<PAGE>
- --------------------------------------------------------------------------------
MARCH 13, 1998 PROSPECTUS
- --------------------------------------------------------------------------------
J.P. MORGAN FIXED INCOME FUNDS
Short Term Bond Fund
Bond Fund
Global Strategic Income Fund
Emerging Markets Debt Fund
Tax Exempt Bond Fund
New York Total Return Bond Fund
California Bond Fund
-------------------------------------
Seeking high total return or current
income by investing primarily in
fixed income securities.
This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.
Shares in these funds are not bank deposits and are not guaranteed or insured by
any bank, government entity, or the FDIC.
As with all mutual funds, the fact that these shares are registered with the
Securities and Exchange Commission does not mean that the commission approves
them as an investment or guarantees that the information in this prospectus is
correct or adequate. It is a criminal offense to state or suggest otherwise.
Distributed by Funds Distributor, Inc. JPMORGAN
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
Principles and techniques common to the funds in this prospectus
2 FIXED INCOME MANAGEMENT APPROACH
Fixed income investment process . . . . . . . . . . . . . . . . . . . . 2
The spectrum of fixed income funds. . . . . . . . . . . . . . . . . . . 3
Each fund's goal, investment approach, risks, expenses, performance, and
financial highlights
4 J.P. MORGAN FIXED INCOME FUNDS
J.P. Morgan Short Term Bond Fund. . . . . . . . . . . . . . . . . . . . 4
J.P. Morgan Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . 6
J.P. Morgan Global Strategic Income Fund. . . . . . . . . . . . . . . . 8
J.P. Morgan Emerging Markets Debt Fund. . . . . . . . . . . . . . . . .10
J.P. Morgan Tax Exempt Bond Fund. . . . . . . . . . . . . . . . . . . .12
J.P. Morgan New York Total Return Bond Fund . . . . . . . . . . . . . .14
J.P. Morgan California Bond Fund. . . . . . . . . . . . . . . . . . . .16
Investing in the J.P. Morgan Fixed Income funds
18 YOUR INVESTMENT
Investing through a financial professional. . . . . . . . . . . . . . .18
Investing through an employer-sponsored retirement plan . . . . . . . .18
Investing through an IRA or rollover IRA. . . . . . . . . . . . . . . .18
Investing directly. . . . . . . . . . . . . . . . . . . . . . . . . . .18
Opening your account. . . . . . . . . . . . . . . . . . . . . . . . . .18
Adding to your account. . . . . . . . . . . . . . . . . . . . . . . . .18
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Account and transaction policies. . . . . . . . . . . . . . . . . . . .19
Dividends and distributions . . . . . . . . . . . . . . . . . . . . . .20
Tax considerations. . . . . . . . . . . . . . . . . . . . . . . . . . .20
More about risk and the funds' business operations
21 FUND DETAILS
Business structure. . . . . . . . . . . . . . . . . . . . . . . . . . .21
Management and administration . . . . . . . . . . . . . . . . . . . . .21
Risk and reward elements. . . . . . . . . . . . . . . . . . . . . . . .22
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
FOR MORE INFORMATION. . . . . . . . . . . . . . . . . . . . . back cover
<PAGE>
INTRODUCTION
- --------------------------------------------------------------------------------
J.P. MORGAN FIXED INCOME FUNDS
These funds invest primarily in bonds and other fixed income securities, either
directly or through another fund. The funds seek high total return or high
current income.
WHO MAY WANT TO INVEST
The funds are designed for investors who:
- - want to add an income investment to further diversify a portfolio
- - want an investment whose risk/return potential is higher than that of money
market funds but generally less than that of stock funds
- - want an investment that pays monthly dividends
- - with regard to the Tax Exempt Bond Fund, are seeking income that is exempt
from federal personal income tax
- - with regard to the state-specific funds, are seeking income that is exempt
from federal, state, and local (if applicable) personal income taxes in New
York or California
The funds are NOT designed for investors who:
- - are investing for aggressive long-term growth
- - require stability of principal
- - with regard to the Emerging Markets Debt or Global Strategic Income funds,
are not prepared to accept a higher degree of risk than most traditional
bond funds
- - with regard to the federal or state tax-exempt funds, are investing through
a tax-deferred account such as an IRA
J.P. MORGAN
Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments, and
individuals. Today, J.P. Morgan employs over 300 analysts and portfolio managers
around the world and has more than $250 billion in assets under management,
including assets managed by the funds' advisor, Morgan Guaranty Trust Company of
New York.
- --------------------------------------------------------------------------------
BEFORE YOU INVEST
Investors considering these funds should understand that:
- - The value of each fund's shares will fluctuate over time. You could lose
money if you sell when a fund's share price is lower than when you
invested.
- - There is no assurance that these funds will meet their investment goals.
- - Future returns will not necessarily resemble past performance.
- - These funds (except for the California Bond Fund) invest in another fund
with an identical goal -- the master portfolio. The California Bond Fund
invests directly in bonds and other individual fixed income securities.
- - Some of these funds invest a portion of assets in non-investment-grade
bonds ("junk bonds") or emerging markets debt, which offer higher
potential yields but have a higher risk of default and are more sensitive
to market risk than investment-grade bonds.
- - These funds do not represent a complete investment program.
1
<PAGE>
FIXED INCOME MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
The J.P. Morgan fixed income funds invest primarily in bonds and other fixed
income securities.
While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor,
emphasizes the potential for consistently enhancing performance while managing
risk.
FIXED INCOME INVESTMENT PROCESS
J.P. Morgan seeks to generate an information advantage through the depth of its
global fixed-income research and the sophistication of its analytical systems.
Using a team-oriented approach, J.P. Morgan seeks to gain insights in a broad
range of distinct areas and takes positions in many different ones, helping the
funds to limit exposure to concentrated sources of risk.
In managing the funds described in this prospectus, J.P. Morgan employs a three-
step process that combines sector allocation, fundamental research for
identifying portfolio securities, and duration management.
[LOGO]
The funds invest across a range of different types of securities
SECTOR ALLOCATION The sector allocation team meets monthly, analyzing the
fundamentals of a broad range of sectors in which a fund may invest. The team
seeks to enhance performance and manage risk by underweighting or overweighting
sectors.
[LOGO]
Each fund makes its portfolio decisions as described later in this prospectus
SECURITY SELECTION Relying on the insights of different specialists, including
credit analysts, quantitative researchers, and dedicated fixed income traders,
the portfolio managers make buy and sell decisions according to each fund's goal
and strategy.
[LOGO]
J.P. Morgan uses a disciplined process to control each fund's sensitivity to
interest rates
DURATION MANAGEMENT Forecasting teams use fundamental economic factors to
develop strategic forecasts of the direction of interest rates. Based on these
forecasts, strategists establish each fund's target duration (a measure of
average weighted maturity of the securities held by a fund and a common
measurement of sensitivity to interest rate movements), typically remaining
relatively close to the duration of the market as a whole, as represented by the
fund's benchmark. The strategists closely monitor the funds and make tactical
adjustments as necessary.
2 FIXED INCOME MANAGEMENT APPROACH
<PAGE>
- --------------------------------------------------------------------------------
THE SPECTRUM OF FIXED INCOME FUNDS
The funds described in this prospectus pursue different goals and offer varying
degrees of risk and potential reward. The table below shows degrees of the
relative risk and return that these funds potentially offer. These and other
distinguishing features of each fixed income fund are described on the following
pages. Differences among these funds include:
- - the types of securities they hold
- - the tax status of the income they offer
- - the relative emphasis on current income versus total return
POTENTIAL RISK AND RETURN
- --------------------------------------------------------------------------------
[CHART]
Return (after taxes)
EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
NEW YORK TOTAL RETURN BOND FUND*
CALIFORNIA BOND FUND*
TAX EXEMPT BOND FUND*
BOND FUND
SHORT TERM BOND FUND
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
FIXED INCOME MANAGEMENT APPROACH 3
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN SHORT TERM BOND FUND)
[LOGO]
GOAL
The fund's goal is to provide high total return while attempting to limit the
likelihood of negative quarterly returns.
[LOGO]
INVESTMENT APPROACH
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, domestic and foreign corporate bonds, private placements,
asset-backed and mortgage-related securities, money market instruments, and
others. These securities may be of any maturity, but under normal market
conditions the fund's duration will range between one and three years, similar
to that of the Merrill Lynch 1-3 Year Treasury Index.
Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. At least
90% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 75% A or better. No more than 10% of assets may be invested
in securities as low as B.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
duration fixed income funds will depend on the success of the investment
process, which is described on page 2.
