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PROSPECTUS
The JPM Institutional New York Total Return Bond Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional New York Total Return Bond Fund (the "Fund") seeks to
provide a high after tax total return for New York residents consistent with
moderate risk of capital. It is designed for investors subject to federal and
New York State income taxes who seek a high after tax total return and who are
willing to receive some taxable income and capital gains to achieve that re-
turn.
The Fund is a non-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 Insti-
tutional Funds, an open-end management investment company organized as a Massa-
chusetts 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 NEW YORK TOTAL RETURN BOND 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 the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a pro-
spective 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 IN-
VESTMENT 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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 21, 1995
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TABLE OF CONTENTS
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PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 4
Investment Objective and Policies.......................................... 5
Additional Investment Information and Risk Factors......................... 7
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Servicing...................................................... 13
Purchase of Shares......................................................... 13
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PAGE
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Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 15
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 15
Organization............................................................... 16
Federal Taxes.............................................................. 16
New York State and New York City Taxes..................................... 18
Additional Information..................................................... 18
Appendix................................................................... A-1
</TABLE>
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The JPM Institutional New York Total Return Bond Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors subject to federal and New York State income
taxes who seek a high after tax total return and who are willing to receive
some taxable income and capital gains to achieve that return. The Fund seeks to
achieve its investment objective by investing all of its investable assets in
The New York Total Return Bond Portfolio, a non-diversified open-end management
investment company 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 Fund requires a minimum initial investment of $5 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her total investment in shares of the Fund to less than $5 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 investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signa-
ture") Hub and Spoke(R) financial services method. The Trustees believe that
the Fund may achieve economies of scale over time by investing through Hub and
Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating 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 approxi-
mately 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 di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and the 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............................................................. 0.30%
Rule 12b-1 Fees........................................................... None
Other Expenses............................................................ 0.20%
----
Total Operating Expenses.................................................. 0.50%
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* These expenses are based on the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, af-
ter any applicable expense reimbursement. Without such reimbursement, the To-
tal Operating Expenses would have been equal on an annual basis to 1.05% of
the average daily net assets of the Fund. See Management of the Trust and the
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..................................................................... $ 5
3 Years.................................................................... $16
5 Years.................................................................... $28
10 Years................................................................... $63
</TABLE>
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, organizational expenses and fees paid to State Street Bank and
Trust Company as custodian of the Portfolio. For a more detailed description
of contractual fee arrangements, including expense reimbursement, and of the
fees and expenses included in Other Expenses, see Management of the Trust and
the 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 redemption 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 period
have been audited by independent accountants. The Fund's annual report includes
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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<CAPTION>
FOR THE PERIOD
APRIL 11, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MARCH 31, 1995
-----------------
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Net Asset Value, Beginning of Period......................... $ 10.00
-------
Income from Investment Operations:
Net Investment Income....................................... 0.42
Net Realized and Unrealized Gain on Investment.............. 0.11
-------
Total From Investment Operations............................. 0.53
-------
Less Distributions to Shareholders From
Net Investment Income....................................... (0.42)
-------
Net Asset Value, End of Period............................... $ 10.11
=======
Total Return................................................. 5.49%(a)
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands).................. $20,621
Ratio to Average Net Assets:
Expenses................................................... 0.50%(b)
Net Investment Income...................................... 4.65%(b)
Decrease reflected in expense ratio due to expense
reimbursements by Morgan.................................. 0.55%(b)
- -------
<FN>
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
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. Signature Broker-Dealer Services, Inc. (the Trust's
and Portfolio's Administrator and the Trust's Distributor) is a wholly owned
subsidiary of Signature.
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(R) 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
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own fund using a different pricing structure than the Fund. Such different
pricing structures may result in differences in returns experienced by invest-
ors in other funds that invest in the Portfolio. Such differences in returns
are not uncommon 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) from
the Portfolio which may or may not be readily marketable. The distribution in
kind may result in the Fund having a less diversified portfolio of investments
or adversely affect the Fund's liquidity, and the Fund could incur brokerage,
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
the Portfolio. For more information about changing the investment objective,
policies 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 after tax total return for
New York residents consistent with moderate risk of capital. Total return will
consist of income plus capital gains and losses. The Fund attempts to achieve
its objective by investing all of its investable assets in The New York Total
Return Bond Portfolio, a non-diversified open-end management investment company
having the same investment objective as the Fund.
