<PAGE>
FEBRUARY 2, 1998 PROSPECTUS
J.P. MORGAN MONEY MARKET FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
-----------------------------
Seeking to preserve capital
and to provide income and
same-day liquidity
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. Each fund seeks to maintain a stable
$1 share price, without guaranteeing that it will always be able to do so.
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. [LOGO]JPMORGAN
<PAGE>
CONTENTS
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2
- -----
Principles and techniques common to the funds in this prospectus
MONEY MARKET MANAGEMENT APPROACH
Money market investment process. . . . . . . . . . . . . . . . . . . . . 2
The spectrum of money market funds . . . . . . . . . . . . . . . . . . . 3
Money market funds and stability . . . . . . . . . . . . . . . . . . . . 3
4
- -----
Each fund's goal, investment approach, risks, expenses, performance, and
financial highlights
J.P. MORGAN MONEY MARKET FUNDS
J.P. Morgan Prime Money Market Fund. . . . . . . . . . . . . . . . . . . 4
J.P. Morgan Federal Money Market Fund. . . . . . . . . . . . . . . . . . 6
J.P. Morgan Tax Exempt Money Market Fund . . . . . . . . . . . . . . . . 8
10
- -----
Investing in the J.P. Morgan Money Market Funds
YOUR INVESTMENT
Investing through a financial professional . . . . . . . . . . . . . . . 10
Investing through an employer-sponsored retirement plan. . . . . . . . . 10
Investing through an IRA or rollover IRA . . . . . . . . . . . . . . . . 10
Investing directly . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Opening your account . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Adding to your account . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selling shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Account and transaction policies . . . . . . . . . . . . . . . . . . . . 11
Dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . 12
Tax considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15
- -----
More about the funds' business operations
FUND DETAILS
Master/feeder structure. . . . . . . . . . . . . . . . . . . . . . . . . 13
Management and administration. . . . . . . . . . . . . . . . . . . . . . 13
FOR MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . back cover
<PAGE>
INTRODUCTION
- --------------------------------------------------------------------------------
J.P. MORGAN MONEY MARKET FUNDS
Each of these funds invests in high-quality short-term debt securities, by
investing through a master portfolio (another fund with the same goal). Each
fund accrues dividends daily, pays them to shareholders monthly, and seeks to
maintain a stable $1 share price.
WHO MAY WANT TO INVEST
The funds are designed for investors who:
- - want an investment that strives to preserve capital
- - want regular income from a high quality portfolio
- - want a highly liquid investment
- - are looking for an interim investment
- - are pursuing a short-term goal
- - are seeking income that is generally exempt from state and local income
taxes (in the case of Federal Money Market Fund) or exempt from federal
income tax (in the case of Tax Exempt Money Market Fund)
The funds are not designed for investors who:
- - are investing for long-term growth
- - are investing for high income
- - require the added security of the FDIC insurance
- - in the case of Tax Exempt Money Market Fund, are investing through an IRA
or other tax-advantaged retirement plan
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 approximately $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:
- - There is no assurance that these funds will meet their investment goals
- - Future returns will not necessarily resemble past performance
- - These funds do not represent complete investment programs
1
<PAGE>
MONEY MARKET MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
The J.P. Morgan money market funds invest exclusively in high-quality short-term
debt obligations.
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 investment quality through in-depth research on short-term securities
and their issuers. This allows each fund to focus on providing current income
without compromising share price stability.
MONEY MARKET INVESTMENT PROCESS
In researching short-term securities, J.P. Morgan's credit analysts enhance
the data furnished by rating agencies by drawing on the insights of J.P.
Morgan's fixed income trading specialists and equity analysts. Only securities
highly rated by independent rating agencies as well as J.P. Morgan's proprietary
ratings system are considered for investment.
In managing the funds described in this prospectus, J.P. Morgan employs a
three-step process:
[GRAPHIC]
J.P. Morgan uses a disciplined process to control each fund's sensitivity
to interest rates
MATURITY DETERMINATION Based on analysis of a range of factors, including
current yields, economic forecasts, and anticipated fiscal and monetary
policies, J.P. Morgan establishes the desired weighted average maturity for each
fund within the permissible 90-day range. Controlling weighted average maturity
allows the funds to manage risk, since securities with shorter maturities are
typically less sensitive to interest rate shifts than those with longer
maturities.
