PROSPECTUS
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) 766-7722
The JPM Institutional Selected U.S. Equity Fund seeks to provide a high
total return from a portfolio of selected equity securities. It is de-
signed for investors who want an actively managed portfolio of selected
equity securities that seeks to outperform the S&P 500 Index.
The JPM Institutional Selected U.S. Equity Fund (the "Fund") is a diversi-
fied no-load mutual fund for which there are no sales charges or exchange
or redemption fees. The Fund is a series of The JPM Institutional Funds,
an open-end management investment company organized as a Massachusetts
Business Trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJEC-
TIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE SELECTED U.S. EQUITY
PORTFOLIO (THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVEST-
MENT 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 FI-
NANCIAL GROUP, INC. SEE SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) ON
PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be re-
tained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission in a Statement of
Additional Information dated September 26, 1994 (as supplemented from time
to time). This information is incorporated herein by reference and is
available without charge upon request from the Fund's Distributor, Signa-
ture Broker-Dealer Services, Inc., 6 St. James Avenue, Boston, Massachu-
setts 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 GOVERNMEN-
TAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE
THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS RE-
DEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY IN-
VESTED 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 SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1994
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TABLE OF CONTENTS
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Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 2
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 5
Investment Restrictions.................................................... 8
Management of the Trust and Portfolio...................................... 9
Shareholder Servicing...................................................... 12
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Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... 18
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THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Selected U.S. Equity Fund is designed for investors who
wish to participate primarily in the U.S. equity markets. The Fund seeks to
achieve its investment objective by investing all of its investable assets in
The Selected U.S. Equity Portfolio, an 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 Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. For further information about these
investments and investment techniques, see Investment Objective and Policies
discussed below.
The Fund requires a minimum initial investment of $3 million. The minimum
subsequent investment is $25,000. See Purchase of Shares. If a shareholder
reduces his or her investment in the Fund to less than $3 million for more than
30 days, the investment will be subject to mandatory redemption. See Redemption
of Shares--Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and
policies, management and operation of The JPM Institutional Selected U.S.
Equity Fund to enable investors to decide if the Fund suits their needs. The
Fund operates through Signature Financial Group, Inc.'s ("Signature") 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 JPM Institutional
Selected U.S. Equity Fund incur no shareholder transaction expenses; their
investment in the Fund is subject only to the operating expenses set forth
below for the Fund and the Portfolio, as a percentage of average net assets of
the Fund. The Trustees of the Trust believe that the aggregate per share
expenses of the Fund and the Portfolio will be approximately equal to and may
be less than the expenses that the Fund would incur if it retained the services
of an investment adviser and invested its assets directly in portfolio
securities. Fund and Portfolio expenses are discussed below under the headings
Management of the Trust and Portfolio-- Expenses, and Shareholder Servicing.
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SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
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EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
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Advisory Fees............................................................. 0.40%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.20%
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Total Operating Expenses (after expense reimbursement).................... 0.60%
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* These expenses are based on estimated expenses for the Fund's and the Portfo-
lio's first fiscal year, after any applicable expense reimbursement. Without
such expected reimbursement, the estimated Total Operating Expenses would be
equal on an annual basis to 1.03% of the average daily net assets of the
Fund. See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
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1 Year...................................................................... $ 6
3 Years..................................................................... $19
5 Years..................................................................... $33
10 Years.................................................................... $75
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The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Shareholder Servicing and Financial and Fund Accounting Services
Agreements, the fees paid to Pierpont Group, Inc. under the Fund Service
Agreements, 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 reimbursements, and of the fees and expenses
included in Other Expenses, see Management of the Trust and Portfolio and
Shareholder Servicing. In connection with the above Example, please note that
$1,000 is less than the Fund's minimum investment requirement and that there
are no 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.
FINANCIAL HIGHLIGHTS
The following financial information has been audited. For additional financial
information, see Financial Statements in the Statement of Additional
Information.
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 will be made available without charge upon request.
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For the period
July 19, 1993
(commencement of
operations) to
May 31, 1994
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Net Asset Value, Beginning of Period.......................... $ 10.00
Income From Investment Operations:
Net Investment Income....................................... 0.08
Net Realized and Unrealized Gain from Portfolio............. 0.88
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Total From Investment Operations.............................. 0.96
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Less Dividends to Shareholders from:
Net Investment Income....................................... (0.04)
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Net Asset Value, End of Period................................ $ 10.92
=======
Total Return.................................................. 9.61%(a)
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands).................. $47,473
Ratios to Average Net Assets (annualized):
Expenses.................................................. 0.60%
Net Investment Income..................................... 1.74%
Decrease reflected in the above expense ratio due to
expense reimbursement.................................... 0.43%
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(a)Not annualized
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke has
been approved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
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
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entity having the same investment 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
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) which may or may not be readily marketable from the Portfolio.
The distribution in kind may result in the Fund having a less diversified
portfolio of 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
actions 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.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional 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 operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), 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
instructions 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
Information and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective,
policies and restrictions of the Fund or the Portfolio, see Investment
Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their effort to achieve this
objective. 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 objective of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a
portfolio of selected equity securities. Total return will consist of realized
and unrealized capital gains and losses plus income. The Fund attempts to
achieve its investment objective by investing all of its investable assets in
The Selected U.S. Equity Portfolio, an open-end management investment company
having the same investment objective as the Fund. The Portfolio invests
primarily in the common stock of large and medium sized U.S. corporations.
The Fund is designed for investors who want an actively managed portfolio of
selected equity securities that seeks to outperform the S&P 500 Index.
Morgan seeks to enhance the Portfolio's total return relative to that of the
universe of large and medium sized U.S. companies, typically represented by the
S&P 500 Index, through fundamental analysis, systematic stock valuation and
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disciplined portfolio construction. Based on internal fundamental research,
Morgan uses a dividend discount model to rank companies within economic sectors
according to their relative value. From the universe of securities this model
shows as undervalued, Morgan selects stocks for the Portfolio based on a
variety of criteria including the company's managerial strength, prospects for
growth and competitive position. Morgan may modestly under or over-weight
selected economic sectors against the S&P 500 Index's sector weightings to seek
to enhance the Portfolio's total return or reduce the fluctuation in its market
value relative to the Index.
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. The Portfolio does not intend to respond to short-term
market fluctuations or to acquire securities for the purpose of short-term
trading; however, it may take advantage of short-term trading opportunities
that are consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.
EQUITY INVESTMENTS. During ordinary market conditions, the Advisor intends to
keep the Portfolio essentially fully invested with at least 65% of the
Portfolio's net assets invested in equity securities consisting of common
stocks and other securities with equity characteristics such as preferred
stocks, warrants, rights and convertible securities. The Portfolio's primary
equity investments are the common stocks of large and medium-sized U.S.
corporations and, to a limited extent, similar securities of foreign
corporations. The common stock in which the Portfolio may invest includes the
common stock of any class or series or any similar equity interest, such as
trust or limited partnership interests. These equity investments may or may not
pay dividends and may or may not carry voting rights. The Portfolio invests in
securities listed on a securities exchange or traded in an over-the-counter
market, and may invest in certain restricted or unlisted securities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations. However, the Portfolio does not expect to invest more than 30% of
its assets at the time of purchase in securities of foreign issuers, nor does
it expect more than 10% to be in securities of foreign issuers not listed on a
national securities exchange or not denominated or principally traded in U.S.
dollars. For further information on foreign investments and foreign currency
exchange transactions, see Additional Investment Information and Risk Factors.
The Portfolio may also invest in securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities and
money market instruments, and enter into certain hedging transactions that may
involve options on securities and securities indexes, futures contracts and
options on futures contracts. For a discussion of these investments and
investment techniques, see Additional Investment Information and Risk Factors.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities 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
fluctuation 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
Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to these commitments. When entering into a when-issued or
delayed delivery transaction, the Portfolio will rely on the other party to
consummate the transaction; if the other party fails to do so, the
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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
obligations created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the 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 respect to the
seller, the Portfolio's realization upon the disposition of collateral may be
delayed or limited. Investments in certain repurchase agreements and certain
other investments which may be considered illiquid are limited. See Illiquid
Investments; Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent
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 income accruing thereon. Loans will be subject to termination by
the Portfolio in the normal settlement time, generally five business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed 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 consider all facts and circumstances, including the
creditworthiness of the borrowing financial institution, and the Portfolio will
not make any loans in excess of one year. The Portfolio will not lend its
securities to any officer, Trustee, Director, employee, or affiliate or
Placement Agent of the Portfolio, or the Advisor, Administrator or Distributor,
unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objective and Policies in the
Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic
companies. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on
foreign investments as compared to dividends and interest paid to the Portfolio
by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the
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Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in
compliance with U.S. and foreign currency restrictions and tax laws restricting
the amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those
for securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers located
in foreign countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions issuing ADRs may not be sponsored by the issuer of the underlying
foreign securities. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer of the underlying foreign
securities. EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or uses forward contracts to purchase or sell foreign
currencies. The cost of the Portfolio's spot currency exchange transactions is
generally the difference between the bid and offer spot rate of the currency
being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are entered into in the interbank market directly between currency traders
(usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement, and is traded
at a net price without commission. The Portfolio will not enter into forward
contracts for speculative purposes. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of the
Portfolio's securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange
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rates that would cause a decline in the value of existing investments
denominated or principally traded in a foreign currency. To do this, the
Portfolio would enter into a forward contract to sell the foreign currency in
which the investment is denominated or principally traded in exchange for U.S.
dollars or in exchange for another foreign currency. The Portfolio will only
enter into forward contracts to sell a foreign currency in exchange for another
foreign currency if the Advisor expects the foreign currency purchased to
appreciate against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased vis a vis the hedged
currency and the U.S. dollar. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies will change
as a consequence of market movements in the value of such securities between
the date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to that 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 and cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933. An
illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it
is valued by the Portfolio. The price the Portfolio pays for illiquid
securities or receives upon resale may be lower than the price paid or received
for similar securities with a more liquid market. Accordingly the valuation of
these securities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act of 1933. These
securities may be determined to be liquid in accordance with guidelines
established by Morgan and approved by the Trustees. The Trustees will monitor
Morgan's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of
Additional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment
perspective. The Portfolio may make money market investments pending other
investment or settlement, for liquidity or in adverse market conditions. The
money market investments permitted for the Portfolio include obligations of the
U.S. Government and its agencies and instrumentalities, other debt securities,
commercial paper, bank obligations and repurchase agreements. For more detailed
information about these money market investments, see Investment Objectives and
Policies in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
government securities, and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer.
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The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, 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 investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Fund's investment restrictions also include the Portfolio's
investment restrictions.
The Fund may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of Fund
total assets, taken at cost at the time of borrowing, or purchase securities
while borrowings exceed 5% of its total assets; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowings in amounts
up to 10% of the value of the Fund's net assets at the time of borrowing; (ii)
purchase securities or other obligations of issuers conducting their principal
business activity in the same industry if its investments in such industry
would exceed 25% of the value of the Fund's total assets, except this
limitation shall not apply to investments in U.S. Government securities; or
(iii) purchase securities of any issuer if, as a result of the purchase, more
than 5% of total Fund assets would be invested in securities of companies with
fewer than three years of operating history (including predecessors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions and Additional Information in the Statement of Additional
Information.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are
identified 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...................... President, The Pierpont Funds; Chairman,
Pierpont Group, Inc.; Chairman of the Board
of Trustees, The JPM Institutional Funds
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising
from the fact that the same individuals are Trustees of the Trust and of the
Portfolio, 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 Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of
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.
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ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
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 conducts a
general banking and trust business. Morgan is a wholly-owned subsidiary 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 clients with
combined assets under management of over $100 billion (of which the Advisor
advises over $26 billion). Morgan provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the day-
to-day management and implementation of Morgan's process for the Portfolio (the
inception date of each person's responsibility for the Portfolio and his
business experience for the past 5 years is indicated parenthetically): William
B. Petersen, Managing Director (since February, 1993, employed by Morgan since
prior to 1989 and William M. Riegel, Jr., Vice President (since February, 1993,
employed 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 0.40% 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
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management 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
Investment Advisor, Services Agent, Custodian, and Shareholder Services. In
connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain recordkeeping responsibilities; (ii) takes responsibility for
compliance with all applicable federal and state securities and other
regulatory requirements; (iii) is responsible for the registration of
sufficient Fund shares under federal and state securities laws; (iv) takes
responsibility for monitoring the Fund's status as a regulated investment
company under the Internal Revenue Code of 1986; and (v) performs such
administrative and managerial oversight of the activities of the Trust's and
the Portfolio's custodian and transfer agent, respectively, as the Trustees may
direct from time to time. Under the terms of the Trust's and the Portfolio's
Financial and Fund Accounting Services Agreements with Morgan, the fees of the
Administrator are covered by Morgan's expense undertakings described under
Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Institutional Funds, as well as The Pierpont Funds, which is another family of
mutual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 billion
of these funds' aggregate average daily net assets, 0.032% of the next $2
billion of these funds' aggregate average daily net assets, 0.024% of the next
$2 billion of these funds' aggregate average daily net assets and 0.016% of
these funds' aggregate average daily net assets in excess of $5 billion. This
fee rate is then applied to the net assets of the Fund.
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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 and The Pierpont Funds invest. The fee rate is calculated
daily in accordance with the following schedule: 0.010% of the first $1 billion
of these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its
affiliates currently provide administration and distribution services for a
number of registered investment companies through offices located in Boston,
New York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is
responsible for certain financial and fund accounting services 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.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
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
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Agreement, the following expenses are not included in the
expense undertaking: the fees of Pierpont Group, Inc., shareholder servicing
fees, the services agent fee, organization expenses and extraordinary expenses
as defined in this Agreement. Under the Portfolio's Agreement, the following
expenses are not included in the expense undertaking: the fees of Pierpont
Group, Inc., custodian fees, advisory fees, brokerage expenses, the services
agent fee, organization expenses and extraordinary expenses as defined in this
Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these
services, which is computed daily and may be paid monthly, equal to 0.05% of
each Fund's average daily net assets. The Portfolio's Agreement provides for
the Portfolio to pay Morgan a fee for these services, which is computed daily
and 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
undertakings 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. For the Fund and the Portfolio, 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 ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will
reimburse the Fund through at least May 31, 1995 to the extent necessary to
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<PAGE>
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.60% of the Fund's average daily net
assets. This limit on certain expenses does not cover extraordinary increases
in these expenses during the period and no longer applies in the event of a
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
pursuant to which Morgan acts as shareholder servicing agent for its customers
and other Fund investors who are customers of an Eligible Institution, as
defined below. The Fund has agreed to pay Morgan for these services at an
annual rate (expressed as a percentage of the average daily net asset values of
Fund shares owned by or for shareholders for whom Morgan is acting as
shareholder servicing agent) of 0.05% of the Fund's average daily net assets.
Under the terms of the Shareholder Servicing Agreement with the Fund, Morgan
may delegate one or more of its responsibilities to other entities at Morgan's
expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any
instructions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's
Distributor. Investors must be customers of Morgan or an eligible institution
with a Morgan account (an "Eligible Institution"). Investors may also be
employer-sponsored retirement plans that have designated the Fund as an
investment option for the plans. Prospective investors who are not already
customers of Morgan may apply to become customers of Morgan for the sole
purpose of Fund transactions. There are no charges associated with becoming a
Morgan customer for this purpose. Morgan reserves the right to determine the
customers that it will accept, and the Fund reserves the right to determine the
purchase orders that it will accept.
The Fund requires a minimum initial investment of $3 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
requirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
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
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
Any shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for
assistance in placing an order for Fund shares. If the Fund receives a purchase
order prior to
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<PAGE>
4:00 P.M. New York time on any business day, the purchase of Fund shares is
effective and is made at the net asset value determined that day, and the
purchaser generally becomes a holder of record on the next business day upon
the Fund's receipt of payment. If the Fund receives a purchase order after 4:00
P.M. New York time, the purchase is effective and is made at the net asset
value determined on the next business day, and the purchaser becomes a holder
of record on the following business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the 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
redemption request to the Fund or may telephone J.P. Morgan Funds Services
directly at (800) 766-7722 and give the Shareholder Service Representative a
preassigned shareholder Personal Identification Number and the amount of the
redemption. The Fund executes effective redemption requests at the next
determined net asset value per share. See Net Asset Value. See Additional
Information below for an explanation of the telephone redemption policy of The
JPM Institutional Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited the next business day in immediately available funds to the
shareholder's account at Morgan or at his Eligible Institution or, in the case
of certain Morgan customers, are mailed by check or wire transferred in
accordance with the customer's instructions, and, subject to Further Redemption
Information below, in any event are paid within seven days.
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the Fund's initial investment amount of $3 million for
more than 30 days because of a redemption of shares, the shareholder's
remaining 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
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption of proceeds when
non-corporate investors have not provided a certified taxpayer identification
number. In addition, if a Morgan customer sends a check to Morgan for the
purchase of Fund shares and shares are purchased with funds made available by
Morgan before the check has cleared, the transmittal of redemption proceeds
from the shares will occur upon clearance of the check which may take up to 15
days.
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<PAGE>
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See
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 fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM
Institutional 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 explanation 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
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all the Fund's net investment income, if
any, are declared and paid twice a year. The Fund may also declare an
additional dividend of net investment income in a given year to the extent
necessary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains for the Fund are declared and
paid on an annual basis, except that an additional capital gains distribution
may be made in a given year to the extent necessary to avoid the imposition of
federal excise tax on the Fund. Declared dividends and distributions are
payable to shareholders of record on the record date.
Dividends and capital gains distributions paid for 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 or are wire
transferred 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
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 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.
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ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares ($0.001 par value) of one or
more series. To date, thirteen series of shares have been authorized and are
available for sale to the public. Only shares of the Fund are offered through
this Prospectus. No series of shares will have any preference over any other
series. See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, 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 non- assessable by the Fund. The Trust does not intend to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for
action by shareholder vote as may be required by either the Investment Company
Act of 1940 or the Declaration of Trust. The Trustees will call a meeting of
shareholders to vote on removal of a Trustee upon the written request of the
record holders of ten percent of Trust shares and will assist shareholders in
communicating with each other as prescribed in Section 16(c) of the 1940 Act.
For further organization information, including certain shareholder rights, see
Description of Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or local taxes.
See Taxes in the Statement of Additional Information. Annual statements as to
the current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. As
a regulated investment company, the Fund should not be subject to federal
income taxes or federal excise taxes if all of its net investment income and
capital gains less any available capital loss carryforwards are distributed to
shareholders within allowable time limits. The Portfolio intends to qualify as
an association treated as a partnership for federal income tax purposes. As
such, the Portfolio should not be subject to tax. The Fund's status as a
regulated investment company is dependent on, among other things, the
Portfolio's continued qualification as a partnership for federal income tax
purposes.
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<PAGE>
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. The Fund expects a portion of these
distributions to corporate shareholders to be eligible for the dividends-
received deduction.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of 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 dividends-received deduction.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder,
will be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. 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.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including 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
investors to give their personal identification number and tape recording of
telephone instructions, to confirm that instructions communicated from
investors by telephone are genuine; if it does not, it or the Shareholder
Servicing Agent may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "yield". The 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.
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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
required by regulations of the Securities and Exchange Commission. Yield and
total return data similarly calculated, unless otherwise indicated, over other
specified periods of time may also be used. See Performance Data in the
Statement of Additional Information. All performance figures are based on
historical earnings and are not intended to indicate future performance.
Performance information may be obtained by calling The Fund's Distributor at
(800) 847-9487.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell exchange traded and OTC put and call
options on equity securities or indexes of equity securities, (b) purchase and
sell futures contracts on indexes of equity securities, and (c) purchase and
sell put and call options on futures contracts on indexes of equity securities.
The Portfolio may use futures contracts and options for hedging purposes. See
Risk Management in the Statement of Additional Information. 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,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and
return characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Advisor and consistent with the Portfolio's objective and
policies. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the 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
correlated 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 connection 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
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
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
Portfolio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the 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 allowing 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 liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
18
<PAGE>
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the 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
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the 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
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security price
increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell 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 purchasing or selling index options, is subject to
the risk that the value of its portfolio securities may not change as much as
an index because the Portfolio's investments generally will not match the
composition of an index.
For a number of reasons, a liquid market may not exist and thus the 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
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a
19
<PAGE>
futures contract, it agrees to sell a specified quantity of the underlying
instrument at a specified future date or to receive a cash payment based on the
value of a securities index. The price at which the purchase and sale will take
place is fixed when the 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
contract 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 underlying instrument, much as if it had purchased the underlying
instrument directly. 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 offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the 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.
20
<PAGE>
---------------------------------------
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 Selected U.S. Equity Fund
PROSPECTUS
September 26, 1994
<PAGE>
PROSPECTUS
THE JPM INSTITUTIONAL DIVERSIFIED FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) 766-7722
The JPM Institutional Diversified Fund seeks to provide a high total re-
turn from a diversified portfolio of equity and fixed income securities.
It is designed for investors who wish to invest for long-term objectives
such as retirement and who seek over time to attain real appreciation in
their investments, but with somewhat less price fluctuation than a portfo-
lio consisting solely of equity securities.
The JPM Institutional Diversified Fund (the "Fund") is a diversified no-
load mutual fund for which there are no sales charges or exchange or re-
demption fees. The Fund is a series of The JPM Institutional Funds, an
open-end management investment company organized as a Massachusetts Busi-
ness Trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJEC-
TIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE DIVERSIFIED PORTFO-
LIO (THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COM-
PANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN
THE PORTFOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R)
FINANCIAL SERVICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER
FEEDER STRUCTURE AND IS A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL
GROUP, INC. SEE SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be re-
tained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission in a Statement of
Additional Information dated September 26, 1994 (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, Massa-
chusetts 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 GOVERNMEN-
TAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE
THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS RE-
DEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY IN-
VESTED 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 SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights ...................................................... 2
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 7
Investment Restrictions.................................................... 10
Management of the Trust and Portfolio...................................... 11
Shareholder Servicing...................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 14
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 15
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 16
Organization............................................................... 16
Taxes...................................................................... 17
Additional Information..................................................... 18
Appendix................................................................... 19
</TABLE>
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Diversified Fund is designed for investors who are inter-
ested in a diversified portfolio of equity and fixed income securities. The
Fund seeks to achieve its investment objective by investing all of its
investable assets in The Diversified Portfolio, an open-end management invest-
ment company having the same investment objective as the Fund. Since the in-
vestment characteristics and experience of the Fund will correspond directly
with those of the Portfolio, the discussion in this Prospectus focuses on the
investments and investment policies of the Portfolio. The net asset value of
shares in the Fund fluctuates with changes in the value of the investments in
the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. For further information about these in-
vestments and investment techniques, see Investment Objective and Policies dis-
cussed below.
The Fund requires a minimum initial investment of $3 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $3 million for more than 30
days, the investment will be subject to mandatory redemption. See Redemption of
Shares--Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Diversified Fund to en-
able investors to decide if the Fund suits their needs. The Fund operates
through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) finan-
cial 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 JPM Institutional Diver-
sified Fund incur no shareholder transaction expenses; their investment in the
Fund is subject only to the operating expenses set forth below for the Fund and
the Portfolio, as a percentage of average net assets of the Fund. The Trustees
of the Trust believe that the aggregate per share expenses of the Fund and the
Portfolio will be approximately equal to and may be less than the expenses that
the Fund would incur if it retained the services of an investment adviser and
invested its assets directly in portfolio securities. Fund and Portfolio ex-
penses are discussed below under the headings Management of the Trust and Port-
folio-- Expenses, and Shareholder Servicing.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.55%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.10%
----
Total Operating Expenses (after expense reimbursement).................... 0.65%
</TABLE>
* These expenses are based on estimated expenses for the Fund's and the Portfo-
lio's first fiscal year, after any applicable expense reimbursement. Without
such expected reimbursement, the estimated Total Operating Expenses would be
equal on an annual basis to 1.62% of the average daily net assets of the
Fund. See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................................... $ 7
3 Years..................................................................... $21
5 Years..................................................................... $36
10 Years.................................................................... $81
</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
Guaranty under the Shareholder Servicing and Financial and Fund Accounting
Services Agreements, the fees paid to Pierpont Group, Inc. under the Fund Serv-
ices Agreements, and fees paid to State Street Bank and Trust Company as custo-
dian of the Portfolio. For a more detailed description of contractual fee ar-
rangements, including expense reimbursement, and of the fees and expenses in-
cluded in Other Expenses, see Management of the Trust and Portfolio and Share-
holder 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.
FINANCIAL HIGHLIGHTS
The following selected data for an outstanding share of the Fund has been au-
dited.
The Fund's Annual Report will include 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 will be made available upon request and without charge.
2
<PAGE>
<TABLE>
<CAPTION>
For the period
July 8, 1993
(commencement
of operations) to
June 30, 1994
-----------------
<S> <C>
Net Asset Value, Beginning of Period......................... $ 10.00
-------
Income from Investment Operations:
Net Investment Income....................................... 0.18
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency........................................... (0.23)
-------
Total From Investment Operations............................. (0.05)
-------
Less Dividends to Shareholders from:
Net Investment Income....................................... (0.05)
-------
Net Asset Value, End of Period............................... $ 9.90
=======
Total Return................................................. (0.56)%(a)
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands).................. $59,222
Ratio to Average Net Assets (annualized):
Expenses.................................................. 0.65 %
Net Investment Income..................................... 2.92 %
Decrease reflected in the above expense ratio due to ex-
pense reimbursement...................................... 0.97 %
</TABLE>
-------
(a) Not annualized.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator 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
3
<PAGE>
entity having the same investment objective and restrictions as the Fund or the
retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a diver-
sified portfolio of equity and fixed income securities. Total return will con-
sist of income plus realized and unrealized capital gains and losses. The Fund
attempts to achieve its investment objective by investing all of its investable
assets in The Diversified Portfolio, an open-end management investment company
having the same investment objective as the Fund.
The Portfolio seeks to provide a total return that approaches that of the uni-
verse of equity securities of large and medium sized U.S. companies and that
exceeds the return typical of a portfolio of fixed income securities. The Port-
folio attempts to achieve this return by investing in equity and fixed income
instruments, as described below.
The JPM Institutional Diversified Fund is designed primarily for investors who
wish to invest for long term objectives such as retirement. It is appropriate
for investors who seek to attain real appreciation in the market value of their
4
<PAGE>
investments over the long term, but with somewhat less price fluctuation than a
portfolio consisting only of equity securities. The Fund may be an attractive
option for investors who want a professional investment adviser to decide how
their investments should be allocated between equity and fixed income securi-
ties.
