenues  of  the
non-governmental user, the non-governmental user is regarded as the sole issuer.
If in either  case the  creating  government  or another  entity  guarantees  an
obligation,  the  guaranty is regarded as a separate  security and treated as an
issue of such  guarantor.  Since  securities  issued or  guaranteed by states or
municipalities  are  not  voting  securities,  there  is no  limitation  on  the
percentage of a single issuer's  securities which the Fund may own so long as it
does not  invest  more  than 5% of its  total  assets  that are  subject  to the
diversification  limitation in the securities of such issuer, except obligations
issued or guaranteed by the U.S. Government.  Consequently,  the Fund may invest
in a greater  percentage of the  outstanding  securities of a single issuer than
would an investment company which invests in voting securities.  See "Investment
Restrictions.

         The Fund  invests in a  diversified  portfolio of  securities  that are
considered  "high grade," and "investment  grade" as described in Appendix A. In
addition, at the time the Fund invests in any commercial paper, bank obligation,
repurchase agreement, or any other money market instruments, the investment must
have  received  a short term  rating of  investment  grade or better  (currently
Prime-3  or better by  Moody's  or A-3 or better by  Standard  & Poor's)  or the
investment  must  have  been  issued by an issuer  that  received  a short  term
investment  grade rating or better with respect to a class of investments or any
investment  within that class that is  comparable  in priority and security with
the  investment  being  purchased  by the Fund.  If no such ratings  exist,  the
investment must be of comparable  investment  quality in the Advisor's  opinion,
but will not be eligible  for purchase if the issuer or its parent has long term
outstanding debt rated below BBB.

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

Options and Futures Transactions

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

         The Fund may use  futures  contracts  and  options for hedging and risk
management  purposes.  The 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  a  Fund's  investments  against  price  fluctuations.  Other  strategies,
including  buying futures  contracts and buying calls,  tend to increase  market
exposure.  Options and futures contracts may be combined with each other or with
forward contracts in order to adjust the risk and return  characteristics of the
Fund's  overall  strategy  in a manner  deemed  appropriate  to the  Advisor and
consistent  with the Fund's  objective and policies.  Because  combined  options
positions involve multiple trades,  they result in higher  transaction costs and
may be more difficult to open and close out.

         The use of options and futures is a highly  specialized  activity which
involves  investment  strategies and risks different from those  associated with
ordinary portfolio securities  transactions,  and there can be no guarantee that
their use will increase the Fund's return. While the use of these instruments by
the  Fund  may  reduce  certain  risks  associated  with  owning  its  portfolio
securities,  these  techniques  themselves  entail  certain other risks.  If the
Advisor applies a strategy at an inappropriate  time or judges market conditions
or trends  incorrectly,  options  and  futures  strategies  may lower the Fund's
return.  Certain  strategies limit the Fund's  possibilities to realize gains as
well as its  exposure to losses.  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 (i) the  aggregate  premiums
paid on all such  options  which are held at any time do not  exceed  20% of the
Fund's net assets,  and (ii) the aggregate margin deposits  required on all such
futures or options thereon held at any time do not exceed 5% of the Fund's total
assets.  In  addition,  the  Fund  will not  purchase  or sell  (write)  futures
contracts, options on futures contracts or commodity options for risk management
purposes if, as a result,  the  aggregate  initial  margin and options  premiums
required to establish  these  positions  exceed 5% of the net asset value of the
Fund.

Options

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

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

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

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

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

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

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

         Options on Indexes. The Fund may purchase and sell put and call options
on any  securities  index  based on  securities  in which  the Fund may  invest.
Options on securities indexes are similar to options on securities,  except that
the exercise of securities index options is settled by cash payment and does not
involve the actual  purchase or sale of securities.  In addition,  these options
are designed to reflect price  fluctuations  in a group of securities or segment
of the securities  market rather than price  fluctuations in a single  security.
The Fund, in purchasing  or selling index  options,  is subject to the risk that
the value of its portfolio securities may not change as much as 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 OTC Options.  All options  purchased or sold by the
Fund will be traded on a  securities  exchange or will be  purchased  or sold by
securities dealers (OTC options) that meet  creditworthiness  standards approved
by the Fund's Board of Trustees.  While exchange-traded  options are obligations
of the Options Clearing Corporation, in the case of OTC options, the Fund relies
on the  dealer  from which it  purchased  the option to perform if the option is
exercised.  Thus, when the Fund purchases an OTC option, it relies on the dealer
from which it purchased  the option to make or take  delivery of the  underlying
securities.  Failure  by the  dealer  to do so would  result  in the loss of the
premium  paid  by the  Fund as well  as  loss  of the  expected  benefit  of the
transaction.

