As filed with the Securities and Exchange Commission on September 2, 1997.
Registration Nos. 33-54632 and 811-7340
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 38
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 39
The JPM Pierpont Funds
(formerly, The Pierpont Funds)
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(617) 557-0700
John E. Pelletier, c/o Funds Distributor, Inc.
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[x] on September 2, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
The Registrant has previously registered an indefinite number of its shares
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant has filed Rule 24f-2
notices with respect to its series as follows: Tax Exempt Money Market and Tax
Exempt Bond Funds (for their fiscal years ended August 31, 1996) on October 29,
1996; Federal Money Market, Short Term Bond, Bond, Emerging Markets Equity and
International Equity Funds (for their fiscal years ended October 31, 1996) on
December 20, 1996; Prime Money Market Fund (for its fiscal year ended November
30, 1996) on January 17, 1997; European Equity, Japan Equity and Asia Growth
Funds (for their fiscal years ended December 31, 1996) on February 27, 1997; New
York Total Return Bond Fund (for its fiscal year ended March 31, 1997) on May
21, 1997; U.S. Equity and U.S. Small Company Funds (for their fiscal years ended
May 31, 1997) on July 22, 1997; and Diversified Fund (for its fiscal year ended
June 30, 1997) on August 28, 1997. The Registrant expects to file Rule 24f-2
notices with respect to its U.S. Small Company Opportunities Fund (for its
fiscal year ending May 31, 1998) on or before July 30, 1998; Global Strategic
Income Fund (for its fiscal years ending October 31, 1997) on or before December
30, 1997; International Opportunities and Latin American Equity Funds (for their
fiscal years ending November 30, 1997) on or before January 29, 1998; and
Emerging Markets Debt Fund (for its fiscal year ending December 31, 1997) on or
before March 2, 1998.
The Prime Money Market Portfolio, The Tax Exempt Money Market Portfolio, The
Federal Money Market Portfolio, The Short Term Bond Portfolio, The U.S. Fixed
Income Portfolio, The Tax Exempt Bond Portfolio, The U.S. Equity Portfolio, The
U.S. Small Company Portfolio, The International Equity Portfolio, The
Diversified Portfolio, The Emerging Markets Equity Portfolio, The New York Total
Return Bond Portfolio, The Series Portfolio and Series Portfolio II have also
executed this Registration Statement.
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<PAGE>
THE JPM PIERPONT FUNDS
(INTERNATIONAL OPPORTUNITIES FUND, GLOBAL STRATEGIC INCOME FUND,
LATIN AMERICAN EQUITY FUND, EMERGING MARKETS DEBT FUND AND SMALL
COMPANY GROWTH FUND) CROSS-REFERENCE SHEET
(As Required by Rule 495)
PART A ITEM NUMBER: Prospectus Headings.
1. COVER PAGE: Cover Page.
2. SYNOPSIS: Who May Be a Suitable Investor in the Fund.
3. CONDENSED FINANCIAL INFORMATION: Financial Highlights
4. GENERAL DESCRIPTION OF REGISTRANT: Information About the Master-Feeder
Structure; Who May Be a Suitable Investor in the Fund; Investment
Objective and Policies; Additional Investment Practices and Risks;
Organization.
5. MANAGEMENT OF THE FUND: Management of the Fund and Portfolio;
Organization; Shareholder Inquiries and Services; Additional
Information.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not Applicable.
6. CAPITAL STOCK AND OTHER SECURITIES: Information About the Master-Feeder
Structure; Shareholder Inquiries and Services; Net Asset Value; Taxes;
Dividends and Distributions; Organization.
7. PURCHASE OF SECURITIES BEING OFFERED: Purchase of Shares; Exchange of
Shares; Who May Be a Suitable Investor in the Fund; Dividends and
Distributions; Net Asset Value.
8. REDEMPTION OR REPURCHASE: Redemption of Shares; Exchange of Shares; Net
Asset Value.
9. PENDING LEGAL PROCEEDINGS: Not Applicable.
PART B ITEM NUMBER: Statement of Additional Information Headings.
10. COVER PAGE: Cover Page.
11. TABLE OF CONTENTS: Table of Contents.
12. GENERAL INFORMATION AND HISTORY: General.
13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies;
Additional Investments; Investment Restrictions; Quality and
Diversification Requirements; Appendix A.
14. MANAGEMENT OF THE FUND: Trustees and Officers.
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<PAGE>
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of
Shares.
16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Distributor;
Co-Administrator; Services Agent; Custodian and Transfer Agent;
Shareholder Servicing; Independent Accountants; Expenses.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.
18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares;
Dividends and Distributions.
20. TAX STATUS: Taxes.
21. UNDERWRITERS: Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Data.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C. Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.
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<PAGE>
EXPLANATORY NOTE
This post-effective amendment No. 38 (the "Amendment") to the
Registrant's registration statement on Form N-1A (File No. 33-54632) (the
"Registration Statement") is being filed with respect to The JPM Pierpont
Emerging Markets Debt Fund, a series of shares of the Registrant (the "Fund"),
pursuant to the Registrant's undertaking to file a post-effective amendment to
the Registration Statement, using financials which need not be certified, within
four to six months following the date of commencement of public investment
operations of the Fund. As a result, the Amendment does not affect any of the
Registrant's currently effective prospectuses for each other series of shares of
the Registrant.
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C-1
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS
The JPM Pierpont Emerging Markets Debt Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) 521-5411
The investment objective of The JPM Pierpont Emerging Markets Debt Fund (the
"Fund") is high total return from a portfolio of fixed income securities of
emerging markets issuers. Total return consists of realized and unrealized
capital gains and losses plus income. THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE EMERGING MARKETS DEBT PORTFOLIO
(THE "PORTFOLIO"), WHICH HAS THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND
INVESTS IN THE PORTFOLIO THROUGH A TWO-TIER MASTER-FEEDER INVESTMENT FUND
STRUCTURE. SEE INFORMATION ABOUT THE MASTER-FEEDER STRUCTURE ON PAGE 2.
The Portfolio invests primarily in a portfolio of debt obligations issued by
governments, government-related agencies and corporate issuers located in
emerging markets around the world.
THE PORTFOLIO INVESTS IN LOWER QUALITY DEBT INSTRUMENTS ("JUNK BONDS"), WHICH
ARE SUBJECT TO HIGHER RISKS OF UNTIMELY INTEREST AND PRINCIPAL PAYMENTS, DEFAULT
AND PRICE VOLATILITY THAN HIGHER QUALITY SECURITIES AND MAY PRESENT LIQUIDITY
AND VALUATION PROBLEMS. INVESTMENTS IN SECURITIES OF ISSUERS IN EMERGING
MARKETS, INVESTMENTS IN UNRATED AND LOWER RATED DEBT OBLIGATIONS AND INVESTMENTS
DENOMINATED OR QUOTED IN FOREIGN CURRENCIES, AS WELL AS THE PORTFOLIO'S USE OF
INTEREST RATE AND CURRENCY MANAGEMENT TECHNIQUES, ENTAIL RISKS IN ADDITION TO
THOSE THAT ARE CUSTOMARILY ASSOCIATED WITH INVESTING IN DOLLAR-DENOMINATED FIXED
INCOME SECURITIES OF U.S. ISSUERS. INTEREST RATE AND CURRENCY MANAGEMENT
TECHNIQUES MAY BE UNAVAILABLE OR INEFFECTIVE IN MITIGATING RISKS INHERENT IN THE
PORTFOLIO. THE FUND MAY NOT BE ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE. THE
FUND IS INTENDED FOR INVESTORS WHO CAN ACCEPT A HIGH DEGREE OF RISK AND IS NOT
SUITABLE FOR ALL INVESTORS.
The Fund is a series of The JPM Pierpont Funds, an open-end management
investment company organized as a Massachusetts business trust (the "Trust").
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be retained for
future reference. Additional information has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated September 2,
1997, as amended or 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 or by calling (800) 221-7930. The Fund's
Distributor is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109, Attention: The JPM Pierpont Funds.
SHARES OF 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 GOVERNMENT AGENCY. THE VALUE OF AN INVESTMENT
IN THE FUND MAY FLUCTUATE AND MAY, AT THE TIME IT IS REDEEMED, BE HIGHER OR
LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
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 SEPTEMBER 2, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
Expense Table........................................... 1
Financial Highlights.................................... 2
Information About the Master-Feeder Structure........... 2
Who May Be a Suitable Investor in the Fund.............. 3
Investment Objective and Policies....................... 3
Additional Investment Practices and Risks............... 5
Management of the Fund and Portfolio.................... 11
Shareholder Inquiries and Services...................... 13
Page
Purchase of Shares...................................... 13
Redemption of Shares.................................... 14
Exchange of Shares...................................... 15
Dividends and Distributions............................. 15
Net Asset Value......................................... 16
Taxes................................................... 16
Organization............................................ 17
Additional Information.................................. 17
</TABLE>
<PAGE>
The JPM Pierpont Emerging Markets Debt Fund
EXPENSE TABLE
An investment in the Fund is not subject to any sales charges or redemption
fees. Operating expenses described below include the expenses of both the Fund
and the Portfolio. The Trustees believe that the Fund's operating expenses are
approximately equal to or less than would be the case if the Fund invested its
assets directly in securities instead of investing all of its investable assets
in the Portfolio.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases(1)................................................ None
Sales Charge Imposed on Reinvested Distributions............................................ None
Deferred Sales Load......................................................................... None
Redemption Fees............................................................................. None
Exchange Fee................................................................................ None
</TABLE>
ANNUAL OPERATING EXPENSES(2)
<TABLE>
<S> <C>
Advisory Fees............................................................................. 0.70%
Rule 12b-1 Fees........................................................................... None
Other Expenses (after expense reimbursement).............................................. 0.55%
---------
Total Operating Expenses (after expense reimbursement).................................... 1.25%
---------
---------
</TABLE>
- ------------------------
(1) Certain Eligible Institutions (defined below) may impose fees in connection
with the purchase of the Fund's shares through such institutions.
(2) These expenses are expressed as a percentage of average net assets for the
Fund after expense reimbursement for the period indicated in Financial
Highlights below and through April 30, 1998. See Management of the Fund and
Portfolio--Expenses. Without such reimbursement, Other Expenses and Total
Operating Expenses would have been 1.83% and 2.53%, respectively, on an
annualized basis.
EXAMPLE
An investor would pay the following expenses on a hypothetical $1,000
investment, assuming a 5% annual return and redemption at the end of each time
period. (The Fund's minimum initial investment is greater than $1,000.)
<TABLE>
<S> <C>
1 Year....................................................................................... $ 13
3 Years...................................................................................... $ 40
5 Years...................................................................................... $ 69
10 Years..................................................................................... $ 151
</TABLE>
The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in the
Fund bear. For a complete description of contractual arrangements and other
expenses applicable to the Fund and the Portfolio, see Management of the Fund
and Portfolio and Shareholder Inquiries and Services--Shareholder Servicing. THE
EXAMPLE IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE OR EXPENSES. ACTUAL EXPENSES
MAY BE MORE OR LESS THAN THOSE SHOWN.
1
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the Fund for the
indicated period should be read in conjunction with the financial statements and
related notes which are contained in the Fund's semi-annual report and are
incorporated by reference into the Statement of Additional Information. The
Fund's semi-annual report includes a discussion of those factors, strategies and
techniques that materially affected the Fund's performance during the period of
the report, as well as certain related information. A copy of the Fund's
semi-annual report will be made available without charge upon request.
<TABLE>
<CAPTION>
For the Period
April 17, 1997
(commencement of
operations) to
June 30, 1997
-----------------
(unaudited)
<S> <C>
Net Asset Value, Beginning of Period.................................................................... $ 10.00
------
Income from Investment Operations:
Net Investment Income................................................................................. 0.18
------
Net Realized and Unrealized Gain on Investment and Foreign Currency................................... 0.50
------
Total from Investment Operations........................................................................ 0.68
------
------
Net Asset Value, End of Period.......................................................................... 10.68
------
------
Total Return............................................................................................ 6.80%(b)
------
Ratios and Supplemental Data:
Net Assets, End of Period (in thousands).............................................................. $ 7,573
------
Ratios to Average Net Assets:
Expenses............................................................................................ 1.25%(a)
------
Net Investment Income............................................................................... 8.54%(a)
------
Decrease Reflected in Expense Ratio due to Expense Reimbursement.................................... 1.28%(a)
------
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
INFORMATION ABOUT THE MASTER-FEEDER STRUCTURE
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which has an identical investment objective.
The Fund is a feeder fund and the Portfolio is the master fund in a so-called
master-feeder structure.
In addition to the Fund, other feeder funds may invest in the Portfolio, and
information about these other feeder funds is available from the Fund's
Distributor. The other feeder funds invest in the Portfolio on the same terms as
the Fund and bear a proportionate share of the Portfolio's expenses. The other
feeder funds may sell shares on different terms and under a different pricing
structure than the Fund, which may produce different performance results.
2
<PAGE>
There are certain risks associated with an investment in a master-feeder
structure. Large scale redemptions by other feeder funds in the Portfolio may
reduce the diversification of the Portfolio's investments, reduce economies of
scale and increase the Portfolio's operating expenses. If the Board of Trustees
of the Portfolio approves a change to the investment objective of the Portfolio
that is not approved by the Fund's Board of Trustees, the Fund would be required
to withdraw its investment in the Portfolio and engage the services of an
investment advisor or find a substitute master fund. Withdrawal of the Fund's
interest in the Portfolio might cause the Fund to incur expenses it would not
otherwise be required to pay.
If the Fund is requested to vote on a matter affecting the Portfolio, the Fund
will call a meeting of its shareholders to vote on the matter. The Fund will
vote on any matter at the meeting of the Portfolio's investors in the same
proportion that the Fund's shareholders voted on the matter. The Fund will vote
the shares held by Fund shareholders who do not vote in the same proportion as
the shares of Fund shareholders who do vote.
WHO MAY BE A SUITABLE INVESTOR IN THE FUND
An investment in the Fund may offer greater potential for gains and losses but
may be more volatile than an investment in a fund investing primarily in
investment grade fixed income securities. THE FUND IS INTENDED FOR INVESTORS WHO
CAN ACCEPT A HIGH DEGREE OF RISK AND IS NOT SUITABLE FOR ALL INVESTORS. THE FUND
DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM.
Investments in high yield and emerging markets securities may be considered
speculative and involve risks not associated with investments in higher-rated
securities. Investments in securities of issuers in emerging markets,
investments in unrated and lower rated debt obligations and investments
denominated or quoted in foreign currencies, as well as the Portfolio's use of
interest rate and currency management techniques, entail risks in addition to
those that are customarily associated with investing in dollar-denominated fixed
income securities of U.S. issuers. Interest rate and currency management
techniques may be unavailable or ineffective in mitigating risks inherent in the
Portfolio. The Fund may not be able to achieve its investment objective.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is high total return from a portfolio of fixed
income securities of emerging markets issuers. Total return consists of realized
and unrealized capital gains and losses plus income. The Fund seeks to achieve
its objective by investing all of its investable assets in the Portfolio, which
has the same investment objective as the Fund. Since the investment
characteristics of the Fund correspond directly to those of the Portfolio, the
following is a discussion of the investment policies and risks of the Portfolio.
The Portfolio invests primarily in a portfolio of debt obligations of
governments, government-related agencies and companies located in emerging
markets around the world.
PRIMARY INVESTMENTS. In normal circumstances, substantially all and at least 65%
of the value of the Portfolio's total assets are invested in debt obligations of
governments, government-related agencies and corporate issuers located in
emerging markets around the world. The Advisor considers "emerging markets" to
be any country which is generally considered to be an emerging or developing
country by the World Bank, the International Finance Corporation or the United
Nations or its authorities. These countries generally include every country in
the world except Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, United Kingdom and United States. An emerging market issuer is one
that (i) has its principal securities trading market in an emerging market
country; (ii) is organized under the laws of an emerging market country; (iii)
derives 50% or more of its total revenue from either goods produced, sales made
or services performed in emerging market countries; (iv) has at least 50% of its
assets located in emerging markets; or (v) is a government, governmental
authority or agency of an emerging market country.
3
<PAGE>
Debt obligations in which the Portfolio may invest include (i) fixed and
floating rate bonds, notes and debentures of corporate issuers, including
convertible securities; (ii) commercial paper and bank certificates of deposit;
(iii) loans and interests therein, including loan participations; (iv)
obligations issued or guaranteed by a foreign government or its agencies,
instrumentalities, political subdivisions and authorities, including obligations
of central banks and Brady bonds; (v) structured notes, bonds and debentures
issued or guaranteed by governmental or corporate issuers; and (vi) any other
debt securities issued or guaranteed by an emerging markets issuer.
Emerging market securities may be denominated in foreign currencies or the U.S.
dollar. The Advisor will not routinely attempt to manage the Portfolio's
exposure to currencies of emerging markets. However, the Portfolio may from time
to time decide to engage in forward foreign currency exchange transactions if
the Advisor believes these transactions would be in the Portfolio's best
interest.
The Portfolio may invest without limit in fixed income securities rated below
investment grade by one or more internationally recognized rating agencies such
as Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or in unrated securities determined to be of comparable credit
quality by the Advisor. These below investment grade securities may include
obligations of sovereign and corporate issuers. Under normal circumstances, at
least 95% of the Portfolio's total assets will consist of securities rated B or
better at the time of purchase by Moody's or S&P. The Portfolio is not required
to dispose of securities whose ratings fall below B. Below investment grade
obligations, commonly called "junk bonds," are considered speculative and
include obligations that are unrated or in default. See Additional Investment
Practices and Risks.
For temporary defensive purposes, the Portfolio may invest up to 100% of its
assets in cash and money market instruments or invest all or a portion of its
assets in debt securities of the U.S. government or corporate issuers. The
Portfolio may engage in defensive investing if Morgan determines that economic
or market conditions in emerging markets significantly limit opportunities for
total return or pose undue risk to investors.
HOW INVESTMENTS ARE SELECTED. The Portfolio seeks to achieve its objective by
country allocation and security selection. Morgan believes that an assessment of
the creditworthiness of emerging market issuers is the key element in the
country allocation process. To assess creditworthiness, Morgan measures country
risk, i.e., the risk of a change in the likelihood of repayment by emerging
market issuers, by combining a quantitative analysis of economic factors with a
qualitative analysis of the political risk for each country. Morgan then
compares that risk to the potential total returns offered by issuers in that
country. The Portfolio will be more heavily invested in the emerging market
countries with higher estimated returns relative to the expected degree of
country risk.
Securities are selected for the Portfolio using fundamental and quantitative
analysis of the general features of specific emerging markets debt securities
including liquidity, volatility, duration and investor participation. The
primary criteria in determining the securities in which the Portfolio will
invest are the instrument's relative value and estimated total return. An
emerging market debt security's expected return and volatility are in large part
determined by the type of security (e.g., Brady bond, sovereign debt or loan
participation) and market characteristics (e.g., liquidity).
The Portfolio's duration will generally be approximately four to six years. The
maturities of the securities in the Portfolio may vary widely, however. In
addition to securities selection, the Advisor may use futures contracts to
adjust the Portfolio's duration. Duration is a measure of the weighted average
maturity of the debt obligations held by the Portfolio and the sensitivity of
the Portfolio's market value to changes in interest rates. Generally, the longer
the duration of the Portfolio, the more sensitive it will be to changes in
interest rates.
4
<PAGE>
ADDITIONAL INVESTMENT PRACTICES AND RISKS
INVESTING IN EMERGING MARKETS. Investing in the securities of emerging market
issuers involves considerations and potential risks not typically associated
with investing in the securities of issuers in the United States and other
developed countries.
MARKET CHARACTERISTICS. The fixed income securities markets of emerging
countries generally have substantially less volume than the markets for similar
securities in the United States and may not be able to absorb, without price
disruptions, a significant increase in trading volume or trade size.
Additionally, market making activities may be less extensive in such markets,
which may contribute to increased volatility and reduced liquidity in those
markets. The less liquid the market, the more difficult it may be for the
Portfolio to accurately price its portfolio securities or to dispose of such
securities at the times determined to be appropriate. The risks associated with
reduced liquidity may be particularly acute to the extent that the Fund needs
cash to meet redemption requests, to pay dividends and other distributions or to
pay expenses.
Investments in foreign issuers may be affected by changes in currency rates,
changes in foreign or U.S. laws or restrictions applicable to these investments
and in exchange control regulations (e.g., currency blockage). In addition,
clearance and settlement procedures may be different in foreign countries and,
in certain markets, these procedures have on occasion been unable to keep pace
with the volume of securities transactions, thus making it difficult to conduct
securities transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S.
securities markets and securities of many foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding taxes on
dividend or interest payments, limitations on the removal of funds or other
assets, political or social instability or diplomatic developments which could
affect investments in those countries.