Although any rise in interest rates is likely to cause a fall in the price of
bonds, the fund's comparatively short duration is designed to help keep its
share price within a relatively narrow range. Because it seeks to minimize risk,
the fund will generally offer less income, and during periods of declining
interest rates, may offer lower total returns than bond funds with longer
durations. However, the fund may offer higher total returns than longer duration
funds during periods of rising interest rates. Additionally, because the fund
may invest up to 25% of assets in foreign securities, it takes on additional
risks.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on pages 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
Emerging Markets Debt Fund
Global Strategic Income Fund
New York Total Return Bond Fund*
California Bond Fund*
Tax Exempt Bond Fund*
Bond Fund
SHORT TERM BOND FUND
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $2 billion using the same strategy as this fund.
The portfolio management team is led by Connie J. Plaehn, managing director, who
has been on the team since the fund's inception and has been at J.P. Morgan
since 1984, and by William G. Tennille, vice president, who joined the team in
January of 1994 and has been at J.P. Morgan since 1992.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.25
Marketing (12b-1) fees none
Other expenses(2)
(after reimbursement) 0.25
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.50
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 5 16 28 63
- --------------------------------------------------------------------------------
</TABLE>
4 J.P. MORGAN SHORT TERM BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN Shows performance over time, for periods ended December 31, 1997
- ----------------------------------------------------------------------------------------------
1 yr. 3 yrs. Since inception(3)
<S> <C> <C> <C>
J.P. MORGAN SHORT TERM BOND FUND
(after expenses) 6.14 7.19 5.17
- ----------------------------------------------------------------------------------------------
MERRILL LYNCH 1-3 YEAR TREASURY INDEX(4)
(no expenses) 6.66 7.52 5.60
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN Shows changes in returns by calendar year
- -----------------------------------------------------------------------------------------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
20% 0.11 10.58 4.94 6.14
10% 0.57 11.00 4.98 6.66
0%
- -----------------------------------------------------------------------------------------------
(10%)
</TABLE>
/X/ J.P. MORGAN SHORT TERM BOND FUND
/ / Merrill Lynch 1-3 Year Treasury Index(4)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal periods ended October 31
- -------------------------------------------------------------------------------------------------------------------------
1993(3) 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00 9.99 9.60 9.84 9.86
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ($) 0.10 0.45 0.57 0.53 0.58
Net realized and unrealized gain (loss)
on investment ($) (0.01) (0.39) 0.24 0.02 (0.01)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.09 0.06 0.81 0.55 0.57
- -------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.10) (0.45) (0.57) (0.53) (0.58)
NET ASSET VALUE, END OF PERIOD ($) 9.99 9.60 9.84 9.86 9.85
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 0.94(5) 0.61 8.70 5.77 5.98
- -------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 6,842 6,008 10,330 8,207 14,519
- -------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.67(6) 0.69 0.67 0.62 0.50
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 3.44(6) 4.49 5.88 5.42 5.94
- -------------------------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE
TO EXPENSE REIMBURSEMENT (%) 1.83(6)(7) 1.36 0.81 0.99 0.88
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by Price Waterhouse LLP, the
fund's independent accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets and reflecting reimbursement for ordinary expenses over 0.50%.
(2) Without reimbursement other expenses and total operating expenses would
have been 1.13% and 1.38%, respectively. There is no guarantee that
reimbursement will continue beyond 2/28/99.
(3) The fund commenced operations on 7/8/93. Except in the Financial
Highlights, returns reflect performance of the fund from 7/31/93.
(4) The Merrill Lynch 1-3 Year Treasury Index, consisting of U.S. Treasury
notes and bonds with maturities of 1-3 years, is an unmanaged index that
measures short-term bond performance.
(5) Not annualized.
(6) Annualized.
(7) After consideration of certain state limitations.
J.P. MORGAN SHORT TERM BOND FUND 5
<PAGE>
J.P. MORGAN BOND FUND TICKER SYMBOL: PPBDX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN BOND FUND)
[LOGO]
GOAL
The fund's goal is to provide high total return consistent with moderate risk of
capital and maintenance of liquidity.
[LOGO]
INVESTMENT APPROACH
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, corporate bonds, private placements, asset-backed and
mortgage-backed securities, and others. These securities may be of any maturity,
but under normal market conditions the management team will keep the fund's
duration within one year of that of the Salomon Brothers Broad Investment Grade
Bond Index (currently about five years).
Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. At least
75% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 65% A or better. No more than 25% of assets may be invested
in securities as low as B.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 2.
To the extent that the fund seeks higher returns by investing in
non-investment-grade bonds, it takes on additional risks, because these bonds
are more sensitive to economic news and their issuers are in less secure
financial condition. Additionally, because the fund may invest up to 25% of
assets in foreign securities, it takes on additional risks. The fund has the
potential to produce higher returns than the Short Term Bond Fund along with a
share price that is somewhat more volatile.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on pages 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
Emerging Markets Debt Fund
Global Strategic Income Fund
New York Total Return Bond Fund*
California Bond Fund*
Tax Exempt Bond Fund*
BOND FUND
Short Term Bond Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $31 billion using the same strategy as this fund.
The portfolio management team is led by William G. Tennille, vice president, who
has been at J.P. Morgan since 1992, and by Connie J. Plaehn, managing director,
who has been at J.P. Morgan since 1984. Both have been on the team since January
of 1994.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.30
Marketing (12b-1) fees none
Other expenses 0.38
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.68
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 7 22 38 85
- --------------------------------------------------------------------------------
</TABLE>
6 J.P. MORGAN BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- ---------------------------------------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs.(2) Since inception(2)
<S> <C> <C> <C> <C>
J.P. MORGAN BOND FUND (after expenses) 9.13 9.97 7.23 8.06
- ---------------------------------------------------------------------------------------------------------------
BOND INDEX(3) (no expenses) 9.62 10.43 7.53 8.91
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- -----------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20% 10.23 10.09 13.45 6.53 9.87 (2.97) 18.17 3.13 9.13
10% 14.24 8.28 15.78 7.59 9.89 (2.85) 18.55 3.62 9.62
0%
- -----------------------------------------------------------------------------------------------------------------------------
(10%)
</TABLE>
/X/ J.P. MORGAN BOND FUND / / Bond Index(3)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal years ended October 31
- -----------------------------------------------------------------------------------------------------------------------------
1988(2) 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR ($) 10.00 9.84 9.84 9.93 10.32 10.52 11.00 9.64 10.41 10.30
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ($) 0.46 0.78 0.74 0.70 0.66 0.54 0.55 0.64 0.62 0.66
Net realized and
unrealized gain (loss)
on investment ($) (0.16) -- 0.09 0.41 0.28 0.67 (0.91) 0.77 (0.11) 0.18
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.30 0.78 0.83 1.11 0.94 1.21 (0.36) 1.41 0.51 0.84
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders from:
Net investment income ($) (0.46) (0.78) (0.74) (0.70) (0.66) (0.54) (0.55) (0.64) (0.62) (0.65)
Net realized gain ($) -- -- -- (0.02) (0.08) (0.19) (0.45) -- -- (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.46) (0.78) (0.74) (0.72) (0.74) (0.73) (1.00) (0.64) (0.62) (0.72)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR ($) 9.84 9.84 9.93 10.32 10.52 11.00 9.64 10.41 10.30 10.42
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 3.12(4) 8.27 8.78 11.55 9.35 11.97 (3.50) 15.10 5.13 8.58
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
($ thousands) 4,847 8,449 12,306 41,616 75,882 103,572 112,049 143,004 149,207 169,233
- -----------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.85(5) 0.84 0.83 0.81 0.81 0.81 0.78 0.69 0.66 0.68
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 7.40(5) 7.92 7.58 6.84 6.26 5.01 5.43 6.40 6.08 6.41
- -----------------------------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN
EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 3.13(5) 2.40 1.26 0.58 0.20 0.08 0.01 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER (%) 144 82 69 167 267 236(6) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by Price Waterhouse LLP, the
fund's independent accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets.
(2) The fund commenced operations on 3/11/88. Except in the Financial
Highlights, returns reflect performance of the fund from 3/31/88. Returns
for the period 3/31/88 through 7/31/93 reflect performance of the Pierpont
Bond Fund, the predecessor of the fund.
(3) The Bond Index is composed of the Lehman Brothers Government/Corporate
Intermediate Bond Index, consisting of all investment grade bonds with
maturities between 1 and 9.99 years, from 3/11/88 through 9/30/91, and the
Salomon Brothers Broad Investment Grade Bond Index, consisting of U.S.
Treasury and agency securities and investment-grade mortgage and corporate
bonds, from 10/1/91 forward. Both are unmanaged indices that measure bond
market performance.
(4) Not annualized.
(5) Annualized.
(6) 1993 portfolio turnover reflects the period 11/1/92 to 7/11/93. On 7/11/93
the fund's predecessor contributed all of its investable assets to The U.S.
Fixed Income Portfolio.
J.P. MORGAN BOND FUND 7
<PAGE>
J.P. MORGAN GLOBAL
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN GLOBAL STRATEGIC INCOME FUND)
[LOGO]
GOAL
The fund's goal is to provide high total return from a portfolio of fixed income
securities of foreign and domestic issuers.
