Subject to Completion
Preliminary Prospectus Dated February 10, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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 March _,
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 March _, 1997
<PAGE>
Table of Contents
Page
Expense Table............................................................1
Information About the Master-Feeder Structure............................2
Who May Be a Suitable Investor in the Fund...............................2
Investment Objective and Policies........................................2
Additional Investment Practices and Risks................................4
Management of the Fund and Portfolio....................................10
Shareholder Inquiries and Services......................................12
Purchase of Shares......................................................13
Redemption of Shares....................................................14
Exchange of Shares......................................................14
Dividends and Distributions.............................................15
Net Asset Value.........................................................15
Taxes...................................................................15
Organization............................................................16
Additional Information..................................................16
<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
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
Annual Operating Expenses(2)
Advisory Fees...........................................................0.70%
Rule 12b-1 Fees..........................................................None
Other Expenses (after expense limitation)...............................0.55%
Total Operating Expenses (after expense limitation).....................1.25%
(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 based on the estimated expenses and estimated average net
assets for the Fund's first fiscal year, and through April 30, 1998, after
applicable expense limitation. Without such expense limitation, the estimated
Other Expenses and Total Operating Expenses would be equal on an annual basis to
0.74% and 1.44%, respectively, of the average daily net assets of the Fund.
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.)
1 Year...................................................................$13
3 Years..................................................................$40
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>
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.
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,
2
<PAGE>
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.
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. The Portfolio will not invest in
securities rated below B 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
3
<PAGE>
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.
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
4
<PAGE>
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
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. Below investment grade securities,
commonly called junk bonds, are considered speculative. While generally
providing greater income 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
5
<PAGE>
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 own 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 determine accurately 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
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 secondary markets. Incomplete collateralization of interest or
principal payment obligations results in increased credit risk.
Dollar-denominated collateralized Brady bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized by U.S. Treasury zero coupon
bonds having the same maturity as the Brady bonds.
6
<PAGE>
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 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 investment companies may
involve duplication of advisory fees and other expenses.
7
<PAGE>
Depository 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. Accordingly the valuation of these securities will
reflect any limitations on their liquidity. The Portfolio may also purchase Rule
144A securities eligible for resale to institutional investors without
registration under the Securities Act of 1933. These securities may be
determined to be liquid in accordance with guidelines established by 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 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 portfolio holdings or as a substitute for the purchase
or sale of securities or currency.
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 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
8
<PAGE>
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 and currency 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 exceed the amount of the initial investment made or the
premium received by the Portfolio.
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 instruments to
hedge portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be caused
by several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Portfolio's assets.
Credit Risk. Derivative securities and over-the-counter derivative contracts
involve a risk that the issuer or counterparty will fail to perform its
contractual obligations.
Liquidity and Valuation Risk. Some derivative securities are not readily
marketable or may become illiquid under adverse market conditions. In addition,
during periods of extreme market volatility, a commodity exchange may suspend or
limit trading in an exchange-traded derivative contract, which may make the
contract temporarily illiquid and difficult to price. The Portfolio's ability to
terminate over-the-counter derivative contracts may depend on the cooperation of
the counterparties to such contracts. For thinly traded derivative securities
and contracts, the only source of price quotations may be the selling dealer or
counterparty.
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.
9
<PAGE>
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 subject to certain requirements for qualification of the
Fund as a regulated investment company under the Code.
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 or emerging market. 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 Trust 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.
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
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
10
<PAGE>
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 $197
billion (of which the Advisor advises over $30 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 processes for the Portfolio
since its inception (business experience for the past five years is indicated
parenthetically): Eduardo L. Cortes, Vice President (employed by Morgan since
prior to 1992) and Elizabeth C. Walker, Vice President (employed by Morgan since
prior to 1992).
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, 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 registered 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
11
<PAGE>
and 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 aggregate average daily net assets in excess of $7 billion, less the
complex-wide fees 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.
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 and filing fees under federal and state securities
laws, respectively. For the Portfolio, such expenses also include brokerage
expenses 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.
The Fund 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. See
Eligible Institutions. 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.
12
<PAGE>
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 become customers of Morgan for the
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 $100,000 except that for investors who were shareholders of another JPM
Pierpont Fund as of September 29, 1995, the minimum initial investment in the
Fund is $10,000. The minimum subsequent investment for all investors is $5,000.
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, and the purchaser becomes a holder of record on the following business day
upon the Fund's receipt of payment.
Eligible Institutions. 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 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
13
<PAGE>
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 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. Cash proceeds of an effective
redemption are generally deposited the next business day in immediately
available funds to the shareholder's account at Morgan or at his Eligible
Institution or, in the case of certain Morgan customers, are mailed by check or
wire transferred in accordance with the customer's instructions and, subject to
further redemption information below, in any event are paid within seven days.
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
14
<PAGE>
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's net investment income and realized net capital gains, if any, will be
distributed at least annually. 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. 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.
15
<PAGE>
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.
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 20 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.
16
<PAGE>
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.
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.
17
<PAGE>
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 jurisdiction.
Prospectus
March _, 1997