[GRAPHIC]
The funds invest across different sectors, for diversification and to take
advantage of yield spreads
SECTOR ALLOCATION Analysis of the yields available in different sectors of the
short-term debt market allows J.P. Morgan to adjust each fund's sector
allocation, with the goal of enhancing current income while also maintaining
diversification across permissible sectors.
[GRAPHIC]
Each fund selects its securities as described later in this prospectus
SECURITY SELECTION Based on the results of the firm's credit research and each
fund's maturity determination and sector allocation, the portfolio managers and
dedicated fixed-income traders make buy and sell decisions according to each
fund's goal and strategy.
2 MONEY MARKET MANAGEMENT APPROACH
<PAGE>
THE SPECTRUM OF MONEY MARKET FUNDS
The funds described in this prospectus differ primarily in the types of
securities they hold and in the tax status of the income they offer. The table
below provides an overview of the main types of securities in which each fund
may invest. The distinguishing features of each money market fund are described
in more detail on the following pages.
MONEY MARKET FUNDS AND STABILITY
Money market funds are subject to a range of federal regulations designed
to promote stability. For example, money market funds must maintain a weighted
average maturity of no more than 90 days, and generally may not invest in any
securities with a remaining maturity of more than 13 months. Keeping the
weighted average maturity this short helps funds in their pursuit of a stable $1
share price.
PRIMARY INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRIME FEDERAL TAX EXEMPT
MONEY MONEY MONEY
MARKET MARKET* MARKET**
<S> <C> <C> <C>
U.S.
Treasuries - -
- --------------------------------------------------------------------------------
U.S.
Government
Agency
instruments - -
- --------------------------------------------------------------------------------
Domestic
&foreign
bank
obligations -
- --------------------------------------------------------------------------------
Domestic
&foreign
short-term
corporate
obligations -
- --------------------------------------------------------------------------------
Foreign
governments -
- --------------------------------------------------------------------------------
Illiquid
holdings -
- --------------------------------------------------------------------------------
Repurchase
agreements -
- --------------------------------------------------------------------------------
Tax-exempt
municipal
obligations** -
- --------------------------------------------------------------------------------
</TABLE>
* Income is generally exempt from state and local income taxes
** Income is generally exempt from federal income taxes
MONEY MARKET MANAGEMENT APPROACH 3
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND TICKER SYMBOL: PPMX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN PRIME MONEY MARKET FUND)
[GRAPHIC]
GOAL
The fund's goal is to maximize current income while maintaining a high level of
liquidity.
[GRAPHIC]
INVESTMENT APPROACH
The fund looks for investments across a broad spectrum of U.S. dollar-
denominated money market securities, typically emphasizing different types of
securities at different times in order to take advantage of changing yield
differentials. The fund's investments may include obligations issued by the U.S.
Treasury, government agencies, domestic and foreign banks and corporations,
foreign governments, repurchase agreements, as well as asset-backed securities,
taxable municipal obligations, and other money market instruments. Some of these
investments may be illiquid or purchased on a when-issued or delayed delivery
basis.
[GRAPHIC]
POTENTIAL RISKS AND REWARDS
The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on pages 2 and 3.
As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security or the counterparty to a contract could default on its obligation. An
unexpected rise in interest rates could also lead to a loss in share price if
the fund is near the maximum allowable average weighted maturity at the time. To
the extent that the fund invests in foreign securities, the fund could lose
money because of foreign government actions, political instability, or lack of
adequate and accurate information. Also, the fund may have difficulty valuing
its illiquid holdings and may be unable to sell them at the time or price it
desired. While these possibilities exist, the fund's investment process and
management policies are designed to minimize the likelihood and impact of these
risks. To date, through this process, the fund's share price has never deviated
from $1.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $250 billion, including more than $13 billion using the same
strategy as the fund.
The portfolio management team is led by Robert R. Johnson, vice president, who
has been on the team and at J.P. Morgan since June of 1988, Daniel B. Mulvey,
vice president, who joined the team in January of 1995 and has been at J.P.
Morgan since 1991, and by John Donohue, vice president, who has been on the team
since joining J.P. Morgan in June of 1997. Prior to managing this fund, Mr.
Donohue was an Institutional Money Market Portfolio Manager at Goldman
Sachs & Co.