ECONOMIC, POLITICAL AND SOCIAL FACTORS. Emerging markets may be subject to a
greater degree of economic, political and social instability that could
significantly disrupt the principal financial markets than are markets in the
United States and in Western European countries. Such instability may result
from among other things: (i) authoritarian governments or military involvement
in political and economic decision making, including changes or attempted
changes in government through extraconstitutional means; (ii) popular unrest
associated with demands for improved economic, political and social conditions;
(iii) internal insurgencies; (iv) hostile relations with neighboring countries;
and (v) ethnic, religious and racial disaffection and conflict. Many emerging
markets have experienced in the past, and continue to experience, high rates of
inflation. In certain countries inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate environment and
sharply eroding the value of outstanding financial assets in those countries.
The economies of many emerging markets are heavily dependent upon international
trade and are accordingly affected by protective trade barriers and the economic
conditions of their trading partners. In addition, the economies of some
emerging markets are vulnerable to weakness in world prices for their commodity
exports. The economies of emerging markets may differ unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position.
RESTRICTIONS ON INVESTMENT AND REPATRIATION. Certain emerging markets require
governmental approval prior to investments by foreign persons or limit
investments by foreign persons to only a specified percentage of an issuer's
5
<PAGE>
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Repatriation of investment income and capital from
certain emerging markets is subject to certain governmental consents. Even where
there is no outright restriction on repatriation of capital, the mechanics of
repatriation may affect the operation of the Portfolio.
CURRENCY RISKS. The U.S. dollar value of foreign securities denominated in a
foreign currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of these currencies against the U.S.
dollar will result in corresponding changes in the U.S. dollar value of the
Portfolio's assets quoted in those currencies. Exchange rates are generally
affected by the forces of supply and demand in the international currency
markets, the relative merits of investing in different countries and the
intervention or failure to intervene of U.S. or foreign governments and central
banks. Some countries in emerging markets also may have managed currencies,
which are not free floating against the U.S. dollar. In addition, emerging
markets may restrict the free conversion of their currencies into other
currencies. Any devaluations in the currencies in which the Portfolio's
securities are denominated may have a detrimental impact on the Portfolio's net
asset value.
The Portfolio may invest any portion of its assets in securities denominated in
foreign currencies or in a particular currency. The Portfolio may enter into
forward foreign currency exchange transactions in an attempt to manage the
Portfolio's foreign currency exposure.
INVESTMENT IN LOWER RATED OBLIGATIONS. While generally providing higher coupons
or interest rates than investments in higher quality securities, lower quality
debt securities involve greater risk of loss of principal and income, including
the possibility of default or bankruptcy of the issuers of such securities, and
have greater price volatility, especially during periods of economic uncertainty
or change. These lower quality debt obligations tend to be affected by economic
changes and short-term corporate and industry developments to a greater extent
than higher quality securities, which react primarily to fluctuations in the
general level of interest rates. To the extent that the Portfolio invests in
such lower quality securities, the achievement of its investment objective may
be more dependent on the Advisor's credit analysis.
Lower quality debt obligations are affected by the market's perception of their
credit quality, especially during times of adverse publicity, and the outlook
for economic growth. Economic downturns or an increase in interest rates may
cause a higher incidence of default by the issuers of these securities,
especially issuers that are highly leveraged. The market for these lower quality
fixed income securities is generally less liquid than the market for investment
grade fixed income securities. It may be more difficult to sell these lower
rated securities to meet redemption requests, to respond to changes in the
market, or to value accurately the Portfolio's portfolio holdings for purposes
of determining the Fund's net asset value.
SOVEREIGN AND CORPORATE DEBT OBLIGATIONS. Investment in sovereign debt
obligations involves special risks not present in corporate debt obligations.
The issuer of the sovereign debt or the governmental authorities that control
the repayment of the debt may be unable or unwilling to repay principal or
interest when due, and the Portfolio may have limited recourse in the event of a
default. During periods of economic uncertainty, the market prices of sovereign
debt, and the Portfolio's net asset value, may be more volatile than prices of
U.S. debt obligations. In the past, certain emerging markets have encountered
difficulties in servicing their debt obligations, withheld payments of principal
and interest and declared moratoria on the payment of principal and interest on
their sovereign debts.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
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sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
to reduce principal and interest arrearages on their debt. The failure of a
sovereign debtor to implement economic reforms, achieve specified levels of
economic performance or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.
Corporate debt obligations, including obligations of industrial, utility,
banking and other financial issuers, are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations and may
also be subject to price volatility due to such factors as market interest
rates, market perception of the creditworthiness of the issuer and general
market liquidity.
BRADY BONDS. Brady bonds are securities created through the exchange of existing
commercial bank loans to public and private entities in certain emerging markets
for new bonds in connection with debt restructurings. Brady bonds have been
issued since 1989 and do not have a long payment history. In light of the
history of defaults of countries issuing Brady bonds on their commercial bank
loans, investments in Brady bonds may be viewed as speculative. Brady bonds may
be fully or partially collateralized or uncollateralized, are issued in various
currencies (but primarily the dollar) and are actively traded in
over-the-counter ("OTC") secondary markets. Incomplete collateralization of
interest or principal payment obligations results in increased credit risk.
Dollar-denominated collateralized Brady bonds, which may be either fixed-rate or
floating-rate bonds, are generally collateralized by U.S. Treasury zero coupon
bonds having the same maturity as the Brady bonds.
OBLIGATIONS OF SUPRANATIONAL ENTITIES. The Portfolio may invest in obligations
of supranational entities designated or supported by governmental entities to
promote economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the "World Bank"), the European Coal
and Steel Community, the Asian Development Bank and the Inter-American
Development Bank. Each supranational entity's lending activities are limited to
a percentage of its total capital (including "callable capital" contributed by
its governmental members at the entity's call), reserves and net income. There
is no assurance that participating governments will be able or willing to honor
their commitments to make capital contributions to a supranational entity.
LOAN PARTICIPATIONS. The Portfolio may invest in fixed- and floating-rate loans
arranged through private negotiations between an issuer of emerging market debt
instruments and one or more financial institutions ("lenders"). Generally, the
Portfolio's investments in loans are expected to take the form of loan
participations and assignments of portions of loans from third parties. When
investing in a participation, the Portfolio will have the right to receive
payments only from the lender to the extent the lender receives payments from
the borrower, and not from the borrower itself. Likewise, the Portfolio will be
able to enforce its rights only through the lender, and not directly against the
borrower. As a result, the Portfolio will assume the credit risk of both the
borrower and the lender that is selling the participation. When the Portfolio
purchases assignments from lenders, it will acquire direct rights against the
borrower, but these rights and the Portfolio's obligations may differ from, and
be more limited than, those held by the assigning lender. Loan participations
and assignments may be illiquid and subject to the Portfolio's restrictions
applicable to illiquid securities.
ZERO COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES. Zero coupon securities
are securities that are sold at a discount to par value and on which interest
payments are not made during the life of the security. Upon
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maturity, the holder is entitled to receive the par value of the security.
Pay-in-kind securities are securities that have interest payable by delivery of
additional securities. Upon maturity, the holder is entitled to receive the
aggregate par value of the securities. The Portfolio accrues income with respect
to zero coupon and pay-in-kind securities prior to the receipt of cash payments.
Deferred payment securities are securities that remain zero coupon securities
until a predetermined date, at which time the stated coupon rate becomes
effective and interest becomes payable at regular intervals. Zero coupon,
pay-in-kind and deferred payment securities may be subject to greater
fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Portfolio may invest up to 5%
of its total assets in mortgage-backed securities and in other asset-backed
securities issued by non-governmental entities, such as banks and other
financial institutions. Mortgage-backed securities include mortgage pass-through
securities and collateralized mortgage obligations ("CMOs"). Asset-backed
securities are collateralized by such assets as automobile or credit card
receivables and are securitized either in a pass-through structure or in a
pay-through structure similar to a CMO.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Certain sectors of the economies of
emerging markets are closed to investment by foreigners. The Portfolio may be
able to invest in issuers in certain emerging markets solely or primarily
through closed-end investment companies that have been authorized as an investor
in the emerging market by the market's government. The Portfolio may invest up
to 10% of its total assets in shares of other investment companies and up to 5%
of its total assets in any one investment company as long as that investment
does not represent more than 3% of the total voting shares of the acquired
investment company. Investments in the securities of other investment companies
may involve duplication of advisory fees and other expenses.
DEPOSITARY RECEIPTS. Depositary receipts are typically issued by a U.S. or
foreign bank or trust company and evidence ownership of underlying securities of
a U.S. or foreign issuer. Unsponsored programs are organized independently and
without the cooperation of the issuer of the underlying securities. As a result,
available information concerning the issuer may not be as current as for
sponsored depositary instruments and their prices may be more volatile than if
they were sponsored by the issuers of the underlying securities.
RESTRICTED AND ILLIQUID SECURITIES. The Portfolio may acquire securities that
have restrictions on their resale (restricted securities) or securities for
which there is a limited trading market which the Advisor may determine are
illiquid. However the Portfolio may not purchase an illiquid security if, as a
result, more that 15% of its net assets would be invested in illiquid
securities. 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. In addition, illiquid securities may be more
difficult to value due to the unavailability of reliable broker quotes for these
securities. The Portfolio may experience delays in disposing of illiquid
securities and this may have an adverse effect on the ability of the Fund to
meet redemptions in an orderly manner. The Portfolio may purchase restricted
securities that are eligible for resale to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended. Restricted
securities eligible for resale under Rule 144A may be determined to be liquid in
accordance with guidelines established by the Advisor and approved by the
Trustees. The Trustees will monitor the Advisor's implementation of these
guidelines on a periodic basis.
MONEY MARKET INSTRUMENTS. Under normal circumstances, the Portfolio will
purchase money market instruments only to invest temporary cash balances or to
maintain liquidity to meet redemptions. However, the
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Portfolio may also invest in money market instruments without limitation as a
temporary defensive measure taken in the Advisor's judgment during, or in
anticipation of, adverse market conditions. These money market instruments
include obligations issued or guaranteed by the U.S. Government or any of its
agencies and instrumentalities, any foreign government or any of its political
subdivisions, commercial paper, bank obligations, repurchase agreements and
other debt obligations of U.S. and foreign issuers. If a repurchase agreement
counterparty defaults on its obligations, the Portfolio may, under some
circumstances, be limited or delayed in disposing of the repurchase agreement
collateral to recover its investment.
WHEN-ISSUED AND FORWARD COMMITMENT TRANSACTIONS. The Portfolio may purchase
when-issued securities and enter into other forward commitments to purchase or
sell securities. The value of securities purchased on a when-issued or forward
commitment basis may decline between the purchase date and the settlement date.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase derivative securities to
enhance return and enter into derivative contracts to hedge against fluctuations
in securities prices or currency exchange rates, to change the duration of the
Portfolio's fixed income holdings or as a substitute for the purchase or sale of
securities or currency. The Portfolio's investments in derivative securities may
include structured securities.
All of the Portfolio's transactions in derivative instruments involve a risk of
loss or depreciation due to unanticipated adverse changes in interest rates,
securities prices or currency exchange rates. The loss on derivative contracts
(other than purchased options) may substantially exceed the Portfolio's initial
investment in these contracts. In addition, the Portfolio may lose the entire
premium paid for purchased options that expire before they can be profitably
exercised by the Portfolio.
STRUCTURED SECURITIES. The Portfolio may invest in structured securities,
including currency linked securities. The interest rate or, in some cases, the
principal payable at the maturity of a structured security may change positively
or inversely in relation to one or more interest rates, financial indices,
currency rates or other financial indicators (reference prices). A structured
security may be leveraged to the extent that the magnitude of any change in the
interest rate or principal payable on a structured security is a multiple of the
change in the reference price. Thus, structured securities may decline in value
due to adverse market changes in currency exchange rates and other reference
prices.
DERIVATIVE CONTRACTS. The Portfolio may purchase and sell a variety of
derivative contracts, including futures contracts on securities, indices or
currency; options on futures contracts; options on securities, indices or
currency; forward contracts to purchase or sell securities or currency; and
interest rate, currency, index and total return swaps. The Portfolio incurs
liability to a counterparty in connection with transactions in futures
contracts, forward contracts and swaps and in selling options. The Portfolio
pays a premium for purchased options. In addition, the Portfolio incurs
transaction costs in opening and closing positions in derivative contracts.
RISKS ASSOCIATED WITH DERIVATIVE SECURITIES AND CONTRACTS. The risks associated
with the Portfolio's transactions in derivative securities and contracts may
include some or all of the following: market risk, leverage and volatility risk,
correlation risk, credit risk, and liquidity and valuation risk.
MARKET RISK. Investments in structured securities are subject to the market
risks described above. Entering into a derivative contract involves a risk that
the applicable market will move against the Portfolio's position and that the
Portfolio will incur a loss. For derivative contracts other than purchased
options, this loss may substantially exceed the amount of the initial investment
made or the premium received by the Portfolio.
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LEVERAGE AND VOLATILITY RISK. Derivative instruments may sometimes increase or
leverage the Portfolio's exposure to a particular market risk. Leverage enhances
the price volatility of derivative instruments held by the Portfolio. If the
Portfolio enters into futures contracts, writes options or engages in certain
foreign currency exchange transactions, it is required to maintain a segregated
account consisting of cash or liquid assets, hold offsetting portfolio
securities or currency positions or cover written options which may partially
offset the leverage inherent in these transactions.
CORRELATION RISK. The Portfolio's success in using derivative contracts to hedge
portfolio assets depends on the degree of price correlation between the
derivative contract and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading markets
for the derivative contract, the assets underlying the derivative contract and
the Portfolio's assets.
CREDIT RISK. Derivative securities and OTC derivative contracts involve a risk
that the issuer or counterparty will fail to perform its contractual
obligations.
LIQUIDITY AND VALUATION RISK. Some derivative securities are not readily
marketable or may become illiquid under adverse market conditions. In addition,
during periods of extreme market volatility, a commodity exchange may suspend or
limit trading in an exchange-traded derivative contract, which may make the
contract temporarily illiquid and difficult to price. The Portfolio's ability to
terminate OTC derivative contracts may depend on the cooperation of the
counterparties to such contracts. For thinly traded derivative securities and
contracts, the only source of price quotations may be the selling dealer or
counterparty. Segregation of a large percentage of assets could impede portfolio
management or the ability to meet redemption requests.
PORTFOLIO SECURITIES LOANS. The Portfolio may lend portfolio securities with a
value up to one-third of its total assets. Each loan must be fully
collateralized by cash or other eligible assets. The Portfolio may pay
reasonable fees in connection with securities loans. The Advisor will evaluate
the creditworthiness of prospective institutional borrowers and monitor the
adequacy of the collateral to reduce the risk of default by borrowers.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may (1) borrow money
from banks solely for temporary or emergency (but not for leverage) purposes and
(2) enter into reverse repurchase agreements for any purpose. The aggregate
amount of such borrowings and reverse repurchase agreements may not exceed
one-third of the Portfolio's total assets less liabilities (other than
borrowings). For the purposes of the Investment Company Act of 1940 (the "1940
Act"), reverse repurchase agreements are considered a form of borrowing by the
Portfolio and, therefore, a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified.
SHORT-TERM TRADING. The Portfolio may sell a portfolio security without regard
to the length of time such security has been held if, in the Advisor's view, the
security meets the criteria for sale. The annual portfolio turnover rate of the
Portfolio is generally not expected to exceed 100%. A high portfolio turnover
rate involves higher transaction costs to the Portfolio in the form of dealer
spreads. This policy is currently subject to certain requirements for
qualification of the Fund as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). Effective as of January 1, 1998,
the limitations imposed by the Code with respect to short-term trading will no
longer apply to the Fund. See "Taxes" in the Statement of Additional
Information. These limitations may, in certain circumstances, have made it more
difficult for the Fund to manage risk and to engage in certain foreign currency,
option, or other transactions. The elimination of these restrictions should give
the Fund more flexibility with respect to its investment and hedging strategies.
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INVESTMENT POLICIES AND RESTRICTIONS. Except as otherwise stated in this
Prospectus or the Statement of Additional Information, the Fund's and the
Portfolio's investment objective, policies and restrictions are not fundamental
and may be changed without shareholder approval.
PORTFOLIO DIVERSIFICATION AND CONCENTRATION. The Portfolio is non-diversified
which means that it may invest more than 5% of its total assets in the
securities of a single issuer. Investing a significant amount of the Portfolio's
assets in the securities of a small number of emerging market issuers will cause
the Fund's net asset value to be more sensitive to events affecting those
issuers. The Portfolio will not concentrate (invest 25% or more of its total
assets) in the securities of issuers in any one industry. For purposes of this
limitation, the staff of the Securities and Exchange Commission (the "SEC")
considers (a) all supranational organizations as a group to be a single industry
and (b) each foreign government and its political subdivisions to be a single
industry.
MANAGEMENT OF THE FUND AND PORTFOLIO
TRUSTEES. The Fund is a series of the Trust, and the Portfolio is a subtrust of
The Series Portfolio (the "Portfolio Trust"). The Trustees of the Trust and the
Portfolio decide upon matters of general policy and review the actions of Morgan
and other service providers. The Trustees of the Trust and the Portfolio Trust
are identified below. A majority of the non-interested Trustees have adopted
written procedures to deal with any potential conflicts of interest that may
arise because the same persons are Trustees of both the Trust and the Portfolio
Trust.
<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 of the
Trust and the Portfolio Trust; Chairman,
Pierpont Group, Inc.
Michael P. Mallardi............................. Former Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group
</TABLE>
ADVISOR. The Fund has not retained the services of an investment advisor 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 provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
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.
Morgan, with principal offices at 60 Wall Street, New York, New York 10260, is a
New York trust company that 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 advisor to individual
and institutional clients with combined assets under management of over $234
billion.
Morgan uses a sophisticated, disciplined, collaborative process for managing all
asset classes. The following persons have been primarily responsible for the
day-to-day management and implementation of Morgan's investment
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process for the Portfolio (the inception date of each person's responsibility
for the Portfolio and his or her business experience for the past five years is
indicated parenthetically): Eduardo L. Cortes, Vice President (since March 1997;
employed by Morgan since prior to 1992) and Kimberly Conroy, Vice President
(since June 1997; employed by Morgan since February 1993).
As compensation for the services rendered and related expenses borne by Morgan
under its 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 0.70% of the Portfolio's average daily net assets.
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.
CO-ADMINISTRATOR. Pursuant to Co-Administration Agreements with the Trust and
the Portfolio Trust, Funds Distributor, Inc. ("FDI") serves as the
Co-Administrator for the Fund and the Portfolio. FDI (i) provides office space,
equipment and clerical personnel for maintaining the organization and books and
records of the Fund and the Portfolio; (ii) provides officers for the Trust and
the Portfolio Trust; (iii) prepares and files documents required for
notification of state securities administrators; (iv) reviews and files
marketing and sales literature; (v) files Portfolio regulatory documents and
mails Portfolio communications to Trustees and investors; and (vi) maintains
related books and records.
For its services under the Co-Administration Agreements, each of the Fund and
the Portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust, the Portfolio Trust and certain
other investment companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to Administrative Services Agreements
with the Trust and the Portfolio Trust, Morgan provides administrative and
related services to the Fund and the Portfolio, including services related to
tax compliance, preparation of financial statements, calculation of performance
data, oversight of service providers and certain regulatory and Board of
Trustees matters.
Under the Administrative Services Agreements, each of the Fund and the Portfolio
has agreed to pay Morgan fees equal to its allocable share of an annual
complex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio, the other portfolios in which series of the Trust or
The JPM Institutional Funds invest and JPM Series Trust and in accordance with
the following annual schedule: 0.09% on the first $7 billion of their aggregate
average daily net assets and 0.04% of such aggregate average daily net assets in
excess of $7 billion, less the complex-wide fee payable to FDI.
DISTRIBUTOR. FDI, a registered broker-dealer, also serves as the Distributor of
shares of the Fund. FDI is a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. FDI's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
FUND SERVICES AGREEMENTS. Pursuant to Fund Services Agreements with the Trust
and the Portfolio Trust, Pierpont Group, Inc. ("PGI"), 461 Fifth Avenue, New
York, New York 10017, assists the Trustees in exercising their overall
supervisory responsibilities for the affairs of the Trust and the Portfolio. PGI
provides these services for a fee approximating its reasonable cost for
providing these services to the Trust, Portfolio and certain other registered
investment companies with similar agreements with PGI.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company ("State
Street"), 225 Franklin Street, Boston, Massachusetts 02110, serves as the
custodian, fund accounting and transfer agent for the Fund and the Portfolio and
as the Fund's dividend disbursing agent. State Street keeps the books of account
for the Fund and the Portfolio.
