PROSPECTUS
The JPM Advisor U.S. Equity Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor U.S. Equity Fund (the "Fund") seeks to provide a high total re-
turn from a portfolio of selected equity securities. It is designed for invest-
ors who want an actively managed portfolio of selected equity securities that
seeks to outperform the S&P 500 Index.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE SELECTED U.S. EQUITY PORTFOLIO (THE "PORT-
FOLIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORT-
FOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL
SERVICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE
AND IS A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a pro-
spective investor ought to know before investing and it should be retained for
future reference. Additional information about the Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon request
from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6 St.
James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor Funds, or
by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE IN-
VESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995
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TABLE OF CONTENTS
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Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke(R)............................ 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 9
Shareholder Transactions................................................... 12
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
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Exchange of Shares......................................................... 13
Dividends and Distribution................................................. 14
Net Asset Value............................................................ 14
Organization............................................................... 14
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-1
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The JPM Advisor U.S. Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who wish to participate primarily in the
U.S. equity markets. The Fund seeks to achieve its investment objective by in-
vesting all of its investable assets in The Selected U.S. Equity Portfolio, a
diversified open end management investment company having the same investment
objective as the Fund. Since the investment characteristics and experience of
the Fund will correspond directly with those of the Portfolio, the discussion
in this Prospectus focuses on the investments and investment policies of the
Portfolio. The net asset value of shares in the Fund fluctuates with changes in
the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The Port-
folio may also purchase certain privately placed securities. For further infor-
mation about these investments, see Investment Objective and Policies below.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signa-
ture") Hub and Spoke(R) financial services method. The Trustees of the Trust
believe that the Fund may achieve economies of scale over time by investing
through Hub and Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating expenses set forth below for the Fund and the Portfolio, as a percentage
of average net assets of the Fund. The Trustees of the Trust believe that the
aggregate per share expenses of the Fund and the Portfolio will be approxi-
mately equal to and may be less than the expenses that the Fund would incur if
it retained the services of an investment adviser and invested its assets di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and the Portfolio--Expenses.
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Shareholder Transaction Expenses
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
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EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
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Advisory Fees............................................................. 0.40%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.81%
----
Total Operating Expenses (after expense reimbursement).................... 1.21%
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* These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after re-
imbursement. Without such expected reimbursement, the estimated Total Operat-
ing Expenses would be equal on an annual basis to 1.30% of the estimated av-
erage net assets of the Fund. See Management of the Trust and the Portfolio--
Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
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1 Year..................................................................... $ 12
3 Years.................................................................... $ 38
5 Years.................................................................... $ 67
10 Years................................................................... $147
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The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services and Services Agreements, and
fees paid to State Street Bank and Trust Company as custodian of the Portfolio.
For a more detailed description of contractual fee arrangements, including
expense reimbursements, and of the fees and expenses included in Other
Expenses, see Management of the Trust and the Portfolio. In connection with the
above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature. Signature Broker-Dealer Services, Inc. (the Trust's
and Portfolio's Administrator and the Trust's Distributor) is a wholly owned
subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke(R)
has been approved by the shareholders of the Fund.
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In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from the
Administrator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable.
The distribution in kind may result in the Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and
Additional Investment Information and Investment Restrictions. For more
information about the Portfolio's management and expenses, see Management of
the Trust and the Portfolio. For more information about changing the investment
objective, policies and restrictions of the Fund or the Portfolio, see
Investment Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their effort to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
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The Fund's investment objective is to provide a high total return from a
portfolio of selected equity securities. Total return will consist of realized
and unrealized capital gains and losses plus income. The Fund attempts to
achieve its investment objective by investing all of its investable assets in
The Selected U.S. Equity Portfolio, a diversified open-end management
investment company having the same investment objective as the Fund. The
Portfolio invests primarily in the common stock of large and medium sized U.S.
corporations. Under certain market conditions, the Fund or the Portfolio may
not be able to achieve its investment objective.
The Fund is designed for investors who want an actively managed portfolio of
selected equity securities that seeks to outperform the S&P 500 Index.
Morgan seeks to enhance the Portfolio's total return relative to that of the
universe of large and medium sized U.S. companies, typically represented by the
S&P 500 Index, through fundamental analysis, systematic stock valuation and
disciplined portfolio construction. Based on internal fundamental research,
Morgan uses a dividend discount model to rank companies within economic sectors
according to their relative value. From the universe of securities this model
shows as undervalued, Morgan selects stocks for the Portfolio based on a
variety of criteria including the company's managerial strength, prospects for
growth and competitive position. Morgan may modestly under or over-weight
selected economic sectors against the S&P 500 Index's sector weightings to seek
to enhance the Portfolio's total return or reduce the fluctuation in its market
value relative to the Index.
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. The Portfolio does not intend to respond to short-term
market fluctuations or to acquire securities for the purpose of short-term
trading; however, it may take advantage of short-term trading opportunities
that are consistent with its objective. To the extent the Portfolio engages in
short-term trading it may realize short-term capital gains or losses and incur
increased transaction costs. See Taxes below. The estimated annual portfolio
turnover rate for the Portfolio is generally not expected to exceed 100%.
EQUITY INVESTMENTS. During ordinary market conditions, the Advisor intends to
keep the Portfolio essentially fully invested with at least 65% of the
Portfolio's net assets invested in equity securities consisting of common
stocks and other securities with equity characteristics comprised of preferred
stock, warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Portfolio's primary equity
investments are the common stock of large and medium-sized U.S. corporations
and, to a limited extent, similar securities of foreign corporations. The
common stock in which the Portfolio may invest includes the common stock of any
class or series or any similar equity interest, such as trust or limited
partnership interests. These equity investments may or may not pay dividends
and may or may not carry voting rights. The Portfolio invests in securities
listed on domestic or foreign securities exchanges and securities traded in
domestic or foreign over-the-counter markets, and may invest in certain
restricted or unlisted securities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations. However, the Portfolio does not expect to invest more than 30% of
its assets at the time of purchase in securities of foreign issuers, nor does
it expect more than 10% to be in securities of foreign issuers not listed on a
national securities exchange or not denominated or principally traded in U.S.
dollars. For further information on foreign investments and foreign currency
exchange transactions, see Risk Factors and Additional Investment Information.
The Portfolio may also invest in securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities and
money market instruments, and enter into certain hedging transactions that may
involve options on securities and securities indexes, futures contracts and
options on futures contracts. Forward foreign currency exchange contracts,
options and futures contracts are derivative instruments. For a discussion of
these investments and investment techniques, see Risk Factors and Additional
Investment Information.
4
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RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WARRANTS. The Portfolio invests in warrants, which entitle the holder to buy
common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower
than the current market price of the underlying securities, yet warrants are
subject to similar price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities.
Warrants do not entitle the holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets of
the issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase money
market instruments on a when- issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and other
Unregistered Securities below. Other repurchase agreements are considered to be
a type of money market instrument. See Risk Factors and Additional Investment
Information--Money Market Instruments.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may
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pay reasonable finders' and custodial fees in connection with a loan. In
addition, the Portfolio will consider all facts and circumstances, including
the creditworthiness of the borrowing financial institution, and the Portfolio
will not make any loans in excess of one year. The Portfolio will not lend its
securities to any officer, Trustee, Director, employee or other affiliate of
the Portfolio, the Advisor or the Distributor, unless otherwise permitted by
applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For
purposes of the Investment Company Act of 1940 (the "1940 Act"), it is
considered as a form of borrowing by the Portfolio and, therefore, is a form of
leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objectives and Policies in the
Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees of the Portfolio. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase exchange
traded and over-the-counter put and call options on equity securities or
indexes of equity securities, (b) purchase and sell futures contracts on
indexes of equity securities, and (c) purchase put and call options on futures
contracts on indexes of equity securities. Each of these instruments is a
derivative instrument, as its value derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts and buying calls, tend to increase market
exposure. Options and futures contracts may be combined with each other or with
forward contracts in order to adjust the risk and return characteristics of the
Portfolio's overall strategy in a manner deemed appropriate to the Advisor and
consistent with the Portfolio's objective and policies. Because combined
options positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses.
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The Portfolio could also experience losses if the prices of its options and
futures positions were poorly correlated with its other investments or if it
could not close out its positions because of an illiquid secondary market. In
addition, the Portfolio will incur transaction costs, including trading
commissions and option premiums, in connection with its futures and options
transactions and these transactions could significantly increase the
Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies in the Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers involves somewhat
different investment risks from those affecting securities of U.S. domestic
issuers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform
accounting, auditing and financial standards and requirements comparable to
those applicable to domestic companies. Dividends and interest paid by foreign
issuers may be subject to withholding and other foreign taxes which may
decrease the net return on foreign investments as compared to dividends and
interest paid to the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in
compliance with U.S. and foreign currency restrictions and tax laws restricting
the amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those
for securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers located
in foreign countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions issuing ADRs may not be sponsored by the issuer of the underlying
foreign securities. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer of the underlying foreign
securities. EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.
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Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign
currencies. The cost of the Portfolio's spot currency exchange transactions is
generally the difference between the bid and offer spot rate of the currency
being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward
contracts to sell a foreign currency in exchange for another foreign currency
if the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased against the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment
perspective. The Portfolio may invest in money market instruments of domestic
or foreign issuers denominated in U.S. dollars. Under normal circumstances the
Portfolio will purchase these securities to invest temporary cash balances or
to maintain liquidity to meet redemptions. However, the Portfolio may also
invest in money market instruments without limitation as a temporary defensive
measure taken in the Advisor's judgment during, or in anticipation of, adverse
market conditions. For more detailed information about these money market
investments, see Investment Objectives and Policies in the Statement of
Additional Information.
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INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
The Portfolio may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of the
Portfolio's total assets, taken at cost at the time of borrowing, or purchase
securities while borrowings exceed 5% of its total assets; or mortgage, pledge
or hypothecate any assets except in connection with any such borrowings in
amounts up to 10% of the value of the Portfolio's net assets at the time of
borrowing; (ii) purchase securities or other obligations of issuers conducting
their principal business activity in the same industry if its investments in
such industry would exceed 25% of the value of the Portfolio's total assets,
except this limitation shall not apply to investments in U.S. Government
securities; or (iii) purchase securities of any issuer if, as a result of the
purchase, more than 5% of the total assets of the Portfolio would be invested
in securities of companies with fewer than three years of operating history
(including predecessors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declaration of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's Administrator, Distributor, Services Agent, and other service providers
and the performance of the Portfolio's Advisor. Pursuant to the Declaration of
Trust for the Portfolio, the Trustees of the Portfolio (who are not the same as
the Trustees of the Trust) have the same responsibilities for the Portfolio
including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers in the Statement of Additional
Information.
ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to
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governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management of over $145 billion (of which the Advisor advises over $30
billion). Morgan provides investment advice and portfolio management services
to the Portfolio. Subject to the supervision of the Portfolio's Trustees,
Morgan makes the Portfolio's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the Portfolio's
investments. See Investment Advisor in the Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental
research, systematic stock selection and disciplined portfolio construction.
Morgan has managed portfolios of U.S. equity securities on behalf of its
clients for over forty years. The portfolio managers making investments in U.S.
equity securities work in conjunction with Morgan's domestic equity analysts,
as well as capital market, credit and economic research analysts, traders and
administrative officers. The U.S. equity analysts each cover a different
industry, monitoring a universe of 700 predominantly large and medium-sized
U.S. companies.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his business experience for
the past five years is indicated parenthetically): William B. Petersen,
Managing Director (since February, 1993, employed by Morgan since prior to 1990
as a portfolio manager of U.S. equity investments) and William M. Riegel, Jr.,
Vice President (since February, 1993, employed by Morgan since prior to 1990 as
a portfolio manager of U.S. equity investments).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.40% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"); and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent as
the respective Trustees may direct from time to time. Under the terms of the
Trust's and the Portfolio's Services Agreements with Morgan, the fees of the
Administrator are covered by Morgan's expense undertakings described under
Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other family of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
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Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The JPM Institutional Funds and The Pierpont Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio, including services
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share, keeping the books of account and providing
shareholder services to shareholders of the Fund.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included
in the expense undertaking: the services agent fee, organization expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organization expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, equal to 0.69%
of the Fund's average daily net assets. The Portfolio's Services Agreement
provides for the Portfolio to pay Morgan a fee for these services, which is
computed daily and may be paid monthly, at the following annual rate of the
Portfolio's average daily net assets: 0.10% on net assets up to $200 million,
0.05% on the next $200 million in net assets and 0.03% on net assets
thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered. For the Fund and the Portfolio, the Trustees regularly
review amounts paid to and accounted for by Morgan pursuant to these
agreements. Under the agreements, Morgan may delegate one or more of its
responsibilities to other entities, including SBDS, at Morgan's expense. See
Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
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EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
May 31, 1995 to the extent necessary to maintain the Fund's total operating
expenses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 1.21% of the Fund's average daily net assets. This limit on certain
expenses does not cover extraordinary increases in these expenses during the
period and no longer applies in the event of a precipitous decline in assets
due to unforeseen circumstances. There is no assurance that Morgan will
continue this waiver beyond the specified period, except as required by the
following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million for
any fiscal year.
SHAREHOLDER TRANSACTION
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions
relating to a Fund account from Morgan as agent for the customer. All purchase
orders must be accepted by the Fund's Distributor. Investors must be customers
of Morgan or an eligible institution which is a customer of Morgan (an
"Eligible Institution"). Investors may also be employer-sponsored retirement
plans that have designated the Fund as an investment option for the plans.
Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Fund
reserves the right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
If the Fund receives a purchase order prior to 4:00 P.M. New York time on any
business day, the purchase of Fund shares is effective and is made at the net
asset value determined that day, and the purchaser generally becomes a holder
of record on the next business day upon the Fund's receipt of payment. If the
Fund receives a purchase order after 4:00 P.M. New York time, the purchase is
effective and is made at the net asset value determined on the next business
day, and the purchaser becomes a holder of record on the following business day
upon the Fund's receipt of payment.
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ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited on the next business day in immediately available funds to
the shareholder's account at Morgan or at his or her Eligible Institution or,
in the case of certain Morgan customers, are mailed by check or wire
transferred in accordance with the customer's instructions and, subject to
Further Redemption Information below, in any event are paid within seven days.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund,
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Advisor Funds. See
also Additional Information below for an explanation of the telephone exchange
policy of The JPM Advisor Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange
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privilege at any time. For investors in certain states, state securities laws
may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTION
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid twice a year. The Fund may also declare an
additional dividend of net investment income in a given year to the extent
necessary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and
distributions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid for the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust". The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration
of Trust. The Trustees will call a meeting of shareholders to
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vote on removal of a Trustee upon the written request of the record holders of
ten percent of Trust shares and will assist shareholders in communicating with
each other as prescribed in Section 16(c) of the 1940 Act. For further
organization information, including certain shareholder rights, see Description
of Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or local taxes.
See Taxes in the Statement of Additional Information. Annual statements as to
the current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio limits its investments so that at the close
of each quarter of its taxable year (a) no more than 25% of its total assets
are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. The Fund expects a portion of the
distributions of this type to corporate shareholders to be eligible for the
dividends-received deduction.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares. Long-
term capital gains distributions to corporate shareholders are not eligible for
the dividends-received deduction.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder,
will be taxable as described above.
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Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of
operations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all
recurring fees. This method of calculating total return is required by
regulations of the Securities and Exchange Commission. Total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling the Fund's Distributor at (800) 847-9487.
16
<PAGE>
APPENDIX
The Portfolio may (a) purchase exchange traded and over-the-counter put and
call options on equity securities or indexes of equity securities, (b) purchase
and sell futures contracts on indexes of equity securities and (c) purchase put
and call options on futures contracts on indexes of equity securities. Each of
these instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
OPTIONS ON INDEXES. The Portfolio may purchase put and call options on any
securities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing index options, is subject to the risk that the
value of its portfolio securities may not change as much as an index because
the Portfolio's investments generally will not match the composition of an
index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an over-the-counter option, it will be
relying on its counterparty to perform its obligations, and the Portfolio may
incur additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a
A-1
<PAGE>
futures contract, it agrees to sell a specified quantity of the underlying
instrument at a specified future date or to receive a cash payment based on the
value of a securities index. The price at which the purchase and sale will take
place is fixed when the Portfolio enters into the contract. Futures can be held
until their delivery dates or the position can be (and normally is) closed out
before then. There is no assurance, however, that a liquid market will exist
when the Portfolio wishes to close out a particular position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-2
<PAGE>
THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS403
The
JPM Advisor
U.S. Equity
Fund
PROSPECTUS
March 31, 1995
<PAGE>
PROSPECTUS
The JPM Advisor U.S. Small Cap Equity Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor U.S. Small Cap Equity Fund (the "Fund") seeks to provide a high
total return from a portfolio of equity securities of small companies. It is
designed for investors who are willing to assume the somewhat higher risk of
investing in small companies in order to seek a higher total return over time
than might be expected from a portfolio of stocks of large companies.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE U.S. SMALL COMPANY PORTFOLIO (THE "PORTFO-
LIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAV-
ING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFO-
LIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERV-
ICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE AND IS
A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL INFOR-
MATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a pro-
spective investor ought to know before investing and it should be retained for
future reference. Additional information about the Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE IN-
VESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke(R)............................ 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 9
Shareholder Transactions................................................... 12
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Exchange of Shares......................................................... 13
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 14
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-1
</TABLE>
<PAGE>
The JPM Advisor U.S. Small Cap Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who wish to invest in a portfolio of equity
securities of small companies. The Fund seeks to achieve its investment objec-
tive by investing all of its investable assets in The U.S. Small Company Port-
folio, a diversified open-end management investment company having the same in-
vestment objective as the Fund. Since the investment characteristics and expe-
rience of the Fund will correspond directly with those of the Portfolio, the
discussion in this Prospectus focuses on the investments and investment poli-
cies of the Portfolio. The net asset value of shares in the Fund fluctuates
with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The Port-
folio may also purchase certain privately placed securities. In view of the
capitalization of the companies in which the Portfolio invests, the risks of
investment in the Fund and the volatility of the value of its shares may be
greater than the general equity markets. For further information about these
investments, see Investment Objective and Policies below.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signa-
ture") Hub and Spoke (R) financial services method. The Trustees of the Trust
believe that the Fund may achieve economies of scale over time by investing
through Hub and Spoke (R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating expenses set forth below for the Fund and the Portfolio, as a percentage
of average net assets of the Fund. The Trustees of the Trust believe that the
aggregate per share expenses of the Fund and the Portfolio will be approxi-
mately equal to and may be less than the expenses that the Fund would incur if
it retained the services of an investment adviser and invested its assets di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and the Portfolio--Expenses.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.60%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.70%
----
Total Operating Expenses (after expense reimbursement).................... 1.30%
</TABLE>
- -------
* These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after any
applicable expense reimbursement. Without such expected reimbursement, the
estimated Total Operating Expenses would be equal on an annual basis to 1.41%
of the estimated average daily net assets of the Fund. See Management of the
Trust and the Portfolio--Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year..................................................................... $ 13
3 Years.................................................................... $ 42
5 Years.................................................................... $ 73
10 Years................................................................... $160
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services and Services Agreements, and
fees paid to State Street Bank and Trust Company as custodian of the Portfolio.