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

Futures Contracts

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

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

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

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

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

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

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

         Combined  Positions.  The  Fund  may  purchase  and  write  options  in
combination  with  each  other,  or  in  combination  with  futures  or  forward
contracts,  to  adjust  the  risk  and  return  characteristics  of the  overall
position.  For  example,  the Fund may  purchase  a put  option and write a call
option on the same  underlying  instrument,  in order to  construct  a  combined
position whose risk and return  characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one  strike  price and  buying a call  option at a lower  price,  in order to
reduce the risk of the written call option in the event of a  substantial  price
increase.  Because combined  options  positions  involve  multiple trades,  they
result in higher  transaction  costs and may be more difficult to open and close
out.

         Correlation  of Price  Changes.  Because there are a limited  number of
types of exchange-traded  options and futures  contracts,  it is likely that the
standardized  options and futures contracts  available will not match the Fund's
current or anticipated  investments  exactly. The Fund may invest in options and
futures  contracts based on securities with different  issuers,  maturities,  or
other  characteristics from the securities in which it typically invests,  which
involves  a risk  that the  options  or  futures  position  will not  track  the
performance of the Fund's other investments.

         Options and futures  contracts  prices can also diverge from the prices
of their underlying  instruments,  even if the underlying  instruments match the
Fund's  investments  well.  Options and futures contracts prices are affected by
such factors as current and anticipated  short term interest  rates,  changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract,  which may not affect security  prices the same way.  Imperfect
correlation  may also result from differing  levels of demand in the options and
futures markets and the securities markets,  from structural  differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation  limits or trading  halts.  The Fund may  purchase  or sell  futures
contracts or purchase put and call  options,  including  put and call options on
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 a Fund to  continue  to hold a position  until  delivery  or  expiration
regardless  of  changes in its value.  As a result,  the Fund's  access to other
assets held to cover its options or futures  positions  could also be  impaired.
(See  "Exchange  Traded and OTC Options" above for a discussion of the liquidity
of options not traded on an exchange.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk Management

         The Fund may employ non-hedging risk management techniques. Examples of
risk  management  strategies  include  synthetically  altering the duration of a
portfolio or the mix of securities in a portfolio.  For example,  if the Advisor
wishes  to  extend  maturities  in a fixed  income  portfolio  in  order to take
advantage  of an  anticipated  decline in interest  rates,  but does not wish to
purchase  the  underlying  long  term  securities,  it might  cause  the Fund to
purchase futures  contracts on long term debt securities.  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.

         Risks  Associated with Derivative  Securities and Contracts.  The risks
associated with the Fund's  transactions in derivative  securities and contracts
may include some or all of the following:  market risk,  leverage and volatility
risk, correlation risk, credit risk, and liquidity and valuation risk.

         Market Risk. Investments in structured securities are subject to market
risk. The interest rate or, in some cases, the principal payable at the maturity
of a structured  security may change  positively or inversely in relation to one
or more interest  rates,  financial  indices,  currency rates or other financial
indicators  (reference  prices).  A structured  security may be leveraged to the
extent  that the  magnitude  of any  change in the  interest  rate or  principal
payable on a  structured  security is a multiple of the change in the  reference
price.  Thus,  structured  securities may decline in value due to adverse market
changes in currency exchange rates and other reference  prices.  Entering into a
derivative contract involves a risk that the applicable market will move against
the  Fund's  position  and that  the  Fund  will  incur a loss.  For  derivative
contracts other than purchased options,  this loss may substantially  exceed the
amount of the initial investment made or the premium received by the Fund.

         Leverage and  Volatility  Risk.  Derivative  instruments  may sometimes
increase or leverage the Fund's exposure to a particular  market risk.  Leverage
enhances the price volatility of derivative instruments held by the Fund. If the
Fund enters into futures contracts, writes options or engages in certain foreign
currency exchange transactions,  it is required to maintain a segregated account
consisting of cash or liquid assets,  hold  offsetting  portfolio  securities or
cover written options which may partially offset the leverage  inherent in these
transactions. Segregation of a large percentage of assets could impede portfolio
management or an investor's ability to meet redemption requests.