EXPENSES. In addition to the fees payable to the service providers identified
above, the Fund and the Portfolio are responsible for usual and customary
expenses associated with their respective operations. These include, among other
things, organization expenses, legal fees, audit and accounting expenses,
insurance costs, the compensation and expenses of the Trustees, interest, taxes
and extraordinary expenses (such as for litigation). For the Fund, such expenses
also include printing and mailing reports, notices and proxy statements to
shareholders and registration fees under federal securities laws and filing fees
under state securities laws. For the Portfolio, such expenses also include
brokerage expenses and registration fees under foreign securities laws.
Morgan has agreed that it will, at least through April 30, 1998, maintain the
Fund's total operating expenses (which include expenses of the Fund and the
Portfolio) at the annual rate of 1.25% of the Fund's average daily net assets.
This expense limitation does not cover extraordinary expenses during the period.
SHAREHOLDER INQUIRIES AND SERVICES
Shareholders may call J.P. Morgan Funds Services at (800) 521-5411 for
information about the Fund and assistance with shareholder transactions.
SHAREHOLDER SERVICING. Under a shareholder servicing agreement with the Trust,
Morgan, acting directly or through an agent (designated as an Eligible
Institution), provides account administration and personal and account
maintenance services to Fund shareholders. These services include assisting in
the maintenance of accurate account records; processing orders to purchase and
redeem shares of the Fund; and responding to shareholder inquiries. The Fund has
agreed to pay Morgan a fee for these services at an annual rate of 0.25% of the
average daily net assets of the Fund.
Shares may be sold to or through Eligible Institutions, including financial
institutions and broker-dealers, that may be paid fees by Morgan or its
affiliates for services provided to their clients that invest in the Fund.
Organizations that provide recordkeeping or other services to certain employee
benefit or retirement plans that include the Fund as an investment alternative
may also be paid a fee.
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.
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
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<PAGE>
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.
MINIMUM INVESTMENT REQUIREMENTS. The Fund requires a minimum initial investment
of $2,500. The minimum subsequent investment for all investors is $500. These
minimum initial investment requirements may be waived for certain investors,
including investors for whom the Advisor is a fiduciary, who are employees of
the Advisor, who maintain related accounts with the Fund, other JPM Pierpont
Funds or with the Advisor, who make investments for a group of clients, such as
financial advisors, trust companies and investment advisors, or who maintain
retirement accounts with the Fund.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value next determined after receipt of
an order. Prospective investors may purchase shares with the assistance of an
Eligible Institution that may establish its own terms, conditions and charges.
To purchase Fund shares, 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) 521-5411 for assistance in placing
an order for shares. If the Fund or its agent 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 becomes a holder of record on the next business day upon the Fund's
receipt of payment in immediately available funds. If the Fund or its agent
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. 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 Distributions.
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
subaccounting, answering client inquiries regarding the Trust, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the 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.
Although there is no sales charge levied directly by the Fund, Eligible
Institutions may establish their own terms and conditions for providing their
services and may charge investors a transaction-based or other fee for their
services. Such charges may vary among Eligible Institutions but in all cases
will be retained by the Eligible Institution and not remitted to the Fund or
Morgan.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem Fund shares, 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
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<PAGE>
Services directly at (800) 521-5411 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 ("NAV"). See Net Asset Value.
A redemption request received by the Fund or its agent 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 the settlement date in immediately available funds
to the shareholder'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 accordance with the customer's instructions. The redeemer will continue to
receive dividends on these shares through the day before the settlement date.
The settlement date is generally the next business day after a redemption is
effective and, subject to Other Redemption Processing Information below, in any
event is within seven days. See Dividends and Distributions.
OTHER REDEMPTION PROCESSING INFORMATION. Redemption requests may not be
processed if the redemption request is not submitted in proper form. To be in
proper form the Fund must have received the shareholder's certified taxpayer
identification number and address. In addition, if shares were paid for by check
and the check has not yet cleared, redemption proceeds will not be transmitted
until the check has cleared, which may take up to 15 days. The Fund reserves the
right to suspend the right of redemption or postpone the payment of redemption
proceeds to the extent permitted by the SEC.
MANDATORY REDEMPTION. If a redemption of shares reduces the value of a
shareholder's account balance below the required initial minimum investment, the
Fund may redeem the remaining shares in the account 60 days after providing
written notice to the shareholder of the mandatory redemption. An account will
not be subject to mandatory redemption if the shareholder purchases sufficient
shares during the 60-day period to increase the account balance to the required
minimum investment amount.
EXCHANGE OF SHARES
Shares of the Fund may be exchanged for shares of any of The JPM Pierpont Funds,
The JPM Institutional Funds or JPM Series Trust at net asset value without a
sales charge. Shareholders should read the prospectus of the fund into which
they are exchanging and may only exchange between fund accounts that are
registered in the same name, address and taxpayer identification number. After
the exchange, shareholders must meet the minimum investment requirements for the
fund in which they are then investing. An exchange is a redemption of shares
from one fund and a purchase of shares in another and is therefore a taxable
transaction that may have tax consequences. The Fund reserves the right to
discontinue, alter or limit the exchange privilege at any time. Exchanges are
available only in states where an exchange may legally be made.
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
immediately 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,
accrued but unpaid dividends are paid with the redemption proceeds. The net
investment income for 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 outstanding.
Shares are issued and outstanding as of the settlement date of a purchase order
through the day before the settlement date of a redemption order.
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Substantially all the realized net capital gains, if any, 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. Dividends and distributions will
be payable to shareholders of record on the record date. The Fund's dividends
and distributions are paid in additional Fund shares unless the shareholder
elects to have them paid in cash. The tax treatment of dividends and
distributions is the same whether they are paid in shares or cash. Cash
dividends and distributions are either (1) credited to the shareholder's account
at Morgan or the shareholder's Eligible Institution or (2) in the case of
certain Morgan clients, paid by a check mailed in accordance with the client's
instructions.
NET ASSET VALUE
The Fund computes its NAV at 4:15 p.m. New York time on each business day. The
NAV 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 outstanding
shares.
TAXES
The Fund intends to elect to be treated as a regulated investment company under
Subchapter M of the Code. To qualify as such, the Fund must satisfy certain
requirements relating to the sources of its income, diversification of its
assets and distribution of its income to shareholders. As a regulated investment
company, the Fund will not be subject to federal income or excise tax on any net
investment income and net realized capital gains that are distributed to
shareholders in accordance with certain timing requirements of the Code.
Dividends paid by the Fund from net investment income, certain foreign currency
gains, and the excess of net short-term capital gain over net long-term capital
loss will be taxable to its shareholders as ordinary income. Distributions paid
by the Fund from the excess of net long-term capital gain over net short-term
capital loss and designated as "capital gain dividends" will be taxable as
long-term capital gains regardless of how long shareholders have held their
shares. These tax consequences will apply whether distributions are received in
additional shares or in cash. As a result of the enactment of the Taxpayer
Relief Act of 1997 (the "Act"), long-term capital gain of an individual is
generally subject to a maximum rate of 28% in respect of a capital asset held
directly by such individual for more than one year but not more than eighteen
months, and the maximum rate is reduced to 20% in respect of a capital asset
held in excess of 18 months. The Act authorizes the Treasury department to
promulgate regulations that would apply these rules in the case of capital gain
dividends distributed by the Fund.
The Fund's dividends and distributions will generally not qualify for the
corporate dividends-received deduction under the Code. Shareholders will be
informed annually about the amount and character, for federal income tax
purposes, of distributions received from the Fund.
The Portfolio anticipates that it may be required to pay foreign taxes on its
income from certain foreign investments, which will reduce its return from those
investments. The Fund may elect to pass through qualifying foreign taxes to its
shareholders. If this election is made, shareholders will then include their
share of such taxes in income (in addition to actual dividends and
distributions) and may be entitled, subject to applicable limitations, to a
corresponding federal income tax credit or deduction. The Fund will provide
appropriate information to shareholders if this election is made.
Investors should consider the adverse tax implications of buying shares before a
distribution. Investors who purchase shares shortly before the record date for a
distribution will pay a per share price that includes the value of the
anticipated distribution and will be taxed on the distribution even though the
distribution represents a return of a portion of the purchase price.
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Redemptions of shares, whether for cash or in-kind, are taxable events on which
a shareholder may recognize a gain or loss and may be subject to special tax
rules if the redeemed shares were held less than six months or if a reinvestment
occurs. Individuals and certain other shareholders may be subject to 31% backup
withholding of federal income tax on distributions and redemptions if they fail
to furnish their correct taxpayer identification number and certain
certifications or if they are otherwise subject to backup withholding.
In addition to federal taxes, a shareholder may be subject to state, local or
other taxes on Fund distributions, redemptions or exchanges of shares of the
Fund, or the value of their Fund investment. Shareholders are urged to consult
their own tax advisors concerning specific questions about federal, state, local
or other taxes.
ORGANIZATION
The Trust was organized on November 4, 1992 as a Massachusetts business trust.
The Trust currently has 19 series of shares, including the Fund, that are
offered to the public.
Shareholders of the Fund are entitled to one full or fractional vote for each
share of the Fund. There is no cumulative voting and shares have no preemption
or conversion rights. The Trust does not intend to hold annual meetings of
shareholders. The Trustees will call special meetings of shareholders to the
extent required by the Trust's Declaration of Trust or the 1940 Act. The 1940
Act requires the Trustees, under certain circumstances, to call a meeting to
allow shareholders to vote on the removal of a Trustee and to assist
shareholders in communicating with each other.
ADDITIONAL INFORMATION
SHAREHOLDER REPORTS AND CONFIRMATIONS. The Fund sends to its shareholders annual
and semiannual reports. The financial statements appearing in annual reports are
audited by independent accountants. Shareholders will also be sent confirmations
of each purchase and redemption transaction and monthly statements reflecting
all account activity.
TELEPHONE TRANSACTIONS. All shareholders are entitled to initiate redemptions
and other transactions by telephone. However, a transaction authorized by
telephone and reasonably believed by the Fund, Morgan, an Eligible Institution
or the Distributor to be genuine may result in a loss to the investor if the
transaction is not in fact genuine. The Fund will employ reasonable procedures
to confirm that investor instructions communicated by telephone are genuine.
These include requiring investors to give their personal identification numbers
and tape recording telephone instructions. If these procedures are not followed,
the Fund, Morgan, the investor's Eligible Institution or the Distributor may be
liable for any losses resulting from unauthorized or fraudulent instructions.
PERFORMANCE ADVERTISING. The Fund may advertise historical performance
information and compare its performance to other investments or relevant
indexes. An advertisement may also include data supplied by Lipper Analytical
Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson Associates and other
industry publications.
The Fund may advertise average annual total return and other forms of total
return data. Average annual total return is determined by computing the average
annual percentage change in value of $1,000 invested at NAV for specified
periods ending with the most recent calendar quarter. The total return
calculation assumes a complete redemption of the investment at the end of the
relevant period. The Fund may also advertise total return on a cumulative,
average, year-by-year or other basis for specified periods. The investment
results of the Fund will fluctuate over time and should not be considered a
representation of the Fund's performance in the future.
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<PAGE>
The Fund may advertise its yield. Yield reflects the Fund's rate of income on
portfolio investments as a percentage of its NAV. Yield is computed by
annualizing the result of dividing the net investment income per share over a 30
day period by the NAV on the last day of that period. Yield is calculated by
accounting methods that are standardized for all stock and bond funds and differ
from the methods used for other accounting purposes. Therefore, the yield on the
Fund's shares may not equal the income paid on these shares or the income
reported in the Fund's financial statements.
Performance information may be obtained by calling Morgan at (800) 521-5411.
18
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The
JPM Pierpont
Emerging Markets
Debt Fund
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 AN OFFER IN SUCH PROSPECTUS
JURISDICTION. SEPTEMBER 2, 1997
PROS203-979
<PAGE>
THE JPM PIERPONT FUNDS
THE JPM PIERPONT EMERGING MARKETS DEBT FUND
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 2, 1997
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
FOR THE JPM PIERPONT EMERGING MARKETS DEBT FUND, DATED SEPTEMBER 2, 1997, AS
SUPPLEMENTED FROM TIME TO TIME, WHICH MAY BE OBTAINED UPON REQUEST FROM FUNDS
DISTRIBUTOR, INC., ATTENTION: THE JPM PIERPONT FUNDS; (800) 221-7930.
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Table of Contents
PAGE
General...................................................................1
Investment Objective and Policies.........................................1
Investment Restrictions..................................................16
Trustees and Officers....................................................18
Investment Advisor.......................................................23
Distributor..............................................................26
Co-Administrator.........................................................26
Services Agent...........................................................27
Custodian and Transfer Agent.............................................27
Shareholder Servicing....................................................28
Independent Accountants..................................................29
Expenses.................................................................29
Purchase of Shares.......................................................29
Redemption of Shares.....................................................30
Exchange of Shares.......................................................30
Dividends and Distributions..............................................31
Net Asset Value..........................................................31
Performance Data.........................................................32
Portfolio Transactions...................................................33
Massachusetts Trust............................................ .........35
Description of Shares....................................................36
Taxes....................................................................38
Additional Information...................................................42
Financial Statements.....................................................43
Appendix A - Description of Securities Ratings...........................A-1
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GENERAL
This Statement of Additional Information relates only to The JPM
Pierpont Emerging Markets Debt Fund (the "Fund"). The Fund is a series of shares
of beneficial interest of The JPM Pierpont Funds, an open-end management
investment company formed as a Massachusetts business trust (the "Trust"). In
addition to the Fund, the Trust consists of nineteen other series representing
separate investment funds (each a "JPM Pierpont Fund"). The other JPM Pierpont
Funds are covered by separate Statements of Additional Information.
This Statement of Additional Information describes the financial
history, investment objective and policies, management and operation of the
Fund. The Fund operates through a two-tier master-feeder investment fund
structure.
This Statement of Additional Information provides additional
information with respect to the Fund and should be read in conjunction with the
Fund's current Prospectus (the "Prospectus"). Capitalized terms not otherwise
defined herein have the meanings accorded to them in the Prospectus. The Fund's
executive offices are located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for the aggressive investor seeking to diversify
an investment portfolio by investing in fixed income securities of emerging
markets issuers. The Fund's investment objective is high total return from a
portfolio of fixed income securities of emerging markets issuers. The Fund seeks
to achieve its objective by investing all of its investable assets in The
Emerging Markets Debt Portfolio (the "Portfolio"), a non-diversified open-end
management investment company having the same investment objective as the Fund.
The Portfolio attempts to achieve its investment objective by investing
primarily in debt obligations of governments, government-related agencies and
companies located in emerging markets around the world. Under normal
circumstances, the Portfolio expects to invest at least 65% of its total assets
in such securities. The Portfolio does not intend to invest in U.S. securities
(other than money market instruments), except temporarily, when extraordinary
circumstances prevailing at the same time in a significant number of emerging
markets countries render investments in such countries inadvisable.
The following discussion supplements the information regarding the
investment objective of the Fund and the policies to be employed to achieve this
objective by the Portfolio as set forth above and in the Prospectus. The
investment objective of the Fund and the investment objective of the Portfolio
are identical. Accordingly, references below to the Fund also include the
Portfolio; similarly, references to the Portfolio also include the Fund unless
the context requires otherwise.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, the Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
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A description of the various types of money market instruments that may be
purchased by the Fund appears below.
U.S. TREASURY SECURITIES. The Fund may invest in direct obligations of the
U.S. Treasury, including Treasury bills, notes and bonds, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. Securities which are backed by the full faith
and credit of the United States include obligations of the Government National
Mortgage Association, the Farmers Home Administration, and the Export-Import
Bank. In the case of securities not backed by the full faith and credit of the
United States, the Fund must look principally to the federal agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitments. Securities in which the Fund may
invest that are not backed by the full faith and credit of the United States
include, but are not limited to: (i) obligations of the Tennessee Valley
Authority, the Federal Home Loan Mortgage Corporation, the Federal Home Loan
Banks and the U.S. Postal Service, each of which has the right to borrow from
the U.S. Treasury to meet its obligations; (ii) securities issued by the Federal
National Mortgage Association, which are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and (iii)
obligations of the Federal Farm Credit System and the Student Loan Marketing
Association, each of whose obligations may be satisfied only by the individual
credits of the issuing agency.
FOREIGN GOVERNMENT OBLIGATIONS. The Fund, subject to its investment
policies, may also invest in short-term obligations of foreign sovereign
governments or of their agencies, instrumentalities, authorities or political
subdivisions. These securities may be denominated in the U.S. dollar or in
another currency. See "Foreign Investments."
BANK OBLIGATIONS. The Fund unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) foreign branches of U.S. banks and U.S. savings and
loans associations or of foreign banks (Euros) and (ii) U.S. branches of foreign
banks (Yankees). See "Foreign Investments." The Fund will not invest in
obligations for which the Advisor, or any of its affiliated persons, is the
ultimate obligor or accepting bank. The Fund may also invest in obligations of
international banking institutions designated or supported by national
governments to promote economic reconstruction, development or trade between
nations (e.g., the European Investment Bank, the Inter-American Development Bank
or the World Bank).
COMMERCIAL PAPER. The Fund may invest in commercial paper, including
master demand obligations. Master demand obligations are obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
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<PAGE>
changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no additional fee,
in its capacity as investment advisor to the Portfolio and as fiduciary for
other clients for whom it exercises investment discretion. The monies loaned to
the borrower come from accounts managed by the Advisor or its affiliates,
pursuant to arrangements with such accounts. Interest and principal payments are
credited to such accounts. The Advisor, acting as a fiduciary on behalf of its
clients, has the right to increase or decrease the amount provided to the
borrower under an obligation. The borrower has the right to pay without penalty
all or any part of the principal amount then outstanding on an obligation
together with interest to the date of payment. Since these obligations typically
provide that the interest rate is tied to the Federal Reserve commercial paper
composite rate, the rate on master demand obligations is subject to change.
Repayment of a master demand obligation to participating accounts depends on the
ability of the borrower to pay the accrued interest and principal of the
obligation on demand, which is continuously monitored by the Advisor. Since
master demand obligations typically are not rated by credit rating agencies, the
Fund may invest in such unrated obligations only if at the time of an investment
the obligation is determined by the Advisor to have a credit quality which
satisfies the Fund's quality restrictions. See "Quality and Diversification
Requirements." Although there is no secondary market for master demand
obligations, such obligations are considered by the Fund to be liquid because
they are payable upon demand. The Fund does not have any specific percentage
limitation on investments in master demand obligations. It is possible that the
issuer of a master demand obligation could be a client of the Advisor to whom
the Advisor, in its capacity as a commercial bank, has made a loan.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
with brokers, dealers or banks that meet the credit guidelines approved by the
Trustees. In a repurchase agreement, the Fund buys a security from a seller that
has agreed to repurchase the same security at a mutually agreed upon date and
price. The resale price normally is in excess of the purchase price, reflecting
an agreed upon interest rate. This interest rate is effective for the period of
time the Fund is invested in the agreement and is not related to the coupon rate
on the underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than thirteen
months. The securities which are subject to repurchase agreements, however, may
have maturity dates in excess of thirteen months from the effective date of the
repurchase agreement. The Fund will always receive securities as collateral
whose market value is, and during the entire term of the agreement remains, at
least equal to 100% of the dollar amount invested by the Fund in each agreement
plus accrued interest, and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the Custodian. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization upon disposal of the collateral by the Fund may be delayed or
limited.
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The Fund may make investments in other debt securities with remaining
effective maturities of not more than thirteen months, including without
limitation corporate and foreign bonds, asset-backed securities and other
obligations described in the Prospectus or this Statement of Additional
Information.
CORPORATE BONDS AND OTHER DEBT SECURITIES
As discussed in the Prospectus, the Fund may invest in bonds and other
debt securities of domestic and foreign issuers to the extent consistent with
its investment objective and policies. A description of these investments
appears in the Prospectus and below. See "Quality and Diversification
Requirements." For information on short-term investments in these securities,
see "Money Market Instruments."
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities. Each mortgage pool underlying mortgage-backed securities consists of
mortgage loans evidenced by promissory notes secured by first mortgages or first
deeds of trust or other similar security instruments creating a first lien on
owner occupied and non-owner occupied one-unit to four-unit residential
properties, multifamily (i.e., five or more) properties, agriculture properties,
commercial properties and mixed use properties. The investment characteristics
of adjustable and fixed rate mortgage-backed securities differ from those of
traditional fixed income securities. The major differences include the payment
of interest and principal on mortgage-backed securities on a more frequent
(usually monthly) schedule and the possibility that principal may be prepaid at
any time due to prepayments on the underlying mortgage loans or other assets.