Under normal circumstances, the Portfolio will be invested approximately 65% in
equities and 35% in fixed income securities. However, Morgan may allocate the
Portfolio's investments between these asset classes in a manner consistent with
the Portfolio's investment objective and current market conditions. Using a va-
riety of analytical tools, Morgan assesses the relative attractiveness of each
asset class and determines an optimal allocation between them. Morgan then se-
lects securities within each asset class based on fundamental research and
quantitative analysis.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. Since the Portfolio has a long-term investment perspective,
it does not intend to respond to short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it may take advan-
tage of short-term trading opportunities that are consistent with its objec-
tive. To the extent the Portfolio engages in short-term trading, it may incur
increased transaction costs. See Taxes below.
EQUITY INVESTMENTS. For the equity portion of the Portfolio, Morgan seeks to
achieve a high total return through fundamental analysis, systematic stock val-
uation and disciplined portfolio construction. Based on internal fundamental
research, Morgan uses a dividend discount model to value equity securities and
rank a universe of large and medium capitalization companies within economic
sectors according to their relative value. Morgan then buys and sells securi-
ties within each economic sector based on this valuation process to seek to en-
hance the Portfolio's return. In addition, Morgan uses this disciplined portfo-
lio construction process to seek to reduce the volatility of the equity portion
of the Portfolio relative to that of the S&P 500 Index.
The Portfolio's equity investments will be primarily the common stock of large
and medium sized U.S. companies with market capitalizations above $1.5 billion,
including common stock of any class or series or any similar equity interest,
such as trust or limited partnership interests. The Portfolio's equity invest-
ments may also include preferred stock, warrants, rights and convertible secu-
rities. The Portfolio may also invest in the equity securities of small compa-
nies and of foreign issuers. The small company holdings of the Portfolio are
primarily companies included in the Russell 2000 Index. The Portfolio's equity
securities may or may not pay dividends and may or may not carry voting rights.
FIXED INCOME INVESTMENTS. For the fixed income portion of the Portfolio, Morgan
seeks to provide a high total return by actively managing the duration of the
Portfolio's fixed income securities, the allocation of securities across market
sectors, and the selection of securities within sectors. Based on fundamental,
economic and capital markets research, Morgan adjusts the duration of the Port-
folio's fixed income investments in light of market conditions. Morgan also ac-
tively allocates the Portfolio's fixed income investments among the broad sec-
tors of the fixed income market. Securities which Morgan believes are underval-
ued are selected for purchase from the sectors using advanced quantitative
tools, analysis of credit risk, the expertise of a dedicated trading desk, and
the judgment of fixed income portfolio managers and analysts.
Duration is a measure of the weighted average maturity of the fixed income se-
curities held in the Portfolio and can be used as a measure of the sensitivity
of the Portfolio's market value to changes in interest rates. Under normal mar-
ket conditions the duration of the fixed income portion of the Portfolio will
range between one year shorter and one year longer than the duration of the
U.S. investment grade fixed income universe, as represented by The Salomon
Brothers Broad Investment Grade Bond Index. Currently the Index's duration is
approximately 4.5 years. The maturities of the individual fixed income securi-
ties in the Portfolio may vary widely, however.
5
<PAGE>
The Portfolio may invest in a broad range of debt securities of domestic and
foreign corporate and government issuers. The corporate securities in which the
Portfolio may invest include debt securities of various types and maturities,
e.g., debentures, notes, mortgage securities, equipment trust certificates and
other collateralized securities and zero coupon securities. Collateralized se-
curities are backed by a pool of assets such as loans or receivables which
generate cash flow to cover the payments due on the securities. Collateralized
securities are subject to certain risks, including a decline in the value of
the collateral backing the security, failure of the collateral to generate the
anticipated cash flow or in certain cases more rapid prepayment because of
events affecting the collateral, such as accelerated prepayment of mortgages or
other loans backing these securities or destruction of equipment subject to
equipment trust certificates. In the event of any such prepayment the Portfolio
will be required to reinvest the proceeds of prepayments at interest rates pre-
vailing at the time of reinvestment, which may be lower. In addition, the value
of zero coupon securities which do not pay interest is more volatile than that
of interest bearing debt securities with the same maturity.
The Portfolio may also invest in obligations issued or guaranteed by the U.S.
Government and backed by the full faith and credit of the United States. These
securities include Treasury securities, obligations of the Government National
Mortgage Association ("GNMA Certificates"), the Farmers Home Administration and
the Export Import Bank. GNMA Certificates are mortgage-backed securities which
evidence an undivided interest in mortgage pools. These securities are subject
to more rapid prepayment than their stated maturity would indicate because pre-
payments of principal on mortgages in the pool are passed through to the holder
of the securities. During periods of declining interest rates, prepayments of
mortgages in the pool can be expected to increase. The pass-through of these
prepayments would have the effect of reducing the Portfolio's positions in
these securities and requiring the Portfolio to reinvest the prepayments at in-
terest rates prevailing at the time of reinvestment. The Portfolio may also in-
vest in obligations issued or guaranteed by U.S. Government agencies or instru-
mentalities where the Portfolio must look principally to the issuing or guaran-
teeing agency for ultimate repayment; some examples of agencies or instrumen-
talities issuing these obligations are the Federal Farm Credit System, the Fed-
eral Home Loan Banks and the Federal National Mortgage Association. Although
these governmental issuers are responsible for payments on their obligations,
they do not guarantee their market value. The Portfolio may also invest in mu-
nicipal obligations which may be general obligations of the issuer or payable
only from specific revenue sources. However, the Portfolio will invest only in
municipal obligations that have been issued on a taxable basis or have an at-
tractive yield excluding tax considerations. In addition, the Portfolio may in-
vest in debt securities of foreign governments and governmental entities. See
Additional Investment Information and Risk Factors for further information on
foreign investments.
QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least 65% of that portion of the Portfolio invested in fixed
income securities will consist of securities that are rated at least A by
Moody's or Standard & Poor's or that are unrated and in Morgan's opinion are of
comparable quality. In the case of 30% of the Portfolio's fixed income invest-
ments, the Portfolio may purchase debt securities that are rated Baa or better
by Moody's or BBB or better by Standard & Poor's or are unrated and in Morgan's
opinion are of comparable quality. The remaining 5% of the Portfolio's fixed
income investments may be debt securities that are rated Ba or better by
Moody's or BB or better by Standard & Poor's or are unrated and in Morgan's
opinion are of comparable quality. Securities rated Baa by Moody's or BBB by
Standard & Poor's are considered investment grade, but have some speculative
characteristics. Securities rated Ba by Moody's or BB by Standard & Poor's are
below investment grade and considered to be speculative with regard to payment
of interest and principal. These standards must be satisfied at the time an in-
vestment is made. If the quality of the investment later declines, the Portfo-
lio may continue to hold the investment. See Appendix A in the Statement of Ad-
ditional Information for more detailed information on these ratings.
FOREIGN INVESTMENTS. The Portfolio may invest in common stocks and convertible
securities of foreign corporations as well as fixed income securities of for-
eign government and corporate issuers. However, the Portfolio does not expect
to invest more than 30% of its assets at the time of purchase in securities of
foreign issuers. For further information on foreign investments and foreign
currency exchange transactions, see Additional Investment Information and Risk
Factors.
6
<PAGE>
The Portfolio may also invest in securities on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and money
market instruments and enter into forward contracts on foreign currencies. In
addition, the Portfolio may use options on securities and indexes of securi-
ties, futures contracts and options on futures contracts for hedging and risk
management purposes. For a discussion of these investments and investment tech-
niques, see Additional Investment Information and Risk Factors.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock. Convert-
ible securities entitle the holder to exchange the securities for a specified
number of shares of common stock, usually of the same company, at specified
prices within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
7
<PAGE>
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objective and Policies in the
Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign se-
curities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign is-
suers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic compa-
nies. Dividends and interest paid by foreign issuers may be subject to with-
holding and other foreign taxes which may decrease the net return on foreign
investments as compared to dividends and interest paid to the Portfolio by do-
mestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, nation-
alization, limitation on the removal of funds or assets, or imposition of (or
change in) exchange control or tax regulations in those foreign countries. In
addition, changes in government administrations or economic or monetary poli-
cies in the United States or abroad could result in appreciation or deprecia-
tion of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign issu-
er. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably be-
low that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than com-
parable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securi-
ties of U.S. issuers, may affect portfolio liquidity. In buying and selling se-
curities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and regula-
tion of securities exchanges, brokers and issuers located in foreign countries
than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they rep-
resent. ADRs are receipts typically issued by a U.S. bank or trust company evi-
dencing ownership of the underlying foreign securities. Certain such institu-
tions issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder in-
formation that a sponsored depository is required to provide under its contrac-
tual arrangements with the issuer of the underlying foreign securities. EDRs
are receipts issued by a European financial institution evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in Eu-
ropean securities markets.
Since the Portfolio's investments in foreign securities involve foreign curren-
cies, the value of its assets as measured in U.S. dollars may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange Trans-
actions.
8
<PAGE>
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may enter from time to time into foreign currency ex-
change transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency ex-
change market, or uses forward contracts to purchase or sell foreign curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gener-
ally the difference between the bid and offer spot rate of the currency being
purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are entered into in the interbank market directly between currency traders
(usually large commercial banks) and their customers. A forward foreign cur-
rency exchange contract generally has no deposit requirement, and is traded at
a net price without commission. The Portfolio will not enter into forward con-
tracts for speculative purposes. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio's securities or in foreign exchange rates, or prevent loss if the prices of
these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or anticipated
securities transactions. The Portfolio may also enter into forward contracts to
hedge against a change in foreign currency exchange rates that would cause a
decline in the value of existing investments denominated or principally traded
in a foreign currency. To do this, the Portfolio would enter into a forward
contract to sell the foreign currency in which the investment is denominated or
principally traded in exchange for U.S. dollars or in exchange for another for-
eign currency. The Portfolio will only enter into forward contracts to sell a
foreign currency in exchange for another foreign currency if the Advisor ex-
pects the foreign currency purchased to appreciate against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of fluctu-
ations in the value of the currency purchased vis a vis the hedged currency and
the U.S. dollar. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the fu-
ture value of such securities in foreign currencies will change as a conse-
quence of market movements in the value of such securities between the date the
forward contract is entered into and the date it matures. The projection of
currency market movements is extremely difficult, and the successful execution
of a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in illiq-
uid investments. Subject to that non-fundamental policy limitation, the Portfo-
lio may acquire investments that are illiquid or have limited liquidity, such
as private placements or investments that are not registered under the Securi-
ties Act of 1933 and cannot be offered for public sale in the United States
without first being registered under the Securities Act of 1933. An illiquid
investment is any investment that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which it is valued
by the Portfolio. The price the Portfolio pays for illiquid securities or re-
ceives upon resale may be lower than the price paid or received for similar se-
curities with a more liquid market. Accordingly the valuation of these securi-
ties will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the Securities Act of 1933. These securities
may be determined to be liquid in accordance with guidelines established by
Morgan and approved by the Trustees. The Trustees will monitor Morgan's imple-
mentation of these guidelines on a periodic basis.
9
<PAGE>
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for both hedging and risk management purposes, although not for speculation.
For more detailed information about these transactions, see the Appendix to
this Prospectus and Risk Management in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity and longer-term
fixed income securities to the extent practical in light of its objectives and
long-term investment perspective. The Portfolio may make money market invest-
ments pending other investment or settlement, for liquidity or in adverse mar-
ket conditions. The money market investments permitted for the Portfolio in-
clude obligations of the U.S. Government and its agencies and instrumentali-
ties, other debt securities, commercial paper, bank obligations and repurchase
agreements. For more detailed information about these money market investments,
see Investment Objectives and Policies in the Statement of Additional Informa-
tion.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S. govern-
ment securities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
The Fund may not (i) purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments in such industry would exceed 25% of the value of the Fund's total as-
sets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) borrow money (not including reverse repurchase agreements),
except from banks for temporary or extraordinary or emergency purposes and then
only in amounts up to 30% of the value of its total assets, taken at cost at
the time of borrowing (and provided that such borrowings and reverse repurchase
agreements do not exceed in the aggregate one-third of the market value of the
Fund's total assets less liabilities other than the obligations represented by
the bank borrowings and reverse repurchase agreements), or purchase securities
while borrowings exceed 5% of its total assets; or mortgage, pledge or hypothe-
cate any assets except in connection with any such borrowings in amounts not to
exceed 30% of the value of the Fund's net assets at the time of borrowing; or
(iii) enter into reverse repurchase agreements and other permitted borrowings
which constitute senior securities under the Investment Company Act of 1940,
exceeding in the aggregate one-third of the market value of the Fund's total
assets, less certain liabilities.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions and Additional Information in the Statement of Additional Information.
10
<PAGE>
MANAGEMENT OF THE TRUST AND 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...................... President, The Pierpont Funds; Chairman,
Pierpont Group, Inc.; Chairman of the Board
of Trustees of The JPM Institutional Funds
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 Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
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 conducts a
general banking and trust business. Morgan is a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized un-
der 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 clients with com-
bined assets under management of over $100 billion (of which the Advisor ad-
vises over $26 billion). Morgan provides investment advice and portfolio man-
agement services to the Portfolio. Subject to the supervision of the Portfo-
lio's Trustees, Morgan makes the Portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments. See Investment Advisor in the Statement of Additional
Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the day-
to-day management and implementation of Morgan's process for the Portfolio (the
inception date of each person's responsibility for the Portfolio and his busi-
ness experience for the past 5 years is indicated parenthetically): Gerald H.
Osterberg, Vice President (since July, 1993, employed by Morgan since prior to
1989) and Paul J. Stegmayer, Vice President (since July, 1993, employed by Mor-
gan since prior to 1989).
11
<PAGE>
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 0.55% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent and Share-
holder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio 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 Invest-
ment Advisor, Services Agent, Custodian, and Shareholder Services. In connec-
tion with its responsibilities as Administrator, SBDS (i) furnishes ordinary
clerical and related services for day-to-day operations including certain re-
cordkeeping responsibilities; (ii) takes responsibility for compliance with all
applicable federal and state securities and other regulatory requirements;
(iii) is responsible for the registration of sufficient Fund shares under fed-
eral and state securities laws; (iv) takes responsibility for monitoring the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986; and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent, re-
spectively, as the Trustees may direct from time to time. Under the terms of
the Trust's and the Portfolio's Financial and Fund Accounting Services Agree-
ments with Morgan, the fees of the Administrator are covered by Morgan's ex-
pense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM Insti-
tutional Funds, as well as The Pierpont Funds, which is another family of mu-
tual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 billion
of these funds' aggregate average daily net assets, 0.032% of the next $2 bil-
lion of these funds' aggregate average daily net assets, 0.024% of the next $2
billion of these funds' aggregate average daily net assets and 0.016% of these
funds' aggregate average daily net assets in excess of $5 billion. This fee is
then applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee is then applied to the net assets of the Portfolio. The Ad-
ministrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreement with the
Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services 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.
12
<PAGE>
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, equal to 0.05% of the
Fund's average daily net assets.
The Portfolio's Agreement provides for the Portfolio to pay Morgan a fee for
these services, which is computed daily and paid monthly, at the following an-
nual 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. For the Fund and the Portfolio, the Trustees regularly review amounts
paid to and accounted for by Morgan pursuant to the Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least June 30, 1995 to the extent necessary to main-
tain the Total Operating Expenses (which includes expenses of the Fund and the
Portfolio) at the annual rate of 0.65% of the Fund's average daily net assets.
This limit on certain expenses does not cover extraordinary increases in these
expenses during the period and no longer applies in the event of a precipitous
decline in assets due to unforeseen circumstances. There is no assurance that
Morgan will continue this waiver beyond the specified period, except as re-
quired 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, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.05% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
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PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $3 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the next business day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for as-
sistance in placing an order for Fund shares. If the Fund receives a purchase
order prior to 4:00 P.M. New York time on any business day, the purchase of
Fund shares is effective and is made at the net asset value determined that
day, and the purchaser generally becomes a holder of record on the next busi-
ness day upon the Fund's receipt of payment. If the Fund receives a purchase
order after 4:00 P.M. New York time, the purchase is effective and is made at
the net asset value determined on the next business day, and the purchaser be-
comes a holder of record on the following business day upon the Fund's receipt
of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing periodic statements showing the client's account balance and integrating
these statements with those of other transactions and balances in the client's
other accounts serviced by the Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other information and
performing such other services as Morgan or the Eligible Institution's clients
may reasonably request and 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 preassigned
shareholder Personal Identification Number and the amount of the redemption.
The Fund executes effective redemption requests at the next determined net as-
set value per share. See Net Asset Value. See Additional Information below for
an explanation of the telephone redemption policy of The JPM Institutional
Funds.
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A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited the next business day in immediately available funds to the
shareholder's account at Morgan or at his Eligible Institution or, in the case
of certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions, and, subject to Further Redemption In-
formation below, in any event are paid within seven days.
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the Fund's initial investment amount of $3 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 income
tax on dividends, distributions and redemption of proceeds when non-corporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a Morgan customer sends a check to Morgan for the purchase of Fund
shares and shares are purchased with funds made available by Morgan before the
check has cleared, the transmittal of redemption proceeds from the shares will
occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other pe-
riods as the Investment Company Act of 1940 or the SEC may permit. See Redemp-
tion of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for The JPM Institutional Funds and The
Pierpont Funds. See also Additional Information below for an explanation 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
Dividends consisting of substantially all the Fund's net investment income, if
any, are declared and paid twice a year. The Fund may also declare an addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
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<PAGE>
Substantially all the realized net capital gains, if any, of the Fund are de-
clared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and distribu-
tions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check or are wire
transferred 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 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, thirteen series of shares have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. As of September 15, 1994, Alcatel Network Systems, Inc. Retirement
Savings Plan and Morgan as Agent for Faber Castell Retirement Plan technically
met the definition of control persons. The Trustees may call meetings of share-
holders for action by shareholder vote as may be required by either the Invest-
ment Company Act of 1940 or the Declaration of Trust. The Trustees will call a
meeting of shareholders to vote on removal of a Trustee upon the written re-
quest of the record holders of ten percent of Trust shares and will assist
shareholders in communicating with each other as prescribed in Section 16(c) of
the 1940 Act. For further organization information, including certain share-
holder rights, see Description of Shares in the Statement of Additional Infor-
mation.
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 Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other
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<PAGE>
investment companies, insurance company separate accounts and common and com-
mingled 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 lia-
bility is limited to circumstances in which both inadequate insurance existed
and the Portfolio itself was unable to meet its obligations. Accordingly, the
Trustees of the Trust believe that neither the Fund nor its shareholders will
be adversely affected by reason of the Fund's investing in the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to federal
taxes and with respect to the applicability of state or local taxes. See Taxes
in the Statement of Additional Information. Annual statements as to the current
federal tax status of distributions, if applicable, are mailed to shareholders
after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's contin-
ued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or re-
invested in additional shares. The Fund expects a portion of the distributions
of this type to corporate shareholders of the Fund to be eligible for the divi-
dends-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 net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is re-
duced below a shareholder's cost as a result of such a distribution, the dis-
tribution, although constituting a return of capital to the shareholder, will
be taxable as described above.
Any gain or loss realized on the redemption or exchange of 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.
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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 communicated from investors
by telephone are genuine; if it does not, it or the Shareholder Servicing Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar, Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Index and other industry publications.
The Fund may advertise "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 in-
vestment is also assumed to be reinvested at the end of the sixth 30-day peri-
od.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of oper-
ations, 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 required by regu-
lations of the Securities and Exchange Commission. Yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be ob-
tained by calling the Fund's Distributor at (800) 847-9487.
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<PAGE>
APPENDIX
The Portfolio may purchase and sell (a) exchange traded and over the counter
(OTC) put and call options on fixed income or equity securities and indexes of
fixed income or equity securities, (b) futures contracts on fixed income secu-
rities and indexes of fixed income or equity securities and (c) put and call
options on futures contracts on fixed income securities and indexes of fixed
income or equity 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 the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
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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 on
any securities index based on securities in which the Portfolio may invest. Op-
tions 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 op-
tions are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single se-
curity. The Portfolio, in purchasing or selling index options, is subject to
the risk that the value of its portfolio securities may not change as much as
an index because the Portfolio's investments generally will not match the com-
position of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
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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.
21
<PAGE>
---------------------------------------
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 Diversified Fund
PROSPECTUS
September 26, 1994
<PAGE>
PROSPECTUS
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) 766-7722
The JPM Institutional U.S. Small Company Fund seeks to provide a high to-
tal return from a portfolio of equity securities of small companies. It is
designed for investors who are willing to assume the somewhat higher risk
of investing in small companies in order to seek a higher total return
over time than might be expected from a portfolio of stocks of large com-
panies.
The JPM Institutional U.S. Small Company Fund (the "Fund") is a diversi-
fied no-load mutual fund for which there are no sales charges or exchange
or redemption fees. The Fund is a series of The JPM Institutional Funds,
an open-end management investment company organized as a Massachusetts
Business Trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJEC-
TIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE U.S. SMALL COMPANY
PORTFOLIO (THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVEST-
MENT 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 FI-
NANCIAL GROUP, INC. SEE SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) ON
PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be re-
tained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission in a Statement of
Additional Information dated September 26, 1994 (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, Massa-
chusetts 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 GOVERNMEN-
TAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE
THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS RE-
DEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY IN-
VESTED 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 SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 2
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 6
Investment Restrictions.................................................... 9
Management of the Trust and Portfolio...................................... 9
Shareholder Servicing...................................................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... 18
</TABLE>
<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional U.S. Small Company Fund is designed for investors who
wish to invest in a portfolio of equity securities of small companies. The Fund
seeks to achieve its investment objective by investing all of its investable
assets in The U.S. Small Company Portfolio, an 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 Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. In view of the capitalization of the com-
panies in which the Portfolio invests, the risks of investment in the Fund and
the volatility of the value of its shares may be greater than the general eq-
uity markets. For further information about these investments and investment
techniques, see Investment Objective and Policies discussed below.
The Fund requires a minimum initial investment of $1 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $1 million for more than 30
days, the investment will be subject to mandatory redemption. See Redemption of
Shares--Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of The JPM Institutional U.S. Small Company Fund
to enable investors to decide if the Fund suits their needs. The Fund operates
through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) finan-
cial 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 JPM Institutional U.S.
Small Company Fund incur no shareholder transaction expenses; their investment
in the Fund is subject only to the operating expenses set forth below for the
Fund and the Portfolio, as a percentage of average net assets of the Fund. The
Trustees of the Trust believe that the aggregate per share expenses of the Fund
and the Portfolio will be approximately equal to and may be less than the ex-
penses that the Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and Portfolio-- Expenses, and Shareholder Servicing.
<TABLE>
<S> <C>
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
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.60%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.20%
----
Total Operating Expenses (after expense reimbursement).................... 0.80%
</TABLE>
* These expenses are based on estimated expenses for the Fund's and the Portfo-
lio's first fiscal year, after any applicable expense reimbursement. Without
such expected reimbursement, the estimated Total Operating Expenses would be
equal on an annual basis to 1.07% of the average daily net assets of the
Fund. See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................................... $ 8
3 Years..................................................................... $26
5 Years..................................................................... $44
10 Years.................................................................... $99
</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 Services
Agreements, the fees paid to Pierpont Group, Inc. under the Fund Services
Agreements, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption of
Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following financial information has been audited. For additional financial
information, see Financial Statements in the Statement of Additional Informa-
tion.
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 Re-
port will be made available without charge upon request.
2
<PAGE>
<TABLE>
<CAPTION>
For the period
July 19, 1993
(commencement of
operations) to
May 31, 1994
----------------
<S> <C>
Net Asset Value, Beginning of Period.......................... $ 10.00
Income From Investment Operations:
Net Investment Income...................................... 0.04
Net Realized and Unrealized Loss from Portfolio............ (0.00)
-------
Net Increase in Net Assets Resulting from Operations.......... 0.04
-------
Less Dividends:
From Net Investment Income................................... (0.01)
-------
Net Asset Value, End of Period................................ $ 10.03
=======
Total Return.................................................. 0.42%(a)
Ratios and Supplemental Data:
Net Assets at the end of Period (in thousands)............... $71,141
Ratio to Average Net Assets (annualized):
Expenses.................................................... 0.80%
Net Investment Income....................................... 0.93%
Decrease reflected in the above expense ratio due to expense
reimbursement ............................................. 0.27%
</TABLE>
-------
(a) Not annualized.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
3
<PAGE>
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a port-
folio of equity securities of small companies. Total return will consist of re-
alized and unrealized capital gains and losses plus income. The Fund attempts
to achieve its investment objective by investing all of its investable assets
in The U.S. Small Company Portfolio, an open-end management investment company
having the same investment objective as the Fund. The Portfolio invests primar-
ily in the common stock of small U.S. companies. The small company holdings of
the Portfolio are primarily companies included in the Russell 2500 Index.
The JPM Institutional U.S. Small Company Fund is designed for investors who are
willing to assume the somewhat higher risk of investing in small companies in
order to seek a higher return over time than might be expected from a portfolio
of
4
<PAGE>
stocks of large companies. The Fund may also serve as an efficient vehicle to
diversify an existing portfolio by adding the equities of smaller U.S. compa-
nies.
Morgan seeks to enhance the Portfolio's total return relative to that of the
U.S. small company universe. To do so, Morgan uses fundamental research, sys-
tematic stock valuation and a disciplined portfolio construction process. Mor-
gan continually screens the universe of small capitalization companies to iden-
tify for further analysis those companies which exhibit favorable characteris-
tics such as significant and predictable cash flow and high quality management.
Based on fundamental research and using a dividend discount model, Morgan ranks
these companies within economic sectors according to their relative value. Mor-
gan then selects for purchase the most attractive companies within each eco-
nomic sector.
Morgan uses a disciplined portfolio construction process to seek to enhance re-
turns and reduce volatility in the market value of the Portfolio relative to
that of the U.S. small company universe. Morgan believes that under normal mar-
ket conditions, the Portfolio will have sector weightings comparable to that of
the U.S. small company universe, although it may moderately under- or over-
weight selected economic sectors. In addition, as a company moves out of the
market capitalization range of the small company universe, it generally becomes
a candidate for sale by the Portfolio.
The Portfolio intends to manage its investments actively in pursuit of its in-
vestment objective. Since the Portfolio has a long-term investment perspective,
it does not intend to respond to short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it may take advan-
tage of short-term trading opportunities that are consistent with its objec-
tive. To the extent the Portfolio engages in short-term trading, it may incur
increased transaction costs. See Taxes below.