[LOGO]
INVESTMENT APPROACH
The fund invests in a wide range of debt securities from the U.S. and other
markets, both developed and emerging. Issuers may include governments,
corporations, financial institutions, and supranational organizations (such as
the World Bank). The fund may invest directly in mortgages and in
mortgage-backed securities. The fund's securities may be of any maturity, but
under normal market conditions the fund's duration will generally be similar to
that of the Lehman Brothers Aggregate Bond Index (currently about four and a
half years). At least 40% of assets must be invested in securities that, at the
time of purchase, are rated investment-grade (BBB/Baa or better) or are the
unrated equivalent. The balance of assets may be invested in securities as low
as B.
The management team uses the process described on page 2, and also makes country
allocations, based primarily on macro-economic factors. With regard to sector
allocation, the team uses the model allocation shown at right as a basis,
although the actual allocations are adjusted periodically within the ranges
indicated. Within each sector, a dedicated team handles securities selection.
The fund typically hedges its non-dollar denominated investments back to the
U.S. dollar.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
global bond markets, interest rates, and currency exchange rates. How well the
fund's performance compares to that of similar fixed income funds will depend on
the success of the investment process. Because of low credit and foreign and
emerging markets investment risks, the fund's performance is likely to be more
volatile than that of most fixed income funds. The fund's mortgage-backed
investments involve the risk of losses due to default or to prepayments that
occur earlier or later than expected. Some investments, including directly owned
mortgages, may be illiquid. The fund has the potential for long-term total
returns that exceed those of more traditional bond funds, but investors should
also be prepared for risks that exceed those of more traditional bond funds.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on pages 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
Emerging Markets Debt Fund
GLOBAL STRATEGIC INCOME FUND
New York Total Return Bond Fund*
California Bond Fund*
Tax Exempt Bond Fund*
Bond Fund
Short Term Bond Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
MODEL SECTOR ALLOCATION
15% public/private corporates (range 5-25%)
23% high yield corporates (range 13-33%)
15% emerging markets (range 5-25%)
12% international non-dollar (range 0-25%)
35% public/private mortgages (range 20-45%)
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $3 billion using the same strategy as this fund.
The portfolio management team is led by Gerard W. Lillis, managing director, who
has been at J.P. Morgan since 1978, and by Mark E. Smith, managing director, who
joined J.P. Morgan in 1994 from Allied Signal, Inc. where he managed fixed
income portfolios and oversaw asset allocation activities across asset classes.
Both have been on the team since the fund's inception.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.45
Marketing (12b-1) fees none
Other expenses(2)
(after reimbursement) 0.55
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 1.00
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs.
<S> <C> <C>
YOUR COST($) 10 32
- --------------------------------------------------------------------------------
</TABLE>
8 J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for period
ended December 31, 1997
- --------------------------------------------------------------------------------
Since inception(3)
<S> <C>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND (after expenses) 9.71
- --------------------------------------------------------------------------------
LEHMAN BROTHERS AGGREGATE BOND INDEX(4) (no expenses) 10.30
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------
1997(3)
<S> <C>
20% 9.71
10% 10.30
0%
- --------------------------------------------------------------------------------
(10%)
</TABLE>
/X/ J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
/ / Lehman Brothers Aggregate Bond Index(4)
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the fiscal year ending 10/31/98, expressed as a
percentage of the fund's average net assets and reflecting reimbursement
for ordinary expenses over 1.00%.
(2) Without reimbursement other expenses and total operating expenses are
estimated to be 0.58% and 1.03%, respectively. There is no guarantee that
reimbursement will continue beyond 2/28/99.
(3) The fund commenced operations on 11/5/97. Returns reflect performance of
J.P. Morgan Institutional Global Strategic Income Fund (a separate feeder
fund investing in the same master portfolio) from 3/17/97 through 11/30/97.
Performance during this period reflects operating expenses which are 0.35%
of net assets lower than those of the fund. Accordingly, performance
returns for the fund would have been lower if an investment had been made
in the fund during the same time period.
(4) The Lehman Brothers Aggregate Bond Index, consisting of U.S. Treasury,
agency, corporate and mortgage-backed securities, is an unmanaged index
that measures overall bond market performance.
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND 9
<PAGE>
J.P. MORGAN EMERGING
MARKETS DEBT FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN EMERGING MARKETS DEBT FUND)
[LOGO]
GOAL
The fund's goal is to provide high total return from a portfolio of fixed income
securities of emerging markets issuers.
[LOGO]
INVESTMENT APPROACH
The fund invests primarily in debt securities from countries whose economies or
bond markets are less developed. This designation currently includes most
countries in the world except Australia, Canada, Hong Kong, Japan, New Zealand,
the U.S., the United Kingdom, and most Western European countries. Issuers of
portfolio securities may include foreign governments, corporations, and
financial institutions. These securities may be of any maturity and quality, but
under normal market conditions the fund's duration will generally range between
four and six years, similar to that of the Emerging Markets Bond Index Plus. At
least 95% of assets will be invested in securities that at the time of purchase
are rated no lower than B or are the unrated equivalent. No more than 5% of
assets may be invested in securities as low as C.
In addition to the investment process described on page 2, the management team
makes country allocation decisions, based primarily on financial and economic
forecasts and other macro-economic factors.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
emerging bond markets, interest rates, and currency exchange rates. How well the
fund's performance compares to that of similar fixed income funds will depend on
the success of the investment process.
Because the fund may invest more than 5% of its assets in a single issuer and
its primary securities combine the risks of emerging markets and low credit
quality, its performance is likely to be more volatile than that of other fixed
income investments. The fund has the potential to produce high total return over
time, but investors should be prepared to ride out periods of negative total
return.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on page 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
EMERGING MARKETS DEBT FUND
Global Strategic Income Fund
New York Total Return Bond Fund*
California Bond Fund*
Tax Exempt Bond Fund*
Bond Fund
Short Term Bond Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $3.5 billion using the same strategy as this fund.
The portfolio management team is led by Andrew F. Goldberg, vice president, who
has been at J.P. Morgan since 1990, and Dimas Jimenez, associate, who joined
J.P. Morgan in July of 1996 after graduating from Stanford Business School.
Prior to joining the portfolio management team, Mr. Goldberg oversaw the capital
research group's research into fixed income and derivatives markets, and Mr.
Jimenez worked in the emerging markets group at RCM Capital Management and the
fixed income department of Lehman Brothers, concentrating in emerging markets
debt, derivatives and international bonds. Both joined the team in February of
1998.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.70
Marketing (12b-1) fees none
Other expenses(2)
(after reimbursement) 0.55
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 1.25
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 13 40 69 151
- --------------------------------------------------------------------------------
</TABLE>
10 J.P. MORGAN EMERGING MARKETS DEBT FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for period ended
December 31, 1997
- --------------------------------------------------------------------------------
Since inception(3)
<S> <C>
J.P. MORGAN EMERGING MARKETS DEBT FUND (after expenses) 3.40
- --------------------------------------------------------------------------------
EMERGING MARKETS BOND INDEX PLUS(4) (no expenses) 8.93
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------
1997(3)
<S> <C>
10% 3.40
5% 8.93
0%
- --------------------------------------------------------------------------------
(5%)
</TABLE>
/X/ J.P. MORGAN EMERGING MARKETS DEBT FUND
/ / Emerging Markets Bond Index Plus(4)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal period ended October 31
- --------------------------------------------------------------------------------
1997(3)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.58
Net realized and unrealized loss
on investment and foreign currency ($) (0.05)
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.53
- --------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.58)
Excess of net investment income ($) (0.02)
Net realized gain ($) (0.17)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.77)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 9.76
- --------------------------------------------------------------------------------
TOTAL RETURN (%) 5.47(5)
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 11,978
- --------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 1.25(6)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 9.71(6)
- --------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 1.15(6)
- --------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by Price Waterhouse LLP, the
fund's independent accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets and reflecting reimbursement for ordinary expenses over 1.25%.
(2) Without reimbursement, other expenses and total operating expenses would
have been 1.70% and 2.40%, respectively, on an annualized basis. There is
no guarantee that reimbursement will continue beyond 4/30/99.
(3) The fund commenced operations on 4/17/97. Except in the Financial
Highlights, returns reflect performance of the fund from 4/30/97.
(4) The Emerging Markets Bond Index Plus, consisting of foreign currency
denominated debt instruments (Brady Bonds, loans, Eurobonds, etc.), is an
unmanaged index that measures total returns in emerging markets.
(5) Not annualized.
(6) Annualized.
J.P. MORGAN EMERGING MARKETS DEBT FUND 11
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND TICKER SYMBOL: PPTBX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN TAX EXEMPT BOND FUND)
[LOGO]
GOAL
The fund's goal is to provide high current income that is exempt from federal
income tax, consistent with moderate risk of capital and maintenance of
liquidity.