4
<PAGE>
The Fund is designed for investors subject to federal and New York State in-
come taxes who seek a high after tax total return and who are willing to re-
ceive some taxable income and capital gains to achieve that return.
The Portfolio's primary investments are municipal securities issued by New
York State and its political subdivisions and by agencies, authorities and in-
strumentalities of New York and its political subdivisions. These securities
earn income exempt from federal and New York State and local income taxes but,
in certain circumstances, may be subject to alternative minimum tax. In addi-
tion, the Portfolio may invest in municipal securities issued by states other
than New York, by territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities. These securities earn
income exempt from federal income taxes but subject to New York State and lo-
cal income taxes; in certain circumstances, they may also be subject to alter-
native minimum tax. In order to seek to enhance the Portfolio's after tax re-
turn, the Advisor may also invest in securities which earn income subject to
New York and/or federal income taxes. These securities include U.S. government
securities, corporate securities and municipal securities issued on a taxable
basis. For more information regarding tax matters, including the applicability
of the alternative minimum tax, see Taxes. Since the Portfolio limits its pur-
chases to investment grade securities, it may not obtain the higher current
income available from lower rated securities, see Quality Information.
The Advisor actively manages the Portfolio's duration, the allocation of secu-
rities across market sectors and the selection of securities to seek to
achieve a high after tax total return. Based on fundamental economic and capi-
tal markets research, the Advisor adjusts the duration of the Portfolio in
light of the Advisor's interest rate outlook. For example, if interest rates
are expected to rise, the duration may be shortened to lessen the Portfolio's
exposure to the expected decrease in bond prices. If interest rates are ex-
pected to remain stable, the Advisor may lengthen the duration in order to en-
hance the Portfolio's yield.
Duration is a measure of the weighted average maturity of the bonds held in
the Portfolio and can be used as a measure of the sensitivity of the Portfo-
lio's market value to changes in interest rates. The longer the duration of
the Portfolio, the greater its price sensitivity. Under normal market condi-
tions, the Advisor believes the Portfolio will have a duration of three to
seven years. The maturity of individual securities in the Portfolio may vary
widely, however.
The Advisor also attempts to enhance after tax total return by allocating the
Portfolio's assets among market sectors. Specific securities which the Advisor
believes are undervalued are selected for purchase within sectors using ad-
vanced quantitative tools, analysis of credit risk, the expertise of a dedi-
cated trading desk and the judgment of fixed income portfolio managers and
analysts.
In seeking to achieve the Portfolio's investment objective, the Advisor at-
tempts to consider the tax consequences to investors of all portfolio transac-
tions. The Advisor will sell and purchase securities to change the Portfolio's
duration, sector allocation or securities holdings only if it believes that
the expected benefit to the Portfolio will be greater than the capital gains
or income taxes shareholders would incur as a result of these sales and pur-
chases. The success of this strategy depends on the Advisor's ability to fore-
cast accurately changes in interest rates and assess the value of fixed income
securities.
The Advisor intends to manage the Portfolio actively in pursuit of its invest-
ment objective. Portfolio transactions are undertaken principally to accom-
plish the Portfolio's objective in relation to expected movements in the gen-
eral level of interest rates, but the Portfolio may engage in short-term trad-
ing consistent with its objective. The estimated portfolio turnover rate for
the Portfolio generally should not exceed 100%. Portfolio transactions may in-
cur taxable long term or short term capital gains which will be distributed
and taxable to investors. In addition, to the extent the Portfolio engages in
short-term trading, it may incur increased transactions costs. See Taxes be-
low.
MUNICIPAL SECURITIES. Under normal circumstances, the Portfolio will invest at
least 65% of its total assets in municipal securities issued by New York State
and its political subdivisions and their agencies, authorities and instrumen-
talities. The
5
<PAGE>
Portfolio may also invest in debt obligations of municipal issuers other than
New York. The municipal securities in which the Portfolio invests are primarily
municipal bonds and municipal notes.
MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf of
New York State, other states, territories and possessions of the United States
and their political subdivisions, agencies, authorities and instrumentalities.
These obligations may be general obligation bonds secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest, or they may be revenue bonds payable from specific revenue sourc-
es, but not generally backed by the issuer's taxing power.
MUNICIPAL NOTES. The Portfolio may also invest in municipal notes of various
types, including notes issued in anticipation of receipt of taxes, the proceeds
of the sale of bonds, other revenues or grant proceeds, as well as municipal
commercial paper and municipal demand obligations such as variable rate demand
notes and master demand obligations. The interest rate on variable rate demand
notes is adjustable at periodic intervals as specified in the notes. Master de-
mand obligations permit the investment of fluctuating amounts at periodically
adjusted interest rates. They are governed by agreements between the municipal
issuer and Morgan acting as agent, for no additional fee, in its capacity as
Advisor to the Portfolio and as fiduciary for other clients. Although master
demand obligations are not marketable to third parties, the Portfolio considers
them to be liquid because they are payable on demand. There is no specific per-
centage limitation on these investments. For more information about municipal
notes, see Investment Objectives and Policies in the Statement of Additional
Information.
NEW YORK MUNICIPAL SECURITIES. Because of the Portfolio's significant invest-
ment in New York municipal securities, its performance will be affected by the
condition of New York's economy, as well as the fiscal condition of the State,
its agencies and municipalities. The New York State economy generally remains
weak, despite some signs of growth. Compounding this effect is the presence of
a persistent budget deficit and the significant claims placed on the State's
budget by education, social service, and infrastructure needs. In addition, the
New York City economy and fiscal condition have profound influences upon the
market for most New York debt obligations. The Advisor currently views the New
York economy and financial condition as fundamentally stable. However, the pos-
sibility of a disruption to economic and financial conditions which would ad-
versely affect the creditworthiness and marketability of New York municipal se-
curities continues to exist. A more detailed discussion of the risks associated
with investing in New York municipal securities is contained in the Statement
of Additional Information.
NON-MUNICIPAL SECURITIES. The Portfolio may invest in non-municipal securities
including obligations of the U.S. government and its agencies and instrumental-
ities, bank obligations, debt securities of corporate issuers, asset backed and
mortgage related securities and repurchase agreements. The Portfolio will in-
vest in non-municipal securities when, in the opinion of the Advisor, these se-
curities will enhance the after tax total return to an individual subject to
federal and New York State income taxes in the highest tax bracket. Under nor-
mal circumstances, the Portfolio's holdings of non-municipal securities and mu-
nicipal securities of tax exempt issuers outside New York State will not exceed
35% of its total assets.
QUALITY INFORMATION. The Portfolio will not purchase a security unless it is
rated at least Baa or better by Moody's Investors Service, Inc. ("Moody's") or
BBB or better by Standard & Poor's Ratings Group ("Standard & Poor's") or it is
unrated and in the Advisor's opinion it is of comparable quality. Securities
rated Baa by Moody's or BBB by Standard & Poor's are considered investment
grade, but have some speculative characteristics. These standards must be sat-
isfied at the time an investment is made. If the quality of the investment
later declines, the Portfolio may continue to hold the investment. See Appendix
A in the Statement of Additional Information for more detailed information on
these ratings.
NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified invest-
ment company which means that the Portfolio is not limited by the Investment
Company Act of 1940 (the "1940 Act") in the proportion of its assets that may
be
6
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invested in the obligations of a single issuer. Thus, the Portfolio may invest
a greater proportion of its assets in the securities of a smaller number of
issuers and, as a result, will be subject to greater risk with respect to its
portfolio securities. The Portfolio, however, will comply with the diversifi-
cation requirements imposed by the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company. See Invest-
ment Restrictions below and Taxes in the Statement of Additional Information.