EQUITY INVESTMENTS. During ordinary market conditions, the Advisor intends to
keep the Portfolio essentially fully invested with at least 65% of the Portfo-
lio's net assets invested in equity securities consisting of common stocks and
other securities with equity characteristics such as preferred stocks, war-
rants, rights and convertible securities. The Portfolio's primary equity in-
vestments are the common stocks of small U.S. companies and, to a limited ex-
tent, similar securities of foreign corporations. The common stock in which the
Portfolio may invest includes the common stock of any class or series or any
similar equity interest, such as trust or limited partnership interests. The
small company holdings of the Portfolio are primarily companies included in the
Russell 2500 Index. These equity investments may or may not pay dividends and
may or may not carry voting rights. The Portfolio invests in securities listed
on a securities exchange or traded in an over-the-counter market, and may in-
vest in certain restricted or unlisted securities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations. However, the Portfolio does not expect to invest more than 30% of
its assets at the time of purchase in securities of foreign issuers, nor does
it expect more than 10% to be in securities of foreign issuers not listed on a
national securities exchange or not denominated or principally traded in U.S.
dollars. For further information on foreign investments and foreign currency
exchange transactions, see Additional Investment Information and Risk Factors.
The Portfolio may also invest in securities on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and money
market instruments, and enter into certain hedging transactions that may in-
volve options on securities and securities indexes, futures contracts and op-
tions on futures contracts. For a discussion of these investments and invest-
ment techniques, see Additional Investment Information and Risk Factors.
5
<PAGE>
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock. Convert-
ible securities entitle the holder to exchange the securities for a specified
number of shares of common stock, usually of the same company, at specified
prices within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objective and Policies in the
Statement of Additional Information.
6
<PAGE>
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign se-
curities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign is-
suers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic compa-
nies. Dividends and interest paid by foreign issuers may be subject to with-
holding and other foreign taxes which may decrease the net return on foreign
investments as compared to dividends and interest paid to the Portfolio by do-
mestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, nation-
alization, limitation on the removal of funds or assets, or imposition of (or
change in) exchange control or tax regulations in those foreign countries. In
addition, changes in government administrations or economic or monetary poli-
cies in the United States or abroad could result in appreciation or deprecia-
tion of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign issu-
er. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably be-
low that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than com-
parable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securi-
ties of U.S. issuers, may affect portfolio liquidity. In buying and selling se-
curities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and regula-
tion of securities exchanges, brokers and issuers located in foreign countries
than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they rep-
resent. ADRs are receipts typically issued by a U.S. bank or trust company evi-
dencing ownership of the underlying foreign securities. Certain such institu-
tions issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder in-
formation that a sponsored depository is required to provide under its contrac-
tual arrangements with the issuer of the underlying foreign securities. EDRs
are receipts issued by a European financial institution evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in Eu-
ropean securities markets.
Since the Portfolio's investments in foreign securities involve foreign curren-
cies, the value of its assets as measured in U.S. dollars may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange Trans-
actions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may enter from time to time into foreign currency ex-
change transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency ex-
change market, or uses forward contracts to purchase or sell foreign curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gener-
ally the difference between the bid and offer spot rate of the currency being
purchased or sold.
7
<PAGE>
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are entered into in the interbank market directly between currency traders
(usually large commercial banks) and their customers. A forward foreign cur-
rency exchange contract generally has no deposit requirement, and is traded at
a net price without commission. The Portfolios will not enter into forward con-
tracts for speculative purposes. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio's securities or in foreign exchange rates, or prevent loss if the prices of
these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or anticipated
securities transactions. The Portfolio may also enter into forward contracts to
hedge against a change in foreign currency exchange rates that would cause a
decline in the value of existing investments denominated or principally traded
in a foreign currency. To do this, the Portfolio would enter into a forward
contract to sell the foreign currency in which the investment is denominated or
principally traded in exchange for U.S. dollars or in exchange for another for-
eign currency. The Portfolio will only enter into forward contracts to sell a
foreign currency in exchange for another foreign currency if the Advisor ex-
pects the foreign currency purchased to appreciate against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of fluctu-
ations in the value of the currency purchased vis a vis the hedged currency and
the U.S. dollar. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the fu-
ture value of such securities in foreign currencies will change as a conse-
quence of market movements in the value of such securities between the date the
forward contract is entered into and the date it matures. The projection of
currency market movements is extremely difficult, and the successful execution
of a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in illiq-
uid investments. Subject to that non-fundamental policy limitation, the Portfo-
lio may acquire investments that are illiquid or have limited liquidity, such
as private placements or investments that are not registered under the Securi-
ties Act of 1933 and cannot be offered for public sale in the United States
without first being registered under the Securities Act of 1933. An illiquid
investment is any investment that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which it is valued
by the Portfolio. The price the Portfolio pays for illiquid securities or re-
ceives upon resale may be lower than the price paid or received for similar se-
curities with a more liquid market. Accordingly the valuation of these securi-
ties will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the Securities Act of 1933. These securities
may be determined to be liquid in accordance with guidelines established by
Morgan and approved by the Trustees. The Trustees will monitor Morgan's imple-
mentation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of Ad-
ditional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objectives and long-term investment perspec-
tive. The Portfolio may make money market investments pending other investment
or settlement, for liquidity or in adverse market
8
<PAGE>
conditions. The money market investments permitted for the Portfolio include
obligations of the U.S. Government and its agencies and instrumentalities,
other debt securities, commercial paper, bank obligations and repurchase agree-
ments. For more detailed information about these money market investments, see
Investment Objectives and Policies in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S. govern-
ment securities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
The Fund may not (i) borrow money, except from banks for extraordinary or emer-
gency purposes and then only in amounts up to 10% of the value of Fund total
assets, taken at cost at the time of borrowing, or purchase securities while
borrowings exceed 5% of its total assets; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowings in amounts up to 10%
of the value of the Fund's net assets at the time of borrowing; (ii) purchase
securities or other obligations of issuers conducting their principal business
activity in the same industry if its investments in such industry would exceed
25% of the value of the Fund's total assets, except this limitation shall not
apply to investments in U.S. Government securities; or (iii) purchase securi-
ties of any issuer if, as a result of the purchase, more than 5% of total Fund
assets would be invested in securities of companies with fewer than three years
of operating history (including predecessors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions and Additional Information in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND 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...................... President, The Pierpont Funds; Chairman,
Pierpont Group, Inc.; Chairman of the Board
of Trustees of the JPM Institutional Funds
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
9
<PAGE>
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 Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
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 conducts a
general banking and trust business. Morgan is a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized un-
der 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 clients with com-
bined assets under management of over $100 billion (of which the Advisor ad-
vises over $26 billion). Morgan provides investment advice and portfolio man-
agement services to the Portfolio. Subject to the supervision of the Portfo-
lio's Trustees, Morgan makes the Portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments. See Investment Advisor in the Statement of Additional
Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the day-
to-day management and implementation of Morgan's process for the Portfolio (the
inception date of each person's responsibility for the Portfolio and his busi-
ness experience for the past 5 years is indicated parenthetically): James B.
Otness, Managing Director (since February, 1993, employed by Morgan since prior
to 1989) and Fred W. Kittler, Vice President (since February, 1993, employed 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 0.60% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent and Share-
holder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio 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 Invest-
ment Advisor, Services Agent, Custodian, and Shareholder Services. In connec-
tion with its responsibilities as Administrator, SBDS (i) furnishes ordinary
clerical and related services for day-to-day operations including certain re-
cordkeeping responsibilities; (ii) takes responsibility for compliance with all
applicable federal and state securities and other regulatory requirements;
(iii) is responsible for the registration of sufficient Fund shares under fed-
eral and state securities laws; (iv) takes responsibility for monitoring the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986; and (v) performs such administrative and managerial
10
<PAGE>
oversight of the activities of the Trust's and the Portfolio's custodian and
transfer agent, respectively, as the Trustees may direct from time to time. Un-
der 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 undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM Insti-
tutional Funds, as well as The Pierpont Funds, which is another family of mu-
tual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 billion
of these funds' aggregate average daily net assets, 0.032% of the next $2 bil-
lion of these funds' aggregate average daily net assets, 0.024% of the next $2
billion of these funds' aggregate average daily net assets and 0.016% of these
funds' aggregate average daily net assets in excess of $5 billion. This fee
rate is then applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, equal to 0.05% of the
Fund's average daily net assets. The Portfolio's Agreement provides for the
Portfolio
11
<PAGE>
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 as-
sets: 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. For the Fund and its Portfolio 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 ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least May 31, 1995 to the extent necessary to main-
tain the Total Operating Expenses (which includes expenses of the Fund and the
Portfolio) at the annual rate of 0.80% of the Fund's average daily net assets.
This limit on certain expenses does not cover extraordinary increases in these
expenses during the period and no longer applies in the event of a precipitous
decline in assets due to unforeseen circumstances. There is no assurance that
Morgan will continue this waiver beyond the specified period, except as re-
quired 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, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.05% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
12
<PAGE>
The Fund requires a minimum initial investment of $1 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the next business day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for as-
sistance with placing an order for Fund shares. If the Fund receives a purchase
order prior to 4:00 P.M. New York time on any business day, the purchase of
Fund shares is effective and is made at the net asset value determined that day
and the purchaser generally becomes a holder of record on the next business day
upon the Fund's receipt of payment. If the Fund receives a purchase order after
4:00 P.M. New York time, the purchase is effective and is made at the net asset
value determined on the next business day, and the purchaser becomes a holder
of record on the following business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing periodic statements showing the client's account balance and integrating
these statements with those of other transactions and balances in the client's
other accounts serviced by the Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other information and
performing such other services as Morgan or the Eligible Institution's clients
may reasonably request and 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 preassigned
shareholder Personal Identification Number and the amount of the redemption.
The Fund executes effective redemption requests at the next determined net as-
set value per share. See Net Asset Value. See Additional Information below for
an explanation of the telephone redemption policy of The JPM Institutional
Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited the next business day in immediately available funds to the
shareholder's account at Morgan or at his Eligible Institution or, in the case
of certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions, and, subject to Further Redemption In-
formation below, in any event are paid within seven days.
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the Fund's initial investment amount of $1 million for
more than 30 days because of a redemption of shares, the shareholder's
13
<PAGE>
remaining shares may be redeemed 60 days after written notice unless the ac-
count 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 income
tax on dividends, distributions and redemption of proceeds when non-corporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a Morgan customer sends a check to Morgan for the purchase of Fund
shares and shares are purchased with funds made available by Morgan before the
check has cleared, the transmittal of redemption proceeds from the shares will
occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other pe-
riods as the Investment Company Act of 1940 or the SEC may permit. See Redemp-
tion of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Institutional Funds
and The Pierpont Funds. See also Additional Information below for an explana-
tion 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
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid twice a year. The Fund may also declare an addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are de-
clared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and distribu-
tions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check or are wire
transferred in accordance with the customer's instructions. The Fund reserves
the right to discontinue, alter or limit the automatic reinvestment privilege
at any time.
14
<PAGE>
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 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, thirteen series of shares, have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust does not intend to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for ac-
tion by shareholder vote as may be required by either the Investment Company
Act of 1940 or the Declaration of Trust. The Trustees will call a meeting of
shareholders to vote on removal of a Trustee upon the written request of the
record holders of ten percent of Trust shares and will assist shareholders in
communicating with each other as prescribed in Section 16(c) of the 1940 Act.
For further organization information, including certain shareholder rights, see
Description of Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and com-
mon 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. According-
ly, the Trustees of the Trust believe that neither the Fund nor its sharehold-
ers will be adversely affected by reason of the Fund's investing in the Portfo-
lio.
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 federal
taxes and with respect to the applicability of state or
15
<PAGE>
local taxes. See Taxes in the Statement of Additional Information. Annual
statements as to the current federal tax status of distributions, if applica-
ble, are mailed to shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's contin-
ued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or re-
invested in additional shares. The Fund expects a portion of the distributions
of this type to corporate shareholders of the Fund to be eligible for the divi-
dends-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 net investment income or capital gains will have the effect
of reducing the net asset value of the Fund's shares held by a shareholder by
the same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the dis-
tribution, although constituting a return of capital to the shareholder, will
be taxable as described above.
Any gain or loss realized on the redemption or exchange of 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.
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 communicated from investors
by telephone are genuine; if it does not, it or the Shareholder Servicing Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
16
<PAGE>
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 As-
sociates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones In-
dustrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of oper-
ations, if less) assuming that all distributions and dividends by the Fund were
reinvested on the reinvestment dates during the period and less all recurring
fees. This method of calculating total return is required by regulations of the
Securities and Exchange Commission. Total return data similarly calculated, un-
less otherwise indicated, over other specified periods of time may also be
used. See Performance Data in the Statement of Additional Information. All per-
formance figures are based on historical earnings and are not intended to indi-
cate future performance. Performance information may be obtained by calling the
Fund's Distributor at (800) 847-9487.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell exchange traded and OTC put and call
options on equity securities or indexes of equity securities, (b) purchase and
sell futures contracts on indexes of equity securities, and (c) purchase and
sell put and call options on futures contracts on indexes of equity securities.
The Portfolio may use futures contracts and options for hedging and risk man-
agement purposes. The Portfolio may not use futures contracts and options for
speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
a Portfolio's investments against price fluctuations. Other strategies, includ-
ing buying futures contracts, writing puts and calls, and buying calls, tend to
increase market exposure. Options and futures contracts may be combined with
each other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed appro-
priate to the Advisor and consistent with the Portfolio's objective and poli-
cies. 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 a 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.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
18
<PAGE>
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 on
any securities index based on securities in which the Portfolio may invest. Op-
tions 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 op-
tions are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single se-
curity. The Portfolio, in purchasing or selling index options, is subject to
the risk that the value of its portfolio securities may not change as much as
an index because the Portfolio's investments generally will not match the com-
position of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a speci-
fied quantity of an underlying instrument at a specified future date or to make
a cash payment based on the value of a securities index. When the Portfolio
sells a
19
<PAGE>
futures contract, it agrees to sell a specified quantity of the underlying in-
strument 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.
20
<PAGE>
---------------------------------------
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 U.S. Small Company Fund
PROSPECTUS
September 26, 1994
<PAGE>
PROSPECTUS
The JPM Institutional Tax Exempt Money Market Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Tax Exempt Money Market Fund seeks to provide a high
level of current income exempt from federal income tax and maintain a high
level of liquidity. It is designed for investors who seek current income
exempt from federal income tax, stability of capital and liquidity.
The JPM Institutional Tax Exempt Money Market Fund (the "Fund") is a di-
versified no-load mutual fund for which there are no sales charges or ex-
change or redemption fees. The Fund is a series of The JPM Institutional
Funds, an open-end management investment company organized as a Massachu-
setts 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 OBJEC-
TIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE TAX EXEMPT MONEY
MARKET 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 SIG-
NATURE FINANCIAL GROUP, INC. SEE SPECIAL INFORMATION CONCERNING HUB AND
SPOKE(R) ON PAGE 4.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be re-
tained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission in a Statement of
Additional Information dated January 3, 1995 (as supplemented from time to
time). This information is incorporated herein by reference and is avail-
able without charge upon written request from the Fund's Distributor, Sig-
nature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston, Massachu-
setts 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 GOVERNMEN-
TAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE
THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS RE-
DEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY IN-
VESTED BY THE INVESTOR. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE
ABLE TO CONTINUE TO DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 3, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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................................................................... 6
Investment Restrictions.................................................... 8
Management of the Trust and Portfolio...................................... 9
Shareholder Servicing...................................................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 13
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 14
Taxes...................................................................... 15
Additional Information..................................................... 17
</TABLE>
<PAGE>
The JPM Institutional Tax Exempt Money Market Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Tax Exempt Money Market Fund is designed for investors
who seek current income exempt from federal income tax, stability of capital
and liquidity. See Taxes. The Fund seeks to achieve its investment objective by
investing all of its investable assets in The Tax Exempt Money Market Portfo-
lio, an open-end management investment company having the same investment ob-
jective 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 Port-
folio.
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT IT WILL BE
ABLE TO CONTINUE TO DO SO.
The Fund requires a minimum initial investment of $10 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $10 million for more than 30
days, the investment will be subject to mandatory redemption. See Redemption of
Shares-Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Tax Exempt Money Market
Fund to enable investors to decide if the Fund suits their needs. The Fund op-
erates through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R)
financial services method. The Trustees believe that the Fund may achieve econ-
omies of scale over time by investing through Hub and Spoke(R).
The following table illustrates that investors in The JPM Institutional Tax Ex-
empt Money Market Fund incur no shareholder transaction expenses; their invest-
ment in the Fund is subject only to the operating expenses set forth below for
the Fund and the Portfolio, as a percentage of average net assets of the Fund.
The Trustees of the Trust believe that the aggregate per share expenses of the
Fund and the Portfolio will be approximately equal to and may be less than the
expenses that the Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and Portfolio-Expenses, and Shareholder Servicing.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.20%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursements)............................. 0.15%
-----
Total Operating Expenses (after expense reimbursements)................... 0.35%
=====
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund and
the Portfolio for the most recent fiscal year, after any applicable expense
reimbursements. After giving effect to applicable state limitations, but with-
out giving effect to any other reimbursements, Total Operating Expenses would
have been equal on an annual basis to 1.00% of the average daily net assets of
the Fund. See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................................... $ 4
3 Years..................................................................... $11
5 Years..................................................................... $20
10 Years.................................................................... $44
</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, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants.
The Fund's Annual Report 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 Re-
port is available without charge upon request.
<TABLE>
<CAPTION>
FOR THE
FOR THE FISCAL PERIOD ENDED
YEAR ENDED AUGUST 31,
AUGUST 31, 1994 1993(1)
--------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Period.............. $1.00 $1.00
------- -------
Income From Investment Operations:
Net Investment Income........................... 0.0228 0.0040
Net Realized and Unrealized Gain (Loss) on Secu-
rities......................................... (0.0000)(a) -0-
------- -------
Total From Investment Operations.................. 0.0228 0.0040
------- -------
Less Distributions:
Dividends from Net Investment Income............ (0.0228) (0.0040)
Distributions from Net Capital Gains............ -0- -0-
------- -------
Total Distributions............................... (0.0228) (0.0040)
------- -------
Net Asset Value, End of Period.................... $1.00 $1.00
======= =======
Total Return...................................... 2.30% 0.40%
Ratios and Supplemental Data:
Net Assets (In Thousands)....................... $46,083 $35,004
Ratio to Average Net Assets:
Expenses...................................... 0.35% 0.35%
Net Investment Income......................... 2.34% 2.25%
Decrease Reflected in the Above Expense Ratio
due to Expense Reimbursements................ 0.65% 1.08%
</TABLE>
-------
(1) Commencement of Operations July 12, 1993. For this period, total return has
not been annualized and ratios have been annualized.
(a) Less than $0.0001 per share.
3
<PAGE>
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
4
<PAGE>
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high level of current income
that is exempt from federal income tax and maintain a high level of liquidity.
The Fund is designed for investors who seek current income exempt from federal
income tax, stability of capital and liquidity. See Taxes. The Fund attempts to
achieve its objective by investing all of its investable assets in The Tax Ex-
empt Money Market Portfolio, an open-end management investment company having
the same investment objective as the Fund.
The Portfolio attempts to achieve its investment objective by investing primar-
ily in the following municipal securities which earn interest exempt from fed-
eral income tax in the opinion of bond counsel for the issuer and which have
effective maturities not greater than thirteen months and by maintaining a dol-
lar-weighted average portfolio maturity of not more than 90 days. During normal
market conditions, the Portfolio will invest at least 80% of its net assets in
tax exempt obligations. Interest on these securities may be subject to state
and local taxes. For more detailed information regarding tax matters, including
the applicability of the alternative minimum tax, see Taxes.
MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, authorities and instrumen-
talities. These obligations may be general obligation bonds secured by the is-
suer'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 rev-
enue sources, but not generally backed by the issuer's taxing power. These in-
clude industrial development bonds where payment is the responsibility of the
private industrial user of the facility financed by the bonds. The Portfolio
may invest more than 25% of its assets in industrial development bonds, but may
not invest more than 25% of its assets in these bonds in projects of similar
type or in the same state.
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.
QUALITY INFORMATION. The Portfolio will limit its investments to those securi-
ties which, in accordance with guidelines adopted by the Trustees, present min-
imal credit risks. In addition, the Portfolio will not purchase any municipal
obligation unless (i) it is rated with the highest rating assigned to short-
term debt securities (or, in the case of New York State
5
<PAGE>
municipal notes, with one of the two highest ratings assigned to short-term
debt securities) by at least two nationally recognized statistical rating orga-
nizations such as Moody's and Standard & Poor's, (ii) it is rated by only one
agency with such rating, or (iii) it is not rated and is determined to be of
comparable quality. Determinations of comparable quality shall be made in ac-
cordance with procedures established by the Trustees. For a more detailed dis-
cussion of applicable quality requirements, see Investment Objectives and Poli-
cies in the Statement of Additional Information. These standards must be satis-
fied at the time an investment is made. If the quality of the investment later
declines below the quality required for purchase, the Portfolio shall dispose
of the investment, subject in certain circumstances to a finding by the Trust-
ees that disposing of the investment would not be in the Portfolio's best in-
terest. The credit quality of variable rate demand notes and other municipal
obligations is frequently enhanced by various arrangements with domestic or
foreign financial institutions, such as letters of credit, guarantees and in-
surance, and these arrangements are considered when investment quality is eval-
uated.
The Portfolio may also invest up to 20% of the value of its total assets in
taxable securities and may purchase municipal obligations together with puts.
In addition, the Portfolio may purchase municipal obligations on a when-issued
or delayed delivery basis, enter into repurchase and reverse repurchase agree-
ments, loan its portfolio securities and purchase synthetic variable rate in-
struments. 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 securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing there-
6
<PAGE>
on. Loans will be subject to termination by the Portfolio in the normal settle-
ment 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 invest-
ors. The Portfolio may pay reasonable finders' and custodial fees in connection
with a loan. In addition, the Portfolio will consider all facts and circum-
stances, including the creditworthiness of the borrowing financial institution,
and the Portfolio will not make any loans in excess of one year. The Portfolio
will not lend its securities to any officer, Trustee, Director, employee, or
affiliate or Placement Agent of the Portfolio, or the Advisor, Administrator or
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objective and Policies in the
Statement of Additional Information.
TAXABLE INVESTMENTS. The Portfolio attempts to invest its assets in tax exempt
municipal securities; however, the Portfolio is permitted to invest up to 20%
of the value of its total assets in securities, the interest income on which
may be subject to federal, state or local income taxes. The Portfolio may make
taxable investments pending investment of proceeds from sales of its interests
or portfolio securities, pending settlement of purchases of portfolio securi-
ties, to maintain liquidity or when it is advisable in Morgan's opinion because
of adverse market conditions. The Portfolio will invest in taxable securities
only if there are no tax exempt securities available for purchase or if the af-
ter tax yield from an investment in taxable securities exceeds the yield on
available tax exempt securities. The taxable investments permitted for the
Portfolio include obligations of the U.S. Government and its agencies and in-
strumentalities, bank obligations, commercial paper and repurchase agreements.
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 spec-
ified period prior to maturity. This right to resell is known as a put. The ag-
gregate price paid for securities with puts may be higher than the price which
otherwise would be paid. Consistent with the investment objective of the Port-
folio and subject to the supervision of the Trustees, the purpose of this prac-
tice is to permit the Portfolio to be fully invested in tax exempt securities
while maintaining the necessary liquidity to purchase securities on a when-is-
sued basis, to meet unusually large withdrawals and to purchase at a later date
securities other than those subject to the put. The principal risk of puts is
that the put writer may default on its obligation to repurchase. Morgan 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 secu-
rities; no value is assigned to any 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. Morgan
will review the structure of synthetic variable rate instruments to identify
credit and liquidity risks (including the conditions under which the right to
tender the instrument would no longer be available) and will monitor those
risks. In the event that the right to tender the instrument is no longer avail-
able, the risk to the Portfolio will be that of holding the long-term bond,
which may require the disposition of the bond which could be at a loss.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 10% of the market value of the Portfolio's total assets would be in illiq-
uid investments. Subject to that non-fundamental policy limitation, the Portfo-
lio may acquire investments that are
7
<PAGE>
illiquid or have limited liquidity, such as private placements or investments
that are not registered under the Securities Act of 1933 and cannot be offered
for public sale in the United States without first being registered under the
Securities Act of 1933. An illiquid investment is any investment that cannot be
disposed of within seven days in the normal course of business at approximately
the amount at which it is valued by the Portfolio. The price the Portfolio pays
for illiquid securities or receives upon resale may be lower than the price
paid or received for similar securities with a more liquid market. Accordingly
the valuation of these securities will reflect any limitations on their liquid-
ity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the Securities Act of 1933. These securities
may be determined to be liquid in accordance with guidelines established by
Morgan and approved by the Trustees. The Trustees will monitor Morgan's imple-
mentation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S. govern-
ment securities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
The Fund may not (i) borrow money, except from banks for temporary, extraordi-
nary or emergency purposes and then only in amounts up to 10% of the value of
Fund total assets, taken at cost at the time of borrowing, or purchase securi-
ties while borrowings exceed 5% of its total assets; or mortgage, pledge or hy-
pothecate any assets except in connection with any such borrowings in amounts
up to 10% of the value of the Fund's net assets at the time of borrowing; or
(ii) acquire industrial revenue bonds if as a result more than 5% of total Fund
assets would be invested in industrial revenue bonds where payment of principal
and interest is the responsibility of companies with fewer than three years of
operating history.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions and Additional Information in the Statement of Additional Information.
8
<PAGE>
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to those funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company
organized under the laws of Delaware. Through offices in New York City and
abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional cli-
ents with combined assets under management of over $145 billion (of which the
Advisor advises over $30 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and her
or his business experience for the past 5 years is
9
<PAGE>
indicated parenthetically): Elizabeth A. Augustin, Vice President (since Janu-
ary, 1992, employed by Morgan since prior to 1990) and Elbridge T. Gerry, III,
Vice President (since January, 1992, employed by Morgan since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.20% of the Portfolio's average daily net assets up to $1
billion, and 0.10% of average daily net assets in excess of $1 billion.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent and Share-
holder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services. In
connection with its responsibilities as Administrator, SBDS (i) furnishes ordi-
nary clerical and related services for day-to-day operations including certain
recordkeeping responsibilities; (ii) takes responsibility for compliance with
all applicable federal and state securities and other regulatory requirements;
(iii) is responsible for the registration of sufficient Fund shares under fed-
eral and state securities laws; (iv) takes responsibility for monitoring the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986; and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent, re-
spectively, as the Trustees may direct from time to time. Under the terms of
the Trust's and the Portfolio's Financial and Fund Accounting Services Agree-
ments with Morgan, the fees of the Administrator are covered by Morgan's ex-
pense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM Insti-
tutional Funds as well as The Pierpont Funds, which is another family of mutual
funds for which SBDS acts as Administrator. The fee rate is calculated daily in
accordance with the following schedule: 0.040% of the first $1 billion of these
funds' aggregate average daily net assets, 0.032% of the next $2 billion of
these funds' aggregate average daily net assets, 0.024% of the next $2 billion
of these funds' aggregate average daily net assets and 0.016% of these funds'
aggregate average daily net assets in excess of $5 billion. This fee rate is
then applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
10
<PAGE>
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, at the annual rate of
0.05% of the Fund's average daily net assets. The Portfolio's Agreement pro-
vides for the Portfolio to pay Morgan a fee for these services, which is com-
puted daily and may be paid monthly, at the annual rate of 0.03% of the Portfo-
lio's average daily net assets.