- --------------------------------------------------------------------------------
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) 0.12
Marketing (12b-1) fees None
Other expenses 0.26
- ----------------------------------------------------
TOTAL OPERATING EXPENSES 0.38
- ----------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
YOUR COST($) 4 12 21 48
- --------------------------------------------------------------------------------
</TABLE>
4 J.P. MORGAN PRIME MONEY MARKET FUND
<PAGE>
- -------------------------------------------------------------------------------
PERFORMANCE (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 yr. 5 yrs. 10 yrs.
J.P. MORGAN PRIME MONEY MARKET FUND(2) (after expenses) 5.41 4.63 5.73
- -----------------------------------------------------------------------------------------------------------------------------------
IBC'S FIRST TIER MONEY FUND AVERAGE(3) (after expenses) 5.04 4.36 5.45
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- -----------------------------------------------------------------------------------------------------------------------------------
[GRAPH]
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. MORGAN PRIME MONEY MARKET FUND(2) 7.38 9.13 8.04 6.07 3.67 2.83 3.95 5.79 5.21 5.41
- -----------------------------------------------------------------------------------------------------------------------------------
IBC'S FIRST TIER MONEY FUND AVERAGE(3) 7.08 8.87 7.82 5.71 3.37 2.70 3.75 5.48 4.85 5.04
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
PER-SHARE DATA For fiscal years ended November 30
- -----------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993(2) 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR($) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.0705 0.0877 0.0780 0.0612 0.0371 0.0281 0.0367 0.0557 0.0509 0.0524
Net realized gain (loss)
on investment ($) -- -- -- 0.0002 0.0006 0.0003 (0.0000)(4) 0.0005 0.0001 (0.0000)(4)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.0705 0.0877 0.0780 0.0614 0.0377 0.0284 0.0367 0.0562 0.0510 0.0524
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders
from:
Net investment income ($) (0.0705) (0.0877) (0.0780) (0.0612) (0.0371) (0.0281) (0.0367) (0.0557) (0.0509) (0.0524)
Net realized gain ($) -- -- -- (0.0002) (0.0006) (0.0003) -- -- (0.0005) (0.0003)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.0705) (0.0877) (0.0780) (0.0614) (0.0377) (0.0284) (0.0367) (0.0557) (0.0514) (0.0527)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ($) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 7.25 9.15 8.09 6.31 3.83 2.89 3.73 5.71 5.27 5.40
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR ($ millions) 1,898 2,156 2,356 3,059 2,700 2,563 2,004 2,153 2,155 2,318
- -----------------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.49 0.46 0.47 0.43 0.43 0.43 0.43 0.41 0.40 0.38
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 7.05 8.77 7.80 6.10 3.74 2.82 3.64 5.56 5.09 5.25
- -----------------------------------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO
DUE TO EXPENSE REIMBURSEMENT (%) -- -- -- 0.01 0.01 0.01 0.01 0.00(5) 0.00(5) --
- -----------------------------------------------------------------------------------------------------------------------------------
</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 9. 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 7/12/93. Returns reflect performance of
The Pierpont Money Market Fund, the fund's predecessor, prior to that date.
The Pierpont Money Market Fund commenced operations on 10/1/82.
(3) Consists of the IBC/Donoghue Taxable Money Market Fund Average from
inception through November 30, 1995 and IBC's First Tier Money Fund Average
thereafter.
(4) $0.0001.
(5) Less than 0.01%.
J.P. MORGAN PRIME MONEY MARKET FUND 5
<PAGE>
J.P. MORGAN FEDERAL
MONEY MARKET FUND TICKER SYMBOL: PTYXX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN FEDERAL MONEY MARKET FUND)
[GRAPHIC]
GOAL
The fund's goal is to provide current income, maintain high liquidity, and
preserve capital.
[GRAPHIC]
INVESTMENT APPROACH
The fund purchases securities that offer very high credit quality and pay
regular income that is generally free from state and local income taxes. It
invests exclusively in U.S. government agency obligations such as the Federal
Farm Credit Bank, the Tennessee Valley Authority, the Federal Home Loan Bank,
the Student Loan Marketing Association, and in obligations of the U.S. Treasury.
Some of these investments may be purchased on a when-issued or delayed delivery
basis.
[GRAPHIC]
POTENTIAL RISKS AND REWARDS
The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on pages 2 and 3.
While the fund's U.S. Treasury obligations are backed by the full faith and
credit of the Government, investors should bear in mind that any agency
obligations the fund may hold do not have this guarantee, and that in any case
government guarantees do not extend to shares of the fund itself.