         Correlation  Risk. The Fund's success in using derivative  contracts to
hedge portfolio  assets depends on the degree of price  correlation  between the
derivative contract and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading markets
for the derivative  contract,  the assets underlying the derivative contract and
the Fund's assets.

     Credit  Risk.   Derivative   securities  and  over-the-counter   derivative
contracts  involve a risk that the issuer or  counterparty  will fail to perform
its contractual obligations.

         Liquidity  and  Valuation  Risk.  Some  derivative  securities  are not
readily  marketable or may become illiquid under adverse market  conditions.  In
addition,  during periods of extreme market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded  derivative  contract,  which may
make the  contract  temporarily  illiquid  and  difficult  to price.  The Fund's
ability to terminate  over-the-counter  derivative  contracts  may depend on the
cooperation  of  the  counterparties  to  such  contracts.   For  thinly  traded
derivative securities and contracts,  the only source of price quotations may be
the selling dealer or counterparty.

INVESTMENT RESTRICTIONS


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


         The Fund:

         1.  May not make any investments  inconsistent with the Fund's
classification as a diversified  investment company under the 1940 Act;

         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
1940 Act 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,  (b)  invest in
securities  or other  instruments  issued by issuers that invest in real estate,
and (c) make direct investments in mortgages;

         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 objective and policies and to the extent permitted by applicable law.

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

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

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

         (iii) 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.

         If any percentage restriction described above is adhered to at the time
of investment,  a subsequent  increase or decrease in the  percentage  resulting
from a change in the value of the Fund's assets will not  constitute a violation
of the restriction.

         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

Trustees

         The Trustees of the Trust,  their names,  principal  occupations during
the past five years and dates of birth are set forth below.


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


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

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

         MATTHEW   HEALEY1-Trustee,   Chairman  and  Chief  Executive   Officer;
Chairman, Pierpont Group, Inc., since prior to 1993. His date of birth is August
23, 1937.

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

Each Trustee is  currently  paid an annual fee of $75,000 for serving as Trustee
of the Trust, each of the Master Portfolios (as defined below),  the J.P. Morgan
Institutional  Funds  and J.P.  Morgan  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.  The  mailing  address  of the
Trustees 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:

<PAGE>


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


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


                                         AGGREGATE TRUSTEE
                                    Compensation Paid by the   TOTAL TRUSTEE COMPENSATION ACCRUED BY
                                      Trust During 1999        THE MASTER PORTFOLIOS(*), J.P. MORGAN
                                                               INSTITUTIONAL FUNDS, J.P. MORGAN FUNDS
                                                                    AND THE TRUST DURING 1999(**)

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

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

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

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

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



(*)      The J.P.  Morgan  Funds and J.P.  Morgan  Institutional  Funds are each
         multi-series  registered  investment  companies  that  are  part  of  a
         two-tier (master-feeder)  investment fund structure. Each series of the
         J.P. Morgan Funds and J.P. Morgan  Institutional Funds is a feeder fund
         that  invests  all of its  investable  assets  in one of 14  registered
         investment   companies  comprised  of  22  separate  master  portfolios
         (collectively, the "Master Portfolios").


     (**) No  investment  company  within  the fund  complex  has a  pension  or
retirement plan.

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

         The Trustees  decide upon  general  policies  and are  responsible  for
overseeing  the Trust's  business  affairs.  The Trust has  entered  into a Fund
Services  Agreement  with  Pierpont  Group,  Inc.  to  assist  the  Trustees  in
exercising their overall  supervisory  responsibilities  over the affairs of the
Trust.  Pierpont Group,  Inc. was organized in July 1989 to provide services for
the J.P. Morgan Family of Funds  (formerly,  The Pierpont Family of Funds),  and
the Trustees are the equal and sole  shareholders  of Pierpont  Group,  Inc. The
Trust has agreed to pay Pierpont Group, Inc. a fee in an amount representing its
reasonable  costs in  performing  these  services to the Trust and certain other
registered  investment  companies  subject to similar  agreements  with Pierpont
Group, Inc. These costs are periodically reviewed by the Trustees. The 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  Series Trust and is  reimbursed  for expenses
incurred in connection  for such service.  The members of the Advisory Board may
hold various other  directorships  unrelated to these funds. The mailing address
of the Members of the Advisory  Board is c/o  Pierpont  Group,  Inc.,  461 Fifth
Avenue, New York, New York 10017. Their names,  principal occupations during the
past five years and dates of birth are set forth below:

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

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

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

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

Officers

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

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

         Matthew Healey-Chief Executive Officer; Chairman, Pierpont Group, since
prior to 1993. 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.

