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PROSPECTUS
The JPM Institutional International Equity Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional International Equity Fund seeks to provide a high total
return from a portfolio of equity securities of foreign corporations. It is
designed for investors with a long-term investment horizon who want to
diversify their investments by adding international equities and take advantage
of investment opportunities outside the United States.
The JPM Institutional International Equity Fund (the "Fund") is a diversified
no-load mutual fund for which there are no sales charges or exchange or
redemption fees. The Fund is a series of The JPM Institutional Funds, an open-
end management investment company organized as a Massachusetts Business Trust
(the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE NON-U.S. EQUITY PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES
METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated June 21, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Institutional
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 1995, AS AMENDED JUNE 21, 1995.
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TABLE OF CONTENTS
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PAGE
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Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 6
Investment Restrictions.................................................... 9
Management of the Trust and Portfolio...................................... 10
Shareholder Servicing...................................................... 12
</TABLE>
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PAGE
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Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 16
Additional Information..................................................... 17
Appendix................................................................... A-1
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The JPM Institutional International Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional International Equity Fund is designed for investors who
seek to diversify their investments by adding international equities. The Fund
seeks to achieve its investment objective by investing all of its investable
assets in The Non-U.S. Equity Portfolio, an open-end management investment com-
pany having the same investment objective as the Fund. Since the investment
characteristics and experience of the Fund will correspond directly with those
of the Portfolio, the discussion in this Prospectus focuses on the investments
and investment policies of the Portfolio. The net asset value of shares in the
Fund fluctuates with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. The Portfolio's investments in securities
of foreign issuers, including issuers in emerging markets, involve foreign in-
vestment risks and may be more volatile and less liquid than domestic securi-
ties. For further information about these investments and investment tech-
niques, see Investment Objective and Policies discussed below.
The Fund requires a minimum initial investment of $1 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $1 million for more than 30
days, the investment will be subject to mandatory redemption. See Redemption of
Shares--Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of The JPM Institutional International Equity
Fund to enable investors to decide if the Fund suits their needs. The Fund op-
erates through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R)
financial services method. The Trustees believe that the Fund may achieve econ-
omies of scale over time by investing through Hub and Spoke(R).
The following table illustrates that investors in The JPM Institutional Inter-
national Equity Fund incur no shareholder transaction expenses; their invest-
ment in the Fund is subject only to the operating expenses set forth below for
the Fund and the Portfolio, as a percentage of average net assets of the Fund.
The Trustees of the Trust believe that the aggregate per share expenses of the
Fund and the Portfolio will be approximately equal to and may be less than the
expenses that the Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and Portfolio- Expenses, and Shareholder Servicing.
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SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
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1
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EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
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Advisory Fees............................................................. 0.60%
Rule 12b-1 Fees........................................................... None
Other Expenses After Expense Reimbursements............................... 0.40%
-----
Total Operating Expenses After Expense Reimbursements..................... 1.00%
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* Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, after any applicable expense reimbursements.
Without such expected reimbursements, Total Operating Expenses would have been
equal on an annual basis to 1.16% of the average daily net assets of the Fund.
See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
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1 Year..................................................................... $ 10
3 Years.................................................................... $ 32
5 Years.................................................................... $ 55
10 Years................................................................... $123
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The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund
bear. The fees and expenses included in Other Expenses are the fees paid to
Morgan under the Shareholder Servicing and Financial and Fund Accounting Serv-
ices Agreements, the fees paid to Pierpont Group, Inc. under the Fund Services
Agreements, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
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FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants. The Fund's Annual Report, which
is incorporated by reference into the Statement of Additional Information, in-
cludes a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's Annual Report is available without
charge upon request.