These differences can result in significantly greater price and yield volatility
than is the case with traditional fixed income securities. As a result, a faster
than expected prepayment rate will reduce both the market value and the yield to
maturity from those which were anticipated. A prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity and
market value.
GOVERNMENT GUARANTEED MORTGAGE-BACKED SECURITIES. Government National
Mortgage Association mortgage-backed certificates ("Ginnie Maes") are supported
by the full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by federal agencies or government sponsored
enterprises, are not supported by the full faith and credit of the United
States, but may be supported by the right of the issuer to borrow from the U.S.
Treasury. These securities include obligations of instrumentalities such as the
Federal Home Loan Mortgage Corporation ("Freddie Macs") and the Federal National
Mortgage Association ("Fannie Maes"). No assurance can be given that the U.S.
Government will provide financial support to these federal agencies,
authorities, instrumentalities and government sponsored enterprises in the
future.
There are several types of guaranteed mortgage-backed securities
currently available, including guaranteed mortgage pass-through certificates and
multiple class securities, which include guaranteed real estate mortgage
investment conduit certificates ("REMIC Certificates"), other collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities.
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Mortgage pass-through securities are fixed or adjustable rate
mortgage-backed securities which provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees or other amounts paid to any guarantor, administrator and/or
servicer of the underlying mortgage loans.
Multiple class securities include CMOs and REMIC Certificates issued by
U.S. Government agencies, instrumentalities (such as Fannie Mae) and sponsored
enterprises (such as Freddie Mac) or by trusts formed by private originators of,
or investors in, mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks, insurance companies, investment banks and
special purpose subsidiaries of the foregoing. In general, CMOs are debt
obligations of a legal entity that are collateralized by, and multiple class
mortgage-backed securities represent direct ownership interests in, a pool of
mortgage loans or mortgaged-backed securities and payments on which are used to
make payments on the CMOs or multiple class mortgage-backed securities.
CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie
Mac are types of multiple class mortgage-backed securities. Investors may
purchase beneficial interests in REMICs, which are known as "regular" interests
or "residual" interests. The Fund does not intend to purchase residual interests
in REMICs. The REMIC Certificates represent beneficial ownership interests in a
REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage-backed securities (the "Mortgage Assets"). The
obligations of Fannie Mae and Freddie Mac under their respective guaranty of the
REMIC Certificates are obligations solely of Fannie Mae and Freddie Mac,
respectively.
CMOs and REMIC Certificates are issued in multiple classes. Each class
of CMOs or REMIC Certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Principal prepayments on the assets underlying
the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or
REMIC Certificates to be retired substantially earlier than their final
scheduled distribution dates. Generally, interest is paid or accrues on all
classes of CMOs or REMIC Certificates on a monthly basis.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed
securities ("SMBS") are derivative multiclass mortgage securities, issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or by
private issuers. Although the market for such securities is increasingly liquid,
privately issued SMBS may not be readily marketable and will be considered
illiquid for purposes of the Fund's limitation on investments in illiquid
securities. The Advisor may determine that SMBS which are U.S. Government
securities are liquid for purposes of the Fund's limitation on investments in
illiquid securities in accordance with procedures adopted by the Board of
Trustees. The market value of the class consisting entirely of principal
payments generally is unusually volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
from Mortgage Assets are generally higher than prevailing market yields on other
mortgage-backed securities because their
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cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped.
ZERO COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES. While
interest payments are not made on such securities, holders of such securities
are deemed to have received "phantom income." Because the Fund will distribute
"phantom income" to shareholders, to the extent that shareholders elect to
receive dividends in cash rather than reinvesting such dividends in additional
shares, the Portfolio will have fewer assets with which to purchase income
producing securities.
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables or other asset-backed securities collateralized by such
assets. Payments of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the entities issuing the securities. The
asset-backed securities in which the Fund may invest are subject to the Fund's
overall credit requirements. However, asset-backed securities, in general, are
subject to certain risks. Most of these risks are related to limited interests
in applicable collateral. For example, credit card debt receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts on credit card debt thereby reducing the
balance due. Additionally, if the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments or losses if the
full amounts due on underlying sales contracts are not realized. Because
asset-backed securities are relatively new, the market experience in these
securities is limited and the market's ability to sustain liquidity through all
phases of the market cycle has not been tested.
FOREIGN INVESTMENTS
The Fund makes substantial investments in foreign countries. Foreign
investments may be made directly in securities of foreign issuers or in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs")
and Global Depositary Receipts ("GDRs") or other similar securities of foreign
issuers. ADRs are securities, typically issued by a U.S. financial institution
(a "depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares. EDRs are receipts issued
by a European financial institution. GDRs, which are sometimes referred to as
Continental Depositary Receipts ("CDRs"), are securities, typically issued by a
non-U.S. financial institution, that evidence ownership interests in a security
or a pool of securities issued by either a U.S. or foreign issuer. ADRs, EDRs,
GDRs and CDRs may be available for investment through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the receipt's underlying security.
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Holders of an unsponsored depositary receipt generally bear all costs
of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.
Since investments in foreign securities may involve foreign currencies,
the value of the Fund's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Fund may enter into forward
commitments for the purchase or sale of foreign currencies in connection with
the settlement of foreign securities transactions or to manage the Fund's
currency exposure related to foreign investments. See "Additional Investment
Practices and Risks" in the Prospectus.
The Fund may also invest in countries with emerging economies or
securities markets. Political and economic structures in many of such countries
may be undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of more developed countries. Certain of such countries may have in the past
failed to recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a result, the risks described
above, including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the values of the Fund's investments in those countries and the
availability to the Fund of additional investments in those countries. The small
size and inexperience of the securities markets in certain of such countries and
the limited volume of trading in securities in those countries may make the
Fund's investments in such countries illiquid and more volatile than investments
in more developed countries, and the Fund may be required to establish special
custodial or other arrangements before making certain investments in those
countries. There may be little financial or accounting information available
with respect to issuers located in certain of such countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers.
For a description of the risks associated with investing in foreign
securities, see "Additional Investment Practices and Risks" in the Prospectus.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and for money market instruments and other fixed income securities
no interest accrues to the Fund until settlement takes place. At the time the
Fund makes the commitment to purchase securities on a when-issued or delayed
delivery basis, it will record the transaction, reflect the value each day of
such securities in determining its net asset value and, if applicable,
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calculate the maturity for the purposes of average maturity from that date. At
the time of settlement a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Fund will maintain with the
Custodian a segregated account with liquid assets, consisting of cash, U.S.
Government securities or other appropriate securities, in an amount at least
equal to such commitments. On delivery dates for such transactions, the Fund
will meet its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition, it could, as
with the disposition of any other portfolio obligation, incur a gain or loss due
to market fluctuation.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies
may be acquired by the Fund to the extent permitted under the 1940 Act. These
limits require that, as determined immediately after a purchase is made, (i) not
more than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company, (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group, and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund, provided however, that
the Fund may invest all of its investable assets in an open-end investment
company that has the same investment objective as the Fund. As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations. The
Trust and the Portfolio have applied for exemptive relief from the Securities
and Exchange Commission ("SEC") to permit investment in affiliated funds. If the
requested relief is granted, the Fund would then be permitted to invest in
affiliated funds, subject to certain conditions specified in the applicable
order.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Fund sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, a reverse repurchase agreement is
also considered as the borrowing of money by the Fund and, therefore, a form of
leverage. The Fund will invest the proceeds of borrowings under reverse
repurchase agreements. In addition, the Fund will enter into a reverse
repurchase agreement only when the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. The Fund will not invest the proceeds of a reverse repurchase
agreement for a period which exceeds the duration of the reverse repurchase
agreement. The Fund will establish and maintain with the Custodian a separate
account with a segregated portfolio of securities in an amount at least equal to
its purchase obligations under its reverse repurchase agreements. See
"Investment Restrictions" below for the Fund's limitations on reverse repurchase
agreements and bank borrowings.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Fund may engage in mortgage dollar
roll transactions with respect to mortgage securities issued by the Government
National Mortgage Association, the Federal National Mortgage Association and the
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Federal Home Loan Mortgage Corporation. In a mortgage dollar roll transaction,
the Fund sells a mortgage backed security and simultaneously agrees to
repurchase a similar security on a specified future date at an agreed upon
price. During the roll period, the Fund will not be entitled to receive any
interest or principal paid on the securities sold. The Fund is compensated for
the lost interest on the securities sold by the difference between the sale
price and the lower price for the future repurchase as well as by the interest
earned on the reinvestment of the sale proceeds. The Fund may also be
compensated by receipt of a commitment fee. When the Fund enters into a mortgage
dollar roll transaction, liquid assets in an amount sufficient to pay for the
future repurchase are segregated with the Custodian. Mortgage dollar roll
transactions are considered reverse repurchase agreements for purposes of the
Fund's investment restrictions.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its securities if such
loans are secured continuously by cash or equivalent collateral or by a letter
of credit in favor of the Fund at least equal at all times to 100% of the market
value of the securities loaned, plus accrued interest. While such securities are
on loan, the borrower will pay the Fund any income accruing thereon. Loans will
be subject to termination by the Fund in the normal settlement time, generally
three business days after notice, or by the borrower on one day's notice.
Borrowed securities must be returned when the loan is terminated. Any gain or
loss in the market price of the borrowed securities which occurs during the term
of the loan inures to the Fund. The Fund may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Fund will consider
all facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Fund will not make any loans in excess of one
year. The Fund will not lend its securities to any officer, Trustee, Director,
employee or other affiliate of the Fund, the Advisor or the Distributor, unless
otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Fund may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus.
As to illiquid investments, the Fund is subject to a risk that should
the Fund decide to sell them when a ready buyer is not available at a price the
Fund deems representative of their value, the value of the Fund's net assets
could be adversely affected. Where an illiquid security must be registered under
the Securities Act of 1933, as amended (the "1933 Act") before it may be sold,
the Fund may be obligated to pay all or part of the registration expenses, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell.
SYNTHETIC INSTRUMENTS. The Fund may invest in certain synthetic
instruments. Such instruments generally involve the deposit of asset-backed
securities in a trust arrangement and the issuance of certificates and/or notes
evidencing interests in the trust. These securities are generally sold in
private placements in reliance on Rule 144A.
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SWAPS AND RELATED SWAP PRODUCTS. The Fund may engage in swap
transactions, specifically interest rate, currency, index and total return swaps
and in the purchase or sale of related caps, floors and collars. In a typical
interest rate swap agreement, one party agrees to make payments equal to a
floating interest rate on a specified amount (the "notional amount") in return
for payments equal to a fixed interest rate on the same amount for a specified
period. If a swap agreement provides for payments in different currencies, the
parties might agree to exchange the notional amount as well. The purchaser of an
interest rate cap or floor, upon payment of a fee, has the right to receive
payments (and the seller of the cap is obligated to make payments) to the extent
a specified interest rate exceeds (in the case of a cap) or is less than (in the
case of a floor) a specified level over a specified period of time or at
specified dates. The purchaser of an interest rate collar, upon payment of a
fee, has the right to receive payments (and the seller of the collar is
obligated to make payments) to the extent that a specified interest rate falls
outside an agreed upon range over a specified period of time or at specified
dates.
Index and currency swaps, caps, floors, and collars are similar to
those described in the preceding paragraph, except that, rather than being
determined by variations in specified interest rates, the obligations of the
parties are determined by variations in specified interest rate or currency
indexes, and, in the case of total return swaps, variations in the total return
of specific securities.
The amount of the Fund's potential gain or loss on any swap transaction
is not subject to any fixed limit. Nor is there any fixed limit on the Fund's
potential loss if it sells a cap, floor or collar. If the Fund buys a cap, floor
or collar, however, the Fund's potential loss is limited to the amount of the
fee that it has paid. Swaps, caps, floors and collars tend to be more volatile
than many other types of investments. Nevertheless, the Fund will use these
techniques only as a risk management tool and not for purposes of leveraging the
Fund's market exposure or its exposure to changing interest rates, security
values or currency values The Fund will use these transactions only to preserve
a return or spread on a particular investment or portion of its investments, to
protect against currency fluctuations, as a duration management technique, to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date, or to gain exposure to certain markets in the most
economical way possible. The Fund will not sell interest rate caps, floors or
collars if it does not own securities providing the interest that the Fund may
be required to pay.
The use of swaps, caps, floors and collars involves investment
techniques and risks different from those associated with other portfolio
security transactions. If the Advisor is incorrect in its forecasts of market
values, interest rates, currency rates and other applicable factors, the
investment performance of the Fund will be less favorable than if these
techniques had not been used. These instruments are typically not traded on
exchanges. Accordingly, there is a risk that the other party to certain of these
instruments will not perform its obligations to the Fund or that the Fund may be
unable to enter into offsetting positions to terminate its exposure or liquidate
its
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investment under certain of these instruments when it wishes to do so. Such
occurrences could result in losses to the Fund.
The Advisor will, however, consider such risks and will enter into
swap, cap, floor and collar transactions only when it believes that the risks
are not unreasonable.
Provided contracts relative to the Fund's use of swaps, caps, floors
and collars permit, the Fund will usually enter into swaps on a net basis--that
is, the two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument--with the Fund receiving or paying, as
the case may be, only the net amount of the two payments.
The Fund will maintain cash or liquid assets in a segregated account
with its custodian in an amount sufficient at all times to cover its current
obligations under swaps, caps, floors and collars. If the Fund enters into a
swap agreement on a net basis, it will segregate assets with a daily value at
least equal to the excess, if any, of the Fund's accrued obligations under the
swap agreement over the accrued amount the Fund is entitled to receive under the
agreement. If the Fund enters into a swap agreement on other than a net basis,
or sells a cap, floor or collar, it will segregate assets with a daily value at
least equal to the full amount of the Fund's accrued obligations under the
agreement.
The Fund will not enter into any swap, cap, floor, or collar, unless
the counterparty to the transaction is deemed creditworthy by the Advisor. If a
counterparty defaults, the Fund may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years, with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid Caps,
floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, for that reason, they are
less liquid than swaps.
The liquidity of swaps, caps, floors and collars will be determined by
the Advisor based on various factors, including (1) the frequency of trades and
quotations, (2) the number of dealers and prospective purchasers in the
marketplace, (3) dealer undertakings to make a market, (4) the nature of the
instrument (including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the Fund's
rights and obligations relating to the investment). Such determination will
govern whether the instrument will be deemed within the 15% restriction on
investments in securities that are not readily marketable.
In connection with such transactions, the Fund will segregate cash or
liquid securities to cover any amounts it could owe under swaps that exceed the
amounts it is entitled to receive, and it will adjust that amount daily, as
needed. During the term of a swap, changes in the value of the swap are
recognized as unrealized gains or losses by marking to market to reflect the
market value of the swap. When the swap is terminated, the Fund will record a
realized gain or loss equal to the difference, if any, between the proceeds from
(or cost of) the closing transaction and the Fund's basis in the contract. The
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Fund is exposed to credit loss in the event of nonperformance by the other party
to the swap.
The federal income tax treatment with respect to swaps, caps, floors,
and collars may impose limitations on the extend to which the Fund may engage in
such transactions.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Although the Fund is not limited by the diversification requirements of the
1940 Act, the Fund will comply with the diversification requirements imposed by
the Code for qualification as a regulated investment company. See "Taxes."
Under normal circumstances, at least 95% of the Fund's total assets
will consist of securities rated B or better at the time of purchase by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("Standard & Poor's"). The higher total return sought by the Fund is generally
obtainable from high yield high risk securities in the lower rating categories
of the established rating services. These securities are rated below Baa by
Moody's or below BBB by Standard & Poor's. The Fund may invest in securities
that are speculative to a high degree and in default. Lower rated securities are
generally referred to as junk bonds. See the Appendix attached to this Statement
of Additional Information for a description of the characteristics of the
various ratings categories. The Fund is not obligated to dispose of securities
whose issuers subsequently are in default or which are downgraded below the
minimum ratings noted above. The credit ratings of Moody's and Standard & Poor's
(the "Rating Agencies"), such as those ratings described in this Statement of
Additional Information, may not be changed by the Rating Agencies in a timely
fashion to reflect subsequent economic events. The credit ratings of securities
do not evaluate market risk. The Fund may also invest in unrated securities
which, in the opinion of the Advisor, offer comparable yields and risks to the
rated securities in which the Fund may invest.
Debt securities that are rated in the lower rating categories, or which
are unrated, involve greater volatility of price and risk of loss of principal
and income. In addition, lower ratings reflect a greater possibility of an
adverse change in financial condition affecting the ability of the issuer to
make payments of interest and principal. The market price and liquidity of lower
rated fixed income securities generally respond to short-term corporate and
market developments to a greater extent than the price and liquidity of higher
rated securities, because these developments are perceived to have a more direct
relationship to the ability of an issuer of lower rated securities to meet its
ongoing debt obligations. Although the Advisor seeks to minimize these risks
through diversification, investment analysis and attention to current
developments in interest rates and economic conditions, there can be no
assurance that the Advisor will be successful in limiting the Fund's exposure to
the risks associated with lower rated securities. Because the Fund invests in
securities in the lower rated categories, the achievement of the Fund's
investment objective is more dependent on the Advisor's ability than would be
the case if the Fund were investing in securities in the higher rated
categories.
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Reduced volume and liquidity in the high yield bond market or the
reduced availability of market quotations may make it more difficult to dispose
of the Fund's investments in high yield securities and to value accurately these
assets. The reduced availability of reliable, objective data may increase the
Fund's reliance on management's judgment in valuing high yield bonds. In
addition, the Fund's investments in high yield securities may be susceptible to
adverse publicity and investor perceptions whether or not justified by
fundamental factors.
In determining suitability of investment in a particular unrated
security, the Advisor takes into consideration asset and debt service coverage,
the purpose of the financing, history of the issuer, existence of other rated
securities of the issuer, and other relevant conditions, such as comparability
to other issuers.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OTC OPTIONS. All options purchased or sold by the
Fund will be traded on a securities exchange or will be purchased or sold by
securities dealers (OTC options) that meet creditworthiness standards approved
by the Trustees. While exchange-traded options are obligations of the Options
Clearing Corporation, in the case of OTC options, the Fund relies on the dealer
from which it purchased the option to perform if the option is exercised. Thus,
when the Fund purchases an OTC option, it relies on the dealer from which it
purchased the option to make or take delivery of the underlying securities.
Failure by the dealer to do so would result in the loss of the premium paid by
the Fund as well as loss of the expected benefit of the transaction.
Provided that the Fund has arrangements with certain qualified dealers
who agree that the Fund may repurchase any option it writes for a maximum price
to be calculated by a predetermined formula, the Fund may treat the underlying
securities used to cover written OTC options as liquid. In these cases, the OTC
option itself would only be considered illiquid to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may
purchase or sell (write) futures contracts and purchase and sell (write) put and
call options, including put and call options on futures contracts. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index. Currently, futures contracts are
available on various types of fixed income securities, including but not limited
to U.S. Treasury bonds, notes and bills, Eurodollar certificates of deposit and
on indexes of fixed income securities and indexes of equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The
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purchaser of an option on a futures contract pays a premium for the option but
makes no initial margin payments or daily payments of cash in the nature of
"variation" margin payments to reflect the change in the value of the underlying
contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by the Fund are paid by the Fund into a segregated account, in
the name of the Futures Commission Merchant, as required by the 1940 Act and the
SEC's interpretations thereunder.
COMBINED POSITIONS. The Fund may write options in combination with each
other, or in combination with futures or forward contracts, to adjust the risk
and return characteristics of the overall position. For example, the Fund may
purchase a put option and write a call option on the same underlying instrument
in order to construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined position
would involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in the
event of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match the Fund's
current or anticipated investments exactly. The Fund may invest in options and
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Fund's investments well. Options and futures contracts prices are affected by
such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in the Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
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LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance that
a liquid market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and could potentially
require the Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, the Fund's access to other
assets held to cover its options or futures positions could also be impaired.
See "Exchange Traded and OTC Options" above for a discussion of the liquidity of
options not traded on an exchange.
