<PAGE>
As filed with the U.S. Securities and Exchange Commission on August 26, 1996
Registration Nos. 33-84798 and 811-8794
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 8
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10
THE JPM ADVISOR FUNDS
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 557-0700
John E. Pelletier
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to:
Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has previously registered an indefinite number of its shares
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant has not filed Rule
24f-2 notices with respect to The JPM Advisor International Fixed Income Fund
(for the Fiscal Year ended September 30, 1995); The JPM Advisor U.S. Equity Fund
and The JPM Advisor U.S. Small Cap Equity Fund (for their Fiscal
Years ended May 31, 1995); The JPM Advisor U.S. Fixed Income Fund, The JPM
Advisor International Equity Fund and The JPM Advisor Emerging Markets Equity
Fund (for their Fiscal Years ended October 31, 1995); and The JPM Advisor
European Equity Fund, The JPM Advisor Japan Equity Fund and The JPM Advisor Asia
Growth Fund (for their Fiscal Years ended December 31, 1995) because the
Registrant has not sold any securities to the public with respect to those
series during the fiscal years indicated. The Registrant filed a Rule 24f-2
notice with respect to its series as follows: The JPM Advisor U.S. Equity Fund
and The JPM Advisor U.S. Small Cap Equity Fund (for their Fiscal
<PAGE>
Years ended May 31, 1996) on July 30, 1996. The Registrant expects to file
Rule 24f-2 notices with respect to its other series as follows: The JPM Advisor
Diversified Fund (for the Fiscal Year ending June 30, 1997) on or before August
30, 1997; The JPM Advisor International Fixed Income Fund (for the Fiscal Year
ending September 30, 1996) on or before November 30, 1996; The JPM Advisor U.S.
Fixed Income Fund, The JPM Advisor International Equity Fund and The JPM Advisor
Emerging Markets Equity Fund (for their Fiscal Years ending October 31, 1996) or
before December 30, 1996; and The JPM Advisor European Equity Fund, The JPM
Advisor Japan Equity Fund and The JPM Advisor Asia Growth Fund (for their Fiscal
Years ending December 31, 1996) on or before February 28, 1997.
The U.S. Fixed Income Portfolio, The Non-U.S. Fixed Income Portfolio, The
Selected U.S. Equity Portfolio, The U.S. Small Company Portfolio, The Non-U.S.
Equity Portfolio, The Emerging Markets Equity Portfolio, The Series Portfolio
and The Diversified Portfolio have also executed this Registration Statement.
JPM510
<PAGE>
THE JPM ADVISOR FUNDS
CROSS-REFERENCE SHEET
(As Required by Rule 495)
PART A ITEM NO.: Prospectus Headings.
1. COVER PAGE: Cover Page.
2. SYNOPSIS: Investors for Whom the Fund is Designed.
3. CONDENSED FINANCIAL INFORMATION: Financial Highlights, where applicable.
4. GENERAL DESCRIPTION OF REGISTRANT: Cover Page; Investors for Whom the Fund
is Designed; Investment Objective and Policies; Risk Factors and Additional
Investment Information; Investment Restrictions; Special Information
Concerning Investment Structure; Organization; Appendix.
5. MANAGEMENT OF THE FUND: Management of the Trust and the Portfolio;
Shareholder Transactions; Additional Information.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not applicable.
6. CAPITAL STOCK AND OTHER SECURITIES: Special Information Concerning
Investment Structure; Shareholder Transactions; Net Asset Value; Purchase
of Shares; Taxes; Dividends and Distributions; Organization.
7. PURCHASE OF SECURITIES BEING OFFERED: Purchase of Shares; Exchange of
Shares; Investors for Whom the Fund is Designed; Dividends and
Distributions; Net Asset Value.
8. REDEMPTION OR REPURCHASE: Redemption of Shares; Exchange of Shares; Net
Asset Value.
9. PENDING LEGAL PROCEEDINGS: Not applicable.
PART B ITEM NO.: Statement of Additional Information Headings.
10. COVER PAGE: Cover Page.
11. TABLE OF CONTENTS: Table of Contents.
12. GENERAL INFORMATION AND HISTORY: General.
13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies;
Additional Investments; Investment Restrictions; Quality and
Diversification Requirements; Appendices A and B.
14. MANAGEMENT OF THE FUND: Trustees and Officers.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of
Shares.
16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Co-
Administrator and Distributor; Services Agent; Custodian; Independent
Accountants; Expenses.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.
18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
<PAGE>
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares;
Dividends and Distributions.
20. TAX STATUS: Taxes.
21. UNDERWRITERS: Co-Administrator and Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Data.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C
Information required to be included in Part C is set forth under the
appropriately numbered items included in Part C of this registration statement.
<PAGE>
EXPLANATORY NOTE
This post-effective amendment no. 8 (the "Amendment") to the
Registrant's registration statement (File nos. 33-84798 and 811-8794) on Form
N-1A (the "Registration Statement") is being filed (i) with respect to The
JPM Advisor U.S. Equity Fund and The JPM Advisor U.S. Small Cap Equity Fund
(each a series of shares of the Registrant), pursuant to the Registrant's
undertaking to file a post-effective amendment to the Registration Statement,
using financials which need not be certified, within four to six months
following the date of commencement of public investment operations ("comply
with the 4- to 6-month undertaking") and to update the Registration Statement
with financial information for the fiscal year ended May 31, 1996; (ii) with
respect to The JPM Advisor European Equity Fund, The JPM Advisor Japan Equity
Fund and The JPM Advisor Asia Growth Fund (each is also a series of shares of
the Registrant), to comply with the 4- to 6- month undertaking; and (iii) with
respect to the above series and all other series of shares of the Registrant,
to make other nonmaterial changes to the disclosure in the Registrant's
statement of additional information and Part C to the Registration Statement.
As a result, the Amendment does not affect any of the Registrant's currently
effective prospectuses, each of which is incorporated herein by reference as
most recently filed pursuant to Rule 497 under the Securities Act of 1933, as
amended.
<PAGE>
PROSPECTUS
The JPM Advisor U.S. Equity Fund
60 State Street
Boston, Massachusetts 02109
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 A TWO-TIER MASTER-FEEDER STRUCTURE. SEE SPECIAL INFORMATION CON-
CERNING INVESTMENT STRUCTURE ON PAGE 3.
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 August 26, 1996 (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, Funds Distributor, Inc. ("FDI"), 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: The JPM Advisor
Funds, or by calling (800) 221-7930.
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 AUGUST 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment
Structure................................................................. 3
Investment Objective and Policies.......................................... 4
Risk Factors and Additional Investment Information......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... A-1
</TABLE>
<PAGE>
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 in a two-tier master-feeder investment fund structure.
The Trustees of the Trust believe that the Fund may achieve economies of scale
over time by utilizing this investment structure.
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 heading Management of the Trust and the Portfolio.
<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............................................................. 0.40%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.81%
----
Total Operating Expenses (after expense reimbursement).................... 1.21%
</TABLE>
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* These expenses are based on the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, af-
ter any applicable expense reimbursement. Without such reimbursement, Other
Expenses and Total Operating Expenses (after application of state expense
limitations) would have been equal on an annual basis to 2.10% and 2.50%, re-
spectively, of the average daily net assets of the Fund. See Management of
the Trust and the Portfolio.
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................................................................... $147
</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 Portfolio's Administrative Services Agreement and the Trust's Serv-
ices Agreement, the fees paid to Pierpont Group, Inc. under the Portfolio Fund
Services Agreement, the fees paid to FDI under the Portfolio's Co-Administra-
tion Agreement, organizational expenses, the fees paid to State Street Bank and
Trust Company as custodian of the Portfolio, and other usual and customary ex-
penses of the Portfolio. For a more detailed description of contractual fee ar-
rangements, including expense reimbursements, 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 re-
demption 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.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated period
have been audited by independent accountants. The Fund's annual report will
include a discussion of those factors, strategies and techniques that materi-
ally affected its performance during the period of the report, as well as cer-
tain related information. A copy of the Fund's annual report will be made
available without charge upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 5, 1996
(COMMENCEMENT
OF OPERATIONS)
TO MAY 31, 1996
----------------
<S> <C>
Net Asset Value, Beginning of Period.......................... $10.00
------
Income from Investment Operations:
Net Investment Income......................................... 0.02
Net Realized and Unrealized Gain on Investment................ 0.71
------
Total from Investment Operations.............................. 0.73
------
Net Asset Value, End of Period................................ $10.73
======
Total Return.................................................. $ 7.30%(a)
======
Ratios and Supplemental Data:
Net Assets, End of Period (in thousands)...................... $ 139
Ratios to Average Net Assets:
Expenses..................................................... 1.21%(b)
Net Investment Income........................................ 1.76%(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursement ............................................... 1.29%(c)
</TABLE>
- ---------------
(a) Not annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio 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 out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
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 bear 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 Morgan at
(800) JPM-3637.
3
<PAGE>
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 from a port-
folio 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 Se-
lected U.S. Equity Portfolio, a diversified open-end management investment com-
pany having the same investment objective as the Fund. The Portfolio invests
primarily in the common stock of large and medium sized U.S. corporations.
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.
4
<PAGE>
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 vari-
ety of criteria including the company's managerial strength, prospects for
growth and competitive position. Morgan may modestly under or over-weight se-
lected 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 in-
vestment objective. The Portfolio does not intend to respond to short-term mar-
ket fluctuations or to acquire securities for the purpose of short-term trad-
ing; 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 Portfo-
lio's net assets invested in equity securities consisting of common stocks and
other securities with equity characteristics comprised of preferred stock, war-
rants, 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 lim-
ited 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 for-
eign securities exchanges and securities traded in domestic or foreign over-
the-counter (OTC) markets, and may invest in certain restricted or unlisted se-
curities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations included in the S&P 500 Index or listed on a national securities
exchange. However, the Portfolio does not expect to invest more than 5% of its
assets at the time of purchase in securities of foreign issuers. 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 deliv-
ery 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 in-
volve options on securities and securities indexes, futures contracts and op-
tions on futures contracts. Forward foreign currency exchange contracts, op-
tions 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. Convert-
ible 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.
COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a spe-
cific price (the strike price) for a specific period of time. The market price
of warrants may be substantially lower than the current market price of the un-
derlying common stock, yet warrants are subject to similar price fluctuations.
As a result, warrants may be more volatile investments than the underlying com-
mon stock.
5
<PAGE>
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or 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 for fixed income investments no in-
terest 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 Port-
folio maintains with the Custodian a separate account with a segregated port-
folio of securities in an amount at least equal to these commitments. When en-
tering 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 liabil-
ities other than the obligations created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished 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 re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below.
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 securi-
ties 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 in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will con-
sider all facts and circumstances, including the creditworthiness of the bor-
rowing financial institution, and the Portfolio will not make any loans in ex-
cess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase agreement transactions. See Repurchase Agreements above. The
Portfolio will not lend its securities to any officer, Trustee, Director, em-
ployee 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 re-
verse 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 agree-
ment. For purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), it is considered a form of borrowing by the Portfolio and, there-
fore, is a form of leverage.
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Leverage may cause any gains or losses of the Portfolio to be magnified. See
Investment Restrictions for investment limitations applicable to reverse re-
purchase agreements and other borrowings. 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, as amended (the "1933 Act"), and cannot be offered for
public sale in the United States without first being registered under 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 il-
liquid 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 de-
termined 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 OTC put and call options on equity securities or indexes of equity
securities, (b) purchase and sell futures contracts on indexes of equity secu-
rities, 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, in-
cluding buying futures contracts and buying calls, tend to increase market ex-
posure. 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 Ad-
visor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfo-
lio's return. Certain strategies limit the Portfolio's possibilities to real-
ize 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 premi-
ums, in connection with its futures and options transactions and these trans-
actions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of se-
curities 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
7
<PAGE>
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 dif-
ferent investment risks from those affecting securities of U.S. domestic is-
suers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform ac-
counting, 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 de-
crease the net return on foreign investments as compared to dividends and in-
terest 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, na-
tionalization, 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 depre-
ciation 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 is-
suer. 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 ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing 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 insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may not provide the same share-
holder information that a sponsored depository is required to provide under
its contractual arrangements with the issuer of the underlying foreign securi-
ties. 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 cur-
rencies, 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 Trans-
actions.
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
8
<PAGE>
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 curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing 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 con-
tracts are derivative instruments, as their value derives from the spot ex-
change rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usu-
ally 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 cur-
rency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio'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 antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally 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 de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts 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 fluc-
tuations 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 projec-
tion 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 perspec-
tive. The Portfolio may invest in money market instruments of domestic or for-
eign issuers denominated in U.S. dollars. Under normal circumstances the Port-
folio 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 meas-
ure taken in the Advisor's judgment during, or in anticipation of, adverse
market conditions. For more detailed information about these money market in-
vestments, see Investment Objectives and Policies in the Statement of Addi-
tional 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.
9
<PAGE>
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional In-
formation, 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 invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
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 secu-
rities; or (iii) purchase securities of any issuer if, as a result of the pur-
chase, 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 (in-
cluding predecessors).
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see Investment Re-
strictions 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 service providers and the performance of the Portfolio's Advisor. Pur-
suant to the Declaration of Trust for the Portfolio, the Trustees of the Port-
folio (who are not the same as the Trustees of the Trust) have the same re-
sponsibilities 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 su-
pervisory 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 those funds. The principal of-
fices 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 Addi-
tional Information.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices 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 con-
ducts a general banking and trust business. Morgan is a wholly owned subsidi-
ary 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 cli-
ents with combined assets under management of over $179 billion (of which the
Advisor advises over $28 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.
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<PAGE>
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 cli-
ents 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 in-
dustry, 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
1991 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
1991 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.
Under separate agreements, Morgan also provides certain financial, fund ac-
counting and administrative services to the Fund and the Portfolio and share-
holder services to Fund shareholders. 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.
CO-ADMINISTRATOR AND DISTRIBUTOR. Under Co-Administration Agreements with the
Trust and the Portfolio, FDI serves as the Co-Administrator for the Trust and
the Portfolio and in that capacity FDI (i) provides office space, equipment
and clerical personnel for maintaining the organization and books and records
of the Trust and the Portfolio; (ii) provides officers for the Trust and the
Portfolio; (iii) prepares and files documents required in connection with the
Trust's state securities law registrations; (iv) reviews and files Trust mar-
keting and sales literature; (v) files Portfolio regulatory documents and
mails Portfolio communications to Trustees and investors; and (vi) maintains
related books and records. Under the terms of the Trust's Services Agreement
with Morgan, the fees of the Co-Administrator for its services to the Trust
are covered by Morgan's expense undertakings described under Services Agent
below.
FDI, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and exclusive placement agent for the Portfolio. FDI is a wholly
owned indirect subsidiary of Boston Institutional Group, Inc. FDI currently
provides administration and distribution services for a number of other regis-
tered investment companies.
SERVICES AGENT. Under a Services Agreement with the Trust and an Administra-
tive Services Agreement with the Portfolio, Morgan is responsible for certain
financial, fund accounting and administrative services provided to the Fund
and the Portfolio, respectively, including services related to taxes, finan-
cial statements, calculation of performance data, oversight of service provid-
ers, certain regulatory and Board of Trustees matters, and providing share-
holder services to shareholders of the Fund.