     John P. Covino - Vice President and Assistant Treasurer. Vice President and
Treasury Group Manger of Treasury  Servicing and Administration of FDI. Prior to
November  1998,  Mr. Covino was employed by Fidelity  Investments  where he held
multiple  positions in their  Institutional  Brokerage  Group.  Prior to joining
Fidelity,  Mr.  Covino was employed by SunGard  Brokerage  systems  where he was
responsible for the technology and development of the accounting  product group.
His date of birth is October 8, 1963.

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

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

     Kathleen K. Morrisey-Vice President and Assistant Secretary. Vice President
and Assistant Secretary of FDI. Manager of Treasury Services  Administration and
an officer of certain investment companies advised or administered by Montgomery
Asset  Management,  L.P.  and  Dresdner RCM Global  Investors,  Inc.,  and their
respective affiliates.  From July 1994 to November 1995, Ms. Morrisey was a Fund
Accountant  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.

     George A. Rio-President and Assistant  Treasurer.  Executive Vice President
and Client  Service  Director of FDI since  April 1998.  From June 1995 to March
1998,  Mr. Rio was Senior  Vice  President  and Senior Key  Account  Manager for
Putnam  Mutual  Funds.  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 in the Funds  Administration group
as a Manager  of the Tax  Group  and is  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.

CODE OF ETHICS


         The Trust and the Advisor have adopted codes of ethics pursuant to Rule
17j-1 under the 1940 Act. Each of these codes permits  personnel subject to such
code to invest in securities, including securities that may be purchased or held
by the Fund.  Such  purchases,  however,  are subject to  procedures  reasonably
necessary to prevent a fraud or deceit on the Trust.


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 $376 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.  J.P.  Morgan  currently  employs  over 375 full time
research analysts capital market researchers,  portfolio  managers,  and traders
and has one of the largest research staffs in the money management industry. The
Advisor has investment  management divisions located in New York, London, Tokyo,
Frankfurt,  and Singapore to cover companies,  industries and countries on site.
The  Advisor's  fixed  income  investment  process is based on  analysis of real
rates, sector diversification, and quantitative and credit analysis.


         The investment  advisory  services the Advisor provides to the Fund are
not exclusive under the terms of the Investment Advisory Agreement.  The Advisor
is free to and does render similar  investment  advisory services to others. 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."


     The benchmark for the Fund is the 90 day treasury  bill. In many  respects,
the volatility of the Fund's returns are similar to the 90 day treasury bill.

         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 J.P. Morgan or
with any of its  affiliated  persons,  with the exception of certain  investment
management affiliates of J.P. Morgan.

         As compensation for the services  rendered and related expenses such as
salaries  of  advisory  personnel  borne  by  the  Advisor  under  the  Advisory
Agreements,  the Fund has  agreed to pay the  Advisor a fee,  which is  computed
daily and may be paid  monthly,  equal to 0.25% of the Fund's  average daily net
assets.

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

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

DISTRIBUTOR

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


         The Distribution  Agreement will continue in effect with respect to the
Fund for a period of two years after execution and will continue thereafter only
if it is  approved  at  least  annually  (i) by a  "vote  of a  majority  of the
outstanding  voting  securities"  of the  Fund (as  defined  in the 1940 Act and
below) or by its  Trustees  and (ii) by a vote of a majority of the  Trustees of
the Trust who are not  "interested  persons" (as defined by the 1940 Act) of the
parties to the  Distribution  Agreement,  cast in person at a meeting called for
the  purpose  of voting on such  approval  (see  "Trustees  and  Members  of the
Advisory  Board" and  "Officers").  The  Distribution  Agreement  will terminate
automatically if assigned by either party.  The  Distribution  Agreement is also
terminable  with respect to the Fund at any time without  penalty by a vote of a
majority of the Trustees of the Trust,  a vote of a majority of the Trustees who
are not  "interested  persons" of the Trust,  or by a "vote of a majority of the
outstanding  voting  securities  of the  Fund',  that  is (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, FDI also serves as
the Trust's Co-Administrator.  The Co-Administration Agreement may be renewed or
amended  by the  Trustees  without a  shareholder  vote.  The  Co-Administration
Agreement is terminable  at any time without  penalty by a vote of a majority of
the Trustees of the Trust on not more than 60 days' written notice nor less than
30 days' written notice to the other party. The Co-Administrator may subcontract
for the performance of its obligations, provided, however, that unless the Trust
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and  omissions  of any  subcontractor  as it would  for its own acts or
omissions. See "Services Agent" below.