Most of the fund's income is generally exempt from state and local personal
income taxes and from some corporate income taxes (although not federal income
taxes). Because of this beneficial tax status, the fund's yields are generally
lower than those of taxable money market funds when compared on a pre-tax basis.
As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security could default on its obligation. An unexpected rise in interest rates
could also lead to a loss in share price if the fund is near the maximum
allowable average weighted maturity at the time. However, the fund's investment
process and management policies are designed to minimize the likelihood and
impact of these risks. To date, through this process, the fund's share price has
never deviated from $1.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $250 billion, including more than $13 billion using the same
strategy as the fund.
The portfolio management team is led by Robert R. Johnson, vice president, who
has been on the team since the fund's inception and has been at J.P. Morgan
since 1988, Daniel B. Mulvey, vice president, who joined the team in October of
1996 and has been at J.P. Morgan since 1991, and by John Donohue, vice
president, who has been on the team since joining J.P. Morgan in June of 1997.
Prior to managing this fund, Mr. Donohue was an Institutional Money Market
Portfolio Manager at Goldman Sachs & Co.
- --------------------------------------------------------------------------------
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 0.20
Marketing (12b-1) fees None
Other expenses(2)
(after reimbursement) 0.25
- ----------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.45
- ----------------------------------------------------
</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 14 25 57
- --------------------------------------------------------------------------------
</TABLE>
6 J.P. MORGAN FEDERAL MONEY MARKET 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
<S> <C> <C> <C>
J.P. MORGAN FEDERAL MONEY MARKET FUND(3) (after expenses) 5.18 5.25 4.45
- ------------------------------------------------------------------------------------------------------------------------------------
IBC'S U.S. GOVERNMENT & AGENCY MONEY MARKET FUND AVERAGE(4) (after expenses) 4.83 4.89 4.18
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%)(%) Shows changes in returns by calendar year
- ------------------------------------------------------------------------------------------------------------------------------------
[GRAPH]
1994 1995 1996 1997
<S> <C> <C> <C> <C>
J.P. MORGAN FEDERAL MONEY MARKET FUND(3) 3.78 5.59 4.99 5.18
- ------------------------------------------------------------------------------------------------------------------------------------
IBC'S U.S. GOVERNMENT & AGENCY MONEY MARKET FUND AVERAGE(4) 3.52 5.19 4.67 4.83
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA For fiscal periods ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.0208 0.0333 0.0536 0.0489 0.0501
Net realized gain (loss)
on investment ($) 0.0002 (0.0000)(5) 0.0004 0.0006 0.0001
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.0210 0.0333 0.0540 0.0495 0.0502
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.0208) (0.0333) (0.0536) (0.0489) (0.0501)
Net realized gain ($) --- (0.0002) --- (0.0003) (0.0005)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.0208) (0.0335) (0.0536) (0.0492) (0.0506)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 2.10(6) 3.41 5.49 5.03 5.17
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD ($ thousands) 83,097 118,631 171,120 185,424 239,074
- ------------------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.48(7) 0.400 .400 0.40 0.40
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 2.53(7) 3.40 5.36 4.89 5.00
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE
TO EXPENSE REIMBURSEMENT (%) 0.26(7) 0.22 0.15 0.13 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
</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 9. 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 after reimbursement for ordinary expenses over 0.45%. The expense
table has been restated to reflect current expenses/waivers/reimbursements.
The fees and expenses in the table are expressed as a percentage of the
fund's average net assets, and assume that the current arrangements were in
effect throughout the fiscal year.
(2) Without reimbursement, other expenses and total operating expenses would
have been 0.32% and 0.52%, respectively. There is no guarantee that
reimbursement will continue beyond 2/28/99.
(3) The fund commenced operations on 1/4/93. Returns reflect performance of the
fund from 1/31/93 through 12/31/97. This data is based on historical
earnings and is not intended to indicate future performance.
(4) Consists of the IBC/Donoghue U.S. Treasury & Repo Money Market Fund Average
through 12/31/95 and IBC's U.S. Government & Agency Money Market Fund
Average thereafter.
(5) Less than $0.0001.
(6) Not annualized.
(7) Annualized.
J.P. MORGAN FEDERAL MONEY MARKET FUND 7
<PAGE>
J.P. MORGAN TAX EXEMPT
MONEY MARKET FUND TICKER SYMBOL: JPEXX
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN FUNDS
(J.P. MORGAN TAX EXEMPT MONEY MARKET FUND)
[GRAPHIC]
GOAL
The fund's goal is to provide high current income that is exempt from federal
income tax and to maintain high liquidity.