In addition, as provided in the Trust's Services Agreement, Morgan is respon-
sible for the annual costs of certain usual and customary expenses incurred by
the Fund (the "expense undertaking"). The expenses covered by the expense un-
dertaking include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Co-Administrator
for services to the Trust, insurance, the compensation and expenses of the
Trust's Trustees, the expenses of printing and mailing reports, notices, and
proxies to Fund shareholders, and registration fees under federal or state se-
curities laws. The Fund will pay these expenses directly and such amounts will
be deducted from the fees to be paid to Morgan under the agreement. If such
amounts are more than the amount of Morgan's fees under the agreement,
11
<PAGE>
Morgan will reimburse the Fund for such excess amounts. Under the agreement,
the following expenses are not included in the expense undertaking: the serv-
ices 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 on an
annual basis to 0.69% of the Fund's average daily net assets.
As noted above, the fee levels of the Fund are expense undertakings and reflect
payments made directly to third parties by the Fund for services rendered, as
well as payments to Morgan for services rendered. The Trustees of the Trust
regularly review amounts paid to and accounted for by Morgan pursuant to the
Services Agreement. See Expenses below.
Under the Portfolio's Administrative Services Agreement and Co-Administration
Agreement effective August 1, 1996, the Portfolio has agreed to pay to Morgan
and FDI fees equal to the Portfolio's allocable share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of
the Portfolio and the other portfolios (collectively the "Master Portfolios")
in which series of the Trust, The Pierpont Funds or The JPM Institutional Funds
invest. This charge is calculated in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios' aggregate av-
erage daily net assets, and 0.04% of the Master Portfolios' aggregate average
daily net assets in excess of $7 billion.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02101, serves as the Fund's and the Portfolio's
Custodian and the Fund's Transfer and Dividend Disbursing Agent. State Street
also keeps the books of account for the Fund and the Portfolio.
EXPENSES. In addition to the fees payable to Pierpont Group, Inc., Morgan and
FDI under the various agreements discussed under Trustees, Advisor, Co-Adminis-
trator and Distributor, and Services Agent above, the Portfolio is responsible
for usual and customary expenses associated with its operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance
costs, the compensation and expenses of its Trustees, registration fees under
federal and foreign securities laws, custodian fees, brokerage expenses and ex-
traordinary expenses applicable to the Portfolio.
In addition to the expenses of the Fund that Morgan assumes under the Trust's
Services Agreement, Morgan has agreed that it will reimburse the Fund through
at least September 30, 1997 to the extent necessary to maintain the Fund's to-
tal 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
does not cover extraordinary expenses during the period. 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 neces-
sary 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 lim-
its 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.
12
<PAGE>
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 Mor-
gan 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 "Eligi-
ble Institution"). Investors may also be employer-sponsored retirement plans
that have designated the Fund as an investment option for the plans. Prospec-
tive 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 ba-
sis 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, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan repre-
sentative (or a representative of their Eligible Institution) to assist them
in placing a purchase order with the Fund's Distributor and to transfer imme-
diately available funds to the Fund's Distributor on the next business day. If
the Fund or its agent receives a purchase order prior to 4:00 P.M. New York
time on any business day, the purchase of Fund shares is effective and is made
at the net asset value determined that day, and the purchaser generally be-
comes 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 follow-
ing business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude 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 sharehold-
ers and, with respect to meetings of shareholders, collecting, tabulating and
forwarding executed proxies and obtaining such other information and perform-
ing such other services as Morgan or the Eligible Institution's clients may
reasonably request and agree upon with the Eligible Institution. Eligible In-
stitutions 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 redemp-
tion request to the Fund. The Fund executes effective redemption requests at
the next determined net asset value per share. See Net Asset Value. See Addi-
tional Information below for an explanation of the telephone redemption policy
of The JPM Advisor Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited on the next business day in immediately
available funds to the shareholder's account at Morgan or at his or her Eligi-
ble Institution or, in the case of certain Morgan customers, are mailed by
check or wire trans-
13
<PAGE>
ferred 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 sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal income
tax on dividends, distributions and redemption proceeds when noncorporate in-
vestors have not provided a certified taxpayer identification number. In addi-
tion, 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 pro-
ceeds 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 pe-
riods 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
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 addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are de-
clared 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 distribu-
tions 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 re-
mainder by the
14
<PAGE>
number of its outstanding shares, rounded to the nearest cent. Expenses, in-
cluding the fees payable to Morgan, are accrued daily. See Net Asset Value in
the Statement of Additional Information for information on valuation of portfo-
lio 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 the holidays listed under Net Asset Value in the Statement of Addi-
tional 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 "Massachu-
setts 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 avail-
able 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 liabili-
ty, 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 ap-
propriate 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. As of July 26, 1996, Steve J. Serdar as guardian for the estate of
Ashley Serdar technically met the definition of a control person of the Fund.
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 Addi-
tional Information.
The Portfolio 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 nei-
ther 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 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 com-
pany under Subchapter M of the Code. For the Fund to qualify as a regulated in-
vestment company, the Portfolio, in addition to other requirements, limits its
invest
15
<PAGE>
ments 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 as-
sets, 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 ex-
cise taxes if substantially 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 associa-
tion 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 in-
vestment company is dependent on, among other things, the Portfolio's contin-
ued 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 distribu-
tions 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 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 regard-
less 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 ef-
fect of reducing the net asset value of the Fund's shares held by a share-
holder 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 distribu-
tion, 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 the Fund's 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 ex-
tent 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 finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally 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 Distribu-
tor may subject the investor to risk of loss if such instruction is subse-
quently 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 commu-
nicated from investors by telephone are genuine; if it does not, the Fund, 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
Associ-
16
<PAGE>
ates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Indus-
trial 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 oper-
ations, 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, un-
less otherwise indicated, over other specified periods of time may also be
used. See Performance Data in the Statement of Additional Information. All per-
formance figures are based on historical earnings and are not intended to indi-
cate future performance. Shareholders may obtain performance information by
calling Morgan at (800) JPM-3637.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase 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 put and call
options on futures contracts on indexes of equity securities. Each of these in-
struments 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 ob-
tains 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 al-
lowing 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 liq-
uid 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 secu-
rity, 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 in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing 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 in-
creases 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 se-
curities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the ex-
ercise of securities index options is settled by cash payment and does not in-
volve 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 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 speci-
fied 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 in-
strument 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 con-
tract 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 under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. 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 off-
set 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 assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties and Exchange Commission. Securities held in a segregated account cannot be
sold while the futures contract or option is outstanding, unless they are re-
placed with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede port-
folio 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.
ADVPROS403-968
MST608024PRO
The
JPM Advisor
U.S. Equity
Fund
PROSPECTUS
August 26, 1996
<PAGE>
PROSPECTUS
The JPM Advisor U.S. Small Cap Equity Fund
60 State Street
Boston, Massachusetts 02109
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 Advi-
sor Funds, an open-end management investment company organized as a Massachu-
setts business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFO-
LIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY IN-
VESTING ALL OF ITS INVESTABLE ASSETS IN THE U.S. SMALL COMPANY 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 A TWO-TIER MASTER-FEEDER STRUCTURE. SEE SPECIAL INFORMATION
CONCERNING INVESTMENT STRUCTURE ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Mor-
gan" 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 In-
formation dated August 26, 1996 (as supplemented from time to time). This in-
formation is incorporated herein by reference and is available without charge
upon written request from the Fund's Distributor, Funds Distributor, Inc.
("FDI"), 60 State Street, Suite 1300, Boston, Massachusetts 02109, Attention:
The JPM Advisor Funds, or by calling (800) 221-7930.
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 AUGUST 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment
Structure................................................................. 3
Investment Objective and Policies.......................................... 4
Risk Factors and Additional Investment Information......................... 6
Investment Restrictions.................................................... 10
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 16
Additional Information..................................................... 17
Appendix................................................................... 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 in a two-tier master-feeder investment fund structure.
The Trustees of the Trust believe that the Fund may achieve economies of scale
over time by utilizing this investment structure.
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 heading Management of the Trust and the Portfolio.
<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 the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, af-
ter any applicable expense reimbursement. Without such reimbursement, Other
Expenses and Total Operating Expenses (after application of state expense
limitations) would have been equal on an annual basis to 1.90% and 2.50%, re-
spectively, of the average daily net assets of the Fund. See Management of
the Trust and the Portfolio.
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.................................................................... $ 41
5 Years.................................................................... $ 71
10 Years................................................................... $157
</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 Portfolio's Administrative Services Agreement and the Trust's Serv-
ices Agreement, the fees paid to Pierpont Group, Inc. under the Portfolio Fund
Services Agreement, the fees paid to FDI under the Portfolio's Co-Administra-
tion Agreement, organizational expenses, the fees paid to State Street Bank and
Trust Company as custodian of the Portfolio, and other usual and customary ex-
penses of the Portfolio. For a more detailed description of contractual fee ar-
rangements, including expense reimbursements, 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 re-
demption 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.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated period
have been audited by independent accountants. The Fund's annual report will
include a discussion of those factors, strategies and techniques that materi-
ally affected its performance during the period of the report, as well as cer-
tain related information. A copy of the Fund's annual report will be made
available without charge upon request.
<TABLE>
<S> <C>
FOR THE PERIOD
FROM JANUARY 19, 1996
(COMMENCEMENT
OF OPERATIONS)
THROUGH
MAY 31, 1996
---------------------
Net Asset Value, Beginning of Period..................... $11.32
Income from Investment Operations:
Net Investment Loss...................................... (0.02)
Net Realized and Unrealized Gain on Investment........... 2.08
---------
Total from Investment Operations......................... 2.06
---------
Net Asset Value, End of Period........................... $13.38
=========
Total Return............................................. 18.20% (a)
==========
Ratios and Supplemental Data:
Net Assets, End of Period (in thousands)................. $71
Ratios to Average Net Assets:
Expenses................................................ 1.30% (b)
Net Investment Loss..................................... (0.44%)(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursement.......................................... 1.20% (b)(c)
</TABLE>
- -------
(a)Not annualized.
(b)Annualized.
(c)After consideration of certain state limitations.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio 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 out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
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 bear 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 Morgan at
(800) JPM-3637.
3
<PAGE>
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 from a port-
folio of equity securities of small companies. Total return will consist of re-
alized 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 invest-
ment company having the same investment objective as the Fund. The Portfolio
invests primarily in the common stock of small U.S. companies. The small com-
pany holdings of the Portfolio are primarily companies included in the Russell
2500 Index.
4
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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 port-
folio 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, sys-
tematic stock valuation and a disciplined portfolio construction process. Mor-
gan continually screens the universe of small capitalization companies to iden-
tify for further analysis those companies which exhibit favorable characteris-
tics 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. Mor-
gan then selects for purchase the most attractive companies within each eco-
nomic sector.
Morgan uses a disciplined portfolio construction process to seek to enhance re-
turns 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 mar-
ket 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 in-
vestment 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 advan-
tage of short-term trading opportunities that are consistent with its objec-
tive. 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 Portfo-
lio's net assets invested in equity securities consisting of common stocks and
other securities with equity characteristics comprised of preferred stock, war-
rants, 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 (OTC) markets, and may invest in certain restricted or unlisted se-
curities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
issuers that are listed on a national securities exchange or denominated or
principally traded in U.S. dollars. However, the Portfolio does not expect to
invest more than 5% of its assets at the time of purchase in foreign equity se-
curities. 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 deliv-
ery 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 in-
volve options on securities and securities indexes, futures contracts and op-
tions on futures contracts. Forward foreign currency exchange contracts, op-
tions and futures contracts are derivative instruments. For a discussion of
these investments and investment techniques, see Risk Factors and Additional
Investment Information.
5
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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. Convert-
ible 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.
COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price fluctu-
ations. As a result, warrants may be more volatile investments than the under-
lying common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or 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 for fixed income investments no in-
terest 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 Port-
folio maintains with the Custodian a separate account with a segregated port-
folio of securities in an amount at least equal to these commitments. When en-
tering 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 liabil-
ities other than the obligations created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished 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 re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below.
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 securi-
ties 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 in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will con-
sider all facts and
6
<PAGE>
circumstances, including the creditworthiness of the borrowing financial in-
stitution, and the Portfolio will not make any loans in excess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase agreement transactions. See Repurchase Agreements above. The
Portfolio will not lend its securities to any officer, Trustee, Director, em-
ployee 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 re-
verse 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 agree-
ment. For purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), it is considered a form of borrowing by the Portfolio and, there-
fore, is a form of leverage. Leverage may cause any gains or losses of the
Portfolio to be magnified. See Investment Restrictions for investment limita-
tions applicable to reverse repurchase agreements and other borrowings. 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 net 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, as amended (the "1933 Act"), and cannot be offered for
public sale in the United States without first being registered under 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 il-
liquid 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 de-
termined 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 OTC put and call options on equity securities or indexes of equity
securities, (b) purchase and sell futures contracts on indexes of equity secu-
rities, 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, in-
cluding buying futures contracts and buying calls, tend to increase market ex-
posure. 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 own-ing its portfo-
lio securities, these techniques themselves entail certain other risks. If the
Advisor applies a strategy at an
7
<PAGE>
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 in-
vestments, or if it could not close out its positions because of an illiquid
secondary market. In addition, the Portfolio will incur transaction costs, in-
cluding 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 se-
curities 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 Port-
folio'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 dif-
ferent investment risks from those affecting securities of U.S. domestic is-
suers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform ac-
counting, 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 de-
crease the net return on foreign investments as compared to dividends and in-
terest 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, na-
tionalization, 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 depre-
ciation 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 is-
suer. 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 ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing 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 insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may not provide the same share-
holder information that a sponsored depository is required to provide under
its contractual arrangements with the issuer of the underlying foreign securi-
ties. EDRs are receipts issued by a European financial institu-
8
<PAGE>
tion 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 cur-
rencies, 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 Trans-
actions.
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 curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing 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 con-
tracts are derivative instruments, as their value derives from the spot ex-
change rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usu-
ally 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 cur-
rency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio'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 antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally 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 de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts 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 fluc-
tuations 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 projec-
tion 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 perspec-
tive. The Portfolio may invest in money market instruments of domestic or for-
eign issuers denominated in U.S. dollars. Under normal circumstances the Port-
folio 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
9
<PAGE>
temporary defensive measure taken in the Advisor's judgment during, or in an-
ticipation 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 in-
vest more than 5% of its total assets in the securities of any one issuer, ex-
cept 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 in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, 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 invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
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 Port-
folio's total assets, taken at cost at the time of borrowing, or purchase secu-
rities 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 prin-
cipal business activity in the same industry if its investments in such indus-
try 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 predeces-
sors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions 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 service providers and the performance of the Portfolio's Advisor. Pur-
suant to the Declaration of Trust for the Portfolio, the Trustees of the Port-
folio (who are not the same as the Trustees of the Trust) have the same respon-
sibilities 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 super-
visory 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 those funds. The principal of-
fices 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 be-
cause 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
10
<PAGE>
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 as-
sets under management of over $179 billion (of which the Advisor advises over
$28 billion). Morgan provides investment advice and portfolio management serv-
ices 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 in-
vestments. 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 ana-
lysts, as well as capital market, credit and economic research analysts, trad-
ers and administrative officers. The U.S. equity analysts each cover a differ-
ent 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, Manag-
ing Director (since February, 1993, employed by Morgan since prior to 1991 as
a portfolio manager of equity securities of small and medium sized U.S. compa-
nies) and Michael J. Kelly, Vice President (since May, 1996, employed by Mor-
gan since prior to 1991 as a portfolio manager of small and medium sized U.S.
companies and an equity research analyst).