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

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

SERVICES AGENT

         The Trust,  on behalf of the Fund,  has entered into an  Administrative
Services  Agreement (the  "Services  Agreement")  with Morgan  pursuant to which
Morgan is responsible 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 Fund,  the Trust's
other series and the Master  Portfolios in accordance with the following  annual
schedule:  0.09% of the first $7 billion of their  aggregate  average  daily net
assets,  and 0.04% of their  aggregate  average daily net assets in excess of $7
billion,  less the complex-wide  fees payable to FDI. The portion of this charge
payable by the Fund is determined by the proportionate share that its net assets
bear to the total net  assets  of the Trust and the other  investment  companies
provided administrative services by Morgan.

CUSTODIAN AND TRANSFER AGENT


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


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

SHAREHOLDER SERVICING

         The  Trust,  on behalf  of the Fund,  has  entered  into a  Shareholder
Servicing  Agreement  with Morgan  pursuant to which Morgan acts as  shareholder
servicing  agent  for  Fund  shareholders.   Under  this  agreement,  Morgan  is
responsible for performing,  directly or through an agent,  shareholder  account
administrative  and  servicing  functions,  which include but are not limited to
answering  inquiries  regarding account status and history,  the manner in which
purchases  and  redemptions  of Fund shares may be effected,  and certain  other
matters pertaining to the Fund;  assisting customers in designating and changing
dividend  options,  account  designations  and  addresses;  providing  necessary
personnel and  facilities to coordinate  the  establishment  and  maintenance of
shareholder  accounts and records with the Fund's transfer  agent;  transmitting
purchase and  redemption  orders to the Fund's  transfer agent and arranging for
the  wiring  or  other  transfer  of  funds to and  from  customer  accounts  in
connection with orders to purchase or redeem Fund shares; verifying purchase and
redemption orders, transfers among and changes in accounts; informing 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 for these services a fee of 0.10% with respect to  Institutional  Shares,
0.25% with  respect to Select  Shares and 0.05% with respect to Ultra Shares (in
each case, expressed as a percentage of the average daily net asset value of the
relevant  class of Fund shares owned by or for  shareholders  for whom Morgan is
acting as Shareholder  Servicing  Agent).  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 J.P. Morgan or the financial  professional's  clients may
reasonably request and agree upon with the financial professional.

         Although  there  is no  sales  charge  levied  directly  by  the  Fund,
financial  professionals  may  establish  their  own terms  and  conditions  for
providing their services and may charge investors a  transaction-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 be remitted
to the Fund or J.P. Morgan.


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


INDEPENDENT ACCOUNTANTS

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

EXPENSES

         In addition to the fees payable to Pierpont Group, Inc., JPMIM,  Morgan
and FDI under various  agreements  discussed  under "Trustees and 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 organization expenses, legal fees, accounting
and audit  expenses,  insurance  costs,  the  compensation  and  expenses of the
Trustees  and Members of the Advisory  Board,  registration  fees under  federal
securities  laws,  extraordinary  expenses,  transfer,  registrar  and  dividend
disbursing  costs,  the  expenses of printing and mailing  reports,  notices and
proxy  statements  to Fund  shareholders,  fees  under  state  securities  laws,
custodian fees and brokerage expenses.

         J.P.  Morgan has agreed that it will  reimburse the Fund until February
28, 2001, 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 net assets. These limits do not cover extraordinary expenses.