The Portfolio may also purchase municipal securities together with puts, pur-
chase securities on a when-issued or delayed delivery basis, enter into repur-
chase and reverse repurchase agreements, purchase synthetic variable rate in-
struments, loan its securities, purchase certain privately placed securities
and enter into certain futures and options transactions. For a discussion of
these transactions, see Additional Investment Information and Risk Factors.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase secu-
rities 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
purchase commitment. The value of these securities is subject to market fluc-
tuation during this period and no interest or income accrues to the Portfolio
until settlement. At the time of settlement, a when-issued security may be
valued at less than its purchase price. The Portfolio maintains with the Cus-
todian 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 disadvantaged. It is the current policy of the Portfolio not to enter
into when-issued commitments exceeding in the aggregate 15% of the market
value of the Portfolio's total assets less liabilities other than the obliga-
tions 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 Portfolio's Trustees. In a repurchase agreement, the Portfolio
buys a security 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 collateral 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 re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3%
of the value of the Portfolio's net assets. The Portfolio may lend its securi-
ties if such loans are secured continuously by cash or equivalent collateral
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 interest.
While such securities are on loan, the borrower will pay the Portfolio any in-
come 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
securities 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 con-
sider all facts and circumstances, including the creditworthiness of the bor-
rowing financial institution, and the Portfolio will not make any loans in ex-
cess of one year. The Portfolio will not lend its securities to any officer,
Trustee, Director, employee or other affiliate of the Portfolio, the Advisor
or the Distributor, unless otherwise permitted by applicable law.
7
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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. For the purposes of the 1940 Act, it is considered as a form of borrow-
ing 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 Objectives and Policies in the Statement of Additional Informa-
tion.
PUTS. The Portfolio may purchase without limit municipal bonds or notes to-
gether with the right to resell them at an agreed price or yield within a
specified period prior to maturity. This right to resell is known as a put.
The aggregate price paid for securities with puts may be higher than the price
which otherwise would be paid. The principal risk of puts is that the put
writer may default on its obligation to repurchase. The Advisor will monitor
each writer's ability to meet its obligations under puts. The amortized cost
method is used by the Portfolio to value all municipal securities with maturi-
ties of less than 60 days; when these securities are subject to puts separate
from the underlying securities, no value is assigned to the puts. The cost of
any such put is carried as an unrealized loss from the time of purchase until
it is exercised or expires. See the Statement of Additional Information for
the valuation procedure if the Portfolio were to invest in municipal securi-
ties with maturities of 60 days or more that are subject to separate puts.
SYNTHETIC VARIABLE RATE INSTRUMENTS. The Portfolio may invest in certain syn-
thetic variable rate instruments. Such instruments generally involve the de-
posit of a long-term tax exempt bond in a custody or trust arrangement and the
creation of a mechanism to adjust the long-term interest rate on the bond to a
variable short-term rate and a right (subject to certain conditions) on the
part of the purchaser to tender it periodically to a third party at par. The
Advisor will review the structure of synthetic variable rate instruments to
identify credit and liquidity risks (including the conditions under which the
right to tender the instrument would no longer be available) and will monitor
those risks. In the event that the right to tender the instrument is no longer
available, the risk to the Portfolio will be that of holding the long-term
bond.
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 net assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, 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 (the "1933 Act") and cannot be offered for public sale
in the United States without first being registered under the 1933 Act. An il-
liquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it
is valued by the Portfolio. The price the Portfolio pays for illiquid securi-
ties 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 1933 Act. These securities may be de-
termined to be liquid in accordance with guidelines established by the Advisor
and approved by the Trustees. The Trustees will monitor the Advisor'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 and risk management purposes, but it does not currently intend to
do so.
INVESTMENT RESTRICTIONS
For the Fund to qualify as a regulated investment company under Subchapter M
of the Code, the Portfolio limits its investments so that at the close of each
quarter of its taxable year (a) no more than 25% of its total assets are in-
vested in the securities of any one issuer, except government securities, and
(b) with regard to 50% of its total assets, no more than 5% of its total as-
sets are invested in the securities of a single issuer, except government se-
curities.
8
<PAGE>
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 Portfolio's investment restrictions also include the Fund's investment re-
strictions.