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.
Under separate agreements, Morgan also provides certain financial, fund ac-
counting and administrative services to the Fund and the Portfolio and share-
holder services to Fund shareholders. 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.
CO-ADMINISTRATOR AND DISTRIBUTOR. Under Co-Administration Agreements with the
Trust and the Portfolio, FDI serves as the Co-Administrator for the Trust and
the Portfolio and in that capacity FDI (i) provides office space, equipment
and clerical personnel for maintaining the organization and books and records
of the Trust and the Portfolio; (ii) provides officers for the Trust and the
Portfolio; (iii) prepares and files documents required in connection with the
Trust's state securities law registrations; (iv) reviews and files Trust mar-
keting and sales literature; (v) files Portfolio regulatory documents and
mails Portfolio communications to Trustees and investors; and (vi) maintains
related books and records. Under the terms of the Trust's Services Agreement
with Morgan, the fees of the Co-Administrator for its services to the Trust
are covered by Morgan's expense undertakings described under Services Agent
below.
FDI, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and exclusive placement agent for the Portfolio. FDI is a wholly
owned indirect subsidiary of Boston Institutional Group, Inc. FDI currently
provides administration and distribution services for a number of other regis-
tered investment companies.
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<PAGE>
SERVICES AGENT. Under a Services Agreement with the Trust and an Administra-
tive Services Agreement with the Portfolio, Morgan is responsible for certain
financial, fund accounting and administrative services provided to the Fund
and the Portfolio, respectively, including services related to taxes, finan-
cial statements, calculation of performance data, oversight of service provid-
ers, certain regulatory and Board of Trustees matters, and providing share-
holder services to shareholders of the Fund.
In addition, as provided in the Trust's Services Agreement, Morgan is respon-
sible for the annual costs of certain usual and customary expenses incurred by
the Fund (the "expense undertaking"). The expenses covered by the expense un-
dertaking include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Co-Administrator
for services to the Trust, insurance, the compensation and expenses of the
Trust's Trustees, the expenses of printing and mailing reports, notices, and
proxies to Fund shareholders, and registration fees under federal or state se-
curities laws. The Fund will pay these expenses directly and such amounts will
be deducted from the fees to be paid to Morgan under the agreement. If such
amounts are more than the amount of Morgan's fees under the agreement, Morgan
will reimburse the Fund for such excess amounts. Under the agreement, the fol-
lowing expenses are not included in the expense undertaking: 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 on an
annual basis to 0.69% of the Fund's average daily net assets.
As noted above, the fee levels of the Fund are expense undertakings and
reflect payments made directly to third parties by the Fund for services
rendered, as well as payments to Morgan for services rendered. The Trustees of
the Trust regularly review amounts paid to and accounted for by Morgan
pursuant to the Services Agreement. See Expenses below.
Under the Portfolio's Administrative Services Agreement and the Co-Administra-
tion Agreement effective August 1, 1996, the Portfolio has agreed to pay to
Morgan and FDI fees equal to the Portfolio's allocable share of an annual com-
plex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio and the other portfolios (collectively the "Master
Portfolios") in which series of the Trust, The Pierpont Funds or The JPM In-
stitutional Funds invest. This charge is calculated in accordance with the
following annual schedule: 0.09% on the first $7 billion of the Master Portfo-
lios' aggregate average daily net assets, and 0.04% of the Master Portfolios'
aggregate average daily net assets in excess of $7 billion.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02101, serves as the Fund's and the Portfolio's
Custodian and the Fund's Transfer and Dividend Disbursing Agent. State Street
also keeps the books of account for the Fund and the Portfolio.
EXPENSES. In addition to the fees payable to Pierpont Group, Inc., Morgan and
FDI under the various agreements discussed under Trustees, Advisor, Co-Admin-
istrator and Distributor, and Services Agent above, the Portfolio is responsi-
ble for usual and customary expenses associated with its operations. Such ex-
penses include organization expenses, legal fees, accounting expenses, insur-
ance costs, the compensation and expenses of its Trustees, registration fees
under federal and foreign securities laws, custodian fees, brokerage expenses
and extraordinary expenses applicable to the Portfolio.
In addition to the expenses of the Fund that Morgan assumes under the Trust's
Services Agreement, Morgan has agreed that it will reimburse the Fund through
at least September 30, 1997 to the extent necessary to maintain the Fund's to-
tal 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
does not cover extraordinary expenses during the period. There is no assurance
that Morgan will continue this waiver beyond the specified period, except as
required by the following sentence. Morgan has
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<PAGE>
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 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 assis-
tance of an Eligible Institution that may establish its own terms, conditions
and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately 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 or its agent receives a purchase order after 4:00 P.M. New York time, the
purchase is effective and is made at the net asset value determined on the next
business day, and the purchaser becomes a holder of record on the following
business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude 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 cli-
ents in changing dividend options, account designations and addresses, provid-
ing 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 state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other infor-
13
<PAGE>
mation and performing such other services as Morgan or the Eligible Institu-
tion's clients may reasonably request and agree upon with the Eligible Insti-
tution. Eligible Institutions may separately establish their own terms, condi-
tions 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 redemp-
tion request to the Fund. The Fund executes effective redemption requests at
the next determined net asset value per share. See Net Asset Value. See Addi-
tional Information below for an explanation of the telephone redemption policy
of The JPM Advisor Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited the next business day in immediately avail-
able 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, sub-
ject 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 sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption proceeds when noncorporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a shareholder sends a check for the purchase of Fund shares and
shares are purchased before the check has cleared, the transmittal of redemp-
tion 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 ex-
change 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
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 addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
14
<PAGE>
Substantially all the realized net capital gains, if any, of the Fund are de-
clared 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 distribu-
tions 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 re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion 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 the holidays listed under Net Asset Value in the Statement of Addi-
tional 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 "Massachu-
setts 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 liabili-
ty, 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 ap-
propriate 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. As of July 26, 1996, John Thayer Sidel technically met the definition
of a control person of the Fund. 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 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
15
<PAGE>
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 nei-
ther 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 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 com-
pany under Subchapter M of the Code. For the Fund to qualify as a regulated in-
vestment company, the Portfolio, in addition to other requirements, 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 is-
suer, except U.S. Government securities, and (b) with regard to 50% of its to-
tal 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 invest-
ment company, the Fund should not be subject to federal income taxes or federal
excise taxes if substantially all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders 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 contin-
ued 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 re-
invested 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 divi-
dends-received deduction.
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 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 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 the Fund's 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 ex-
16
<PAGE>
change 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 distribu-
tions received by the shareholder with respect to such shares.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally 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 Distribu-
tor may subject the investor to risk of loss if such instruction is subse-
quently 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 commu-
nicated from investors by telephone are genuine; if it does not, the Fund, 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 op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. This method of calculating total return is required by regula-
tions 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 Informa-
tion. All performance figures are based on historical earnings and are not in-
tended to indicate future performance. Shareholders may obtain performance in-
formation by calling Morgan at (800) JPM-3637.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase 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 put and call
options on futures contracts on indexes of equity securities. Each of these in-
struments 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 ob-
tains 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 al-
lowing 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 liq-
uid 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 secu-
rity, 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 in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing 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 in-
creases 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 se-
curities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the ex-
ercise of securities index options is settled by cash payment and does not in-
volve 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 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 speci-
fied 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 under-
lying 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 con-
tract 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 under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. 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 off-
set 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 assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties and Exchange Commission. Securities held in a segregated account cannot be
sold while the futures contract or option is outstanding, unless they are re-
placed with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede port-
folio 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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<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--968
MST608025PRO
The JPM Advisor U.S. Small Cap Equity Fund
PROSPECTUS
August 26, 1996
<PAGE>
PROSPECTUS
The JPM Advisor European Equity Fund
60 State Street
Boston, Massachusetts 02109
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 A TWO-TIER MASTER-FEEDER STRUCTURE. SEE SPECIAL INFORMATION CON-
CERNING INVESTMENT STRUCTURE ON PAGE 3.
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 August 26, 1996 (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, Funds Distributor, Inc. ("FDI"), 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: The JPM Advisor
Funds, or by calling (800) 221-7930.
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 AUGUST 26, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment Structure........................ 3
Investment Objective and Policies.......................................... 4
Risk Factors and Additional Investment Information......................... 6
Investment Restrictions.................................................... 10
Management of the Trust and the Portfolio.................................. 11
Shareholder Transactions................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 15
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 16
Additional Information..................................................... 17
Appendix................................................................... A-1
</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 Port-
folio may also purchase certain privately placed securities. The Portfolio's
investments in securities of foreign issuers, including issuers in emerging Eu-
ropean markets, involve foreign investment risks and may be more volatile and
less liquid than domestic securities. For further information about these in-
vestments, 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 in a two-tier master-feeder investment fund structure.
The Trustees of the Trust believe that the Fund may achieve economies of scale
over time by utilizing this investment structure.
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 the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, af-
ter any applicable expense reimbursement. Without such reimbursement, Other
Expenses and Total Operating Expenses (after application of state expense
limitations) would have been equal on an annual basis to 1.85% and 2.50%, re-
spectively, of the average daily net assets of the Fund. See Management of
the Trust and the Portfolio.
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 Portfolio's Administrative Services Agreement and the Trust's Serv-
ices Agreement, the fees paid to Pierpont Group, Inc. under the Portfolio Fund
Services Agreement, the fees paid to FDI under the Portfolio's Co-Administra-
tion Agreement, organizational expenses, the fees paid to State Street Bank and
Trust Company as custodian of the Portfolio, and other usual and customary ex-
penses of the Portfolio. For a more detailed description of contractual fee ar-
rangements, including expense reimbursements, 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 re-
demption 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.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding are unaudited. The Fund's
semi-annual financial statements are part of the Statement of Additional In-
formation and are incorporated herein. The financial statements and subsequent
semi- annual reports are available without charge upon request. Future reports
will include a discussion of those factors, strategies and techniques that ma-
terially affected the Fund's performance during the period of the report, as
well as certain related information.
<TABLE>
<CAPTION>
For the Period
January 5, 1996
(commencement of
operations) through
June 30, 1996
(unaudited)
-------------------
<S> <C>
Net Asset Value, Beginning of Period....................... $11.35
------
Income From Investment Operations:
Net Investment Income...................................... 0.08
Net Realized and Unrealized Gain on Investment and Foreign
Currency.................................................. 0.69
------
Total from Investment Operations........................... 0.77
------
Net Asset Value, End of Period............................. $12.12
======
Total Return............................................... 6.78%(a)
======
Ratios and Supplemental Data:
Net Assets, End of Period (in thousands)................... $ 590
Ratios to Average Net Assets:
Expenses................................................. 1.70%(b)
Net Investment Income.................................... 1.55%(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursement........................................... .80%(b)(c)
</TABLE>
- -------
(a) Not Annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio 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 out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
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 bear 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 Morgan at
(800) JPM-3637.
3
<PAGE>
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 from a port-
folio 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.
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.
4
<PAGE>
The Portfolio seeks to achieve its investment objective through country alloca-
tion and stock valuation and selection. Based on fundamental research, quanti-
tative 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, It-
aly, the Netherlands, Norway, Spain, Sweden, Switzerland and the United King-
dom.
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 coun-
try; or (iii) derives 50% or more of its total revenue and/or profits from ei-
ther 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, com-
panies in each country are ranked within industrial sectors according to their
relative value. Based on this valuation, Morgan selects the companies which ap-
pear 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 multina-
tional 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 cur-
rency 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 in-
vestment objective. The Portfolio does not intend to respond to short-term mar-
ket fluctuations or to acquire securities for the purpose of short-term trad-
ing; 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 to-
tal 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 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 eq-
uity securities of issuers in emerging European markets such as Eastern Euro-
pean countries and Turkey. See Risk Factors and Additional Investment Informa-
tion. The Portfolio invests in securities listed on foreign or domestic securi-
ties exchanges and securities traded in foreign or domestic over-the-counter
(OTC) 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 agree-
ments, loan its portfolio securities, purchase certain privately placed securi-
ties 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 pur-
poses. Forward foreign currency exchange contracts, options
5
<PAGE>
and futures contracts are derivative instruments. For a discussion of these
investments and investment techniques, see Risk Factors and Additional Invest-
ment Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in foreign se-
curities. Investment in securities of foreign issuers involves somewhat dif-
ferent investment risks from those affecting securities of U.S. domestic is-
suers. There may be limited publicly available information with respect to
foreign issuers, and foreign issuers are not generally subject to uniform ac-
counting, 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 de-
crease the net return on foreign investments as compared to dividends and in-
terest 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, na-
tionalization, 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 depre-
ciation 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 is-
suer. 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 ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing 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 sec-
tion to a heightened degree. These heightened risks include (i) greater risks
of expropriation, confiscatory taxation, nationalization, and less social, po-
litical 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 de-
veloped 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
6
<PAGE>
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 insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may not provide the same share-
holder information that a sponsored depository is required to provide under
its contractual arrangements with the issuer of the underlying foreign securi-
ties. 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 cur-
rencies, 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 Trans-
actions.
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 curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing 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 con-
tracts are derivative instruments, as their value derives from the spot ex-
change 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 cur-
rency exchange contract generally has no deposit requirement and is traded at
a net price without commission. The Portfolio will not enter into forward con-
tracts for speculative purposes. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of the Port-
folio'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 antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally 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 de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts 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 fluc-
tuations 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 projec-
tion of currency market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
7
<PAGE>
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. Convert-
ible 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.
COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price fluctu-
ations. As a result, warrants may be more volatile investments than the under-
lying common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or 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 Cus-
todian 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 obliga-
tions created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished 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 re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below. Other repurchase agreements are considered to be a type of money
market instrument. See Risk Factors and Additional Investment Information--
Fixed Income Investments.