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FOR THE FISCAL FOR THE PERIOD
YEAR ENDED ENDED
OCTOBER 31, 1994 10/31/93(1)
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Net Asset Value, Beginning of Period........... $ 10.20 $10.00
-------- ------
Income From Investment Operations
Net Investment Income........................ 0.06 0.00
Net Realized and Unrealized Gain (Loss) on
Portfolio................................... 0.57 0.20
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Total From Investment Operations............... 0.63 0.20
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Net Asset Value, End of Period................. $ 10.83 $10.20
======== ======
Total Return................................... 6.18% 2.00%
Ratios and Supplemental Data
Net Assets, End of Period (In Thousands)..... $213,119 $ 0.2
Ratio to Average Net Assets:
Expenses................................... 1.00% 0.00%
Net Investment Income...................... 0.95% 0.00%
Decrease Reflected in the Above Expense
Ratio due to Expense Reimbursements....... 0.16% 2.50%
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<FN>
(1) Commencement of Operations October 4, 1993. For the period, total return
has not been annualized and ratios have been annualized.
</FN>
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SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncom-
3
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mon and are present in other mutual fund structures. Information concerning
other holders of interests in the Portfolio is available from the Administrator
at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a port-
folio of equity securities of foreign corporations. Total return will consist
of realized and unrealized capital gains and losses plus income. The Fund at-
tempts to achieve its investment objective by investing all of its investable
assets in The Non-U.S. Equity Portfolio, an open-end management investment com-
pany having the same investment objective as the Fund.
4
<PAGE>
The JPM Institutional International Equity Fund is designed for investors with
a long-term investment horizon who want to diversify their portfolios by in-
vesting in an actively managed portfolio of non-U.S. securities that seeks to
outperform the Morgan Stanley Europe, Australia and Far East Index ( the "EAFE
Index").
The Portfolio seeks to achieve its investment objective through country allo-
cation, stock selection and management of currency exposure. Morgan uses a
disciplined portfolio construction process to seek to enhance returns and re-
duce volatility in the market value of the Portfolio relative to that of the
EAFE Index.
Based on fundamental research, quantitative valuation techniques, and experi-
enced judgment, Morgan uses a structured decision-making process to allocate
the Portfolio primarily across the developed countries of the world outside
the United States by under- or over-weighting selected countries in the EAFE
Index. Currently, Japan has the heaviest weighting in the EAFE Index and in
the Portfolio. At April 30, 1995, the approximate Japan weighting was 45% in
the EAFE Index and 50% in the Portfolio.
Using a dividend discount model and based on analysts' industry expertise, se-
curities within each country are ranked within economic sectors according to
their relative value. Based on this valuation, Morgan selects the securities
which appear the most attractive for the Portfolio. Morgan believes that under
normal market conditions, economic sector weightings generally will be similar
to those of the relevant equity index.
Finally, Morgan actively manages currency exposure, in conjunction with coun-
try and stock allocation, in an attempt to protect and possibly enhance the
Portfolio's market value. Through the use of forward foreign currency exchange
contracts, Morgan will adjust the Portfolio's foreign currency weightings to
reduce its exposure to currencies deemed unattractive and, in certain circum-
stances, increase exposure to currencies deemed attractive, as market condi-
tions warrant, based on fundamental research, technical factors, and the judg-
ment of a team of experienced currency managers. For further information on
foreign currency exchange transactions, see Additional Investment Information
and Risk Factors.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. The Portfolio does not expect to trade in securities for
short-term profits; however, when circumstances warrant, securities may be
sold without regard to the length of time held. To the extent the Portfolio
engages in short-term trading, it may incur increased transaction costs. See
Taxes below.
EQUITY INVESTMENTS. In normal circumstances, Morgan intends to keep the Port-
folio essentially fully invested with at least 65% of the value of its total
assets in equity securities of foreign issuers, consisting of common stocks
and other securities with equity characteristics such as preferred stock, war-
rants, rights and convertible securities. The Portfolio's primary equity in-
vestments are the common stock of established companies based in developed
countries outside the United States. Such investments will be made in at least
three foreign countries. The common stock in which the Portfolio may invest
includes the common stock of any class or series or any similar equity inter-
est such as trust or limited partnership interests. The Portfolio may also in-
vest in securities of issuers located in developing countries. See Additional
Investment Information and Risk Factors. The Portfolio invests in securities
listed on foreign or domestic securities exchanges and securities traded in
foreign or domestic over-the-counter markets, and may invest in certain re-
stricted or unlisted securities.