As noted above, the fee levels of the Fund and the Portfolio are expense under-
takings and reflect payments made directly to third parties by the Fund and the
Portfolio for services rendered, as well as payments to Morgan for services
rendered. The Trustees of the Trust and the Portfolio regularly review amounts
paid to and accounted for by Morgan pursuant to these Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least August 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.35% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
11
<PAGE>
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.11% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $10 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 basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the same day. Any share-
holder may also call J.P. Morgan Funds Services at (800) 766-7722 for assis-
tance in placing an order for Fund shares. Immediately available funds must be
received by 11:00 A.M. New York time on a business day for the purchase to be
effective and dividends to be earned on the same day. The Fund does not accept
orders after the indicated time. If funds are received after 11 A.M. New York
time for any reason, including that the day is a Federal Reserve holiday, the
purchase is not effective and dividends are not earned until the next business
day.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub-accounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing periodic statements showing the client's account balance and integrating
these statements with those of other transactions and balances in the client's
other accounts serviced by the Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect
12
<PAGE>
to meetings of shareholders, collecting, tabulating and forwarding executed
proxies and obtaining such other information and performing such other serv-
ices as Morgan or the Eligible Institution's clients may reasonably request
and agree upon with the Eligible Institution. Eligible Institutions may sepa-
rately 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 on a business day prior to 11:00 A.M. New York
time is effective on that day. A redemption request received after that time
becomes effective on the next day. Proceeds of an effective redemption are
generally deposited the same day in immediately available funds to the share-
holder's account at Morgan or at his Eligible Institution or, in the case of
certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions. If a redemption request becomes effec-
tive on a day when the New York Stock Exchange is open but which is a Federal
Reserve holiday, the proceeds are paid the next business day. See Further Re-
demption Information.
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 $10 million for
more than 30 days because of a redemption of shares, the shareholder's remain-
ing shares may be redeemed 60 days after written notice unless the account is
increased to the Fund's minimum investment amount or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption of proceeds when non-
corporate investors have not provided a certified taxpayer identification num-
ber. In addition, if a Morgan customer sends a check to Morgan for the pur-
chase of Fund shares and shares are purchased with funds made available by
Morgan before the check has cleared, the transmittal of redemption proceeds
from the shares will occur upon clearance of the check which may take up to 15
days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the pro-
13
<PAGE>
spectuses for the other JPM Institutional Funds and The Pierpont Funds. See
also Additional Information below for an explanation 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
All of the Fund's net investment income is declared as a dividend daily and
paid monthly. If an investor's shares are redeemed during a month, accrued but
unpaid dividends are paid with the redemption proceeds. The net investment in-
come of the Fund for dividend purposes consists of its pro rata share of the
net income of the Portfolio less the Fund's expenses. Dividends and distribu-
tions are payable to shareholders of record at the time of declaration. The net
investment income of the Fund for each business day is determined immediately
prior to the determination of net asset value. Net investment income for other
days is determined at the time net asset value is determined on the prior busi-
ness day. Shares of the Fund earn dividends on the business day their purchase
is effective, but not on the business day redemption proceeds are paid. See
Purchase of Shares and Redemption of Shares.
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.
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. The Portfo-
lio values all portfolio securities by the amortized cost method. This method
attempts to maintain for the Fund a constant net asset value per share of
$1.00. No assurances can be given that this goal can be attained. See Net Asset
Value in the Statement of Additional Information for more information on valua-
tion of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date thirteen series of shares
14
<PAGE>
have been authorized and are available for sale to the public. Only shares of
the Fund are offered through this Prospectus. No series of shares will have
any preference over any other series. See Massachusetts Trust in the Statement
of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non-assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. As of December 12, 1994, Morgan as Agent for G.L. Dick technically
met the definition of a control person. The Trustees may call meetings of
shareholders for action by shareholder vote as may be required by either the
Investment Company Act of 1940 or the Declaration of Trust. The Trustees will
call a meeting of shareholders to vote on removal of a Trustee upon the writ-
ten request of the record holders of ten percent of Trust shares and will as-
sist shareholders in communicating with each other as prescribed in Section
16(c) of the 1940 Act. For further organization information, including certain
shareholder rights, see Description of Shares in the Statement of Additional
Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declara-
tion of Trust provides that the Fund and other entities investing in the Port-
folio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's con-
tinued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
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
15
<PAGE>
securities. Exempt-interest dividends received from the Fund will be treated
for federal income tax purposes as tax exempt interest income. In view of the
Fund's investment policies, it is expected that a substantial portion of the
Fund's dividends will be exempt-interest dividends, although the Fund may from
time to time realize and distribute net short-term capital gains and may invest
limited amounts in taxable securities under certain circumstances. See Taxable
Investments.
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. The Fund has limited its investments to
those securities the interest on which will not be treated as preference items
for purposes of the alternative minimum tax in the opinion of bond counsel for
the issuer. The Fund currently has no intention of investing in obligations
subject to the alternative minimum tax under normal market conditions.
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 not de-
ductible. 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 controlled by
the taxpayer. Entities or persons who are "substantial users" (or related per-
sons) of facilities financed by tax exempt bonds should consult their tax advi-
sors 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 reinvested in additional shares. Distributions of this type to corporate
shareholders 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. The Fund does not expect to realize long-term capital
gains and thus does not contemplate paying distributions taxable to sharehold-
ers who are subject to tax as long-term capital gains.
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 the shares. See Taxes in the Statement of Additional In-
formation.
16
<PAGE>
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including re-
quiring investors to give their personal identification number and tape re-
cording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it or the Shareholder
Servicing Agent may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Donoghue's Money Market and Tax Free Money Market fund averages
and other industry publications. The Fund may advertise "yield," "effective
yield," and "tax equivalent yield". Yield refers to the net income generated
by an investment in the Fund over a stated seven-day period. This income is
then annualized-i.e., the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. Effective yield is calculated simi-
larly to the yield, but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested; the effective yield will be slightly
higher than the yield because of the compounding effect of this assumed rein-
vestment. Tax equivalent 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 advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. These methods of calculating yield and total return are required
by regulations of the Securities and Exchange Commission. Yield and total re-
turn data similarly calculated, unless otherwise indicated, over other speci-
fied periods of time may also be used. See Performance Data in the Statement
of Additional Information. All performance figures are based on historical
earnings and are not intended to indicate future performance. Performance in-
formation may be obtained by calling the Fund's Distributor at (800) 847-9487.
17
<PAGE>
---------------------------------------
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 Tax Exempt Money Market Fund
PROSPECTUS
January 3, 1995
<PAGE>
PROSPECTUS
The JPM Institutional Tax Exempt Bond Fund
6 St. James Avenue Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Tax Exempt Bond Fund seeks to provide a high level
of current income exempt from federal income tax consistent with moderate
risk of capital and maintenance of liquidity. It is designed for investors
who seek tax exempt yields greater than those generally available from a
portfolio of short-term tax exempt obligations and who are willing to in-
cur the greater price fluctuation of longer-term instruments.
The JPM Institutional Tax Exempt Bond Fund (the "Fund") is a diversified
no-load mutual fund for which there are no sales charges or exchange or
redemption fees. The Fund is a series of The JPM Institutional Funds, an
open-end management investment company organized as a Massachusetts Busi-
ness Trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJEC-
TIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE TAX EXEMPT BOND
PORTFOLIO (THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVEST-
MENT 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 FI-
NANCIAL GROUP, INC. SEE SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) ON
PAGE 4.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be re-
tained for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission in a Statement of
Additional Information dated January 3, 1995 (as supplemented from time to
time). This information is incorporated herein by reference and is avail-
able without charge upon written request from the Fund's Distributor, Sig-
nature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston, Massachu-
setts 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 GOVERNMEN-
TAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE
THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS RE-
DEEMED, THE VALUE MAY BE HIGHER OR LOWER, THAN THE AMOUNT ORIGINALLY IN-
VESTED 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 SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 3, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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......................... 6
Investment Restrictions.................................................... 8
Management of the Trust and Portfolio...................................... 9
Shareholder Servicing...................................................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 17
Appendix................................................................... 18
</TABLE>
<PAGE>
The JPM Institutional Tax Exempt Bond Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Tax Exempt Bond Fund is designed for investors who seek
tax exempt yields greater than those generally available from a portfolio of
short-term tax exempt obligations and who are willing to incur the greater
price fluctuation of longer-term instruments. The Fund seeks to achieve its in-
vestment objective by investing all of its investable assets in The Tax Exempt
Bond Portfolio, an open-end management investment company having the same in-
vestment objective as the Fund. Since the investment characteristics and expe-
rience of the Fund will correspond directly with those of the Portfolio, the
discussion in this Prospectus focuses on the investments and investment poli-
cies 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 investment in 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 financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Tax Exempt Bond Fund to
enable investors to decide if the Fund suits their needs. The Fund operates
through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) finan-
cial 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 JPM Institutional Tax Ex-
empt Bond Fund incur no shareholder transaction expenses; their investment in
the Fund is subject only to the operating expenses set forth below for the Fund
and the Portfolio, as a percentage of average net assets of the Fund. The
Trustees of the Trust believe that the aggregate per share expenses of the Fund
and the Portfolio will be approximately equal to and may be less than the ex-
penses that the Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and Portfolio- Expenses, and Shareholder Servicing.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.30%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursements)............................. 0.20%
-----
Total Operating Expenses (after expense reimbursements)................... 0.50%
=====
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund for
the most recent fiscal year, after any applicable expense reimbursements.
Without giving effect to any reimbursements, Total Operating Expenses would
have been equal on an annual basis to 1.98% of the average daily net assets of
the Fund. See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
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, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants.
The Fund's Annual Report 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 Re-
port is available without charge upon request.
<TABLE>
<CAPTION>
FOR THE FOR THE
FISCAL YEAR ENDED PERIOD ENDED
AUGUST 31, 1994 AUGUST 31, 1993(1)
----------------- ------------------
<S> <C> <C>
Net Asset Value, Beginning of Period...... $ 10.07 $10.00
------- ------
Income From Investment Operations:
Net Investment Income.................... 0.48 0.06
Net Realized and Unrealized Gain (Loss)
on Investments.......................... (0.32) 0.07
------- ------
Total From Investment Operations.......... 0.16 0.13
------- ------
Less Distributions:
Dividends from Net Investment Income..... (0.48) (0.06)
Distributions from Net Realized Gain..... -0- -0-
Total Distributions....................... (0.48) (0.06)
------- ------
Net Asset Value, End of Period............ $ 9.75 $10.07
======= ======
Total Return.............................. 1.61% 1.39%
Ratios and Supplemental Data:
Net Assets (In Thousands)................ $16,415 $ 0.2
Ratio to Average Net Assets:
Expenses................................ 0.50% 0.00%
Net Investment Income................... 4.70% 3.56%
Decrease Reflected in the Above Expense
Ratio due to Expense Reimbursements.... 1.48% 2.50%
</TABLE>
-------
(1) Commencement of Operations July 12, 1993. For the period, total return has
not been annualized and ratios have been annualized.
3
<PAGE>
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly-owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
4
<PAGE>
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVES 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 level of current income
exempt from federal income tax consistent with moderate risk of capital and
maintenance of liquidity. See Taxes. The Fund attempts to achieve its invest-
ment objective by investing all of its investable assets in The Tax Exempt Bond
Portfolio, an open-end management investment company having the same investment
objective as the Fund.
The Fund is designed for investors who seek tax exempt yields greater than
those generally available from a portfolio of short term tax exempt obligations
and who are willing to incur the greater price fluctuation of longer-term in-
struments.
The Portfolio attempts to achieve its investment objective by investing primar-
ily in municipal securities which earn interest exempt from federal income tax
in the opinion of bond counsel for the issuer. During normal market conditions,
the Portfolio will invest at least 80% of its net assets in tax exempt obliga-
tions. Interest on these securities may be subject to state and local taxes.
For more detailed information regarding tax matters, including the applicabil-
ity of the alternative minimum tax, see Taxes.
Morgan believes that based upon current market conditions, the Portfolio will
consist of a portfolio of securities with a duration of four to seven years. In
view of the duration of the Portfolio, under normal market conditions, the
Fund's yield can be expected to be higher and its net asset value less stable
than those of a money market fund. Duration is a measure of the weighted aver-
age maturity of the bonds held in the Portfolio and can be used as a measure of
the sensitivity of the Portfolio's market value to changes in interest rates.
The maturities of the individual securities in the Portfolio may vary widely,
however, as Morgan adjusts the Portfolio's holdings of long-term and short-term
debt securities to reflect its assessment of prospective changes in interest
rates, which may adversely affect current income.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment 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 also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.
The value of the Portfolio's investments will generally fluctuate inversely
with changes in prevailing interest rates. The value of the Portfolio's invest-
ments will also be affected by changes in the creditworthiness of issuers and
other market factors. The quality criteria applied in the selection of portfo-
lio securities are intended to minimize adverse price changes due to credit
considerations. The value of the Portfolio's municipal securities can also be
affected by market reaction to legislative consideration of various tax reform
proposals. Although the net asset value of Portfolio fluctuates, the Portfolio
attempts to preserve the value of its investments to the extent consistent with
its objective.
MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, authorities and instrumen-
talities.
5
<PAGE>
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
sources, but not generally backed by the issuer's taxing power. These include
industrial development bonds where payment is the responsibility of the pri-
vate industrial user of the facility financed by the bonds. The Portfolio may
invest more than 25% of its assets in industrial development bonds, but may
not invest more than 25% of its assets in industrial development bonds in pro-
jects of similar type or in the same state.
MONEY MARKET INSTRUMENTS. 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 demand obligations permit the investment of fluctuating amounts
at periodically adjusted interest rates. They are governed by agreements be-
tween 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 cli-
ents. Although master demand obligations are not marketable to third parties,
the Portfolio considers them to be liquid because they are payable on demand.
For more information about municipal notes, see Investment Objectives and Pol-
icies in the Statement of Additional Information.
The Portfolio will invest in money market instruments that meet the quality
requirements described below except that short-term municipal obligations of
New York State issuers may be rated MIG-2 by Moody's or SP-2 by Standard &
Poor's. Under normal circumstances, the Portfolio will purchase these securi-
ties to invest temporary cash balances or to maintain liquidity to meet with-
drawals. However, the Portfolio may also invest in money market instruments as
a temporary defensive measure taken during, or in anticipation of, adverse
market conditions.
QUALITY INFORMATION. The Portfolio will not purchase any municipal obligation
unless it is rated at least A, MIG-1 or Prime-1 by Moody's or A, SP-1 or A1 by
Standard & Poor's (except for short-term obligations of New York State issuers
as described above) or it is unrated and in Morgan's opinion it is of compara-
ble quality. These standards must be satisfied at the time an investment is
made. If the quality of the investment later declines, the Portfolio may con-
tinue to hold the investment.
In certain circumstances, the Portfolio may also invest up to 20% of the value
of its total assets in taxable securities. In addition, the Portfolio may pur-
chase municipal obligations together with puts, municipal obligations on a
when-issued or delayed delivery basis, enter into repurchase and reverse re-
purchase agreements, purchase synthetic variable rate instruments, loan its
portfolio securities and purchase certain privately placed securities. 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 val-
ued at less than its purchase price. The Portfolio maintains with the Custo-
dian 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 de-
layed delivery transaction, the Portfolio will rely on the other party to con-
summate 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 obligations cre-
ated by these commitments.
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<PAGE>
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objective and Policies in the
Statement of Additional Information.
TAXABLE INVESTMENTS. The Portfolio attempts to invest its assets in tax exempt
municipal securities; however, the Portfolio is permitted to invest up to 20%
of the value of its total assets in securities, the interest income on which
may be subject to federal, state or local income taxes. The Portfolio may make
taxable investments pending investment of proceeds from sales of its interests
or portfolio securities, pending settlement of purchases of portfolio securi-
ties, to maintain liquidity or when it is advisable in Morgan's opinion because
of adverse market conditions. The Portfolio will invest in taxable securities
only if there are no tax exempt securities available for purchase or if the af-
ter tax yield from an investment in taxable securities exceeds the yield on
available tax exempt securities. In abnormal market conditions, if, in the
judgment of Morgan, tax exempt securities satisfying the Portfolio's investment
objective may not be purchased, the Portfolio may, for defensive purposes only,
temporarily invest more than 20% of its net assets in debt securities the in-
terest on which is subject to federal, state or local income taxes. The taxable
investments permitted for the Portfolio include obligations of the U.S. Govern-
ment and its agencies and instrumentalities, bank obligations, commercial paper
and repurchase agreements and other debt securities which meet the Portfolio's
quality requirements. See Taxes.
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 spec-
ified period prior to maturity. This right to resell is known as a put. The ag-
gregate price paid for securities with puts may be higher than the price which
otherwise would be paid. Consistent with the
7
<PAGE>
investment objective of the Portfolio and subject to the supervision of the
Trustees, the purpose of this practice is to permit the Portfolio to be fully
invested in tax exempt securities while maintaining the necessary liquidity to
purchase securities on a when-issued basis, to meet unusually large withdraw-
als, to purchase at a later date securities other than those subject to the put
and to facilitate Morgan's ability to manage the Portfolio actively. The prin-
cipal risk of puts is that the put writer may default on its obligation to re-
purchase. Morgan will monitor each writer's ability to meet its obligations un-
der puts.
The amortized cost method is used by the Portfolio to value all municipal secu-
rities with maturities 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 mu-
nicipal securities with maturities of 60 days or more that are subject to sepa-
rate 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. Morgan
will review the structure of synthetic variable rate instruments to identify
credit and liquidity risks (including the conditions under which the right to
tender the instrument would no longer be available) and will monitor those
risks. In the event that the right to tender the instrument is no longer avail-
able, 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 total assets would be in illiq-
uid investments. Subject to that non-fundamental policy limitation, the Portfo-
lio may acquire investments that are illiquid or have limited liquidity, such
as private placements or investments that are not registered under the Securi-
ties Act of 1933 and cannot be offered for public sale in the United States
without first being registered under the Securities Act of 1933. An illiquid
investment is any investment that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which it is valued
by the Portfolio. The price the Portfolio pays for illiquid securities or re-
ceives upon resale may be lower than the price paid or received for similar se-
curities with a more liquid market. Accordingly the valuation of these securi-
ties will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the Securities Act of 1933. These securities
may be determined to be liquid in accordance with guidelines established by
Morgan and approved by the Trustees. The Trustees will monitor Morgan's imple-
mentation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes, but it does not currently intend to do so.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
8
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As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
government securities, and (b) the Fund may not own more than 10% of the out-
standing voting securities of any one issuer.
The Fund may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of Fund to-
tal assets, taken at cost at the time of borrowing, or purchase securities
while borrowings exceed 5% of its total assets; or mortgage, pledge or hypoth-
ecate any assets except in connection with any such borrowings in amounts up
to 10% of the value of the Fund's net assets at the time of borrowing; or (ii)
acquire industrial revenue bonds if as a result more than 5% of total Fund as-
sets would be invested in industrial revenue bonds where payment of principal
and interest is the responsibility of companies with fewer than three years of
operating history.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions and Additional Information in the Statement of Additional Informa-
tion.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to those funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York
9
<PAGE>
trust company which conducts a general banking and trust business. Morgan is a
wholly-owned subsidiary 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 subsidi-
aries, offers a wide range of services to governmental, institutional, corpo-
rate and individual customers and acts as investment adviser to individual and
institutional clients with combined assets under management of over $145 bil-
lion (of which the Advisor advises over $30 billion). Morgan provides invest-
ment advice and portfolio management services to the Portfolio. Subject to the
supervision of the Portfolio's Trustees, Morgan makes the Portfolio's day-to-
day investment decisions, arranges for the execution of portfolio transactions
and generally manages the Portfolio's investments. See Investment Advisor in
the Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
and its predecessor entity (the inception date of each person's responsibility
for the Portfolio (or its predecessor) and his or her business experience for
the past 5 years is indicated parenthetically): Elbridge T. Gerry, III, Vice
President (since January, 1992, employed by Morgan since prior to 1990) and
Elizabeth A. Augustin, Vice President (since January, 1992, employed by Morgan
since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.30% 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. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services.
In connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain recordkeeping responsibilities; (ii) takes responsibility for compli-
ance with all applicable federal and state securities and other regulatory re-
quirements; (iii) is responsible for the registration of sufficient Fund
shares under federal and state securities laws; (iv) takes responsibility for
monitoring the Fund's status as a regulated investment company under the In-
ternal Revenue Code of 1986; and (v) performs such administrative and manage-
rial oversight of the activities of the Trust's and the Portfolio's custodian
and transfer agent, respectively, as the Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Financial and Fund
Accounting Services Agreements with Morgan, the fees of the Administrator are
covered by Morgan's expense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM In-
stitutional Funds as well as The Pierpont Funds, which is another family of
mutual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 bil-
lion of these funds' aggregate average daily net assets, 0.032% of the next $2
billion of these funds' aggregate average daily net assets, 0.024% of the next
$2 billion of these funds' aggregate average daily net assets and 0.016% of
these funds' aggregate average daily net assets in excess of $5 billion. This
fee rate is then applied to the net assets of the Fund.
10
<PAGE>
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, at the annual rate of
0.05% of the Fund's average daily net assets. The Portfolio's Agreement pro-
vides for the Portfolio to pay Morgan a fee for these services, which is com-
puted daily and may be paid monthly, at the following annual rate of the Port-
folio's average daily net assets: 0.10% 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 of the Trust and the Portfolio regularly review amounts
paid to and accounted for by Morgan pursuant to these Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
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<PAGE>
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least August 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.50% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below.
The Fund has agreed to pay Morgan for these services at an annual rate (ex-
pressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.05% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $5 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor. Any shareholder may also
call J.P.
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Morgan Funds Services at (800) 766-7722 for assistance in placing an order for
Fund shares. If the Fund receives a purchase order prior to 4:00 P.M. New York
time on any business day, the purchase of Fund shares is effective and is made
at the net asset value determined that day. If the Fund receives a purchase or-
der after 4:00 P.M. New York time, the purchase is effective 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 Institu-
tion) to transfer immediately available funds to the Fund's Distributor on set-
tlement date. The settlement date is generally the business day after the pur-
chase is effective. The purchaser will begin to receive the daily dividends on
the settlement date. See Dividends and Distributions.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing periodic statements showing the client's account balance and integrating
these statements with those of other transactions and balances in the client's
other accounts serviced by the Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other information and
performing such other services as Morgan or the Eligible Institution's clients
may reasonably request and 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 preassigned
shareholder Personal Identification Number and the amount of the redemption.
The Fund executes effective redemption requests at the next determined net as-
set value per share. See Net Asset Value. See Additional Information 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 de-
posited on settlement date in immediately available funds to the shareholder's
account at Morgan or at his Eligible Institution or, in the case of certain
Morgan customers, are mailed by check or wire transferred in accordance with
the customer's instructions. The redeemer will continue to receive dividends on
these shares through the day before the 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 income
tax on dividends, distributions and redemption of proceeds when non-corporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a Morgan customer sends a check to Morgan for the purchase of Fund
shares and shares are purchased with funds made available by Morgan before
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<PAGE>
the check has cleared, the transmittal of redemption proceeds from the shares
will occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any JPM Institutional Fund
or Pierpont Fund without charge. An exchange may be made so long as after the
exchange the investor has shares, in each fund in which he or she remains an
investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Institutional
Funds and The Pierpont Funds. See also Additional Information below for an ex-
planation of the telephone exchange policy of The JPM Institutional Funds.
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 the 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.
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 ac-
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<PAGE>
crued daily. See Net Asset Value in the Statement of Additional Information for
information on valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, thirteen series of shares have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by share-
holder vote as may be required by either the Investment Company Act of 1940 or
the Declaration of Trust. The Trustees will call a meeting of shareholders to
vote on removal of a Trustee upon the written request of the record holders of
ten percent of Trust shares and will assist shareholders in communicating with
each other as prescribed in Section 16(c) of the 1940 Act. For further organi-
zation information, including certain shareholder rights, see Description of
Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and com-
mon 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. According-
ly, the Trustees of the Trust believe that neither the Fund nor its sharehold-
ers will be adversely affected by reason of the Fund's investing in the Portfo-
lio.
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 federal
taxes and with respect to the applicability of state or local taxes. See Taxes
in the Statement of Additional Information. Annual statements as to the current
federal tax status of distributions, if applicable, are mailed to shareholders
after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal
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<PAGE>
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 limits. The Portfolio intends to qualify as
an association treated as a partnership for federal income tax purposes. As
such, the Portfolio should not be subject to tax. The Fund's status as a regu-
lated investment company is dependent on, among other things, the Portfolio's
continued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
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. Ex-
empt-interest dividends received from the Fund will be treated for federal in-
come tax purposes as tax exempt interest income. In view of the Fund's invest-
ment policies, it is expected that a substantial portion of the Fund's divi-
dends will be exempt-interest dividends, although the Fund may from time to
time realize and distribute net short-term capital gains and may invest lim-
ited amounts in taxable securities under certain circumstances. See Taxable
Investments.
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
purposes of the alternative minimum tax. The Fund has limited its investments
to those securities the interest on which will not be treated as preference
items for purposes of the alternative minimum tax in the opinion of bond coun-
sel for the issuer. The Fund currently has no intention of investing in obli-
gations subject to the alternative minimum tax under normal market conditions.
Corporations should, however, be aware that interest on all municipal securi-
ties will be included in calculating (i) adjusted current earnings for pur-
poses of the alternative minimum tax applicable to them, (ii) the additional
tax imposed 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 prop-
erty and casualty insurance companies, and they should consult their tax advi-
sors before purchasing shares of the Fund.
Interest on indebtedness incurred or continued by a shareholder (whether a
corporation or an individual) to purchase or carry shares of the Fund is 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 controlled
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
capital gains in excess of net long-term capital losses are taxable as ordi-
nary income to shareholders of the Fund whether such distributions are taken
in cash or reinvested in additional shares. Distributions of this type to cor-
porate shareholders 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 regard-
less of whether taken in cash or reinvested in additional shares. Long-term
capital gains distributions to corporate shareholders are not eligible for the
dividends-received deduction.