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 securi-
ties 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 in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may
8
<PAGE>
pay reasonable finders' and custodial fees in connection with a loan. In addi-
tion, 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.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase agreement transactions. See Repurchase Agreements above. The
Portfolio will not lend its securities to any officer, Trustee, Director, em-
ployee 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 re-
verse 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 agree-
ment. 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. See Investment Restrictions for investment limitations applica-
ble to reverse repurchase agreements and other borrowings. For more informa-
tion, 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, as amended (the "1933 Act"), and cannot be offered for
public sale in the United States without first being registered under 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 il-
liquid 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 de-
termined 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 in-
dexes of equity securities, and (c) purchase and sell (write) put and call op-
tions on futures contracts on indexes of equity securities. Each of these in-
struments 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 man-
agement 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, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be com-
bined 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 objec-
tive 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 own-
9
<PAGE>
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 possi-
bilities to realize gains as well as limiting its exposure to losses. The Port-
folio could also experience losses if the prices of its options and futures po-
sitions 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 secu-
rities 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 Port-
folio'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 as-
set value of the Portfolio. For more detailed information about these transac-
tions, see the Appendix to this Prospectus and Investment Objectives and Poli-
cies--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 main-
tain 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 in-
vest more than 5% of its total assets in the securities of any one issuer, ex-
cept 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 in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, 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 invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
The Portfolio may not purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments 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. Govern-
ment securities. In addition, the Portfolio may not borrow money except that
the Portfolio may (a) borrow money from banks for temporary or emergency pur-
poses (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
10
<PAGE>
issue senior securities except as permitted by the 1940 Act or any rule, order
or interpretation thereunder. See Risk Factors and Additional Investment In-
formation--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 Re-
strictions 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 service providers and the performance of the Portfolio's Advisor. Pur-
suant to the Declaration of Trust for the Portfolio, the Trustees of the Port-
folio (who are not the same as the Trustees of the Trust) have the same re-
sponsibilities 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 su-
pervisory 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 those funds. The principal of-
fices 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 Addi-
tional Information.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices 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 con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary 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 cli-
ents with combined assets under management of over $179 billion (of which the
Advisor advises over $28 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages 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 manag-
ers making investments in European equity securities work in conjunction with
Morgan's European equity analysts, as well as capital market, credit and eco-
nomic research analysts, traders and administrative officers. The European eq-
uity 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 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, em-
ployed by Morgan since prior to 1991 as a portfolio manager of international
equity investments).
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<PAGE>
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. IN-
VESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
CO-ADMINISTRATOR AND DISTRIBUTOR. Under Co-Administration Agreements with the
Trust and the Portfolio, FDI serves as the Co-Administrator for the Trust and
the Portfolio and in that capacity FDI (i) provides office space, equipment and
clerical personnel for maintaining the organization and books and records of
the Trust and the Portfolio; (ii) provides officers for the Trust and the Port-
folio; (iii) prepares and files documents required in connection with the
Trust's state securities law registrations; (iv) reviews and files Trust mar-
keting and sales literature; (v) files Portfolio regulatory documents and mails
Portfolio communications to Trustees and investors; and (vi) maintains related
books and records. Under the terms of the Trust's Services Agreement with Mor-
gan, the fees of the Co-Administrator for its services to the Trust are covered
by Morgan's expense undertakings described under Services Agent below.
FDI, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and exclusive placement agent for the Portfolio. FDI is a wholly owned
indirect subsidiary of Boston Institutional Group, Inc. FDI currently provides
administration and distribution services for a number of other registered in-
vestment companies.
SERVICES AGENT. Under a Services Agreement with the Trust and an Administrative
Services Agreement with the Portfolio, Morgan is responsible for certain finan-
cial, fund accounting and administrative services provided to the Fund and the
Portfolio, respectively, including services related to taxes, financial state-
ments, calculation of performance data, oversight of service providers, certain
regulatory and Board of Trustees matters, and providing shareholders services
to shareholders of the Fund.
In addition, as provided in the Trust's Services Agreement, Morgan is responsi-
ble for the annual costs of certain usual and customary expenses incurred by
the Fund (the "expense undertaking"). The expenses covered by the expense un-
dertaking include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Co-Administrator
for services to the Trust, insurance, the compensation and expenses of the
Trust's Trustees, the expenses of printing and mailing reports, notices, and
proxies to Fund shareholders, and registration fees under federal or state se-
curities laws. The Fund will pay these expenses directly and such amounts will
be deducted from the fees to be paid to Morgan under the agreement. If such
amounts are more than the amount of Morgan's fees under the agreement, Morgan
will reimburse the Fund for such excess amounts. Under the agreement, the fol-
lowing expenses are not included in the expense undertaking: 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 on an
annual basis to 0.75% of the Fund's average daily net assets.
As noted above, the fee levels of the Fund are expense undertakings and reflect
payments made directly to third parties by the Fund for services rendered, as
well as payments to Morgan for services rendered. The Trustees of the Trust
regularly review amounts paid to and accounted for by Morgan pursuant to the
Services Agreement. See Expenses below.
Under the Portfolio's Administrative Services Agreement and the Co-Administra-
tive Agreement effective August 1, 1996, the Portfolio has agreed to pay to
Morgan and FDI fees equal to the Portfolio's allocable share of an annual com-
plex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio and the other portfolios (collectively the "Master
Portfolios") in which series of the Trust, The Pierpont Funds or The JPM Insti-
tutional Funds
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<PAGE>
invest. This charge is calculated in accordance with the following annual
schedule: 0.9% on the first $7 billion of the Master Portfolios' aggregate av-
erage daily net assets and 0.04% of the Master Portfolios' aggregate average
daily net assets in excess of $7 billion.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02101, serves as the Fund's and the Portfolio's
Custodian and the Fund's Transfer and Dividend Disbursing Agent. State Street
also keeps the books of account for the Fund and the Portfolio.
EXPENSES. In addition to the fees payable to Pierpont Group, Inc., Morgan and
FDI under the various agreements discussed under Trustees, Advisor, Co-Adminis-
trator and Distributor, and Services Agent above, the Portfolio is responsible
for usual and customary expenses associated with its operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance
costs, the compensation and expenses of its Trustees, registration fees under
federal and foreign securities laws, custodian fees, brokerage expenses and ex-
traordinary expenses applicable to the Portfolio.
In addition to the expenses of the Fund that Morgan assumes under the Trust's
Services Agreement, Morgan has agreed that it will reimburse the Fund through
at least April 30, 1997 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
does not cover extraordinary expenses during the period. 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 neces-
sary, 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 lim-
its 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.
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<PAGE>
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous ba-
sis 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, condi-
tions and charges.
To purchase shares in the Fund, investors should request their Morgan repre-
sentative (or a representative of their Eligible Institution) to assist them
in placing a purchase order with the Fund's Distributor and to transfer imme-
diately 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 or its agent receives a purchase order after 4:00 P.M. New York time, the
purchase is effective and is made at the net asset value determined on the
next business day, and the purchaser becomes a holder of record on the follow-
ing business day upon the Fund's receipt of payment.
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing 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 state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating 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 redemp-
tion request to the Fund. The Fund executes effective redemption requests at
the next determined net asset value per share. See Net Asset Value. See Addi-
tional Information below for an explanation of the telephone redemption policy
of The JPM Advisor Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited on the next business day in immediately
available funds to the shareholder's account at Morgan or at his or her Eligi-
ble 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 sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption proceeds when noncorporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a shareholder sends a check for the purchase of Fund shares and
shares are purchased before the check has cleared, the transmittal of redemp-
tion 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.
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<PAGE>
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
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 de-
clared 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 distribu-
tions 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 re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion 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 the holidays listed under Net Asset Value in the Statement of Addi-
tional 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 "Massachu-
setts 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 avail-
able 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.
15
<PAGE>
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 liabili-
ty, 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. As of July 26, 1996, The American Hospital of Paris technically met
the definition of a control person of the Fund. 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 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 Dec-
laration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate ac-
counts and common and commingled trust funds) will each be liable for all ob-
ligations 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 their own tax advisors with respect to specific questions as to fed-
eral 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 com-
pany under Subchapter M of the Code. For the Fund to qualify as a regulated
investment company, the Portfolio, in addition to other requirements, 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 securi-
ties of a single issuer, except U.S. Government securities. As a regulated in-
vestment company, the Fund should not be subject to federal income taxes or
federal excise taxes if substantially 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 regu-
lated 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
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<PAGE>
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 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.)
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, includ-
ing 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 sub-
ject 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 invest-
ors 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 unautho-
rized 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
17
<PAGE>
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 oper-
ations, 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, un-
less otherwise indicated, over other specified periods of time may also be
used. See Performance Data in the Statement of Additional Information. All per-
formance figures are based on historical earnings and are not intended to indi-
cate future performance. Shareholders may obtain performance information by
calling Morgan at (800) JPM-3637.
18
<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 se-
curities. 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 man-
agement purposes. See Risk Management in the Statement of Additional Informa-
tion. The Portfolio may not use futures contracts and options for speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains 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 al-
lowing 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 liq-
uid 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 secu-
rity, 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 in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing 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 in-
creases 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 po-
sition 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 pre-
mium 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 re-
ceived 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 op-
tion. The characteristics of writing call options are similar to those of writ-
ing 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 abil-
ity 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, ex-
cept 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 securi-
ties or segment of the securities market rather than price fluctuations in a
single security. The Portfolio, in purchasing or selling index options, is sub-
ject 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 speci-
fied 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 under-
lying 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 con-
tract 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 under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. 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 off-
set 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 assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties and Exchange Commission. Securities held in a segregated account cannot be
sold while the futures contract or option is outstanding, unless they are re-
placed with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede port-
folio 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.
ADVPROS406-968
MST608026PRO
The JPM Advisor European Equity Fund
PROSPECTUS
August 26, 1996
<PAGE>
PROSPECTUS
The JPM Advisor Japan Equity Fund
60 State Street
Boston, Massachusetts 02109
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 PORTFO-
LIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY IN-
VESTING ALL OF ITS INVESTABLE ASSETS IN THE JAPAN EQUITY PORTFOLIO (THE "PORT-
FOLIO"), A CORRESPONDING NON-DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COM-
PANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE
PORTFOLIO THROUGH A TWO-TIER MASTER-FEEDER STRUCTURE. SEE SPECIAL INFORMATION
CONCERNING INVESTMENT STRUCTURE ON PAGE 3.
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 August 26, 1996 (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, Funds Distributor,
Inc. ("FDI"), 60 State Street, Suite 1300, Boston, Massachusetts 02109,
Attention: The JPM Advisor Funds, or by calling (800) 221-7930.
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 AUGUST 26, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment
Structure................................................................. 3
Investment Objective and Policies.......................................... 4
Risk Factors and Additional Investment Information......................... 6
Investment Restrictions.................................................... 10
Management of the Trust and the Portfolio.................................. 10
Shareholder Transactions................................................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 13
Redemption of Shares....................................................... 14
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 15
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 16
Additional Information..................................................... 17
Appendix................................................................... A-1
</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 in a two-tier master-feeder investment fund structure.
The Trustees of the Trust believe that the Fund may achieve economies of scale
over time by utilizing this investment structure.
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 the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, af-
ter any applicable expense reimbursement. Without such reimbursement, Other
Expenses and Total Operating Expenses (after application of state expense
limitations) would have been equal on an annual basis to 1.85% and 2.50%, re-
spectively, of the average daily net assets of the Fund. See Management of
the Trust and the Portfolio.
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 Portfolio's Administrative Services Agreement and the Trust's Serv-
ices Agreement, the fees paid to Pierpont Group, Inc. under the Portfolio Fund
Services Agreement, the fees paid to FDI under the Portfolio's Co-Administra-
tion Agreement, organizational expenses, the fees paid to State Street Bank and
Trust Company as custodian of the Portfolio, and other usual and customary ex-
penses of the Portfolio. For a more detailed description of contractual fee ar-
rangements, including expense reimbursements, 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 re-
demption 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.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding are unaudited. The Fund's
semi-annual financial statements are part of the Statement of Additional In-
formation and are incorporated herein. The financial statements and subsequent
semi- annual reports are available without charge upon request. Future annual
reports will include a discussion of those factors, strategies and techniques
that materially affected the Fund's performance during the period of the re-
port, as well as certain related information.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 24, 1996
(COMMENCEMENT
OF OPERATIONS)
THROUGH JUNE 30, 1996
(UNAUDITED)
---------------------
<S> <C>
Net Asset Value, Beginning of Period..................... $ 9.91
------
Income from Investment Operations:
Net Investment Income.................................... (.03)
Net Realized and Unrealized Gain (Loss) on Investments
and
Foreign Currency Allocated from Portfolio............... .58
------
Total from Investment Operations......................... .55
------
Net Asset Value, End of Period........................... $10.46
======
Total Return............................................. $ 5.55%(a)
======
Ratios and Supplemental Data:
Net Assets, End of Period (in thousands)................. $ 124
Ratios to Average Net Assets:
Expenses................................................ 1.70%(b)
Net Investment Income................................... (0.20)%(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursement........................................... .80%(b)(c)
</TABLE>
- ---------------
(a) Not annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio 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 out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
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 bear 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 Morgan at
(800) JPM-3637.
3
<PAGE>
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 from a port-
folio 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.
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
4
<PAGE>
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 lo-
cated 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 un-
derlying market inefficiencies. Based on internal fundamental research, Morgan
uses a proprietary valuation model to establish the relative valuation of indi-
vidual 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 war-
rants 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 in-
vestment objective. The Portfolio does not intend to respond to short-term mar-
ket fluctuations or to acquire securities for the purpose of short-term trad-
ing; how- ever, 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 cur-
rencies, 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 In-
formation.
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 un-
listed securities.
NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified invest-
ment 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 in-
vest 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 diversifica-
tion requirements imposed by the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company. See Taxes below.
5
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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 en-
ter into forward foreign currency exchange contracts. In addition, the Portfo-
lio 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 as-
sociated with investing in foreign securities generally. See Other Foreign In-
vestment Information. In addition, because the Portfolio invests primarily in
Japan, it will be subject to the general economic and political conditions in
Japan.
Despite recent increases, prices for exchange-listed and OTC stocks of Japa-
nese companies are currently depressed in comparison to their historical peaks
in 1989 and 1990. Nevertheless, Japanese stocks continue to trade at high
price earnings ratios relative to stocks of U.S. companies. In addition, dif-
ferences in accounting methods make it difficult to compare the earnings of
Japanese companies with those of U.S. companies. Because most of the Portfo-
lio's investments are denominated in yen, changes in currency exchange rates
will affect the U.S. dollar value of the Portfolio's assets. The Japanese
economy has experienced a substantial reduction in its rate of growth. Eco-
nomic growth and the prices of Japanese stocks could be adversely affected by
a reversal of Japan's historical success in exporting its products and main-
taining low inflation and interest rates. Recent political instability and any
resulting delay in implementing regulatory reforms could also have a negative
effect on Japanese stock prices. For additional information, see Appendix C--
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 for-
eign 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 ac-
counting, 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, na-
tionalization, 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 depre-
ciation 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 is-
suer. 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 insti-
tutions issuing ADRs may not be sponsored by the issuer of the underlying for-
eign securities. A non-sponsored depository may
6
<PAGE>
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 finan-
cial institution evidencing a similar arrangement. Generally, ADRs, in regis-
tered 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 cur-
rencies, 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 Trans-
actions.
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 trans-
actions 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 con-
tracts are derivative instruments, as their value derives from the spot ex-
change rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usu-
ally 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 cur-
rency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio'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 antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally 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 de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts 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 fluc-
tuations 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 projec-
tion 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. Convert-
ible 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.
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COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price fluctu-
ations. As a result, warrants may be more volatile investments than the under-
lying common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or 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 Cus-
todian 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 obliga-
tions created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished 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 re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities 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 securi-
ties 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 in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will con-
sider all facts and circumstances, including the creditworthiness of the bor-
rowing financial institution, and the Portfolio will not make any loans in ex-
cess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase
8
<PAGE>
agreement transactions. See Repurchase Agreements above. The Portfolio will not
lend its securities to any officer, Trustee, Director, employee or other affil-
iate of the Portfolio, the Advisor or the Distributor, unless otherwise permit-
ted 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 Port-
folio and, therefore, a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified. See Investment Restrictions for in-
vestment limitations applicable to reverse repurchase agreements and other
borrowings. 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 illiq-
uid investments. Subject to this non-fundamental policy limitation, the Portfo-
lio may acquire investments that are illiquid or have limited liquidity, such
as private placements or investments that are not registered under the Securi-
ties Act of 1933, as amended (the "1933 Act"), and cannot be offered for public
sale in the United States without first being registered under 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 securi-
ties 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.