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, the Fund or the Advisor may be required
to reduce the size of its futures and options positions or may not be able to
trade a certain futures or options contract in order to avoid exceeding such
limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Fund
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which the Fund can commit assets to
initial margin deposits and option premiums. In addition, the Fund will comply
with guidelines established by the SEC with respect to coverage of options and
futures contracts by mutual funds, and if the guidelines so require, will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
RISK MANAGEMENT
The Fund may employ non-hedging risk management techniques. Examples of
risk management strategies include synthetically altering the duration of a
portfolio or the mix of securities in a portfolio. For example, if the Advisor
wishes to extend maturities in a fixed income portfolio in order to take
advantage of an anticipated decline in interest rates, but does not wish to
purchase the underlying long term securities, it might cause the Fund to
purchase futures contracts on long term debt securities. Similarly, if the
Advisor wishes to decrease fixed income securities or purchase equities, it
could cause the Fund to sell futures contracts on debt securities and purchase
futures contracts on a stock index. Such non-hedging risk management techniques
are not speculative, but because they involve leverage include, as do all
leveraged transactions, the possibility of losses as well as gains that are
greater than if these techniques
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involved the purchase and sale of the securities themselves rather than their
synthetic derivatives.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Portfolio for the period March 7,
1997 (commencement of operations) through June 30, 1997 was 118% (unaudited). A
rate of 100% indicates that the equivalent of all of the Fund's assets have been
sold and reinvested in a year. High portfolio turnover may result in the
realization of substantial net capital gains or losses. To the extent net short
term capital gains are realized, any distributions resulting from such gains are
considered ordinary income for federal income tax purposes. See "Taxes" below.
INVESTMENT RESTRICTIONS
The investment restrictions of the Fund and the Portfolio are
identical, unless otherwise specified. Accordingly, references below to the Fund
also include the Portfolio unless the context requires otherwise; similarly,
references to the Portfolio also include the Fund unless the context requires
otherwise.
The investment restrictions below have been adopted by the Trust with
respect to the Fund and by the Portfolio. Except where otherwise noted, these
investment restrictions are "fundamental" policies which, under the 1940 Act,
may not be changed without the vote of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Fund or Portfolio, as the case
may be. A "majority of the outstanding voting securities" is defined in the 1940
Act as the lesser of (a) 67% or more of the voting securities present at a
meeting if the holders of more than 50% of the outstanding voting securities are
present or represented by proxy, or (b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the restrictions below apply
at the time of the purchase of securities. Whenever the Fund is requested to
vote on a change in the fundamental investment restrictions of the Portfolio,
the Trust will hold a meeting of Fund shareholders and will cast its votes as
instructed by the Fund's shareholders.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof, are amended or modified, the Fund and the
Portfolio may not:
1. Purchase any security if, as a result, more than 25% of the value of
the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry. This
limitation shall not apply to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
2. Issue senior securities. For purposes of this restriction, borrowing
money in accordance with paragraph 3 below, making loans in accordance
with paragraph 7 below, the issuance of shares of beneficial interest
in multiple classes or series, the purchase or sale of options, futures
contracts, forward commitments, swaps and transactions in repurchase
agreements are not deemed to be senior securities.
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3. Borrow money, except in amounts not to exceed one third of the Fund's
total assets (including the amount borrowed) less liabilities (other than
borrowings) (i) from banks for temporary or short-term purposes or for the
clearance of transactions, (ii) in connection with the redemption of Fund
shares or to finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets, (iii) in
order to fulfill commitments or plans to purchase additional securities
pending the anticipated sale of other portfolio securities or assets and
(iv) pursuant to reverse repurchase agreement entered into by the Fund.1
4. Underwrite the securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund
may be deemed to be an underwriter under the 1933 Act.
5. Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) make direct investments in mortgages, (v) purchase and sell
mortgage-related securities and (vi) hold and sell real estate acquired
by the Fund as a result of the ownership of securities including
mortgages.
6. Purchase or sell commodities or commodity contracts, unless acquired as
a result of the ownership of securities or instruments, except the Fund
may purchase and sell financial futures contracts, options on financial
futures contracts and warrants and may enter into swap and forward
commitment transactions.
7. Make loans, except that the Fund (1) may lend portfolio securities with a
value not exceeding one third of the Fund's total assets, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an issue of
debt obligations (including privately issued debt obligations and direct
investments in mortgages), bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance
of the securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - The investment restrictions
described below are not fundamental policies of the Fund and the Portfolio and
may be changed by their respective Trustees. These non-fundamental investment
policies require that the Fund may not:
(i) Acquire securities of other investment companies, except as permitted by the
1940 Act or any rule, order or interpretation thereunder, or in connection with
a merger, consolidation, reorganization, acquisition of assets or an offer of
exchange;
- --------
1 Although the Fund is permitted to fulfill plans to purchase
additional securities pending the anticipated sale of other portfolio
securities or assets, the Fund has no current intention of engaging in
this form of leverage.
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(ii) Acquire any illiquid securities, such as repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of over seven
calendar days, if as a result thereof, more than 15% of the market value of the
Fund's net assets would be in investments that are illiquid;
(iii) Sell any security short, except to the extent permitted by the 1940 Act.
Transactions in futures contracts and options shall not constitute selling
securities short;
(iv) Purchase securities on margin, but the Fund may obtain such short term
credits as may be necessary for the clearance of transactions;
Notwithstanding any other fundamental or non-fundamental investment
restriction or policy, the Fund reserves the right, without the approval of
shareholders, to invest all of its assets in the securities of a single open-end
registered investment company with substantially the same investment objective,
restrictions and policies as the Fund.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
For purposes of fundamental investment restrictions regarding industry
concentration, the Advisor may classify issuers by industry in accordance with
classifications set forth in the DIRECTORY OF COMPANIES FILING ANNUAL REPORTS
WITH THE SECURITIES AND EXCHANGE COMMISSION or other sources. In the absence of
such classification or if the Advisor determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Advisor may classify accordingly. For instance, personal credit finance
companies and business credit finance companies are deemed to be separate
industries and wholly owned finance companies are considered to be in the
industry of their parents if their activities are primarily related to financing
the activities of their parents.
TRUSTEES AND OFFICERS
TRUSTEES
The Trustees of the Trust, who are also the Trustees of the Portfolio,
their business addresses, principal occupations during the past five years and
dates of birth are set forth below.
FREDERICK S. ADDY--Trustee; Retired; Executive Vice President and Chief
Financial Officer since prior to April 1994, Amoco Corporation. His address is
5300 Arbutus Cove, Austin, TX 78746, and his date of birth is January 1, 1932.
WILLIAM G. BURNS--Trustee; Retired, Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779,
and his date of birth is November 2, 1932.
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ARTHUR C. ESCHENLAUER--Trustee; Retired; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. His address is 14 Alta Vista Drive,
RD #2, Princeton, NJ 08540, and his date of birth is May 23, 1934.
MATTHEW HEALEY (*)--Trustee, Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc., ("Pierpont Group") since prior to 1992. His
address is Pine Tree Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL
33436, and his date of birth is August 23, 1937.
MICHAEL P. MALLARDI--Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group since prior to April 1996. His
address is 10 Charnwood Drive, Suffern, NY 10910, and his date of birth is March
17, 1934.
- ------------------------
(*) Mr. Healey is an "interested person" of the Trust and the Portfolio, as that
term is defined in the 1940 Act.
The Trustees of the Trust are the same as the Trustees of the
Portfolio. In accordance with applicable state requirements, 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, the Portfolio and The JPM Institutional
Funds, up to and including creating a separate board of trustees.
Each Trustee is currently paid an annual fee of $75,000 (adjusted as of
April 1, 1997) for serving as Trustee of the Trust, each of the Master
Portfolios (as defined below), The JPM Institutional Funds and the JPM Series
Trust and is reimbursed for expenses incurred in connection with service as a
Trustee. The Trustees may hold various other directorships unrelated to these
funds.
Trustee compensation expenses accrued by the Trust for the calendar
year ended December 31, 1996 is set forth below.
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TOTAL TRUSTEE
COMPENSATION ACCRUED
AGGREGATE BY THE MASTER
TRUSTEE PORTFOLIOS(*), THE JPM
COMPENSATION INSTITUTIONAL FUNDS,
ACCRUED BY THE JPM SERIES TRUST AND
TRUST DURING THE TRUST DURING
NAME OF TRUSTEE 1996 1996 (***)
- --------------- -------------- ----------
Frederick S. Addy, Trustee $15,808 $65,000
William G. Burns, Trustee $15,808 $65,000
Arthur C. Eschenlauer, Trustee $15,808 $65,000
Matthew Healey, Trustee (**) $15,808 $65,000
Chairman and Chief Executive
Officer
Michael P. Mallardi, Trustee $15,808 $65,000
(*) Includes the Portfolio, each Portfolio in which a series of the Trust
invests, The Non-U.S. Fixed Income Portfolio and The Disciplined Equity
Portfolio (collectively the "Master Portfolios").
(**) During 1996, Pierpont Group paid Mr. Healey, in his role as Chairman of
Pierpont Group, compensation in the amount of $140,000, contributed $21,000 to a
defined contribution plan on his behalf and paid $21,500 in insurance premiums
for his benefit.
(***) No investment company within the fund complex has a pension or retirement
plan. Currently there are 18 investment companies (15 investment companies
comprising the Master Portfolios, the Trust, The JPM Institutional Funds and JPM
Series Trust) in the fund complex.
The Trustees, in addition to reviewing actions of the Trust's and the
Portfolio's various service providers, decide upon matters of general policy.
The Portfolio and the Trust have entered into a Fund Services Agreement with
Pierpont Group to assist the Trustees in exercising their overall supervisory
responsibilities over the affairs of the Portfolio and the Trust. Pierpont Group
was organized in July 1989 to provide services for The Pierpont Family of Funds,
and the Trustees are the equal and sole shareholders of Pierpont Group. The
Trust and the Portfolio have agreed to pay Pierpont Group a fee in an amount
representing its reasonable costs in performing these services to the Trust, the
Portfolio and certain other registered investment companies with similar
agreements with Pierpont Group. These costs are periodically reviewed by the
Trustees.
The aggregate fees paid to Pierpont Group Inc. by the Fund and the
Portfolio during the indicated fiscal period are set forth below:
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FUND -- For the period April 17, 1997 (commencement of operations) through June
30, 1997 (unaudited): $43.
PORTFOLIO -- For the period March 7, 1997 (commencement of operations)
through June 30, 1997(unaudited): $935.
OFFICERS
The Trust's and Portfolio's executive officers (listed below), other
than the Chief Executive Officer, are provided and compensated by Funds
Distributor, Inc. ("FDI"), a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The officers conduct and supervise the business
operations of the Trust and the Portfolio. The Trust and the Portfolio have no
employees.
The officers of the Trust and the Portfolio, their principal
occupations during the past five years and dates of birth are set forth below.
Unless otherwise specified, each officer holds the same position with the Trust
and the Portfolio. The business address of each of the officers unless otherwise
noted is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts
02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1992. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. His date of birth is August 23, 1937.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI, Premier
Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies advised or administered by the Dreyfus
Corporation ("Dreyfus") or its affiliates. From December 1991 to July 1994, she
was President and Chief Compliance Officer of FDI. Her date of birth is August
1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant Vice
President and Manager of Treasury Services and Administration of FDI and an
officer of certain investment companies advised or administered by Dreyfus or
its affiliates. Prior to April 1997, Mr. Conroy was Supervisor of Treasury
Services and Administration of FDI. From April 1993 to January 1995, Mr. Conroy
was a Senior Fund Accountant for Investors Bank & Trust Company. Prior to March
1993, Mr. Conroy was employed as a fund accountant at The Boston Company, Inc.
His date of birth is March 31, 1969.
JACQUELINE HENNING; Assistant Secretary and Assistant Treasurer of the
Portfolio only. Managing Director, State Street Cayman Trust Company, Ltd. since
October 1994. Prior to October 1994, Mrs. Henning was head of mutual funds at
Morgan Grenfell in Cayman and for five years was Managing Director of Bank of
Nova Scotia Trust Company (Cayman) Limited from September 1988 to September
1993. Address: P.O. Box 2508 GT, Elizabethan Square, 2nd Floor, Shedden Road,
George Town, Grand Cayman, Cayman Islands. Her date of birth is March 24, 1942.
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RICHARD W. INGRAM; President and Treasurer. Executive Vice President
and Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or Harris Trust and
Savings Bank ("Harris") or their respective affiliates. Prior to April 1997, Mr.
Ingram was Senior Vice President and Director of Client Service and Treasury
Administration of FDI. From March 1994 to November 1995, Mr. Ingram was Vice
President and Division Manager of First Data Investor Services Group, Inc. From
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc. His date of birth is
September 15, 1955.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant Vice
President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity Funds,
Inc., Waterhouse Investors Cash Management Fund, Inc. and Harris or their
respective affiliates. From June 1994 to January 1996, Ms. Jacoppo-Wood was a
Manager, SEC Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994,
Ms. Jacoppo-Wood was a senior paralegal at The Boston Company Advisors, Inc.
("TBCA"). Her date of birth is December 29, 1966.
MARK A. KARPE; Vice President and Assistant Secretary. Counsel of FDI and
an officer of certain investment companies advised or administered by The
Dreyfus Corporation or its affiliates since September 1996. From August 1993 to
May 1996, Mr. Karpe was enrolled at Hofstra Law School and received his JD in
May 1996. From August 1992 to July 1993, Mr. Karpe was employed as an Associate
Examiner with the Enforcement Department of the NASD. Prior to September 1992,
Mr. Karpe was an Associate Analyst with the Enforcement Department of the
American Stock Exchange. His date of birth is November 22, 1968.
ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Vice President
and Senior Counsel of FDI and Premier Mutual and an officer of RCM Capital
Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund,
Inc. and certain investment companies advised or administered by Dreyfus or
Harris or their respective affiliates. Prior to August 1996, Ms. Keeley was
Assistant Vice President and Counsel of FDI and Premier Mutual. Prior to
September 1995, Ms. Keeley was enrolled at Fordham University School of Law and
received her JD in May 1995. Prior to September 1992, Ms. Keeley was an
assistant at the National Association for Public Interest Law. Address: 200 Park
Avenue, New York, New York 10166. Her date of birth is September 14, 1969.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI and Premier Mutual and an officer
of Waterhouse Investors Cash Management Fund, Inc. and certain investment
companies advised or administered by Harris or its affiliates. From April 1994
to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial Group. From
1992 to 1994, Mr. Kelley was employed by Putnam Investments in legal and
compliance capacities. Prior to September 1992, Mr. Kelley was enrolled at
Boston College Law School and received his JD in May 1992. His date of birth is
December 24, 1964.
LENORE J. MCCABE; Assistant Secretary and Assistant Treasurer of the
Portfolio only. Assistant Vice President, State Street Bank and Trust Company
since November 1994. Assigned as Operations Manager, State Street Cayman Trust
Company, Ltd. since February 1995. Prior to November, 1994, employed by Boston
Financial Data Services, Inc. as Control Group Manager. Address: P.O. Box 2508
GT, Elizabethan Square, 2nd Floor, Shedden Road, George Town, Grand Cayman,
Cayman Islands. Her date of birth is May 31, 1961.
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MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual, an
officer of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors
Cash Management Fund, Inc. and certain investment companies advised or
administered by Dreyfus or Harris or their respective affiliates. From 1989 to
1994, Ms. Nelson was an Assistant Vice President and Client Manager for The
Boston Company, Inc. Her date of birth is April 22, 1964.
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of FDI and Premier Mutual and an officer of
RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by Dreyfus or Harris or their respective affiliates. From February 1992 to April
1994, Mr. Pelletier served as Counsel for TBCA. From August 1990 to February
1992, Mr. Pelletier was employed as an Associate at Ropes & Gray. His date of
birth is June 24, 1964.
MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior Vice
President and Director of Strategic Client Initiatives for FDI since December
1996. From December 1989 through November 1996, Mr. Petrucelli was employed with
GE Investments where he held various financial, business development and
compliance positions. He also served as Treasurer of the GE Funds and as
Director of GE Investment Services. Address: 200 Park Avenue, New York, New
York, 10166. His date of birth is May 18, 1961.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Executive Vice
President, Treasurer and Chief Financial Officer, Chief Administrative Officer
and Director Of FDI. Senior Vice President, Treasurer and Chief Financial
Officer, Chief Administrative Officer and Director of Premier Mutual and an
officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or its Affiliates. Prior
to April 1997, Mr. Tower was Senior Vice President, Treasurer and Chief
Financial Officer, Chief Administrative Officer and Director of FDI. From July
1988 to November 1993, Mr. Tower was Financial Manager of The Boston Company,
Inc. His date of birth is June 13, 1962.
INVESTMENT ADVISOR
The investment advisor to the Portfolio is Morgan Guaranty Trust
Company of New York, a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), a bank holding company organized under the laws of the State of
Delaware. The Advisor, whose principal offices are at 60 Wall Street, New York,
New York 10260, is a New York trust company which conducts a general banking and
trust business. The Advisor is subject to regulation by the New York State
Banking Department and is a member bank of the Federal Reserve System. Through
offices in New York City and abroad, the Advisor offers a wide range of
services, primarily to governmental, institutional, corporate and high net worth
individual customers in the United States and throughout the world.
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<PAGE>
J.P. Morgan, through the Advisor and other subsidiaries, acts as
investment advisor to individuals, governments, corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of over $234 billion.
J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as a financial advisor to
national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
The basis of the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. Morgan currently employs over 100 full time
research analysts, among the largest research staffs in the money management
industry, in its investment management divisions located in New York, London,
Tokyo, Frankfurt, Melbourne and Singapore to cover companies, industries and
countries on site. In addition, the investment management divisions employ
approximately 300 capital market researchers, portfolio managers and traders.
The investment advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Advisory Agreement. The Advisor is free
to and does render similar investment advisory services to others. The Advisor
serves as investment advisor to personal investors and other investment
companies and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which the Advisor serves as trustee. The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolio. Such accounts are supervised by officers and employees of the
Advisor who may also be acting in similar capacities for the Portfolio. See
"Portfolio Transactions."
Sector weightings are generally similar to a benchmark with the
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmark for the Portfolio in which the Fund
invests is currently Emerging Market Bond Index+ ("EMBI+").
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary
of J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, which manages employee benefit funds of corporations,
labor unions and state and local governments and the accounts of other
institutional investors, including investment companies. Certain of the assets
of employee benefit accounts under its management are invested in commingled
pension trust funds for which the Advisor serves as trustee. J.P. Morgan
Investment Management Inc. advises the Advisor on investment of the commingled
pension trust funds.
The Portfolio is managed by officers of the Advisor who, in acting for
their customers, including the Portfolio, do not discuss their investment
decisions with any personnel of J.P. Morgan or any personnel of other divisions
of the Advisor or with any of its affiliated persons, with the exception of J.P.
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Morgan Investment Management Inc. and certain other investment management
affiliates of JP Morgan.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Advisory
Agreement, the Portfolio has agreed to pay the Advisor a fee, which is computed
daily and may be paid monthly, equal to an annual rate of 0.70% of the
Portfolio's average daily net assets. The advisory fees paid by the Portfolio to
the Advisor for the period March 7, 1997 (commencement of operations) through
June 30, 1997 was $271,243 (unaudited). See "Expenses" in the prospectus and
below for applicable expense limitations.
The Investment Advisory Agreement provides that it will continue in
effect for a period of two years after execution only if specifically approved
thereafter annually in the same manner as the Distribution Agreement. See
"Distributor" below. The Investment Advisory Agreement will terminate
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Portfolio's Trustees, or by a vote of the holders of a
majority of the Portfolio's outstanding voting securities, on 60 days' written
notice to the Advisor and by the Advisor on 90 days' written notice to the
Portfolio. See "Additional Information."
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as the Advisor from engaging in the business of underwriting or
distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Trust. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment advisor and custodian to such an
investment company. The Advisor believes that it may perform the services for
the Portfolio contemplated by the Advisory Agreement without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent the Advisor from continuing to perform such services for the
Portfolio.
If the Advisor were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio would recommend to
investors that they approve the Portfolio's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Under separate agreements, Morgan also provides certain financial, fund
accounting and administrative services to the Trust and the Portfolio and
shareholder services for the Trust. See "Services Agent" and "Shareholder
Servicing" below.
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DISTRIBUTOR
FDI serves as the Trust's exclusive Distributor and holds itself
available to receive purchase orders for the Fund's shares. In that capacity,
FDI has been granted the right, as agent of the Trust, to solicit and accept
orders for the purchase of the Fund's shares in accordance with the terms of the
Distribution Agreement between the Trust and FDI. Under the terms of the
Distribution Agreement between FDI and the Trust, FDI receives no compensation
in its capacity as the Trust's distributor.