The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its port-
folio securities, purchase certain privately placed securities, enter into
forward contracts on foreign currencies and enter into certain hedging trans-
actions that may involve options on securities and securities indexes, futures
contracts and options on futures contracts. For a discussion of these invest-
ments and investment techniques, see Additional Investment Information and
Risk Factors.
5
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ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities of
domestic and, subject to the Portfolio's investment restrictions, foreign is-
suers. The convertible securities in which the Portfolio 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 com-
mon stock, usually of the same company, at specified prices within a certain
period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five 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 secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in foreign se-
curities. 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 is-
suers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic compa-
nies. Dividends and interest paid by foreign issuers may
6
<PAGE>
be subject to withholding and other foreign taxes which may decrease the net
return on foreign investments as compared to dividends and interest paid to
the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, 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 depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolio 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 stock ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing securities on foreign exchanges, purchasers normally pay fixed commissions
that are generally higher than the negotiated commissions charged in the
United States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
Although the Portfolio invests primarily in securities of established issuers
based in developed foreign countries, it may also invest in securities of is-
suers in emerging markets countries. Investments in securities of issuers in
emerging markets countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investing
in securities of foreign issuers outlined in this section to a heightened de-
gree. These heightened risks include (i) greater risks of expropriation, con-
fiscatory taxation, nationalization, and less social, political and economic
stability; (ii) the small current size of the markets for securities of emerg-
ing markets issuers and the currently low or non-existent volume of trading,
resulting in lack of liquidity and in price volatility; (iii) certain national
policies which may restrict the Portfolio's investment opportunities including
restrictions on investing in issuers or industries deemed sensitive to rele-
vant national interests; and (iv) the absence of developed legal structures
governing private or foreign investment and private property.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may not provide the same share-
holder information that a sponsored depository is required to provide under
its contractual arrangements with the issuer of the underlying foreign securi-
ties. EDRs are receipts issued by a European financial institution evidencing
a similar arrangement. Generally, ADRs, in registered form, are designed for
use in the U.S. securities markets, and EDRs, in bearer form, are designed for
use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign cur-
rencies, the value of its 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. See Foreign Currency Exchange Trans-
actions.
For a discussion of investment risks associated with the general economic and
political conditions in Japan, see Investment Objectives and Policies in the
Statement of Additional Information.
7
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FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and sells
securities and receives interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio 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 curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
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 con-
tracts are entered into in the interbank market directly between currency
traders (usually large commercial banks) and their customers. A forward for-
eign currency exchange contract generally has no deposit requirement, and is
traded at a net price without commission. The Portfolio will not enter into
forward contracts for speculative purposes. Neither spot transactions nor for-
ward foreign currency exchange contracts eliminate fluctuations in the prices
of the Portfolio's securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally traded in a foreign currency. To do this, the Portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts to sell a foreign currency in exchange 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 Portfolio to assume the risk of fluc-
tuations in the value of the currency purchased vis a vis the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The projec-
tion of currency market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into re-
verse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date
and price, reflecting the interest rate effective for the term of the agree-
ment. It may also be viewed as the borrowing of money by the Portfolio and,
therefore, is a form of leverage. Leverage may cause any gains or losses of
the Portfolio to be magnified. For more information, see Investment Objective
and Policies in the Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the market value of the Portfolio's total assets would be in-
vested in illiquid investments. Subject to that non-fundamental policy limita-
tion, the Portfolio 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. An illiquid investment is any investment
that cannot be disposed of within seven days in the normal course
8
<PAGE>
of business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the Securities Act of 1933. These securities
may be determined to be liquid in accordance with guidelines established by
Morgan and approved by the Trustees. The Trustees will monitor Morgan's imple-
mentation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of Ad-
ditional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objectives and long-term investment perspec-
tive. The Portfolio may make money market investments pending other investment