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 in-
dexes of equity securities, and (c) purchase and sell (write) put and call op-
tions on futures contracts on indexes of equity securities. Each of these in-
struments 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 man-
agement 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, in-
cluding 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 re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. 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 securi-
ties, 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 Portfo-
9
<PAGE>
lio's return. Certain strategies limit the Portfolio's possibilities to realize
gains as well as limiting its exposure to losses. The Portfolio could also ex-
perience 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 posi-
tions 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 secu-
rities 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 Port-
folio'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 as-
set value of the Portfolio. For more detailed information about these transac-
tions, see the Appendix to this Prospectus and Investment Objectives and Poli-
cies--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 in-
struments without limitation as a temporary defensive measure taken in the Ad-
visor'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 in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, 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 invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
The Portfolio may not purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments 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. Govern-
ment securities. In addition, the Portfolio may not borrow money except that
the Portfolio may (a) borrow money from banks for temporary or emergency pur-
poses (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 per-
mitted by the 1940 Act or any rule, order or interpretation thereunder. See
Risk Factors and Additional Investment Information--Loans of Portfolio Securi-
ties 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 Restric-
tions 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 service providers and the performance of the Portfolio's Advisor. Pur-
suant to
10
<PAGE>
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 su-
pervisory 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 those funds. The principal of-
fices 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 Addi-
tional Information.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices 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 con-
ducts a general banking and trust business. Morgan is a wholly owned subsidi-
ary 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 cli-
ents with combined assets under management of over $179 billion (of which the
Advisor advises over $28 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages 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 mar-
ket, credit and economic research analysts, traders and administrative offi-
cers. 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): Masato Degawa, Vice
President (since August, 1995, employed by Morgan since September 1993 as a
portfolio manager of Japanese equity investments and by Morgan Stanley prior
to September, 1993 as a senior analyst covering Japanese utilities and special
situations) and Yukiko Sugimoto, Vice President (since March, 1995, employed
by Morgan since prior to 1991 as a portfolio manager of Japanese equity in-
vestments since 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.
11
<PAGE>
CO-ADMINISTRATOR AND DISTRIBUTOR. Under Co-Administration Agreements with the
Trust and the Portfolio, FDI serves as the Co-Administrator for the Trust and
the Portfolio and in that capacity FDI (i) provides office space, equipment and
clerical personnel for maintaining the organization and books and records of
the Trust and the Portfolio; (ii) provides officers for the Trust and the Port-
folio; (iii) prepares and files documents required in connection with the
Trust's state securities law registrations; (iv) reviews and files Trust mar-
keting and sales literature; (v) files Portfolio regulatory documents and mails
Portfolio communications to Trustees and investors; and (vi) maintains related
books and records. Under the terms of the Trust's Services Agreement with Mor-
gan, the fees of the Co-Administrator for its services to the Trust are covered
by Morgan's expense undertakings described under Services Agent below.
FDI, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and exclusive placement agent for the Portfolio. FDI is a wholly owned
indirect subsidiary of Boston Institutional Group, Inc. FDI currently provides
administration and distribution services for a number of other registered in-
vestment companies.
SERVICES AGENT. Under a Services Agreement with the Trust and an Administrative
Services Agreement with the Portfolio, Morgan is responsible for certain finan-
cial, fund accounting and administrative services provided to the Fund and the
Portfolio, respectively, including services related to taxes, financial state-
ments, calculation of performance data, oversight of service providers, certain
regulatory and Board of Trustees matters, and providing shareholder services to
shareholders of the Fund.
In addition, as provided in the Trust's Services Agreement, Morgan is responsi-
ble for the annual costs of certain usual and customary expenses incurred by
the Fund (the "expense undertaking"). The expenses covered by the expense un-
dertaking include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Co-Administrator
for services to the Trust, insurance, the compensation and expenses of the
Trust's Trustees, the expenses of printing and mailing reports, notices, and
proxies to Fund shareholders, and registration fees under federal or state se-
curities laws. The Fund will pay these expenses directly and such amounts will
be deducted from the fees to be paid to Morgan under the agreement. If such
amounts are more than the amount of Morgan's fees under the agreement, Morgan
will reimburse the Fund for such excess amounts. Under the agreement, the fol-
lowing expenses are not included in the expense undertaking: 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 on an
annual basis to of 0.75% of the Fund's average daily net assets.
As noted above, the fee levels of the Fund are expense undertakings and reflect
payments made directly to third parties by the Fund for services rendered, as
well as payments to Morgan for services rendered. The Trustees of the Trust
regularly review amounts paid to and accounted for by Morgan pursuant to the
Services Agreement. See Expenses below.
Under the Portfolio's Administrative Services Agreement and the Co-Administra-
tion Agreement effective August 1, 1996, the Portfolio has agreed to pay to
Morgan and FDI fees equal to the Portfolio's allocable share of an annual com-
plex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio and the other portfolios (collectively the "Master
Portfolios") in which series of the Trust, The Pierpont Funds or The JPM Insti-
tutional Funds invest. This charge is calculated in accordance with the follow-
ing annual schedule: 0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.04% of the Master Portfolios' aggre-
gate average daily net assets in excess of $7 billion.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02101, serves as the Fund's and the Portfolio's
Custodian and the Fund's Transfer and Dividend Disbursing Agent. State Street
also keeps the books of account for the Fund and the Portfolio.
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<PAGE>
EXPENSES. In addition to the fees payable to Pierpont Group, Inc., Morgan and
FDI under the various agreements discussed under Trustees, Advisor, Co-Adminis-
trator and Distributor, and Services Agent above, the Portfolio is responsible
for usual and customary expenses associated with its operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance
costs, the compensation and expenses of its Trustees, registration fees under
federal and foreign securities laws, custodian fees, brokerage expenses and ex-
traordinary expenses applicable to the Portfolio.
In addition to the expenses that Morgan assumes under the Trust's Services
Agreement, Morgan has agreed that it will reimburse the Fund through at least
April 30, 1997 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 does not cover
extraordinary expenses during the period. 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 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 assis-
tance of an Eligible Institution that may establish its own terms, conditions
and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately 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 or its agent receives a purchase order after 4:00 P.M. New York time, the
purchase is effective and is made at the net asset value determined on the next
business day, and the purchaser becomes a holder of record on the following
business day upon the Fund's receipt of payment.
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<PAGE>
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing 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 state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating 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 redemp-
tion request to the Fund. The Fund executes effective redemption requests at
the next determined net asset value per share. See Net Asset Value. See Addi-
tional Information below for an explanation of the telephone redemption policy
of The JPM Advisor Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited on the next business day in immediately
available funds to the shareholder's account at Morgan or at his or her Eligi-
ble 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 sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption proceeds when noncorporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a shareholder sends a check for the purchase of Fund shares and
shares are purchased before the check has cleared, the transmittal of redemp-
tion 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 ex-
change 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
14
<PAGE>
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 de-
clared 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 distribu-
tions 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 re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion 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 the holidays listed under Net Asset Value in the Statement of Addi-
tional 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 "Massachu-
setts 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 avail-
able 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 liabili-
ty, 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 ap-
propriate 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. As of July 26, 1996, The American Hospital of Paris technically met
the definition of a control person of the Fund. The Trustees may call meetings
of shareholders for action by shareholder vote as
15
<PAGE>
may be required by either the 1940 Act or the Declaration of Trust. The Trust-
ees 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 Sec-
tion 16(c) of the 1940 Act. For further organization information, including
certain shareholder rights, see Description of Shares in the Statement of Addi-
tional Information.
The Portfolio 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 Port-
folio's Declaration of Trust provides that the Fund and other entities invest-
ing in the Portfolio (e.g., other investment companies, insurance company sepa-
rate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Fund incurring fi-
nancial 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 share- holders 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 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 com-
pany under Subchapter M of the Code. For the Fund to qualify as a regulated in-
vestment company, the Portfolio, in addition to other requirements, 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 is-
suer, except U.S. Government securities, and (b) with regard to 50% of its to-
tal 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 invest-
ment company, the Fund should not be subject to federal income taxes or federal
excise taxes if substantially all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders 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 contin-
ued 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 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.
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<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 re-
spect 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 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 finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, in-
cluding dividends and any distributions reinvested in additional shares or
credited as cash.
All shareholders are given the privilege to initiate transactions automati-
cally 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 Distribu-
tor may subject the investor to risk of loss if such instruction is subse-
quently 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 commu-
nicated from investors by telephone are genuine; if it does not, it, the Serv-
ices 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 TOPIX, 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 op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. This method of calculating total return is required by regula-
tions 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 Informa-
tion. All performance figures are based on historical earnings and are not in-
tended to indicate future performance. Shareholders may obtain performance in-
formation by calling Morgan at (800) JPM-3637.
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 se-
curities. 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 man-
agement purposes. See Risk Management in the Statement of Additional Informa-
tion. The Portfolio may not use futures contracts and options for speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains 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 al-
lowing 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 liq-
uid 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 secu-
rity, 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 in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing 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 in-
creases 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 po-
sition 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 pre-
mium 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 re-
ceived 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 op-
tion. The characteristics of writing call options are similar to those of writ-
ing 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 abil-
ity 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, ex-
cept 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 securi-
ties or segment of the securities market rather than price fluctuations in a
single security. The Portfolio, in purchasing or selling index options, is sub-
ject 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 speci-
fied 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 under-
lying 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 con-
tract 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 under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. 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 off-
set 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 assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties and Exchange Commission. Securities held in a segregated account cannot be
sold while the futures contract or option is outstanding, unless they are re-
placed with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede port-
folio 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.
ADVPROS408-968
MST608028PRO
The JPM Advisor Japan Equity Fund
PROSPECTUS
August 26, 1996
<PAGE>
PROSPECTUS
The JPM Advisor Asia Growth Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) JPM-3637
The JPM Advisor Asia Growth Fund (the "Fund") seeks to provide a high total
return from a portfolio of equity securities of companies in Asian growth
markets. It is designed for long-term investors who want access to the rapidly
growing Asian 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 ASIA GROWTH PORTFOLIO (THE "PORTFOLIO"), A
CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH A TWO-TIER MASTER-FEEDER STRUCTURE. SEE SPECIAL INFORMATION CONCERNING
INVESTMENT STRUCTURE ON PAGE 3.
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 August 26, 1996 (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, Funds Distributor, Inc. ("FDI"), 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: The JPM Advisor
Funds, or by calling (800) 221-7930.
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 AUGUST 26, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment Structure........................ 3
Investment Objective and Policies.......................................... 4
Risk Factors and Additional Investment Information......................... 6
Investment Restrictions.................................................... 11
Management of the Trust and the Portfolio.................................. 11
Shareholder Transactions................................................... 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 14
Redemption of Shares....................................................... 15
Exchange of Shares......................................................... 15
Dividends and Distributions................................................ 16
Net Asset Value............................................................ 16
Organization............................................................... 16
Taxes...................................................................... 17
Additional Information..................................................... 18
Appendix................................................................... A-1
</TABLE>
<PAGE>
The JPM Advisor Asia Growth Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for long-term investors who want access to the rapidly
growing Asian markets. The Fund seeks to achieve its investment objective by
investing all of its investable assets in The Asia Growth Portfolio, a diver-
sified open-end management investment company having the same investment ob-
jective 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 Portfo-
lio's investments in securities of issuers in Asian growth markets involve
foreign investment risks and may be more volatile and less liquid than domes-
tic securities. For further information about these investments, see Invest-
ment 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 in a two-tier master-feeder investment fund
structure. The Trustees of the Trust believe that the Fund may achieve econo-
mies of scale over time by utilizing this investment structure.
The following table illustrates that investors in the Fund incur no share-
holder 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 be-
lieve 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............................................................. 0.80%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 1.05%
----
Total Operating Expenses (after expense reimbursement).................... 1.85%
</TABLE>
- -------
* These expenses are based on the expenses and average net assets of the Fund
and the Portfolio for the period reflected in Financial Highlights below, af-
ter any applicable expense reimbursement. Without such reimbursement, Other
Expenses and Total Operating Expenses (after application of state expense
limitations) would have been equal on an annual basis to 1.70% and 2.50%, re-
spectively, of the average daily net assets of the Fund. See Management of
the Trust and the Portfolio.
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..................................................................... $ 19
3 Years.................................................................... $ 58
5 Years.................................................................... $100
10 Years................................................................... $217
</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 Portfolio's Administrative Services and Trust's Services Agreement,
the fees paid to Pierpont Group, Inc. under the Portfolio Fund Services Agree-
ment, the fees paid to FDI under the Portfolio's Co-Administration Agreement,
organizational expenses, the fees paid to State Street Bank and Trust Company
as custodian of the Portfolio, and other usual and customary expenses of the
Portfolio. For a more detailed description of contractual fee arrangements, in-
cluding expense reimbursements, 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 ex-
change 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 EX-
PENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding are unaudited. The Fund's
semi-annual financial statements are part of the Statement of Additional
Information and are incorporated herein. The financial statements and
subsequent semi- annual reports are available without charge upon request.
Future annual reports will include a discussion of those factors, strategies
and techniques that materially affected the Fund's performance during the
period of the report, as well as certain related information.
<TABLE>
<CAPTION>
For the Period
January 5, 1996
(commencement of
operations) through
June 30, 1996
(unaudited)
-------------------
<S> <C>
Net Asset Value, Beginning of Period....................... $10.71
------
Income From Investment Operations:
Net Investment Income...................................... 0.10
Net Realized and Unrealized Gain on Investment and Foreign
Currency.................................................. 0.36
------
Total from Investment Operations........................... 0.46
------
Net Asset Value, End of Period............................. $11.17
======
Total Return............................................... 4.30%(a)
======
Ratios and Supplemental Data:
Net Assets at End of Period (in thousands)................. $ 116
Ratios to Average Net Assets:
Expenses................................................. 1.85%(b)
Net Investment Income.................................... 0.87%(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursement........................................... 0.65%(b)(c)
</TABLE>
- -------
(a) Not Annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio 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 out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
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 bear 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 Morgan at
(800) JPM-3637.
3
<PAGE>
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 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 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 achieve a high total return from a port-
folio of equity securities of companies in Asian growth markets. 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 its
investable assets in The Asia Growth Portfolio, a diversified open-end manage-
ment investment company having the same investment objective as the Fund.
The Fund is designed for long-term investors who want access to the rapidly
growing Asian markets. THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PRO-
GRAM NOR IS THE FUND SUITABLE FOR ALL INVESTORS. MANY INVESTMENTS
4
<PAGE>
IN ASIAN GROWTH 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 Invest-
ment Information.
The Advisor considers "Asian growth markets" to be Bangladesh, China, India,
Indonesia, Korea, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand,
Taiwan, Hong Kong, and Singapore.
A company in an Asian growth market is one that: (i) has its principal securi-
ties trading market in an Asian growth market; or (ii) is organized under the
laws of an Asian growth market; or (iii) derives 50% or more of its total reve-
nue and/or profits from either goods produced, sales made or services performed
in Asian growth markets; or (iv) has at least 50% of its assets located in
Asian growth markets.