                  Institutional Shares:                 0.25%
                  Select Shares:                        0.40%
                  Ultra Shares:                         0.15%

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  accounts  with the Fund only
through  the  Distributor.  All  purchase  transactions  in  Fund  accounts  are
processed by Morgan as shareholder servicing agent and the Fund is authorized to
accept any  instructions  relating to a Fund account from Morgan as  shareholder
servicing  agent for the customer.  All purchase  orders must be accepted by the
Distributor.  Prospective  investors who are not already customers of Morgan may
apply to become  customers of Morgan for the sole purpose of Fund  transactions.
There  are no  charges  associated  with  becoming  a Morgan  customer  for this
purpose.  Morgan  reserves the right to  determine  the  customers  that it will
accept,  and the Fund reserves the right to determine  the purchase  orders that
they will accept.

         References  in  the  Prospectuses  and  this  Statement  of  Additional
Information  to customers  of J.P.  Morgan or a financial  professional  include
customers of their affiliates,  and references to transactions by customers with
J.P.  Morgan  or  a  financial  professional  include  transactions  with  their
affiliates.  Only  Fund  investors  who are using the  services  of a  financial
institution acting as shareholder  servicing agent pursuant to an agreement with
the Trust on behalf of the Fund may make transactions in shares of the Fund.

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


     Prospective  investors  may  purchase  shares  with  the  assistance  of  a
financial  professional and the financial professional may charge the investor a
fee for this  service and other  services it  provides  to its  customers.  J.P.
Morgan may pay fees to financial  professionals  for services in connection with
Fund investments. See "Financial Professionals" above.


REDEMPTION OF SHARES

         Investors may redeem shares of the Fund as described in the Prospectus.
The 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. 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.

         If the  Trust  determines  that it  would  be  detrimental  to the best
interests 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 Fund.
If the  requested  relief is granted,  the 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 Prospectuses 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 any other  J.P.  Morgan  Fund or J.P.  Morgan  Institutional  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 a 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.

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

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

NET ASSET VALUE


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

         Portfolio  securities with a maturity of 60 days or more, are generally
valued using bid quotations  supplied  daily by third party pricing  services or
brokers that in other cases,  take into account various factors affecting market
value, including yields and prices of comparable securities,  and indications as
to value from  dealers and  general  market  conditions.  If such prices are not
supplied by the Fund's independent  pricing service,  such securities are priced
in accordance with fair value procedures adopted by the Trustees.  All portfolio
securities  with a  remaining  maturity  of less than 60 days are  valued by the
amortized cost method.


PERFORMANCE DATA

         From time to time,  the Fund may quote  performance  in terms of actual
distributions, total return or capital appreciation for the various Fund classes
in reports, sales literature and advertisements  published by the Trust. Current
performance information may be obtained by calling Morgan at (800) 766-7722.

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

         Yield Quotations. As required by regulations of the SEC, the annualized
yield for each class of shares of the Fund is computed  by  dividing  the Fund's
net investment income per share attributable to the class earned during a 30-day
period by the net asset  value of the class on the last day of the  period.  The
average daily number of shares of the class  outstanding  during the period that
are eligible to receive  dividends  is used in  determining  the net  investment
income per share. Income is computed by totaling the interest earned on all debt
obligations  during the period and subtracting from that amount the total of all
recurring  expenses  incurred  during  the  period.  The  30-day  yield  is then
annualized on a  bond-equivalent  basis assuming  semi-annual  reinvestment  and
compounding of net investment income.


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


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

         General.  Performance will vary from time to time depending upon market
conditions,   the   composition   of  the  portfolio  and  operating   expenses.
Consequently,   any  given  performance   quotation  should  not  be  considered
representative of 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 including
the benchmarks  indicated under  "Investment  Advisor" above or data from Lipper
Analytical  Services,  Inc., Micropal,  Inc., Ibbotson  Associates,  Morningstar
Inc., the Dow Jones Industrial Average and other industry publications.

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

PORTFOLIO TRANSACTIONS

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

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

         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 broker's
financial  condition;  and  the  commissions  charged.  A  broker  may be paid a
brokerage  commission in excess of that which another  broker might have charged
for effecting the same transaction if, after considering the foregoing  factors,
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  Trust's   Trustees  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 Morgan and published data concerning
transaction costs incurred by institutional investors generally.

         Research  services  provided  by  brokers  to  which  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  and
political  analysts.  Research  services  furnished  by brokers are used for the
benefit of all of 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 Fund that either
comply with rules adopted by the SEC or with interpretations of the SEC's staff.