The Portfolio may not (i) borrow money, except that the Portfolio may (a) bor-
row money from banks for temporary or emergency purposes (not for leveraging
purposes) and (b) enter into reverse repurchase agreements for any purpose,
provided that (a) and (b) in total do not exceed 33 1/3% of the value of the
Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings) (if at any time borrowings come to exceed 33 1/3% of
the value of the Portfolio's total assets, the Portfolio will reduce its
borrowings within three business days to the extent necessary to comply with
the 33 1/3% limitation); or (ii) issue senior securities except as permitted by
the 1940 Act or any rule, order or interpretation thereunder. See Additional
Investment Information and Risk Factors--Loans of Portfolio Securities and Re-
verse Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the Port-
folio, the Trustees decide upon matters of general policy and review the ac-
tions 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 and of the Portfo-
lio, up to and including creating a separate board of trustees. See Trustees
and Officers in the Statement of Additional Information for more information
about the Trustees and Officers of the Fund and the Portfolio.
The Trust and the Portfolio 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
9
<PAGE>
paid under the agreements approximate the reasonable cost of Pierpont Group,
Inc. in providing these services. Pierpont Group, Inc. was organized in 1989
at the request of the Trustees of The Pierpont Family of Funds for the purpose
of providing these services at cost to these funds. See Trustees and Officers
in the Statement of Additional Information. The principal offices 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. For fixed income portfolios, this process focuses on the
systematic analysis of real interest rates, sector diversification and quanti-
tative and credit analysis. Morgan has managed portfolios of domestic fixed
income securities on behalf of its clients for over 50 years. The Portfolio
managers making investments in domestic fixed income securities work in con-
junction with fixed income, credit, capital market and economic research ana-
lysts, as well as traders and administrative officers.
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 or her business ex-
perience for the past five years is indicated parenthetically): Elbridge T.
Gerry, III, Vice President (since April, 1994, employed by Morgan since prior
to 1989) and Elizabeth A. Augustin, Vice President (since April, 1994, em-
ployed by Morgan since prior to 1989).
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 0.30% 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
Shareholder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLI-
GATIONS 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 and in that capacity super-
vises the Fund's and the Portfolio's day-to-day operations other than manage-
ment of the Portfolio's investments. In this capacity, SBDS administers 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 under Advisor,
Services Agent, Custodian and Shareholder Servicing. In connection with its
responsibilities as Administrator, SBDS (i) furnishes ordinary clerical and
related services for day-to-day operations including certain recordkeeping re-
sponsibilities; (ii) takes responsibility for compliance with all applicable
federal and state securities and other regulatory requirements; (iii) is re-
sponsible for the registration of sufficient Fund
10
<PAGE>
shares under federal and state securities laws; (iv) takes responsibility for
monitoring the Fund's status as a regulated investment company under the Code;
and (v) performs such administrative and managerial oversight of the activi-
ties of the Trust's and the Portfolio's custodian and transfer agent as the
respective Trustees may direct from time to time. Under the terms of the
Trust's and the Portfolio's Financial and Fund Accounting Services Agreements
with Morgan, the fees of the Administrator are covered by Morgan's expense un-
dertakings 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 In-
stitutional Funds as well as The Pierpont Funds and The JPM Advisor Funds,
which are two other families of mutual funds for which SBDS acts as Adminis-
trator. 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 av-
erage daily net assets, 0.024% of the next $2 billion of these funds' aggre-
gate 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
Portfolio, as well as all of the other portfolios in which series of The JPM
Institutional Funds, The Pierpont Funds or The JPM Advisor 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 as-
sets, 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 and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio (each a "Services Agreement" and collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides the following two services to them. The agreements pro-
vide that Morgan is responsible for certain accounting and operational serv-
ices provided to the Fund and the Portfolio, including services 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.