The Portfolio seeks to achieve its objective through country allocation and
company selection. Morgan uses a disciplined portfolio construction process to
seek to enhance returns and reduce volatility in the market value of the Port-
folio relative to its benchmark. The Portfolio's benchmark is a customized in-
dex comprised of Morgan Stanley Capital International's indices for Hong Kong
and Singapore and the International Finance Corporation's Investable indices
for China, Indonesia, Malaysia, Philippines, South Korea, Taiwan and Thailand.
Based on fundamental research, quantitative valuation techniques and experi-
enced judgment, Morgan identifies those countries where economic and political
factors, including currency movements, are likely to produce above-average re-
turns. Drawing on this analysis, Morgan allocates the Portfolio among Asian
growth markets by overweighting or underweighting selected countries against
the benchmark. Currently, three Asian growth markets--Hong Kong, Malaysia and
Thailand--represent more than 60% of the market value of the benchmark and of
the Portfolio.
To select investments for the Portfolio, the Advisor ranks companies in each
Asian growth market within industrial sectors according to their relative
value. These valuations are based on the Advisor's fundamental research and
use of quantitative tools to project a company's long-term prospects for
earnings growth and its dividend paying capability. Based on this valuation,
Morgan then selects the companies which appear most attractive for the
Portfolio. Typically, the Portfolio's industrial sector weightings will be
similar to those of its benchmark.
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 investments are primarily in securities 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.
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 Asian growth markets
consisting of common stocks and other securities with equity characteristics
comprised of preferred stock, warrants, rights, convertible securities, trust
certificates, limited partership interests and equity participations. The
Portfolio's primary equity investments
5
<PAGE>
are the common stock of companies the Advisor has identified as attractive in
the Asian growth markets. Such investments will be made in at least three
different countries considered to be Asian growth 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 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.
Certain Asian growth 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
contracts are derivative instruments. For a discussion of these investments
and investment techniques, see Risk Facotrs and Additional Investment
Information.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
INVESTING IN ASIAN GROWTH MARKETS. The Portfolio invests primarily in equity
securities of companies in Asian growth markets. Investments in securities of
issuers in Asian growth markets 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 Asian 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.
Different combinations of the above risks exist in each Asian growth market.
For example, the People's Republic of China (the "PRC") continues to exercise
significant centralized control over the economy. A delay in implementing, or
a reversal of, economic reforms could adversely affect economic growth,
opportunities for foreign investment and the prospects of private sector
enterprises. Actions by the PRC with respect to Hong Kong, both before and
after reversion to Chinese rule, could have a negative effect on business
confidence, the performance of Hong Kong companies and prices of Hong Kong
stocks.
The value of the Portfolio's investments could also be unfavorably affected
by limitations on the foreign ownership of stock imposed by Indonesia,
Malaysia, Thailand and Taiwan; by substantial delays in the settlement
(through physical delivery) of stock transactions in India; and Thailand's
border disputes with Laos and Cambodia. In addition, all of these countries
have experienced or may experience a significant degree of political
instability and volatility in the prices of
6
<PAGE>
their respective currencies. For additional information, see Appendix
C--Investing in Japan and Asian Growth Markets in the Statement of Additional
Information.
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 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 generallly 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 compnay
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 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 cur-
rencies, 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 Trans-
actions.
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
7
<PAGE>
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 curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing 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 con-
tracts are derivative instruments, as their value derives from the spot ex-
change rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usu-
ally 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 cur-
rency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio'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 antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally 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 de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts 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 fluc-
tuations 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 projec-
tion 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. Convert-
ible 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.
COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price fluctu-
ations. As a result, warrants may be more volatile investments than the under-
lying common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or prior to the expiration date.
8
<PAGE>
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 for money market instruments 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 trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished 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 re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below.
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 securi-
ties 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 in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will con-
sider all facts and circumstances, including the creditworthiness of the bor-
rowing financial institution, and the Portfolio will not make any loans in ex-
cess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase agreement transactions. See Repurchase Agreements above. The
Portfolio will not lend its securities to any officer, Trustee, Director, em-
ployee 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 re-
verse 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 agree-
ment. For the purposes of the 1940 Act, it is considered as a form of borrow-
ing by the Portfolio and, therefore, a form of leverage. Leverage may cause
any gains or losses of the Portfolio to be magnified. See Investment Restric-
tions for investment limitations applicable to reverse repurchase agreements
and other borrowings. For more information, see Investment Objectives and Pol-
icies in the Statement of Additional Information.
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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, as amended (the "1933 Act"), and cannot be offered for
public sale in the United States without first being registered under 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 il-
liquid 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 de-
termined 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 in-
dexes of equity securities, and (c) purchase and sell (write) put and call op-
tions on futures contracts on indexes of equity securities. Each of these in-
struments 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 man-
agement 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, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be com-
bined 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 objec-
tive 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 Ad-
visor applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options and futures strategies may lower the Portfo-
lio's return. Certain strategies limit the Portfolio's possibilities to real-
ize 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 premi-
ums, in connection with its futures and options transactions and these trans-
actions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of se-
curities 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 Port-
folio'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
transac-
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tions, see the Appendix to this Prospectus and Investment Objectives and Poli-
cies--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 in-
struments without limitation as a temporary defensive measure taken in the Ad-
visor'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 in-
vest more than 5% of its total assets in the securities of any one issuer, ex-
cept 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 in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, 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 invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
The Portfolio may not purchase securities or other obligations of issuers con-
ducting their principal business activity in the same industry if its invest-
ments 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. Govern-
ment securities. In addition, the Portfolio may not borrow money except that
the Portfolio may (a) borrow money from banks for temporary or emergency pur-
poses (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 per-
mitted by the 1940 Act or any rule, order or interpretation thereunder. See
Risk Factors and Additional Investment Information--Loans of Portfolio Securi-
ties 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 Restric-
tions 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 service providers and the performance of the Portfolio's Advisor. Pur-
suant to the Declaration of Trust for the Portfolio, the Trustees of the Port-
folio (who are not the same as the Trustees of the Trust) have the same respon-
sibilities 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 super-
visory 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
11
<PAGE>
providing these services at cost to those 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 Trust-
ees and officers, see Trustees and Officers in the Statement of Additional In-
formation.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the serv-
ices 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 con-
ducts a general banking and trust business. Morgan is a wholly-owned subsidi-
ary 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 cli-
ents with combined assets under management of over $179 billion (of which the
Advisor advises over $28 billion). Morgan provides investment advice and port-
folio management services to the Portfolio. Subject to the supervision of the
Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment deci-
sions, arranges for the execution of portfolio transactions and generally man-
ages 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 companies in emerging
markets, including Asian growth markets, since 1990. The portfolio managers
making investments in Asian growth markets work in conjunction with Morgan's
equity analysts focused on Asian growth markets, as well as capital market,
credit and economic research analysts, traders and administrative officers.
The Asian equity analysts, located in Singapore, each cover a different indus-
try, monitoring a universe of approximately 250 companies in the region.
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): Steven T. Ho, Vice
President (since March, 1995, employed by Morgan since prior to 1991 as a
portfolio manager of Asian investments and as an investment research analyst
prior to 1993) and Yuen-Peng Mok, Vice President (since March, 1995, employed
by Morgan since prior to 1991 as a portfolio manager of Southeast Asian 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 0.80% of the Portfolio's average daily net assets. While
the advisory fee for the Portfolio is higher than that of most investment com-
panies, 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.
CO-ADMINISTRATOR AND DISTRIBUTOR. Under Co-Administration Agreements with the
Trust and the Portfolio, FDI serves as the Co-Administrator for the Trust and
the Portfolio and in that capacity FDI (i) provides office space, equipment
and clerical personnel for maintaining the organization and books and records
of the Trust and the Portfolio; (ii) provides officers for the Trust and the
Portfolio; (iii) prepares and files documents required in connection with the
Trust's state securities law registrations; (iv) reviews and files Trust mar-
keting and sales literature; (v) files Portfolio regulatory documents and
mails Portfolio communications to Trustees and investors; and (vi) maintains
related books andrecords. Under the terms of the Trust's Services Agreement
with Morgan, the fees of the Co-Administrator for its services to the Trust
are covered by Morgan's expense undertakings described under Services Agent
below.
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<PAGE>
FDI, a registered broker-dealer, also serves as the Distributor of shares of
the Fund and exclusive placement agent for the Portfolio. FDI is a wholly owned
indirect subsidiary of Boston Institutional Group, Inc. FDI currently provides
administration and distribution services for a number of other registered in-
vestment companies.
SERVICES AGENT. Under a Services Agreement with the Trust and an Administrative
Services Agreement with the Portfolio, Morgan is responsible for certain finan-
cial, fund accounting and administrative services provided to the Fund and the
Portfolio, respectively, including services related to taxes, financial state-
ments, calculation of performance data, oversight of service providers, certain
regulatory and Board of Trustees matters, and providing shareholder services to
shareholders of the Fund.
In addition, as provided in the Trust's Services Agreement, Morgan is responsi-
ble for the annual costs of certain usual and customary expenses incurred by
the Fund (the "expense undertaking"). The expenses covered by the expense un-
dertaking include, but are not limited to, transfer, registrar, and dividend
disbursing costs, legal and accounting expenses, fees of the Co-Administrator
for services to the Trust, insurance, the compensation and expenses of the
Trust's Trustees, the expenses of printing and mailing reports, notices, and
proxies to Fund shareholders, and registration fees under federal or state se-
curities laws. The Fund will pay these expenses directly and such amounts will
be deducted from the fees to be paid to Morgan under the agreement. If such
amounts are more than the amount of Morgan's fees under the agreement, Morgan
will reimburse the Fund for such excess amounts. Under the agreement, the fol-
lowing expenses are not included in the expense undertaking: 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 on an
annual basis to 0.75% of the Fund's average daily net assets.
As noted above, the fee levels of the Fund are expense undertakings and reflect
payments made directly to third parties by the Fund for services rendered, as
well as payments to Morgan for services rendered. The Trustees of the Trust
regularly review amounts paid to and accounted for by Morgan pursuant to the
Services Agreement. See Expenses below.
Under the Portfolio's Administrative Services Agreement and the Co-Administra-
tion Agreement effective August 1, 1996, the Portfolio has agreed to pay to
Morgan and FDI fees equal to the Portfolio's share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of
the Portfolio and the other portfolios (collectively the "Master Portfolios")
in which series of the Trust, The Pierpont Funds or The JPM Institutional Funds
invest. This charge is calculated in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios' aggregate av-
erage daily net assets and 0.04% of the Master Portfolios' aggregate average
daily net assets in excess of $7 billion.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02101, serves as the Fund's and the Portfolio's
Custodian and the Fund's Transfer and Dividend Disbursing Agent. State Street
also keeps the books of account for the Fund and the Portfolio.
EXPENSES. In addition to the fees payable to Pierpont Group, Inc., Morgan and
FDI under the various agreements discussed under Trustees, Advisor, Co-Adminis-
trator and Distributor, and Services Agent above, the Portfolio is responsible
for usual and customary expenses associated with its operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance
costs, the compensation and expenses of its Trustees, registration fees under
federal and foreign securities laws, custodian fees, brokerage expenses and ex-
traordinary expenses applicable to the Portfolio.
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<PAGE>
In addition to the expenses that Morgan assumes under the Trust's Services
Agreement, Morgan has agreed that it will reimburse the Fund through at least
April 30, 1997 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 1.85% of the Fund's average daily net assets. This limit does not cover
extraordinary expenses during the period. 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 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 assis-
tance of an Eligible Institution that may establish its own terms, conditions
and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately 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 or its agent receives a purchase order after 4:00 P.M. New York time, the
purchase is effective and is made at the net asset value determined on the next
business day, and the purchaser becomes a holder of record on the following
business day upon the Fund's receipt of payment.
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<PAGE>
ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
subaccounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing 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 state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating 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 redemp-
tion request to the Fund. The Fund executes effective redemption requests at
the next determined net asset value per share. See Net Asset Value. See Addi-
tional Information below for an explanation of the telephone redemption policy
of The JPM Advisor Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited on the next business day in immediately
available funds to the shareholder's account at Morgan or at his or her Eligi-
ble 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 sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal in-
come tax on dividends, distributions and redemption proceeds when noncorporate
investors have not provided a certified taxpayer identification number. In ad-
dition, if a shareholder sends a check for the purchase of Fund shares and
shares are purchased before the check has cleared, the transmittal of redemp-
tion 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 ex-
change 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.
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<PAGE>
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 addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are de-
clared 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 distribu-
tions 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 re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion 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 the holidays listed under Net Asset Value in the Statement of Addi-
tional 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 "Massachu-
setts 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 liabili-
ty, 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 share-
holder 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 informa-
tion, including certain shareholder rights, see Description of Shares in the
Statement of Additional Information.
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<PAGE>
The Portfolio 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 Dec-
laration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate ac-
counts and common and commingled trust funds) will each be liable for all obli-
gations of the Portfolio. However, the risk of the Fund incurring financial
loss on account of such liability is limited to circumstances in which both in-
adequate insurance existed and the Portfolio itself was unable to meet its ob-
ligations. Accordingly, the Trustees of the Trust believe that neither the Fund
nor its shareholders will be adversely affected by reason of the Fund's invest-
ing 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 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 com-
pany under Subchapter M of the Code. For the Fund to qualify as a regulated in-
vestment company, the Portfolio, in addition to other requirements, 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 is-
suer, except U.S. Government securities, and (b) with regard to 50% of its to-
tal 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 invest-
ment company, the Fund should not be subject to federal income taxes or federal
excise taxes if substantially all of its net investment income and capital
gains less any available capital loss carryforwards are distributed to share-
holders 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 contin-
ued 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 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
17
<PAGE>
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 semiannual 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
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
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. Shareholders
may obtain performance information by calling Morgan at (800) JPM-3637.
18
<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 se-
curities. 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 man-
agement purposes. See Risk Management in the Statement of Additional Informa-
tion. The Portfolio may not use futures contracts and options for speculation.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains 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 al-
lowing 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 liq-
uid 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 secu-
rity, 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 in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing 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 in-
creases 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 po-
sition 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 pre-
mium 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 re-
ceived 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 op-
tion. The characteristics of writing call options are similar to those of writ-
ing 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 abil-
ity 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, ex-
cept 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 securi-
ties or segment of the securities market rather than price fluctuations in a
single security. The Portfolio, in purchasing or selling index options, is sub-
ject 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 speci-
fied 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 under-
lying 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 con-
tract 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 under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. 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 off-
set 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
A-2
<PAGE>
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 Portfo-
lio 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 assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties 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
The JPM Advisor U.S. Fixed Income Fund ASIA GROWTH
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.
ADVPROS407-968 MST608027PRO
PROSPECTUS
August 26, 1996
<PAGE>
JPM597B
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 DIVERSIFIED FUND
THE JPM ADVISOR EMERGING MARKETS EQUITY FUND
THE JPM ADVISOR ASIA GROWTH FUND
THE JPM ADVISOR EUROPEAN EQUITY FUND
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
August 26, 1996
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION, WHICH SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS FOR THE FUND OR FUNDS LISTED ABOVE AS SUPPLEMENTED FROM TIME TO
TIME, WHICH MAY BE OBTAINED UPON REQUEST FROM FUNDS DISTRIBUTOR, INC.,
ATTENTION: THE JPM ADVISOR FUNDS (800) 221-7930.