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<PAGE>
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
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of
any long-term capital gain distributions received by the shareholder with re-
spect to such shares. In addition, any loss realized by a shareholder upon the
redemption or exchange of shares in the Fund held six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholder with respect to these shares. See Taxes in the Statement of Addi-
tional Information.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including re-
quiring investors to give their personal identification number and tape re-
cording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it or the Shareholder
Servicing Agent may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poors 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes 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 in-
vestment during the 30-day period is assumed to be generated each 30-day pe-
riod 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 equivalent yield is calculated similarly to
the yield for the Fund, except that the yield is increased using a stated in-
come tax rate to demonstrate the taxable yield necessary to produce an after-
tax equivalent to the Fund.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. These methods of calculating yield and total return are required
by regulations of the Securities and Exchange Commission. Yield and total re-
turn data similarly calculated, unless otherwise indicated, over other speci-
fied periods of time may also be used. See Performance Data in the Statement
of Additional Information. All performance figures are based on historical
earnings and are not intended to indicate future performance. Performance in-
formation may be obtained by calling the Fund's Distributor at (800) 847-9487.
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<PAGE>
APPENDIX
The Portfolio is permitted to enter into the futures and options transactions
described below, but it does not currently intend to do so.
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 put and call op-
tions on futures contracts on fixed income securities and indexes of fixed in-
come securities.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. Because combined options positions involve multiple trades, they result
in higher transaction costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio securi-
ties, these techniques themselves entail certain other risks. If the Advisor
applies a strategy at an inappropriate time or judges market conditions or
trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments, or if it could not close out its positions
because of an illiquid secondary market. In addition, the Portfolio will incur
transaction costs, including trading commissions and option premiums, in con-
nection with its futures and options transactions and these transactions could
significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of secu-
rities and futures contracts, or purchase and sell futures contracts, only if
such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the Port-
folio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on
18
<PAGE>
an index, settlement is in cash and does not involve the actual sale of securi-
ties. 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 expira-
tion 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 on
any securities index based on securities in which the Portfolio may invest. Op-
tions 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 op-
tions are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single se-
curity. The Portfolio, in purchasing or selling index options, is subject to
the risk that the value of its portfolio securities may not change as much as
an index because the Portfolio's investments generally will not match the com-
position of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
19
<PAGE>
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.
20
<PAGE>
---------------------------------------
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 Tax Exempt Bond Fund
PROSPECTUS
January 3, 1995
<PAGE>
PROSPECTUS
The JPM Institutional Emerging Markets Equity Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Emerging Markets Equity Fund seeks to provide a high
total return from a portfolio of equity securities of companies in emerging
markets. It is designed for long-term investors who want to diversify their
investments by adding exposure to the rapidly growing emerging markets.
The JPM Institutional Emerging Markets Equity Fund (the "Fund") is a
diversified no-load mutual fund for which there are no sales charges or
exchange or redemption fees. The Fund is a series of The JPM Institutional
Funds, an open-end management investment company organized as a Massachusetts
Business Trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE EMERGING MARKETS EQUITY PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES
METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL INFORMA-
TION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 1, 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 MARCH 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk
Factors................................................................... 6
Investment Restrictions.................................................... 9
Management of the Trust and Portfolio...................................... 10
Shareholder Servicing...................................................... 13
Purchase of Shares......................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 15
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 15
Organization............................................................... 16
Taxes...................................................................... 16
Additional Information..................................................... 17
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-3
</TABLE>
<PAGE>
The JPM Institutional Emerging Markets Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Emerging Markets Equity Fund is designed for long term
investors who want to diversify their investments by adding exposure to the
rapidly growing emerging markets. The Fund seeks to achieve its investment ob-
jective by investing all of its investable assets in The Emerging Markets Eq-
uity Portfolio, an open-end management investment company having the same in-
vestment objective as the Fund. Since the investment characteristics and expe-
rience of the Fund will correspond directly with those of the Portfolio, the
discussion in this Prospectus focuses on the investments and investment poli-
cies of the Portfolio. The net asset value of shares in the Fund fluctuates
with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. The Portfolio's investments in securities
of issuers in emerging markets, involve foreign investment risks and may be
more volatile and less liquid than domestic securities. For further information
about these investments and investment techniques, see Investment Objective and
Policies discussed below.
The Fund requires a minimum initial investment of $500,000. The minimum subse-
quent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $500,000 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 JPM Institutional Emerging Markets Equity Fund to enable in-
vestors to decide if the Fund suits their needs. The Fund operates through Sig-
nature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) financial serv-
ices 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 JPM Institutional Emerg-
ing Markets Equity Fund incur no shareholder transaction expenses; their in-
vestment in the Fund is subject only to the operating expenses set forth below
for the Fund and the Portfolio, as a percentage of average net assets of the
Fund. The Trustees of the Trust believe that the aggregate per share expenses
of the Fund and the Portfolio will be approximately equal to and may be less
than the expenses that the Fund would incur if it retained the services of an
investment adviser and invested its assets directly in portfolio securities.
Fund and Portfolio expenses are discussed below under the headings Management
of the Trust and Portfolio--Expenses, and Shareholder Servicing.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 1.00%
Rule 12b-1 Fees........................................................... None
Other Expenses After Expense Reimbursements............................... 0.46%
-----
Total Operating Expenses After Expense Reimbursements..................... 1.46%
=====
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, after any applicable expense reimbursements.
Without such reimbursements, Total Operating Expenses would have been equal on
an annual basis to 1.62% of the average daily net assets of the Fund. See Man-
agement of the Trust and Portfolio. The Fund commenced operations in November,
1993.
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:
<TABLE>
<S> <C>
1 Year..................................................................... $ 15
3 Years.................................................................... $ 46
5 Years.................................................................... $ 80
10 Years................................................................... $175
</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, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
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 , which
is incorporated by reference into the Statement of Additional Information, in-
cludes a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's Annual Report is available without
charge upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
OCTOBER 31, 1994(1)
--------------------
<S> <C>
Net Asset Value, Beginning of Period...................... $ 10.00
--------
Income From Investment Operations:
Net Investment Income................................... 0.04
Net Realized and Unrealized Gain (Loss) from Portfolio.. 2.43
--------
Total From investment operations.......................... 2.47
--------
Net Asset Value, End of Period............................ $ 12.47
========
Total Return.............................................. 24.70%
Ratios and Supplemental Data:
Net Assets at end of Period (In Thousands).............. $146,667
Ratios to Average Net Assets (Annualized):
Expenses.............................................. 1.46%
Net Investment Income................................. 0.61%
Decrease Reflected in the above Expense Ratio due to
Expense Reimbursements............................... 0.16%
</TABLE>
-------
(1) Commencement of Operations November 15, 1993. For the period, total return
has not been annualized.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly-owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
3
<PAGE>
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to achieve a high total return from a port-
folio of equity securities of companies in emerging markets. Total return will
consist of realized and unrealized capital gains and losses plus income. The
Fund attempts to achieve its investment objective by investing all its
investable assets in The Emerging Markets Equity Portfolio, an open-end manage-
ment investment company having the same investment objective as the Fund.
The JPM Institutional Emerging Markets Equity Fund is designed for long-term
investors who want exposure to the rapidly growing emerging markets. THE FUND
DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM NOR IS THE FUND SUITABLE FOR
ALL INVESTORS. Many investments in emerging markets can be considered specula-
tive, and therefore
4
<PAGE>
may offer higher potential for gains and losses and may be more volatile than
investments in the developed markets of the world. See Additional Investment
Information and Risk Factors.
As used in this Prospectus, "emerging markets" include any country which is
generally considered to be an emerging or developing country by the World
Bank, the International Finance Corporation, the United Nations or its author-
ities. These countries generally include every country in the world except
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ire-
land, Italy, Japan, Netherlands, New Zealand, Norway, Spain, Sweden, Switzer-
land, United Kingdom and United States. The Portfolio will focus its invest-
ments in those emerging markets countries which it believes have strongly de-
veloping economies and in which the markets are becoming more sophisticated.
A company in an emerging market is one that: (i) has its principal securities
trading market in an emerging market country; (ii) is organized under the laws
of, and with a principal office in, an emerging market; or (iii) (alone or on
a consolidated basis) derives 50% or more of its total revenue from either
goods produced, sales made or services performed in emerging markets.
The Advisor seeks to achieve the Portfolio's investment objective by a disci-
plined process of country allocation and company selection. Based on fundamen-
tal research, quantitative analysis, and experienced judgment, the Advisor
identifies those countries where economic and political factors, including
currency movements, are likely to produce above-average returns. Based on
their relative value, the Advisor then selects those companies in each
country's major industry sectors which it believes are best positioned and
managed to take advantage of these economic and political factors.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. The Portfolio does not expect to trade in securities for
short-term profits; however, when circumstances warrant, securities may be
sold without regard to the length of time held. To the extent the Portfolio
engages in short-term trading, it may incur increased transaction costs. See
Taxes below.
EQUITY INVESTMENTS. In normal circumstances, the Advisor intends to keep the
Portfolio essentially fully invested with at least 65% of the value of its to-
tal assets in equity securities of emerging markets issuers, consisting of
common stocks and other securities with equity characteristics such as pre-
ferred stock, warrants, rights and convertible securities. The Portfolio's
primary equity investments are the common stock of established companies in
the emerging markets countries the Advisor has identified as attractive. The
assets of the Portfolio ordinarily will be invested in the securities of is-
suers in at least three different emerging markets countries. The common stock
in which the Portfolio may invest includes the common stock of any class or
series or any similar equity interest such as trust or limited partnership in-
terests. The Portfolio invests in securities listed on securities exchanges,
traded in over-the-counter markets, and may invest in certain restricted or
unlisted securities.
Certain emerging markets are closed in whole or in part to equity investments
by foreigners except through specifically authorized investment funds. Securi-
ties of other investment companies may be acquired by the Portfolio to the ex-
tent permitted under the 1940 Act--that is, the Portfolio may invest up to 10%
of its total assets in securities of other investment companies so long as not
more than 3% of the outstanding voting stock of any one investment company is
held by the Portfolio. In addition, not more than 5% of the Portfolio's total
assets may be invested in the securities of any one investment company. As a
shareholder in an investment fund, the Portfolio would bear its share of that
investment fund's expenses, including its advisory and administration fees. At
the same time the Portfolio and the Fund would continue to pay their own oper-
ating expenses.
The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its port-
folio securities, purchase certain privately placed securities and enter into
forward foreign currency exchange contracts. In addi-
5
<PAGE>
tion, the Portfolio may use options on securities and securities indexes,
futures contracts and options on futures contracts for hedging and risk manage-
ment purposes. For a discussion of these investments and investment techniques,
see Additional Investment Information and Risk Factors.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities of
domestic and, subject to the Portfolio's investment restrictions, foreign is-
suers. The convertible securities in which the Portfolio may invest include any
debt securities or preferred stock which may be converted into common stock or
which carry the right to purchase common stock. Convertible securities entitle
the holder to exchange the securities for a specified number of shares of com-
mon stock, usually of the same company, at specified prices within a certain
period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
6
<PAGE>
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into re-
verse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date
and price, reflecting the interest rate effective for the term of the agree-
ment. It may also be viewed as the borrowing of money by the Portfolio and,
therefore, is a form of leverage. Leverage may cause any gains or losses of
the Portfolio to be magnified. For more information, see Investment Objective
and Policies in the Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in foreign se-
curities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment
risks from those affecting securities of U.S. domestic issuers. There may be
limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to domes-
tic companies. Dividends and interest paid by foreign issuers may be subject
to withholding and other foreign taxes which may decrease the net return on
foreign investments as compared to dividends and interest paid to these Port-
folios by domestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing securities on foreign exchanges, purchasers normally pay fixed commissions
that are generally higher than the negotiated commissions charged in the
United States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
The Portfolio invests primarily in equity securities of companies in emerging
markets countries. Investments in securities of issuers in emerging markets
countries may involve a high degree of risk and many may be considered specu-
lative. These investments carry all of the risks of investing in securities of
foreign issuers outlined in this section to a heightened degree. These height-
ened risks include (i) greater risks of expropriation, confiscatory taxation,
nationalization, and less social, political and economic stability; (ii) the
small current size of the markets for securities of emerging markets issuers
and the currently low or non-existent volume of trading, resulting in lack of
liquidity and in price volatility; (iii) certain national policies which may
restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national in-
terests; and (iv) the absence of developed legal structures governing private
or foreign investment and private property.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued
7
<PAGE>
by a U.S. bank or trust company evidencing ownership of the underlying foreign
securities. Certain such institutions issuing ADRs may not be sponsored by the
issuer of the underlying foreign securities. A non-sponsored depository may
not provide the same shareholder information that a sponsored depository is
required to provide under its contractual arrangements with the issuer of the
underlying foreign securities. EDRs are receipts issued by a European finan-
cial institution evidencing a similar arrangement. Generally, ADRs, in regis-
tered form, are designed for use in the U.S. securities markets, and EDRs, in
bearer form, are designed for use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign cur-
rencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange Trans-
actions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and sells
securities and receives interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or uses forward contracts to purchase or sell foreign curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These con-
tracts are entered into in the interbank market directly between currency
traders (usually large commercial banks) and their customers. A forward for-
eign currency exchange contract generally has no deposit requirement, and is
traded at a net price without commission. The Portfolio will not enter into
forward contracts for speculative purposes. Neither spot transactions nor for-
ward foreign currency exchange contracts eliminate fluctuations in the prices
of the Portfolio's securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally traded in a foreign currency. To do this, the Portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts to sell a foreign currency in exchange for another foreign currency if
the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of fluc-
tuations in the value of the currency purchased vis a vis the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The projec-
tion of currency market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
8
<PAGE>
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to that 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 and cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933. 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 Securities Act of 1933. These securi-
ties may be determined to be liquid in accordance with guidelines established
by Morgan and approved by the Trustees. The Trustees will monitor Morgan's im-
plementation 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 both hedging and risk management purposes, although not for speculation.
For more detailed information about these transactions, see the Appendix to
this Prospectus and Risk Management in the Statement of Additional Informa-
tion.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment perspec-
tive. The Portfolio may make money market investments pending other investment
or settlement, for liquidity or in adverse market conditions. The money market
investments permitted for the Portfolio include obligations of the U.S. Gov-
ernment and its agencies and instrumentalities, other debt securities, commer-
cial paper, bank obligations and repurchase agreements. The Portfolio may also
invest in short-term obligations of sovereign foreign governments, their agen-
cies, instrumentalities and political subdivisions. For more detailed informa-
tion about these money market investments, see Investment Objectives and Poli-
cies in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional In-
formation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
Government securities, and (b) the Fund may not own more than 10% of the out-
standing voting securities of any one issuer.
The Fund may not (i) purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments in such industry would exceed 25% of the value of the Fund's total as-
sets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) borrow money except that the Fund may (a) borrow 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 one-third of the Fund's total
9
<PAGE>
assets less liabilities (other than borrowings), or (iii) issue senior securi-
ties except as permitted by the 1940 Act or any rule, order or interpretation
thereunder.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions and Additional Information in the Statement of Additional Informa-
tion.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company
organized under the laws of Delaware. Through offices in New York City and
abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional cli-
ents with combined assets under management of over $145 billion (of which the
Advisor advises over $30 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
10
<PAGE>
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the day-
to-day management and implementation of Morgan's process for the Portfolio (the
inception date of each person's responsibility for the Portfolio and his busi-
ness experience for the past 5 years is indicated parenthetically): Douglas J.
Dooley, Vice President (since November, 1993, employed by Morgan since prior to
1990) and Satyen Mehta, Vice President (since November, 1993, employed by Mor-
gan since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 1.00% of the Portfolio's average daily net assets. While the
advisory fee for the Portfolio is higher than that of most investment compa-
nies, it is similar to the advisory fees of other emerging market funds.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent and Share-
holder Servicing below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services. In
connection with its responsibilities as Administrator, SBDS (i) furnishes ordi-
nary clerical and related services for day-to-day operations including certain
recordkeeping responsibilities; (ii) takes responsibility for compliance with
all applicable federal and state securities and other regulatory requirements;
(iii) is responsible for the registration of sufficient Fund shares under fed-
eral and state securities laws; (iv) takes responsibility for monitoring the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986; and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent, re-
spectively, as the Trustees may direct from time to time. Under the terms of
the Trust's and the Portfolio's Financial and Fund Accounting Services Agree-
ments with Morgan, the fees of the Administrator are covered by Morgan's ex-
pense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM Insti-
tutional Funds as well as The Pierpont Funds, which is another family of mutual
funds for which SBDS acts as Administrator. The fee rate is calculated daily in
accordance with the following schedule: 0.040% of the first $1 billion of these
funds' aggregate average daily net assets, 0.032% of the next $2 billion of
these funds' aggregate average daily net assets, 0.024% of the next $2 billion
of these funds' aggregate average daily net assets and 0.016% of these funds'
aggregate average daily net assets in excess of $5 billion. This fee rate is
then applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
11
<PAGE>
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, at the annual rate of
0.05% of the Fund's average daily net assets. The Portfolio's Agreement pro-
vides for the Portfolio to pay Morgan a fee for these services, which is com-
puted daily and may be paid monthly, at the following annual rate of the Port-
folio's average daily net assets: 0.15% on net assets up to $200 million, 0.10%
on the next $200 million in net assets, 0.05% on the next $200 million in net
assets, and 0.03% on net assets thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense under-
takings and reflect payments made directly to third parties by the Fund and the
Portfolio for services rendered, as well as payments to Morgan for services
rendered. The Trustees of the Trust and the Portfolio regularly review amounts
paid to and accounted for by Morgan pursuant to these Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least October 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 1.60% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are
12
<PAGE>
currently 2.5% of the first $30 million of average net assets, 2% of the next
$70 million of such net assets and 1.5% of such net assets in excess of $100
million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.05% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $500,000 and a minimum subse-
quent investment of $25,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the next business day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for as-
sistance in placing an order for Fund shares. If the Fund receives a purchase
order prior to 4:00 P.M. New York time on any business day, the purchase of
Fund shares is effective and is made at the net asset value determined that
day, and the purchaser generally becomes a holder of record on the next busi-
ness day upon the Fund's receipt of payment. If the Fund receives a purchase
order after 4:00 P.M. New York time, the purchase is effective and is made at
the net asset value determined on the next business day, and the purchaser be-
comes a holder of record on the following business day upon the Fund's receipt
of payment.
13
<PAGE>
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses, pro-
viding periodic statements showing the client's account balance and integrat-
ing these statements with those of other transactions and balances in the cli-
ent's other accounts serviced by the Eligible Institution, transmitting proxy
statements, 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
generally deposited the next business day in immediately available funds to
the shareholder's account at Morgan or at his Eligible Institution or, in the
case of certain Morgan customers, are mailed by check or wire transferred in
accordance with the customer's instructions and, subject to Further Redemption
Information, in any event are paid within seven days.
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the Fund's initial investment amount of $500,000 for more
than 30 days because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is in-
creased to the Fund's minimum investment amount or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption of proceeds when non-cor-
porate investors have not provided a certified taxpayer identification number.
In addition, if a Morgan customer sends a check to Morgan for the purchase of
Fund shares and shares are purchased with funds made available by Morgan be-
fore the check has cleared, the transmittal of redemption proceeds from the
shares will occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
14
<PAGE>
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Institutional
Funds and The Pierpont Funds. See also Additional Information below for an ex-
planation of the telephone exchange policy of The JPM Institutional Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state securi-
ties laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income
if any, are declared and paid annually. The Fund may also declare an addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are de-
clared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and distribu-
tions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
15
<PAGE>
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, thirteen series of shares have been authorized and are
available for sale to the public. Only shares of the Fund are offered through
this Prospectus. No series of shares will have any preference over any other
series. See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust does not intend to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for ac-
tion by shareholder vote as may be required by either the Investment Company
Act of 1940 or the Declaration of Trust. The Trustees will call a meeting of
shareholders to vote on removal of a Trustee upon the written request of the
record holders of ten percent of Trust shares and will assist shareholders in
communicating with each other as prescribed in Section 16(c) of the 1940 Act.
For further organization information, including certain shareholder rights,
see Description of Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declara-
tion of Trust provides that the Fund and other entities investing in the Port-
folio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's con-
tinued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
16
<PAGE>
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or re-
invested in additional shares. Distributions of this type to corporate share-
holders of the Fund will not qualify for the dividends- received deduction be-
cause the income of the Fund will not consist of dividends paid by United
States corporations.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and 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.
The Fund is subject to foreign withholding taxes with respect to income re-
ceived from sources within certain foreign countries. So long as more than 50%
of the value of the Fund's total assets at the close of any taxable year con-
sists of stock or securities of foreign corporations, the Fund may elect to
treat any such foreign income taxes paid by it as paid directly by its share-
holders. The Fund will make such an election only if it deems it to be in the
best interests of its shareholders and will notify shareholders in writing each
year if it makes the election and of the amount of foreign income taxes, if
any, to be treated as paid by the shareholders. If the Fund makes the election,
each shareholder will be required to include in income his proportionate share
of the amount of foreign income taxes paid by the Fund and will be entitled to
claim either a credit (which is subject to certain limitations), or, if the
shareholder itemizes deductions, a deduction for his share of the foreign in-
come taxes in computing his federal income tax liability. (No deduction will be
permitted to individuals in computing their alternative minimum tax liability.)
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, 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 communicated from investors
by telephone are genuine; if it does not, it or the Shareholder Servicing Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
17
<PAGE>
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 & Poors 500 Composite Stock Price Index, the Dow Jones
Average, the Frank Russell Indexes, the EAFE Index, the Financial Times World
Stock Index and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. This method of calculating total return is required by regula-
tions of the Securities and Exchange Commission. Yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling the Fund's Distributor at (800) 847-9487.
18
<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell (write) exchange traded and OTC put and
call options on equity securities or indexes of equity securities, (b) purchase
and sell futures contracts on indexes of equity securities, and (c) purchase
and sell (write) put and call options on futures contracts on indexes of equity
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 the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
A-1
<PAGE>
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 (write) 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, ex-
cept 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 securi-
ties or segment of the securities market rather than price fluctuations in a
single security. The Portfolio, in purchasing or selling index options, is sub-
ject 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.
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.
A-2
<PAGE>
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 Portfo-lio'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.
A-3
<PAGE>
---------------------------------------
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 Emerging Markets Equity Fund
PROSPECTUS
March 1, 1995
<PAGE>
PROSPECTUS
The JPM Institutional Short Term Bond Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Short Term Bond Fund seeks to provide a high total return
while attempting to limit the likelihood of negative quarterly returns. It is
designed for investors who do not require the stable net asset value typical of
a money market fund but who seek less price fluctuation than is typical of a
longer-term bond fund.
The JPM Institutional Short Term Bond Fund (the "Fund") is a diversified no-
load mutual fund for which there are no sales charges or exchange or redemption
fees. The Fund is a series of The JPM Institutional Funds, an open-end
management investment company organized as a Massachusetts Business Trust (the
"Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE SHORT TERM 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 "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 1, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Institutional
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 6
Investment Restrictions.................................................... 9
Management of the Trust and Portfolio...................................... 10
Shareholder Servicing...................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares........................................................ 13
Redemption of Shares...................................................... 14
Exchange of Shares........................................................ 15
Dividends and Distributions............................................... 15
Net Assets Value.......................................................... 15
Organization.............................................................. 16
Taxes..................................................................... 16
Additional Information.................................................... 17
Appendix................................................................... A-1
</TABLE>
<PAGE>
The JPM Institutional Short Term Bond Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Short Term Bond Fund is designed for investors who place
a strong emphasis on conservation of capital but who also want a return greater
than that of a money market fund and other very low risk investment vehicles.
It is appropriate for investors who do not require the stable net asset value
typical of a money market fund but do want less price fluctuation than is typi-
cal of a longer-term bond fund. The Fund seeks to achieve its investment objec-
tive by investing all of its investable assets in The Short Term Bond Portfo-
lio, an open-end management investment company having the same investment ob-
jective 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 Port-
folio. The net asset value of shares in the Fund fluctuates with changes in the
value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. For further information about these in-
vestments and investment techniques, see Investment Objective and Policies dis-
cussed below.
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 investment in 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 financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Short Term Bond Fund to
enable investors to decide if the Fund suits their needs. The Fund operates
through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) finan-
cial 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 JPM Institutional Short
Term Bond Fund incur no shareholder transaction expenses; their investment in
the Fund is subject only to the operating expenses set forth below for the Fund
and the Portfolio, as a percentage of average net assets of the Fund. The
Trustees of the Trust believe that the aggregate per share expenses of the Fund
and the Portfolio will be approximately equal to and may be less than the ex-
penses that the Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and Portfolio-- Expenses, and Shareholder Servicing.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases........................................... None
Sales Load Imposed on Reinvested Dividends................................ None
Deferred Sales Load....................................................... None
Redemption Fees........................................................... None
Exchange Fees............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................ 0.25%
Rule 12b-1 Fees.......................................................... None
Other Expenses After Expense Reimbursements.............................. 0.20%
-----
Total Operating Expenses After Expense Reimbursements.................... 0.45%
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, after any applicable expense reimbursement.
Without such reimbursement, Total Operating Expenses would have been equal
on an annual basis to 0.78% of the average daily net assets of the Fund. See
Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year..................................................................... $ 5
3 Years.................................................................... $14
5 Years.................................................................... $25
10 Years................................................................... $57
</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, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants. The Fund's Annual Report, which
is incorporated by reference into the Statement of Additional Information, in-
cludes a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's Annual Report is available without
charge upon request.
<TABLE>
<CAPTION>
FOR THE FOR THE
FISCAL YEAR PERIOD
ENDED ENDED
10/31/94 10/31/93(1)
----------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $ 9.99 $ 10.00
------- -------
Income from Investment Operations
Net Investment Income................................. 0.47 0.11
Net Realized and Unrealized Gain (Loss) on Portfolio.. (0.39) (0.01)
------- -------
Total From Investment Operations....................... 0.08 0.10
Less Distributions to Shareholders From
Net Investment Income................................. (0.47) (0.11)
------- -------
Net Asset Value, End of Period......................... $ 9.60 $ 9.99
======= =======
Total Return........................................... 0.87% 1.01%
Ratios and Supplemental Data
Net Assets, End of Period (In Thousands).............. $47,679 $27,605
Ratio to Average Net Assets:
Expenses............................................. 0.45% 0.46%
Net Investment Income................................ 4.96% 3.92%
Decrease Reflected in the Above Expense Ratio due to
Expense Reimbursements.............................. 0.33% 0.84%
</TABLE>
-------
(1) Commencement of Operations July 8, 1993. For the period, total return has
not been annualized and ratios have been annualized.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
3
<PAGE>
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The JPM Institutional Short Term Bond Fund's investment objective is to provide
a high total return while attempting to limit the likelihood of negative quar-
terly returns. Total return will consist of income plus realized and unrealized
capital gains and losses. The Fund seeks to achieve this high total return to
the extent consistent with modest risk of capital and the maintenance of li-
quidity. The Fund attempts to achieve its investment objective by investing all
of its investable assets in The Short Term Bond Portfolio, an open-end manage-
ment investment company having the same investment objective as the Fund.