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

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

MASSACHUSETTS TRUST

         The Trust is a  "Massachusetts  business  trust" of which the Fund is a
series.  A copy of the  Declaration  of  Trust  for the  Trust is on file in the
office  of  the  Secretary  of  The   Commonwealth   of   Massachusetts.   Under
Massachusetts   law,   shareholders   of  such  a  trust  may,   under   certain
circumstances,  be held personally liable as partners for the obligations of the
trust.  However, the Trust's Declaration of Trust provides that the shareholders
will not be subject to any personal liability for the acts or obligations of the
Fund and that every written  agreement,  obligation,  instrument or  undertaking
made on behalf  of the Fund will  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,
Member of the Advisory Board, officer,  employee or agent of the Trust is liable
to the Fund or to a  shareholder,  and that no Trustee,  Member of the  Advisory
Board,  officer,  employee or agent is liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his or its
own bad faith,  willful  misfeasance,  gross negligence or reckless disregard of
his or its duties to such third persons ("disabling conduct").  It also provides
that all third  persons must look solely to Fund  property for  satisfaction  of
claims  arising  in  connection  with  the  affairs  of the  Fund.  The  Trust's
Declaration  of Trust  provides  that a Trustee,  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. To date, the Fund is authorized to issue Institutional  Shares, Select
Shares and Ultra 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 full or  fractional
vote for each dollar or fraction of a dollar invested in shares.  Subject to the
1940 Act,  the  Trustees  have the power to alter  the  number  and the terms of
office of the Trustees,  to lengthen their own terms,  or to make their terms of
unlimited duration,  subject to certain removal procedures, and to appoint their
own  successors.  However,  immediately  after such  appointment,  the requisite
majority  of the  Trustees  must have been  elected by the  shareholders  of the
Trust. The voting rights of shareholders are not cumulative.  The Trust does not
intend to hold annual meetings of  shareholders.  The Trustees may call meetings
of  shareholders  for action by shareholder  vote if required by either the 1940
Act or the Trust's Declaration of Trust.

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

TAXES

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


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

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




     Distributions of net investment income, certain foreign currency gains, and
realized net short-term capital gain in excess of net long-term capital loss are
generally  taxable to  shareholders  of the Fund as ordinary income whether such
distributions   are  taken  in  cash  or  reinvested   in   additional   shares.
Distributions  to  corporate  shareholders  of the Fund are not eligible for the
dividends  received  deuction.  The Fund generally pays a monthly  dividend.  If
dividend payments exceed income earned by the Fund, the  overdistribution  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 gains in excess of net short-term  capital losses) 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
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  by the Fund  will be
treated as long-term  capital gains or losses if the  securities  have been held
for more than one year except in certain cases where,  if  applicable,  a put is
acquired or a call option is written  thereon or the  straddle  rules  described
below are otherwise applicable.  Other gains or losses on the sale of securities
will be short-term capital gains or losses.  Gains and losses on the sale, lapse
or other  termination  of  options  on  securities  will be treated as gains and
losses from the sale of securities.  If an option written by the Fund lapses
or is  terminated  through a closing  transaction,  such as a repurchase  by the
Fund of the option from its holder, the Fund will realize a short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount paid by the Fund in the closing transaction.  If securities
are purchased by the Fund pursuant to the exercise of a put option written by
it, the Fund will subtract the premium  received from its cost basis in the
securities purchased.


         Any  distribution  of net investment  income or capital gains will have
the effect of reducing the net asset value of Fund shares held by a  shareholder
by the same amount as the distribution.  If the net asset value of the shares is
reduced  below a  shareholder's  cost as a result  of such a  distribution,  the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described  above.  Investors  should 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 ordinary loss.  Similarly,  gains or losses on the
disposition of debt  securitiesheld 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  fiscal  year will be  required  to be "marked  to  market"  for
federal income tax purposes - i.e., treated as having been sold at market value.
For options and futures  contracts,  60% of any gain or loss recognized on these
deemed sales and on actual  dispositions  will be treated as  long-term  capital
gain or loss,  and the remainder  will be treated as short-term  capital gain or
loss regardless of how long the Fund has held such options or futures.  However,
gain or loss recognized on certain foreign currency contracts will be treated as
ordinary income or loss.