The Distribution Agreement shall continue in effect with respect to the
Fund for a period of two years after execution only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding shares or by the Trust's Trustees and (ii) by a vote of a majority
of the Trustees of the Trust who are not "interested persons" (as defined by the
1940 Act) of the parties to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval (see "Trustees and
Officers"). The Distribution Agreement will terminate automatically if assigned
by either party thereto and is terminable at any time without penalty by a vote
of a majority of the Trustees of the Trust, a vote of a majority of the Trustees
who are not "interested persons" of the Trust, or by a vote of the holders of a
majority of the Fund's outstanding shares as defined under "Additional
Information," in any case without payment of any penalty on 60 days' written
notice to the other party. The principal offices of FDI are located at 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
CO-ADMINISTRATOR
Under Co-Administration Agreements with the Trust and the Portfolio
dated August 1, 1996, FDI also serves as the Trust's and the Portfolio's
Co-Administrator. The Co-Administration Agreements may be renewed or amended by
the respective Trustees without a shareholder vote. The Co-Administration
Agreements are terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust or the Portfolio, as applicable, on not more than 60
days' written notice nor less than 30 days' written notice to the other party.
The Co-Administrator may subcontract for the performance of its obligations,
provided, however, that unless the Trust or the Portfolio, as applicable,
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and omissions of any subcontractor as it would for its own acts or
omissions. See "Services Agent" below.
For its services under the Co-Administration Agreements, the Fund and
the Portfolio have agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust, the Portfolio and certain other
investment companies subject to similar agreements with FDI.
The table below sets forth the administrative fees paid to FDI for the
fiscal period indicated. See "Expenses" below for applicable expense
limitations.
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PORTFOLIO -- For the period March 7, 1997 (commencement of operations) through
June 30, 1997(unaudited): $941.
FUND -- For the period April 17, 1997 (commencement of operations)
through June 30, 1997 (unaudited): $46.
SERVICES AGENT
The Trust, on behalf of the Fund, and the Portfolio have entered into
Administrative Services Agreements (the "Services Agreements") with Morgan
pursuant to which Morgan is responsible for certain administrative and related
services provided to the Fund and the Portfolio. The Services Agreements may be
terminated at any time, without penalty, by the Trustees or Morgan, in each case
on not more than 60 days' nor less than 30 days' written notice to the other
party.
Under the Services Agreements, the Fund and the Portfolio have agreed
to pay Morgan fees equal to its allocable share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios and the JPM Series Trust in accordance with the following
annual schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their average daily net assets in excess of $7 billion,
less the complex-wide fees payable to FDI. The portion of this charge payable by
the Fund and the Portfolio is determined by the proportionate share that its net
assets bear to the total net assets of the Trust, the Master Portfolios, the
other investors in the Master Portfolios for which Morgan provides similar
services and JPM Series Trust.
The table below sets forth the service fees paid to Morgan, net of fee
waivers and reimbursements, for the fiscal period indicated.
PORTFOLIO -- For the period March 7, 1997 (commencement of operations) through
June 30, 1997(unaudited): $11,875.
FUND -- For the period April 17, 1997 (commencement of operations) through
June 30, 1997(unaudited): $464.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Trust's and the Portfolio's
custodian and fund accounting agent and the Fund's transfer and dividend
disbursing agent. Pursuant to the Custodian Contracts, State Street is
responsible for maintaining the books of account and records of portfolio
transactions and holding portfolio securities and cash. In the case of foreign
assets held outside the United States, the Custodian employs various
subcustodians who were approved by the Trustees of the Portfolio in accordance
with the regulations of the SEC. The Custodian maintains portfolio transaction
records. As Transfer Agent and Dividend Disbursing Agent, State Street is
responsible for maintaining account records detailing the ownership of Fund
shares and for crediting income, capital gains and other changes in share
ownership to shareholder accounts.
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SHAREHOLDER SERVICING
The Trust on behalf of the Fund has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for its customers and for other Fund investors who are customers
of an Eligible Institution. Under this agreement, Morgan is responsible for
performing shareholder account administrative and servicing functions, which
includes, but is not limited to, answering inquiries regarding account status
and history, the manner in which purchases and redemptions of Fund shares may be
effected, and certain other matters pertaining to the Fund; assisting customers
in designating and changing dividend options, account designations and
addresses; providing necessary personnel and facilities to coordinate the
establishment and maintenance of shareholder accounts and records with the
Fund's transfer agent; transmitting purchase and redemption orders to the Fund's
transfer agent and arranging for the wiring or other transfer of funds to and
from customer accounts in connection with orders to purchase or redeem Fund
shares; verifying purchase and redemption orders, transfers among and changes in
accounts; informing the Distributor of the gross amount of purchase orders for
Fund shares; and providing other related services.
Under the Shareholder Servicing Agreement, the Fund has agreed to pay
Morgan for these services a fee at an annual rate of 0.25% of the average daily
net asset value of Fund shares owned by or for shareholders for whom Morgan is
acting as shareholder servicing agent). Morgan acts as shareholder servicing
agent for all shareholders.
The shareholder servicing fees paid by the Fund to Morgan, net of fee
waivers and reimbursements, for the period April 17, 1997 (commencement of
operations) through June 30, 1997 (unaudited) were $3,716.
As discussed under "Investment Advisor," the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
and providing administrative services to the Fund and the Portfolio under the
Services Agreements and in acting as Advisor to the Portfolio under the
Investment Advisory Agreement, may raise issues under these laws. However,
Morgan believes that it may properly perform these services and the other
activities described in the Prospectus without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.
If Morgan were prohibited from providing any of the services under the
Shareholder Servicing Agreement and the Services Agreements, the Trustees would
seek an alternative provider of such services. In such event, changes in the
operation of the Fund or the Portfolio might occur and a shareholder might no
longer be able to avail himself or herself of any services then being provided
to shareholders by Morgan.
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INDEPENDENT ACCOUNTANTS
The independent accountants of the Trust and the Portfolio are Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. Price
Waterhouse LLP conducts an annual audit of the financial statements of the Fund
and the Portfolio, assists in the preparation and/or review of the Fund's and
the Portfolio's federal and state income tax returns and consults with the Fund
and the Portfolio as to matters of accounting and federal and state income
taxation.
EXPENSES
In addition to the fees payable to Pierpont Group, Morgan and FDI under
various agreements discussed under "Trustees and Officers," "Investment
Advisor," "Co-Administrator and Distributor," "Services Agent" and "Shareholder
Servicing" above, the Fund and the Portfolio are responsible for usual and
customary expenses associated with their respective operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance costs,
the compensation and expenses of the Trustees, registration fees under federal
securities laws, and extraordinary expenses applicable to the Fund or the
Portfolio. For the Fund, such expenses also include transfer, registrar and
dividend disbursing costs, the expenses of printing and mailing reports, notices
and proxy statements to Fund shareholders, and registration fees under state
securities laws. For the Portfolio, such expenses also include applicable
registration fees under foreign securities laws, custodian fees and brokerage
expenses. For additional information regarding waivers or expense subsidies, see
"Management of the Fund and Portfolio" in the Prospectus.
PURCHASE OF SHARES
Investors may open Fund accounts and purchase shares as described in
the Prospectus under "Purchase of Shares." References in the Prospectus and this
Statement of Additional Information to customers of Morgan or an Eligible
Institution include customers of their affiliates and references to transactions
by customers with Morgan or an Eligible Institution include transactions with
their affiliates. Only Fund investors who are using the services of a financial
institution acting as shareholder servicing agent pursuant to an agreement with
the Trust on behalf of the Fund may make transactions in shares of the Fund.
The Fund may, at its own option, accept securities in payment for
shares. The securities delivered in such a transaction are valued by the method
described in "Net Asset Value" as of the day the Fund receives the securities.
This is a taxable transaction to the shareholder. Securities may be accepted in
payment for shares only if they are, in the judgment of Morgan, appropriate
investments for the Portfolio. In addition, securities accepted in payment for
shares must: (i) meet the investment objective and policies of the Portfolio;
(ii) be acquired by the Fund for investment and not for resale (other than for
resale to the Portfolio); (iii) be liquid securities which are not restricted as
to transfer either by law or liquidity of market; and (iv) have a value which is
readily ascertainable as evidenced by a listing on a stock exchange, OTC market
or by readily available market quotations from a dealer in such securities. The
Fund reserves the right to accept or reject at its own option any and all
securities offered in payment for its shares.
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Prospective investors may purchase shares with the assistance of an
Eligible Institution, and the Eligible Institution may charge the investor a fee
for this service and other services it provides to its customers.
REDEMPTION OF SHARES
Investors may redeem shares as described in the Prospectus under
"Redemption of Shares."
If the Trust on behalf of the Fund and the Portfolio determine that it
would be detrimental to the best interest of the remaining shareholders of the
Fund to make payment wholly or partly in cash, payment of the redemption price
may be made in whole or in part by a distribution in kind of securities from the
Portfolio, in lieu of cash, in conformity with the applicable rule of the SEC.
If shares are redeemed in kind, the redeeming shareholder might incur
transaction costs in converting the assets into cash. The method of valuing
portfolio securities is described under "Net Asset Value," and such valuation
will be made as of the same time the redemption price is determined. The Trust
on behalf of Fund has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or one percent of the net asset value of the Fund during
any 90-day period for any one shareholder. The Trust will redeem Fund shares in
kind only if it has received a redemption in kind from the Portfolio, and
therefore shareholders of the Fund that receive redemptions in kind will receive
Portfolio holdings. The Portfolio has advised the Trust that the Portfolio will
not redeem in kind except in circumstances in which the Fund is permitted to
redeem in kind.
FURTHER REDEMPTION INFORMATION. The Trust, on behalf of the Fund, and
the Portfolio reserves the right to suspend the right of redemption and to
postpone the date of payment upon redemption as follows: (i) for up to seven
days, (ii) during periods when the New York Stock Exchange is closed for other
than weekends and holidays or when trading on such Exchange is restricted as
determined by the SEC by rule or regulation, (iii) during periods in which an
emergency, as determined by the SEC, exists that causes disposal by the
Portfolio of, or evaluation of the net asset value of, its portfolio securities
to be unreasonable or impracticable, or (iv) for such other periods as the SEC
may permit.
EXCHANGE OF SHARES
An investor may exchange shares from any JPM Pierpont Fund into any
other JPM Pierpont Fund or shares of The JPM Institutional Funds or JPM Series
Trust, as described under "Exchange of Shares" in the Prospectus. For complete
information, the prospectus as it relates to a fund into which a transfer is
being made should be read prior to the transfer. Requests for exchange are made
in the same manner as requests for redemptions. See "Redemption of Shares."
Shares of the fund to be acquired are purchased for settlement when the proceeds
from redemption become available. In the case of investors in certain states,
state securities laws may restrict the availability of the exchange privilege.
The Trust reserves the right to discontinue, alter or limit the exchange
privilege at any time.
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DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions as described
under "Dividends and Distributions" in the Prospectus.
Determination of the net income for the Fund is made at the times
described in the Prospectus; in addition, net investment income for days other
than business days is determined at the time net asset value is determined on
the prior business day.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
NET ASSET VALUE
The Fund computes its net asset value once daily on Monday through
Friday as described under "Net Asset Value" in the Prospectus. The net asset
value will not be computed on the days the following legal holidays are
observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Fund and the Portfolio may also close for purchases and
redemptions at such other times as may be determined by the Board of Trustees to
the extent permitted by applicable law. The days on which net asset value is
determined are the Fund's business days.
The net asset value of the Fund is equal to the value of the Fund's
investment in the Portfolio (which is equal to the Fund's pro rata share of the
total investment of the Fund and of any other investors in the Portfolio less
the Fund's pro rata share of the Portfolio's liabilities) less the Fund's
liabilities. The following is a discussion of the procedures used by the Fund in
valuing its assets.
Securities with a maturity of 60 days or more, including securities that
are listed on an exchange or traded over the counter, are valued using prices
supplied daily by an independent pricing service or services that (i) are based
on the last sale price on a national securities exchange or, in the absence of
recorded sales, at the readily available closing bid price on such exchange or
at the quoted bid price in the OTC market, if such exchange or market
constitutes the broadest and most representative market for the security and
(ii) in other cases, take into account various factors affecting market value,
including yields and prices of comparable securities, indication as to value
from dealers and general market conditions. If such prices are not supplied by
the Fund's independent pricing service, such securities are priced in accordance
with procedures adopted by the Trustees. All portfolio securities with a
remaining maturity of less than 60 days are valued by the amortized cost method.
Securities listed on a foreign exchange are valued at the last quoted sale price
available before the time when net assets are valued.
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Options are traded on national securities exchanges and are valued at the
close of options trading on such exchanges which is currently 4:10 P.M., New
York time. Futures and related options, which are traded on commodities
exchanges, are valued at their last sales price as of the close of such
commodities exchanges which is currently 4:15 P.M., New York time. Securities or
other assets for which market quotations are not readily available (including
certain restricted and illiquid securities) are valued at fair value in
accordance with procedures established by and under the general supervision and
responsibility of the Trustees. Such procedures include the use of independent
pricing services which use prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Short-term investments which mature in
60 days or less are valued at amortized cost if their original maturity was 60
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original maturity when acquired by the Portfolio was more than 60 days,
unless this is determined not to represent fair value by the Trustees.
Trading in securities in most foreign markets is normally completed
before the close of trading in U.S. markets and may also take place on days on
which the U.S. markets are closed. If events materially affecting the value of
securities occur between the time when the market in which they are traded
closes and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.
PERFORMANCE DATA
As required by regulations of the SEC, the annualized yield for Fund is
computed by dividing the Fund's net investment income per share earned during a
30-day period by the net asset value on the last day of the period. The average
daily number of shares outstanding during the period that are eligible to
receive dividends is used in determining the net investment income per share.
Income is computed by totaling the interest earned on all debt obligations
during the period and subtracting from that amount the total of all recurring
expenses incurred during the period. The 30-day yield is then annualized on a
bond-equivalent basis assuming semi-annual reinvestment and compounding of net
investment income, as described under "Additional Information" in the
Prospectus.
TOTAL RETURN QUOTATIONS. As required by regulations of the SEC, the
annualized total return of the Fund for a period is computed by assuming a
hypothetical initial payment of $1,000. It is then assumed that all of the
dividends and distributions distributed by the Fund over the period are
reinvested. It is then assumed that at the end of the period, the entire amount
is redeemed. The annualized total return is then calculated by determining the
annual rate required for the initial payment to grow to the amount which would
have been received upon redemption.
HISTORICAL PERFORMANCE
Historical return information for the Fund for the fiscal period April
17, 1997 (commencement of operations) through June 30, 1997 was:
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Average annual total return, 1 year: N/A; average annual total return, 5 years:
N/A; average annual total return, commencement of operations(*) to period end:
6.80%; aggregate total return, 1 year: N/A; aggregate total return, 5 years:
N/A; aggregate total return, commencement of operations(*) to period end: 6.80%.
- --------------------
* The Fund commenced operations on April 17, 1997.
GENERAL. The Fund's performance will vary from time to time depending
upon market conditions, the composition of the Fund, and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including appropriate market indices including
the benchmark indicated under "Investment Advisor" above or data from Lipper
Analytical Services, Inc., Micropal, Inc., Ibbotson Associates, Morningstar
Inc., the Dow Jones Industrial Average and other industry publications.
From time to time, the Fund may quote performance in terms of yield,
actual distributions, total return, or capital appreciation in reports, sales
literature, and advertisements published by the Fund. Current performance
information for the Fund may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.
PORTFOLIO TRANSACTIONS
The Advisor places orders for the Fund for all purchases and sales of
portfolio securities, enters into repurchase agreements, and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Fund. See "Investment Objective and Policies."
Fixed income and debt securities are generally traded at a net price
with dealers acting as principal for their own accounts without a stated
commission. The price of the security usually includes profit to the dealers. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.
Portfolio transactions for the Fund will be undertaken principally to
accomplish the Fund's objective in relation to expected movements in the general
level of interest rates. The Fund may engage in short-term trading consistent
with its objective. See "Investment Objective and Policies -- Portfolio
Turnover."
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In connection with portfolio transactions for the Fund, the Advisor
intends to seek best price and execution on a competitive basis for both
purchases and sales of securities.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisor may allocate a portion of the Fund's brokerage
transactions to affiliates of the Advisor. In order for affiliates of the
Advisor to effect any portfolio transactions for the Fund, the commissions, fees
or other remuneration received by such affiliates must be reasonable and fair
compared to the commissions, fees, or other remuneration paid to other brokers
in connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
Furthermore, the Trustees, including a majority of the Trustees who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees, or other remuneration paid to such
affiliates are consistent with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to
or through the Co-Administrator, the Distributor or the Advisor or any other
"affiliated person" (as defined in the 1940 Act) of the Co-Administrator,
Distributor or Advisor when such entities are acting as principals, except to
the extent permitted by law. In addition, the Fund will not purchase securities
during the existence of any underwriting group relating thereto of which the
Advisor or an affiliate of the Advisor is a member, except to the extent
permitted by law.
On those occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of the Fund as well as other customers, the
Advisor to the extent permitted by applicable laws and regulations, may, but is
not obligated to, aggregate the securities to be sold or purchased for the Fund
with those to be sold or purchased for other customers in order to obtain best
execution, including lower brokerage commissions if appropriate. In such event,
allocation of the securities so purchased or sold as well as any expenses
incurred in the transaction will be made by the Advisor in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Fund. In some instances, this procedure might adversely affect the Fund.
If the Fund effects a closing purchase transaction with respect to an
option written by it, normally such transaction will be executed by the same
broker-dealer who executed the sale of the option. The writing of options by the
Fund will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class which may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options which the Fund may write may be affected by options written by the
Advisor for other investment advisory clients. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
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MASSACHUSETTS TRUST
The Trust is a trust fund of the type commonly known as a
"Massachusetts business trust" of which the Fund is a separate and distinct
series. A copy of the Declaration of Trust for the Trust is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The Declaration of
Trust and the By-Laws of the Trust are designed to make the Trust similar in
most respects to a Massachusetts business corporation. The principal distinction
between the two forms concerns shareholder liability described below.
Effective October 10, 1996, the name of the Trust was changed from "The
Pierpont Funds" to "The JPM Pierpont Funds".
Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust, which is not the case for a corporation. However, the Trust's
Declaration of Trust provides that the shareholders shall not be subject to any
personal liability for the acts or obligations of any series thereof and that
every written agreement, obligation, instrument or undertaking made on behalf of
any series shall contain a provision to the effect that the shareholders are not
personally liable thereunder.
No personal liability will attach to the shareholders under any
undertaking containing such provision when adequate notice of such provision is
given, except possibly in a few jurisdictions. With respect to (i) all types of
claims in the latter jurisdictions, (ii) tort claims, (iii) contract claims
where the provision referred to is omitted from the undertaking, (iv) claims for
taxes and (v) certain statutory liabilities in other jurisdictions, a
shareholder may be held personally liable to the extent that claims are not
satisfied by the Fund. How ever, upon payment of such liability, the shareholder
will be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Trust in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.
The Trust's Declaration of Trust further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as individuals or
personally, that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder and that no Trustee, officer, employee, or agent is
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his or its own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or its duties to such third
persons. It also provides that all third persons shall look solely to Fund
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee or agent is entitled to be indemnified against
all liability in connection with the affairs of the Fund.
The Trust shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.
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DESCRIPTION OF SHARES
The Trust is an open-end management investment company organized as a
Massachusetts business trust in which the Fund represents a separate series of
shares of beneficial interest. See "Massachusetts Trust."
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares (of any
series, if applicable) without changing the proportionate beneficial interest of
each shareholder in the Fund (or in the assets of other series, if applicable).
To date shares of 19 series have been authorized and are available for sale to
the public. Each share represents an equal proportional interest in the Fund
with each other share. Upon liquidation of the Fund, holders are entitled to
share pro rata in the net assets of the Fund available for distribution to such
shareholders. See "Massachusetts Trust." Shares of the Fund have no preemptive
or conversion rights and are fully paid and nonassessable. The rights of
redemption and exchange are described in the Prospectus and elsewhere in this
Statement of Additional Information.
The shareholders of the Trust are entitled to a full vote for each full
share held and to a fractional vote for each fractional share. Subject to the
1940 Act, the Trustees have the power to alter the number and the terms of
office of the Trustees, to lengthen their own terms, or to make their terms of
unlimited duration subject to certain removal procedures and to appoint their
own successors, provided, however, that immediately after such appointment the
requisite majority of the Trustees have been elected by the shareholders of the
Trust. The voting rights of shareholders are not cumulative so that holders of
more than 50% of the shares voting can, if they choose, elect all Trustees being
selected while the shareholders of the remaining shares would be unable to elect
any Trustees. It is the intention of the Trust not 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 1940 Act or the Trust's
Declaration of Trust.
Shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of its outstanding shares, to remove a
Trustee. The Trustees will call a meeting of shareholders to vote on removal of
a Trustee upon the written request of the record holders of 10% of the Trust's
shares. In addition, whenever ten or more shareholders of record who have been
such for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000 or at
least 1% of the Trust's outstanding shares, whichever is less, shall apply to
the Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting for the
purpose of voting upon the question of removal of any Trustee or Trustees and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either (i) afford to such applicants access to a list of the names and addresses
of all shareholders as recorded on the books of the Trust or (ii) inform such
applicants as to the approximate number of shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request. If the Trustees elect
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to follow the latter course, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as recorded on the
books, unless within five business days after such tender the Trustees shall
mail to such applicants and file with the SEC, together with a copy of the
material to be mailed, a written statement signed by at least a majority of the
Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion. After opportunity for
hearing upon the objections specified in the written statements filed, the SEC
may, and if demanded by the Trustees or by such applicants shall, enter an order
either sustaining one or more of such objections or refusing to sustain any of
them. If the SEC shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of such
objections, the SEC shall find, after notice and opportunity for hearing, that
all objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all shareholders
with reasonable promptness after the entry of such order and the renewal of such
tender.
The Trustees have authorized the issuance and sale to the public of
shares of twenty series of the Trust. The Trustees have no current intention to
create any classes within the initial series or any subsequent series. The
Trustees may, however, authorize the issuance of shares of additional series and
the creation of classes of shares within any series with such preferences,
privileges, limitations and voting and dividend rights as the Trustees may
determine. The proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with distinct investment
objectives, policies and restrictions, and share purchase, redemption and net
asset valuation procedures. Any additional classes would be used to distinguish
among the rights of different categories of shareholders, as might be required
by future regulations or other unforeseen circumstances. All consideration
received by the Trust for shares of any additional series or class, and all
assets in which such consideration is invested, would belong to that series or
class, subject only to the rights of creditors of the Trust and would be subject
to the liabilities related thereto. Shareholders of any additional series or
class will approve the adoption of any management contract or distribution plan
relating to such series or class and of any changes in the investment policies
related thereto, to the extent required by the 1940 Act.
For information relating to mandatory redemption of Fund shares or
their redemption at the option of the Trust under certain circumstances, see
"Redemption of Shares" in the Prospectus.
As of August 31, 1997, Morgan as Agent for Three M Operating Subsidiary
Ltd. owned of record or, to the knowledge of management, beneficially owned
84.77% of the outstanding shares of the Fund.
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TAXES
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As a regulated investment company, the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to loans of stock and securities, gains from the
sale or other disposition of stock, securities or foreign currency and other
income (including but not limited to gains from options, futures, and forward
contracts) derived with respect to its business of investing in such stock,
securities or foreign currency; (b) derive less than 30% of its gross income
from the sale or other disposition of stock, securities, options, futures or
forward contracts (other than options, futures or forward contracts on foreign
currencies) held less than three months, or foreign currencies (or options,
futures or forward contracts on foreign currencies), but only if such currencies
(or options, futures or forward contracts on foreign currencies) are not
directly related to the Fund's principal business of investing in stocks or
securities (or options and futures with respect to stocks or securities); and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the value of the Fund's total assets is represented by
cash, cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's total assets, and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or securities of other regulated
investment companies). Effective as of January 1, 1998, the 30% of gross income
test described in (b) above will no longer apply to the Fund.
As a regulated investment company, the Fund (as opposed to its
shareholders) will not be subject to federal income taxes on the net investment
income and capital gain that it distributes to its shareholders, provided that
at least 90% of its net investment income and realized net short-term capital
gain in excess of net long-term capital loss for the taxable year is distributed
in accordance with the Code's timing requirements.
Under the Code, the Fund will be subject to a 4% excise tax on a
portion of its undistributed taxable income and capital gains if it fails to
meet certain distribution requirements by the end of the calendar year. The Fund
intends to make distributions in a timely manner and accordingly does not expect
to be subject to the excise tax.
For federal income tax purposes, dividends that are declared by the
Fund in October, November or December as of a record date in such month and
actually paid in January of the following year will be treated as if they were
paid on December 31 of the year declared. Therefore, such dividends will be
taxable to a shareholder in the year declared rather than the year paid.
Distributions of net investment income, certain foreign currency gains
and realized net short-term capital gain in excess of net long-term capital loss
(other than exempt interest dividends) are generally taxable to shareholders of
the Fund as ordinary income whether such distributions are taken in cash or
reinvested in additional shares. Distributions to corporate shareholders of
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the Fund are not eligible for the dividends received deduction. Distributions of
net long-term capital gain (i.e., net long-term capital gain in excess of net
short-term capital loss) are taxable to shareholders of the Fund as long-term
capital gain, regardless of whether such distributions are taken in cash or
reinvested in additional shares and regardless of how long a shareholder has
held shares in the Fund. As a result of the enactment of the Taxpayer Relief Act
of 1997 (the "Act"), long-term capital gain of an individual is generally
subject to a maximum rate of 28% in respect of a capital asset held directly by
such individual for more than one year. The maximum rate is reduced to 20% in
respect of a capital asset held in excess of 18 months. The Act authorizes the
Treasury department to promulgate regulations that would apply these rules in
the case of distributions of net long-term gain by the Fund. See "Taxes" in the
Prospectus for a discussion of the federal income tax treatment of any gain or
loss realized on the redemption or exchange of the Fund's shares. Additionally,
any loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent the shares disposed of are replaced within a period of
61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend in shares of the Fund.
Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where a put is acquired or a call option is
written thereon or the straddle rules described below are otherwise applicable.
Other gains or losses on the sale of securities will be short-term capital gains
or losses. Gains and losses on the sale, lapse or other termination of options
on securities will be treated as gains and losses from the sale of securities.
Except as described below, if an option written by the Portfolio lapses or is
terminated through a closing transaction, such as a repurchase by the Portfolio
of the option from its holder, the Portfolio will realize a short-term capital
gain or loss, depending on whether the premium income is greater or less than
the amount paid by the Portfolio in the closing transaction. If securities are
purchased by the Portfolio pursuant to the exercise of a put option written by
it, the Portfolio will subtract the premium received from its cost basis in the
securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to certain foreign currency contracts, or to fluctuations in
exchange rates between the time the Portfolio accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Portfolio actually collects such income or pays such liabilities, are generally
treated as ordinary income or ordinary loss. Similarly, gains or losses on the
disposition of debt securities held by the Portfolio, if any, denominated in
foreign currency, to the extent attributable to fluctuations in exchange rates
between the acquisition and disposition dates are also treated as ordinary
income or loss.
Forward currency contracts, options and futures contracts entered into
by the Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Certain straddles treated as short sales for tax purposes
may also result in the loss of the holding period of underlying securities for
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39
<PAGE>
purposes of the 30% of gross income test described above, and therefore, the
Portfolio's ability to enter into forward currency contracts, options and
futures contracts may be limited under current law. Effective as of January 1,
1998, the 30% of gross income test will no longer apply to the Fund.
Certain options, futures and foreign currency contracts held by the
Portfolio at the end of each taxable year will be required to be "marked to
market" for federal income tax purposes -- i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. However, gain or loss recognized on certain foreign currency
contracts will be treated as ordinary income or loss.
The Portfolio may invest in equity securities of foreign issuers. If
the Portfolio purchases shares in certain foreign corporations (referred to as
passive foreign investment companies ("PFICs") under the Code, the Fund may be
subject to federal income tax on a portion of any "excess distribution" from
such foreign corporation including any gain from the disposition of such shares,
even though a portion of such income may have to be distributed as a taxable
dividend by the Fund to its shareholders. In addition, certain interest charges
may be imposed on the Fund as a result of any such distributions. Alternatively,
a Fund may in some cases be permitted to include each year in its income and
distribute to shareholders a pro rata portion of the PFIC's income, whether or
not distributed to the Fund.
For taxable years of the Portfolio beginning after 1997, the Portfolio
will be permitted to "mark to market" any marketable stock held by the Portfolio
in a PFIC. If the Portfolio made such an election, the Fund would include in
income each year an amount equal to its share of the excess, if any of the fair
market value of the PFIC stock as of the taxable year over the adjusted basis of
such stock. The Fund would be allowed a deduction for its shares in excess, if
any, of the adjusted basis of the PFIC stock over its fair market value as of
the close of the taxable year, but only to the extent of any net mark-to-market
gains with respect to the stock included by the Fund for prior taxable years.
FOREIGN SHAREHOLDERS. Dividends of net investment income and
distributions of realized net short-term gain in excess of net long-term loss to
a shareholder who, as to the United States, is a nonresident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Distributions treated
as long term capital gains to foreign shareholders will not be subject to U.S.
tax unless the distributions are effectively connected with the shareholder's
trade or business in the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder was present in the United States
for more than 182 days during the taxable year and certain other conditions are
met.
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In the case of a foreign shareholder who is a nonresident alien
individual or foreign entity, the Fund may be required to withhold U.S. federal
income tax as "backup withholding" at the rate of 31% from distributions treated
as long-term capital gains and from the proceeds of redemptions, exchanges or
other dispositions of Fund shares unless IRS Form W-8 is provided. Transfers by
gift of shares of the Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of shares
of the Fund held by such a shareholder at his or her death will be includible in
his or her gross estate for U.S. federal estate tax purposes.
FOREIGN TAXES. It is expected that the Fund may be subject to foreign
withholding taxes or other foreign taxes with respect to income (possibly
including, in some cases, capital gains) received from sources within foreign
countries. So long as more than 50% in value of the total assets of the Fund
(including its share of the assets of the Portfolio) at the close of any taxable
year consists of stock or securities of foreign corporations, the Fund may elect
to treat any foreign income taxes deemed paid by it as paid directly by its
shareholders. The Fund will make such an election only if they deem it to be in
the best interest of their respective shareholders. The Fund will notify its
shareholders in writing each year if they make the election and of the amount of
foreign income taxes, if any, to be treated as paid by the shareholders and the
amount of foreign taxes, if any, for which shareholders of the Fund will not be
eligible to claim a foreign tax credit because the holding period requirements
(described below) have not been satisfied. If the Fund makes the election, each
shareholder will be required to include in his income (in addition to the
dividends and distributions he receives) his proportionate share of the amount
of foreign income taxes deemed paid by the Fund and will be entitled to claim
either a credit (subject to the limitations discussed below) or, if he or she
itemizes deductions, a deduction for his or her share of the foreign income
taxes in computing federal income tax liability. (No deduction will be permitted
in computing an individual's alternative minimum tax liability.) Effective for
dividends paid after September 5, 1997, shareholders of the Fund will not be
eligible to claim a foreign tax credit with respect to taxes paid by the Fund
(notwithstanding that the Fund elects to treat the foreign taxes deemed paid by
it as paid directly by its shareholders) unless certain holding period
requirements are met. A shareholder who is a nonresident alien individual or a
foreign corporation may be subject to U.S. withholding tax on the income
resulting from the election described in this paragraph, but may not be able to
claim a credit or deduction against such U.S. tax for the foreign taxes treated
as having been paid by such shareholder. A tax-exempt shareholder will not
ordinarily benefit from this election. Shareholders who choose to utilize a
credit (rather than a deduction) for foreign taxes will be subject to the
limitation that the credit may not exceed the shareholder's U.S. tax (determined
without regard to the availability of the credit) attributable to his or her
total foreign source taxable income. For this purpose, the portion of dividends
and distributions paid by Fund from its foreign source net investment income
will be treated as foreign source income. The Fund's gains and losses from the
sale of securities will generally be treated as derived from U.S. sources,
however, and certain foreign currency gains and losses likewise will be treated
as derived from U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source "passive income," such as the portion of
dividends
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<PAGE>
received from the Fund which qualifies as foreign source income. In addition,
the foreign tax credit is allowed to offset only 90% of the alternative minimum
tax imposed on corporations and individuals. Because of these limitations, if
the election is made, shareholders may nevertheless be unable to claim a credit
for the full amount of their proportionate shares of the foreign income taxes
paid by the Fund. Effective for taxable years of a shareholder beginning after
December 31, 1997, individual shareholders of the Fund with $300 or less of
creditable foreign taxes ($600 in the case of an individual shareholder filing
jointly) may elect to be exempt from the foreign tax credit limitation rules
described above (other than the 90% limitation applicable for purposes of the
alternative minimum tax), provided that all of such individual shareholder's
foreign source income is "qualified passive income" (which generally includes
interest, dividends, rents, royalties and certain other types of income) and
further provided that all of such foreign source income is shown on one or more
payee statements furnished to the shareholder. Shareholders making this election
will not be permitted to carry over any excess foreign taxes to or from a tax
year to which such an election applies.
STATE AND LOCAL TAXES. The Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business. In addition,
the treatment of the Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.
OTHER TAXATION. The Trust is organized as a Massachusetts business
trust and, under current law, neither the Trust nor the Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts, provided that the
Fund continues to qualify as a regulated investment company under Subchapter M
of the Code. The Portfolio is organized as a New York trust. The Portfolio is
not subject to any federal income taxation or income or franchise tax in the
State of New York or The Commonwealth of Massachusetts. The investment by the
Fund in the Portfolio does not cause the Fund to be liable for any income or
franchise tax in the State of New York.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" means the vote of (i)
67% or more of the Fund's shares or the Portfolio's outstanding voting
securities present at a meeting, if the holders of more than 50% of the Fund's
outstanding shares or the Portfolio's outstanding voting securities are present
or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares
or the Portfolio's outstanding voting securities, whichever is less.
Telephone calls to the Fund, Morgan or Eligible Institutions as
shareholder servicing agent may be tape recorded. With respect to the securities
offered hereby, this Statement of Additional Information and the Prospectus do
not contain all the information included in the Trust's Registration Statement
filed with the SEC under the 1933 Act and the Trust's and the Portfolio's
Registration Statement filed under the 1940 Act. Pursuant to the rules and
regulations of the SEC, certain portions have been omitted. The Registration
Statements including
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the exhibits filed therewith may be examined at the office of the SEC in
Washington D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectus and this Statement of Additional Information, in connection with the
offer contained therein and, if given or made, such other information or
representations must not be relied upon as having been authorized by any of the
Trust, the Fund or the Distributor. The Prospectus and this Statement of
Additional Information do not constitute an offer by the Fund or by the
Distributor to sell or solicit any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Fund or
the Distributor to make such offer in such jurisdictions.
FINANCIAL STATEMENTS
The Fund's financial statements are incorporated herein by reference from
the Fund's June 30, 1997 semi-annual report filing made with the SEC on
September 2, 1997 pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder Accession No. 0000912057-97-029671. The Fund's financial statements
include the Portfolio's financial statements. The semi-annual report is
available without charge upon request by calling J.P. Morgan Funds Services at
(800) 521-5411.
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APPENDIX A
Description of Security Ratings
STANDARD & POOR'S
CORPORATE BONDS
AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC - An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC - An obligation rated CC is currently highly vulnerable to nonpayment.
C - The C rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued.
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Appendix A-1
<PAGE>
COMMERCIAL PAPER
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
MOODY'S
CORPORATE BONDS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
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Appendix A-2
<PAGE>
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
COMMERCIAL PAPER
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
internal cash generation.
- Well established access to a range of financial markets and assured sources
of alternate liquidity.
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Appendix A-3
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The following financial statements are included in Part A:
Financial Highlights: The JPM Pierpont Emerging Markets Debt Fund
The following financial statements are incorporated by reference into Part B:
The JPM Pierpont Emerging Markets Debt Fund
Statement of Assets and Liabilities at June 30, 1997 (unaudited)
Statement of Operations for the fiscal period ended June 30, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements June 30, 1997 (unaudited)
The Emerging Markets Debt Fund Portfolio
Schedule of Investments at June 30, 1997 (unaudited)
Statement of Assets and Liabilities at June 30, 1997 (unaudited)
Statement of Operations for the fiscal period ended June 30, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements June 30, 1997 (unaudited)
(b) Exhibits
Exhibit Number
1. Declaration of Trust, as amended, was filed as Exhibit No. 1 to
Post-Effective Amendment No. 26 to the Registration Statement filed on
September 27, 1996 (Accession Number 0000912057-96-021331).
1(a). Amendment No. 5 to Declaration of Trust; Amendment and Fifth Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest.*
1(b). Amendment No. 6 to Declaration of Trust; Amendment and Sixth Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest was filed as Exhibit No. 1(b) to Post-Effective Amendment No.
32 to the Registration Statement February 28, 1997 (Accession Number
0001016964-97-000038).
1(c). Amendment No. 7 to Declaration of Trust; Amendment and Seventh Amended
and Restated Establishment and Designation of Series of Shares of
Beneficial Interest was filed as Exhibit No. 1(c) to Post-Effective
Amendment No. 34 to the Registration Statement filed on April 30, 1997
(Accession Number 0001019694-97-000063).
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2. Restated By-Laws of Registrant.*
6. Distribution Agreement between Registrant and Funds Distributor, Inc.
("FDI").*
8. Custodian Contract between Registrant and State Street Bank and Trust
Company ("State Street").*
9(a). Co-Administration Agreement between Registrant and FDI.*
9(b). Restated Shareholder Servicing Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty") was filed as
Exhibit No. 9(b) to Post-Effective Amendment No. 33 to the Registration
Statement filed on March 6, 1997 (Accession Number 0001019694-97-
000048).
9(c). Transfer Agency and Service Agreement between Registrant and State
Street.*
9(d). Restated Administrative Services Agreement between Registrant and Morgan
Guaranty.*
9(e). Fund Services Agreement, as amended, between Registrant and Pierpont
Group, Inc.*
10. Opinion and consent of Sullivan & Cromwell.*
13. Purchase agreements with respect to Registrant's initial shares.*
16. Schedule for computation of performance quotations.*
17. Financial Data Schedules. (filed herewith)
18. Powers of Attorney.( were filed as Exhibit No. 18 to Post-Effective
Amendment No. 37 to the Registration Statement filed on August 1, 1997 -
Accession Number 0001016964-97-000138.)
- -------------------------
* Incorporated herein by reference to Post-Effective Amendment No. 30 to
the Registration Statement filed on December 27, 1996 (Accession Number
0001016964-96-000066)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Shares of Beneficial Interest ($0.001 par value).
Title of Class: Number of Record Holders as of July 31, 1997.
The JPM Pierpont Prime Money Market Fund: 3,471
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The JPM Pierpont Tax Exempt Money Market Fund: 1,567
The JPM Pierpont Federal Money Market Fund: 335
The JPM Pierpont Short Term Bond Fund: 86
The JPM Pierpont Bond Fund: 632
The JPM Pierpont Tax Exempt Bond Fund: 949
The JPM Pierpont New York Total Return Bond Fund: 175
The JPM Pierpont Diversified Fund: 486
The JPM Pierpont U.S. Equity Fund: 1,976
The JPM Pierpont U.S. Small Company Fund: 1,614
The JPM Pierpont International Equity Fund: 1,126
The JPM Pierpont Emerging Markets Equity Fund: 1,020
The JPM Pierpont European Equity Fund: 60
The JPM Pierpont Asia Growth Fund: 46
The JPM Pierpont Japan Equity Fund: 35
The JPM Pierpont International Opportunities Fund: 312
The JPM Pierpont Global Strategic Income Fund: 3
The JPM Pierpont Latin American Equity Fund: N/A
The JPM Pierpont Emerging Markets Debt Fund: 37
The JPM Pierpont U.S. Small Company Opportunities Fund: 199
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust and
Section 5 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain expenses in
connection with the defense of claims, demands, actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, trustee, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suite or proceeding) is asserted against the Registrant by such
director, trustee, officer or controlling person or principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not Applicable.
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ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FDI, located at 60 State Street, Suite 1300, Boston, Massachusetts 02109, is
the principal underwriter of the Registrant's shares.
FDI acts as principal underwriter of the following investment companies other
than the Registrant:
BJB Investment Funds
Burridge Funds
Foreign Fund, Inc.
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
H.T. Insight Funds, Inc. d/b/a Harris Insight Funds
LKCM Fund
Monetta Fund, Inc.
Monetta Trust
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
The Skyline Funds
St. Clair Money Market Fund
Waterhouse Investors Cash Management Funds, Inc.
The JPM Institutional Funds
JPM Series Trust
JPM Series Trust II
FDI does not act as depositor or investment adviser of any investment companies.
FDI is registered with the Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities Dealers. FDI is an
indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.
(b) The information required by this Item 29(b) with respect to each director,
officer and partner of FDI is incorporated herein by reference to Schedule A of
Form BD filed by FDI with the Securities and Exchange Commission pursuant to the
Securities Act of 1934 (SEC File No. 8-20518).