<PAGE>
Table of Contents
Page
----
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Objectives and Policies. . . . . . . . . . . . . . . . . . 1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . 21
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . 31
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . 35
Co-Administrator and Distributor . . . . . . . . . . . . . . . . . . 39
Services Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . 43
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 44
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . 44
Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 45
Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . 45
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 49
Massachusetts Trust . . . . . . . . . . . . . . . . . . . . . . . . . 51
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . 52
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Additional Information . . . . . . . . . . . . . . . . . . . . . . . 57
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 58
Appendix A - Description of Securities
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix B - Investing in Japan
and Asian Growth Markets . . . . . . . . . . . . . . . . . . . . . . B-1
<PAGE>
GENERAL
The JPM Advisor Funds is a family of open-end investment companies,
currently consisting of ten 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 Diversified Fund, The JPM Advisor Emerging Markets Equity
Fund, The JPM Advisor Asia Growth Fund, The JPM Advisor European Equity Fund and
The JPM Advisor Japan Equity Fund (collectively, the "Funds"). Each of the
Funds is a series of shares of beneficial interest of The JPM Advisor Funds, an
open-end management investment company formed as a Massachusetts business trust
(the "Trust"). As of the date of this Statement of Additional Information, the
Diversified Fund had neither been offered to the public nor commenced public
investment operations.
This Statement of Additional Information describes the investment
objectives and policies, management and operation of each of the Funds to enable
investors to select the Funds which best suit their needs. The Funds operate
through a two-tier master-feeder investment fund structure.
This Statement of Additional Information provides additional information
with respect to the Funds and should be read in conjunction with the current
Prospectuses. Capitalized terms not otherwise defined herein have the meanings
accorded to them in the Funds' Prospectuses. The Funds' executive offices are
located at 60 State Street, Suite 1300, Boston, Massachusetts 02109.
INVESTMENT OBJECTIVES AND POLICIES
THE JPM ADVISOR U.S. FIXED INCOME FUND (the "U.S. Fixed Income Fund") is
designed to be an economical and convenient means of making substantial
investments in a broad range of corporate and government debt obligations and
related investments of domestic and foreign issuers, subject to certain quality
and other restrictions. See "Quality and Diversification Requirements." The
U.S. Fixed Income Fund's investment objective is to provide a high total return
consistent with moderate risk of capital and maintenance of liquidity. Although
the net asset value of the U.S. Fixed Income Fund will fluctuate, the U.S. Fixed
Income Fund attempts to conserve the value of its investments to the extent
consistent with its objective. The U.S. Fixed Income Fund attempts to achieve
its objective by investing all of its investable assets in The U.S. Fixed Income
Portfolio (the "U.S. Fixed Income Portfolio"), a diversified open-end management
investment company having the same investment objective as the U.S. Fixed Income
Fund.
The U.S. Fixed Income Portfolio attempts to achieve its investment
objective by investing primarily in high grade corporate and government debt
obligations and related securities of domestic and foreign issuers described in
the Prospectus and this Statement of Additional Information.
INVESTMENT PROCESS
Duration/yield curve management: Morgan's duration decision begins with an
analysis of real yields, which its research indicates are generally a reliable
indicator of longer term interest rate trends. Other factors Morgan studies
with regard to interest rates include economic growth and inflation, capital
flows and monetary policy. Based on this analysis, Morgan forms a view of the
most likely changes in the level and shape of the yield curve -- as well as the
timing of those changes -- and sets the Portfolio's duration and maturity
structure accordingly. To help contain interest rate risk, Morgan typically
limits the overall duration of the Portfolio to a range between one year shorter
and one year longer than that of the Salomon Brothers Broad Investment Grade
Bond Index, the benchmark index.
1
<PAGE>
Sector allocations: Sector allocations are driven by Morgan's fundamental
and quantitative analysis of the relative valuation of a broad array of fixed
income sectors. Specifically, Morgan utilizes market and credit analysts to
assess whether the current risk-adjusted yield spreads of various sectors are
likely to widen or narrow. Morgan then overweights (underweights) those sectors
its analysis indicates offer the most (least) relative value, basing the speed
and magnitude of these shifts on valuation considerations.
Security selection: Securities are selected by the portfolio manager, with
substantial input from Morgan's fixed income analysis and traders. Using
quantitative analysis as well as traditional valuation methods, Morgan's
applied-research analysts aim to optimize security selection within the bounds
of the Portfolio's investment objective. In addition, credit analysts --
supported by Morgan's equity analysts -- assess the creditworthiness of issuers
and counterparties. A dedicated trading desk contributes to security selection
by tracking new issuance, monitoring dealer inventories, and identifying
attractively priced bonds. The traders also handle all transactions for the
Portfolio.
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND (the "International Fixed
Income Fund") is designed to be an economical and convenient means of making
substantial investments in a broad range of international fixed income
securities. The International Fixed Income 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. The International Fixed
Income Fund attempts to achieve its objective by investing all of its investable
assets in The Non-U.S. Fixed Income Portfolio (the "Non-U.S. Fixed Income
Portfolio"), a non-diversified open-end management investment company having the
same investment objective as the International Fixed Income Fund.
The Non-U.S. Fixed Income Portfolio attempts to achieve its investment
objective by investing primarily in high grade, non-dollar-denominated corporate
and government debt obligations of foreign issuers described in the Prospectus
and this Statement of Additional Information.
INVESTMENT PROCESS
Duration management: The duration decision is central to Morgan's
investment process and begins with an analysis of economic conditions and real
yields in the countries that make up the Portfolio's universe. Based on this
analysis, fixed income portfolio managers forecast three potential paths
(optimistic, pessimistic, and most likely) that interest rates in each market
could follow over the next three and twelve months. These forecasts are
converted into return curves that enable Morgan to estimate the risk-return
profile of different portfolio durations. In each market, duration is set at
its "optimal" level-that is, at the level that Morgan believes will generate the
highest excess return per unit of excess risk, as measured against the Salomon
Brothers World Government Bond Index.
Country allocation: Morgan allocates the Portfolio's assets primarily
among the developed countries of the world outside the United States. Country
allocations are determined through and optimization procedure that ranks markets
according to the risks and returns inherent in their "optimal" durations.
Country weightings also reflect liquidity and credit quality considerations. To
help contain risk, Morgan typically limits the country-weighted duration of the
Portfolio to a range between one year shorter and one year longer than that of
the benchmark.
Sector/security selection: Holdings primarily consist of government and
government-guaranteed bonds, but also include publicly and privately traded
corporates, debt obligations of banks and bank holding companies and of
supranational organizations, and convertible securities. Sectors are over- or
2
<PAGE>
under-weighted when Morgan perceives significant valuation distortions in their
yield spreads. Securities are selected by the portfolio manager, with
substantial input from fixed income analysts and traders as well as from
Morgan's extended network of equity analysts. Credit analysts monitor the
quality of current and prospective holdings and, in conjunction with the credit
committee, recommend purchases and sales.
THE JPM ADVISOR U.S. EQUITY FUND (the "U.S. Equity Fund") is designed for
investors who want an actively managed portfolio of selected equity securities
that seeks to outperform the S&P 500 Index. The U.S. Equity Fund's investment
objective is to provide a high total return from a portfolio of selected equity
securities. The Fund attempts to achieve its investment objective by investing
all of its investable assets in The Selected U.S. Equity Portfolio (the
"Selected U.S. Equity Portfolio"), a diversified open-end management investment
company having the same investment objective as the U.S. Equity Fund.
In normal circumstances, at least 65% of the Selected U.S. Equity
Portfolio's net assets will be 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 (collectively, "Equity
Securities"). The Selected U.S. Equity 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.
INVESTMENT PROCESS
Fundamental research: Morgan's 20 domestic equity analysts, each an
industry specialist with an average of 13 years of experience, follow 700
predominantly large- and medium-sized U.S. companies -- 500 of which form the
universe for the Portfolio's investments. Their research goal is to forecast
normalized, longer term earnings and dividends for the most attractive companies
among those they cover. In doing this, they may work in concert with Morgan's
international equity analysts in order to gain a broader perspective for
evaluating industries and companies in today's global economy.
Systematic valuation: The analysts' forecasts are converted into
comparable expected returns by a dividend discount model, which calculates those
expected returns by comparing a company's current stock price with the "fair
value" price forecasted by its estimated long-term earnings power. Within each
sector, companies are ranked by their expected return and grouped into
quintiles; those with the highest expected returns (Quintile 1) are deemed the
most undervalued relative to their long-term earnings power, while those with
the lowest expected returns (Quintile 5) are deemed the most overvalued.
Disciplined portfolio construction: A diversified portfolio is constructed
using disciplined buy and sell rules. Purchases are concentrated among first-
quintile stocks; the specific names selected reflect the portfolio manager's
judgment concerning the soundness of the underlying forecasts, the likelihood
that the perceived misvaluation will be corrected within a reasonable time
frame, and the magnitude of the risks versus the rewards. Once a stock falls
into the third quintile -- because its price has risen or its fundamentals have
deteriorated -- it generally becomes a sale candidate. The portfolio manager
seeks to hold sector weightings close to those of the S&P 500 Index, reflecting
Morgan's belief that its research has the potential to add value at the
individual stock level, but not at the sector level. Sector neutrality is also
seen as a way to help to protect the portfolio from macroeconomic risks, and --
together with diversification -- represents an important element of Morgan's
risk control strategy. Morgan's dedicated trading desk handles all transactions
for the Portfolio.
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THE JPM ADVISOR U.S. SMALL CAP EQUITY FUND (the "U.S. Small Cap Equity
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 U.S.
Small Cap Equity Fund's investment objective is to provide a high total return
from a portfolio of Equity Securities of small companies. The Fund attempts to
achieve its investment objective by investing all of its investable assets in
The U.S. Small Company Portfolio (the "U.S. Small Company Portfolio"), a
diversified open-end management investment company having the same investment
objective as the U.S. Small Cap Equity Fund.
The U.S. Small Company Portfolio attempts to achieve its investment
objective by investing primarily in the common stock of small U.S. companies
included in the Russell 2500 Index, which is composed of 2,500 common stocks of
U.S. companies with market capitalizations ranging between $100 million and $1.5
billion.
INVESTMENT PROCESS
Fundamental research: Morgan's 20 domestic equity analysts -- each an
industry specialist with an average of 13 years of experience -- continuously
monitor the small cap stocks in their respective sectors with the aim of
identifying companies that exhibit superior financial strength and operating
returns. Meetings with management and on-site visits play a key role in shaping
their assessments. Their research goal is to forecast normalized, long-term
earnings and dividends for the most attractive small cap companies among those
they monitor -- a universe that generally contains a total of 300-350 names.
Because Morgan's analysts follow both the larger and smaller companies in their
industries -- in essence, covering their industries from top to bottom -- they
are able to bring broad perspective to the research they do on both.
Systematic valuation: The analysts' forecasts are converted into
comparable expected returns by Morgan's dividend discount model, which
calculates those returns by comparing a company's current stock price with the
"fair value" price forecasted by its estimated long-term earnings power. Within
each industry, companies are ranked by their expected returns and grouped into
quintiles; those with the highest expected returns (Quintile 1) are deemed the
most undervalued relative to their long-term earnings power, while those with
the lowest expected returns (Quintile 5) are deemed the most overvalued.
Disciplined portfolio construction: A diversified portfolio is constructed
using disciplined buy and sell rules. Purchases are concentrated among the
stocks in the top two quintiles of the rankings; the specific names selected
reflect the portfolio manager's judgment concerning the soundness of the
underlying forecasts, the likelihood that the perceived misevaluation will soon
be corrected, and the magnitude of the risks versus the rewards. Once a stock
falls into the third quintile -- because its price has risen or its fundamentals
have deteriorated -- it generally becomes a sale candidate. The portfolio
manager seeks to hold sector weightings close to those of the Russell 2500
Index, the Portfolio's benchmark, reflecting Morgan's belief that its research
has the potential to add value at the individual stock level, but not at the
sector level. Sector neutrality is also seen as a way to help to protect the
portfolio from macroeconomic risks, and -- together with diversification --
represents an important element of Morgan's investment strategy.
THE JPM ADVISOR INTERNATIONAL EQUITY FUND (the "International Equity Fund")
is designed for investors with a long-term investment horizon who want to
diversify their portfolios by investing in an actively managed portfolio of non-
U.S. securities that seeks to outperform the Morgan Stanley Capital
International ("MSCI") Europe, Australia and Far East Index (the "EAFE Index").
The International Equity Fund's investment objective is to provide a high total
return from a portfolio of Equity Securities of foreign corporations. The Fund
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attempts to achieve its investment objective by investing all of its investable
assets in The Non-U.S. Equity Portfolio (the "Non-U.S. Equity Portfolio"), a
diversified open-end management investment company having the same investment
objective as the International Equity Fund.
The Non-U.S. Equity Portfolio seeks to achieve its investment objective by
investing primarily in the Equity Securities of foreign corporations. Under
normal circumstances, the Non-U.S. Equity Portfolio expects to invest at least
65% of its total assets in such securities. The Non-U.S. Equity Portfolio does
not intend to invest in U.S. securities (other than money market instruments),
except temporarily, when extraordinary circumstances prevailing at the same time
in a significant number of developed foreign countries render investments in
such countries inadvisable.
INVESTMENT PROCESS
Country allocation: Morgan's country allocation decision begins with a
forecast of equity risk premiums, which provide a valuation signal by measuring
the relative attractiveness of stocks versus bonds. Using a proprietary
approach, Morgan calculates this risk premium for each of the nations in the
Portfolio's universe, determines the extent of its deviation -- if any -- from
its historical norm, and then ranks countries according to the size of those
deviations. Countries with high (low) rankings are overweighted (underweighted)
in comparisons to the EAFE Index to reflect the above-average (below-average)
attractiveness of their stock markets. In determining weightings, Morgan
analyzes a variety of qualitative factors as well -- including the liquidity,
earnings momentum and interest rate climate of the market at hand. These
qualitative assessments can change the magnitude but not the direction of the
country allocations called for by the risk premium forecast. Morgan places
limits on the total size of the Portfolio's country over- and under-weightings
relative to the EAFE Index.
Stock selection: Morgan's 44 international equity analysts, each an
industry and country specialist, forecast normalized earnings and dividend
payouts for roughly 1,000 non-U.S. companies -- taking a long-term perspective
rather than the short time frame common to consensus estimates. These forecasts
are converted into comparable expected returns by a dividend discount model, and
then companies are ranked from most to least attractive by industry and country.
A diversified portfolio is constructed using disciplined buy and sell rules.
The portfolio manager's objective is to concentrate the purchases in the top
third of the rankings, and to keep sector weightings close to those of the EAFE
Index, the Fund's benchmark. Once a stock falls into the bottom third of the
rankings, it generally becomes a sales candidate. Where available, warrants and
convertibles may be purchased instead of common stock if they are deemed a more
attractive means of investing in an undervalued company.