For a more detailed description of contractual fee arrangements, including
expense reimbursements, and of the fees and expenses included in Other
Expenses, see Management of the Trust and the Portfolio. In connection with the
above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature. Signature Broker-Dealer Services, Inc. (the Trust's
and Portfolio's Administrator and the Trust's Distributor) is a wholly owned
subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke(R)
has been approved by the shareholders of the Fund.
2
<PAGE>
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from the
Administrator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable.
The distribution in kind may result in the Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and
Additional Investment Information and Investment Restrictions. For more
information about the Portfolio's management and expenses, see Management of
the Trust and the Portfolio. For more information about changing the investment
objective, policies and restrictions of the Fund or the Portfolio, see
Investment Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
3
<PAGE>
The Fund's investment objective is to provide a high total return from a
portfolio of equity securities of small companies. Total return will consist of
realized and unrealized capital gains and losses plus income. The Fund attempts
to achieve its investment objective by investing all of its investable assets
in The U.S. Small Company Portfolio, a diversified open-end management
investment company having the same investment objective as the Fund. The
Portfolio invests primarily in the common stock of small U.S. companies. The
small company holdings of the Portfolio are primarily companies included in the
Russell 2500 Index. Under certain market conditions, the Fund or the Portfolio
may not be able to achieve its investment objective.
The Fund is designed for investors who are willing to assume the somewhat
higher risk of investing in small companies in order to seek a higher return
over time than might be expected from a portfolio of stocks of large companies.
The Fund may also serve as an efficient vehicle to diversify an existing
portfolio by adding the equities of smaller U.S. companies.
Morgan seeks to enhance the Portfolio's total return relative to that of the
U.S. small company universe. To do so, Morgan uses fundamental research,
systematic stock valuation and a disciplined portfolio construction process.
Morgan continually screens the universe of small capitalization companies to
identify for further analysis those companies which exhibit favorable
characteristics such as significant and predictable cash flow and high quality
management. Based on fundamental research and using a dividend discount model,
Morgan ranks these companies within economic sectors according to their
relative value. Morgan then selects for purchase the most attractive companies
within each economic sector.
Morgan uses a disciplined portfolio construction process to seek to enhance
returns and reduce volatility in the market value of the Portfolio relative to
that of the U.S. small company universe. Morgan believes that under normal
market conditions, the Portfolio will have sector weightings comparable to that
of the U.S. small company universe, although it may moderately under- or over-
weight selected economic sectors. In addition, as a company moves out of the
market capitalization range of the small company universe, it generally becomes
a candidate for sale by the Portfolio.
The Portfolio intends to manage its investments actively in pursuit of its
investment objective. Since the Portfolio has a long-term investment
perspective, it does not intend to respond to short-term market fluctuations or
to acquire securities for the purpose of short-term trading; however, it may
take advantage of short-term trading opportunities that are consistent with its
objective. To the extent the Portfolio engages in short-term trading, it may
realize short-term capital gains or losses and incur increased transaction
costs. See Taxes below. The estimated annual portfolio turnover rate for the
Portfolio is generally not expected to exceed 100%.
EQUITY INVESTMENTS. During ordinary market conditions, the Advisor intends to
keep the Portfolio essentially fully invested with at least 65% of the
Portfolio's net assets invested in equity securities consisting of common
stocks and other securities with equity characteristics comprised of preferred
stock, warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Portfolio's primary equity
investments are the common stock of small U.S. companies and, to a limited
extent, similar securities of foreign corporations. The common stock in which
the Portfolio may invest includes the common stock of any class or series or
any similar equity interest, such as trust or limited partnership interests.
The small company holdings of the Portfolio are primarily companies included in
the Russell 2500 Index. These equity investments may or may not pay dividends
and may or may not carry voting rights. The Portfolio invests in securities
listed on domestic or foreign securities exchanges and securities traded in
domestic or foreign over-the-counter markets, and may invest in certain
restricted or unlisted securities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations. However, the Portfolio does not expect to invest more than 30% of
its assets at the time of purchase in securities of foreign issuers, nor does
it expect more than 10% to be in securities of foreign issuers not listed on a
national securities exchange or not denominated or principally traded in U.S.
dollars. For further information on foreign investments and foreign currency
exchange transactions, see Risk Factors and Additional Investment Information.
4
<PAGE>
The Portfolio may also invest in securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities and
money market instruments, and enter into certain hedging transactions that may
involve options on securities and securities indexes, futures contracts and
options on futures contracts. Forward foreign currency exchange contracts,
options and futures contracts are derivative instruments. For a discussion of
these investments and investment techniques, see Risk Factors and Additional
Investment Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WARRANTS. The Portfolio invests in warrants, which entitle the holder to buy
common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower
than the current market price of the underlying securities, yet warrants are
subject to similar price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities.
Warrants do not entitle the holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets of
the issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase money
market instruments on a when-issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and other
Unregistered Securities below. Other repurchase agreements are considered to be
a type of money market instrument. See Risk Factors and Additional Investment
Information--Money Market Instruments.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans
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are secured continuously by cash or equivalent collateral or by a letter of
credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For
purposes of the Investment Company Act of 1940 (the "1940 Act"), it is
considered as a form of borrowing by the Portfolio and, therefore, is a form of
leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objectives and Policies in the
Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees of the Portfolio. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase exchange
traded and over-the-counter put and call options on equity securities or
indexes of equity securities, (b) purchase and sell futures contracts on
indexes of equity securities, and (c) purchase put and call options on futures
contracts on indexes of equity securities. Each of these instruments is a
derivative instrument, as its value derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts and buying calls, tend to increase market
exposure. Options and futures contracts may be combined with each other or with
forward contracts in order to adjust the risk and return characteristics of the
Portfolio's overall strategy in a manner deemed appropriate to the Advisor and
consistent with the Portfolio's objective and policies. Because combined
options positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase
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the Portfolio's return. While the use of these instruments by the Portfolio may
reduce certain risks associated with own-ing its portfolio securities, these
techniques themselves entail certain other risks. If the Advisor applies a
strategy at an inappropriate time or judges market conditions or trends
incorrectly, options and futures strategies may lower the Portfolio's return.
Certain strategies limit the Portfolio's possibilities to realize gains as well
as limiting its exposure to losses. The Portfolio could also experience losses
if the prices of its options and futures positions were poorly correlated with
its other investment, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur transaction
costs, including trading commissions and option premiums, in connection with
its futures and options transactions and these transactions could significantly
increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies in the Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers involves somewhat
different investment risks from those affecting securities of U.S. domestic
issuers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform
accounting, auditing and financial standards and requirements comparable to
those applicable to domestic companies. Dividends and interest paid by foreign
issuers may be subject to withholding and other foreign taxes which may
decrease the net return on foreign investments as compared to dividends and
interest paid to the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in
compliance with U.S. and foreign currency restrictions and tax laws restricting
the amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those
for securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers located
in foreign countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions
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issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangements with the issuer of the underlying foreign securities.
EDRs are receipts issued by a European financial institution evidencing a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets, and EDRs, in bearer form, are designed for use
in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign
currencies. The cost of the Portfolio's spot currency exchange transactions is
generally the difference between the bid and offer spot rate of the currency
being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward
contracts to sell a foreign currency in exchange for another foreign currency
if the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased against the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment
perspective. The
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Portfolio may invest in money market instruments of domestic or foreign issuers
denominated in U.S. dollars. Under normal circumstances the Portfolio will
purchase these securities to invest temporary cash balances or to maintain
liquidity to meet redemptions. However, the Portfolio may also invest in money
market instruments without limitation as a temporary defensive measure taken in
the Advisor's judgment during, or in anticipation of, adverse market
conditions. For more detailed information about these money market investments,
see Investment Objectives and Policies in the Statement of Additional
Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
The Portfolio may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of the
Portfolio's total assets, taken at cost at the time of borrowing, or purchase
securities while borrowings exceed 5% of its total assets; or mortgage, pledge
or hypothecate any assets except in connection with any such borrowings in
amounts up to 10% of the value of the Portfolio's net assets at the time of
borrowing; (ii) purchase securities or other obligations of issuers conducting
their principal business activity in the same industry if its investments in
such industry would exceed 25% of the value of the Portfolio's total assets,
except this limitation shall not apply to investments in U.S. Government
securities; or (iii) purchase securities of any issuer if, as a result of the
purchase, more than 5% of the total assets of the Portfolio would be invested
in securities of companies with fewer than three years of operating history
(including predecessors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's Administrator, Distributor, Services Agent, and other service providers
and the performance of the Portfolio's Advisor. Pursuant to the Declaration of
Trust for the Portfolio, the Trustees of the Portfolio (who are not the same as
the Trustees of the Trust) have the same responsibilities for the Portfolio
including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers in the Statement of Additional
Information.
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ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with
combined assets under management of over $145 billion (of which the Advisor
advises over $30 billion). Morgan provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental
research, systematic stock selection and disciplined portfolio construction.
Morgan has invested in equity securities of small U.S. companies on behalf of
its clients since the 1960s. The portfolio managers making investments in small
U.S. companies work in conjunction with Morgan's domestic equity analysts, as
well as capital market, credit and economic research analysts, traders and
administrative officers. The U.S. equity analysts each cover a different
industry, following both the small and large companies in their respective
industries. They currently monitor a universe of over 300 small companies.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his business experience for
the past five years is indicated parenthetically): James B. Otness, Managing
Director (since February, 1993, employed by Morgan since prior to 1990 as a
portfolio manager of equity securities of small and medium sized U.S.
companies) and Fred W. Kittler, Vice President (since February, 1993, employed
by Morgan since prior to 1990 as a portfolio manager of small and medium sized
U.S. companies).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.60% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"); and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent as
the respective Trustees may direct from time to time. Under the terms of the
Trust's and the Portfolio's Services Agreements with Morgan, the fees of the
Administrator are covered by Morgan's expense undertakings described under
Services Agent below.
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Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other family of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The JPM Institutional Funds and The Pierpont Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio including services
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share, keeping the books of account and providing
shareholder services to shareholders of the Fund.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included
in the expense undertaking: the services agent fee, organization expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organization expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, equal to 0.69%
of the Fund's average daily net assets. The Portfolio's Services Agreement
provides for the Portfolio to pay Morgan a fee for these services, which is
computed daily and may be paid monthly, at the following annual rate of the
Portfolio's average daily net assets: 0.10% on net assets up to $200 million,
0.05% on the next $200 million in net assets and 0.03% on net assets
thereafter.
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As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered. For the Fund and its Portfolio, the Trustees regularly
review amounts paid to and accounted for by Morgan pursuant to these
agreements. Under the agreements, Morgan may delegate one or more of its
responsibilities to other entities, including SBDS, at Morgan's expense. See
Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
May 31, 1995 to the extent necessary to maintain the Fund's total operating
expenses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 1.30% of the Fund's average daily net assets. This limit on certain
expenses does not cover extraordinary increases in these expenses during the
period and no longer applies in the event of a precipitous decline in assets
due to unforeseen circumstances. There is no assurance that Morgan will
continue this waiver beyond the specified period, except as required by the
following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million for
any fiscal year.
SHAREHOLDER TRANSACTIONS
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions
relating to a Fund account from Morgan as agent for the customer. All purchase
orders must be accepted by the Fund's Distributor. Investors must be customers
of Morgan or an eligible institution which is a customer of Morgan (an
"Eligible Institution"). Investors may also be employer-sponsored retirement
plans that have designated the Fund as an investment option for the plans.
Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Fund
reserves the right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
If the Fund receives a purchase order prior to 4:00 P.M. New York time on any
business day, the purchase of Fund shares is effective and is made at the net
asset value determined
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that day and the purchaser generally becomes a holder of record on the next
business day upon the Fund's receipt of payment. If the Fund receives a
purchase order after 4:00 P.M. New York time, the purchase is effective and is
made at the net asset value determined on the next business day, and the
purchaser becomes a holder of record on the following business day upon the
Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited the next business day in immediately available funds to the
shareholder's account at Morgan or at his or her Eligible Institution or, in
the case of certain Morgan customers, are mailed by check or wire transferred
in accordance with the customer's instructions and, subject to Further
Redemption Information below, in any event are paid within seven days.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Advisor Funds. See
also Additional Information below for an explanation of the telephone exchange
policy of The JPM Advisor Funds.
13
<PAGE>
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid twice a year. The Fund may also declare an
additional dividend of net investment income in a given year to the extent
necessary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and
distributions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust". The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares, have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to
14
<PAGE>
hold meetings of shareholders annually. The Trustees may call meetings of
shareholders for action by shareholder vote as may be required by either the
1940 Act or the Declaration of Trust. The Trustees will call a meeting of
shareholders to vote on removal of a Trustee upon the written request of the
record holders of ten percent of Trust shares and will assist shareholders in
communicating with each other as prescribed in Section 16(c) of the 1940 Act.
For further organization information, including certain shareholder rights, see
Description of Shares in the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or local taxes.
See Taxes in the Statement of Additional Information. Annual statements as to
the current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio limits its investments so that at the close
of each quarter of its taxable year (a) no more than 25% of its total assets
are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. The Fund expects a portion of the
distributions of this type to corporate shareholders of the Fund to be eligible
for the dividends-received deduction.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares. Long-
term capital gains distributions to corporate shareholders are not eligible for
the dividends-received deduction.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of the Fund's shares held by a shareholder by
the same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder,
will be taxable as described above.
15
<PAGE>
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of
operations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all
recurring fees. This method of calculating total return is required by
regulations of the Securities and Exchange Commission. Total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling the Fund's Distributor at (800) 847-9487.
16
<PAGE>
APPENDIX
The Portfolio may (a) purchase exchange traded and over-the-counter put and
call options on equity securities or indexes of equity securities, (b) purchase
and sell futures contracts on indexes of equity securities and (c) purchase put
and call options on futures contracts on indexes of equity securities. Each of
these instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
OPTIONS ON INDEXES. The Portfolio may purchase put and call options on any
securities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing index options, is subject to the risk that the
value of its portfolio securities may not change as much as an index because
the Portfolio's investments generally will not match the composition of an
index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an over-the-counter option, it will be
relying on its counterparty to perform its obligations, and the Portfolio may
incur additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a futures contract, it agrees to sell a specified quantity of
the underlying instrument at a specified future date or to receive a
A-1
<PAGE>
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Futures can be held until their delivery dates or the position can be
(and normally is) closed out before then. There is no assurance, however, that
a liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-2
<PAGE>
THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS404
The
JPM Advisor
U.S. Small
Cap Equity
Fund
PROSPECTUS
March 31, 1995
<PAGE>
PROSPECTUS
The JPM Advisor U.S. Fixed Income Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor U.S. Fixed Income Fund (the "Fund") seeks to provide a high
total return consistent with moderate risk of capital and maintenance of
liquidity. It is designed for investors who seek a total return over time that
is higher than that generally available from a portfolio of short-term
obligations while recognizing the greater price fluctuation of longer term
instruments.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE U.S. FIXED INCOME PORTFOLIO (THE "PORTFO-
LIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAV-
ING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFO-
LIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERV-
ICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE AND IS
A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL INFOR-
MATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE IN-
VESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke(R)............................ 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 6
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 12
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 16
Additional Information..................................................... 16
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-1
</TABLE>
<PAGE>
The JPM Advisor U.S. Fixed Income Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors seeking a higher total return over time than
that generally available from a portfolio of short-term obligations in exchange
for some risk of capital. The Fund seeks to achieve its investment objective by
investing all of its investable assets in The U.S. Fixed Income Portfolio, a
diversified open-end management investment company having the same investment
objective as the Fund. Since the investment characteristics and experience of
the Fund will correspond directly with those of the Portfolio, the discussion
in this Prospectus focuses on the investments and investment policies of the
Portfolio. The net asset value of shares in the Fund fluctuates with changes in
the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The
Portfolio may also purchase certain privately placed securities. For further
information about these investments, see Investment Objective and Policies
below.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s
("Signature") Hub and Spoke(R) financial services method. The Trustees of the
Trust believe that the Fund may achieve economies of scale over time by
investing through Hub and Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the
operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average net assets of the Fund. The Trustees of the Trust believe
that the aggregate per share expenses of the Fund and the Portfolio will be
approximately equal to and may be less than the expenses that the Fund would
incur if it retained the services of an investment adviser and invested its
assets directly in portfolio securities. Fund and Portfolio expenses are
discussed below under the headings Management of the Trust and the Portfolio--
Expenses.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.30%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.60%
----
Total Operating Expenses (after expense reimbursement).................... 0.90%
</TABLE>
* These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after any
applicable expense reimbursement. Without such expected reimbursement, the es-
timated Total Operating Expenses would be equal on an annual basis to 1.03% of
the estimated average daily net assets of the Fund. See Management of the Trust
and the Portfolio--Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year.................................................................... $ 9
3 Years................................................................... $ 29
5 Years................................................................... $ 51
10 Years.................................................................. $113
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services and Services Agreements, and
fees paid to State Street Bank and Trust Company as custodian of the Portfolio.
For a more detailed description of contractual fee arrangements, including ex-
pense reimbursements, and of the fees and expenses included in Other Expenses,
see Management of the Trust and the Portfolio. In connection with the above ex-
ample, please note that $1,000 is less than the Fund's minimum investment re-
quirement and that there are no redemption or exchange fees of any kind. See
Purchase of Shares and Redemption of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS
INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRE-
SENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature. Signature Broker-Dealer Services, Inc. (the Trust's
and Portfolio's Administrator and the Trust's Distributor) is a wholly owned
subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or Port-
folio may be changed only with the approval of the holders of the outstanding
shares of the Fund and the Portfolio. The use of Hub and Spoke(R) has been ap-
proved by the shareholders of the Fund.
2
<PAGE>
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concern-
ing other holders of interests in the Portfolio is available from the Adminis-
trator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution) from
the Portfolio which may or may not be readily marketable. The distribution in
kind may result in the Fund having a less diversified portfolio of investments
or adversely affect the Fund's liquidity, and the Fund could incur brokerage,
tax or other charges in converting the securities to cash. Notwithstanding the
above, there are other means for meeting shareholder redemption requests, such
as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and Addi-
tional Investment Information and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
the Portfolio. For more information about changing the investment objective,
policies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return consistent
with moderate risk of capital and maintenance of liquidity. Total return will
consist of income plus realized and unrealized capital gains and losses. Al-
though the net asset value of the Fund will fluctuate, the Fund attempts to
preserve the value of its investments to the extent consis-
3
<PAGE>
tent with its objective. The Fund attempts to achieve its objective by invest-
ing all of its investable assets in The U.S. Fixed Income Portfolio, a diversi-
fied open-end management investment company having the same investment objec-
tive as the Fund. Under certain market conditions, the Fund or the Portfolio
may not be able to achieve its investment objective.
The Fund is designed for investors who seek a total return over time that is
higher than that generally available from a portfolio of shorter-term obliga-
tions while recognizing the greater price fluctuation of longer-term instru-
ments. It may also be a convenient way to add fixed income exposure to diver-
sify an existing portfolio.
Morgan actively manages the Portfolio's duration, the allocation of securities
across market sectors, and the selection of specific securities within sectors.