4
<PAGE>
The JPM Institutional Short Term Bond Fund is designed for investors who place
a strong emphasis on conservation of capital but who also want a return greater
than that of a money market fund and other very low risk investment vehicles.
It is appropriate for investors who do not require the stable net asset value
typical of a money market fund but do want less price fluctuation than is typi-
cal of a longer-term bond fund.
Morgan actively manages the Portfolio's duration, the allocation of securities
across market sectors and the selection of securities within sectors. Based on
fundamental, economic and capital markets research, Morgan adjusts the duration
of the Portfolio in accordance with its outlook for interest rates. Morgan also
actively allocates the Portfolio's assets among the broad sectors of the fixed
income market including, but not limited to, U.S. Government and agency securi-
ties, corporate securities, private placements, asset-backed and mortgage-re-
lated securities. Specific securities which Morgan believes are undervalued are
selected for purchase within the sectors using advanced quantitative tools,
analysis of credit risk, the expertise of a dedicated trading desk, and the
judgment of fixed income portfolio managers and analysts.
Morgan also seeks to limit the likelihood of negative quarterly returns by bal-
ancing the Portfolio's level of income with the possibility of capital losses.
This balancing effort helps determine the Portfolio's duration.
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 Portfolio's
market value to changes in interest rates. Under normal market conditions, the
Portfolio's duration will range between one and three years. The maturities of
the individual securities in the Portfolio may vary widely, however.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment 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 also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.
CORPORATE BONDS, ETC. The Portfolio may invest in a broad range of debt securi-
ties of domestic and foreign issuers. These include debt securities of various
types and maturities, e.g., debentures, notes, mortgage securities, equipment
trust certificates and other collateralized securities and zero coupon securi-
ties. Collateralized securities are backed by a pool of assets such as loans or
receivables which generate cash flow to cover the payments due on the securi-
ties. Collateralized securities are subject to certain risks, including a de-
cline in the value of the collateral backing the security, failure of the col-
lateral to generate the anticipated cash flow or in certain cases more rapid
prepayment because of events affecting the collateral, such as accelerated pre-
payment of mortgages or other loans backing these securities or destruction of
equipment subject to equipment trust certificates. In the event of any such
prepayment the Portfolio will be required to reinvest the proceeds of prepay-
ments at interest rates prevailing at the time of reinvestment, which may be
lower. In addition, the value of zero coupon securities which do not pay inter-
est is more volatile than that of interest bearing debt securities with the
same maturity. The Portfolio does not intend to invest in common stock but may
invest to a limited extent in convertible debt or preferred stock. The Portfo-
lio does not expect to invest more than 25% of its assets in securities of for-
eign issuers. If the Portfolio invests in non-U.S. dollar denominated securi-
ties, it hedges the foreign currency exposure into the U.S. dollar. See Addi-
tional Investment Information and Risk Factors for further information on for-
eign investments and convertible securities.
GOVERNMENT OBLIGATIONS, ETC. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of
the United States. These securities include Treasury securities, obligations of
the Government National Mortgage Association ("GNMA Certificates"), the Farmers
Home Administration and the Export Import Bank. GNMA Certificates are mortgage-
backed securities which evidence an undivided interest in mortgage pools. These
securities are subject to more rapid repayment than their stated maturity would
indicate because prepayments of principal on mortgages in the pool are passed
through to the holder of the securities. During periods of declin-
5
<PAGE>
ing interest rates, prepayments of mortgages in the pool can be expected to
increase. The pass-through of these prepayments would have the effect of re-
ducing the Portfolio's positions in these securities and requiring the Portfo-
lio to reinvest the prepayments at interest rates prevailing at the time of
reinvestment. The Portfolio may also invest in obligations issued or guaran-
teed by U.S. Government agencies or instrumentalities where the Portfolio must
look principally to the issuing or guaranteeing agency for ultimate repayment;
some examples of agencies or instrumentalities issuing these obligations are
the Federal Farm Credit System, the Federal Home Loan Banks and the Federal
National Mortgage Association. Although these governmental issuers are respon-
sible for payments on their obligations, they do not guarantee their market
value. The Portfolio may also invest in municipal obligations which may be
general obligations of the issuer or payable only from specific revenue sourc-
es. However, the Portfolio will invest only in municipal obligations that have
been issued on a taxable basis or have an attractive yield excluding tax con-
siderations. In addition, the Portfolio may invest in debt securities of for-
eign governments and governmental entities. See Additional Investment Informa-
tion and Risk Factors for further information on foreign investments.
MONEY MARKET INVESTMENTS. The Portfolio may purchase money market instruments
to invest temporary cash balances or to maintain liquidity to meet withdraw-
als. However, the Portfolio may also invest in money market instruments as a
temporary defensive measure taken during, or in anticipation of, adverse mar-
ket conditions. The money market investments permitted for the Portfolio in-
clude obligations of the U.S. Government and its agencies and instrumentali-
ties, other debt securities, commercial paper, bank obligations and repurchase
agreements. For more detailed information about these money market invest-
ments, see Investment Objectives and Policies in the Statement of Additional
Information.
QUALITY INFORMATION. Under normal market circumstances at least 80% of the
Portfolio's total assets will consist of debt securities that are rated at
least A by Moody's or Standard & Poor's or that are unrated and in Morgan's
opinion are of comparable quality. In the case of the remaining 20% of the
Portfolio's investments, the Portfolio may purchase debt securities that are
rated Baa or better by Moody's or BBB or better by Standard & Poor's or are
unrated and in Morgan's opinion are of comparable quality. Securities rated
Baa by Moody's or BBB by Standard & Poor's are considered investment grade,
but have some speculative characteristics. These standards must be satisfied
at the time an investment is made. If the quality of the investment later de-
clines, the Portfolio may continue to hold the investment. See Appendix A in
the Statement of Additional Information for more detailed information on these
ratings.
The Portfolio may also purchase obligations on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and enter
into certain hedging transactions that may involve options on securities and
securities indexes, futures contracts and options on futures contracts. For a
discussion of these investments and investment techniques, see Additional In-
vestment Information and Risk Factors.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities of
domestic and, subject to the Portfolio's investment restrictions, foreign is-
suers. The convertible securities in which the Portfolio may invest include
any debt securities or preferred stock which may be converted into common
stock or which carry the right to purchase common stock. Convertible securi-
ties entitle the holder to exchange the securities for a specified number of
shares of common stock, usually of the same company, at specified prices
within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY BASIS. Delivery of and payment for these se-
curities 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 fluctuation
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 Custodian a
separate account with
6
<PAGE>
a segregated portfolio of securities in an amount at least equal to these com-
mitments. 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 cur-
rent policy of the Portfolio not to enter into when-issued commitments exceed-
ing in the aggregate 15% of the market value of the Portfolio's total assets
less liabilities other than the obligations created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objective and Policies in the
Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign se-
curities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign is-
suers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic compa-
nies. Dividends and interest paid by foreign issuers may be subject to with-
holding and other foreign taxes which may decrease the net return on foreign
investments as compared to dividends and interest paid to the Portfolio by do-
mestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, nation-
alization, limita-
7
<PAGE>
tion on the removal of funds or assets, or imposition of (or change in) ex-
change control or tax regulations in those foreign countries. In addition,
changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of port-
folio securities and could favorably or unfavorably affect the Portfolio's op-
erations. Furthermore, the economies of individual foreign nations may differ
from the U.S. economy, whether favorably or unfavorably, in areas such as
growth of gross national product, rate of inflation, capital reinvestment, re-
source self-sufficiency and balance of payments position; it may also be more
difficult to obtain and enforce a judgment against a foreign issuer. Any for-
eign investments made by the Portfolio must be made in compliance with U.S.
and foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing securities on foreign exchanges, purchasers normally pay fixed commissions
that are generally higher than the negotiated commissions charged in the
United States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may not provide the same share-
holder information that a sponsored depository is required to provide under
its contractual arrangements with the issuer of the underlying foreign securi-
ties. EDRs are receipts issued by a European financial institution evidencing
a similar arrangement. Generally, ADRs, in registered form, are designed for
use in the U.S. securities markets, and EDRs, in bearer form, are designed for
use in European securities markets.
Since investments in foreign securities involve foreign currencies, the value
of assets as measured in U.S. dollars may be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations, including
currency blockage. See Foreign Currency Exchange Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or uses forward contracts to purchase or sell foreign curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These con-
tracts are entered into in the interbank market directly between currency
traders (usually large commercial banks) and their customers. A forward for-
eign currency exchange contract generally has no deposit requirement, and is
traded at a net price without commission. The Portfolio will not enter into
forward contracts for speculative purposes. Neither spot transactions nor for-
ward foreign currency exchange contracts eliminate fluctuations in the prices
of the Portfolio's securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline.
8
<PAGE>
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally traded in a foreign currency. To do this, the portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a consequence of
market movements in the value of such securities between the date the forward
contract is entered into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful execution of a
hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to that 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 and cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933. 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 Securities Act of 1933. These securi-
ties may be determined to be liquid in accordance with guidelines established
by Morgan and approved by the Trustees. The Trustees will monitor Morgan's im-
plementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional In-
formation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
Government securities, and (b) the Fund may not own more than 10% of the out-
standing voting securities of any one issuer.
9
<PAGE>
The Fund may not (i) purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments in such industry would exceed 25% of the value of the Fund's total as-
sets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) borrow money (not including reverse repurchase agreements),
except from banks for temporary or extraordinary or emergency purposes and
then only in amounts up to 30% of the value of its total assets, taken at cost
at the time of borrowing (and provided that such borrowings and reverse repur-
chase agreements do not exceed in the aggregate one-third of the market value
of the Fund's total assets less liabilities other than the obligations repre-
sented by the bank borrowings and reverse repurchase agreements), or purchase
securities while borrowings exceed 5% of its total assets; or mortgage, pledge
or hypothecate any assets except in connection with any such borrowings in
amounts not to exceed 30% of the value of the Fund's net assets at the time of
borrowing; or (iii) enter into reverse repurchase agreements and other permit-
ted borrowings which constitute senior securities under the Investment Company
Act of 1940, exceeding in the aggregate one-third of the market value of the
Fund's total assets, less certain liabilities.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions and Additional Information in the Statement of Additional Informa-
tion.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy.................. Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer.............. Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey..................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................ Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan
10
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as Investment Advisor. Morgan, with principal offices at 60 Wall Street, New
York, New York 10260, is a New York trust company which conducts a general
banking and trust business. Morgan is a wholly-owned subsidiary 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 clients with combined as-
sets under management of over $145 billion (of which the Advisor advises over
$30 billion). Morgan provides investment advice and portfolio management serv-
ices to the Portfolio. Subject to the supervision of the Portfolio's Trustees,
Morgan makes the Portfolio's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the Portfolio's in-
vestments. See Investment Advisor in the Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and her
or his business experience for the past 5 years is indicated parenthetically):
Connie J. Plaehn, Vice President (since July, 1993, employed by Morgan since
prior to 1990), and William G. Tennille, Vice President (since January 1994,
employed by Morgan since March, 1992, previouslyManaging Director, Manufactur-
ers Hanover Trust Company).
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 0.25% 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. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services.
In connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain recordkeeping responsibilities; (ii) takes responsibility for compli-
ance with all applicable federal and state securities and other regulatory re-
quirements; (iii) is responsible for the registration of sufficient Fund
shares under federal and state securities laws; (iv) takes responsibility for
monitoring the Fund's status as a regulated investment company under the In-
ternal Revenue Code of 1986; and (v) performs such administrative and manage-
rial oversight of the activities of the Trust's and the Portfolio's custodian
and transfer agent, respectively, as the Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Financial and Fund
Accounting Services Agreements with Morgan, the fees of the Administrator are
covered by Morgan's expense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM In-
stitutional Funds as well as The Pierpont Funds, which is another family of
mutual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 bil-
lion of these funds' aggregate average daily net assets, 0.032% of the next $2
billion of these funds' aggregate average daily net assets, 0.024% of the next
$2 billion of these funds' aggregate average daily net assets and 0.016% of
these funds' aggregate average daily net assets in excess of $5 billion. This
fee rate is then applied to the net assets of the Fund.
11
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Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting ex-penses, fees of the Administrator,
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. Under
the Trust's Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, equal to 0.05% of the
Fund's average daily net assets. The Portfolio's 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: 0.05% on net assets up to $200 million, and 0.03% on net as-
sets 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. For the Fund and the Portfolio, 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 ("Custodian").
12
<PAGE>
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least October 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.45% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.05% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $5 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor. Any shareholder may also
call J.P. Morgan Funds Services at (800) 766-7722 for assistance with placing
an order for Fund shares. If the Fund receives a
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<PAGE>
purchase order prior to 4:00 P.M. New York time on any business day, the pur-
chase of Fund shares is effective and is made at the net asset value deter-
mined that day. If the Fund receives a purchase order after 4:00 P.M. New York
time, the purchase is effective 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 pur-
chaser will begin to receive the daily dividends on the settlement date. See
Dividends and Distributions.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses, pro-
viding periodic statements showing the client's account balance and integrat-
ing these statements with those of other transactions and balances in the cli-
ent's other accounts serviced by the Eligible Institution, transmitting proxy
statements, 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 or her Eligible Institution or, in the case
of certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions. The redeemer will continue to receive
dividends on these shares through the day before the settlement date. Settle-
ment 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 of proceeds when
non-corporate investors have not provided a certified taxpayer identification
number. In addition, if a Morgan customer sends a check to Morgan for the pur-
chase of Fund shares and shares are purchased with funds made available by
Morgan
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<PAGE>
before the check has cleared, the transmittal of redemption proceeds from the
shares will occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Funds or Pierpont Fund without charge. An exchange may be made so long as af-
ter the exchange the investor has shares, in each fund in which he or she re-
mains an investor, with a value of at least each of those fund's minimum in-
vestment amounts. See Method of Purchase in the prospectuses for the other JPM
Institutional Funds and The Pierpont Funds for the minimum investment amount
for each of those funds. Shares are exchanged on the basis of relative net as-
set 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 Redemp-
tion 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 explanation of the telephone exchange policy of The JPM Institu-
tional 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 the 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 of the Fund are declared 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.
NET ASSETS 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.
15
<PAGE>
The Fund computes its net asset value once daily at 4:15 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, thirteen series of shares have been authorized and are
available for sale to the public. Only shares of the Fund are offered through
this Prospectus. No series of shares will have any preference over any other
series. See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. As of February 8, 1995, the following technically met the definition
of a control person of the Fund; Alcatel Network Systems, Inc. Retirement Sav-
ings Plan. The Trustees may call meetings of shareholders for action by share-
holder vote as may be required by either the Investment Company Act of 1940 or
the Declaration of Trust. The Trustees will call a meeting of shareholders to
vote on removal of a Trustee upon the written request of the record holders of
ten percent of Trust shares and will assist shareholders in communicating with
each other as prescribed in Section 16(c) of the 1940 Act. For further organi-
zation information, including certain shareholder rights, see Description of
Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declara-
tion of Trust provides that the Fund and other entities investing in the Port-
folio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
associa-
16
<PAGE>
tion treated as a partnership for federal income tax purposes. As such, the
Portfolio should not be subject to tax. The Fund's status as a regulated in-
vestment company is dependent on, among other things, the Portfolio's contin-
ued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund are not eligible for the dividends- received deduc-
tion.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regard-
less of whether taken in cash or reinvested in additional shares. Long-term
capital gains distributions to corporate shareholders are not eligible for the
dividends-received deduction.
Any distribution of 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
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of
any long-term capital gain distributions received by the shareholder with re-
spect to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including re-
quiring investors to give their personal identification number and tape re-
cording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it or the Shareholder
Servicing Agent may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "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
17
<PAGE>
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 Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of oper-
ations, 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 required by regu-
lations of the Securities and Exchange Commission. Yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be ob-
tained by calling the Fund's Distributor at (800) 847-9487.
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<PAGE>
APPENDIX
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 purposes. The
Portfolio may not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. Because combined options positions involve multiple trades, they result
in higher transaction costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio securi-
ties, these techniques themselves entail certain other risks. If the Advisor
applies a strategy at an inappropriate time or judges market conditions or
trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments, or if it could not close out its positions
because of an illiquid secondary market. In addition, the Portfolio will incur
transaction costs, including trading commissions and option premiums, in con-
nection with its futures and options transactions and these transactions could
significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of secu-
rities and futures contracts, or purchase and sell futures contracts, only if
such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the Port-
folio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
A-1
<PAGE>
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 on
any securities index based on securities in which the Portfolio may invest. Op-
tions 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 op-
tions are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single se-
curity. The Portfolio, in purchasing or selling index options, is subject to
the risk that the value of its portfolio securities may not change as much as
an index because the Portfolio's investments generally will not match the com-
position of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
A-2
<PAGE>
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.
A-3
<PAGE>
------------------------------------------
The JPM
Institutional
Short Term
Bond Fund
PROSPECTUS
March 1, 1995
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.
<PAGE>
PROSPECTUS
The JPM Institutional Treasury Money Market Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Treasury Money Market Fund seeks to provide current
income, maintain a high level of liquidity and preserve capital. It is designed
for investors who seek to preserve capital and earn current income from a
portfolio of direct obligations of the U.S. Treasury and repurchase agreement
transactions with respect to those obligations.
The JPM Institutional Treasury Money Market Fund (the "Fund") is a diversified
no-load mutual fund for which there are no sales charges or exchange or
redemption fees. The Fund is a series of The JPM Institutional Funds, an open-
end management investment company organized as a Massachusetts Business Trust
(the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE TREASURY MONEY MARKET PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES
METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 1, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Institutional
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR. ALTHOUGH
THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 5
Investment Restrictions.................................................... 6
Management of the Trust and Portfolio...................................... 7
Shareholder Servicing...................................................... 10
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 10
Redemption of Shares....................................................... 11
Exchange of Shares......................................................... 12
Dividends and Distributions................................................ 12
Net Asset Value............................................................ 13
Organization............................................................... 13
Taxes...................................................................... 14
Additional Information..................................................... 14
</TABLE>
<PAGE>
The JPM Institutional Treasury Money Market Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Treasury Money Market Fund is designed to be an economi-
cal and convenient means of making substantial investments in money market in-
struments for investors who are interested in current income, preserving capi-
tal and maintaining liquidity. The Fund seeks to achieve its investment objec-
tive by investing all of its investable assets in The Treasury Money Market
Portfolio, an 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 JPM INSTITUTIONAL TREASURY MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE
TO CONTINUE TO DO SO.
The Fund requires a minimum initial investment of $10 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $10 million for more than 30
days, the investment will be subject to mandatory redemption. See Redemption of
Shares-Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Treasury Money Market
Fund to enable investors to decide if the Fund suits their needs. The Fund op-
erates through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R)
financial services method. The Trustees believe that the Fund may achieve econ-
omies of scale over time by investing through Hub and Spoke(R).
The following table illustrates that investors in The JPM Institutional Trea-
sury Money Market Fund incur no shareholder transaction expenses; their invest-
ment in the Fund is subject only to the operating expenses set forth below for
the Fund and the Portfolio, as a percentage of average net assets of the Fund.
The Trustees of the Trust believe that the aggregate per share expenses of the
Fund and the Portfolio will be approximately equal to and may be less than the
expenses that the Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and Portfolio- Expenses, and Shareholder Servicing.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases........................................... None
Sales Load Sales on Reinvested Dividends.................................. None
Deferred Sales Load....................................................... None
Redemption Fees........................................................... None
Exchange Fees............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................ 0.20%
Rule 12b-1 Fees.......................................................... None
Other Expenses After Expense Reimbursements.............................. None
-----
Total Operating Expenses After Expense Reimbursements.................... 0.20%
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, after any applicable expense reimbursements.
Without such reimbursements, Total Operating Expenses would have been equal on
an annual basis to 0.67% of the average daily net assets of the Fund. See Man-
agement of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year..................................................................... $ 2
3 Years.................................................................... $ 6
5 Years.................................................................... $11
10 Years................................................................... $26
</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 Services
Agreements, the fees paid Pierpont Group, Inc. under the Fund Services Agree-
ments, and fees paid to State Street Bank and Trust Company as custodian of the
Portfolio. For a more detailed description of contractual fee arrangements, in-
cluding expense reimbursements, and of the fees and expenses included in Other
Expenses, see Management of the Trust and Portfolio and Shareholder Servicing.
In connection with the above Example, please note that $1,000 is less than the
Fund's minimum investment requirement and that there are no redemption or ex-
change 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 EX-
PENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants. The Fund's Annual Report, which
is incorporated by reference into the Statement of Additional Information, in-
cludes a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's Annual Report is available without
charge upon request.
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
YEAR ENDED ENDED
10/31/94 10/31/93(1)
-------------- --------------
<S> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.00 $ 1.00
-------- --------
Income From Investment Operations
Net Investment Income.......................... 0.0354 0.0220
Net Realized Gain (Loss) on Portfolio.......... (0.0000)(a) -0-
-------- --------
Total From Investment Operations................ 0.0354 0.0220
-------- --------
Less Distributions to Shareholders From
Net Investment Income.......................... (0.0354) (0.0220)
Net Capital Gain............................... (0.0001) -0-
-------- --------
Total Distributions to Shareholders............. (0.0355) (0.0220)
-------- --------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00
======== ========
Total Return.................................... 3.61% 2.23%
Ratios and Supplemental Data
Net Assets at end of Period (In Thousands)..... $ 80,146 $ 25,477
Ratio to Average Net Assets:
Expenses...................................... 0.20% 0.27%
Net Investment Income......................... 3.81% 2.81%
Decrease Reflected in the Above Expense Ratio
due to Expense Reimbursements................ 0.47% 0.76%
</TABLE>
-------
(1) Commencement of Operations January 4, 1993. For the period, total return
has not been annualized and ratios have been annualized.
(a) Less than $0.0001 per share.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
3
<PAGE>
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
4
<PAGE>
The JPM Institutional Treasury Money Market Fund's investment objective is to
provide current income, maintain a high level of liquidity and preserve capi-
tal. The Fund attempts to achieve its investment objective by investing all of
its investable assets in The Treasury Money Market Portfolio, an open-end man-
agement investment company having the same investment objective as the Fund.
The Portfolio seeks to achieve its investment objective by investing in direct
obligations of the U.S. Treasury and engaging in repurchase agreement transac-
tions with respect to those obligations. The Portfolio maintains a dollar-
weighted average portfolio maturity of not more than 90 days and invests in the
following securities which have effective maturities of not more than thirteen
months.
Treasury Securities. The Portfolio will invest in Treasury Bills, Notes, and
Bonds, all of which are backed as to principal and interest payments by the
full faith and credit of the United States ("Treasury Securities"). Each such
obligation must have a remaining maturity of thirteen months or less at the
time of purchase by the Portfolio. Treasury Bills have initial maturities of
one year or less; Treasury Notes have initial maturities of one to ten years;
and Treasury Bonds generally have initial maturities of greater than ten years.
The Portfolio will not invest in U.S. Government agency obligations.
Obligations of the U.S. Treasury are guaranteed by the U.S. Government as to
the timely payment of principal and interest, but the market value of such ob-
ligations is not guaranteed and may rise and fall in response to changes in in-
terest rates. Neither the shares of the Fund nor the interests in the Portfolio
are guaranteed or insured by the U.S. Government.
The Portfolio also may purchase Treasury Securities on a when-issued or delayed
delivery basis and may engage in repurchase and reverse repurchase agreement
transactions involving Treasury Securities. For a discussion of these transac-
tions, see Additional Investment Information and Risk Factors.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The Portfolio only enters into repurchase agreements involving U.S.
Treasury Securities. 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 securi-
ties 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 Port-
folio might incur a loss. If bankruptcy proceedings are commenced with respect
to the seller, the Portfolio's realization upon the disposition of collateral
may be
5
<PAGE>
delayed or limited. Investments in certain repurchase agreements and certain
other investments which may be considered illiquid are limited. See Illiquid
Investments; Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent col-
lateral 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 Portfo-
lio any income accruing thereon. Loans will be subject to termination by the
Portfolio in the normal settlement time, generally five business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Portfolio and its respective investors. The Portfolio may pay reasonable find-
ers' and custodial fees in connection with a loan. In addition, the Portfolio
will consider all facts and circumstances, including the creditworthiness of
the borrowing financial institution, and the Portfolio will not make any loans
in excess of one year. The Portfolio will not lend its securities to any offi-
cer, Trustee, Director, employee, or affiliate or Placement Agent of the Port-
folio, or the Advisor, Administrator or Distributor, unless otherwise permit-
ted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into re-
verse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date
and price, reflecting the interest rate effective for the term of the agree-
ment. It may also be viewed as the borrowing of money by the Portfolio and,
therefore, is a form of leverage. Leverage may cause any gains or losses of
the Portfolio to be magnified. For more information, see Investment Objective
and Policies in the Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 10% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to that fundamental policy limitation, the Port-
folio 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 and cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933. 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 Securities Act of 1933. These securi-
ties may be determined to be liquid in accordance with guidelines established
by Morgan and approved by the Trustees. The Trustees will monitor Morgan's im-
plementation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional In-
formation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
Government
6
<PAGE>
securities, and (b) the Fund may not own more than 10% of the outstanding vot-
ing securities of any one issuer. The Fund is subject to additional non-funda-
mental requirements governing non-tax exempt money market funds. These non-
fundamental requirements generally prohibit the Fund from investing more than
5% of its total assets in the securities of any single issuer, except obliga-
tions of the U.S. Government and its agencies and instrumentalities.
The Fund may not (i) enter into reverse repurchase agreements which together
with any other borrowings exceed one-third of the market value of its total
assets, less certain liabilities, or (ii) borrow money (not including reverse
repurchase agreements), except from banks for temporary or extraordinary or
emergency purposes and then only in amounts up to 10% of the value of its to-
tal assets, taken at cost at the time of borrowing (and provided that such
borrowings and reverse repurchase agreements do not exceed in the aggregate
one-third of the market value of the Fund's total assets less liabilities
other than the obligations represented by the bank borrowings and reverse re-
purchase agreements), or purchase securities while borrowings exceed 5% of its
total assets; or mortgage, pledge or hypothecate any assets except in connec-
tion with any such borrowings in amounts up to 10% of the value of the Fund's
net assets at the time of borrowing, or (iii) make loans, except through pur-
chasing or holding debt obligations, repurchase agreements, or loans of port-
folio securities in accordance with the Fund's investment objective and poli-
cies.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions and Additional Information in the Statement of Additional Informa-
tion.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
7
<PAGE>
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company
organized under the laws of Delaware. Through offices in New York City and
abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional cli-
ents with combined assets under management of over $145 billion (of which the
Advisor advises over $30 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and his
business experience for the past 5 years is indicated parenthetically): James
A. Hayes, Vice President (since January 1993, employed by Morgan since prior
to 1990) and Robert R. Johnson, Vice President (since January 1993, employed
by Morgan since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.20% of the Portfolio's average daily net assets up to
$1 billion, and 0.10% of average daily net assets in excess of $1 billion.