[LOGO]
INVESTMENT APPROACH
The fund invests primarily in high quality municipal securities whose income is
free from federal personal income tax. While the fund's goal is high tax-exempt
income, the fund may invest to a limited extent in taxable securities, including
U.S. government, government agency, corporate, or taxable municipal securities.
The fund's securities may be of any maturity, but under normal market conditions
the fund's duration will generally range between four and seven years, similar
to that of the Lehman Brothers 1-16 Year Municipal Bond Index. At least 90% of
assets must be invested in securities that, at the time of purchase, are rated
investment-grade (BBB/Baa or better) or are the unrated equivalent. No more than
10% of assets may be invested in securities as low as B.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
tax-exempt funds will depend on the success of the investment process, which is
described on page 2.
Investors should expect the potential for returns that exceed those of a
comparable tax-exempt fund of shorter duration, and should be prepared for
higher share price volatility than such a fund. The fund's performance could
also be affected by market reaction to proposed tax legislation. A portion of
the fund's returns may be subject to federal, state, or local tax, or the
alternative minimum tax.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on pages 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
Emerging Markets Debt Fund
Global Strategic Income Fund
New York Total Return Bond Fund*
California Bond Fund*
TAX EXEMPT BOND FUND*
Bond Fund
Short Term Bond Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $8 billion using the same strategy as this fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
joined the team in May of 1997 and has been at J.P. Morgan since 1987, and by
Elaine B. Young, vice president, who joined the team in January of 1996 and has
been at J.P. Morgan since August of 1994. Prior to joining J.P. Morgan, Ms.
Young was a municipal bond trader and fixed income portfolio manager at Scudder,
Stevens, & Clark, Inc.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.30
Marketing (12b-1) fees none
Other expenses 0.34
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.64
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 7 20 36 80
- --------------------------------------------------------------------------------
</TABLE>
12 J.P. MORGAN TAX EXEMPT BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- ----------------------------------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs.(2) 10 yrs.(2)
<S> <C> <C> <C> <C>
J.P. MORGAN TAX EXEMPT BOND FUND (after expenses) 7.42 8.04 6.10 7.13
- ----------------------------------------------------------------------------------------------------------
MUNICIPAL BOND INDEX(3) (no expenses) 7.80 8.55 6.61 7.57
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- -----------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20% 7.38 8.25 6.87 10.92 7.47 9.58 (2.70) 13.40 3.54 7.42
10% 5.80 9.62 7.48 11.66 8.25 10.71 (2.74) 13.80 4.27 7.80
0%
- -----------------------------------------------------------------------------------------------------------------------------
(10%)
</TABLE>
/X/ J.P. MORGAN TAX EXEMPT BOND FUND / / Municipal Bond Index(3)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal years ended August 31
- -----------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR ($) 10.84 10.72 10.85 10.75 11.19 11.60 12.04 11.45 11.73 11.63
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ($) 0.71 0.71 0.70 0.68 0.62 0.55 0.51 0.55 0.55 0.55
Net realized and
unrealized gain (loss)
on investment ($) (0.12) 0.13 (0.10) 0.44 0.41 0.56 (0.35) 0.29 (0.08) 0.24
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.59 0.84 0.60 1.12 1.03 1.11 0.16 0.84 0.47 0.79
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income ($) (0.71) (0.71) (0.70) (0.68) (0.62) (0.55) (0.51) (0.55) (0.55) (0.55)
Net realized gain ($) -- -- -- -- -- (0.12) (0.24) (0.01) (0.02) (0.02)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.71) (0.71) (0.70) (0.68) (0.62) (0.67) (0.75) (0.56) (0.57) (0.57)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR ($) 10.72 10.85 10.75 11.19 11.60 12.04 11.45 11.73 11.63 11.85
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 5.64 8.11 5.65 10.67 9.47 9.88 1.35 7.63 4.01 6.95
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
($ thousands) 118,066 113,638 151,755 239,709 360,343 485,013 392,460 352,005 369,987 401,007
- -----------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.80 0.80 0.79 0.78 0.77 0.74 0.71 0.71 0.64 0.64
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 6.62 6.62 6.43 6.12 5.45 4.64 4.39 4.87 4.67 4.67
- -----------------------------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN
EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 0.08 0.06 0.04 0.02 0.01 0.01 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER (%) 20 10 7 16 20 41(4) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above have been audited by Price Waterhouse LLP, the
fund's independent accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets.
(2) Returns for the period 12/31/87 through 7/31/93 reflect performance of the
Pierpont Tax Exempt Bond Fund, the predecessor of the fund.
(3) The Municipal Bond Index is composed of the Lehman Brothers Quality
Intermediate Municipal Bond Index, consisting of general obligation and
revenue bonds rated A or better with maturities of 2-12 years, from
12/31/87 through 4/30/97, and the Lehman Brothers 1-16 year Municipal Bond
Index, consisting of general obligation and revenue bonds with maturities
of 1-16 years, from 5/1/97 forward. Both are unmanaged indices that measure
municipal bond market performance.
(4) 1993 Portfolio turnover reflects the period 9/1/92 to 7/11/93 and has not
been annualized. On 7/11/93, the fund's predecessor contributed all of its
investable assets to The Tax Exempt Bond Portfolio.
J.P. MORGAN TAX EXEMPT BOND FUND 13
<PAGE>
J.P. MORGAN NEW YORK TOTAL
RETURN BOND FUND TICKER SYMBOL: PPNYX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND)
[LOGO]
GOAL
The fund's goal is to provide high after-tax total return for New York residents
consistent with moderate risk of capital.
[LOGO]
INVESTMENT APPROACH
The fund invests primarily in New York municipal securities whose income is free
from federal, state, and New York City personal income taxes for New York
residents. Because the fund's goal is high after-tax total return rather than
high tax-exempt income, the fund may invest to a limited extent in securities of
other states or territories. To the extent that the fund invests in municipal
securities of other states, the income from such securities would be free from
federal personal income taxes for New York residents but would be subject to New
York state and New York City personal income taxes. For non-New York residents,
the income from New York municipal securities is free from federal personal
income taxes only. The fund may also invest in taxable securities. The fund's
securities may be of any maturity, but under normal market conditions the fund's
duration will generally range between three and seven years, similar to that of
the Lehman Brothers 1-16 Year Municipal Bond Index. At least 90% of assets must
be invested in securities that, at the time of purchase, are rated
investment-grade (BBB/Baa or better) or are the unrated equivalent. No more than
10% of assets may be invested in securities as low as B.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 2. Because most of the fund's investments will typically be
from issuers in the State of New York, its performance will be affected by the
fiscal and economic health of that state and its municipalities. The fund may
invest more than 5% of assets in a single issuer, which could further
concentrate its risks. To the extent that the fund seeks higher returns by
investing in non-investment-grade bonds, it takes on additional risks, since
these bonds are more sensitive to economic news and their issuers have a less
secure financial condition. A portion of the fund's returns may be subject to
federal, state, or local tax, or the alternative minimum tax.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on pages 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
Emerging Markets Debt Fund
Global Strategic Income Fund
NEW YORK TOTAL RETURN BOND FUND*
California Bond Fund*
Tax Exempt Bond Fund*
Bond Fund
Short Term Bond Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $8 billion using the same strategy as this fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
has been at J.P. Morgan since 1987, and by Elaine B. Young, vice president, who
joined J.P. Morgan from Scudder, Stevens & Clark, Inc. in 1994 where she was a
municipal bond trader and fixed income portfolio manager. Both have been on the
team since June of 1997.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.30
Marketing (12b-1) fees none
Other expenses(2)
(after reimbursement) 0.40
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.70
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 7 22 39 87
- --------------------------------------------------------------------------------
</TABLE>
14 J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- -------------------------------------------------------------------------------------------------------------
1 yr. 3 yrs. Since inception(3)
<S> <C> <C> <C>
J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
(after expenses) 7.41 8.07 6.62
- -------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND INDEX(4) (no expenses) 8.16 9.19 7.55
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- -------------------------------------------------------------------------------------------------------------
1995 1996 1997
<S> <C> <C> <C>
20% 13.03 3.96 7.41
10% 14.69 4.93 8.16
0%
- -------------------------------------------------------------------------------------------------------------
(10%)
</TABLE>
/X/ J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
/ / Municipal Bond Index(4)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal periods ended
- ---------------------------------------------------------------------------------------------------------
3/31/95(3) 3/31/96 3/31/97 9/30/97
(unaudited)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00 10.11 10.34 10.28
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.40 0.46 0.46 0.23
Net realized and unrealized gain (loss)
on investment ($) 0.11 0.26 (0.03) 0.34
- ---------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.51 0.72 0.43 0.57
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.40) (0.46) (0.46) (0.23)
Net realized gain ($) -- (0.03) (0.03) --
- ---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.40) (0.49) (0.49) (0.23)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 10.11 10.34 10.28 10.62
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 5.26(5) 7.16 4.19 5.61(5)
- ---------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 38,137 50,523 56,198 67,491
- ---------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.75(6) 0.75 0.75 0.72(6)
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 4.31(6) 4.43 4.44 4.41(6)
- ---------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 0.22(6) 0.04 0.06 0.01(6)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above, except for the six months ended 9/30/97, have
been audited by Price Waterhouse LLP, the fund's independent accountants.