Based on fundamental, economic and capital markets research, Morgan adjusts the
duration of the Portfolio in light of market conditions and Morgan's interest
rate outlook. For example, if interest rates are expected to fall, the duration
may be lengthened to take advantage of the expected associated increase in bond
prices. Morgan also actively allocates the Portfolio's assets among the broad
sectors of the fixed income market including, but not limited to, U.S. Govern-
ment and agency securities, corporate securities, private placements, asset-
backed and mortgage-related securities. Specific securities which Morgan be-
lieves are undervalued are selected for purchase within the sectors using ad-
vanced quantitative tools, analysis of credit risk, the expertise of a dedi-
cated trading desk, and the judgment of fixed income portfolio managers and
analysts. Under normal circumstances, Morgan intends to keep the Portfolio es-
sentially fully invested with at least 65% of the Portfolio's assets invested
in fixed income securities.
Duration is a measure of the weighted average maturity of the bonds held in the
Portfolio and can be used as a measure of the sensitivity of the Portfolio's
market value to changes in interest rates. Under normal market conditions the
Portfolio's duration will range between one year shorter and one year longer
than the duration of the U.S. investment grade fixed income universe, as repre-
sented by Salomon Brothers Broad Investment Grade Bond Index, the Portfolio's
benchmark. Currently, the benchmark's duration is approximately 4.5 years. The
maturities of the individual securities in the Portfolio may vary widely, how-
ever.
The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. Portfolio transactions are undertaken principally to accom-
plish the Portfolio's objective in relation to expected movements in the gen-
eral level of interest rates, but the Portfolio may also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may realize short-term capital gains or losses and incur
increased transaction costs. See Taxes below. The estimated annual portfolio
turnover rate for the Portfolio is generally not expected to exceed 300%.
CORPORATE BONDS. The Portfolio may invest in a broad range of debt securities
of domestic and foreign issuers. These include debt securities of various types
and maturities, e.g., debentures, notes, mortgage securities, equipment trust
certificates and other collateralized securities and zero coupon securities.
Collateralized securities are backed by a pool of assets such as loans or
receivables which generate cash flow to cover the payments due on the
securities. Collateralized securities are subject to certain risks, including a
decline in the value of the collateral backing the security, failure of the
collateral to generate the anticipated cash flow or in certain cases more rapid
prepayment because of events affecting the collateral, such as accelerated
prepayment of mortgages or other loans backing these securities or destruction
of equipment subject to equipment trust certificates. In the event of any such
prepayment the Portfolio will be required to reinvest the proceeds of
prepayments at interest rates prevailing at the time of reinvestment, which may
be lower. In addition, the value of zero coupon securities which do not pay
interest is more volatile than that of interest bearing debt securities with
the same maturity. The Portfolio does not intend to invest in common stock but
may invest to a limited extent in convertible debt or preferred stock. The
Portfolio does not expect to invest more than 25% of its assets in securities
of foreign issuers. If the Portfolio invests in non-U.S. dollar denominated
securities, it hedges the foreign currency exposure into the U.S. dollar. See
Risk Factors and Additional Investment Information for further information on
foreign investments and convertible securities.
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<PAGE>
GOVERNMENT OBLIGATIONS. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of
the United States. These securities include Treasury securities, obligations of
the Government National Mortgage Association ("GNMA Certificates"), the Farmers
Home Administration and the Export Import Bank. GNMA Certificates are mortgage-
backed securities which evidence an undivided interest in mortgage pools. These
securities are subject to more rapid repayment than their stated maturity would
indicate because prepayments of principal on mortgages in the pool are passed
through to the holder of the securities. During periods of declining interest
rates, prepayments of mortgages in the pool can be expected to increase. The
pass-through of these prepayments would have the effect of reducing the
Portfolio's positions in these securities and requiring the Portfolio to
reinvest the prepayments at interest rates prevailing at the time of
reinvestment. The Portfolio may also invest in obligations issued or guaranteed
by U.S. Government agencies or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment; some
examples of agencies or instrumentalities issuing these obligations are the
Federal Farm Credit System, the Federal Home Loan Banks and the Federal
National Mortgage Association. Although these governmental issuers are
responsible for payments on their obligations, they do not guarantee their
market value. The Portfolio may also invest in municipal obligations which may
be general obligations of the issuer or payable only from specific revenue
sources. However, the Portfolio will invest only in municipal obligations that
have been issued on a taxable basis or have an attractive yield excluding tax
considerations. In addition, the Portfolio may invest in debt securities of
foreign governments and governmental entities. See Risk Factors and Additional
Investment Information for further information on foreign investments.
MONEY MARKET INSTRUMENTS. The Advisor may purchase money market instruments as
part of its management of the Portfolio's duration, to invest temporary cash
balances or to maintain liquidity to meet withdrawals. However, the Portfolio
may also invest in money market instruments without limitation as a temporary
defensive measure taken in the Advisor's judgment during, or in anticipation
of, adverse market conditions. The money market investments permitted for the
Portfolio include obligations of the U.S. Government and its agencies and
instrumentalities, other debt securities, commercial paper, bank obligations
and repurchase agreements. For more detailed information about these money
market investments, see Investment Objectives and Policies in the Statement of
Additional Information.
QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least 65% of its total assets will consist of securities that
are rated at least A by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Corporation ("Standard & Poor's") or that are unrated and in Morgan's
opinion are of comparable quality. In the case of 30% of the Portfolio's
investments, the Portfolio may purchase debt securities that are rated Baa or
better by Moody's or BBB or better by Standard & Poor's or are unrated and in
Morgan's opinion are of comparable quality. The remaining 5% of the Portfolio's
assets may be invested in debt securities that are rated Ba or better by
Moody's or BB or better by Standard & Poor's or are unrated and in Morgan's
opinion are of comparable quality. Securities rated Baa by Moody's or BBB by
Standard & Poor's are considered investment grade, but have some speculative
characteristics. Securities rated Ba by Moody's or BB by Standard & Poor's are
below investment grade and considered to be speculative with regard to payment
of interest and principal. These standards must be satisfied at the time an
investment is made. If the quality of the investment later declines, the
Portfolio may continue to hold the investment. See Appendix A in the Statement
of Additional Information for more detailed information on these ratings.
The Portfolio may also purchase securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its port-
folio securities, purchase certain privately placed securities and enter into
certain hedging transactions that may involve options on securities and securi-
ties indexes, futures contracts and options on futures contracts. Forward for-
eign currency exchange contracts, options and futures contracts are derivative
instruments. For a discussion of these investments and investment techniques,
see Risk Factors and Additional Investment Information.
5
<PAGE>
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement, a when-issued security
may be valued at less than its purchase price. The Portfolio maintains with the
Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to these commitments. When entering into a when-issued or
delayed delivery transaction, the Portfolio will rely on the other party to
consummate the transaction; if the other party fails to do so, the Portfolio
may be disadvantaged. It is the current policy of the Portfolio not to enter
into when-issued commitments exceeding in the aggregate 15% of the market value
of the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and other
Unregistered Securities below. Other repurchase agreements are considered to be
a type of money market instrument. See Money Market Instruments above.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For
purposes of the Investment Company Act of 1940 (the "1940 Act"), it is
considered as a form of borrowing by the Portfolio and, therefore, is a form of
leverage. Leverage
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<PAGE>
may cause any gains or losses of the Portfolio to be magnified. For more infor-
mation, see Investment Objectives and Policies in the Statement of Additional
Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the 1933 Act. These securities may be deter-
mined to be liquid in accordance with guidelines established by the Advisor and
approved by the Trustees of the Portfolio. The Trustees will monitor the Advi-
sor's implementation of these guidelines on a periodic basis.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic
companies. Interest paid by foreign issuers may be subject to withholding and
other foreign taxes which may decrease the net return on foreign investments as
compared to interest paid to the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, nation-
alization, limitation on the removal of funds or assets, or imposition of (or
change in) exchange control or tax regulations in those foreign countries. In
addition, changes in government administrations or economic or monetary poli-
cies in the United States or abroad could result in appreciation or deprecia-
tion of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign issu-
er. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected in foreign bond markets
has increased in recent years, in most cases it remains appreciably below that
of domestic markets. Accordingly, the Portfolio's foreign investments may be
less liquid and their prices may be more volatile than comparable investments
in securities of U.S. issuers. Moreover, the settlement periods for foreign se-
curities, which are often longer than those for securities of U.S. issuers, may
affect portfolio liquidity. In addition, there is generally less government su-
pervision and regulation of brokers, financial institutions and issuers located
in foreign countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they rep-
resent. ADRs are receipts typically issued by a U.S. bank or trust company evi-
dencing ownership of the underlying foreign securities. Certain such institu-
tions issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may
7
<PAGE>
not provide the same shareholder information that a sponsored depository is re-
quired to provide under its contractual arrangements with the issuer of the un-
derlying foreign securities. EDRs are receipts issued by a European financial
institution evidencing a similar arrangement. Generally, ADRs, in registered
form, are designed for use in the U.S. securities markets, and EDRs, in bearer
form, are designed for use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign curren-
cies, the value of its assets as measured in U.S. dollars may be affected fa-
vorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange Trans-
actions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest in currencies other than the U.S. dollar, the
Portfolio may enter from time to time into foreign currency exchange
transactions. The Portfolio either enters into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or uses forward contracts to purchase or sell foreign currencies. The
cost of the Portfolio's spot currency exchange transactions is generally the
difference between the bid and offer spot rate of the currency being purchased
or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large commer-
cial banks) and their customers. A forward foreign currency exchange contract
generally has no deposit requirement and is traded at a net price without com-
mission. The Portfolio will not enter into forward contracts for speculative
purposes. Neither spot transactions nor forward foreign currency exchange con-
tracts eliminate fluctuations in the prices of the Portfolio's securities or in
foreign exchange rates, or prevent loss if the prices of these securities
should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or anticipated
securities transactions. The Portfolio may also enter into forward contracts to
hedge against a change in foreign currency exchange rates that would cause a
decline in the value of existing investments denominated or principally traded
in a foreign currency. To do this, the Portfolio would enter into a forward
contract to sell the foreign currency in which the investment is denominated or
principally traded in exchange for U.S. dollars.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date the forward contract
is entered into and the date it matures. The projection of currency market
movements is extremely difficult, and the successful execution of a hedging
strategy is highly uncertain.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase exchange
traded and over-the-counter put and call options on fixed income securities or
indexes of fixed income securities, (b) purchase and sell futures contracts on
indexes of fixed income securities, and (c) purchase put and call options on
futures contracts on indexes of fixed income securities. Each of these
instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
8
<PAGE>
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts and buying calls, tend to increase market
exposure. Options and futures contracts may be combined with each other or with
forward contracts in order to adjust the risk and return characteristics of the
Portfolio's overall strategy in a manner deemed appropriate to the Advisor and
consistent with the Portfolio's objective and policies. Because combined
options positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly
correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option
premiums, in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. Government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
The Portfolio may not (i) purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Portfolio's
total assets, except this limitation shall not apply to investments in U.S.
Government securities; (ii) enter into reverse repurchase agreements and other
permitted borrowings which constitute senior securities under the 1940 Act,
exceeding in the aggregate one-third of the market value of the Portfolio's
total assets, less certain liabilities; or (iii) borrow money, except from
banks for extraordinary or emergency purposes and then only in amounts up to
30% of the value of the Portfolio's total assets taken at cost at the time of
borrowing and except in connection with reverse repurchase agreements or
purchase securities while borrowings, including reverse repurchase agreements,
exceed 5% of its total assets; or mortgage, pledge or
9
<PAGE>
hypothecate any assets except in connection with any such borrowing in amounts
up to 30% of the value of the Portfolio's net assets at the time of borrowing.
See Risk Factors and Additional Investment Information--Loans of Portfolio
Securities and Reverse Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declaration of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's Administrator, Distributor, Services Agent, and other service providers
and the performance of the Portfolio's Advisor. Pursuant to the Declaration of
Trust for the Portfolio, the Trustees of the Portfolio (who are not the same as
the Trustees of the Trust) have the same responsibilities for the Portfolio
including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers in the Statement of Additional
Information.
ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with
combined assets under management of over $145 billion (of which the Advisor
advises over $30 billion). Morgan provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For fixed income portfolios, this process focuses on
systematic analysis of real interest rates, sector diversification and
quantitative and credit analysis. Morgan has managed portfolios of domestic
fixed income securities on behalf of its clients for over fifty years. The
portfolio managers making investments in domestic fixed income securities work
in conjunction with fixed income, credit, capital market and economic research
analysts, as well as traders and administrative officers.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his or her business
experience for the past five years is indicated parenthetically): William G.
Tennille, Vice President (since January, 1994, employed by Morgan since March,
1992 and prior to 1992 by Manufacturers Hanover Trust Company as a portfolio
manager of U.S. fixed income investments) and Connie J. Plaehn, Vice President
(since January, 1994, employed by Morgan since prior to 1990 as a portfolio
manager of U.S. fixed income investments).
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As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.30% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"); and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent as
the respective Trustees may direct from time to time. Under the terms of the
Trust's and the Portfolio's Services Agreements with Morgan, the fees of the
Administrator are covered by Morgan's expense undertakings described under
Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other families of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The JPM Institutional Funds and The Pierpont Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio, including services
related to tax
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returns and financial reports. In the case of the Fund, these services also
include matters related to computing the amount of dividends and the net asset
value per share, keeping the books of account and providing shareholder
services to shareholders of the Fund.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included in
the expense undertaking: the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, equal to 0.60%
of the Fund's average daily net assets. The Portfolio's Services Agreement
provides for the Portfolio to pay Morgan a fee for these services, which is
computed daily and may be paid monthly, at the following annual rate of the
Portfolio's average daily net assets: 0.10% on net assets up to $200 million,
0.05% on the next $200 million in net assets and 0.03% on net assets
thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered. For the Fund and the Portfolio, the Trustees regularly
review amounts paid to and accounted for by Morgan pursuant to these
agreements. Under the agreements, Morgan may delegate one or more of its
responsibilities to other entities, including SBDS, at Morgan's expense. See
Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
October 31, 1995 to the extent necessary to maintain the Fund's total operating
expenses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 0.90% of the Fund's average daily net assets. This limit on certain
expenses does not cover extraordinary increases in these expenses during the
period and no longer applies in the event of a precipitous decline in assets
due to unforeseen circumstances. There is no assurance that Morgan will
continue this waiver beyond the specified period, except as required by the
following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million for
any fiscal year.
SHAREHOLDER TRANSACTIONS
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
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Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions
relating to a Fund account from Morgan as agent for the customer. All purchase
orders must be accepted by the Fund's Distributor. Investors must be customers
of Morgan or an eligible institution which is a customer of Morgan (an
"Eligible Institution"). Investors may also be employer-sponsored retirement
plans that have designated the Fund as an investment option for the plans.
Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Fund
reserves the right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor. If the Fund
receives a purchase order prior to 4:00 P.M. New York time on any business day,
the purchase of Fund shares is effective and is made at the net asset value
determined that day. If the Fund receives a purchase order after 4:00 P.M. New
York time, the purchase is effective and is made at net asset value determined
on the next business day. All purchase orders for Fund shares must be
accompanied by instructions to Morgan (or an Eligible Institution) to transfer
immediately available funds to the Fund's Distributor on settlement date. The
settlement date is generally the business day after the purchase is effective.
The purchaser will begin to receive the daily dividends on the settlement date.
See Dividends and Distributions.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
infor- mation and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
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A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
deposited on settlement date in immediately available funds to the
shareholder's account at Morgan or at his or her Eligible Institution or, in
the case of certain Morgan customers, are mailed by check or wire transferred
in accordance with the customer's instructions. The redeemer will continue to
receive dividends on these shares through the day before the settlement date.
Settlement date is generally the next business day after a redemption is
effective and, subject to Further Redemption Information below, in any event is
within seven days. See Dividends and Distributions.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Advisor Funds. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income.
The net investment income of the Fund is declared as a dividend daily immedi-
ately prior to the determination of the net asset value of the Fund on that day
and paid monthly. If an investor's shares are redeemed during a month, accrued
but unpaid dividends are paid with the redemption proceeds. The net investment
income of the Fund for dividend purposes consists of its pro rata share of the
net income of the Portfolio less the Fund's expenses. Expenses of the Fund and
the Portfolio, including the fees payable to Morgan are accrued daily. Shares
will accrue dividends as long as they are issued and outstanding. Shares are
issued and outstanding as of the settlement date of a purchase order to the
settlement date of a redemption order.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.
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Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust". The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration
of Trust. The Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of ten percent of
Trust shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
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TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or local taxes.
See Taxes in the Statement of Additional Information. Annual statements as to
the current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio limits its investments so that at the close
of each quarter of its taxable year (a) no more than 25% of its total assets
are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund are not eligible for the dividends-received deduction.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares. Long-
term capital gains distributions to corporate shareholders are not eligible for
the dividends-received deduction.
Any distribution of capital gains will have the effect of reducing the net
asset value of Fund shares held by a shareholder by the same amount as the
distribution. If the net asset value of the shares is reduced below a
shareholder's cost as a result of such a distribution, the distribution,
although constituting a return of capital to the shareholder, will be taxable
as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
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All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Salomon Brothers Broad Investment Grade Bond Index and other
industry publications. The Fund may advertise "yield". Yield refers to the net
income generated by an investment in the Fund over a stated 30-day period. This
income is then annualized -- i.e., the amount of income generated by the
investment during the 30-day period is assumed to be generated each 30-day
period for twelve periods and is shown as a percentage of the investment. The
income earned on the investment is also assumed to be reinvested at the end of
the sixth 30-day period.
The Fund may also advertise "total return" and non-standardized total return
data. The total return shows what an investment in the Fund would have earned
over a specified period of time (one, five or ten years or since commencement
of operations, if less) assuming that all distributions and dividends by the
Fund were reinvested on the reinvestment dates during the period and less all
recurring fees. These methods of calculating yield and total return are
required by regulations of the Securities and Exchange Commission. Yield and
total return data similarly calculated, unless otherwise indicated, over other
specified periods of time may also be used. See Performance Data in the
Statement of Additional Information. All performance figures are based on
historical earnings and are not intended to indicate future performance.
Performance information may be obtained by calling the Fund's Distributor at
(800) 847-9487.
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APPENDIX
The Portfolio may (a) purchase exchange traded and over-the-counter put and
call options on fixed income securities and indexes of fixed income securities,
(b) purchase and sell futures contracts on fixed income securities and indexes
of fixed income securities and (c) purchase put and call options on futures
contracts on fixed income securities and indexes of fixed income securities.
Each of these instruments is a derivative instrument, as its value derives from
the underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
OPTIONS ON INDEXES. The Portfolio may purchase put and call options on any
securities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing index options, is subject to the risk that the
value of its portfolio securities may not change as much as an index because
the Portfolio's investments generally will not match the composition of an
index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an over-the-counter option, it will be
relying on its counterparty to perform its obligations, and the Portfolio may
incur additional losses if the counterparty is unable to perform.