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. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services.
In connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain recordkeeping responsibilities; (ii) takes responsibility for compli-
ance with all applicable federal and state securities and other regulatory re-
quirements; (iii) is responsible for the registration of sufficient Fund
shares under federal and state securities laws; (iv) takes responsibility for
monitoring the Fund's status as a regulated investment company under the In-
ternal Revenue Code of 1986; and (v) performs such administrative and manage-
rial oversight of the activities of the Trust's and the Portfolio's custodian
and transfer agent, respectively, as the Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Financial and Fund
Accounting Services Agreements with Morgan, the fees of the Administrator are
covered by Morgan's expense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM In-
stitutional Funds, as well as The Pierpont Funds, which is another family of
mutual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 bil-
lion of these funds' aggregate average daily net assets, 0.032% of the next $2
billion of these
8
<PAGE>
funds' aggregate average daily net assets, 0.024% of the next $2 billion of
these funds' aggregate average daily net assets and 0.016% of these funds' ag-
gregate average daily net assets in excess of $5 billion. This fee rate is then
applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, at the annual rate of
0.05% of the Fund's average daily net assets. The Portfolio's Agreement pro-
vides for the Portfolio to pay Morgan a fee for these services, which is com-
puted daily and may be paid monthly, at the annual rate of 0.03% of the Portfo-
lio's average daily net assets.
As noted above, the fee levels of the Fund and the Portfolio are expense under-
takings and reflect payments made directly to third parties by the Fund and the
Portfolio for services rendered, as well as payments to Morgan for services
rendered. The Trustees of the Trust and the Portfolio regularly review amounts
paid to and accounted for by Morgan pursuant to these Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
9
<PAGE>
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least October 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.20% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.11% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $10 million and a minimum
subsequent investment of $100,000. These minimum investment requirements may be
waived for certain retirement plans. For purposes of minimum investment re-
quirements, the Fund may aggregate investments by related shareholders.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
10
<PAGE>
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 and to transfer imme-
diately available funds to the Fund's Distributor on the same day. Any share-
holder may also call J.P. Morgan Funds Services at (800) 766-7722 for assis-
tance in placing an order for Fund shares. Immediately available funds must be
received by 2:30 P.M. New York time on a business day for the purchase to be
effective and dividends to be earned on the same day. The Fund does not accept
orders after the indicated time. If funds are received after 2:30 P.M. New
York time for any reason, including that the day is a Federal Reserve holiday,
the purchase is not effective and dividends are not earned until the next
business day.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub-accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses, pro-
viding periodic statements showing the client's account balance and integrat-
ing these statements with those of other transactions and balances in the cli-
ent's other accounts serviced by the Eligible Institution, transmitting proxy
statements, 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 on a business day prior to 1:00 P.M. New York
time is effective on that day. A redemption request received after that time
becomes effective on the next day. Proceeds of an effective redemption are
generally deposited the same day in immediately available funds to the share-
holder's account at Morgan or at his Eligible Institution or, in the case of
certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions. If a redemption request becomes effec-
tive on a day when the New York Stock Exchange is open but which is a Federal
Reserve holiday, the proceeds are paid the next business day. See Further Re-
demption Information.
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 $10 million for
more than 30 days because of a redemption of shares, the shareholder's remain-
ing shares may be redeemed 60 days after written notice unless the account is
increased to the Fund's minimum investment amount or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption of proceeds when
non-corporate investors have not provided a certified taxpayer identification
number. In addition, if a Morgan customer sends a check to Morgan for the pur-
chase of Fund shares and shares are purchased with funds made available by
Morgan
11
<PAGE>
before the check has cleared, the transmittal of redemption proceeds from the
shares will occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Institutional
Funds and The Pierpont Funds. See also Additional Information below for an ex-
planation of the telephone exchange policy of The JPM Institutional Funds.
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
All of the Fund's net investment income is declared as a dividend daily and
paid monthly. If an investor's shares are redeemed during a month, accrued but
unpaid dividends are paid with the redemption proceeds. The net investment in-
come of the Fund for dividend purposes consists of its pro rata share of the
net income of the Portfolio less the Fund's expenses. Dividends and distribu-
tions are payable to shareholders of record at the time of declaration. The
net investment income of the Fund for each business day is determined immedi-
ately prior to the determination of net asset value. Net investment income for
other days is determined at the time net asset value is determined on the
prior business day. Shares of the Fund earn dividends on the business day
their purchase is effective, but not on the business day their redemption is
effective. See Purchase of Shares and Redemption of Shares.
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.
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.
12
<PAGE>
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. The Portfo-
lio values all portfolio securities by the amortized cost method. This method
attempts to maintain for the Fund a constant net asset value per share of
$1.00. No assurances can be given that this goal can be attained. See Net Asset
Value in the Statement of Additional Information for more information on valua-
tion of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date thirteen series of shares have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non-assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. As of February 8, 1995, the following technically met the definition
of a control person of the Fund: Morgan as Agent for One Penn Plaza. The Trust-
ees may call meetings of shareholders for action by shareholder vote as may be
required by either the Investment Company Act of 1940 or the Declaration of
Trust. The Trustees will call a meeting of shareholders to vote on removal of a
Trustee upon the written request of the record holders of ten percent of Trust
shares and will assist shareholders in communicating with each other as pre-
scribed in Section 16(c) of the 1940 Act. For further organization information,
including certain shareholder rights, see Description of Shares in the State-
ment 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 Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and com-
mon 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. According-
ly, the Trustees of the Trust believe that neither the Fund nor its sharehold-
ers will be adversely affected by reason of the Fund's investing in the Portfo-
lio.
13
<PAGE>
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's con-
tinued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of net long-term capital gains
in excess of net short-term capital losses are taxable to shareholders of the
Fund as long-term capital gains regardless of 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 share-
holders are not eligible for the dividends-received deduction. The Fund does
not expect to realize long-term capital gains and thus does not contemplate
paying distributions taxable to shareholders who are subject to tax as long-
term capital gains.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. 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 re-
spect to such shares.
Shareholders should consult their tax advisors to assess the consequences of
investing in the Fund under state and local laws. Interest income derived from
Treasury Securities is generally not subject to state and local personal in-
come taxation. Most states allow a pass-through to the individual shareholders
of the Fund of the tax-exempt character of this income, subject to certain re-
strictions, for purposes of those states' personal income taxes.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction
14
<PAGE>
is subsequently found not to be genuine. The Fund will employ reasonable proce-
dures, including requiring investors to give their personal identification num-
ber and tape recording of telephone instructions, to confirm that instructions
communicated from investors by telephone are genuine; if it does not, it or the
Shareholder Servicing Agent may be liable for any losses due to unauthorized or
fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Donoghue's Money Market fund average,
Micropal Inc., Morningstar Inc., Ibbotson Associates, Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, the Frank Rus-
sell Indexes and other industry publications. The Fund may advertise "yield"
and "effective yield". Yield refers to the net income generated by an invest-
ment in the Fund over a stated seven-day period. This income is then annualized
-- i.e., the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a per-
centage of the investment. Effective yield is calculated similarly to the
yield, but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested; the effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of oper-
ations, 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 required by regu-
lations of the Securities and Exchange Commission. Yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be ob-
tained by calling the Fund's Distributor at (800) 847-9487.
15
<PAGE>
------------------------------------------
The JPM
Institutional
Treasury Money
Market Fund
PROSPECTUS
March 1, 1995
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.
<PAGE>
PROSPECTUS
The JPM Institutional Bond Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Bond Fund seeks to provide a high total return consistent
with moderate risk of capital and maintenance of liquidity. It is designed for
investors who seek a total return over time that is higher than that generally
available from a portfolio of short-term obligations while recognizing the
greater price fluctuation of longer term instruments.
The JPM Institutional Bond Fund (the "Fund") is a diversified no-load mutual
fund for which there are no sales charges or exchange or redemption fees. The
Fund is a series of The JPM Institutional Funds, an open-end management
investment company organized as a Massachusetts Business Trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE U.S. FIXED INCOME PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES
METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 1, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Institutional
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 7
Investment Restrictions.................................................... 10
Management of the Trust and Portfolio...................................... 10
Shareholder Servicing...................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 15
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 16
Organization............................................................... 16
Taxes...................................................................... 17
Additional Information..................................................... 17
Appendix................................................................... A-1
</TABLE>
<PAGE>
The JPM Institutional Bond Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Bond Fund is designed for investors seeking a higher to-
tal return over time than that generally available from a portfolio of short-
term obligations in exchange for some risk of capital. The Fund seeks to
achieve its investment objective by investing all of its investable assets in
The U.S. Fixed Income Portfolio, an open-end management investment company hav-
ing the same investment objective as the Fund. Since the investment character-
istics and experience of the Fund will correspond directly with those of the
Portfolio, the discussion in this Prospectus focuses on the investments and in-
vestment policies of the Portfolio. The net asset value of shares in the Fund
fluctuates with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. For further information about these in-
vestments and investment techniques, see Investment Objective and Policies dis-
cussed below.
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 investment in 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 financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Bond Fund to enable in-
vestors to decide if the Fund suits their needs. The Fund operates through Sig-
nature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) financial serv-
ices 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 JPM Institutional Bond
Fund incur no shareholder transaction expenses; their investment in the Fund is
subject only to the operating expenses set forth below for the Fund and the
Portfolio, as a percentage of average net assets of the Fund. The Trustees of
the Trust believe that the aggregate per share expenses of the Fund and the
Portfolio will be approximately equal to and may be less than the expenses that
the Fund would incur if it retained the services of an investment adviser and
invested its assets directly in portfolio securities. Fund and Portfolio ex-
penses are discussed below under the headings Management of the Trust and Port-
folio-Expenses, and Shareholder Servicing.
<TABLE>
<S> <C>
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
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.30%
Rule 12b-1 Fees........................................................... None
Other Expenses After Expense Reimbursements............................... 0.20%
-----
Total Operating Expenses After Expense Reimbursements..................... 0.50%
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, after any applicable expense reimbursements.
Without such reimbursements, Total Operating Expenses would have been equal
on an annual basis to 0.69% of the average daily net assets of the Fund. See
Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
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, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolio. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and Portfolio and Shareholder
Servicing. In connection with the above Example, please note that $1,000 is
less than the Fund's minimum investment requirement and that there are no re-
demption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants. The Fund's Annual Report, which
is incorporated by reference into the Statement of Additional Information, in-
cludes a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's Annual Report is available without
charge upon request.
<TABLE>
<CAPTION>
FOR THE FOR THE
FISCAL YEAR PERIOD
ENDED ENDED
10/31/94 10/31/93(1)
----------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $ 10.14 $ 10.00
-------- -------
Income From Investment Operations
Net Investment Income................................. 0.55 0.15
Net Realized and Unrealized Gain (Loss) on Portfolio.. (0.88) 0.14
-------- -------
Total From Investment Operations....................... (0.33) 0.29
-------- -------
Less Distributions to Shareholders From
Net Investment Income................................. (0.55) (0.15)
Net Capital Gains..................................... (0.03) -0-
-------- -------
Total Distributions to Shareholders.................... (0.58) (0.15)
-------- -------
Net Asset Value, End of Period......................... $ 9.23 $ 10.14
======== =======
Total Return........................................... (3.33)% 2.90%
Ratios and Supplemental Data
Net Assets, End of Period (In Thousands).............. $253,174 $43,711
Ratios to Average Net Assets:
Expenses............................................. 0.50% 0.50%
Net Investment Income................................ 6.00% 4.83%
Decrease Reflected in the Above Expense Ratio due to
Expense Reimbursements.............................. 0.19% 0.39%
</TABLE>
-------
(1) Commencement of Operations July 12, 1993. For the period, total return has
not been annualized and ratios have been annualized.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a propor-
3
<PAGE>
tionate share of the Portfolio's expenses. However, the other investors invest-
ing in the Portfolio may sell shares of their own fund using a different pric-
ing structure than the Fund. Such different pricing structures may result in
differences in returns experienced by investors in other funds that invest in
the Portfolio. Such differences in returns are not 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)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The JPM Institutional Bond Fund's investment objective is to provide a high to-
tal return consistent with moderate risk of capital and maintenance of liquidi-
ty. Total return will consist of income plus realized and unrealized capital
gains and
4
<PAGE>
losses. Although the net asset value of the Fund will fluctuate, the Fund at-
tempts to preserve the value of its investments to the extent consistent with
its objective. The Fund attempts to achieve its objective by investing all of
its investable assets in The U.S. Fixed Income Portfolio, an open-end manage-
ment investment company having the same investment objective as the Fund.
The JPM Institutional Bond Fund is designed for investors who seek a total re-
turn over time that is higher than that generally available from a portfolio of
shorter-term obligations while recognizing the greater price fluctuation of
longer-term instruments. It may also be a convenient way to add fixed income
exposure to diversify an existing portfolio.
Morgan actively manages the Portfolio's duration, the allocation of securities
across market sectors, and the selection of specific securities within sectors.
Based on fundamental, economic and capital markets research, Morgan adjusts the
duration of the Portfolio in light of market conditions and Morgan's interest
rate outlook. For example, if interest rates are expected to fall, the duration
may be lengthened to take advantage of the expected associated increase in bond
prices. Morgan also actively allocates the Portfolio's assets among the broad
sectors of the fixed income market including, but not limited to, U.S. Govern-
ment and agency securities, corporate securities, private placements, asset-
backed and mortgage-related securities. Specific securities which Morgan be-
lieves are undervalued are selected for purchase within the 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. Under normal circumstances, Morgan intends to keep the Portfolio es-
sentially fully invested with at least 65% of the Portfolio's assets invested
in bonds.
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 Portfolio's
market value to changes in interest rates. Under normal market conditions the
Portfolio's duration will range between one year shorter and one year longer
than the duration of the U.S. investment grade fixed income universe, as repre-
sented by Salomon Brothers Broad Investment Grade Bond Index, the Portfolio's
benchmark. Currently, the benchmark's duration is approximately 4.5 years. The
maturities of the individual securities in the Portfolio may vary widely, how-
ever.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment 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 also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.
CORPORATE BONDS, ETC. The Portfolio may invest in a broad range of debt securi-
ties of domestic and foreign issuers. These include debt securities of various
types and maturities, e.g., debentures, notes, mortgage securities, equipment
trust certificates and other collateralized securities and zero coupon securi-
ties. Collateralized securities are backed by a pool of assets such as loans or
receivables which generate cash flow to cover the payments due on the securi-
ties. Collateralized securities are subject to certain risks, including a de-
cline in the value of the collateral backing the security, failure of the col-
lateral to generate the anticipated cash flow or in certain cases more rapid
prepayment because of events affecting the collateral, such as accelerated pre-
payment of mortgages or other loans backing these securities or destruction of
equipment subject to equipment trust certificates. In the event of any such
prepayment the Portfolio will be required to reinvest the proceeds of prepay-
ments at interest rates prevailing at the time of reinvestment, which may be
lower. In addition, the value of zero coupon securities which do not pay inter-
est is more volatile than that of interest bearing debt securities with the
same maturity. The Portfolio does not intend to invest in common stock but may
invest to a limited extent in convertible debt or preferred stock. The Portfo-
lio does not expect to invest more than 25% of its assets in securities of for-
eign issuers. If the Portfolio invests in non-U.S. dollar denominated securi-
ties, it hedges the foreign currency exposure into the U.S. dollar. See Addi-
tional Investment Information and Risk Factors for further information on for-
eign investments and convertible securities.
5
<PAGE>
GOVERNMENT OBLIGATIONS, ETC. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of
the United States. These securities include Treasury securities, obligations
of the Government National Mortgage Association ("GNMA Certificates"), the
Farmers Home Administration and the Export Import Bank. GNMA Certificates are
mortgage-backed securities which evidence an undivided interest in mortgage
pools. These securities are subject to more rapid repayment than their stated
maturity would indicate because prepayments of principal on mortgages in the
pool are passed through to the holder of the securities. During periods of
declining interest rates, prepayments of mortgages in the pool can be expected
to increase. The pass-through of these prepayments would have the effect of
reducing the Portfolio's positions in these securities and requiring the Port-
folio to reinvest the prepayments at interest rates prevailing at the time of
reinvestment. The Portfolio may also invest in obligations issued or guaran-
teed by U.S. Government agencies or instrumentalities where the Portfolio must
look principally to the issuing or guaranteeing agency for ultimate repayment;
some examples of agencies or instrumentalities issuing these obligations are
the Federal Farm Credit System, the Federal Home Loan Banks and the Federal
National Mortgage Association. Although these governmental issuers are respon-
sible for payments on their obligations, they do not guarantee their market
value. The Portfolio may also invest in municipal obligations which may be
general obligations of the issuer or payable only from specific revenue sourc-
es. However, the Portfolio will invest only in municipal obligations that have
been issued on a taxable basis or have an attractive yield excluding tax con-
siderations. In addition, the Portfolio may invest in debt securities of for-
eign governments and governmental entities. See Additional Investment Informa-
tion and Risk Factors for further information on foreign investments.
MONEY MARKET INSTRUMENTS. The Portfolio may purchase money market instruments
to invest temporary cash balances or to maintain liquidity to meet withdraw-
als. However, the Portfolio may also invest in money market instruments as a
temporary defensive measure taken during, or in anticipation of, adverse mar-
ket conditions. The money market investments permitted for the Portfolio in-
clude obligations of the U.S. Government and its agencies and instrumentali-
ties, other debt securities, commercial paper, bank obligations and repurchase
agreements. For more detailed information about these money market invest-
ments, see Investment Objectives and Policies in the Statement of Additional
Information.
QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least 65% of its total assets will consist of securities that
are rated at least A by Moody's or Standard & Poor's or that are unrated and
in Morgan's opinion are of comparable quality. In the case of 30% of the Port-
folio's investments, the Portfolio may purchase debt securities that are rated
Baa or better by Moody's or BBB or better by Standard & Poor's or are unrated
and in Morgan's opinion are of comparable quality. The remaining 5% of the
Portfolio's assets may be invested in debt securities that are rated Ba or
better by Moody's or BB or better by Standard & Poor's or are unrated and in
Morgan's opinion are of comparable quality. Securities rated Baa by Moody's or
BBB by Standard & Poor's are considered investment grade, but have some specu-
lative characteristics. Securities rated Ba by Moody's or BB by Standard &
Poor's are below investment grade and considered to be speculative with regard
to payment of interest and principal. These standards must be satisfied at the
time an investment is made. If the quality of the investment later declines,
the Portfolio may continue to hold the investment. See Appendix A in the
Statement of Additional Information for more detailed information on these
ratings.
The Portfolio may also purchase obligations on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and enter
into certain hedging transactions that may involve options on securities and
securities indexes, futures contracts and options on futures contracts. For a
discussion of these investments and investment techniques, see Additional In-
vestment Information and Risk Factors.
6
<PAGE>
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities of
domestic and, subject to the Portfolio's investment restrictions, foreign is-
suers. The convertible securities in which the Portfolio may invest include any
debt securities or preferred stock which may be converted into common stock or
which carry the right to purchase common stock. Convertible securities entitle
the holder to exchange the securities for a specified number of shares of com-
mon stock, usually of the same company, at specified prices within a certain
period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Placement Agent of the Portfolio, or the Ad-
visor, Administrator or Distributor, unless otherwise permitted by applicable
law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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 agreement. It may
also be viewed as the borrowing of money by
7
<PAGE>
the Portfolio and, therefore, is a form of leverage. Leverage may cause any
gains or losses of the Portfolio to be magnified. For more information, see
Investment Objective and Policies in the Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment
risks from those affecting securities of U.S. domestic issuers. There may be
limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to domes-
tic companies. Dividends and interest paid by foreign issuers may be subject
to withholding and other foreign taxes which may decrease the net return on
foreign investments as compared to dividends and interest paid to the Portfo-
lio by domestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing securities on foreign exchanges, purchasers normally pay fixed commissions
that are generally higher than the negotiated commissions charged in the
United States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may not provide the same share-
holder information that a sponsored depository is required to provide under
its contractual arrangements with the issuer of the underlying foreign securi-
ties. EDRs are receipts issued by a European financial institution evidencing
a similar arrangement. Generally, ADRs, in registered form, are designed for
use in the U.S. securities markets, and EDRs, in bearer form, are designed for
use in European securities markets.
Since investments in foreign securities involve foreign currencies, the value
of assets as measured in U.S. dollars may be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations, including
currency blockage. See Foreign Currency Exchange Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on
a spot (i.e., cash) basis at the spot rate prevail-
8
<PAGE>
ing in the foreign currency exchange market, or uses forward contracts to pur-
chase or sell foreign currencies. The cost of the Portfolio's spot currency
exchange transactions is generally the difference between the bid and offer
spot rate of the currency being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These con-
tracts are entered into in the interbank market directly between currency
traders (usually large commercial banks) and their customers. A forward for-
eign currency exchange contract generally has no deposit requirement, and is
traded at a net price without commission. The Portfolio will not enter into
forward contracts for speculative purposes. Neither spot transactions nor for-
ward foreign currency exchange contracts eliminate fluctuations in the prices
of the Portfolio's securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally traded in a foreign currency. To do this, the Portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a consequence of
market movements in the value of such securities between the date the forward
contract is entered into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful execution of a
hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to that 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 and cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933. 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 Securities Act of 1933. These securi-
ties may be determined to be liquid in accordance with guidelines established
by Morgan and approved by the Trustees. The Trustees will monitor Morgan's im-
plementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of
Additional Information.
9
<PAGE>
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional In-
formation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
Government securities, and (b) the Fund may not own more than 10% of the out-
standing voting securities of any one issuer.
The Fund may not (i) purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments in such industry would exceed 25% of the value of the Fund's total as-
sets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) enter into reverse repurchase agreements and other permitted
borrowings which constitute senior securities under the Investment Company act
of 1940, exceeding in the aggregate one-third of the market value of the
Fund's total assets, less certain liabilities; or (iii) borrow money, except
from banks for extraordinary or emergency purposes and then only in amounts up
to 30% of the value of the Fund's total assets taken at cost at the time of
borrowing and except in connection with reverse repurchase agreements, or pur-
chase securities while borrowings, including reverse repurchase agreements,
exceed 5% of its total assets; or mortgage, pledge or hypothecate any assets
except in connection with any such borrowing in amounts up to 30% of the value
of the Fund's net assets at the time of borrowing.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions and Additional Information in the Statement of Additional Informa-
tion.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
10
<PAGE>
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company
organized under the laws of Delaware. Through offices in New York City and
abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional cli-
ents with combined assets under management of over $145 billion (of which the
Advisor advises over $30 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and his
or her business experience for the past 5 years is indicated parenthetically):
William G. Tennille, Vice President (since January, 1994, employed by Morgan
since March, 1992, previously Managing Director, Manufacturers Hanover Trust
Company) and Connie J. Plaehn, Vice President (since January, 1994, employed
by Morgan since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.30% 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. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services.
In connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain recordkeeping responsibilities; (ii) takes responsibility for compli-
ance with all applicable federal and state securities and other regulatory re-
quirements; (iii) is responsible for the registration of sufficient Fund
shares under federal and state securities laws; (iv) takes responsibility for
monitoring the Fund's status as a regulated investment company under the In-
ternal Revenue Code of 1986; and (v) performs such administrative and manage-
rial oversight of the activities of the Trust's and the Portfolio's custodian
and transfer agent, respectively, as the Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Financial and Fund
Accounting Services Agreements
11
<PAGE>
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 Insti-
tutional Funds as well as The Pierpont Funds, which is another family of mutual
funds for which SBDS acts as Administrator. The fee rate is calculated daily in
accordance with the following schedule: 0.040% of the first $1 billion of these
funds' aggregate average daily net assets, 0.032% of the next $2 billion of
these funds' aggregate average daily net assets, 0.024% of the next $2 billion
of these funds' aggregate average daily net assets and 0.016% of these funds'
aggregate average daily net assets in excess of $5 billion. This fee rate is
then applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, equal to 0.05% of the
Fund's average daily net assets. The Portfolio's 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.
12
<PAGE>
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. For the Fund and the Portfolio, 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 ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least October 31, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.50% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.05% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
13
<PAGE>
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 with
placing an order for Fund shares. If the Fund receives a purchase order prior
to 4:00 P.M. New York time on any business day, the purchase of Fund shares is
effective and is made at the net asset value determined that day. 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
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses, pro-
viding periodic statements showing the client's account balance and integrat-
ing these statements with those of other transactions and balances in the cli-
ent's other accounts serviced by the Eligible Institution, transmitting proxy
statements, 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 or her Eligible Institution or, in the case
of certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions. The redeemer will continue to receive
dividends on these shares through the day before the settlement date. Settle-
ment 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.
14
<PAGE>
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 of proceeds when non-
corporate investors have not provided a certified taxpayer identification num-
ber. In addition, if a Morgan customer sends a check to Morgan for the pur-
chase of Fund shares and shares are purchased with funds made available by
Morgan before the check has cleared, the transmittal of redemption proceeds
from the shares will occur upon clearance of the check which may take up to 15
days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Institutional
Funds and The Pierpont Funds. See Additional Information below for an explana-
tion of the telephone redemption 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 the 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.
15
<PAGE>
Substantially all the realized net capital gains of the Fund are declared 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.
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 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, thirteen series of shares have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by share-
holder vote as may be required by either the Investment Company Act of 1940 or
the Declaration of Trust. The Trustees will call a meeting of shareholders to
vote on removal of a Trustee upon the written request of the record holders of
ten percent of Trust shares and will assist shareholders in communicating with
each other as prescribed in Section 16(c) of the 1940 Act. For further organi-
zation information, including certain shareholder rights, see Description of
Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and com-
mon 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. According-
ly, the Trustees of the Trust believe that neither the Fund nor its sharehold-
ers will be adversely affected by reason of the Fund's investing in the Portfo-
lio.
16
<PAGE>
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's con-
tinued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund are not eligible for the dividends- received deduc-
tion.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regard-
less of whether taken in cash or reinvested in additional shares. Long-term
capital gains distributions to corporate shareholders are not eligible for the
dividends-received deduction.
Any distribution of 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
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of
any long-term capital gain distributions received by the shareholder with re-
spect to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine
17
<PAGE>
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
investors to give their personal identification number and tape recording of
telephone instructions, to confirm that instructions communicated from invest-
ors by telephone are genuine; if it does not, it or the Shareholder Servicing
Agent may be liable for any losses due to unauthorized or fraudulent instruc-
tions.
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 and other industry publications.