(1) The fund has a master/feeder structure as described on page 21. This table
shows the fund's expenses and its share of master portfolio expenses for
the current fiscal year, expressed as a percentage of the fund's average
net assets and reflecting reimbursement for ordinary expenses over 0.70%.
(2) Without reimbursement, other expenses and total operating expenses for the
fiscal year ended 3/31/97 would have been 0.51% and 0.81%, respectively.
There is no guarantee that reimbursement will continue beyond 7/31/98.
(3) The fund commenced operations on 4/11/94. Except in the Financial
Highlights, returns reflect performance of the fund from 4/30/94.
(4) The Municipal Bond Index is composed of The Lehman Brothers New York 1-15
Year Municipal Bond Index, consisting of New York general obligation and
revenue bonds with maturities of 1-15 years, from 4/11/94 through 4/30/97,
and the Lehman Brothers 1-16 Year Municipal Bond Index, consisting of
general obligation and revenue bonds with maturities of 1-16 years, from
5/1/97 forward. Both are unmanaged indices that measure municipal bond
market performance.
(5) Not annualized.
(6) Annualized.
J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND 15
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN SERIES TRUST
(J.P. MORGAN CALIFORNIA BOND FUND: SELECT SHARES)
[LOGO]
GOAL
The fund's goal is to provide high after-tax total return for California
residents consistent with moderate risk of capital.
[LOGO]
INVESTMENT APPROACH
The fund invests primarily in California municipal securities whose income is
free from federal and state personal income taxes for California residents.
Because the fund's goal is high after-tax total return rather than high
tax-exempt income, the fund may invest to a limited extent in securities of
other states or territories. To the extent that the fund invests in municipal
securities of other states, the income from such securities would be free from
federal personal income taxes for California residents but would be subject to
California state personal income taxes. For non-California residents, the income
from California municipal securities is free from federal personal income taxes
only. The fund may also invest in taxable securities. The fund's securities may
be of any maturity, but under normal market conditions the fund's duration will
generally range between three and ten years, similar to that of the Lehman
Brothers 1-16 Year Municipal Bond Index. At least 90% of assets must be invested
in securities that, at the time of purchase, are rated investment-grade (BBB/Baa
or better) or are the unrated equivalent. No more than 10% of assets may be
invested in securities as low as B.
[LOGO]
POTENTIAL RISKS AND REWARDS
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 2. Because most of the fund's investments will typically be
from issuers in the State of California, its performance will be affected by the
fiscal and economic health of that state and its municipalities. The fund may
invest more than 5% of assets in a single issuer, which could further
concentrate its risks. To the extent that the fund seeks higher returns by
investing in non-investment-grade bonds, it takes on additional risks, because
these bonds are more sensitive to economic news and their issuers are in less
secure financial condition. A portion of the fund's returns may be subject to
federal, state, or local tax, or the alternative minimum tax.
The fund's investments and their main risks, as well as fund strategies, are
described in more detail on pages 22-25.
POTENTIAL RISK AND RETURN
[CHART]
Return (after taxes)
Emerging Markets Debt Fund
Global Strategic Income Fund
New York Total Return Bond Fund*
CALIFORNIA BOND FUND*
Tax Exempt Bond Fund*
Bond Fund
Short Term Bond Fund
Risk
The positions of the funds in this graph reflect long-term performance goals
only, and are relative, not absolute.
* Based on tax-equivalent returns for an investor in the highest income tax
bracket.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages over $250
billion, including more than $8 billion using the same strategy as this fund.
The portfolio management team is led by Robert W. Meiselas, vice president, who
has been at J.P. Morgan since 1987, and by Elaine B. Young, vice president, who
joined J.P. Morgan from Scudder, Stevens & Clark, Inc. in 1994 where she was a
municipal bond trader and fixed income portfolio manager. Both have been on the
team since June of 1997.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.
Footnotes for this section are shown on next page.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(1) (%)
- --------------------------------------------------------------------------------
<S> <C>
Management fees (actual) 0.30
Marketing (12b-1) fees none
Other expenses(2)
(after reimbursement) 0.35
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.65
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 7 21 36 81
- --------------------------------------------------------------------------------
</TABLE>
16 J.P. MORGAN CALIFORNIA BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for period ended
December 31, 1997
- --------------------------------------------------------------------------------
SINCE INCEPTION(3)
<S> <C>
J.P. MORGAN CALIFORNIA BOND FUND (after expenses) 7.62
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 1-16 YEAR MUNICIPAL BOND INDEX(4)
(no expenses) 7.96
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN (%) Shows changes in returns by calendar year
- --------------------------------------------------------------------------------
1997(3)
<S> <C>
10% 7.62
5% 7.96
0%
- --------------------------------------------------------------------------------
(5%)
</TABLE>
/X/ J.P. MORGAN CALIFORNIA BOND FUND
/ / Lehman Brothers 1-16 Year Municipal Bond Index(4)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER-SHARE DATA For fiscal periods ended
- ------------------------------------------------------------------------------------------
4/30/97(3) 10/31/97
(unaudited)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00 10.04
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.01 0.20
Net realized and unrealized gain (loss)
on investment ($) 0.04 0.33
- ------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.05 0.53
- ------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income ($) (0.01) (0.20)
NET ASSET VALUE, END OF PERIOD ($) 10.04 10.37
- ------------------------------------------------------------------------------------------
TOTAL RETURN (%) 0.51(5) 5.34(5)
- ------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 302 2,726
- ------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.62(6) 0.65(6)
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 4.52(6) 3.94(6)
- ------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 0.55(6) 0.32(6)
- ------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER (%) 40 15
- ------------------------------------------------------------------------------------------
</TABLE>
The Financial Highlights above, except for the six months ended 10/31/97, have
been audited by Price Waterhouse LLP, the fund's independent accountants.
(1) This table shows expenses for the fiscal period ended 4/30/97, expressed as
a percentage of average net assets and reflecting reimbursement of ordinary
expenses over 0.65%.
(2) Without reimbursement, other expenses and total operating expenses for the
fiscal period ended 4/30/97 would have been 0.87% and 1.17%, respectively,
on an annualized basis. There is no guarantee that reimbursement will
continue beyond 8/31/98.
(3) The fund commenced operations on 4/21/97. Except in the Financial
Highlights, returns reflect performance of J.P. Morgan California Bond
Fund: Institutional Shares (a separate class of shares) from 12/31/96
through 4/30/97. Performance during this period reflects operating expenses
which are 0.20% of net assets lower than those of the fund. Accordingly,
performance returns for the fund would have been lower if an investment had
been made in the fund during the same time period.
(4) The Lehman Brothers 1-16 Year Municipal Bond Index, consisting of general
obligation and revenue bonds with maturities of 1-16 years, is an unmanaged
index that measures municipal bond market performance.
(5) Not annualized.
(6) Annualized.
J.P. MORGAN CALIFORNIA BOND FUND 17
<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------
For your convenience, the J.P. Morgan Funds offer several ways to start and add
to fund investments.
INVESTING THROUGH A FINANCIAL PROFESSIONAL
If you work with a financial professional, either at J.P. Morgan or elsewhere,
he or she is prepared to handle your planning and transaction needs. Your
financial professional will be able to assist you in establishing your fund
account, executing transactions, and monitoring your investment. If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly.
INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN
Your fund investments are handled through your plan. Refer to your plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares.
INVESTING THROUGH AN IRA OR ROLLOVER IRA
Please contact a J.P. Morgan Retirement Services Specialist at 1-888-576-4472
for information on J.P. Morgan's comprehensive IRA services, including lower
minimum investments.
INVESTING DIRECTLY
Investors may establish accounts without the help of an intermediary by using
the instructions below and at right:
- - Choose a fund (or funds) and determine the amount you are investing. The
minimum amount for initial investments in a fund is $2,500 and for
additional investments $500, although these minimums may be less for some
investors. For more information on minimum investments, call
1-800-521-5411.
- - Complete the application, indicating how much of your investment you want
to allocate to which fund(s). Please apply now for any account privileges
you may want to use in the future, in order to avoid the delays associated
with adding them later on.
- - Mail in your application, making your initial investment as shown at right.
For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.
OPENING YOUR ACCOUNT
BY WIRE
- - Mail your completed application to the Shareholder Services Agent.