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FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a futures contract, it agrees to sell a specified quantity of
the underlying instrument at a specified future date or to receive a cash
payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Futures can be held until their delivery dates or the position can be
(and normally is) closed out before then. There is no assurance, however, that
a liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
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THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS401
The
JPM Advisor
U.S. Fixed
Income Fund
PROSPECTUS
March 31, 1995
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PROSPECTUS
The JPM Advisor Emerging Markets Equity Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor Emerging Markets Equity Fund (the "Fund") seeks to provide a
high total return from a portfolio of equity securities of companies in emerg-
ing markets. It is designed for long-term investors who want to diversify their
investments by adding exposure to the rapidly growing emerging markets.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE EMERGING MARKETS EQUITY PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COM-
PANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE
PORTFOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL
SERVICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE
AND IS A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a pro-
spective investor ought to know before investing and it should be retained for
future reference. Additional information about the Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE IN-
VESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995
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TABLE OF CONTENTS
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Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke(R)............................ 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 13
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
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Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 17
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-2
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The JPM Advisor Emerging Markets Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for long term investors who want to diversify their in-
vestments by adding exposure to the rapidly growing emerging markets. The Fund
seeks to achieve its investment objective by investing all of its investable
assets in The Emerging Markets Equity Portfolio, a diversified open-end manage-
ment investment company having the same investment objective as the Fund. Since
the investment characteristics and experience of the Fund will correspond di-
rectly with those of the Portfolio, the discussion in this Prospectus focuses
on the investments and investment policies of the Portfolio. The net asset
value of shares in the Fund fluctuates with changes in the value of the invest-
ments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The Port-
folio may also purchase certain privately placed securities. The Portfolio's
investments in securities of issuers in emerging markets, involve foreign in-
vestment risks and may be more volatile and less liquid than domestic securi-
ties. For further information about these investments, see Investment Objective
and Policies below.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signa-
ture") Hub and Spoke(R) financial services method. The Trustees of the Trust
believe that the Fund may achieve economies of scale over time by investing
through Hub and Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating expenses set forth below for the Fund and the Portfolio, as a percentage
of average net assets of the Fund. The Trustees of the Trust believe that the
aggregate per share expenses of the Fund and the Portfolio will be approxi-
mately equal to and may be less than the expenses that the Fund would incur if
it retained the services of an investment adviser and invested its assets di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and Portfolio--Expenses.
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SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
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EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
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Advisory Fees............................................................. 1.00%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.95%
----
Total Operating Expenses (after expense reimbursement).................... 1.95%
====
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*These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after any
applicable expense reimbursement. Without such expected reimbursement, the es-
timated Total Operating Expenses would be equal on an annual basis to 2.10% of
the estimated average daily net assets of the Fund. See Management of the Trust
and the Portfolio--Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
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1 Year..................................................................... $ 20
3 Years.................................................................... $ 61
5 Years.................................................................... $105
10 Years................................................................... $228
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The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services and Services Agreements, and
fees paid to State Street Bank and Trust Company as custodian of the Portfolio.
For a more detailed description of contractual fee arrangements, including
expense reimbursements, and of the fees and expenses included in Other
Expenses, see Management of the Trust and the Portfolio. In connection with the
above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and finan-
cial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a registered
service mark of Signature. Signature Broker-Dealer Services, Inc. (the Trust's
and Portfolio's Administrator and the Trust's Distributor) is a wholly owned
subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke(R)
has been approved by the shareholders of the Fund.
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In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from the
Administrator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable.
The distribution in kind may result in the Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and
Additional Investment Information and Investment Restrictions. For more
information about the Portfolio's management and expenses, see Management of
the Trust and the Portfolio. For more information about changing the investment
objective, policies and restrictions of the Fund or the Portfolio, see
Investment Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to achieve a high total return from a
portfolio of equity securities of companies in emerging markets. Total return
will consist of realized and unrealized capital gains and losses plus income.
The Fund
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attempts to achieve its investment objective by investing all its investable
assets in The Emerging Markets Equity Portfolio, a diversified open-end
management investment company having the same investment objective as the Fund.
Under certain market conditions, the Fund or the Portfolio may not be able to
achieve its investment objective.
The Fund is designed for long-term investors who want exposure to the rapidly
growing emerging markets. THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT
PROGRAM NOR IS THE FUND SUITABLE FOR ALL INVESTORS. Many investments in
emerging markets can be considered speculative and, therefore, may offer higher
potential for gains and losses and may be more volatile than investments in the
developed markets of the world. See Risk Factors and Additional Investment
Information.
The Advisor considers "emerging markets" to be any country which is generally
considered to be an emerging or developing country by the World Bank, the
International Finance Corporation, the United Nations or its authorities. These
countries generally include every country in the world except Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United
Kingdom and United States. The Portfolio will focus its investments in those
emerging markets countries which it believes have strongly developing economies
and in which the markets are becoming more sophisticated.
A company in an emerging market is one that: (i) has its principal securities
trading market in an emerging market country; (ii) is organized under the laws
of an emerging market; or (iii) derives 50% or more of its total revenue from
either goods produced, sales made or services performed in emerging markets; or
(iv) has at least 50% of its assets located in emerging markets.
The Advisor seeks to achieve the Portfolio's investment objective by a
disciplined process of country allocation and company selection. Based on
fundamental research, quantitative analysis, and experienced judgment, the
Advisor identifies those countries where economic and political factors,
including currency movements, are likely to produce above-average returns.
Based on their relative value, the Advisor then selects those companies in each
country's major industry sectors which it believes are best positioned and
managed to take advantage of these economic and political factors.
The Portfolio's investments are primarily denominated in foreign currencies but
it may also invest in securities denominated in the U.S. dollar or
multinational currency units such as the ECU. The Advisor will not routinely
attempt to hedge the Portfolio's foreign currency exposure. However, the
Advisor may from time to time engage in foreign currency exchange transactions
if, based on fundamental research, technical factors, and the judgment of
experienced currency managers, it believes the transactions would be in the
Portfolio's best interest. For further information on foreign currency exchange
transactions, see Risk Factors and Additional Investment Information.
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. The Portfolio does not expect to trade in securities for
short-term profits; however, when circumstances warrant, securities may be sold
without regard to the length of time held. To the extent the Portfolio engages
in short-term trading, it may realize short-term capital gains or losses and
incur increased transaction costs. See Taxes below. The estimated annual
portfolio turnover rate for the Portfolio is generally not expected to exceed
100%.
EQUITY INVESTMENTS. In normal circumstances, the Advisor intends to keep the
Portfolio essentially fully invested with at least 65% of the value of its
total assets in equity securities of companies in emerging markets consisting
of common stocks and other securities with equity characteristics comprised of
preferred stock, warrants, rights, convertible securities, trust certificates,
limited partnership interests and equity participations. The Portfolio's
primary equity investments are the common stock of established companies in the
emerging markets countries the Advisor has identified as attractive. The assets
of the Portfolio ordinarily will be invested in the securities of issuers in at
least three different countries considered to be emerging markets. The common
stock in which the Portfolio may invest includes the common stock of any class
or series or any similar equity interest, such as trust or limited partnership
interests. These equity investments may or may
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not pay dividends and may or may not carry voting rights. The Portfolio invests
in securities listed on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets, and may invest in
certain restricted or unlisted securities.
Certain emerging markets are closed in whole or in part to equity investments
by foreigners except through specifically authorized investment funds.
Securities of other investment companies may be acquired by the Portfolio to
the extent permitted under the Investment Company Act of 1940 (the "1940
Act")--that is, the Portfolio may invest up to 10% of its total assets in
securities of other investment companies so long as not more than 3% of the
outstanding voting stock of any one investment company is held by the
Portfolio. In addition, not more than 5% of the Portfolio's total assets may be
invested in the securities of any one investment company. As a shareholder in
an investment fund, the Portfolio would bear its share of that investment
fund's expenses, including its advisory and administration fees. At the same
time the Portfolio and the Fund would continue to pay their own operating
expenses.
The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, purchase securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities and
enter into forward foreign currency exchange contracts. In addition, the
Portfolio may use options on securities and indexes of securities, futures
contracts and options on futures contracts for hedging and risk management
purposes. Forward foreign currency exchange contracts, options and futures are
derivative instruments. For a discussion of these investments and investment
techniques, see Risk Factors and Additional Investment Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
INVESTING IN EMERGING MARKETS. The Portfolio invests primarily in equity
securities of companies in emerging markets. Investments in securities of
issuers in emerging markets countries may involve a high degree of risk and
many may be considered speculative. These investments carry all of the risks of
investing in securities of foreign issuers described below to a heightened
degree. These heightened risks include (i) greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and economic
stability; (ii) the small current size of the markets for securities of
emerging markets issuers and the currently low or nonexistent volume of
trading, resulting in lack of liquidity and in price volatility; (iii) certain
national policies which may restrict the Portfolio's investment opportunities
including restrictions on investing in issuers or industries deemed sensitive
to relevant national interests; and (iv) the absence of developed legal
structures governing private or foreign investment and private property.
OTHER FOREIGN INVESTMENT INFORMATION. Generally, investment in securities of
foreign issuers involves somewhat different investment risks from those
affecting securities of U.S. domestic issuers. There may be limited publicly
available information with respect to foreign issuers, and foreign issuers are
not generally subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to domestic companies.
Dividends and interest paid by foreign issuers may be subject to withholding
and other foreign taxes which may decrease the net return on foreign
investments as compared to dividends and interest paid to these Portfolios by
domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a
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judgment against a foreign issuer. Any foreign investments made by the
Portfolio must be made in compliance with U.S. and foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those
for securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers located
in foreign countries than in the United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions issuing ADRs may not be sponsored by the issuer of the underlying
foreign securities. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer of the underlying foreign
securities. EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and sells
securities and receives interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign
currencies. The cost of the Portfolio's spot currency exchange transactions is
generally the difference between the bid and offer spot rate of the currency
being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the invest-
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ment is denominated or principally traded in exchange for U.S. dollars or in
exchange for another foreign currency. The Portfolio will only enter into
forward contracts to sell a foreign currency in exchange for another foreign
currency if the Advisor expects the foreign currency purchased to appreciate
against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased against the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WARRANTS. The Portfolio invests in warrants, which entitle the holder to buy
common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower
than the current market price of the underlying securities, yet warrants are
subject to similar price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities.
Warrants do not entitle the holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets of
the issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and
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other Unregistered Securities below. Other repurchase agreements are considered
to be a type of money market instrument. See Risk Factors and Additional
Investment Information--Money Market Instruments.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For
purposes of the 1940 Act, it is considered as a form of borrowing by the
Portfolio and, therefore, is a form of leverage. Leverage may cause any gains
or losses of the Portfolio to be magnified. For more information, see
Investment Objectives and Policies in the Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees of the Portfolio. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase and sell
(write) exchange traded and over-the-counter put and call options on equity
securities or indexes of equity securities, (b) purchase and sell futures
contracts on indexes of equity securities, and (c) purchase and sell (write)
put and call options on futures contracts on indexes of equity securities. Each
of these instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. The Portfolio may not use futures contracts and options
for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and
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buying calls, tend to increase market exposure. Options and futures contracts
may be combined with each other or with forward contracts in order to adjust
the risk and return characteristics of the Portfolio's overall strategy in a
manner deemed appropriate to the Advisor and consistent with the Portfolio's
objective and policies. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as to limit its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly
correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option
premiums, in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. In addition, the Portfolio will not purchase or sell
(write) futures contracts, options on futures contracts or commodity options
for risk management purposes if, as a result, the aggregate initial margin and
options premiums required to establish these positions exceed 5% of the net
asset value of the Portfolio. In addition, the Portfolio will not purchase or
sell (write) futures contracts, options, or futures contracts or commodity
options for risk management purposes if, as a result, the aggregate initial
margin and options premiums required to establish these positions exceed 5% of
the net asset value of the Portfolio. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies--Risk Management in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment
perspective. The Portfolio may invest in money market instruments of domestic
or foreign issuers denominated in U.S. dollars and other currencies. Under
normal circumstances the Portfolio will purchase these securities to invest
temporary cash balances or to maintain liquidity to meet redemptions. However,
the Portfolio may also invest in money market instruments without limitation as
a temporary defensive measure taken in the Advisor's judgment during, or in
anticipation of, adverse market conditions. For more detailed information about
these money market investments, see Investment Objectives and Policies in the
Statement of Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. Government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
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The Portfolio may not (i) purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Portfolio's
total assets, except this limitation shall not apply to investments in U.S.
Government securities; (ii) borrow money except that the Portfolio may (a)
borrow money from banks for temporary or emergency purposes (not for leveraging
purposes) and (b) enter into reverse repurchase agreements for any purpose,
provided that (a) and (b) in total do not exceed one-third of the Portfolio's
total assets less liabilities (other than borrowings), or (iii) issue senior
securities except as permitted by the 1940 Act or any rule, order or
interpretation thereunder. See Risk Factors and Additional Investment
Information--Loans of Portfolio Securities and Reverse Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declaration of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's, Administrator, Distributor, Services Agent, and other service
providers and the performance of the Portfolio's Advisor. Pursuant to the
Declaration of Trust for the Portfolio, the Trustees of the Portfolio (who are
not the same as the Trustees of the Trust) have the same responsibilities for
the Portfolio including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers to the Statement of Additional
Information.
ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with
combined assets under management of over $145 billion (of which the Advisor
advises over $30 billion). Morgan provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental
research, systematic stock selection, disciplined portfolio construction and,
in the case of foreign equities, country exposure and currency management.
Morgan has managed portfolios of emerging markets equity securities on behalf
of its clients since 1990. The portfolio managers making investments in
emerging markets work in conjunction with Morgan's emerging markets research
analysts, as well as capital market, credit and economic research analysts,
traders and administrative officers. The equity research analysts, located in
New York, London and Singapore, each cover a different industry, monitoring a
universe of approximately 900 companies in emerging markets countries.
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The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his business experience for
the past five years is indicated parenthetically): Douglas J. Dooley, Managing
Director (since November, 1993, employed by Morgan since prior to 1990 and has
been a portfolio manager of emerging markets investments since 1990) and Satyen
Mehta, Vice President (since November, 1993, employed by Morgan since prior to
1990 and has been a portfolio manager of emerging markets investments since
1990).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 1.00% of the Portfolio's average daily net assets. While the
advisory fee for the Portfolio is higher than that of most investment
companies, it is similar to the advisory fees of other funds of this type.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"); and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent as
the respective Trustees may direct from time to time. Under the terms of the
Trust's and the Portfolio's Services Agreements with Morgan, the fees of the
Administrator are covered by Morgan's expense undertakings described under
Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other families of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The JPM Institutional Funds and The Pierpont Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
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administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio, including services
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share, keeping the books of account and providing
shareholder services to shareholders of the Fund.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included
in the expense undertaking: the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, at the annual
rate of 0.77% of the Fund's average daily net assets. The Portfolio's Services
Agreement provides for the Portfolio to pay Morgan a fee for these services,
which is computed daily and may be paid monthly, at the following annual rate
of the Portfolio's average daily net assets: 0.15% on net assets up to $200
million, 0.10% on the next $200 million in net assets, 0.05% on the next $200
million in net assets and 0.03% on net assets thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered. For the Fund and the Portfolio, the Trustees regularly
review amounts paid to and accounted for by Morgan pursuant to these
agreements. Under the agreements, Morgan may delegate one or more of its
responsibilities to other entities, including SBDS, at Morgan's expense. See
Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
October 31, 1995 to the extent necessary to maintain the Fund's total operating
expenses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 1.95% of the Fund's average daily net assets. This limit on certain
expenses does not cover extraordinary increases in these expenses during the
period and no longer applies in the event of a precipitous decline in assets
due to unforeseen circumstances. There is no assurance that Morgan will
continue this waiver beyond the specified period, except as required by the
following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by
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applicable regulations of state securities commissions. Such annual limits are
currently 2.5% of the first $30 million of average net assets, 2% of the next
$70 million of such net assets and 1.5% of such net assets in excess of $100
million for any fiscal year.
SHAREHOLDER TRANSACTIONS
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions relat-
ing to a Fund account from Morgan as agent for the customer. All purchase or-
ders must be accepted by the Fund's Distributor. Investors must be customers of
Morgan or an eligible institution which is a customer of Morgan (an "Eligible
Institution"). Investors may also be employer-sponsored retirement plans that
have designated the Fund as an investment option for the plans. Prospective in-
vestors who are not already customers of Morgan may apply to become customers
of Morgan for the sole purpose of Fund transactions. There are no charges asso-
ciated with becoming a Morgan customer for this purpose. Morgan reserves the
right to determine the customers that it will accept, and the Fund reserves the
right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
If the Fund receives a purchase order prior to 4:00 P.M. New York time on any
business day, the purchase of Fund shares is effective and is made at the net
asset value determined that day, and the purchaser generally becomes a holder
of record on the next business day upon the Fund's receipt of payment. If the
Fund receives a purchase order after 4:00 P.M. New York time, the purchase is
effective and is made at the net asset value determined on the next business
day, and the purchaser becomes a holder of record on the following business day
upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub- accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
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REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited the next business day in immediately available funds to the
shareholder's account at Morgan or at his or her Eligible Institution or, in
the case of certain Morgan customers, are mailed by check or wire transferred
in accordance with the customer's instructions and, subject to Further
Redemption Information, in any event are paid within seven days.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Advisor Funds. See
also Additional Information below for an explanation of the telephone exchange
policy of The JPM Advisor Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and
distributions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited
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to the shareholder's account at Morgan or at his Eligible Institution or, in
the case of certain Morgan customers, are mailed by check in accordance with
the customer's instructions. The Fund reserves the right to discontinue, alter
or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust". The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration
of Trust. The Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of ten percent of
Trust shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult
15
<PAGE>
their own tax advisors with respect to specific questions as to federal taxes
and with respect to the applicability of state or local taxes. See Taxes in the
Statement of Additional Information. Annual statements as to the current fed-
eral tax status of distributions, if applicable, are mailed to shareholders af-
ter the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment com-
pany under Subchapter M of the Code of 1986. For the Fund to qualify as a regu-
lated investment company, the Portfolio limits its investments so that at the
close of each quarter of its taxable year (a) no more than 25% of its total as-
sets are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for fed-
eral income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or re-
invested in additional shares. Distributions of this type to corporate share-
holders of the Fund will not qualify for the dividends- received deduction be-
cause the income of the Fund will not consist of dividends paid by U.S. corpo-
rations.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regardless
of whether taken in cash or reinvested in additional shares. Long-term capital
gains distributions to corporate shareholders are not eligible for the divi-
dends-received deduction.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is re-
duced below a shareholder's cost as a result of such a distribution, the dis-
tribution, although constituting a return of capital to the shareholder, will
be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term cap-
ital gain or loss if the shares have been held for more than one year, and oth-
erwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
The Fund is subject to foreign withholding taxes with respect to income re-
ceived from sources within certain foreign countries. So long as more than 50%
of the value of the Fund's total assets at the close of any taxable year con-
sists of stock or securities of foreign corporations, the Fund may elect to
treat any such foreign income taxes paid by it as paid directly by its share-
holders. The Fund will make such an election only if it deems it to be in the
best interests of its shareholders and will notify shareholders in writing each
year if it makes the election and of the amount of foreign income taxes and
gross income derived from sources within any foreign country or possession of
the United States, if any, to be treated as paid by the shareholders. If the
Fund makes the election, each shareholder will be required to include in income
his proportionate share of the amount of foreign income taxes paid by the Fund
and will be entitled to claim either a credit (which is subject to certain lim-
itations) or, if the shareholder itemizes deductions, a deduction for his share
of the foreign income taxes in computing his federal income tax liability. (No
deduction will be permitted to individuals in computing their alternative mini-
mum tax liability.)