The Fund may advertise "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 in-
vestment is also assumed to be reinvested at the end of the sixth 30-day peri-
od.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. These methods of calculating yield and total return are required
by regulations of the Securities and Exchange Commission. Yield and total re-
turn data similarly calculated, unless otherwise indicated, over other speci-
fied periods of time may also be used. See Performance Data in the Statement
of Additional Information. All performance figures are based on historical
earnings and are not intended to indicate future performance. Performance in-
formation may be obtained by calling the Fund's Distributor at (800) 847-9487.
18
<PAGE>
APPENDIX
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 put and call op-
tions on futures contracts on fixed income securities and indexes of fixed in-
come securities.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. Because combined options positions involve multiple trades, they result
in higher transaction costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio securi-
ties, these techniques themselves entail certain other risks. If the Advisor
applies a strategy at an inappropriate time or judges market conditions or
trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments, or if it could not close out its positions
because of an illiquid secondary market. In addition, the Portfolio will incur
transaction costs, including trading commissions and option premiums, in con-
nection with its futures and options transactions and these transactions could
significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of secu-
rities and futures contracts, or purchase and sell futures contracts, only if
such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the Port-
folio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
A-1
<PAGE>
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 on
any securities index based on securities in which the Portfolio may invest. Op-
tions 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 op-
tions are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single se-
curity. The Portfolio, in purchasing or selling index options, is subject to
the risk that the value of its portfolio securities may not change as much as
an index because the Portfolio's investments generally will not match the com-
position of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
A-2
<PAGE>
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.
A-3
<PAGE>
---------------------------------------
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 Bond Fund
PROSPECTUS
March 1, 1995
<PAGE>
PROSPECTUS
The JPM Institutional Money Market Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722
The JPM Institutional Money Market Fund seeks to maximize current income and
maintain a high level of liquidity. It is designed for investors who seek to
preserve capital and earn current income from a portfolio of high quality money
market instruments.
The JPM Institutional Money Market Fund (the "Fund") is a diversified no-load
mutual fund for which there are no sales charges or exchange or redemption
fees. The Fund is a series of The JPM Institutional Funds, an open-end
management investment company organized as a Massachusetts Business Trust (the
"Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE MONEY MARKET PORTFOLIO (THE "PORTFOLIO"), A
CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE SAME INVESTMENT
OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO THROUGH SIGNATURE
FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES METHOD. HUB AND
SPOKE(R) EMPLOYS A TWO-TIER MASTER FEEDER STRUCTURE AND IS A REGISTERED SERVICE
MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL INFORMATION CONCERNING HUB
AND SPOKE(R) ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 1, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Institutional
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR. ALTHOUGH
THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Hub and Spoke(R)............................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk
Factors................................................................... 6
Investment Restrictions.................................................... 7
Management of the Trust and Portfolio...................................... 8
Shareholder Servicing...................................................... 11
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 11
Redemption of Shares....................................................... 12
Exchange of Shares......................................................... 13
Dividends and Distributions................................................ 13
Net Asset Value............................................................ 14
Organization............................................................... 14
Taxes...................................................................... 15
Additional Information..................................................... 15
</TABLE>
<PAGE>
The JPM Institutional Money Market Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The JPM Institutional Money Market Fund is designed to be an economical and
convenient means of making substantial investments in money market instruments
for investors who are interested in current income, preserving capital and
maintaining liquidity. The Fund seeks to achieve its investment objective by
investing all of its investable assets in The Money Market Portfolio, an open-
end management investment company having the same investment objective as the
Fund. Since the investment characteristics and experience of the Fund will cor-
respond directly with those of the Portfolio, the discussion in this Prospectus
focuses on the investments and investment policies of the Portfolio.
THE JPM INSTITUTIONAL MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
CONTINUE TO DO SO.
The Fund requires a minimum initial investment of $10 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder reduces
his or her investment in the Fund to less than $10 million for more than 30
days, the investment will be subject to mandatory redemption. See Redemption of
Shares-Mandatory Redemption by the Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of The JPM Institutional Money Market Fund to
enable investors to decide if the Fund suits their needs. The Fund operates
through Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) finan-
cial 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 JPM Institutional Money
Market Fund incur no shareholder transaction expenses; their investment in the
Fund is subject only to the operating expenses set forth below for the Fund and
the Portfolio, as a percentage of average net assets of the Fund. The Trustees
of the Trust believe that the aggregate per share expenses of the Fund and the
Portfolio will be approximately equal to and may be less than the expenses that
the Fund would incur if it retained the services of an investment adviser and
invested its assets directly in portfolio securities. Fund and Portfolio ex-
penses are discussed below under the headings Management of the Trust and Port-
folio-Expenses, and Shareholder Servicing.
<TABLE>
<S> <C>
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
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.14%
Rule 12b-1 Fees........................................................... None
Other Expenses After Expense Reimbursements............................... 0.06%
-----
Total Operating Expenses After Expense Reimbursements..................... 0.20%
</TABLE>
* Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, and are restated to reflect reimbursements for the
Fund's current fiscal year. Without such reimbursements, Total Operating Ex-
penses would have been equal on an annual basis to 0.52% of the average daily
net assets of the Fund. See Management of the Trust and Portfolio.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................................... $ 2
3 Years..................................................................... $ 6
5 Years..................................................................... $11
10 Years.................................................................... $26
</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 Services
Agreements, the fees paid Pierpont Group, Inc. under the Fund Services Agree-
ments, and fees paid to State Street Bank and Trust Company as custodian of the
Portfolio. For a more detailed description of contractual fee arrangements, in-
cluding expense reimbursements, and of the fees and expenses included in Other
Expenses, see Management of the Trust and Portfolio and Shareholder Servicing.
In connection with the above Example, please note that $1,000 is less than the
Fund's minimum investment requirement and that there are no redemption or ex-
change 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 EX-
PENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants. The Fund's Annual Report, which
is incorporated by reference into the Statement of Additional Information, in-
cludes a discussion of those factors, strategies and techniques that materially
affected its performance during the period of the report, as well as certain
related information. A copy of the Fund's Annual Report is available without
charge upon request.
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
YEAR ENDED ENDED
11/30/94 11/30/93(1)
-------------- --------------
<S> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.00 $ 1.00
-------- --------
Income From Investment Operations
Net Investment Income.......................... 0.0385 0.0120
Net Realized Gain (Loss) on Portfolio.......... (0.0000)(a) 0.0000(a)
-------- --------
Total From Investment Operations................ 0.0385 0.0120
-------- --------
Less Distributions to Shareholders From
Net Investment Income.......................... (0.0385) (0.0120)
Net Capital Gains.............................. -- 0.0000(a)
-------- --------
Total Distributions to Shareholders............. (0.0385) (0.0120)
-------- --------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00
======== ========
Total Return.................................... 3.92% 1.21%
Ratios and Supplemental Data
Net Assets at end of Period (In Thousands)..... $584,867 $ 27,188
Ratio to Average Net Assets:
Expenses...................................... 0.21% 0.30%
Net Investment Income......................... 4.42% 2.88%
Decrease Reflected in the Above Expense Ratio
due to Expense Reimbursements................ 0.31% 1.10%
</TABLE>
-------
(1) Commencement of Operations July 12, 1993. For the period, total return has
not been annualized and ratios have been annualized.
(a) Less than $0.0001 per share.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature, of which Signature Broker-Dealer Services, Inc., the
Trust's Administrator and Distributor, is a wholly owned subsidiary.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke has been ap-
proved by the shareholders of the Fund.
3
<PAGE>
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 propor-tionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution)
which may or may not be readily marketable from the Portfolio. The distribution
in kind may result in the Fund having a less diversified portfolio of invest-
ments or adversely affect the Fund's liquidity and the Fund could incur broker-
age, tax or other charges in converting the securities to cash. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
Portfolio. For more information about changing the investment objective, poli-
cies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
4
<PAGE>
The Fund's investment objective is to maximize current income and maintain a
high level of liquidity. The Fund is designed for investors who seek to pre-
serve capital and earn current income from a portfolio of high quality money
market instruments. The Fund attempts to achieve its objective by investing all
of its investable assets in The Money Market Portfolio, an open-end management
investment company having the same investment objective as the Fund.
The Portfolio seeks to achieve its investment objective by maintaining a dol-
lar-weighted average portfolio maturity of not more than 90 days and by invest-
ing in the following high quality U.S. dollar-denominated securities which have
effective maturities of not more than thirteen months. The Portfolio's ability
to achieve maximum current income is affected by its high quality standards
(discussed below).
UNITED STATES GOVERNMENT OBLIGATIONS. The Portfolio may invest in obligations
issued or guaranteed by the U.S. Government and backed by the full faith and
credit of the United States. These securities include Treasury securities, ob-
ligations of the Government National Mortgage Association, the Farmers Home Ad-
ministration and the Export Import Bank. The Portfolio may also invest in obli-
gations issued or guaranteed by U.S. Government agencies or instrumentalities
where the Portfolio must look principally to the issuing or guaranteeing agency
for ultimate repayment; some examples of agencies or instrumentalities issuing
these obligations are the Federal Farm Credit System, the Federal Home Loan
Banks and the Federal National Mortgage Association.
BANK OBLIGATIONS. The Portfolio may invest in high quality U.S. dollar-denomi-
nated negotiable certificates of deposit, time deposits and bankers' accept-
ances of (i) banks, savings and loan associations and savings banks which have
more than $2 billion in total assets and are organized under U.S. federal or
state law, (ii) foreign branches of these banks or of foreign banks of equiva-
lent size (Euros) and (iii) U.S. branches of foreign banks of equivalent size
(Yankees). The Portfolio may also invest in obligations of international bank-
ing institutions designated or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the Euro-
pean Investment Bank, the Inter-American Development Bank, or the World Bank).
These obligations may be supported by appropriated but unpaid commitments of
their member countries, and there is no assurance these commitments will be un-
dertaken or met in the future.
COMMERCIAL PAPER; BONDS. The Portfolio may invest in high quality commercial
paper and corporate bonds issued by U.S. corporations. The Portfolio may also
invest in bonds and commercial paper of foreign issuers if the obligation is
U.S. dollar-denominated and is not subject to foreign withholding tax.
ASSET-BACKED SECURITIES. The Portfolio may also invest in securities generally
referred to as asset-backed securities, which directly or indirectly represent
a participation interest in, or are secured by and payable from, a stream of
payments generated by particular assets such as motor vehicle or credit card
receivables. Asset-backed securities provide periodic payments that generally
consist of both interest and principal payments. Consequently, the life of an
asset-backed security varies with the prepayment experience of the underlying
debt instruments.
QUALITY INFORMATION. The Portfolio will limit its investments to those securi-
ties which, in accordance with guidelines adopted by the Trustees, present min-
imal credit risks. In addition, the Portfolio will not purchase any security
(other than a U.S. Government security) unless (i) it is rated with the highest
rating assigned to short-term debt securities by at least two nationally recog-
nized statistical rating organizations such as Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Corporation ("Standard & Poor's"), (ii) it is
rated by only one agency with the highest such rating, or (iii) it is not rated
and is determined to be of comparable quality. Determinations of comparable
quality shall be made in accordance with procedures established by the Trust-
ees. For a more detailed discussion of applicable quality requirements, see In-
vestment Objective and Policies in the Statement of Additional Information.
These standards must be satisfied at the time an investment is made. If the
quality of the investment later declines below the quality required for pur-
chase,
5
<PAGE>
the Portfolio shall dispose of the investment, subject in certain circumstances
to a finding by the Trustees that disposing of the investment would not be in
the Portfolio's best interest.
The Portfolio may also invest in securities on a when-issued or delayed deliv-
ery basis and in certain privately placed securities. The Portfolio may also
enter into repurchase and reverse repurchase agreements and loan its portfolio
securities. For a discussion of these investments and for more information on
foreign investments, see Additional Investment Information.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase securi-
ties on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more after the date of the pur-
chase commitment. The value of these securities is subject to market fluctua-
tion during this period and no interest or income accrues to the Portfolio un-
til settlement. At the time of settlement a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be disad-
vantaged. It is the current policy of the Portfolio not to enter into when-is-
sued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Trustees. In a repurchase agreement, the Portfolio buys a secu-
rity from a seller that has agreed to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week.
A repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as col-
lateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other invest-
ments which may be considered illiquid are limited. See Illiquid Investments;
Privately Placed and other Unregistered Securities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent collat-
eral or by a letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned, plus accrued inter-
est. While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally five business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed secu-
rities which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing finan-
cial institution, and the Portfolio will not make any loans in excess of one
year. The Portfolio will not lend its securities to any officer, Trustee, Di-
rector, employee, or affiliate or Private Placement Agent of the Portfolio, or
the Advisor, Administrator or Distributor, unless otherwise permitted by appli-
cable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
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,
6
<PAGE>
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to
be magnified. For more information, see Investment Objective and Policies in
the Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain U.S. dol-
lar-denominated foreign securities. Investment in securities of foreign is-
suers and in obligations of foreign branches of domestic banks involves some-
what different investment risks from those affecting securities of U.S. domes-
tic issuers. There may be limited publicly available information with respect
to foreign issuers, and foreign issuers are not generally subject to uniform
accounting, auditing and financial standards and requirements comparable to
those applicable to domestic companies. The Portfolio may only invest in for-
eign securities that are not subject to foreign withholding tax.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 10% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to that fundamental policy limitation, the Port-
folio 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 and cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933. 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 Securities Act of 1933. These securi-
ties may be determined to be liquid in accordance with guidelines established
by Morgan and approved by the Trustees. The Trustees will monitor Morgan's im-
plementation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional In-
formation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Fund's investment restrictions also include the Portfolio's investment re-
strictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more
than 5% of its total assets in the securities of any one issuer, except U.S.
Government
7
<PAGE>
securities, and (b) the Fund may not own more than 10% of the outstanding vot-
ing securities of any one issuer. The Fund is subject to additional non-funda-
mental requirements governing non-tax exempt money market funds. These non-
fundamental requirements generally prohibit the Fund from investing more than
5% of its total assets in the securities of any single issuer, except obliga-
tions of the U.S. Government and its agencies and instrumentalities.
The Fund may not (i) acquire any illiquid securities if as a result more than
10% of the market value of its total assets would be in investments which are
illiquid, (ii) enter into reverse repurchase agreements exceeding one-third of
the market value of its total assets, less certain liabilities, (iii) borrow
money, except from banks for extraordinary or emergency purposes and then only
in amounts up to 10% of the value of Fund total assets, taken at cost at the
time of borrowing, or purchase securities while borrowings exceed 5% of its
total assets; or mortgage, pledge or hypothecate any assets except in connec-
tion with any such borrowings in amounts up to 10% of the value of the Fund's
net assets at the time of borrowing; or (iv) invest more than 25% of its as-
sets in any one industry, except there is no percentage limitation with re-
spect to investments in U.S. Government securities, negotiable certificates of
deposit, time deposits, and bankers' acceptances of U.S. branches of U.S.
banks.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions and Additional Information in the Statement of Additional Informa-
tion.
MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of the Portfolio are identi-
fied below.
<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>
A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio
and The Pierpont Funds, 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 Port-
folio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services. Pierpont Group, Inc. was orga-
nized in 1989 at the request of the Trustees of The Pierpont Family of Funds
for the purpose of providing these services at cost to these funds. See Trust-
ees and Officers in the Statement of Additional Information. The principal of-
fices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017.
8
<PAGE>
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices of Morgan as Investment Advisor. Morgan, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company
organized under the laws of Delaware. Through offices in New York City and
abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional cli-
ents with combined assets under management of over $145 billion (of which the
Advisor advises over $30 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and his
business experience for the past 5 years is indicated parenthetically): Robert
W. Holland, Vice President (since March, 1988, employed by Morgan since prior
to 1990) and Robert R. Johnson, Vice President (since June, 1988, employed by
Morgan since prior to 1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.20% of the Portfolio's average daily net assets up to
$1 billion, and 0.10% of average daily net assets in excess of $1 billion.
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. In this capacity, SBDS ad-
ministers and manages all aspects of the Fund's and the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Investment Advisor, Services Agent, Custodian, and Shareholder Services.
In connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain recordkeeping responsibilities; (ii) takes responsibility for compli-
ance with all applicable federal and state securities and other regulatory re-
quirements; (iii) is responsible for the registration of sufficient Fund
shares under federal and state securities laws; (iv) takes responsibility for
monitoring the Fund's status as a regulated investment company under the In-
ternal Revenue Code of 1986; and (v) performs such administrative and manage-
rial oversight of the activities of the Trust's and the Portfolio's custodian
and transfer agent, respectively, as the Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Financial and Fund
Accounting Services Agreements with Morgan, the fees of the Administrator are
covered by Morgan's expense undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM In-
stitutional Funds as well as The Pierpont Funds, which is another family of
mutual funds for which SBDS acts as Administrator. The fee rate is calculated
daily in accordance with the following schedule: 0.040% of the first $1 bil-
lion of these funds' aggregate average daily net assets, 0.032% of the next $2
billion of these
9
<PAGE>
funds' aggregate average daily net assets, 0.024% of the next $2 billion of
these funds' aggregate average daily net assets and 0.016% of these funds' ag-
gregate average daily net assets in excess of $5 billion. This fee rate is then
applied to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folio, as well as all of the other portfolios in which series of The JPM Insti-
tutional Funds and The Pierpont Funds invest. The fee rate is calculated daily
in accordance with the following schedule: 0.010% of the first $1 billion of
these portfolios' aggregate average daily net assets, 0.008% of the next $2
billion of these portfolios' aggregate average daily net assets, 0.006% of the
next $2 billion of these portfolios' aggregate average daily net assets and
0.004% of these portfolios' aggregate average daily net assets in excess of $5
billion. This fee rate is then applied to the net assets of the Portfolio. The
Administrator may voluntarily waive a portion of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund. SBDS is a wholly-owned subsidiary of Signature. Signature and its af-
filiates currently provide administration and distribution services for a num-
ber of registered investment companies through offices located in Boston, New
York, London, Toronto and The Cayman Islands.
SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and the Portfolio, Morgan acts as Services Agent to the Fund and the
Portfolio and provides the following two services to them. First, Morgan is re-
sponsible for certain financial and fund accounting services provided to the
Fund and the Portfolio, including services related to tax returns and financial
reports. In the case of the Fund, these services also include matters related
to computing the amount of dividends and the net asset value per share and
keeping the books of account.
Second, as provided in the Agreements, Morgan is responsible for the annual
costs of certain usual and customary expenses incurred by the Fund and the
Portfolio (the "expense undertakings"). The expenses covered by the expense un-
dertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator, in-
surance, the compensation and expenses of the Trustees, the expenses of print-
ing and mailing reports, notices, and proxies to Fund shareholders, and regis-
tration fees under federal or state securities laws. The Fund and the Portfolio
will pay these expenses directly and such amounts will be deducted from the
fees to be paid to Morgan under these Agreements. If such amounts are more than
the amount of Morgan's fees under the Agreements, Morgan will reimburse the
Fund or the Portfolio, as appropriate, for such excess amounts. Under the
Trust's Agreement, the following expenses are not included in the expense un-
dertaking: the fees of Pierpont Group, Inc., shareholder servicing fees, the
services agent fee, organization expenses and extraordinary expenses as defined
in this Agreement. Under the Portfolio's Agreement, the following expenses are
not included in the expense undertaking: the fees of Pierpont Group, Inc., cus-
todian fees, advisory fees, brokerage expenses, the services agent fee, organi-
zation expenses and extraordinary expenses as defined in this Agreement.
The Trust's Agreement provides for the Fund to pay Morgan a fee for these serv-
ices, which is computed daily and may be paid monthly, at the annual rate of
0.05% of the Fund's average daily net assets. The Portfolio's Agreement pro-
vides for the Portfolio to pay Morgan a fee for these services, which is com-
puted daily and may be paid monthly, at the annual rate of 0.03% of the Portfo-
lio's average daily net assets.
As noted above, the fee levels of the Fund and the Portfolio are expense under-
takings and reflect payments made directly to third parties by the Fund and the
Portfolio for services rendered, as well as payments to Morgan for services
rendered. The Trustees of the Trust and the Portfolio regularly review amounts
paid to and accounted for by Morgan pursuant to these Agreements. Under the
Agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.
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CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent ("Custodian").
EXPENSES. In addition to the expenses that Morgan assumes under the Financial
and Fund Accounting Services Agreements, Morgan has agreed that it will reim-
burse the Fund through at least November 30, 1995 to the extent necessary to
maintain the Total Operating Expenses (which includes expenses of the Fund and
the Portfolio) at the annual rate of 0.20% of the Fund's average daily net as-
sets. This limit on certain expenses does not cover extraordinary increases in
these expenses during the period and no longer applies in the event of a pre-
cipitous decline in assets due to unforeseen circumstances. There is no assur-
ance that Morgan will continue this waiver beyond the specified period, except
as required by the following sentence. Morgan has agreed to waive fees as nec-
essary, if in any fiscal year the sum of the Fund's expenses exceeds the limits
set by applicable regulations of state securities commissions. Such annual lim-
its are currently 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess
of $100 million for any fiscal year.
SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an Eligible Institution, as defined
below. The Fund has agreed to pay Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.11% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 9 West 57th Street, New York, New York
10019 or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's Dis-
tributor. Investors must be customers of Morgan or an eligible institution with
a Morgan account (an "Eligible Institution"). Investors may also be employer-
sponsored retirement plans that have designated the Fund as an investment op-
tion for the plans. Prospective investors who are not already customers of Mor-
gan may apply to become customers of Morgan for the sole purpose of Fund trans-
actions. There are no charges associated with becoming a Morgan customer for
this purpose. Morgan reserves the right to determine the customers that it will
accept, and the Fund reserves the right to determine the purchase orders that
it will accept.
The Fund requires a minimum initial investment of $10 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 basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of another Eligible Institution that may establish its own terms, condi-
tions and charges.
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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 and to transfer imme-
diately available funds to the Fund's Distributor on the same day. Any share-
holder may also call J.P. Morgan Funds Services at (800) 766-7722 for assis-
tance in placing an order for Fund shares. Immediately available funds must be
received by 2:30 P.M. New York time on a business day for the purchase to be
effective and dividends to be earned on the same day. The Fund does not accept
orders after the indicated time. If funds are received after 2:30 P.M. New
York time for any reason, including that the day is a Federal Reserve holiday,
the purchase is not effective and dividends are not earned until the next
business day.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses, pro-
viding periodic statements showing the client's account balance and integrat-
ing these statements with those of other transactions and balances in the cli-
ent's other accounts serviced by the Eligible Institution, transmitting proxy
statements, 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 on a business day prior to 1:00 P.M. New York
time is effective on that day. A redemption request received after that time
becomes effective on the next day. Proceeds of an effective redemption are
generally deposited the same day in immediately available funds to the share-
holder's account at Morgan or at his Eligible Institution or, in the case of
certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions. If a redemption request becomes effec-
tive on a day when the New York Stock Exchange is open but which is a Federal
Reserve holiday, the proceeds are paid the next business day. See Further Re-
demption Information.
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 $10 million for
more than 30 days because of a redemption of shares, the shareholder's remain-
ing shares may be redeemed 60 days after written notice unless the account is
increased to the Fund's minimum investment amount or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption of proceeds when non-cor-
porate investors have not provided a certified taxpayer identification number.
In addition, if a Morgan customer sends a check to Morgan for the purchase of
Fund shares and shares are purchased with funds made available by Morgan be-
fore
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the check has cleared, the transmittal of redemption proceeds from the shares
will occur upon clearance of the check which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the Investment Company Act of 1940 or the SEC may permit. See Re-
demption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or Pierpont Fund without charge. An exchange may be made so long as after
the exchange the investor has shares, in each fund in which he or she remains
an investor, with a value of at least each of those fund's minimum investment
amounts. See Method of Purchase in the prospectuses for the other JPM Institu-
tional Funds and The Pierpont Funds for the minimum investment amount for each
of those funds. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Institutional
Funds and The Pierpont Funds. See also Additional Information below for an ex-
planation of the telephone exchange policy of The JPM Institutional Funds.
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
All of the Fund's net investment income is declared as a dividend daily and
paid monthly. If an investor's shares are redeemed during a month, accrued but
unpaid dividends are paid with the redemption proceeds. The net investment in-
come of the Fund for dividend purposes consists of its pro rata share of the
net income of the Portfolio less the Fund's expenses. Dividends and distribu-
tions are payable to shareholders of record at the time of declaration. The
net investment income of the Fund for each business day is determined immedi-
ately prior to the determination of net asset value. Net investment income for
other days is determined at the time net asset value is determined on the
prior business day. Shares of the Fund earn dividends on the business day
their purchase is effective, but not on the business day their redemption is
effective. See Purchase of Shares and Redemption of Shares.
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.
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.
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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. The Portfo-
lio values all portfolio securities by the amortized cost method. This method
attempts to maintain for the Fund a constant net asset value per share of
$1.00. No assurances can be given that this goal can be attained. See Net Asset
Value in the Statement of Additional Information for more information on valua-
tion of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date thirteen series of shares have been authorized and are avail-
able for sale to the public. Only shares of the Fund are offered through this
Prospectus. No series of shares will have any preference over any other series.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust Property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by share-
holder vote as may be required by either the Investment Company Act of 1940 or
the Declaration of Trust. The Trustees will call a meeting of shareholders to
vote on removal of a Trustee upon the written request of the record holders of
ten percent of Trust shares and will assist shareholders in communicating with
each other as prescribed in Section 16(c) of the 1940 Act. For further organi-
zation information, including certain shareholder rights, see Description of
Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and com-
mon 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. According-
ly, the Trustees of the Trust believe that neither the Fund nor its sharehold-
ers will be adversely affected by reason of the Fund's investing in the Portfo-
lio.
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TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund should not be subject to federal income
taxes or federal excise taxes if all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders within allowable time limits. The Portfolio intends to qualify as an
association treated as a partnership for federal income tax purposes. As such,
the Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's con-
tinued qualification as a partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund are not eligible for the dividends- received deduc-
tion. The Fund does not expect to realize long-term capital gains and thus
does not contemplate paying distributions taxable to shareholders who are sub-
ject to tax as long-term capital gains.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. 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 re-
spect to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including re-
quiring investors to give their personal identification number and tape re-
cording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it or the Shareholder
Servicing Agent may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Donoghue's Money Market fund average and other industry publica-
tions. The Fund may advertise "yield" and
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<PAGE>
"effective yield". Yield refers to the net income generated by an investment in
the Fund over a stated seven-day period. This income is then annualized i.e.,
the amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. Effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in the Fund is assumed to be re-
invested; the effective yield will be slightly higher than the yield because of
the compounding effect of this assumed reinvestment.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of oper-
ations, 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 required by regu-
lations of the Securities and Exchange Commission. Yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be ob-
tained by calling the Fund's Distributor at (800) 847-9487.
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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 Money Market Fund
PROSPECTUS
March 1, 1995