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
PIERPONT GROUP, INC.: 461 Fifth Avenue, New York, New York 10017 (records
relating to its assisting the Trustees in carrying out their duties in
supervising the Registrant's affairs).
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MORGAN GUARANTY TRUST COMPANY OF NEW YORK: 60 Wall Street, New York, New York
10260-0060, 522 Fifth Avenue, New York, New York 10036 or 9 West 57th Street,
New York, New York 10019 (records relating to its functions as shareholder
servicing agent, and administrative services agent).
STATE STREET BANK AND TRUST COMPANY: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 and 40 King Street West, Toronto, Ontario, Canada M5H 3Y8
(records relating to its functions as fund accountant, custodian, transfer agent
and dividend disbursing agent).
FUNDS DISTRIBUTOR, INC.: 60 State Street, Boston, Massachusetts 02109 (records
relating to its functions as distributor and co-administrator).
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall
furnish each person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders upon request
and without charge.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the 1940 Act were applicable to the
Registrant, except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value of shares held by such requesting
shareholders.
(c) The Registrant undertakes to file a Post-Effective Amendment on
behalf of The JPM Pierpont Global Strategic Income Fund, The JPM
Pierpont Latin American Equity Fund, and The JPM Pierpont U.S. Small
Company Opportunities Fund, using financial statements which need not
be certified, within four to six months from the commencement of
public investment operations of such funds.
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston and Commonwealth of Massachusetts on the 2nd
day of September, 1997.
THE JPM PIERPONT FUNDS
By /s/ Richard W. Ingram
-----------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on September 2, 1997.
/s/ Richard W. Ingram
- ------------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer)
Matthew Healey*
- -----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer)
Frederick S. Addy*
- ------------------------------
Frederick S. Addy
Trustee
William G. Burns*
- ------------------------------
William G. Burns
Trustee
Arthur C. Eschenlauer*
- ------------------------------
Arthur C. Eschenlauer
Trustee
Michael P. Mallardi*
- ------------------------------
Michael P. Mallardi
Trustee
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-7
<PAGE>
*By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney previously filed.
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-8
<PAGE>
SIGNATURES
Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of The JPM Pierpont Funds (the "Trust") (File No.
33-54632) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and Commonwealth of Massachusetts on the 2nd
day of September, 1997.
THE FEDERAL MONEY MARKET PORTFOLIO, THE TAX EXEMPT MONEY MARKET PORTFOLIO, THE
TAX EXEMPT BOND PORTFOLIO, THE NEW YORK TOTAL RETURN BOND PORTFOLIO AND SERIES
PORTFOLIO II
By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on September 2, 1997.
/s/ Richard W. Ingram
- ----------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios
Matthew Healey*
- ----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer) of
the Portfolios
Frederick S. Addy*
- ----------------------------
Frederick S. Addy
Trustee of the Portfolios
William G. Burns*
- ----------------------------
William G. Burns
Trustee of the Portfolios
Arthur C. Eschenlauer*
- ----------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios
Michael P. Mallardi*
- ----------------------------
Michael P. Mallardi
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-9
<PAGE>
Trustee of the Portfolios
*By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney previously filed.
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-10
<PAGE>
SIGNATURES
Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of The JPM Pierpont Funds (the "Trust") (File No.
33-54632) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of George Town, Grand Cayman, on the 2nd day of
September, 1997.
THE PRIME MONEY MARKET PORTFOLIO, THE SHORT TERM BOND PORTFOLIO, THE U.S.
FIXED INCOME PORTFOLIO, THE U.S. EQUITY PORTFOLIO, THE U.S. SMALL COMPANY
PORTFOLIO, THE INTERNATIONAL EQUITY PORTFOLIO, THE DIVERSIFIED PORTFOLIO, THE
EMERGING MARKETS EQUITY PORTFOLIO, THE NON-U.S. FIXED INCOME PORTFOLIO, AND
THE SERIES PORTFOLIO
/s/ Lenore J. McCabe
By -------------------------
Lenore J. McCabe
Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on September 2, 1997.
Richard W. Ingram*
- ----------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios
Matthew Healey*
- ----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer) of
the Portfolios
Frederick S. Addy*
- ----------------------------
Frederick S. Addy
Trustee of the Portfolios
William G. Burns*
- ----------------------------
William G. Burns
Trustee of the Portfolios
Arthur C. Eschenlauer*
- ----------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-11
<PAGE>
Michael P. Mallardi*
- ----------------------------
Michael P. Mallardi
Trustee of the Portfolios
/s/ Lenore J. McCabe
*By ------------------------
Lenore J. McCabe
as attorney-in-fact pursuant to a power of attorney previously filed.
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
C-12
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ------------- ----------------------
EX-27.1
to EX-27.17 Financial Data Schedules
C-13
i:\dsfndlgl\pierpont\0997.pea\wrapper.wpf
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the semi-annual
report dated 5/31/97 for The JPM Pierpont Prime Money Market Fund and is
qualified in its entirety by reference to such semi-annual report.
</LEGEND>
<CIK>0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 012
<NAME> THE JPM PIERPONT PRIME MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 2251883
<INVESTMENTS-AT-VALUE> 2251883
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15
<TOTAL-ASSETS> 2251898
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1526
<TOTAL-LIABILITIES> 1526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2250927
<SHARES-COMMON-STOCK> 2250576
<SHARES-COMMON-PRIOR> 2154906
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2250372
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 60547
<EXPENSES-NET> 2243
<NET-INVESTMENT-INCOME> 58304
<REALIZED-GAINS-CURRENT> (41)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 58263
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 58304
<DISTRIBUTIONS-OF-GAINS> 615
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7084655
<NUMBER-OF-SHARES-REDEEMED> 7040595
<SHARES-REINVESTED> 51610
<NET-CHANGE-IN-ASSETS> 95014
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 101
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2243
<AVERAGE-NET-ASSETS> 2267383
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED FEBRUARY 28, 1997 FOR THE JPM PIERPONT TAX EXEMPT MONEY MARKET
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 007
<NAME> THE JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 1082685
<INVESTMENTS-AT-VALUE> 1082685
<RECEIVABLES> 0
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1082742
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 596
<TOTAL-LIABILITIES> 596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1082406
<SHARES-COMMON-STOCK> 1082061
<SHARES-COMMON-PRIOR> 1050312
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (260)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1082146
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18543
<OTHER-INCOME> 0
<EXPENSES-NET> 2428
<NET-INVESTMENT-INCOME> 16115
<REALIZED-GAINS-CURRENT> 26
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 16141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16115
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2147780
<NUMBER-OF-SHARES-REDEEMED> 2129764
<SHARES-REINVESTED> 13743
<NET-CHANGE-IN-ASSETS> 31775
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (286)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2428
<AVERAGE-NET-ASSETS> 1055150
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT FEDERAL MONEY MARKET
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 001
<NAME> THE JPM PIERPONT FEDERAL MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 218579
<INVESTMENTS-AT-VALUE> 218579
<RECEIVABLES> 7
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 218597
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 245
<TOTAL-LIABILITIES> 245
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 218361
<SHARES-COMMON-STOCK> 218361
<SHARES-COMMON-PRIOR> 185318
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 218352
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5737
<OTHER-INCOME> 0
<EXPENSES-NET> 435
<NET-INVESTMENT-INCOME> 5301
<REALIZED-GAINS-CURRENT> (10)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5301
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 927100
<NUMBER-OF-SHARES-REDEEMED> 898221
<SHARES-REINVESTED> 4165
<NET-CHANGE-IN-ASSETS> 32928
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 262
<AVERAGE-NET-ASSETS> 219578
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .024
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .024
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT SHORT TERM BOND FUND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 002
<NAME> THE JPM PIERPONT SHORT TERM BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 11247
<RECEIVABLES> 6
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11261
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 40
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11329
<SHARES-COMMON-STOCK> 1146
<SHARES-COMMON-PRIOR> 833
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (55)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (53)
<NET-ASSETS> 11220
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 372
<OTHER-INCOME> 0
<EXPENSES-NET> 15
<NET-INVESTMENT-INCOME> 357
<REALIZED-GAINS-CURRENT> 20
<APPREC-INCREASE-CURRENT> (111)
<NET-CHANGE-FROM-OPS> 266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (357)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 656
<NUMBER-OF-SHARES-REDEEMED> 369
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 314
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (75)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 51
<AVERAGE-NET-ASSETS> 12257
<PER-SHARE-NAV-BEGIN> 9.86
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> .29
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.79
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT BOND FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 003
<NAME> THE JPM PIERPONT BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 152456
<RECEIVABLES> 133
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 152591
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155158
<SHARES-COMMON-STOCK> 15097
<SHARES-COMMON-PRIOR> 14487
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1371)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1347)
<NET-ASSETS> 152459
<DIVIDEND-INCOME> 54
<INTEREST-INCOME> 5207
<OTHER-INCOME> 0
<EXPENSES-NET> 230
<NET-INVESTMENT-INCOME> 4758
<REALIZED-GAINS-CURRENT> 604
<APPREC-INCREASE-CURRENT> (2580)
<NET-CHANGE-FROM-OPS> 2782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4724
<DISTRIBUTIONS-OF-GAINS> 1045
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3288
<NUMBER-OF-SHARES-REDEEMED> 3130
<SHARES-REINVESTED> 453
<NET-CHANGE-IN-ASSETS> 610
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 224
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 230
<AVERAGE-NET-ASSETS> 150177
<PER-SHARE-NAV-BEGIN> 10.30
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> (.13)
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.10
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED FEBRUARY 28, 1997 FOR THE JPM PIERPONT TAX EXEMPT BOND FUND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 006
<NAME> THE JPM PIERPONT TAX EXEMPT BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 365808
<INVESTMENTS-AT-VALUE> 383656
<RECEIVABLES> 629
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384290
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 456
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 456
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 365918
<SHARES-COMMON-STOCK> 32541
<SHARES-COMMON-PRIOR> 31811
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 66
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17848
<NET-ASSETS> 383834
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 9184
<EXPENSES-NET> 506
<NET-INVESTMENT-INCOME> 8678
<REALIZED-GAINS-CURRENT> 586
<APPREC-INCREASE-CURRENT> 5200
<NET-CHANGE-FROM-OPS> 14464
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8678
<DISTRIBUTIONS-OF-GAINS> 702
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7018
<NUMBER-OF-SHARES-REDEEMED> 6928
<SHARES-REINVESTED> 640
<NET-CHANGE-IN-ASSETS> 730
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 182
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 506
<AVERAGE-NET-ASSETS> 370007
<PER-SHARE-NAV-BEGIN> 11.63
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> .28
<PER-SHARE-DISTRIBUTIONS> .02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.80
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the annual
report dated 5/31/97 for the JPM Pierpont U.S. Equity Fund and is qualified in
its entirety by reference to such annual report.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 010
<NAME> THE JPM PIERPONT U.S. EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 362,601
<RECEIVABLES> 391
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 363,030
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 427
<TOTAL-LIABILITIES> 427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 252,841
<SHARES-COMMON-STOCK> 14,722
<SHARES-COMMON-PRIOR> 15,804
<ACCUMULATED-NII-CURRENT> 1,269
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37,796
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 70,697
<NET-ASSETS> 362,603
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4,932
<EXPENSES-NET> 1,120
<NET-INVESTMENT-INCOME> 3,812
<REALIZED-GAINS-CURRENT> 50,364
<APPREC-INCREASE-CURRENT> 22,399
<NET-CHANGE-FROM-OPS> 76,576
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,464
<DISTRIBUTIONS-OF-GAINS> 31,903
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59,295
<NUMBER-OF-SHARES-REDEEMED> 100,748
<SHARES-REINVESTED> 34,833
<NET-CHANGE-IN-ASSETS> 32,589
<ACCUMULATED-NII-PRIOR> 3,430
<ACCUMULATED-GAINS-PRIOR> 14,362
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,120
<AVERAGE-NET-ASSETS> 337,770
<PER-SHARE-NAV-BEGIN> 22.15
<PER-SHARE-NII> 0.250
<PER-SHARE-GAIN-APPREC> 4.720
<PER-SHARE-DIVIDEND> 0.360
<PER-SHARE-DISTRIBUTIONS> 2.130
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.63
<EXPENSE-RATIO> 0.800
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the annual report
dated 5/31/97 for The JPM Pierpont U.S. Small Company Fund and is qualified in
its entirety by reference to such annual report.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 011
<NAME> THE JPM PIERPONT U.S. SMALL COMPANY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 238535
<RECEIVABLES> 125
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 238770
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 685
<TOTAL-LIABILITIES> 685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 187527
<SHARES-COMMON-STOCK> 9140
<SHARES-COMMON-PRIOR> 8431
<ACCUMULATED-NII-CURRENT> 593
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18766
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31099
<NET-ASSETS> 237985
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2001
<EXPENSES-NET> 472
<NET-INVESTMENT-INCOME> 1529
<REALIZED-GAINS-CURRENT> 23594
<APPREC-INCREASE-CURRENT> (5713)
<NET-CHANGE-FROM-OPS> 19410
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1768)
<DISTRIBUTIONS-OF-GAINS> (17936)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1966
<NUMBER-OF-SHARES-REDEEMED> (1837)
<SHARES-REINVESTED> 580
<NET-CHANGE-IN-ASSETS> 17068
<ACCUMULATED-NII-PRIOR> 902
<ACCUMULATED-GAINS-PRIOR> 13108
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 760
<AVERAGE-NET-ASSETS> 216432
<PER-SHARE-NAV-BEGIN> 26.20
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 2.00
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> (2.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.04
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT INTERNATIONAL EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 004
<NAME> THE JPM PIERPONT INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 163549
<INVESTMENTS-AT-VALUE> 171476
<RECEIVABLES> 30
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 171508
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101
<TOTAL-LIABILITIES> 101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57885
<SHARES-COMMON-STOCK> 15701
<SHARES-COMMON-PRIOR> 17642
<ACCUMULATED-NII-CURRENT> 662
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7926
<NET-ASSETS> 171407
<DIVIDEND-INCOME> 1448
<INTEREST-INCOME> 335
<OTHER-INCOME> 0
<EXPENSES-NET> 1083
<NET-INVESTMENT-INCOME> 700
<REALIZED-GAINS-CURRENT> 4940
<APPREC-INCREASE-CURRENT> (225)
<NET-CHANGE-FROM-OPS> 5415
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4419
<DISTRIBUTIONS-OF-GAINS> 9302
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2133
<NUMBER-OF-SHARES-REDEEMED> 4936
<SHARES-REINVESTED> 862
<NET-CHANGE-IN-ASSETS> (29313)
<ACCUMULATED-NII-PRIOR> 4380
<ACCUMULATED-GAINS-PRIOR> 9296
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1083
<AVERAGE-NET-ASSETS> 194853
<PER-SHARE-NAV-BEGIN> 11.38
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .27
<PER-SHARE-DIVIDEND> .25
<PER-SHARE-DISTRIBUTIONS> .52
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED DECEMBER 31, 1996 FOR THE JPM PIERPONT DIVERSIFIED FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000908940
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 008
<NAME> THE JPM PIERPONT DIVERSIFIED FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 53208
<INVESTMENTS-AT-VALUE> 26
<RECEIVABLES> 16
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53250
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 52
<TOTAL-LIABILITIES> 52
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 4354
<SHARES-COMMON-PRIOR> 2000
<ACCUMULATED-NII-CURRENT> 690
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1140
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3539
<NET-ASSETS> 53198
<DIVIDEND-INCOME> 500
<INTEREST-INCOME> 958
<OTHER-INCOME> 0
<EXPENSES-NET> 356
<NET-INVESTMENT-INCOME> 1102
<REALIZED-GAINS-CURRENT> 1956
<APPREC-INCREASE-CURRENT> 2096
<NET-CHANGE-FROM-OPS> 5154
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 830
<DISTRIBUTIONS-OF-GAINS> 1142
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2576
<NUMBER-OF-SHARES-REDEEMED> 392
<SHARES-REINVESTED> 170
<NET-CHANGE-IN-ASSETS> 2354
<ACCUMULATED-NII-PRIOR> 290
<ACCUMULATED-GAINS-PRIOR> 431
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 495
<AVERAGE-NET-ASSETS> 36264
<PER-SHARE-NAV-BEGIN> 11.20
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.48
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .44
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.22
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT EMERGING MARKETS
EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 005
<NAME> THE JPM PIERPONT EMERGING MARKETS EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 58032
<RECEIVABLES> 73
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58068
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46
<TOTAL-LIABILITIES> 46
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57158
<SHARES-COMMON-STOCK> 5104
<SHARES-COMMON-PRIOR> 5806
<ACCUMULATED-NII-CURRENT> (117)
<OVERDISTRIBUTION-NII> (4191)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5172
<NET-ASSETS> 58022
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 611
<EXPENSES-NET> 492
<NET-INVESTMENT-INCOME> 119
<REALIZED-GAINS-CURRENT> 1211
<APPREC-INCREASE-CURRENT> 5495
<NET-CHANGE-FROM-OPS> 6826
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (323)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1430
<NUMBER-OF-SHARES-REDEEMED> 2158
<SHARES-REINVESTED> 26
<NET-CHANGE-IN-ASSETS> (702)
<ACCUMULATED-NII-PRIOR> 87
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 60161
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.37
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED MARCH 31, 1997 FOR THE JPM PIERPONT NEW YORK TOTAL RETURN
BOND FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 013
<NAME> THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 55770
<INVESTMENTS-AT-VALUE> 56813
<RECEIVABLES> 8
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6
<TOTAL-ASSETS> 56827
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 629
<TOTAL-LIABILITIES> 629
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55134
<SHARES-COMMON-STOCK> 5465
<SHARES-COMMON-PRIOR> 4888
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1043
<NET-ASSETS> 56198
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2636
<EXPENSES-NET> 176
<NET-INVESTMENT-INCOME> 2460
<REALIZED-GAINS-CURRENT> 46
<APPREC-INCREASE-CURRENT> 178
<NET-CHANGE-FROM-OPS> 2328
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2460
<DISTRIBUTIONS-OF-GAINS> 140
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20654
<NUMBER-OF-SHARES-REDEEMED> 16516
<SHARES-REINVESTED> 1809
<NET-CHANGE-IN-ASSETS> 5675
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 115
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 209
<AVERAGE-NET-ASSETS> 55445
<PER-SHARE-NAV-BEGIN> 10.34
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> .46
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.28
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED DECEMBER 31, 1996 FOR THE JPM PIERPONT EUROPEAN EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 015
<NAME> THE JPM PIERPONT EUROPEAN EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2107
<RECEIVABLES> 39
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2161
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89
<TOTAL-LIABILITIES> 89
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1939
<SHARES-COMMON-STOCK> 178
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 135
<NET-ASSETS> 2072
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3
<EXPENSES-NET> 2
<NET-INVESTMENT-INCOME> 1
<REALIZED-GAINS-CURRENT> (4)
<APPREC-INCREASE-CURRENT> 135
<NET-CHANGE-FROM-OPS> 132
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 181
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2072
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 86
<AVERAGE-NET-ASSETS> 629
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 1.60
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.61
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED DECEMBER 31, 1996 FOR THE JPM PIERPONT JAPAN EQUITY FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 016
<NAME> THE JPM PIERPONT JAPAN EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 660
<RECEIVABLES> 25
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 699
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80
<TOTAL-LIABILITIES> 80
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 714
<SHARES-COMMON-STOCK> 79
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (23)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (71)
<NET-ASSETS> 619
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> (1)
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> (2)
<REALIZED-GAINS-CURRENT> (26)
<APPREC-INCREASE-CURRENT> (72)
<NET-CHANGE-FROM-OPS> (100)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 169
<NUMBER-OF-SHARES-REDEEMED> 90
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 619
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 79
<AVERAGE-NET-ASSETS> 342
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> (2.14)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.83
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED DECEMBER 31, 1996 FOR THE JPM PIERPONT ASIA GROWTH FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 014
<NAME> THE JPM PIERPONT ASIA GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1201
<RECEIVABLES> 28
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1244
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 88
<TOTAL-LIABILITIES> 88
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1111
<SHARES-COMMON-STOCK> 115
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> (13)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59
<NET-ASSETS> 1156
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 1
<REALIZED-GAINS-CURRENT> (14)
<APPREC-INCREASE-CURRENT> 59
<NET-CHANGE-FROM-OPS> 46
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 120
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1156
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 85
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<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED MAY 31, 1997 FOR THE JPM PIERPONT INTERNATIONAL
OPPORTUNITIES FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
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<NAME> THE JPM PIERPONT INTERNATIONAL OPPORTUNITIES FUND
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM PIERPONT EMERGING MARKETS DEBT
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 018
<NAME> THE JPM PIERPONT EMERGING MARKETS DEBT FUND
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