16
<PAGE>
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or the shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poors 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes, the EAFE Index, the IFC
Investable Index, the Financial Times World Stock Index and other industry
publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of
opera- tions, if less) assuming that all distributions and dividends by the
Fund were reinvested on the reinvestment dates during the period and less all
recurring fees. This method of calculating total return is required by
regulations of the Securities and Exchange Commission. Total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling The Fund's Distributor at (800) 847-9487.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell (write) exchange traded and over-the-
counter put and call options on equity securities or indexes of equity
securities, (b) purchase and sell futures contracts on equity securities or
indexes of equity securities, and (c) purchase and sell (write) put and call
options on futures contracts on equity securities or indexes of equity
securities. Each of these instruments is a derivative instrument, as its value
derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. See Risk Management in the Statement of Additional
Information. The Portfolio may not use futures contracts and options for
speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options,
A-1
<PAGE>
except that writing calls generally is a profitable strategy if prices remain
the same or fall. Through receipt of the option premium a call writer offsets
part of the effect of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell (write) put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indexes are similar to options on securities,
except that the exercise of securities index options is settled by cash payment
and does not involve the actual purchase or sale of securities. In addition,
these options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations
in a single security. The Portfolio, in purchasing or selling index options, is
subject to the risk that the value of its portfolio securities may not change
as much as an index because the Portfolio's investments generally will not
match the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an over-the-counter option, it will be
relying on its counterparty to perform its obligations, and the Portfolio may
incur additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a futures contract, it agrees to sell a specified quantity of
the underlying instrument at a specified future date or to receive a cash
payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Futures can be held until their delivery dates or the position can be
(and normally is) closed out before then. There is no assurance, however, that
a liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
pay-
A-2
<PAGE>
ments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-3
<PAGE>
THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS409
The
JPM Advisor
Emerging
Markets
Equity Fund
PROSPECTUS
March 31, 1995
<PAGE>
PROSPECTUS
The JPM Advisor International Fixed Income Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor International Fixed Income Fund (the "Fund") seeks to provide a
high total return, consistent with moderate risk of capital, from a portfolio
of international fixed income securities. It is designed for investors who seek
exposure to the international bond markets in their investment portfolios.
The Fund is a non-diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE NON-U.S. FIXED INCOME PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING NON-DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN
THE PORTFOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R)
FINANCIAL SERVICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER
STRUCTURE AND IS A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC.
SEE SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke (R)........................... 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 12
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 17
Appendix................................................................... A-1
Options.................................................................... A-1
Future Contracts........................................................... A-2
</TABLE>
<PAGE>
The JPM Advisor International Fixed Income Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who seek to broaden their investments by
adding exposure to international bonds. The Fund seeks to achieve its invest-
ment objective by investing all of its investable assets in The Non-U.S. Fixed
Income Portfolio, a non-diversified open-end management investment company hav-
ing the same investment objective as the Fund. Since the investment character-
istics and experience of the Fund will correspond directly with those of the
Portfolio, the discussion in this Prospectus focuses on the investments and in-
vestment policies of the Portfolio. The net asset value of shares in the Fund
fluctuates with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The Port-
folio may also purchase certain privately placed securities. The Portfolio's
investments in securities of foreign issuers, including issuers in emerging
markets, involve foreign investment risks and may be more volatile and less
liquid than domestic securities. For further information about these invest-
ments, see Investment Objective and Policies below.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signa-
ture") Hub and Spoke(R) financial services method. The Trustees of the Trust
believe that the Fund may achieve economies of scale over time by investing
through Hub and Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating expenses set forth below for the Fund and the Portfolio, as a percentage
of average net assets of the Fund. The Trustees of the Trust believe that the
aggregate per share expenses of the Fund and the Portfolio will be approxi-
mately equal to and may be less than the expenses that the Fund would incur if
it retained the services of an investment adviser and invested its assets di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and the Portfolio -- Expenses.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.35%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.85%
----
Total Operating Expenses (after expense reimbursement).................... 1.20%
</TABLE>
- -------
* These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after any
applicable expense reimbursement. Without such expected reimbursement, the es-
timated Total Operating Expenses would be equal on an annual basis to 1.32% of
the estimated average net assets of the Fund. See Management of the Trust and
the Portfolio--Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year..................................................................... $ 12
3 Years.................................................................... $ 38
5 Years.................................................................... $ 66
10 Years................................................................... $146
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services and Services Agreements and
fees paid to State Street Bank and Trust Company as custodian of the Portfolio.
For a more detailed description of contractual fee arrangements, including
expense reimbursements, and of the fees and expenses included in Other
Expenses, see Management of the Trust and the Portfolio. In connection with the
above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE (R)
The Trust and the Portfolio use certain proprietary rights, know-how and
financial services referred to as Hub and Spoke (R). Hub and Spoke (R) is a
registered service mark of Signature. Signature Broker-Dealer Services, Inc.
(the Trust's and Portfolio's Administrator and the Trust's Distributor) is a
wholly owned subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke(R)
has been approved by the shareholders of the Fund.
2
<PAGE>
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from the
Administrator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable.
The distribution in kind may result in the Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and
Additional Investment Information and Investment Restrictions. For more
information about the Portfolio's management and expenses, see Management of
the Trust and the Portfolio. For more information about changing the investment
objective, policies and restrictions of the Fund or the Portfolio, see
Investment Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
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The Fund's investment objective is to provide a high total return, consistent
with moderate risk of capital, from a portfolio of international fixed income
securities. Total return will consist of income plus realized and unrealized
capital gains and losses. The Fund attempts to achieve its objective by
investing all of its investable assets in The Non-U.S. Fixed Income Portfolio,
a non-diversified open-end management investment company having the same
investment objective as the Fund. The Portfolio seeks to achieve its objective
by investing in the types of fixed income securities described below. The
expected total return of a portfolio of fixed income securities may not be as
high as that of a portfolio of equity securities. Under certain market
conditions, the Fund or the Portfolio may not be able to achieve its investment
objective.
The Fund is designed for investors who seek exposure to the international bond
markets in their investment portfolios.
Morgan actively manages the Portfolio's allocation across countries, its
duration and the selection of specific securities within countries. Based on
fundamental economic and capital markets research, quantitative valuation
techniques and experienced judgment, Morgan allocates the Portfolio's assets
primarily among the developed countries of the world outside the United States.
Morgan adjusts the Portfolio's duration in light of market conditions and the
Advisor's interest rate outlook for the countries in which it invests. The
Advisor selects securities among the broad sectors of the fixed income market
including, but not limited to, debt obligations of governments and their
agencies, supranational organizations, corporations and banks, taking into
consideration such factors as their relative value, the likelihood of a change
in credit rating, and the liquidity of the issue. Under normal circumstances,
the Advisor intends to keep the Portfolio essentially fully invested with at
least 65% of the Portfolio's assets invested in bonds of foreign issuers. These
investments will be made in at least three foreign countries. For further
information on international investments, see Risk Factors and Additional
Investment Information.
Duration is a measure of the weighted average maturity of the bonds held in the
Portfolio and can be used as a measure of the sensitivity of the Portfolio's
market value to changes in interest rates. Typically, the Portfolio's duration
will range between one year shorter and one year longer than the duration of
the non-U.S. fixed income universe, as represented by Salomon Brothers Non-U.S.
World Government Bond Index, the Portfolio's benchmark. Currently the
benchmark's duration is approximately five years. The maturities of the
individual bonds in the Portfolio may vary widely, however.
The Portfolio may invest in securities denominated in foreign currencies, the
U.S. dollar or multinational currency units such as the ECU. The Advisor will
generally attempt to hedge the Portfolio's foreign currency exposure into the
U.S. dollar. However, the Advisor may from time to time decide to keep foreign
currency positions unhedged or engage in foreign currency transactions if,
based on fundamental research, technical factors and the judgment of
experienced currency managers, it believes the foreign currency exposure will
benefit the Portfolio. For further information on foreign currency exchange
transactions, see Risk Factors and Additional Investment Information.
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates in each country, but the Portfolio may also
engage in short-term trading consistent with its objective. To the extent the
Portfolio engages in short-term trading, it may realize short-term capital
gains or losses and incur increased transaction costs. See Taxes below. The
estimated annual portfolio turnover rate for the Portfolio is generally not
expected to exceed 300%.
CORPORATE BONDS. The Portfolio may invest in a broad range of debt obligations
of foreign issuers. These include debt securities of foreign corporations; debt
obligations of foreign banks and bank holding companies; and debt obligations
issued or guaranteed by supranational organizations such as the World Bank, the
European Investment Bank and the Asian Development Bank. To a limited extent,
the Portfolio may also invest in non-U.S. dollar denominated securities of U.S.
issuers.
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GOVERNMENT SECURITIES. The Portfolio may invest in debt obligations issued or
guaranteed by a foreign sovereign government or one of its agencies,
authorities, instrumentalities or political subdivisions including a foreign
state, province or municipality.
MONEY MARKET INSTRUMENTS. The Portfolio may invest in money market instruments
of foreign or domestic issuers denominated in U.S. dollars and other curren-
cies. Under normal circumstances the Portfolio will purchase these securities
as part of its management of the Portfolio's duration, to invest temporary cash
balances or to maintain liquidity to meet redemptions. However, the Portfolio
may also invest in money market instruments without limitation as a temporary
defensive measure taken in the Advisor's judgment during, or in anticipation
of, adverse market conditions. For more detailed information about these money
market investments, see Investment Objectives and Policies in the Statement of
Additional Information.
QUALITY INFORMATION. Under normal circumstances at least 65% of the Portfolio's
total assets will consist of securities that at the time of purchase are rated
at least A by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("Standard & Poor's") or that are unrated and in the Advisor's
opinion are of comparable quality. In the case of the remaining 35% of the
Portfolio's investments, the Portfolio may purchase securities that are rated
Baa or better by Moody's or BBB or better by Standard & Poor's or are unrated
and in the Advisor's opinion are of comparable quality. Securities rated Baa by
Moody's or BBB by Standard & Poor's are considered investment grade, but have
some speculative characteristics. These standards must be satisfied at the time
an investment is made. If the quality of the investment later declines, the
Portfolio may continue to hold the investment. See Appendix A in the Statement
of Additional Information for more detailed information on these ratings.
NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified
investment company which means that the Portfolio is not limited by the
Investment Company Act of 1940 (the "1940 Act") in the proportion of its assets
that may be invested in the obligations of a single issuer. Thus, the Portfolio
may invest a greater proportion of its assets in the securities of a smaller
number of issuers and, as a result, may be subject to greater risk with respect
to its portfolio securities. The Portfolio, however, will comply with the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. See
Taxes below.
The Portfolio may also purchase securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and enter
into forward foreign currency exchange contracts. In addition, the Portfolio
may use options on securities and indexes of securities, futures contracts and
options on futures contracts for hedging and risk management purposes. Forward
foreign currency exchange contracts, options and futures contracts are
derivative instruments. For a discussion of these investments and investment
techniques, see Risk Factors and Additional Investment Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic
companies. Interest paid by foreign issuers may be subject to withholding and
other foreign taxes which may decrease the net return on foreign investments as
compared to interest paid to the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limita-
5
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tion on the removal of funds or assets, or imposition of (or change in)
exchange control or tax regulations in those foreign countries. In addition,
changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of
portfolio securities and could favorably or unfavorably affect the Portfolio's
operations. Furthermore, the economies of individual foreign nations may differ
from the U.S. economy, whether favorably or unfavorably, in areas such as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position; it may also be more
difficult to obtain and enforce a judgment against a foreign issuer. Any
foreign investments made by the Portfolio must be made in compliance with U.S.
and foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.
In addition, while the volume of transactions effected in foreign bond markets
has increased in recent years, in most cases it remains appreciably below that
of domestic markets. Accordingly, the Portfolio's foreign investments may be
less liquid and their prices may be more volatile than comparable investments
in securities of U.S. issuers. Moreover, the settlement periods for foreign
securities, which are often longer than those for securities of U.S. issuers,
may affect portfolio liquidity. In addition, there is generally less government
supervision and regulation of brokers, financial institutions and issuers
located in foreign countries than in the United States.
Although the Portfolio invests primarily in securities of established issuers
based in developed foreign countries, it may also invest in securities of
issuers in emerging markets countries. Investments in securities of issuers in
emerging markets countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investing
in securities of foreign issuers outlined in this section to a heightened
degree. These heightened risks include (i) greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and economic
stability; (ii) the small current size of the markets for securities of
emerging markets issuers and the currently low or nonexistent volume of
trading, resulting in lack of liquidity and in price volatility; (iii) certain
national policies which may restrict the Portfolio's investment opportunities
including restrictions on investing in issuers or industries deemed sensitive
to relevant national interests; and (iv) the absence of developed legal
structures governing private or foreign investment and private property.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and sells
securities and receives interest in currencies other than the U.S. dollar, the
Portfolio enters into foreign currency exchange transactions. The Portfolio
either enters into these transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or uses forward
contracts to purchase or sell foreign currencies. The cost of the Portfolio's
spot currency exchange transactions is generally the difference between the bid
and offer spot rate of the currency being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
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The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward
contracts to sell a foreign currency in exchange for another foreign currency
if the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased against the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement, a when-issued security
may be valued at less than its purchase price. The Portfolio maintains with the
Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to these commitments. When entering into a when-issued or
delayed delivery transaction, the Portfolio will rely on the other party to
consummate the transaction; if the other party fails to do so, the Portfolio
may be disadvantaged. It is the current policy of the Portfolio not to enter
into when-issued commitments exceeding in the aggregate 15% of the market value
of the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and other
Unregistered Securities below. Other repurchase agreements are considered to be
a type of money market instrument. See Money Market Instruments above.
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<PAGE>
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For the
purposes of the 1940 Act, it is considered as a form of borrowing by the
Portfolio and, therefore, a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified. For more information, see Investment
Objectives and Policies in the Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees of the Portfolio. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase and sell
(write) exchange traded and over-the-counter put and call options on fixed
income securities or indexes of fixed income securities, (b) purchase and sell
futures contracts on indexes of fixed income securities, and (c) purchase and
sell (write) put and call options on futures contracts on indexes of fixed
income securities. Each of these instruments is a derivative instrument, as its
value derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. The Portfolio may not use futures contracts and options
for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with
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forward contracts in order to adjust the risk and return characteristics of the
Portfolio's overall strategy in a manner deemed appropriate to the Advisor and
consistent with the Portfolio's objective and policies. Because combined
options positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly
correlated with its other investments or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option
premiums, in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. In addition, the Portfolio will not purchase or sell
(write) futures contracts, options, or futures contracts or commodity options
for risk management purposes if, as a result, the aggregate initial margin and
options premiums required to establish these positions exceed 5% of the net
asset value of the Portfolio. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies--Risk Management in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
The Portfolio may not purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Portfolio's
total assets, except this limitation shall not apply to investments in U.S.
Government securities. (For the purposes of this 25% limitation, the staff of
the Securities and Exchange Commision considers i) all supranational
organizations as a group to be a single industry and ii) each foreign
government and its political subdivisions to be a single industry.) In
addition, the Portfolio may not borrow money except that the Portfolio may (a)
borrow money from banks for temporary or emergency purposes (not for leveraging
purposes) and (b) enter into reverse repurchase agreements for any purpose,
provided that (a) and (b) in total do not exceed 33 1/3% of the Portfolio's
total assets less liabilities (other than borrowings); and the Portfolio may
not issue senior securities except as permitted by the 1940 Act or any rule,
order or interpretation thereunder. See Risk Factors and Additional Investment
Information--Loans of Portfolio Securities and Reverse Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
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MANAGEMENT OF THE TRUST AND PORTFOLIO
TRUSTEES. Pursuant to the Declaration of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's Administrator, Distributor, Services Agent, and other service providers
and the performance of the Portfolio's Advisor. Pursuant to the Declaration of
Trust for the Portfolio, the Trustees of the Portfolio (who are not the same as
the Trustees of the Trust) have the same responsibilities for the Portfolio
including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers in the Statement of Additional
Information.
ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with
combined assets under management of over $145 billion (of which the Advisor
advises over $30 billion). Morgan provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For fixed income portfolios, this process focuses on
systematic analysis of real interest rates, sector diversification,
quantitative and credit analysis, and, for foreign fixed income securities,
country selection. Morgan has managed portfolios of international fixed income
securities on behalf of its clients since 1977. The portfolio managers making
investments in international fixed income securities work in conjunction with
fixed income, credit, capital market and economic research analysts, as well as
traders and administrative officers.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his business experience for
the past five years is indicated parenthetically): Robert P. Browne, Vice
President (since October, 1994, employed by Morgan since 1990 as a portfolio
manager of international fixed income investments) and Lili B.L. Dung, Vice
President (since October, 1994, employed by Morgan since prior to 1990 as a
portfolio manager of international fixed income investments).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.35% of the Portfolio's average daily net assets.
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Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Code; and (v) performs such administrative and
managerial oversight of the activities of the Trust's and the Portfolio's
custodian and transfer agent as the respective Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Services Agreements
with Morgan, the fees of the Administrator are covered by Morgan's expense
undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other families of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The Pierpont Funds and The JPM Institutional Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio, including services
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share, keeping the books of account and providing
shareholder services to shareholders of the Fund.
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In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included
in the expense undertaking: the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, at the annual
rate of 0.68% of the Fund's average daily net assets. The Portfolio's Services
Agreement provides for the Portfolio to pay Morgan a fee for these services,
which is computed daily and may be paid monthly, at the following annual rate
of the Portfolio's average daily net assets: 0.12% on net assets up to $200
million, 0.08% on the next $200 million in net assets and 0.04% on net assets
thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered. For the Fund and the Portfolio, the Trustees regularly
review amounts paid to and accounted for by Morgan pursuant to these
agreements. Under the agreements, Morgan may delegate one or more of its
responsibilities to other entities, including SBDS, at Morgan's expense. See
Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
September 30, 1995 to the extent necessary to maintain the Fund's total
operating expenses (which includes expenses of the Fund and the Portfolio) at
the annual rate of 1.20% of the Fund's average daily net assets. This limit on
certain expenses does not cover extraordinary increases in these expenses
during the period and no longer applies in the event of a precipitous decline
in assets due to unforeseen circumstances. There is no assurance that Morgan
will continue this waiver beyond the specified period, except as required by
the following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million for
any fiscal year.
SHAREHOLDER TRANSACTIONS
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
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PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions
relating to a Fund account from Morgan as agent for the customer. All purchase
orders must be accepted by the Fund's Distributor. Investors must be customers
of Morgan or an eligible institution which is a customer of Morgan (an
"Eligible Institution"). Investors may also be employer-sponsored retirement
plans that have designated the Fund as an investment option for the plans.
Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Fund
reserves the right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor. If the Fund
receives a purchase order prior to 4:00 P.M. New York time on any business day,
the purchase of Fund shares is effective and is made at the net asset value
determined that day. If the Fund receives a purchase order after 4:00 P.M. New
York time, the purchase is effective and is made at the net asset value
determined on the next business day. All purchase orders for Fund shares must
be accompanied by instructions to Morgan (or an Eligible Institution) to
transfer immediately available funds to the Fund's Distributor on settlement
date. The settlement date is generally the business day after the purchase is
effective. See Dividends and Distributions.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
deposited on settlement date in immediately available funds to the
shareholder's account at Morgan or at his or her
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Eligible Institution or, in the case of certain Morgan customers, are mailed
by check or wire transferred in accordance with the customer's instructions.
Settlement date is generally the next business day after a redemption is
effective and, subject to Further Redemption Information below, in any event
is within seven days. See Dividends and Distributions.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares
in this Prospectus and in the prospectuses for the other JPM Advisor Funds.