or settlement, for liquidity or in adverse market conditions. The money market
investments permitted for these Portfolios include obligations of the U.S. Gov-
ernment and its agencies and instrumentalities, other debt securities, commer-
cial paper, bank obligations and repurchase agreements. The Portfolio may also
invest in short-term obligations of sovereign foreign governments, their agen-
cies, instrumentalities and political subdivisions. For more detailed informa-
tion about these money market investments, see Investment Objectives and Poli-
cies in the Statement of Additional information.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S. Govern-
ment securities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
The Fund may not (i) purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments in such industry would exceed 25% of the value of the Fund's total as-
sets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) enter into reverse repurchase agreements and other permitted
borrowings which constitute senior securities under the Investment Company Act
of 1940, exceeding in the aggregate one-third of the market value of the Fund's
total assets, less certain liabilities; or (iii) borrow money, except from
banks for extraordinary or emergency purposes and then only in amounts up to
30% of the value of the Fund's net assets at the time of borrowing, and except
in connection with reverse repurchase agreements and then only in amounts up to
33 1/3% of the value of the Fund's net assets; or purchase securities while
borrowings, including reverse repurchase agreements, exceed 5% of its total as-
sets; or mortgage, pledge or hypothecate any assets except in connection with
any such borrowing and in amounts not to exceed 30% of the value of the Fund's
net assets at the time of such borrowing.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions and Additional Information in the Statement of Additional Information.
9
<PAGE>
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The JPM Institutional Funds, up to and including creating a separate board
of trustees. See Trustees and Officers in the Statement of Additional Informa-
tion for more information about the Trustees and Officers of the Fund and the
Portfolio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services as cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary of J.P Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company
organized under the laws of Delaware. Through offices in New York City and
abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional cli-
ents with combined assets under management of over $145 billion (of which the
Advisor advises over $30 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and his
business experience for the past 5 years is indicated parenthetically): Paul
A. Quinsee, Vice President (since April, 1993, employed by Morgan since Febru-
ary, 1992, previ-
10
<PAGE>
ously Vice President, Citibank) and Thomas P. Madsen, Managing Director (since
April, 1993, employed by Morgan since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.60% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent and Share-
holder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services. In
connection with its responsibilities as Administrator, SBDS (i) furnishes ordi-
nary clerical and related services for day-to-day operations including certain
recordkeeping responsibilities; (ii) takes responsibility for compliance with
all applicable federal and state securities and other regulatory requirements;
(iii) is responsible for the registration of sufficient Fund shares under fed-
eral and state securities laws; (iv) takes responsibility for monitoring the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986; and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent, re-
spectively, as the Trustees may direct from time to time. Under the terms of
the Trust's and the Portfolio's Financial and Fund Accounting Services Agree-
ments with Morgan, the fees of the Administrator are covered by Morgan's ex-
pense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of the JPM Insti-
tutional Funds as well as The Pierpont Funds, which is another family of mutual
funds for which SBDS acts as Administrator. The fee rate is calculated daily in
accordance with the following schedule: 0.040% of the first $1 billion of these
funds' aggregate average daily net assets, 0.032% of the next $2 billion of
these funds' aggregate average daily net assets, 0.024% of the next $2 billion
of these funds' aggregate average daily net assets and 0.016% of these funds'
aggregate average daily net assets in excess of $5 billion. This fee rate is
then applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services
11
<PAGE>
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share and keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, at the annual rate of
0.05% of the Fund's average daily net assets. The Portfolio's Agreement pro-
vides for the Portfolio to pay Morgan a fee for these services, which is com-
puted daily and may be paid monthly, at the following annual rate of the Port-
folio's average daily net assets: 0.15% on net assets up to $200 million, 0.10%
on the next $200 million in net assets, 0.05% on the next $200 million in net
assets and 0.03% on net assets thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense under-
takings and reflect payments made directly to third parties by the Fund and the
Portfolio for services rendered, as well as payments to Morgan for services
rendered. The Trustees of the Trust and the Portfolio regularly review amounts
paid to and accounted for by Morgan pursuant to these Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least October 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 1.00% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average
12
<PAGE>
daily net asset values of Fund shares owned by or for shareholders for whom
Morgan is acting as shareholder servicing agent) of 0.05% of the Fund's average
daily net assets. Under the terms of the Shareholder Servicing Agreement with
the Fund, Morgan may delegate one or more of its responsibilities to other en-
tities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
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 in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. 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
it will accept.