[GRAPHIC]
INVESTMENT APPROACH
The fund invests primarily in high quality municipal obligations whose income is
exempt from federal income taxes. The fund's municipal obligations must fall
into the highest short-term rating category (top two highest categories for New
York State obligations) or be of equivalent quality. The fund may also invest in
certain structured municipal obligations, and in certain securities whose income
is subject to the alternative minimum tax (AMT). In order to maintain liquidity
while being fully invested, the fund may buy securities with puts that allow the
fund to liquidate the securities on short notice. Some of the fund's securities
may be purchased on a when-issued or delayed delivery basis.
[GRAPHIC]
POTENTIAL RISKS AND REWARDS
The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on pages 2 and 3.
Most of the fund's income is exempt from federal income taxes. A small portion
may be exempt from state or local income taxes.
As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security or the counterparty to a contract could default on its obligation. An
unexpected rise in interest rates could also lead to a loss in share price if
the fund is near the maximum allowable average weighted maturity at the time.
However, the fund's investment process and management policies are designed to
minimize the likelihood and impact of these risks. To date, through this
process, the fund's share price has never deviated from $1.
PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $250 billion, including more than $13 billion using the same
strategy as the fund.
The portfolio management team is led by Daniel B. Mulvey, vice president, who
has been on the team since August of 1995 and has been at J.P. Morgan since
1991, and by Richard W. Oswald, vice president, who has been on the team since
joining J.P. Morgan in October of 1996. Prior to managing this fund, Mr. Oswald
served as Treasurer of CBS and President of its finance unit.
- --------------------------------------------------------------------------------
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) 0.18
Marketing (12b-1) fees None
Other expenses 0.28
- --------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.46
- --------------------------------------------------------------
</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 15 26 58
- --------------------------------------------------------------------------------
</TABLE>
8 J.P. MORGAN TAX EXEMPT MONEY MARKET FUND
<PAGE>
PERFORMANCE (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%) (%) Shows performance over time, for periods ended December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 yr. 5 yrs. 10 yrs.
J.P. MORGAN TAX EXEMPT MONEY MARKET FUND(2) (after expenses) 3.26 2.89 3.78
- -----------------------------------------------------------------------------------------------------------------------------------
IBC'S TAX EXEMPT MONEY MARKET FUND AVERAGE3 (after expenses) 3.09 2.72 3.65
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- -----------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. MORGAN TAX EXEMPT MONEY MARKET FUND(2) 4.93 6.11 5.58 4.16 2.71 2.04 2.50 3.52 3.12 3.26
IBC'STAX EXEMPT MONEY MARKET FUND AVERAGE(3) 4.80 5.91 5.49 4.17 2.56 1.93 2.34 3.34 2.93 3.09
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
PER-SHARE DATA For fiscal years ended August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993(2) 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR($) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.0455 0.0581 0.0550 0.0460 0.0317 0.0214 0.0212 0.0336 0.0318 0.0314
Net realized gain (loss) on
investment ($) 0.0001 0.0001 --- (0.0000)(4)0.0002 0.0001 (0.0000)(4)(0.0002)(0.0000)(4)(0.0000)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.0456 0.0582 0.0550 0.0460 0.0319 0.0215 0.0212 0.0334 0.0318 0.0314
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders
from:
Net investment income ($) (0.0455) (0.0581) (0.0550) (0.0460) (0.0317) (0.0214) (0.0212) (0.0336) (0.0318) (0.0314)
Net realized gain ($) (0.0001) (0.0001) --- --- --- (0.0002) (0.0000)(4) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.0456) (0.0582) (0.0550) (0.0460) (0.0317) (0.0216) (0.0212) (0.0336) (0.0318) (0.0314)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ($) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 4.56 5.82 5.50 4.60 3.19 2.15 2.14 3.41 3.23 3.18
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR ($ millions) 896 876 903 877 922 1,007 974 985 1,050 1,103
- -----------------------------------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS:
EXPENSES (%) 0.55 0.53 0.57 0.55 0.53 0.52 0.52 0.51 0.48 0.46
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (%) 4.54 5.79 5.51 4.60 3.16 2.14 2.10 3.35 3.17 3.13
- -----------------------------------------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO
DUE TO EXPENSE REIMBURSEMENT (%) --- --- --- 0.01 0.01 0.01 0.01 0.00(5) --- ---
- -----------------------------------------------------------------------------------------------------------------------------------
</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 9. 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 7/12/93. Returns reflect performance of
The Pierpont Tax Exempt Money Market Fund, the fund's predecessor, prior to
that date. The Pierpont Tax Exempt Money Market Fund commenced operations
on 9/12/83.