See also Additional Information below for an explanation of the telephone
exchange policy of The JPM Advisor Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state securi-
ties laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Income dividends for the Fund are declared and paid quarterly. The Fund may
also declare an additional dividend of net investment income in a given year
to the extent necessary to avoid the imposition of federal excise tax on the
Fund. Substantially all the realized net capital gains, if any, of the Fund
are declared and paid on an annual basis, except that an additional capital
gains distribution may be made in a given year to the extent necessary to
avoid the imposition of federal excise tax on the Fund. Declared dividends and
distributions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest
cent. Expenses, including the fees payable to Morgan, are
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accrued daily. See Net Asset Value in the Statement of Additional Information
for information on valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust." The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration
of Trust. The Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of ten percent of
Trust shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is organized
as a trust under the laws of the State of New York. The Portfolio's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or local taxes.
See Taxes in the Statement of Additional Information. Annual statements as to
the current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio limits its investments so that at the close
of each
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quarter of its taxable year (a) no more than 25% of its total assets are
invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund will not qualify for the dividends- received deduction
because the income of the Fund will not consist of dividends paid by U.S.
corporations.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares. Long-
term capital gains distributions to corporate shareholders are not eligible for
the dividends-received deduction.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder,
will be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
The Fund is subject to foreign withholding taxes with respect to income
received from sources within certain foreign countries. So long as more than
50% of the value of the Fund's total assets at the close of any taxable year
consists of securities of foreign corporations, the Fund may elect to treat any
such foreign income taxes paid by it as paid directly by its shareholders. The
Fund will make such an election only if it deems it to be in the best interests
of its shareholders and will notify shareholders in writing each year if it
makes the election and of the amount of foreign income taxes and gross income
derived from sources within any foreign country or possession of the United
States, if any, to be treated as paid by the shareholders. If the Fund makes
the election, each shareholder will be required to include in income his
proportionate share of the amount of foreign income taxes paid by the Fund and
will be entitled to claim either a credit (which is subject to certain
limitations) or, if the shareholder itemizes deductions, a deduction for his
share of the foreign income taxes in computing his federal income tax
liability. (No deduction will be permitted to individuals in computing their
alternative minimum tax liability.)
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ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Salomon Brothers Non-U.S. World Government Bond Index and other
industry publications. The Fund may advertise "yield". Yield refers to the net
income generated by an investment in the Fund over a stated 30-day period. This
income is then annualized--i.e., the amount of income generated by the
investment during the 30-day period is assumed to be generated each 30-day
period for twelve periods and is shown as a percentage of the investment. The
income earned on the investment is also assumed to be reinvested at the end of
the sixth 30-day period.
The Fund may also advertise "total return" and non-standardized total return
data. The total return shows what an investment in the Fund would have earned
over a specified period of time (one, five or ten years or since commencement
of operations, if less) assuming that all distributions and dividends by the
Fund were reinvested on the reinvestment dates during the period and less all
recurring fees. These methods of calculating yield and total return are
required by regulations of the Securities and Exchange Commission. Yield and
total return data similarly calculated, unless otherwise indicated, over other
specified periods of time may also be used. See Performance Data in the
Statement of Additional Information. All performance figures are based on
historical earnings and are not intended to indicate future performance.
Performance information may be obtained by calling the Fund's Distributor at
(800) 847-9487.
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APPENDIX
The Portfolio may (a) purchase and sell (write) exchange traded and over-the-
counter put and call options on fixed income securities or indexes of fixed
income securities, (b) purchase and sell futures contracts on indexes of fixed
income securities, and (c) purchase and sell (write) put and call options on
futures contracts on indexes of fixed income securities. Each of these
instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. See Risk Management in the Statement of Additional
Information. The Portfolio may not use futures contracts and options for
speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options,
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except that writing calls generally is a profitable strategy if prices remain
the same or fall. Through receipt of the option premium a call writer offsets
part of the effect of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase put and call options on any
securities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing or selling index options, is subject to the risk
that the value of its portfolio securities may not change as much as an index
because the Portfolio's investments generally will not match the composition of
an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an over-the-counter option, it will be
relying on its counterparty to perform its obligations, and the Portfolio may
incur additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a futures contract, it agrees to sell a specified quantity of
the underlying instrument at a specified future date or to receive a cash
payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Futures can be held until their delivery dates or the position can be
(and normally is) closed out before then. There is no assurance, however, that
a liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a
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futures position, the Portfolio will be obligated to continue to pay variation
margin. Initial and variation margin payments do not constitute purchasing on
margin for purposes of the Portfolio's investment restrictions. In the event of
the bankruptcy of an FCM that holds margin on behalf of the Portfolio, the
Portfolio may be entitled to return of margin owed to it only in proportion to
the amount received by the FCM's other customers, potentially resulting in
losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
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THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS402
The
JPM Advisor
International
Fixed Income
Fund
PROSPECTUS
March 31, 1995
<PAGE>
PROSPECTUS
The JPM Advisor Japan Equity Fund
6 St. James AvenueBoston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor Japan Equity Fund (the "Fund") seeks to provide a high total
return from a portfolio of equity securities of Japanese companies. The Fund is
designed for investors who want an actively managed portfolio of Japanese
equity securities that seeks to outperform the Tokyo Stock Price Index
("TOPIX"), a composite market-capitalization weighted index of all common
stocks listed on the First Section of the Tokyo Stock Exchange.
The Fund is a non-diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE JAPAN EQUITY PORTFOLIO (THE "PORTFOLIO"), A
CORRESPONDING NON-DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES
METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke(R)............................ 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 10
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 13
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 16
Additional Information..................................................... 17
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-2
</TABLE>
<PAGE>
The JPM Advisor Japan Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who seek to broaden their investments by
adding exposure to Japanese equity securities. The Fund seeks to achieve its
investment objective by investing all of its investable assets in The Japan Eq-
uity Portfolio, a non-diversified open-end management investment company having
the same investment objective as the Fund. Since the investment characteristics
and experience of the Fund will correspond directly with those of the Portfo-
lio, the discussion in this Prospectus focuses on the investments and invest-
ment policies of the Portfolio. The net asset value of shares in the Fund fluc-
tuates with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The Port-
folio may also purchase certain privately placed securities. The Portfolio's
investments in securities of Japanese issuers involve foreign investment risks
and may be more volatile and less liquid than domestic securities. For further
information about these investments, see Investment Objective and Policies be-
low.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s ("Signa-
ture") Hub and Spoke(R) financial services method. The Trustees of the Trust
believe that the Fund may achieve economies of scale over time by investing
through Hub and Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating expenses set forth below for the Fund and the Portfolio, as a percentage
of average net assets of the Fund. The Trustees of the Trust believe that the
aggregate per share expenses of the Fund and the Portfolio will be approxi-
mately equal to and may be less than the expenses that the Fund would incur if
it retained the services of an investment adviser and invested its assets di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and the Portfolio--Expenses.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.65%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 1.05%
----
Total Operating Expenses (after expense reimbursement).................... 1.70%
</TABLE>
* These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after ap-
plicable expense reimbursement. Without such expense reimbursement, the esti-
mated Total Operating Expenses would be equal on an annual basis to 1.71% of
the estimated average daily net assets of the Fund. See Management of the
Trust and the Portfolio--Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year..................................................................... $ 17
3 Years.................................................................... $ 54
5 Years.................................................................... $ 92
10 Years................................................................... $201
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services Agreement and the Services
Agreement, and fees paid to State Street Bank and Trust Company as custodian of
the Portfolio. For a more detailed description of contractual fee arrangements,
including expense reimbursements, and of the fees and expenses included in
Other Expenses, see Management of the Trust and the Portfolio. In connection
with the above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and
financial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a
registered service mark of Signature. Signature Broker-Dealer Services, Inc.
(the Trust's and Portfolio's Administrator and the Trust's Distributor) is a
wholly owned subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke(R)
has been approved by the shareholders of the Fund.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a propor-
2
<PAGE>
tionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio may sell shares of their own fund using a different
pricing structure than the Fund. Such different pricing structures may result
in differences in returns experienced by investors in other funds that invest
in the Portfolio. Such differences in returns are not uncommon and are present
in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from the Administrator at (800) 847-
9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable.
The distribution in kind may result in the Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and
Additional Investment Information and Investment Restrictions. For more
information about the Portfolio's management and expenses, see Management of
the Trust and the Portfolio. For more information about changing the investment
objective, policies and restrictions of the Fund or the Portfolio, see
Investment Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a
portfolio of equity securities of Japanese companies. Total return will consist
of realized and unrealized capital gains and losses plus income. The Fund
attempts to achieve its investment objective by investing all of its investable
assets in The Japan Equity Portfolio, a non-diversified open-end management
investment company having the same investment objective as the Fund. Under
certain market conditions, the Fund or the Portfolio may not be able to achieve
its investment objective.
3
<PAGE>
The Fund is designed for investors who want an actively managed portfolio of
Japanese equity securities that seeks to outperform the Tokyo Stock Price Index
("TOPIX"), a composite market-capitalization weighted index of all common
stocks listed on the First Section of the Tokyo Stock Exchange. THE FUND DOES
NOT REPRESENT A COMPLETE INVESTMENT PROGRAM NOR IS THE FUND SUITABLE FOR ALL
INVESTORS.
A Japanese company is one that: (i) has its principal securities trading market
in Japan; or (ii) is organized under the laws of Japan; or (iii) derives 50% or
more of its total revenues and/or profits from either goods produced, sales
made or services performed in Japan; or (iv) has at least 50% of its assets
located in Japan.
Morgan seeks to enhance the Portfolio's total return relative to that of the
TOPIX through fundamental research, stock valuation and the exploitation of
underlying market inefficiencies. Based on internal fundamental research,
Morgan uses a proprietary valuation model to establish the relative valuation
of individual Japanese companies within industrial sectors. Morgan then buys
and sells securities within each industrial sector based on this valuation
process. In addition to stocks, the Advisor actively uses convertible
securities and warrants to seek to enhance overall portfolio performance.
In addition, Morgan uses a disciplined portfolio construction process to seek
to reduce the Portfolio's volatility relative to the TOPIX. Morgan attempts to
keep the industrial sector weightings, the average market capitalization and
other broad characteristics of the Portfolio comparable to those of the TOPIX.
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. The Portfolio does not intend to respond to short-term
market fluctuations or to acquire securities for the purpose of short-term
trading; however, it may take advantage of short-term trading opportunities
that are consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may realize short-term capital gains or losses and incur
increased transaction costs. See Taxes below. The estimated annual portfolio
turnover rate for the Portfolio is generally not expected to exceed 100%.
The Portfolio's equity investments will be primarily denominated in yen, but
the Portfolio may also invest in securities denominated in other foreign
currencies, the U.S. dollar or multinational currency units such as the ECU.
The Advisor will not routinely attempt to hedge the Portfolio's foreign
currency exposure. However, the Advisor may from time to time engage in foreign
currency exchange transactions if, based on fundamental research, technical
factors, and the judgment of experienced currency managers, it believes the
transactions would be in the Portfolio's best interest. For further information
on foreign currency exchange transactions, see Risk Factors and Additional
Investment Information.
EQUITY INVESTMENTS. In normal circumstances, the Advisor intends to keep the
Portfolio essentially fully invested with at least 65% of the Portfolio's total
assets invested in equity securities of Japanese companies consisting of common
stocks and other securities with equity characteristics comprised of preferred
stock, warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Portfolio's primary equity
investments are the common stock of established Japanese companies. The common
stock in which the Portfolio may invest includes the common stock of any class
or series or any similar equity interest, such as trust or limited partnership
interests. These equity investments may or may not pay dividends and may or may
not carry voting rights. The Portfolio invests in securities listed on foreign
or domestic securities exchanges and securities traded in foreign or domestic
over-the-counter ("OTC") markets, and may invest in certain restricted or
unlisted securities.
NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified
investment company which means that the Portfolio is not limited by the
Investment Company Act of 1940 (the "1940 Act") in the proportion of its assets
that may be invested in the obligations of a single issuer. Thus, the Portfolio
may invest a greater proportion of its assets in the securities of a smaller
number of issuers and, as a result, may be subject to greater risk with respect
to its portfolio securities. The Portfolio, however, will comply with the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. See
Taxes below.
4
<PAGE>
The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, purchase securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities and
enter into forward foreign currency exchange contracts. In addition, the
Portfolio may use options on securities and indexes of securities, futures
contracts and options on futures contracts for hedging and risk management
purposes. Forward foreign currency exchange contracts, options and futures
contracts are derivative instruments. For a discussion of these investments and
investment techniques, see Risk Factors and Additional Investment Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
INVESTING IN JAPAN. Investing in Japanese securities may involve the risks
associated with investing in foreign securities generally. See Other Foreign
Investment Information. In addition, because the Portfolio invests primarily in
Japan, it will be subject to the general economic and political conditions in
Japan.
Share prices of companies listed on Japanese stock exchanges and on the
Japanese OTC market reached historical peaks (which were later referred to as
the "bubble") as well as historically high trading volumes in 1989 and 1990.
Since then, stock prices in both markets decreased significantly, with listed
stock prices reaching their lowest levels in the third quarter of 1992 and OTC
stock prices reaching their lowest levels in the fourth quarter of 1992. During
the period from January 1, 1989 through December 31, 1994, the highest Nikkei
stock average and Nikkei OTC average were 38,915.87 and 4,149.20, respectively,
and the lowest for each were 14,309.41 and 1,099.32, respectively. There can be
no assurance that additional market corrections will not occur.
The common stocks of many Japanese companies continue to trade at high price
earnings ratios in comparison with those in the United States, even after the
recent market decline. Differences in accounting methods make it difficult to
compare the earnings of Japanese companies with those of companies in other
countries, especially the United States.
Since the Portfolio invests primarily in securities denominated in yen, changes
in exchange rates between the U.S. dollar and the yen affect the U.S. dollar
value of the Portfolio's assets. Such rate of exchange is determined by forces
of supply and demand on the foreign exchange markets. These forces are in turn
affected by the international balance of payments and other economic, political
and financial conditions, government intervention, speculation and other
factors. See Foreign Currency Exchange Transactions.
Japanese securities held by the Portfolio are not registered with the U.S.
Securities and Exchange Commission nor are the issuers thereof subject to its
reporting requirements. There may be less publicly available information about
issuers of Japanese securities than about U.S. companies and such issuers may
not be subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. companies are subject.
Although the Japanese economy has grown substantially over the past four
decades, recently the rate of growth had slowed substantially. During 1991,
1992 and 1993, the Japanese economy grew at rates of 4.3%, 1.1% and 0.1%,
respectively, as measured by real gross domestic product. For additional
information about the Japanese economy, see Appendix B--Investing in Japan and
Asian Growth Markets--Japan and its Securities Markets in the Statement of
Additional Information.
Japan's success in exporting its products has generated a sizeable trade
surplus. Such trade surplus has caused tensions at times between Japan and some
of its trading partners. In particular, Japan's trade relations with the United
States have recently been the subject of discussion and negotiation between the
two nations. The United States has imposed certain measures designed to address
trade issues in specific industries. These measures and similar measures in the
future may adversely affect the performance of the Portfolio.
Japan's economy has typically exhibited low inflation and low interest rates.
There can be no assurance that low inflation and low interest rates will
continue, and it is likely that a reversal of such factors would adversely
affect the Japanese
5
<PAGE>
economy. Moreover, the Japanese economy may differ, favorably or unfavorably,
from the U.S. economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resources, self-sufficiency and
balance of payments position.
Japan has a parliamentary form of government. In 1993 a coalition government
was formed which, for the first time since 1955, did not include the Liberal
Democratic Party. Since mid-1993, that have been several changes in leadership
in Japan. What, if any, effect the current political situation will have on
prospective regulatory reforms on the economy in Japan cannot be predicted.
Recent and future developments in Japan and neighboring Asian countries may
lead to changes in policy that might adversely affect the Portfolio. For
additional information, see Appendix B--Investing in Japan and Asian Growth
Markets--Japan and its Securities Markets in the Statement of Additional
Information.
OTHER FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in
foreign securities. Investment in securities of foreign issuers involves
somewhat different investment risks from those affecting securities of U.S.
domestic issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements
comparable to those applicable to domestic companies. Interest paid by foreign
issuers may be subject to withholding and other foreign taxes which may
decrease the net return on foreign investments as compared to interest paid to
the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in
compliance with U.S. and foreign currency restrictions and tax laws restricting
the amounts and types of foreign investments.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions issuing ADRs may not be sponsored by the issuer of the underlying
foreign securities. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer of the underlying foreign
securities. EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and sells
securities and receives interest and dividends in currencies other than the
U.S. dollar--principally yen--the Portfolio may enter from time to time into
foreign currency exchange transactions. The Portfolio either enters into these
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or uses forward contracts to purchase or sell
foreign currencies. The cost of the Portfolio's spot currency exchange
transactions is generally the difference between the bid and offer spot rate of
the currency being purchased or sold.
6
<PAGE>
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward
contracts to sell a foreign currency in exchange for another foreign currency
if the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased against the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WARRANTS. The Portfolio invests in warrants, which entitle the holder to buy
common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower
than the current market price of the underlying securities, yet warrants are
subject to similar price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities. Warrants do not entitle
the holder to dividends or voting rights with respect to the underlying
securities and do not represent any rights in the assets of the issuing
company. Also, the value of the warrant does not necessarily change with the
value of the underlying securities and a warrant ceases to have value if it is
not exercised prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase money
market instruments on a when- issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement. At the time of settlement, a when-issued security may be valued
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at less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and other
Unregistered Securities below. Other repurchase agreements are considered to be
a type of money market instrument. See Risk Factors and Additional Investment
Information--Money Market Instruments.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For the
purposes of the 1940 Act, it is considered as a form of borrowing by the
Portfolio and, therefore, a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified. For more information, see Investment
Objectives and Policies in the Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
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The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees of the Portfolio. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase and sell
(write) exchange traded and OTC put and call options on equity securities or
indexes of equity securities, (b) purchase and sell futures contracts on
indexes of equity securities, and (c) purchase and sell (write) put and call
options on futures contracts on indexes of equity securities. Each of these
instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. The Portfolio may not use futures contracts and options
for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and
return characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Advisor and consistent with the Portfolio's objective and
policies. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly
correlated with its other investments or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option
premiums, in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. In addition, the Portfolio will not purchase or sell
(write) futures contracts, options, or futures contracts or commodity options
for risk management purposes if, as a result, the aggregate initial margin and
options premiums required to establish these positions exceed 5% of the net
asset value of the Portfolio. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies--Risk Management in the Statement of Additional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective. The Portfolio may invest in money
market instruments of foreign or domestic issuers denominated in U.S. dollars
and other currencies. Under normal circumstances the Portfolio will purchase
these securities to invest temporary cash balances or to maintain liquidity to
meet redemptions. However, the Portfolio may also invest in money market
instruments without limitation as a temporary
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defensive measure taken in the Advisor's judgment during, or in anticipation
of, adverse market conditions. For more detailed information about these money
market investments, see Investment Objectives and Policies in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
The Portfolio may not purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Portfolio's
total assets, except this limitation shall not apply to investments in U.S.