In addition, as provided in the agreements, Morgan is responsible for the an-
nual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the ex-
pense undertakings include, but are not limited to, transfer, registrar, and
dividend disbursing costs, legal and accounting expenses, fees of the Adminis-
trator, insurance, the compensation and expenses of the Trustees, the expenses
of printing and mailing reports, notices, and proxies to Fund shareholders,
and registration 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 reim-
burse the Fund or the Portfolio, as appropriate, for such excess amounts. Un-
der the Trust's Services Agreement, the following expenses are not included in
the expense undertaking: the fees of Pierpont Group, Inc., shareholder servic-
ing fees, the services agent fee, organization expenses and extraordinary ex-
penses as defined in this agreement. Under the Portfolio's Services Agreement,
the following expenses are not included in the expense undertaking: the fees
of Pierpont Group, Inc., custodian fees, advisory fees, brokerage expenses,
the services agent fee, organization expenses and extraordinary expenses as
defined in this agreement.
11
<PAGE>
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, 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 Services
Agreement provides for the Portfolio to pay Morgan a fee for these services,
which is computed daily and may be paid monthly, at the following annual rate
of the Portfolio's average daily net assets: 0.10% on net assets up to $200
million, 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 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.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
March 31, 1996 to the extent necessary to maintain the Fund's total operating
expenses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 0.50% of the Fund's average daily net assets. This limit on certain ex-
penses does not cover extraordinary increases in these expenses during the pe-
riod and no longer applies in the event of a precipitous decline in assets due
to unforeseen circumstances. There is no assurance that Morgan will continue
this waiver beyond the specified period, except as required by the following
sentence. Morgan has agreed to waive fees as necessary, 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 limits 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 which is a
customer of Morgan (an "Eligible Institution"). The Fund has agreed to pay Mor-
gan for these services at an annual rate (expressed as a percentage of the av-
erage daily net asset value 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 Agree-
ment with the Fund, Morgan may delegate one or more of its responsibilities to
other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
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. In-
vestors may also be employer-sponsored retirement plans that have designated
the Fund as an investment option for the plans.
12
<PAGE>
Prospective investors who are not already customers of Morgan may apply to be-
come 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 it will accept.
The Fund requires a minimum initial investment of $5 million and a minimum
subsequent 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 ba-
sis 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
assistance of another Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan repre-
sentative (or a representative of their Eligible Institution) to assist them
in placing a purchase order with the Fund's Distributor. Any shareholder may
also call J.P. Morgan Funds Services at (800) 766-7722 for assistance in plac-
ing 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. If the Fund
receives a purchase order after 4:00 P.M. New York time, the purchase is ef-
fective and is made at net asset value determined on the next business day.
All purchase orders for Fund shares must be accompanied by instructions to
Morgan (or an Eligible Institution) to transfer immediately available funds to
the Fund's Distributor on settlement date. The settlement date is generally
the business day after the purchase is effective. The purchaser will begin to
receive the daily dividends on the settlement date. See Dividends and Distri-
butions.
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
subaccounting, 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 agree upon with the Eligible Institution.
Eligible Institutions may separately establish their own terms, conditions and
charges for providing the aforementioned 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
deposited on settlement date in immediately available funds to the sharehold-
er's account at Morgan or at his Eligible Institution or, in the case of cer-
tain Morgan customers, are mailed by check or transferred by wire in accor-
dance with the customer's instructions. The redeemer will continue to receive
dividends on these shares through the day before the
13
<PAGE>
settlement date. Settlement date is generally the next business day after a
redemption is effective and, subject to Further Redemption Information below,
in any event is within seven days. See Dividends and Distributions.
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 $5 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 proceeds when noncorporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a shareholder sends a check for the purchase of Fund shares and
shares are purchased before the check has cleared, the transmittal of redemp-
tion 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 1940 Act or the Securities and Exchange Commission may permit.
See Redemption 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 funds' 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.
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
The Fund intends to distribute substantially all of its net investment income.
The net investment income of each Fund is declared as a dividend daily immedi-
ately prior to the determination of the net asset value of the Fund on that
day and paid monthly. If an investor's shares are redeemed during a month, ac-
crued but unpaid dividends are paid with the redemption proceeds. The net in-
vestment income of the Fund for dividend purposes consists of its pro rata
share of the net income of the Portfolio less the Fund's expenses. Expenses of
the Fund and the Portfolio, including the fees payable to Morgan, are accrued
daily. Shares will accrue dividends as long as they are issued and outstand-
ing. Shares are issued and outstanding as of the settlement date of a purchase
order to the settlement date of a redemption order.