- - Call the Shareholder Services Agent to obtain an account number and to
place a purchase order. FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL
BE RETURNED UNINVESTED.
- - After placing your purchase order, instruct your bank to wire the amount of
your investment to:
State Street Bank & Trust Company
ROUTING NUMBER: 011-000-028
CREDIT: J.P. Morgan Funds
ACCOUNT NUMBER: 9904-226-9
FFC: your account number, name of registered owner(s) and fund name
BY CHECK
- - Make out a check for the investment amount payable to J.P. Morgan Funds.
- - Mail the check with your completed application to the Transfer Agent.
BY EXCHANGE
- - Call the Shareholder Services Agent to effect an exchange.
ADDING TO YOUR ACCOUNT
BY WIRE
- - Call the Shareholder Services Agent to place a purchase order. FUNDS THAT
ARE WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED.
- - Once you have placed your purchase order, instruct your bank to wire the
amount of your investment as described above.
BY CHECK
- - Make out a check for the investment amount payable to J.P. Morgan Funds.
- - Mail the check with a completed investment slip to the Transfer Agent. If
you do not have an investment slip, attach a note indicating your account
number and how much you wish to invest in which fund(s).
BY EXCHANGE
- - Call the Shareholder Services Agent to effect an exchange.
18 YOUR INVESTMENT
<PAGE>
- --------------------------------------------------------------------------------
SELLING SHARES
BY PHONE -- WIRE PAYMENT
- - Call the Shareholder Services Agent to verify that the wire redemption
privilege is in place on your account. If it is not, a representative can
help you add it.
- - Place your wire request. If you are transferring money to a non-Morgan
account, you will need to provide the representative with the personal
identification number (PIN) that was provided to you when you opened your
fund account.
BY PHONE -- CHECK PAYMENT
- - Call the Shareholder Services Agent and place your request. Once your
request has been verified, a check for the net amount, payable to the
registered owner(s), will be mailed to the address of record. For checks
payable to any other party or mailed to any other address, please make your
request in writing (see below).
IN WRITING
- - Write a letter of instruction that includes the following information: The
name of the registered owner(s) of the account; the account number; the
fund name; the amount you want to sell; and the recipient's name and
address or wire information, if different from those of the account
registration.
- - Indicate whether you want the proceeds sent by check or by wire.
- - Make sure the letter is signed by an authorized party. The Shareholder
Services Agent may require additional information, such as a signature
guarantee.
- - Mail the letter to the Shareholder Services Agent.
BY EXCHANGE
- - Call the Shareholder Services Agent to effect an exchange.
ACCOUNT AND TRANSACTION POLICIES
TELEPHONE ORDERS The funds accept telephone orders from all shareholders. To
guard against fraud, the funds require shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if a fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.
EXCHANGES You may exchange shares in these funds for shares in any other J.P.
Morgan or J.P. Morgan Institutional mutual fund at no charge (subject to the
securities laws of your state). When making exchanges, it is important to
observe any applicable minimums. Keep in mind that for tax purposes an exchange
is considered a sale.
A fund may alter, limit, or suspend its exchange policy at any time.
BUSINESS HOURS AND NAV CALCULATIONS The funds' regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). Each fund
calculates its net asset value per share (NAV) every business day as of the
close of trading on the NYSE (normally 4:00 p.m. eastern time).
TIMING OF ORDERS Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. A fund has the right to suspend redemption of shares and to
postpone payment of proceeds for up to seven days or as permitted by law.
- --------------------------------------------------------------------------------
TRANSFER AGENT SHAREHOLDER SERVICES AGENT
STATE STREET BANK AND TRUST COMPANY J.P. MORGAN FUNDS SERVICES
P.O. Box 8411 522 Fifth Avenue
Boston, MA 02266-8411 New York, NY 10036
Attention: J.P. Morgan Funds Services 1-800-521-5411
Representatives are available 8:00
a.m. to 5:00 p.m. eastern time on
fund business days.
YOUR INVESTMENT 19
<PAGE>
- --------------------------------------------------------------------------------
TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record
when a fund receives your payment, generally the day following execution. When
you sell shares, proceeds are generally available the day following execution
and will be forwarded according to your instructions.
When you sell shares that you recently purchased by check, your order will be
executed at the next NAV but the proceeds will not be available until your check
clears. This may take up to 15 days.
STATEMENTS AND REPORTS The funds send monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months each fund sends out an annual or semi-annual report, containing
information on its holdings and a discussion of recent and anticipated market
conditions and fund performance.
ACCOUNTS WITH BELOW-MINIMUM BALANCES If your account balance falls below the
minimum for 30 days as a result of selling shares (and not because of
performance), each fund reserves the right to request that you buy more shares
or close your account. If your account balance is still below the minimum 60
days after notification, a fund may close out your account and send the proceeds
to the address of record.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are typically declared daily and paid monthly. If an investor's
shares are redeemed during the month, accrued but unpaid dividends are paid with
the redemption proceeds. Shares of a fund earn dividends on the business day the
purchase is effective, but not on the business day the redemption is effective.
Each fund distributes capital gains, if any, once a year. However, a fund may
make more or fewer payments in a given year, depending on its investment results
and its tax compliance situation. Each fund's dividends and distributions
consist of most or all of its net investment income and net realized capital
gains.
Dividends and distributions are reinvested in additional fund shares.
Alternatively, you may instruct your financial professional or J.P. Morgan Funds
Services to have them sent to you by check, credited to a separate account, or
invested in another J.P. Morgan Fund.
TAX CONSIDERATIONS
In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. These transactions
typically create the following tax liabilities:
- --------------------------------------------------------------------------------
TRANSACTION TAX STATUS
Income dividends from the Exempt from federal, state,
New York Total Return Bond and New York City personal
Fund income taxes for New York
residents only
Income dividends from the Exempt from federal and state
California Bond Fund personal income taxes for
California residents only
Income dividends from the Exempt from federal personal
Tax Exempt Bond Fund income taxes
Income dividends from Ordinary income
all other funds
Short-term capital gains Ordinary income
distributions
Long-term capital gains Capital gains
distributions
Sales or exchanges of Capital gains or
shares owned for more losses
than one year
Sales or exchanges of Gains are treated as ordinary
shares owned for one year income; losses are subject
or less to special rules
Because long-term capital gains distributions are taxable as capital gains
regardless of how long you have owned your shares, you may want to avoid making
a substantial investment when a fund is about to declare a long-term capital
gains distribution.
Every January, each fund issues tax information on its distributions for the
previous year.
Any investor for whom a fund does not have a valid taxpayer identification
number will be subject to backup withholding for taxes.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
Because each investor's tax circumstances are unique, please consult your tax
professional about your fund investment.
20 YOUR INVESTMENT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
As noted earlier, each fund (except the California Bond Fund) is a "feeder" fund
that invests in a master portfolio. (Except where indicated, this prospectus
uses the term "the fund" to mean the feeder fund and its master portfolio taken
together.)
Each master portfolio accepts investments from other feeder funds, and all the
feeders of a given master portfolio bear the portfolio's expenses in proportion
to their assets. However, each feeder can set its own transaction minimums,
fund-specific expenses, and other conditions. This means that one feeder could
offer access to the same master portfolio on more attractive terms, or could
experience better performance, than another feeder. Information about other
feeders is available by calling 1-800-521-5411. Generally, when a master
portfolio seeks a vote, each of its feeder funds will hold a shareholder meeting
and cast its vote proportionately, as instructed by its shareholders. Fund
shareholders (except California Bond Fund shareholders) are entitled to one vote
per fund share. California Bond Fund shareholders are entitled to one full or
fractional vote for each dollar or fraction of a dollar invested.
Each feeder fund and its master portfolio expect to maintain consistent goals,
but if they do not, the feeder fund will withdraw from the master portfolio,
receiving its assets either in cash or securities. Each feeder fund's trustees
would then consider whether it should hire its own investment adviser, invest in
a different master portfolio, or take other action.
The California Bond Fund is a series of J.P. Morgan Series Trust, a
Massachusetts business trust. The California Bond Fund is one of three series of
shares currently offered by the trust. Information about other series or classes
is available by calling 1-800-521-5411. In the future, the trustees could create
other series or share classes, which would have different expenses.
MANAGEMENT AND ADMINISTRATION
The feeder funds described in this prospectus, their corresponding master
portfolios, and J.P. Morgan Series Trust are all governed by the same trustees.
The trustees are responsible for overseeing all business activities. The
trustees are assisted by Pierpont Group, Inc., which they own and operate on a
cost basis; costs are shared by all funds governed by these trustees. Funds
Distributor, Inc., as co-administrator, along with J.P. Morgan, provides fund
officers. J.P. Morgan, as co-administrator, oversees each fund's other service
providers.