Government securities. In addition, the Portfolio may not borrow money except
that the Portfolio may (a) borrow money from banks for temporary or emergency
purposes (not for leveraging purposes) and (b) enter into reverse repurchase
agreements for any purpose, provided that (a) and (b) in total do not exceed
one-third of the Portfolio's total assets less liabilities (other than
borrowings); and the Portfolio may not issue senior securities except as
permitted by the 1940 Act or any rule, order or interpretation thereunder. See
Risk Factors and Additional Investment Information--Loans of Portfolio
Securities and Reverse Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declaration of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's Administrator, Distributor, Services Agent, and other service providers
and the performance of the Portfolio's Advisor. Pursuant to the Declaration of
Trust for the Portfolio, the Trustees of the Portfolio (who are not the same as
the Trustees of the Trust) have the same responsibilities for the Portfolio
including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers in the Statement of Additional
Information.
ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with
combined assets under management of over $145 billion (of which the Advisor
advises over $30 billion).
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Morgan provides investment advice and portfolio management services to the
Portfolio. Subject to the supervision of the Portfolio's Trustees, Morgan makes
the Portfolio's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages the Portfolio's investments. See
Investment Advisor in the Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental
research, systematic stock selection and disciplined portfolio construction.
Morgan has invested in equity securities of Japanese companies on behalf of its
clients for over a decade and has had a research team in Tokyo since 1972. The
portfolio managers making investments in Japanese equity securities work in
conjunction with Morgan's Japanese equity analysts, as well as capital market,
credit and economic research analysts, traders and administrative officers. The
Japanese equity analysts, located in Tokyo, each cover a different industry,
monitoring a universe of over 300 Japanese companies.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his business experience for
the past five years is indicated parenthetically): Yoshihiro Takahashi, Vice
President (since March, 1995, employed by Morgan since prior to 1990 as a
portfolio manager of Japanese equity investments since 1993 and as an account
officer for Morgan's Euroclear operations group prior to 1993) and Yukiko
Sugimoto, Vice President (since March, 1995, employed by Morgan since prior to
1990 as a portfolio manager of Japanese equity investments since 1991 and as an
account officer for Morgan's Euroclear operations group prior to 1991).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.65% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Code; and (v) performs such administrative and
managerial oversight of the activities of the Trust's and the Portfolio's
custodian and transfer agent as the respective Trustees may direct from time to
time. Under the terms of the Trust's and the Portfolio's Services Agreements
with Morgan, the fees of the Administrator are covered by Morgan's expense
undertakings described under Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other families of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
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funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The Pierpont Funds and The JPM Institutional Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio, including services
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share, keeping the books of account and providing
shareholder services to shareholders of the Fund.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included
in the expense undertaking: the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, at the annual
rate of 0.75% of the Fund's average daily net assets. The Portfolio's Services
Agreement provides for the Portfolio to pay Morgan a fee for these services,
which is computed daily and may be paid monthly, at the following annual rate
of the Portfolio's average daily net assets: 0.15% on net assets up to $200
million, 0.10% on the next $200 million in net assets, 0.05% on the next $200
million in net assets and 0.03% on net assets thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered.
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For the Fund and the Portfolio, the Trustees regularly review amounts paid to
and accounted for by Morgan pursuant to these agreements. Under the agreements,
Morgan may delegate one or more of its responsibilities to other entities,
including SBDS, at Morgan's expense. See Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
December 31, 1995 to the extent necessary to maintain the Fund's total
operating expenses (which includes expenses of the Fund and the Portfolio) at
the annual rate of 1.70% of the Fund's average daily net assets. This limit on
certain expenses does not cover extraordinary increases in these expenses
during the period and no longer applies in the event of a precipitous decline
in assets due to unforeseen circumstances. There is no assurance that Morgan
will continue this waiver beyond the specified period, except as required by
the following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million for
any fiscal year.
SHAREHOLDER TRANSACTIONS
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions
relating to a Fund account from Morgan as agent for the customer. All purchase
orders must be accepted by the Fund's Distributor. Investors must be customers
of Morgan or an eligible institution which is a customer of Morgan (an
"Eligible Institution"). Investors may also be employer-sponsored retirement
plans that have designated the Fund as an investment option for the plans.
Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Fund
reserves the right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
If the Fund receives a purchase order prior to 4:00 P.M. New York time on any
business day, the purchase of Fund shares is effective and is made at the net
asset value determined that day, and the purchaser generally becomes a holder
of record on the next business day upon the Fund's receipt of
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payment. If the Fund receives a purchase order after 4:00 P.M. New York time,
the purchase is effective and is made at the net asset value determined on the
next business day, and the purchaser becomes a holder of record on the
following business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited on the next business day in immediately available funds to
the shareholder's account at Morgan or at his or her Eligible Institution or,
in the case of certain Morgan customers, are mailed by check in accordance with
the customer's instructions and, subject to Further Redemption Information
below, in any event are paid within seven days.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund,
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges.
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See Purchase of Shares and Redemption of Shares in this Prospectus and in the
prospectuses for the other JPM Advisor Funds. See also Additional Information
below for an explanation of the telephone exchange policy of The JPM Advisor
Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and
distributions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust." The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
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Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration
of Trust. The Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of ten percent of
Trust shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is a series
(subtrust) of The Series Portfolio, a master trust organized as a trust under
the laws of the State of New York. The Series Portfolio's Declaration of Trust
provides that the Fund and other entities investing in the Portfolio (e.g.,
other investment companies, insurance company separate accounts and common and
commingled trust funds) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account of
such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or local taxes.
See Taxes in the Statement of Additional Information. Annual statements as to
the current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio limits its investments so that at the close
of each quarter of its taxable year (a) no more than 25% of its total assets
are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund will not qualify for the dividends- received deduction
because the income of the Fund will not consist of dividends paid by U.S.
corporations.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares. Long-
term capital gains distributions to corporate shareholders are not eligible for
the dividends-received deduction.
16
<PAGE>
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder,
will be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
The Fund is subject to foreign withholding taxes with respect to income
received from sources within certain foreign countries. So long as more than
50% of the value of the Fund's total assets at the close of any taxable year
consists of stock or securities of foreign corporations, the Fund may elect to
treat any such foreign income taxes paid by it as paid directly by its
shareholders. The Fund will make such an election only if it deems it to be in
the best interests of its shareholders and will notify shareholders in writing
each year if it makes the election and of the amount of foreign income taxes
and gross income derived from sources within any foreign country or possession
of the United States, if any, to be treated as paid by the shareholders. If the
Fund makes the election, each shareholder will be required to include in income
his proportionate share of the amount of foreign income taxes paid by the Fund
and will be entitled to claim either a credit (which is subject to certain
limitations) or, if the shareholder itemizes deductions, a deduction for his
share of the foreign income taxes in computing his federal income tax
liability. (No deduction will be permitted to individuals in computing their
alternative minimum tax liability.)
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, the Tokyo Stock Price Index, Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average, the Frank Russell Indexes, the
Morgan Stanley Europe, Australia and Far East Index, the Financial Times World
Stock Index and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of
operations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all
recurring fees. This method of calculating total return is required by
regulations of the Securities and Exchange Commission. Total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling the Fund's Distributor at (800) 847-9487.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell (write) exchange traded and OTC put and
call options on equity securities or indexes of equity securities, (b) purchase
and sell futures contracts on indexes of equity securities and (c) purchase and
sell (write) put and call options on futures contracts on indexes of equity
securities. Each of these instruments is a derivative instrument, as its value
derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. See Risk Management in the Statement of Additional
Information. The Portfolio may not use futures contracts and options for
speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options,
A-1
<PAGE>
except that writing calls generally is a profitable strategy if prices remain
the same or fall. Through receipt of the option premium a call writer offsets
part of the effect of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell (write) put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indexes are similar to options on securities,
except that the exercise of securities index options is settled by cash payment
and does not involve the actual purchase or sale of securities. In addition,
these options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations
in a single security. The Portfolio, in purchasing or selling index options, is
subject to the risk that the value of its portfolio securities may not change
as much as an index because the Portfolio's investments generally will not
match the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a futures contract, it agrees to sell a specified quantity of
the underlying instrument at a specified future date or to receive a cash
payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Futures can be held until their delivery dates or the position can be
(and normally is) closed out before then. There is no assurance, however, that
a liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a
A-2
<PAGE>
futures position, the Portfolio will be obligated to continue to pay variation
margin. Initial and variation margin payments do not constitute purchasing on
margin for purposes of the Portfolio's investment restrictions. In the event of
the bankruptcy of an FCM that holds margin on behalf of the Portfolio, the
Portfolio may be entitled to return of margin owed to it only in proportion to
the amount received by the FCM's other customers, potentially resulting in
losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-3
<PAGE>
THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS408
The
JPM Advisor
Japan Equity
Fund
PROSPECTUS
March 31, 1995
<PAGE>
PROSPECTUS
The JPM Advisor European Equity Fund
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) JPM-3637
The JPM Advisor European Equity Fund (the "Fund") seeks to provide a high total
return from a portfolio of equity securities of European companies. The Fund is
designed for investors who want an actively managed portfolio of European
equity securities that seeks to outperform the Morgan Stanley Capital
International Europe Index which is comprised of more than 500 companies in
fourteen European countries.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM Advisor
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE EUROPEAN EQUITY PORTFOLIO (THE "PORTFO-
LIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAV-
ING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFO-
LIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERV-
ICES METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE AND IS
A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL INFOR-
MATION CONCERNING HUB AND SPOKE(R) ON PAGE 2.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated March 31, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Advisor
Funds, or by calling (800) 847-9487.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE IN-
VESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund Is Designed.................................... 1
Special Information Concerning Hub and Spoke (R)........................... 2
Investment Objective and Policies.......................................... 3
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 13
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 17
Appendix................................................................... A-1
Options.................................................................... A-1
Futures Contracts.......................................................... A-2
</TABLE>
<PAGE>
The JPM Advisor European Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who want an actively managed portfolio of
European equity securities. The Fund seeks to achieve its investment objective
by investing all of its investable assets in The European Equity Portfolio, a
diversified open-end management investment company having the same investment
objective as the Fund. Since the investment characteristics and experience of
the Fund will correspond directly with those of the Portfolio, the discussion
in this Prospectus focuses on the investments and investment policies of the
Portfolio. The net asset value of shares in the Fund fluctuates with changes in
the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options and forward contracts on foreign currencies. The
potential risks of investing in these derivative instruments are discussed in
Risk Factors and Additional Investment Information and the Appendix. The
Portfolio may also purchase certain privately placed securities. The
Portfolio's investments in securities of foreign issuers, including issuers in
emerging European markets, involve foreign investment risks and may be more
volatile and less liquid than domestic securities. For further information
about these investments, see Investment Objective and Policies below.
The Fund requires a minimum initial investment of $5,000. See Purchase of
Shares.
This Prospectus describes the investment objective and policies, management and
operation of the Fund to enable investors to decide if the Fund suits their
needs. The Fund operates through Signature Financial Group, Inc.'s
("Signature") Hub and Spoke(R) financial services method. The Trustees of the
Trust believe that the Fund may achieve economies of scale over time by
investing through Hub and Spoke(R).
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the
operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average net assets of the Fund. The Trustees of the Trust believe
that the aggregate per share expenses of the Fund and the Portfolio will be
approximately equal to and may be less than the expenses that the Fund would
incur if it retained the services of an investment adviser and invested its
assets directly in portfolio securities. Fund and Portfolio expenses are
discussed below under the headings Management of the Trust and the Portfolio--
Expenses.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.65%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 1.05%
----
Total Operating Expenses (after expense reimbursement).................... 1.70%
</TABLE>
* These expenses are based on estimated expenses of the Fund and the Portfolio
and estimated average net assets for the Fund's first fiscal year, after re-
imbursement. Without such expected reimbursement, the estimated Total Operat-
ing Expenses would be equal on an annual basis to 1.80% of the estimated av-
erage net assets of the Fund. See Management of the Trust and the Portfolio--
Expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year..................................................................... $ 17
3 Years.................................................................... $ 54
5 Years.................................................................... $ 92
10 Years................................................................... $201
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Financial and Fund Accounting Services Agreement and the Services
Agreement, and fees paid to State Street Bank and Trust Company as custodian of
the Portfolio. For a more detailed description of contractual fee arrangements,
including expense reimbursements, and of the fees and expenses included in
Other Expenses, see Management of the Trust and the Portfolio. In connection
with the above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
The Fund's annual report will include a discussion of those factors, strategies
and techniques that materially affected its performance during the period of
the report, as well as certain related information. A copy of the Fund's annual
report will be made available without charge upon request.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
The Trust and the Portfolio use certain proprietary rights, know-how and
financial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a
registered service mark of Signature. Signature Broker-Dealer Services, Inc.
(the Trust's and Portfolio's Administrator and the Trust's Distributor) is a
wholly-owned subsidiary of Signature.
Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the same
investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the
outstanding shares of the Fund and the Portfolio. The use of Hub and Spoke(R)
has been approved by the shareholders of the Fund.
2
<PAGE>
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their own fund
using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from the
Administrator at (800) 847-9487.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Portfolio's investment objective or restrictions, may require withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable.
The distribution in kind may result in the Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund). Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. Whenever the Fund is requested to vote on
matters pertaining to the Portfolio (other than a vote by the Fund to continue
the operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Risk Factors and
Additional Investment Information and Investment Restrictions. For more
information about the Portfolio's management and expenses, see Management of
the Trust and the Portfolio. For more information about changing the investment
objective, policies and restrictions of the Fund or the Portfolio, see
Investment Restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.
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The Fund's investment objective is to provide a high total return from a
portfolio of equity securities of European companies. Total return will consist
of realized and unrealized capital gains and losses plus income. The Fund
attempts to achieve its investment objective by investing all of its investable
assets in The European Equity Portfolio, a diversified open-end management
investment company having the same investment objective as the Fund. Under
certain market conditions, the Fund or the Portfolio may not be able to achieve
its investment objective.
The Fund is designed for investors who want an actively managed portfolio of
European equity securities that seeks to outperform the Morgan Stanley Capital
International Europe Index which is comprised of more than 500 companies in
fourteen European countries. THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT
PROGRAM NOR IS THE FUND SUITABLE FOR ALL INVESTORS.
The Portfolio seeks to achieve its investment objective through country
allocation and stock valuation and selection. Based on fundamental research,
quantitative valuation techniques, and experienced judgment, Morgan uses a
structured decision-making process to allocate the Portfolio across European
countries, consisting of Austria, Belgium, Denmark, Germany, Finland, France,
Ireland, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the
United Kingdom.
A European company is one that: (i) has its principal securities trading market
in a European country; or (ii) is organized under the laws of a European
country; or (iii) derives 50% or more of its total revenue and/or profits from
either goods produced, sales made or services performed in European countries;
or (iv) has at least 50% of its assets located in European countries.
Using a dividend discount model and based on analysts' industry expertise,
companies in each country are ranked within industrial sectors according to
their relative value. Based on this valuation, Morgan selects the companies
which appear the most attractive for the Portfolio. Morgan believes that under
normal market conditions, industrial sector weightings generally will be
similar to those of the Morgan Stanley Capital International Europe Index.
The Portfolio's investments are primarily denominated in foreign currencies but
it may also invest in securities denominated in the U.S. dollar or
multinational currency units such as the ECU. The Advisor will not routinely
attempt to hedge the Portfolio's foreign currency exposure. However, the
Advisor may from time to time engage in foreign currency exchange transactions
if, based on fundamental research, technical factors, and the judgment of
experienced currency managers, it believes the transactions would be in the
Portfolio's best interest. For further information on foreign currency exchange
transactions, see Risk Factors and Additional Investment Information.
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. The Portfolio does not intend to respond to short-term
market fluctuations or to acquire securities for the purpose of short-term
trading; however, it may take advantage of short-term trading opportunities
that are consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may realize short-term capital gains or losses and incur
increased transaction costs. See Taxes below. The estimated annual portfolio
turnover rate for the Portfolio is generally not expected to exceed 100%.
EQUITY INVESTMENTS. In normal circumstances, the Advisor intends to keep the
Portfolio essentially fully invested with at least 65% of the value of its
total assets in equity securities of European companies consisting of common
stocks and other securities with equity characteristics comprised of preferred
stock, warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Portfolio's primary equity
investments are the common stock of companies based in the developed countries
of Europe. Such investments will be made in at least three European countries.
The common stock in which the Portfolio may invest includes the common stock of
any class or series or any similar equity interest, such as trust or limited
partnership interests. These equity investments may or may not pay
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dividends and may or may not carry voting rights. In addition to its equity
investments in European companies, the Portfolio may invest up to 5% of its
assets in equity securities of issuers in emerging European markets such as
Eastern European countries and Turkey. See Risk Factors and Additional
Investment Information. The Portfolio invests in securities listed on foreign
or domestic securities exchanges and securities traded in foreign or domestic
over-the-counter markets, and may invest in certain restricted or unlisted
securities.
The Portfolio may also invest in money market instruments and bonds denominated
in U.S. dollars and other currencies, purchase securities on a when-issued or
delayed delivery basis, enter into repurchase and reverse repurchase
agreements, loan its portfolio securities, purchase certain privately placed
securities and enter into forward foreign currency exchange contracts. In
addition, the Portfolio may use options on securities and indexes of
securities, futures contracts and options on futures contracts for hedging and
risk management purposes. Forward foreign currency exchange contracts, options
and futures contracts are derivative instruments. For a discussion of these
investments and investment techniques, see Risk Factors and Additional
Investment Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in foreign
securities. Investment in securities of foreign issuers involves somewhat
different investment risks from those affecting securities of U.S. domestic
issuers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform
accounting, auditing and financial standards and requirements comparable to
those applicable to domestic companies. Dividends and interest paid by foreign
issuers may be subject to withholding and other foreign taxes which may
decrease the net return on foreign investments as compared to dividends and
interest paid to the Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in
compliance with U.S. and foreign currency restrictions and tax laws restricting
the amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those
for securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers located
in foreign countries than in the United States.
Although the Portfolio invests primarily in securities of established issuers
in developed European countries, it may also invest in equity securities of
companies in European emerging market countries. Investments in securities of
issuers in European emerging market countries may involve a high degree of risk
and many may be considered speculative. These investments carry all of the
risks of investing in securities of foreign issuers outlined in this section to
a heightened
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degree. These heightened risks include (i) greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and economic
stability; (ii) the small current size of the markets for securities of
emerging markets issuers and the currently low or nonexistent volume of
trading, resulting in lack of liquidity and in price volatility; (iii) certain
national policies which may restrict the Portfolio's investment opportunities
including restrictions on investing in issuers or industries deemed sensitive
to relevant national interests; and (iv) the absence of developed legal
structures governing private or foreign investment and private property.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions issuing ADRs may not be sponsored by the issuer of the underlying
foreign securities. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer of the underlying foreign
securities. EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange
Transactions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and sells
securities and receives interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign
currencies. The cost of the Portfolio's spot currency exchange transactions is
generally the difference between the bid and offer spot rate of the currency
being purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying under the contract. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward
contracts to sell a foreign currency in exchange for another foreign currency
if the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
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Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased against the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
WARRANTS. The Portfolio invests in warrants, which entitle the holder to buy
common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower
than the current market price of the underlying securities, yet warrants are
subject to similar price fluctuations. As a result, warrants may be more
volatile investments than the underlying securities.
Warrants do not entitle the holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets of
the issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase money
market instruments on a when- issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. The Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See Illiquid Investments; Privately Placed and other
Unregistered Securities below. Other repurchase agreements are considered to be
a type of money market instrument. See Risk Factors and Additional Investment
Information--Fixed Income Investments.