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.
14
<PAGE>
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 "Massachu-
setts business 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. To date, 13 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 has any preference over any other series of
shares. 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
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable by the Fund. The Trust does not intend to hold meetings of
shareholders annually. As of June 13, 1995, Morgan Guaranty Trust as Agent for
Shubert Organization technically met the definition of a control person of the
Fund. The Trustees may call meetings of shareholders for action by shareholder
vote as may be required by either the 1940 Act 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 pre-
scribed in Section 16(c) of the 1940 Act. For further organization informa-
tion, 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.
15
<PAGE>
FEDERAL 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 feder-
al, state or local taxes. See Taxes in the Statement of Additional Information.
Annual statements as to the current federal tax status of distributions, if ap-
plicable, 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 Code. 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 shareholders within allowable time lim-
its. The Portfolio intends to qualify as an association treated as a partner-
ship for federal income tax purposes. As such, the Portfolio should not be sub-
ject to tax. The Fund's status as a regulated investment company is dependent
on, among other things, the Portfolio's continued qualification as a partner-
ship 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 noncorporate shareholders.
The Fund intends to qualify to pay exempt-interest dividends to its sharehold-
ers by having, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consist of tax exempt securities. An exempt-
interest dividend is that part of dividend distributions made by the Fund which
consists of interest received by the Fund on tax exempt securities. Exempt-in-
terest dividends received from the Fund will be treated for federal income tax
purposes as tax exempt interest income. Since, under normal circumstances, at
least 65% of the Portfolio's total assets will be invested in New York tax ex-
empt obligations, it is expected that a substantial portion of the Fund's divi-
dends will be exempt-interest dividends. However, in pursuit of its investment
objective of a high after tax total return, the Portfolio is permitted to in-
vest in securities whose income is subject to federal income tax and to seek to
realize capital gains. Therefore it is expected that a portion of the Fund's
dividends will be taxable and that the Fund may distribute net long and short
term capital gains. See Investment Objective and Policies.
Interest on certain tax exempt municipal obligations issued after August 7,
1986 is a preference item for purposes of the alternative minimum tax applica-
ble to individuals and corporations. Under tax regulations to be issued, the
portion of an exempt-interest dividend of a regulated investment company that
is allocable to these obligations will be treated as a preference item for pur-
poses of the alternative minimum tax.
Corporations should, however, be aware that interest on all municipal securi-
ties will be included in calculating (i) adjusted current earnings for purposes
of the alternative minimum tax applicable to them, (ii) the additional tax im-
posed on certain corporations by the Superfund Revenue Act of 1986, and (iii)
the foreign branch profits tax imposed on effectively connected earnings and
profits of United States branches of foreign corporations. Furthermore, special
tax provisions may apply to certain financial institutions and property and ca-
sualty insurance companies, and they should consult their tax advisors before
purchasing shares of the Fund.
Interest on indebtedness incurred or continued by a shareholder (whether a cor-
poration or an individual) to purchase or carry shares of the Fund is generally
not deductible. The Treasury has been given authority to issue regulations
which would disallow the interest deduction if incurred to purchase or carry
shares of the Fund owned by the taxpayer's spouse, minor child or entity con-
trolled by the taxpayer. Entities or persons who are "substantial users" (or
related persons) of facilities financed by tax exempt bonds should consult
their tax advisors before purchasing shares of the Fund.
Distributions of taxable net investment income and realized net short-term cap-
ital 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 rein-
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vested in additional shares. Distributions of this type to corporate sharehold-
ers of the Fund are not eligible for the dividends-received deduction.
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 regardless
of whether taken in cash or reinvested in additional shares. Long-term capital
gains distributions to corporate shareholders are not eligible for the divi-
dends-received deduction.
Any distribution of capital gains will have the effect of reducing the net as-
set value of Fund shares held by a shareholder by the same amount as the dis-
tribution. If the net asset value of the shares is reduced below a sharehold-
er's cost as a result of such a distribution, the distribution, although con-
stituting a return of capital to the shareholder, will be taxable as described
above.