J.P. Morgan, subject to the expense reimbursements described earlier in this
prospectus, receives the following fees for investment advisory and other
services:
<TABLE>
<CAPTION>
ADVISORY SERVICES Percentage of the master
portfolio's average net assets
<S> <C>
Short Term Bond 0.25%
Bond 0.30%
Global Strategic Income 0.45%
Emerging Markets Debt 0.70%
Tax Exempt Bond 0.30%
New York Total Return Bond 0.30%
ADMINISTRATIVE SERVICES Master portfolio's and fund's pro-
(fee shared with Funds rata portions of 0.09% of the
Distributor, Inc.) first $7 billion in J.P. Morgan-
advised portfolios, plus 0.04% of
average net assets over $7 billion
SHAREHOLDER SERVICES Percentage of the fund's average
net assets
Short Term Bond 0.20%
Bond 0.20%
Global Strategic Income 0.25%
Emerging Markets Debt 0.25%
Tax Exempt Bond 0.20%
New York Total Return Bond 0.20%
</TABLE>
The California Bond Fund, subject to the expense reimbursements described
earlier in this prospectus, pays J.P. Morgan the following fees for investment
advisory and other services:
ADVISORY SERVICES 0.30% of the fund's average
net assets
ADMINISTRATIVE SERVICES Fund's pro-rata portion of
(fee shared with Funds 0.09% of the first $7 billion
Distributor, Inc.) in J.P. Morgan-advised portfolios,
plus 0.04% of average net
assets over $7 billion
SHAREHOLDER SERVICES 0.25% of the fund's average
net assets
J.P. Morgan may pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.
FUND DETAILS 21
<PAGE>
- --------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS
This table discusses the main elements that make up each fund's overall risk and
reward characteristics (described on pages 4-17). It also outlines each fund's
policies toward various securities, including those that are designed to help
certain funds manage risk.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARKET CONDITIONS
- - Each fund's share price, yield, - Bonds have generally outperformed - Under normal circumstances the funds plan
and total return will fluctuate money market investments over the to remain fully invested in bonds and other
in response to bond market long term, with less risk than fixed income securities as noted in the
movements stocks table on pages 24-25
- - The value of most bonds will - Most bonds will rise in value - The funds seek to limit risk and enhance
fall when interest rates rise; when interest rates fall total return or yields through careful
the longer a bond's maturity management, sector allocation, individual
and the lower its credit quality, - Mortgage-backed and asset-backed securities selection, and duration
the more its value typically falls securities can offer attractive management
returns
- - Mortgage-backed and asset-backed - During severe market downturns, the funds
securities (securities representing have the option of investing up to 100% of
an interest in, or secured by, a assets in investment-grade short-term
pool of mortgages or other assets securities
such as receivables) could generate
capital losses or periods of low - J.P. Morgan monitors interest rate trends,
yields if they are paid off as well as geographic and demographic
substantially earlier or later than information related to mortgage-backed
anticipated securities and mortgage prepayments; the
Tax Exempt Bond Fund is not permitted to
invest in asset-backed or mortgage-backed
securities; the New York Total Return Bond
and California Bond funds are not permitted
to invest in mortgage-backed securities
MANAGEMENT CHOICES
- - A fund could underperform its - A fund could outperform its - J.P. Morgan focuses its active management
benchmark due to its sector, benchmark due to these same on those areas where it believes its
securities or duration choices choices commitment to research can most enhance
returns and manage risks in a consistent way
CREDIT QUALITY
- - The default of an issuer would - Investment-grade bonds have a - Each fund maintains its own policies for
leave a fund with unpaid interest lower risk of default balancing credit quality against potential
or principal yields and gains in light of its investment
- Junk bonds offer higher yields goals
- - Junk bonds (those rated BB/Ba or and higher potential gains
lower) have a higher risk of - J.P. Morgan develops its own ratings of
default, tend to be less liquid, unrated securities and makes a credit
and may be more difficult to value quality determination for unrated securities
FOREIGN INVESTMENTS
- - A fund could lose money because of - Foreign bonds, which represent - Foreign bonds are a primary investment only
foreign government actions, a major portion of the world's for the Global Strategic Income and Emerging
political instability, or lack of fixed income securities, offer Markets Debt funds and may be a significant
adequate and accurate information attractive potential performance investment for the Short Term Bond and Bond
and opportunities for funds; the Tax Exempt Bond, New York Total
- - Currency exchange rate movements diversification Return Bond and California Bond funds are
could reduce gains or create losses not permitted to invest any assets in
- Favorable exchange rate foreign bonds
- - Currency and investment risks tend movements could generate gains
to be higher in emerging markets or reduce losses - To the extent that a fund invests in foreign
bonds, it may manage the currency exposure
- Emerging markets can offer of its foreign investments relative to its
higher returns benchmark, and may hedge back into the U.S.
dollar from time to time (see also
"Derivatives")
</TABLE>
22 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DERIVATIVES
- - Derivatives such as futures, - Hedges that correlate well with - The funds use derivatives for hedging
options, and foreign currency underlying positions can reduce and for risk management (i.e., to
forward contracts that are or eliminate losses at low cost adjust duration or to establish or
used for hedging the portfolio adjust exposure to particular securities,
or specific securities may not - A fund could make money and markets, or currencies); risk management
fully offset the underlying protect against losses if may include management of a fund's exposure
positions(1) management's analysis proves relative to its benchmark (risk management
correct techniques that involve derivatives are
- - Derivatives used for risk not permitted to be used by the Short Term
management may not have the - Derivatives that involve Bond, Bond and Tax Exempt Bond funds); the
intended effects and may result leverage could generate Tax Exempt Bond, New York Total Return
in losses or missed opportunities substantial gains at low cost Bond and California Bond funds are
permitted to enter into futures and
- - The counterparty to a derivatives options transactions, however, these
contract could default transactions result in taxable gains or
losses so it is expected that these funds
- - Derivatives that involve leverage will utilize them infrequently; foreign
could magnify losses currency forward contracts are not
permitted to be used by the Tax Exempt
Bond, New York Total Return Bond and
California Bond funds
- The funds only establish hedges that
they expect will be highly correlated
with underlying positions
- While the funds may use derivatives
that incidentally involve leverage,
they do not use them for the specific
purpose of leveraging their portfolios
ILLIQUID HOLDINGS
- - A fund could have difficulty - These holdings may offer more - No fund may invest more than 15% of net
valuing these holdings precisely attractive yields or potential assets in illiquid holdings
growth than comparable widely
- - A fund could be unable to sell traded securities - To maintain adequate liquidity to meet
these holdings at the time or redemptions, each fund may hold
price desired investment-grade short-term securities
(including repurchase agreements) and,
for temporary or extraordinary purposes,
may borrow from banks up to 33 1/3%
(with respect to the Global Strategic
Income, Emerging Markets Debt, New York
Total Return Bond and California Bond
funds), 30% (with respect to the Short
Term Bond and Bond funds) or 10% (with
respect to the Tax Exempt Bond Fund) of
the value of its assets
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
- - When a fund buys securities - A fund can take advantage of - Each fund uses segregated accounts to
before issue or for delayed attractive transaction offset leverage risk
delivery, it could be exposed opportunities
to leverage risk if it does
not use segregated accounts
SHORT-TERM TRADING
- - Increased trading would raise a - A fund could realize gains - The expected turnover rate for each
fund's transaction costs in a short period of time fund is as follows:
- - Increased short-term capital - A fund could protect against - Tax Exempt Bond 50%
gains distributions would raise losses if a bond is overvalued - New York Total Return Bond,
shareholders' income tax liability and its value later falls California Bond 75%
- Short Term Bond, Bond,
Global Strategic Income 300%
- Emerging Markets Debt 350%
- The funds generally avoid short-term
trading, except to take advantage of
attractive or unexpected opportunities
or to meet demands generated by
shareholder activity
</TABLE>
(1) A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash
payment based on the value of a securities index. An option is the right to
buy or sell securities that is granted in exchange for an agreed-upon sum.
A foreign currency forward contract is an obligation to buy or sell a given
currency on a future date and at a set price.
FUND DETAILS 23
<PAGE>
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INVESTMENTS
- --------------------------------------------------------------------------------
This table discusses the customary types of securities which can be held by each
fund. In each case the principal types of risk are listed on the following page
(see below for definitions). This table reads across two pages.
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Bonds or notes backed by unsecured debt, such as credit
card receivables; these securities are often guaranteed or over-collateralized
to enhance their credit quality.
- --------------------------------------------------------------------------------
BANK OBLIGATIONS Negotiable certificates of deposit, time deposits and bankers'
acceptances of domestic and foreign issuers.
- --------------------------------------------------------------------------------
COMMERCIAL PAPER Unsecured short term debt issued by domestic and foreign banks
or corporations. These securities are usually discounted and are rated by S&P or
Moody's.
- --------------------------------------------------------------------------------
CONVERTIBLE SECURITIES Domestic and foreign debt securities that can be
converted into equity securities at a future time and price.