The Fund requires a minimum initial investment of $1 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the next business day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for as-
sistance in placing an order for Fund shares. If the Fund receives a purchase
order prior to 4:00 P.M. New York time on any business day, the purchase of
Fund shares is effective and is made at the net asset value determined that
day, and the purchaser generally becomes a holder of record on the next busi-
ness day upon the Fund's receipt of payment. If the Fund receives a purchase
order after 4:00 P.M. New York time, the purchase is effective and is made at
the net asset value determined on the next business day, and the purchaser be-
comes a holder of record on the following business day upon the Fund's receipt
of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing 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 Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other information and
performing such other services as Morgan or the Eligible Institution's clients
may reasonably request and
13
<PAGE>
agree upon with the Eligible Institution. Eligible Institutions may separately
establish their own terms, conditions and charges for providing the aforemen-
tioned services and for providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a redemp-
tion request to the Fund or may telephone J.P. Morgan Funds Services directly
at (800) 766-7722 and give the Shareholder Service Representative a preas-
signed shareholder Personal Identification Number and the amount of the re-
demption. The Fund executes effective redemption requests at the next deter-
mined net asset value per share. See Net Asset Value. See Additional Informa-
tion below for an explanation of the telephone redemption policy of The JPM
Institutional Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited the next business day in immediately available funds to
the shareholder's account at Morgan or at his Eligible Institution or, in the
case of certain Morgan customers, are mailed by check or wire transferred in
accordance with the customer's instructions, and, subject to Further Redemp-
tion Information below, in any event are paid within seven days.
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the Fund's initial investment amount of $1 million for
more than 30 days because of a redemption of shares, the shareholder's remain-
ing shares may be redeemed 60 days after written notice unless the account is
increased to the Fund's minimum investment amount or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption of proceeds when non-
corporate investors have not provided a certified taxpayer identification num-
ber. In addition, if a Morgan customer sends a check to Morgan for the pur-
chase of Fund shares and shares are purchased with funds made available by
Morgan before the check has cleared, the transmittal of redemption proceeds
from the shares will occur upon clearance of the check which may take up to 15
days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont 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 each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. 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. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Institutional
Funds and The Pierpont Funds. See also Additional Information below for an ex-
planation of the telephone exchange policy of The JPM Institutional Funds.
14
<PAGE>
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. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state securi-
ties laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are de-
clared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and distribu-
tions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
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.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, thirteen series of shares have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non-
15
<PAGE>
assessable by the Fund. The Trust has adopted a policy of not issuing share
certificates. The Trust does not intend to hold meetings of shareholders annu-
ally. The Trustees may call meetings of shareholders for action by shareholder
vote as may be required by either the Investment Company Act of 1940 or the
Declaration of Trust. The Trustees will call a meeting of shareholders to vote
on removal of a Trustee upon the written request of the record holders of ten
percent of Trust shares and will assist shareholders in communicating with
each other as prescribed in Section 16(c) of the 1940 Act. For further organi-
zation information, including certain shareholder rights, see Description of
Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declara-
tion of Trust provides that the Fund and other entities investing in the Port-
folio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's con-
tinued qualification as a partnership for federal income tax purposes.