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 cap-
ital gain or loss if the shares have been held for more than one year, and oth-
erwise 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 extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares. In addition, any loss realized by a shareholder upon the re-
demption or exchange of shares in the Fund held six months or less will be dis-
allowed to the extent of any exempt-interest dividends received by the share-
holder with respect to these shares.
NEW YORK STATE AND NEW YORK CITY TAXES
Shareholders are not subject to New York State or New York City personal income
taxes on Fund dividends to the extent that such dividends qualify as "exempt
interest dividends" and represent interest income attributable to New York tax
exempt obligations (as well as certain other obligations the interest on which
is exempt from New York State and New York City personal income taxes, such as,
for example, certain obligations of the Commonwealth of Puerto Rico). Dividends
and distributions derived from taxable income and capital gains are not exempt
from New York State and New York City taxes.
Corporations should note that the Fund's income dividends and other distribu-
tions are not exempt from the New York State Franchise Tax on Business Corpora-
tions or the New York City General Corporation Tax.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is generally not deductible for New York State or New
York City personal income tax purposes.
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, includ-
ing dividends and any distributions reinvested in additional shares or credited
as cash.
All shareholders are given the privilege to initiate transactions automatically
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 requiring in-
vestors to give their Personal Identification Number and tape recording of tel-
ephone instructions, to confirm that instructions com-
17
<PAGE>
municated from investors by telephone are genuine; if it does not, it, the
Shareholder Servicing Agent or a shareholder's Eligible Institution may be li-
able 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
Industrial Average, the Frank Russell Indexes, the Lehman Brothers Bond In-
dexes and other industry publications. The Fund may advertise "yield" and "tax
equivalent yield". Yield refers to the net income generated by an investment
in the Fund over a stated 30-day period. This income is then annualized--i.e.,
the amount of income generated by the investment during the 30-day period is
assumed to be generated each 30-day period for twelve periods and is shown as
a percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The tax equiv-
alent yield is calculated similarly to the yield for the Fund, except that the
yield is increased using a stated income tax rate to demonstrate the taxable
yield necessary to produce an after-tax equivalent to the Fund.
The Fund may also advertise "total return" and non-standardized total return
data. The total return shows what an investment in the Fund would have earned
over a specified period of time (one, five or ten years or since commencement
of operations, if less) assuming that all distributions and dividends by the
Fund were reinvested on the reinvestment dates during the period and less all
recurring fees. These methods of calculating yield and total return are re-
quired by regulations of the Securities and Exchange Commission. Yield and to-
tal return data similarly calculated, unless otherwise indicated, over other
specified periods of time may also be used. See Performance Data in the State-
ment of Additional Information. All performance figures are based on histori-
cal earnings and are not intended to indicate future performance. Performance
information may be obtained by calling The Fund's Distributor at (800) 847-
9487.
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<PAGE>
APPENDIX
The hedging and risk management transactions which are permissible for the
Portfolio are described below. The Portfolio has no present intention of engag-
ing in any of these transactions.
The Portfolio may (a) purchase and sell exchange traded and over-the-counter
(OTC) put and call options on fixed income securities and indexes of fixed in-
come securities, (b) purchase and sell futures contracts on fixed income secu-
rities and indexes of fixed income securities and (c) purchase and sell put and
call options on futures contracts on fixed income securities and indexes of
fixed income securities.
The Portfolio may use futures contracts and options for hedging and risk man-
agement purposes. See Risk Management in the Statement of Additional Informa-
tion. 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 thereon held at any time do not exceed 5% of the Port-
folio's total assets. In addition, the Portfolio 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 as-
set value of the Portfolio.
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
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the option is allowed to expire, the Portfolio will lose the entire premium it
paid. If the Portfolio exercises a put option on a security, it will sell the
instrument underlying the option at the strike price. If the Portfolio exer-
cises an option on an index, settlement is in cash and does not involve the ac-
tual 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).
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 may purchase and sell put and call options
and sell (write) covered 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 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 Portfolio, in purchas-
ing 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 Portfolio's
investments generally will not match the composition of an index.
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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 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 Portfolio's
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 Portfolio's 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
New York
Total Return
Bond Fund
PROSPECTUS
June 21, 1995