- --------------------------------------------------------------------------------
CORPORATE BONDS Debt securities of domestic and foreign industrial, utility,
banking, and other financial institutions.
- --------------------------------------------------------------------------------
MORTGAGES (DIRECTLY HELD) Domestic debt instrument which gives the lender a
lien on property as security for the loan repayment.
- --------------------------------------------------------------------------------
MORTGAGE DOLLAR ROLLS The sale of domestic mortgage-backed securities with the
commitment to buy back similar securities at a future date and at an agreed upon
price. Segregated accounts are used to offset leverage risk.
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES Domestic and foreign securities backed by pools of
mortgages (such as Ginnie Maes, Fannie Maes and Freddie Macs), including pass
through certificates, and other senior classes of collateralized mortgage
obligations (CMOs) or stripped mortgage-backed securities.
- --------------------------------------------------------------------------------
PARTICIPATION INTERESTS Securities representing an interest in another security
or in bank loans.
- --------------------------------------------------------------------------------
PRIVATE PLACEMENTS Bonds or other investments that are sold directly to an
institutional investor.
- --------------------------------------------------------------------------------
REITS AND OTHER REAL-ESTATE RELATED INSTRUMENTS Securities of issuers that
invest in real estate or are secured by real estate.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS Agreements between a seller and a buyer whereby the
seller agrees to repurchase the securities at an agreed upon price and at a
stated time.
- --------------------------------------------------------------------------------
SOVEREIGN DEBT, BRADY BONDS, AND DEBT OF SUPRANATIONAL ORGANIZATIONS Dollar-
and non-dollar-denominated securities issued to refinance foreign government
bank loans and other debt.
- --------------------------------------------------------------------------------
SWAPS Contractual agreement whereby a party agrees to exchange periodic
payments with a counterparty. Segregated accounts are used to offset leverage
risk.
- --------------------------------------------------------------------------------
SYNTHETIC VARIABLE RATE INSTRUMENTS Debt instruments whereby the issuer agrees
to exchange one security for another in order to change the maturity or quality
of a security in the fund.
- --------------------------------------------------------------------------------
TAX EXEMPT MUNICIPAL SECURITIES Securities, generally issued as general
obligation and revenue bonds, whose interest is exempt from federal taxation and
state and/or local taxes in the state where the securities were issued.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES Debt instruments (Treasury bills, notes, and bonds)
guaranteed by the U.S. government for the timely payment of principal and
interest.
- --------------------------------------------------------------------------------
ZERO COUPON, PAY-IN-KIND, AND DEFERRED PAYMENT SECURITIES Domestic and foreign
securities offering non-cash or delayed-cash payment. Their prices are typically
more volatile than those of some other debt instruments and involve certain
special tax considerations.
- --------------------------------------------------------------------------------
RISK RELATED TO CERTAIN SECURITIES HELD BY J.P. MORGAN FIXED INCOME FUNDS:
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency-denominated investments, and may widen any losses.
EXTENSION RISK The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.
INTEREST RATE RISK The risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates typically
causes a fall in values, while a fall in rates typically causes a rise in
values.
LEVERAGE RISK The risk the costs associated with a liability are more than the
obligation of the fund with regard to the underlying instrument.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance.
24 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/X/ Permitted (and if applicable, percentage limitation)
percentage of total assets - BOLD
percentage of net assets - ITALIC
/ / Permitted, but not typically used
- -- Not permitted
<TABLE>
<CAPTION>
SHORT GLOBAL EMERGING TAX NEW YORK
TERM STRATEGIC MARKETS EXEMPT TOTAL CALIFORNIA
PRINCIPAL TYPES OF RISK BOND BOND INCOME DEBT BOND RETURN BOND BOND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
credit, interest rate, market,
prepayment /X/ /X/ /X/ / / -- / / / /
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, liquidity, Domestic Domestic Domestic
political /X/(1) /X/(1) /X/ /X/ / /Only / /Only / /Only
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest /X/Tax /X/Tax /X/Tax
rate, liquidity, market, /X/ /X/ / / / / Exempt Exempt Exempt
political / /Taxable / /Taxable / /Taxable
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate,
liquidity, market, political, /X/ 25% /X/ 25% / / /X/ -- -- --
valuation Foreign Foreign
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest
rate, liquidity, market, /X/ 25% /X/ 25% /X/ /X/ -- -- --
political, valuation Foreign Foreign
- --------------------------------------------------------------------------------------------------------------------------------
credit, extension, interest
rate, market, natural event, -- -- /X/ -- -- -- --
prepayment, valuation
- --------------------------------------------------------------------------------------------------------------------------------
extension, interest rate,
leverage, liquidity, market, /X/ 30% /X/ 30% /X/ 33 1/3% -- -- -- --
prepayment
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, extension,
interest rate, leverage, market, /X/ /X/ /X/ / / -- -- --
political prepayment
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, extension,
interest rate, liquidity, /X/ /X/ /X/ /X/ -- -- --
political, prepayment
- --------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity,
market, valuation /X/ /X/ /X/ /X/ /X/ /X/ /X/
- --------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, liquidity,
market, natural event, prepayment, /X/ /X/ /X/ -- -- -- --
valuation
- --------------------------------------------------------------------------------------------------------------------------------
credit /X/ /X/ /X/ /X/ / / / / / /
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate,
market, political /X/ /X/ /X/ /X/ -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate,
leverage, market, political / / / / /X/ /X/ -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, leverage,
liquidity, market -- -- -- -- /X/ /X/ /X/
- --------------------------------------------------------------------------------------------------------------------------------
credit, interest rate, market,
natural event, political / / / / -- -- /X/(2) /X/(2) /X/(2)
- --------------------------------------------------------------------------------------------------------------------------------
interest rate /X/ /X/ /X/ /X/ /X/ /X/ /X/
- --------------------------------------------------------------------------------------------------------------------------------
credit, currency, interest rate,
liquidity, market, political, /X/ /X/ /X/ /X/ /X/ /X/ /X/
valuation
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MARKET RISK The risk that the market value of an investment may move up or
down, sometimes rapidly and unpredictably. Market risk may affect a single
issuer, an industry, a sector of the bond market or the market as a whole.
Common to all investments and the mutual funds that invest in them.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
POLITICAL RISK The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
PREPAYMENT RISK The risk that unanticipated prepayments may occur, reducing the
value asset-backed, mortgages, mortgage-related securities, and participation
interests.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
(1) For each of the Short Term Bond and Bond funds, all foreign securities in
the aggregate may not exceed 25% of such fund's assets.
(2) At least 65% of assets must be in tax exempt securities (for New York Total
Return Bond and California Bond funds, the 65% must be in New York or
California municipal securities, respectively).
FUND DETAILS 25
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
For investors who want more information on these funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS Contain financial statements, performance data,
information on portfolio holdings, and a written analysis of market conditions
and fund performance for a fund's most recently completed fiscal year or
half-year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) Provides a fuller technical and legal
description of a fund's policies, investment restrictions, and business
structure. This prospectus incorporates each fund's SAI by reference.
Copies of the current versions of these documents may be obtained by contacting:
J.P. MORGAN FUNDS
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
TELEPHONE: 1-800-521-5411
HEARING IMPAIRED: 1-888-468-4015
EMAIL: [email protected]
Text-only versions of these documents and this prospectus are available from the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. (1-800-SEC-0330) and may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov. The funds' investment company and 1933 Act
registration numbers are:
J.P. Morgan Short Term Bond Fund. . . . . . . . . 811-07340 and 033-54632
J.P. Morgan Bond Fund . . . . . . . . . . . . . . 811-07340 and 033-54632
J.P. Morgan Global Strategic Income Fund. . . . . 811-07340 and 033-54632
J.P. Morgan Emerging Markets Debt Fund. . . . . . 811-07340 and 033-54632
J.P. Morgan Tax Exempt Bond Fund. . . . . . . . . 811-07340 and 033-54632
J.P. Morgan New York Total Return Bond Fund . . . 811-07340 and 033-54632
J.P. Morgan California Bond Fund. . . . . . . . . 811-07795 and 333-11125
J.P. MORGAN FUNDS AND THE MORGAN TRADITION
The J.P. Morgan Funds combine a heritage of integrity and financial
leadership with comprehensive, sophisticated analysis and management techniques.
Drawing on J.P. Morgan's extensive experience and depth as an investment
manager, the J.P. Morgan Funds offer a broad array of distinctive opportunities
for mutual fund investors.
J.P. MORGAN
- --------------------------------------------------------------------------------
J.P. MORGAN FUNDS
ADVISOR DISTRIBUTOR
Morgan Guaranty Trust Company of New York Funds Distributor, Inc.
522 Fifth Avenue 60 State Street
New York, NY 10036 Boston, MA 02109
1-800-521-5411 1-800-221-7930