         The Fund may invest in equity 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 an "excess  distribution"  from such foreign
corporation, including any gain from the disposition of such shares, even though
a portion of such income may have to be distributed as a taxable dividend by the
Fund to its shareholders.  In addition,  certain interest charges may be imposed
on the Fund as a result of such  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.  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 IRS Form W-8BEN is  provided.  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 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.


         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 that 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,  J.P.  Morgan or State Street may be tape
recorded.  With respect to the  securities  offered  hereby,  this  Statement of
Additional  Information  and the  Prospectus do not contain all the  information
included in the Trust's  registration  statement filed with the SEC. Pursuant to
the rules and regulations of the SEC,  certain  portions have been omitted.  The
registration statement,  including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.

         Statements  contained in this Statement of Additional  Information  and
the  Prospectuses  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  Trust's
Registration Statement. 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
Prospectuses  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 FDI.  The  Prospectuses  and this  Statement  of  Additional
Information  do not constitute an offer by the Fund or by FDI to sell or solicit
any offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is  unlawful  for the Fund or FDI to make  such  offer in such
jurisdictions.





<PAGE>


APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

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

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

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

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

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

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

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

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

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

Commercial Paper, including Tax Exempt

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

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

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

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

Short-Term Tax-Exempt Notes

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

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

MOODY'S

Corporate and Municipal Bonds

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

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

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

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

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

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

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

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

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




Commercial Paper, Including Tax Exempt

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

-  Leading market positions in well established industries.

-  High rates of return on funds employed.

     - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.

     - Broad margins in earnings  coverage of fixed  financial  charges and high
internal cash generation.

     - Well  established  access to a range of  financial  markets  and  assured
sources of alternate liquidity.

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

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

Short-Term Tax Exempt Notes

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

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


--------
1 Mr.  Healey is an  "interested  person"  (as  defined  in the 1940 Act) of the
Trust. Mr. Healey is also an "interested person" (as defined in the 1940 Act) of
the Advisor due to his son's affiliation with JPMIM.

<PAGE>

PART C OTHER INFORMATION

ITEM 23.  EXHIBITS.

     (a) Declaration of Trust.(1)

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

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

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

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

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


     (a)6 Amendment No. 6 to  Declaration  of Trust. Filed Herewith.

     (a)7 Amendment No. 7 to  Declaration  of Trust. Filed Herewith.


     (b) Restated By-Laws.(2)

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

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


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


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

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

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

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

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


     (h)2(a)  Administrative Services Agreement between Registrant and Morgan.
(Filed Herewith).


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

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


     (h)5 Shareholder  Servicing  Agreement between Registrant and Morgan.
Filed Herewith.

      (j) Consent of independent accountants. Filed Herewith.


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

      (n) Financial Data Schedules (not applicable)

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

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

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


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

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

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


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

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

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

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

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

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

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

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

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

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

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

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


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




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

               Not applicable.

ITEM 25. INDEMNIFICATION.

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

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

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

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

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

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

ITEM 27. PRINCIPAL UNDERWRITERS.

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

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

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

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

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

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

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

(c) Not applicable

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

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

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

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

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

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

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

ITEM 29. MANAGEMENT SERVICES.

               Not applicable.

ITEM 30. UNDERTAKINGS.

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

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

<PAGE>


                                   SIGNATURES

Pursuant to the  requirements  of the  Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration  statement
to be signed on its behalf by the undersigned,  thereto duly authorized,  in the
     city of Boston and the  Commonwealth  of  Massachusetts  on the 28th day of
June, 2000.

J.P. MORGAN SERIES TRUST


By       /s/ Christopher Kelley
         ---------------------------------------
 Christopher Kelley
 Vice President and Assistant Secretary

Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement  has been  signed  below by the  following  persons in the  capacities
indicated on June 28, 2000.

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

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

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

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

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

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


*By      /s/ Christopher Kelley
         ----------------------------
         Christopher Kelley
         as attorney-in-fact pursuant to a power of attorney.

<PAGE>

INDEX TO EXHIBITS


Exhibit No.       Description of Exhibit
-------------    ------------------------

EX-99.(a)(6)      Declaration of Trust

EX-99.(a)(7)      Declaration of Trust

EX-99.(d)(1)      Investment Advisory Agreement

EX-99.(h)(2)(a)   Administrative Services Agreement

EX-99.(h)(5)      Shareholder Service Agreement

EX-99.(j)         Consent of independent accountants






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