(3) The IBC Tax Exempt Money Market Fund Average is an average of all major tax
free money market fund returns.
(4) Less than $0.0001.
(5) Less than 0.01%.
J.P. MORGAN TAX EXEMPT MONEY MARKET FUND 9
<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:
- - 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 below.
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: 021-000-238
CREDIT: J.P. Morgan Funds
ACCOUNT NUMBER: 001-57-689
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.
10 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 DAYS AND NAV CALCULATIONS The funds' regular business days are the
same as those of the New York Stock Exchange. Each fund calculates its net asset
value per share (NAV) every business day at 4:00 p.m. (5:00 p.m. for Prime Money
Market Fund) eastern time.
TIMING OF ORDERS Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Purchase and redemption orders for
each fund must be received by the times indicated in the table below:
FUND CUT-OFF TIME
Prime Money Market 5:00 P.M.
Federal Money Market 2:00 P.M.
Tax Exempt Money Market 12:00 NOON
For the purchase to be effective and dividends to be earned on the same day,
immediately available funds must be received by 4:00 p.m. (5:00 p.m. for Prime
Money Market Fund) eastern time on a fund business day. 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 11
<PAGE>
- --------------------------------------------------------------------------------
TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record
when a fund receives your payment.
Redemption orders for each fund received by the respective cut-off times will be
paid in immediately available funds normally on the same day, according to
instructions on file.
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), the 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, the fund reserves the right to close out your account and
send the proceeds to the address of record.
DIVIDENDS AND DISTRIBUTIONS
Substantially all income dividends are declared daily and paid monthly. If all
of an investor's shares are redeemed during the month, accrued but unpaid
dividends are paid with the redemption proceeds. Shares of the funds earn
dividends on the business day their purchase is effective, but not on the
business day their redemption is effective.
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. The transactions
below typically create the following tax liabilities:
TRANSACTION TAX STATUS
- --------------------------------------------------------------------------------
Income dividends Ordinary income
- --------------------------------------------------------------------------------
Short-term capital gains Ordinary income
distributions
- --------------------------------------------------------------------------------
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.
12 YOUR INVESTMENT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
MASTER/FEEDER STRUCTURE
As noted earlier, each 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, its feeder fund will hold a shareholder meeting and cast
its vote proportionately, as instructed by its shareholders. Fund shareholders
are entitled to one vote per fund share.
Each fund and its master portfolio expect to maintain consistent goals, but if
they do not, the fund will withdraw from the master portfolio, receiving its
assets either in cash or securities. Each fund's trustees would then consider
whether the fund should hire its own investment adviser, invest in a different
master portfolio, or take other action.
MANAGEMENT AND ADMINISTRATION
The funds described in this prospectus and, their corresponding master
portfolios 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, as co-administrator,
provides fund officers. J.P. Morgan, as co-administrator, oversees each fund's
other service providers.
J.P. Morgan receives the following fees for investment advisory and other
services:
- --------------------------------------------------------------------------------
ADVISORY SERVICES 0.20% of the first $1 billion of
each master portfolio's average
net assets plus 0.10% over $1 billion
- --------------------------------------------------------------------------------
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% over
$7 billion
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES 0.15% of the first $2 billion of
each fund's average net assets
plus 0.10% over $2 billion
- --------------------------------------------------------------------------------
With respect to the Federal Money Market Fund, the advisor has voluntarily
agreed to reimburse the fund so that total operating expenses will not exceed
0.45% of average net assets of the fund. There is no guarantee that this
arrangement will continue beyond 2/28/99.
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 13
<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
registration numbers are:
J.P. Morgan Prime Money Market Fund. . . . . . . . . . 811-07340 and
033-54632
J.P. Morgan Federal Money Market Fund. . . . . . . . . 811-07340 and
033-54632
J.P. Morgan Tax Exempt Money Market Fund . . . . . . . 811-07340 and
033-54632
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.
JPMORGAN
- --------------------------------------------------------------------------------
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
PROSPMM-982