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LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
Distributor, unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. For the
purposes of the Investment Company Act of 1940 (the "1940 Act"), it is
considered as a form of borrowing by the Portfolio and, therefore, a form of
leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objectives and Policies in the
Statement of Additional Information.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act"). An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees of the Portfolio. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase and sell
(write) exchange traded and over-the-counter put and call options on equity
securities or indexes of equity securities, (b) purchase and sell futures
contracts on indexes of equity securities, and (c) purchase and sell (write)
put and call options on futures contracts on indexes of equity securities. Each
of these instruments is a derivative instrument, as its value derives from the
underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. The Portfolio may not use futures contracts and options
for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and
return characteristics of the Portfolio's overall strategy in a manner
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deemed appropriate to the Advisor and consistent with the Portfolio's objective
and policies. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly
correlated with its other investments or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option
premiums, in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets. In addition, the Portfolio will not purchase or sell
(write) futures contracts, options, or futures contracts or commodity options
for risk management purposes if, as a result, the aggregate initial margin and
options premiums required to establish these positions exceed 5% of the net
asset value of the Portfolio. For more detailed information about these
transactions, see the Appendix to this Prospectus and Investment Objectives and
Policies--Risk Management in the Statement of Additional Information.
FIXED INCOME INVESTMENTS. The Portfolio is permitted to invest in money market
instruments and bonds although it intends to stay invested in equity securities
to the extent practical in light of its objective. The Portfolio may invest in
fixed income instruments of foreign or domestic issuers denominated in U.S.
dollars and other currencies. Under normal circumstances the Portfolio will
purchase money market instruments to invest temporary cash balances or to
maintain liquidity to meet redemptions. However, the Portfolio may also invest
in money market instruments and bonds without limitation as a temporary
defensive measure taken in the Advisor's judgment during, or in anticipation
of, adverse market conditions. For more detailed information about these
investments, see Investment Objectives and Policies in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of the Fund and the Portfolio. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in another open-end investment company with the
same investment objective and restrictions (such as the Portfolio). References
below to the Portfolio's investment restrictions also include the Fund's
investment restrictions.
The Portfolio may not purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Portfolio's
total assets, except this
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limitation shall not apply to investments in U.S. Government securities. In
addition, the Portfolio may not borrow money except that the Portfolio may (a)
borrow money from banks for temporary or emergency purposes (not for leveraging
purposes) and (b) enter into reverse repurchase agreements for any purpose,
provided that (a) and (b) in total do not exceed one-third of the Portfolio's
total assets less liabilities (other than borrowings); and the Portfolio may
not issue senior securities except as permitted by the 1940 Act or any rule,
order or interpretation thereunder. See Risk Factors and Additional Investment
Information--Loans of Portfolio Securities and Reverse Repurchase Agreements.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment
Restrictions in the Statement of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declaration of Trust for the Trust, the Trustees of
the Trust decide upon matters of general policy and review the actions of the
Trust's Administrator, Distributor, Services Agent, and other service providers
and the performance of the Portfolio's Advisor. Pursuant to the Declaration of
Trust for the Portfolio, the Trustees of the Portfolio (who are not the same as
the Trustees of the Trust) have the same responsibilities for the Portfolio
including overseeing its service providers.
The Portfolio has entered into a Fund Services Agreement with Pierpont Group,
Inc. to assist the Trustees of the Portfolio in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The fee to be paid by
the Portfolio under the agreement approximates the reasonable cost of Pierpont
Group, Inc. in providing these services. Pierpont Group, Inc. was organized in
1989 at the request of the Trustees of The Pierpont Family of Funds for the
purpose of providing these services at cost to these funds. The principal
offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New
York 10017. For more information concerning the Trust's and the Portfolio's
Trustees and officers, see Trustees and Officers in the Statement of Additional
Information.
ADVISOR. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with
combined assets under management of over $145 billion (of which the Advisor
advises over $30 billion). Morgan provides investment advice and portfolio
management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental
research, systematic stock selection, disciplined portfolio construction and,
in the case of foreign equities, country exposure and currency management.
Morgan has managed portfolios of equity securities of international, including
European, companies on behalf of its clients since 1974. The portfolio managers
making investments in European equity securities work in conjunction with
Morgan's European equity analysts, as well as capital market, credit and
economic research analysts, traders and administrative officers. The European
equity analysts, located in London, each cover a different industry, monitoring
a universe of approximately 600 companies in Europe.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and his business experience for
the
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past five years is indicated parenthetically): Paul A. Quinsee, Vice President
(since March, 1995, employed by Morgan since February, 1992 and by Citibank,
N.A. prior to 1992 as a portfolio manager of international equity investments)
and Rudolph Leuthold, Managing Director (since March, 1995, employed by Morgan
since prior to 1990 as a portfolio manager of international equity
investments).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.65% of the Portfolio's average daily net assets.
Morgan also acts as Services Agent to the Trust and the Portfolio and provides
shareholder services to shareholders of the Fund. See Services Agent below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and the Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolio and in that capacity
supervises the Fund's and the Portfolio's day-to-day operations other than
management of the Portfolio's investments. In this capacity, SBDS administers
and manages all aspects of the Fund's and the Portfolio's day-to-day operations
subject to the supervision of the Trustees, except as set forth under Advisor,
Services Agent and Custodian. In connection with its responsibilities as
Administrator, SBDS (i) furnishes ordinary clerical and related services for
day-to-day operations including certain recordkeeping responsibilities; (ii)
takes responsibility for compliance with all applicable federal and state
securities and other regulatory requirements; (iii) is responsible for the
registration of sufficient Fund shares under federal and state securities laws;
(iv) takes responsibility for monitoring the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"); and (v) performs such administrative and managerial oversight of the
activities of the Trust's and the Portfolio's custodian and transfer agent as
the respective Trustees may direct from time to time. Under the terms of the
Trust's and the Portfolio's Services Agreements with Morgan, the fees of the
Administrator are covered by Morgan's expense undertakings described under
Services Agent below.
Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM
Advisor Funds, as well as The JPM Institutional Funds and The Pierpont Funds,
which are two other families of mutual funds for which SBDS acts as
Administrator. The fee rate is calculated daily in accordance with the
following schedule: 0.040% of the first $1 billion of these funds' aggregate
average daily net assets, 0.032% of the next $2 billion of these funds'
aggregate average daily net assets, 0.024% of the next $2 billion of these
funds' aggregate average daily net assets and 0.016% of these funds' aggregate
average daily net assets in excess of $5 billion. This fee rate is then applied
to the net assets of the Fund.
Under the Portfolio's Administration Agreement, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the
Portfolio, as well as all of the other portfolios in which series of The JPM
Advisor Funds, The Pierpont Funds and The JPM Institutional Funds invest. The
fee rate is calculated daily in accordance with the following schedule: 0.010%
of the first $1 billion of these portfolios' aggregate average daily net
assets, 0.008% of the next $2 billion of these portfolios' aggregate average
daily net assets, 0.006% of the next $2 billion of these portfolios' aggregate
average daily net assets and 0.004% of these portfolios' aggregate average
daily net assets in excess of $5 billion. This fee rate is then applied to the
net assets of the Portfolio. The Administrator may voluntarily waive a portion
of its fees.
SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and the Exclusive Placement Agent for the Portfolio. SBDS is a wholly
owned subsidiary of Signature. Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman.
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SERVICES AGENT. Under a Financial and Fund Accounting Services Agreement with
the Portfolio and a Services Agreement with the Trust (collectively, the
"Services Agreements"), Morgan acts as Services Agent to the Trust and the
Portfolio and provides shareholder services to shareholders of the Fund. The
agreements provide that Morgan is responsible for certain accounting and
operational services provided to the Fund and the Portfolio, including services
related to tax returns and financial reports. In the case of the Fund, these
services also include matters related to computing the amount of dividends and
the net asset value per share, keeping the books of account and providing
shareholder services to shareholders of the Fund.
In addition, as provided in the agreements, Morgan is responsible for the
annual costs of certain usual and customary expenses incurred by the Fund and
the Portfolio (the "expense undertakings"). The expenses covered by the expense
undertakings include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Administrator,
insurance, the compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices, and proxies to Fund shareholders, and
registration fees under federal or state securities laws. The Fund and the
Portfolio will pay these expenses directly and such amounts will be deducted
from the fees to be paid to Morgan under these agreements. If such amounts are
more than the amount of Morgan's fees under the agreements, Morgan will
reimburse the Fund or the Portfolio, as appropriate, for such excess amounts.
Under the Trust's Services Agreement, the following expenses are not included
in the expense undertaking: the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement. Under the Portfolio's
Services Agreement, the following expenses are not included in the expense
undertaking: the fees of Pierpont Group, Inc., custodian fees, advisory fees,
brokerage expenses, the services agent fee, organizational expenses and
extraordinary expenses as defined in this agreement.
The Trust's Services Agreement provides for the Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, at the annual
rate of 0.75% of the Fund's average daily net assets. The Portfolio's Services
Agreement provides for the Portfolio to pay Morgan a fee for these services,
which is computed daily and may be paid monthly, at the following annual rate
of the Portfolio's average daily net assets: 0.15% on net assets up to $200
million, 0.10% on the next $200 million in net assets, 0.05% on the next $200
million in net assets and 0.03% on net assets thereafter.
As noted above, the fee levels of the Fund and the Portfolio are expense
undertakings and reflect payments made directly to third parties by the Fund
and the Portfolio for services rendered, as well as payments to Morgan for
services rendered. For the Fund and the Portfolio, the Trustees regularly
review amounts paid to and accounted for by Morgan pursuant to these
agreements. Under the agreements, Morgan may delegate one or more of its
responsibilities to other entities, including SBDS, at Morgan's expense. See
Expenses below.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Fund's and the Portfolio's Custodian and
Transfer and Dividend Disbursing Agent.
EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse the Fund through at least
December 31, 1995 to the extent necessary to maintain the Fund's total
operating expenses (which includes expenses of the Fund and the Portfolio) at
the annual rate of 1.70% of the Fund's average daily net assets. This limit on
certain expenses does not cover extraordinary increases in these expenses
during the period and no longer applies in the event of a precipitous decline
in assets due to unforeseen circumstances. There is no assurance that Morgan
will continue this waiver beyond the specified period, except as required by
the following sentence. Morgan has agreed to waive fees as necessary, if in any
fiscal year the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million for
any fiscal year.
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SHAREHOLDER TRANSACTIONS
Investors may request either Morgan or their Eligible Institution, as defined
below, for assistance in placing orders to purchase, redeem or exchange shares
of the Fund.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) JPM-3637.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as Services Agent and the Fund is authorized to accept any instructions
relating to a Fund account from Morgan as agent for the customer. All purchase
orders must be accepted by the Fund's Distributor. Investors must be customers
of Morgan or an eligible institution which is a customer of Morgan (an
"Eligible Institution"). Investors may also be employer-sponsored retirement
plans that have designated the Fund as an investment option for the plans.
Prospective investors who are not already customers of Morgan may apply to
become customers of Morgan for the sole purpose of Fund transactions. There are
no charges associated with becoming a Morgan customer for this purpose. Morgan
reserves the right to determine the customers that it will accept, and the Fund
reserves the right to determine the purchase orders that it will accept.
The Fund requires a minimum initial investment of $5,000.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the next business day.
If the Fund receives a purchase order prior to 4:00 P.M. New York time on any
business day, the purchase of Fund shares is effective and is made at the net
asset value determined that day, and the purchaser generally becomes a holder
of record on the next business day upon the Fund's receipt of payment. If the
Fund receives a purchase order after 4:00 P.M. New York time, the purchase is
effective and is made at the net asset value determined on the next business
day, and the purchaser becomes a holder of record on the following business day
upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may
include establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Eligible Institution, transmitting
proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding executed proxies and obtaining such other
information and performing such other services as Morgan or the Eligible
Institution's clients may reasonably request and agree upon with the Eligible
Institution. Eligible Institutions may separately establish their own terms,
conditions and charges for providing the aforementioned services and for
providing other services.
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REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund. The Fund executes effective redemption requests
at the next determined net asset value per share. See Net Asset Value. See
Additional Information below for an explanation of the telephone redemption
policy of The JPM Advisor Funds.
A redemption request received by the Fund prior to 4:00 P.M. New York time is
effective on that day. A redemption request received after that time becomes
effective on the next business day. Proceeds of an effective redemption are
generally deposited on the next business day in immediately available funds to
the shareholder's account at Morgan or at his or her Eligible Institution or,
in the case of certain Morgan customers, are mailed by check in accordance with
the customer's instructions and, subject to Further Redemption Information
below, in any event are paid within seven days.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the
shareholder's taxpayer identification number and address. As discussed under
Taxes below, the Fund may be required to impose "back-up" withholding of
federal income tax on dividends, distributions and redemption proceeds when
noncorporate investors have not provided a certified taxpayer identification
number. In addition, if a shareholder sends a check for the purchase of Fund
shares and shares are purchased before the check has cleared, the transmittal
of redemption proceeds from the shares will occur upon clearance of the check
which may take up to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or the Securities and Exchange Commission may permit.
See Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Advisor Fund
without charge. Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one fund and purchases of
another fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Advisor Funds. See
also Additional Information below for an explanation of the telephone exchange
policy of The JPM Advisor Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and
distributions are payable to shareholders of record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited
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to the shareholder's account at Morgan or at his Eligible Institution or, in
the case of certain Morgan customers, are mailed by check in accordance with
the customer's instructions. The Fund reserves the right to discontinue, alter
or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net
Asset Value in the Statement of Additional Information for information on
valuation of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information.
ORGANIZATION
The Trust was organized on September 16, 1994 as an unincorporated business
trust under Massachusetts law and is an entity commonly known as a
"Massachusetts business trust." The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares ($0.001 par value)
of one or more series. To date, nine series of shares have been authorized and
are available for sale to the public. Only shares of the Fund are offered
through this Prospectus. No series of shares has any preference over any other
series of shares. See Massachusetts Trust in the Statement of Additional
Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or the Declaration
of Trust. The Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of ten percent of
Trust shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio, in which all the assets of the Fund are invested, is a series
(subtrust) of The Series Portfolio, a master trust organized under the laws of
the State of New York. The Series Portfolio's Declaration of Trust provides
that the Fund and other entities investing in the Portfolio (e.g., other
investment companies, insurance company separate accounts and common and
commingled trust funds) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account of
such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in
the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are
subject to change by legislative or administrative action. Investors are urged
to consult their own tax advisors with respect to specific questions as to
federal taxes and with respect to the applicability of state or
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local taxes. See Taxes in the Statement of Additional Information. Annual
statements as to the current federal tax status of distributions, if
applicable, are mailed to shareholders after the end of the taxable year for
the Fund.
The Trust intends to qualify the Fund as a separate regulated investment
company under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio limits its investments so that at the close
of each quarter of its taxable year (a) no more than 25% of its total assets
are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if all of its net
investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or
reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund will not qualify for the dividends- received deduction
because the income of the Fund will not consist of dividends paid by U.S.
corporations.
Distributions of net long-term capital gains in excess of net short-term
capital losses are taxable to shareholders of the Fund as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether taken in cash or reinvested in additional shares. Long-
term capital gains distributions to corporate shareholders are not eligible for
the dividends-received deduction.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the
distribution, although constituting a return of capital to the shareholder,
will be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares.
The Fund is subject to foreign withholding taxes with respect to income
received from sources within certain foreign countries. So long as more than
50% of the value of the Fund's total assets at the close of any taxable year
consists of stock or securities of foreign corporations, the Fund may elect to
treat any such foreign income taxes paid by it as paid directly by its
shareholders. The Fund will make such an election only if it deems it to be in
the best interests of its shareholders and will notify shareholders in writing
each year if it makes the election and of the amount of foreign income taxes
and gross income derived from sources within any foreign country or possession
of the United States, if any, to be treated as paid by the shareholders. If the
Fund makes the election, each shareholder will be required to include in income
his proportionate share of the amount of foreign income taxes paid by the Fund
and will be entitled to claim either a credit (which is subject to certain
limitations) or, if the shareholder itemizes deductions, a deduction for his
share of the foreign income taxes in computing his federal income tax
liability. (No deduction will be permitted to individuals in computing their
alternative minimum tax liability.)
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ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his or her Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. The Fund will employ reasonable procedures, including
requiring investors to give their Personal Identification Number and tape
recording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes, the Morgan Stanley Europe,
Australia and Far East Index, Morgan Stanley Capital International Europe
Index, the Financial Times World Stock Index and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of
operations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all
recurring fees. This method of calculating total return is required by
regulations of the Securities and Exchange Commission. Total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. See Performance Data in the Statement of Additional
Information. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by calling the Fund's Distributor at (800) 847-9487.
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APPENDIX
The Portfolio may (a) purchase and sell (write) exchange traded and over-the-
counter put and call options on equity securities or indexes of equity
securities, (b) purchase and sell futures contracts on indexes of equity
securities and (c) purchase and sell (write) put and call options on futures
contracts on indexes of equity securities. Each of these instruments is a
derivative instrument, as its value derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. See Risk Management in the Statement of Additional
Information. The Portfolio may not use futures contracts and options for
speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying
the option at a fixed strike price. In return for this right, the Portfolio
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indexes of securities, indexes of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a
put option on a security, it will sell the instrument underlying the option at
the strike price. If the Portfolio exercises an option on an index, settlement
is in cash and does not involve the actual sale of securities. If an option is
American style, it may be exercised on any day up to its expiration date. A
European style option may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options,
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except that writing calls generally is a profitable strategy if prices remain
the same or fall. Through receipt of the option premium a call writer offsets
part of the effect of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell (write) put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indexes are similar to options on securities,
except that the exercise of securities index options is settled by cash payment
and does not involve the actual purchase or sale of securities. In addition,
these options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations
in a single security. The Portfolio, in purchasing or selling index options, is
subject to the risk that the value of its portfolio securities may not change
as much as an index because the Portfolio's investments generally will not
match the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an over-the-counter option, it will be
relying on its counterparty to perform its obligations, and the Portfolio may
incur additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date or to
make a cash payment based on the value of a securities index. When the
Portfolio sells a futures contract, it agrees to sell a specified quantity of
the underlying instrument at a specified future date or to receive a cash
payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Futures can be held until their delivery dates or the position can be
(and normally is) closed out before then. There is no assurance, however, that
a liquid market will exist when the Portfolio wishes to close out a particular
position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase the Portfolio's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When the Portfolio sells a futures contract, by contrast,
the value of its futures position will tend to move in a direction contrary to
the value of the underlying instrument. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a
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futures position, the Portfolio will be obligated to continue to pay variation
margin. Initial and variation margin payments do not constitute purchasing on
margin for purposes of the Portfolio's investment restrictions. In the event of
the bankruptcy of an FCM that holds margin on behalf of the Portfolio, the
Portfolio may be entitled to return of margin owed to it only in proportion to
the amount received by the FCM's other customers, potentially resulting in
losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-3
<PAGE>
THE JPM ADVISOR FUNDS
The JPM Advisor U.S. Fixed Income Fund
The JPM Advisor International Fixed Income Fund
The JPM Advisor U.S. Equity Fund
The JPM Advisor U.S. Small Cap Equity Fund
The JPM Advisor International Equity Fund
The JPM Advisor European Equity Fund
The JPM Advisor Asia Growth Fund
The JPM Advisor Japan Equity Fund
The JPM Advisor Emerging Markets Equity Fund
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Trust
or the Distributor to make such offer in such jurisdiction.
ADVPROS406
The
JPM Advisor
European
Equity Fund
PROSPECTUS
March 31, 1995