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.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund will not qualify for the dividends- received deduc-
tion because the income of the Fund will not consist of dividends paid by
United States corporations.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regard-
less of whether taken in cash or reinvested in additional shares. Long-term
capital gains distributions to corporate shareholders are not eligible for the
dividends-received deduction.
Any distribution of net investment income or capital gains will have the ef-
fect 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
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a shareholder's cost as a result of such a distribution, the distribution, al-
though constituting a return of capital to the shareholder, will be taxable as
described above.
Any gain or loss realized on the redemption or exchange of the Fund's 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. 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 ex-
tent of any long-term capital gain distributions received by the shareholder
with respect to such shares.
The Fund is subject to foreign withholding taxes with respect to income re-
ceived from sources within certain foreign countries. So long as more than 50%
of the value of the Fund's total assets at the close of any taxable year con-
sists of stock or securities of foreign corporations, the Fund may elect to
treat any such foreign income taxes paid by it as paid directly by its share-
holders. The Fund will make such an election only if it deems it to be in the
best interests of its shareholders and will notify shareholders in writing
each year if it makes the election and of the amount of foreign income taxes,
if any, to be treated as paid by the shareholders. If the Fund makes the elec-
tion, each shareholder will be required to include in income his proportionate
share of the amount of foreign income taxes paid by the Fund and will be enti-
tled to claim either a credit (which is subject to certain limitations), or,
if the shareholder itemizes deductions, a deduction for his share of the for-
eign income taxes in computing his federal income tax liability. (No deduction
will be permitted to individuals in computing their alternative minimum tax
liability.)
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including re-
quiring investors to give their personal identification number and tape re-
cording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it or the Shareholder
Servicing Agent may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Average, the Frank Russell Indexes, the EAFE Index, the Financial Time World
Stock Index and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. This method of calculating total return is required by regula-
tions of the Securities and Exchange Commission. Yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling the Fund's Distributor at (800) 847-9487.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase exchange traded and OTC put and call options on
equity securities or indexes of equity securities, (b) purchase and sell
futures contracts on indexes of equity securities, and (c) purchase put and
call options on futures contracts on indexes of equity securities.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. 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 Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio securi-
ties, 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 Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments, or if it could not close out its positions
because of an illiquid secondary market. In addition, the Portfolio will incur
transaction costs, including trading commissions and option premiums, in con-
nection with its futures and options transactions and these transactions could
significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of secu-
rities 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
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options or thereon held at any time do not exceed 5% of the
Portfolio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio 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
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
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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 in-
creases 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 Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its po-
sition 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 Portfolio has written, however, the Portfolio 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 pre-
mium 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 re-
ceived for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the op-
tion. The characteristics of writing call options are similar to those of writ-
ing 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 Portfolio permitted to enter into options transactions
may purchase put and call options on any securities index based on securities
in which the Portfolio 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 se-
curities. 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 Portfolio, in purchasing or selling in-
dex options, is subject to the risk that the value of its portfolio securities
may not change as much as an index because the Portfolio's investments gener-
ally will not match the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a speci-
fied 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 Portfolio
sells a futures contract, it agrees to sell a specified quantity of the under-
lying instrument at a specified future date or to receive a
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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 Portfolio 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 Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures con-
tract tends to increase and decrease in tandem with the value of its underlying
instrument. Therefore, purchasing futures contracts will tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. When the Portfolio 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 off-
set 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 Portfolio 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 Portfolio 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 Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolios'
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio 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 Portfolio.
The Portfolio will segregate liquid, high quality 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 Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolios' use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
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No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This Prospectus
does not constitute an offer by the Trust or by the Distributor to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Trust or the
Distributor to make such offer in such jurisdiction.
- ---------------------------------------
The
JPM
Institutional
International
Equity Fund
PROSPECTUS
March 1, 1995, as amended June 21, 1995