Currency management: Currency is actively managed, in conjunction with
country and stock allocation, with the goal of protecting and possibly enhancing
the Fund's return. Morgan's currency decisions are supported by a proprietary
tactical mode which forecasts currency movements based on an analysis of four
fundamental factors -- trade balance trends, purchasing power parity, real
short-term interest differentials, and real bond yields -- plus a technical
factor designed to improve the timing of transactions. Combining the output of
this model with a subjective assessment of economic, political and market
factors, Morgan's currency group recommends currency strategies that are
implemented in conjunction with the Portfolio's investment strategy.
THE JPM ADVISOR DIVERSIFIED FUND (the "Diversified Fund") is designed for
investors who wish to invest for long term objectives such as retirement and who
seek to attain real appreciation in their investments over the long term, but
with somewhat less price fluctuation than a portfolio consisting solely of
equity securities. The Diversified Fund's investment objective is to provide a
high
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total return from a diversified portfolio of equity and fixed income securities.
The Fund attempts to achieve its investment objective by investing all of its
investable assets in The Diversified Portfolio, a diversified open-end
management investment company having the same investment objective as the
Diversified Fund. Morgan allocates the Portfolio's assets between major asset
classes based on a systematic valuation procedure and subjective assessment.
INVESTMENT PROCESS
The mix of equities and fixed income is based on the risk premium model and
the anticipation of changing economic trends. The risk premium is the
difference between Morgan's forecast of the long-term return on stocks
(determined using Morgan's proprietary dividend discount model) and the current
nominal yield on 30-year U.S. Treasury bonds. When the risk premium is high,
more assets are allocated to stocks. When the risk premium is low, more assets
are allocated to bonds. Within U.S. equities, the allocation between large cap
and small cap stocks is based on the relative dividend discount rate spread
between large and small cap. Within fixed income, the allocation among sectors
is based on Morgan's analysis of their relative valuation. Morgan's asset
allocation decisions for the Portfolio are implemented using the investment
processes described herein for the U.S. Fixed Income, U.S. Equity, U.S. Small
Cap Equity and International Equity Funds.
THE JPM ADVISOR EMERGING MARKETS EQUITY FUND (the "Emerging Markets Equity
Fund") is designed for investors with a long-term investment horizon who want
exposure to the rapidly growing emerging markets. The Emerging Markets Equity
Fund's investment objective is to provide a high total return from a portfolio
of Equity Securities of companies in emerging markets. The Fund attempts to
achieve its investment objective by investing all of its investable assets in
The Emerging Markets Equity Portfolio (the "Emerging Markets Equity Portfolio"),
a diversified open-end management investment company having the same investment
objective as the Emerging Markets Equity Fund.
The Emerging Markets Equity Portfolio seeks to achieve its investment
objective by investing primarily in Equity Securities of emerging markets
issuers. Under normal circumstances, the Portfolio expects to invest at least
65% of its total assets in such securities. The Portfolio does not intend to
invest in U.S. securities (other than money market instruments), except
temporarily, when extraordinary circumstances prevailing at the same time in a
significant number of emerging markets countries render investments in such
countries inadvisable.
INVESTMENT PROCESS
Country allocation: Morgan's country allocation decision begins with a
forecast of the expected return of each market in the Portfolio's universe.
These expected returns are calculated using a proprietary valuation method that
is forward looking in nature rather than based on historical data. Morgan then
evaluates these expected returns from two different perspectives: first, it
identifies those countries that have high real expected returns relative to
their own history and other nations in their universe. Second, it identifies
those countries that it expects will provide high returns relative to their
currency risk. Countries that rank highly on one or both of these scores are
overweighted relative to the Fund's benchmark, the MSCI Emerging Markets Free
Index, while those that rank poorly are underweighted. To help contain risk,
Morgan places limits on the total size of the Portfolio's country over- and
under-weightings.
Stock selection: Morgan's 12 emerging market equity analysts -- each an
industry specialist -- monitor a universe of approximately 900 companies in
these countries, developing forecasts of earnings and cash flows for the most
attractive among them. Companies are ranked from most to least attractive based
on this research, and then a diversified portfolio is constructed using
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disciplined buy and sell rules. The portfolio manager's objective is to
concentrate the Portfolio's holdings in the stocks deemed most undervalued, and
to keep sector weightings relatively close to those of the index. Stocks are
generally held until they fall into the bottom half of Morgan's rankings.
THE JPM ADVISOR ASIA GROWTH FUND (the "Asia Growth Fund") is designed for
long-term investors who want access to the rapidly growing Asian markets. The
Advisor considers Asian growth markets to be Bangladesh, China, India,
Indonesia, Korea, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand,
Taiwan, Hong Kong and Singapore. The Asia Growth Fund's investment objective is
to provide a high total return from a portfolio of Equity Securities of
companies in Asian growth markets. The Asia Growth Fund attempts to achieve its
investment objective by investing all its investable assets in The Asia Growth
Portfolio (the "Asia Growth Portfolio"), a diversified open-end management
investment company having the same investment objective as the Asia Growth Fund.
For additional information, see "Appendix B -Investing in Japan and Asian Growth
Markets."
The Asia Growth Portfolio seeks to achieve its investment objective by
investing primarily in the Equity Securities of companies in Asian growth
markets. Under normal circumstances, the Asia Growth Portfolio expects to
invest at least 65% of its total assets in such securities. The Asia Growth
Portfolio does not intend to invest in U.S. securities (other than money market
instruments), except temporarily, when extraordinary circumstances prevailing at
the same time in a significant number of countries considered to be Asian growth
markets render investments in such countries inadvisable.
INVESTMENT PROCESS
Country allocation: Morgan's country allocation decision begins with a
forecast of equity risk premiums, which provide a valuation signal by measuring
the relative attractiveness of stocks versus bonds. Using a proprietary
approach, Morgan calculates this risk premium for each of the nations in the
Portfolio's universe, determines the extent of its deviation -- if any -- from
its historical norm, and then ranks countries according to the size of these
deviations. Countries with high (low) rankings are overweighted (underweighted)
to reflect the above-average (below average) attractiveness of their stock
markets. In determining weightings, Morgan analyzes a variety of qualitative
factors as well -- including the liquidity, earnings momentum and interest rate
climate of the market at hand. These qualitative assessments can change the
magnitude but not the direction of the country allocations called for by the
risk-premium forecast. In an effort to contain risk, Morgan places limits on
the total size of the Portfolio's country over- and under-weightings.
Stock selection: Morgan's six Asian equity analysts focused on Asian
markets -- each an industry and country specialist -- forecast normalized, long-
term earnings and dividend payouts for approximately 250 companies in this
region. These forecasts are converted into comparable expected returns by a
dividend discount model, and then companies are ranked from most to least
attractive by industry and country, and are grouped into quintiles. A
diversified portfolio is constructed using disciplined buy and sell rules. The
portfolio manager's objective is to concentrate purchases in the top 20% of the
rankings, and to keep sector weightings close to those of the benchmark. Once a
stock falls into the third quintile -- because its price has risen or its
fundamentals have deteriorated -- it generally becomes a sale candidate. Where
available, warrants and convertibles are purchased when they appear to have the
potential to add value over common stock.
THE JPM ADVISOR EUROPEAN EQUITY FUND (the "European Equity 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
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countries. The European Equity Fund's investment objective is to provide a high
total return from a portfolio of Equity Securities of European companies. The
European Equity Fund attempts to achieve its investment objective by investing
all of its investable assets in The European Equity Portfolio (the "European
Equity Portfolio"), a diversified open-end management investment company having
the same investment objective as the European Equity Fund.
The European Equity Portfolio seeks to achieve its investment objective by
investing primarily in the Equity Securities of European companies. Under
normal circumstances, the European Equity Portfolio expects to invest at least
65% of its total assets in such securities. The European Equity Portfolio does
not intend to invest in U.S. securities (other than money market instruments),
except temporarily, when extraordinary circumstances prevailing at the same time
in a significant number of European countries render investments in such
countries inadvisable.
INVESTMENT PROCESS
Country allocation: Morgan's country allocation decision begins with a
forecast of equity risk premiums, which provide a valuation signal by measuring
the relative attractiveness of stocks versus bonds. Using a proprietary
approach, Morgan calculates this risk premium for each of the nations in the
Portfolio's universe, determines the extent of its deviation -- if any -- from
its historical norm, and then ranks countries according to the size of those
deviations. Countries with high (low) rankings are overweighted (underweighted)
in comparison to the Morgan Stanley Capital International Europe Index to
reflect the above-average (below-average) attractiveness of their stock markets.
In determining weightings, Morgan analyzes a variety of qualitative factors as
well -- including the liquidity, earnings momentum and interest rate climate of
the market at hand. These qualitative assessments can change the magnitude but
not the direction of the country allocations called for by the risk-premium
forecast. In an effort to contain risk, Morgan place limits on the total size
of the Portfolio's country over- and under-weightings.
Stock selection: Morgan's 15 European equity analysts, each an industry
and country specialist, forecast normalized earnings and dividend payouts for
roughly 600 companies, taking a long-term perspective rather than the short time
frame common to consensus estimates. The analysts' forecasts are converted into
comparable expected returns by a dividend discount model, and then companies are
ranked from most to least attractive by industry and country. A diversified
portfolio is constructed using disciplined buy and sell rules. The portfolio
manager's objective is to concentrate purchases in the top third of the
rankings, and to keep sector weightings close to those of the benchmark. Once a
stock falls into the bottom third of the rankings -- because its price has risen
or its fundamentals have deteriorated -- it generally becomes a sale candidate.
THE JPM JAPAN EQUITY FUND (the "Japan Equity 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 Japan Equity Fund's investment
objective is to provide a high total return from a portfolio of Equity
Securities of Japanese companies. The Japan Equity Fund attempts to achieve its
investment objective by investing all of its investable assets in The Japan
Equity Portfolio (the "Japan Equity Portfolio"), a non-diversified open-end
management investment company having the same investment objective as the Japan
Equity Fund. For additional information, see "Appendix B - Investing in Japan
and Asian Growth Markets."
The Japan Equity Portfolio seeks to achieve its investment objective by
investing primarily in the Equity Securities of Japanese companies. Under
normal circumstances, the Japan Equity Portfolio expects to invest at least 65%
of its
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total assets in such securities. The Japan Equity Portfolio does not intend to
invest in U.S. securities (other than money market instruments), except
temporarily, when extraordinary circumstances prevailing in Japan render
investments there inadvisable.
INVESTMENT PROCESS
Systematic valuation: Morgan's ten Japanese equity analysts in Tokyo --
each an industry specialist -- follow a total of over 300 Japanese companies.
The most attractive names in that universe are identified by a multifactor model
which screens for low price/earnings ratios, high earnings growth rates and high
sales/price ratios. Within each sector, this subset of the universe is ranked
by these three measures and broken into quintiles; the companies in the top
quintile are considered the most attractive ones from both a growth and
valuation viewpoint. To provide an additional check on the valuation of
selected companies, the analysts prepare normalized, long-term earnings and
dividend forecasts which are converted into comparable expected returns by a
dividend discount model.
Warrant/convertible strategy: Once a company has been identified as a buy
candidate, the portfolio manager analyzes the yields on the company's available
equity vehicles -- stocks, warrants and convertibles -- to determine which
appears the most attractive means of purchase. In an effort to enhance
potential returns, the Portfolio also trades among these vehicles -- a strategy
that seeks to capitalize on the inefficiencies that pervade the Japanese equity
market. If the Portfolio invests in a warrant, it will set aside cash in an
amount approximately equal to the difference in the price of the warrant and the
market value of the underlying common stock. The cash is invested in money
market instruments.
Disciplined portfolio construction: The Portfolio is constructed using
disciplined buy and sell rules. The portfolio manager's objective is to
concentrate purchases in the top 20% of the rankings; the specific companies
selected reflect the portfolio manager's judgment concerning the liquidity of an
issue, the soundness of the underlying forecasts, and the magnitude of the risks
versus the rewards. Once a stock falls into the third quintile -- because its
price has risen or its fundamentals have deteriorated it generally becomes a
sale candidate. The portfolio manager strives to hold sector weightings close
to those of the benchmark in an effort to contain risk.
The following discussion supplements the information regarding the
investment objective of each of the Funds and the policies to be employed to
achieve this objective by their corresponding Portfolios as set forth above and
in the Prospectus. The investment objective of each Fund and its corresponding
Portfolio is identical. Accordingly, references below to a Fund also include
the Fund's corresponding Portfolio; similarly, references to a Portfolio also
include the corresponding Fund that invests in the Portfolio unless the context
requires otherwise.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, each Portfolio may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased by the Portfolios appears below. See "Quality and Diversification
Requirements."
U.S. TREASURY SECURITIES. Each of the Portfolios may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, all
of which are backed as to principal and interest payments by the full faith and
credit of the United States.
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ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each of the Portfolios may invest
in obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full
faith and credit" of the United States. In the case of securities not backed by
the full faith and credit of the United States, each Portfolio must look
principally to the federal agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitments. Securities in which each Portfolio may invest that are not backed
by the full faith and credit of the United States include, but are not limited
to, obligations of the Tennessee Valley Authority, the Federal Home Loan
Mortgage Corporation and the U.S. Postal Service, each of which has the right to
borrow from the U.S. Treasury to meet its obligations, and obligations of the
Federal Farm Credit System and the Federal Home Loan Banks, both of whose
obligations may be satisfied only by the individual credits of each issuing
agency. Securities which are backed by the full faith and credit of the United
States include obligations of the Government National Mortgage Association, the
Farmers Home Administration and the Export-Import Bank.
FOREIGN GOVERNMENT OBLIGATIONS. Each of the Portfolios, subject to its
applicable investment policies, may also invest in short-term obligations of
foreign sovereign governments or of their agencies, instrumentalities,
authorities or political subdivisions. These securities may be denominated in
the U.S. dollar or, in the case of all Portfolios except U.S. Fixed Income
Portfolio, in another currency. See "Foreign Investments."
BANK OBLIGATIONS. Each of the Portfolios, unless otherwise noted in the
Prospectus or below, may invest in negotiable certificates of deposit, time
deposits and bankers' acceptances of (i) banks, savings and loan associations
and savings banks which have more than $2 billion in total assets (the "Asset
Limitation") and are organized under the laws of the United States or any state,
(ii) foreign branches of these banks or of foreign banks of equivalent size
(Euros) and (iii) U.S. branches of foreign banks of equivalent size (Yankees).
The Asset Limitation is not applicable to the Non-U.S. Fixed Income, Non-U.S.
Equity, Emerging Markets Equity, Asia Growth, European Equity and Japan Equity
Portfolios. See "Foreign Investments." The Portfolios will not invest in
obligations for which the Advisor, or any of its affiliated persons, is the
ultimate obligor or accepting bank. Each of the Portfolios may also invest in
obligations of international banking institutions designated or supported by
national governments to promote economic reconstruction, development or trade
between nations (e.g., the European Investment Bank, the Inter-American
Development Bank or the World Bank).
COMMERCIAL PAPER. Each of the Portfolios may invest in commercial paper,
including master demand obligations. Master demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no additional fee,
in its capacity as investment advisor to the Portfolios and as fiduciary for
other clients for whom it exercises investment discretion. The monies loaned to
the borrower come from accounts managed by the Advisor or its affiliates,
pursuant to arrangements with such accounts. Interest and principal payments
are credited to such accounts. The Advisor, acting as a fiduciary on behalf of
its clients, has the right to increase or decrease the amount provided to the
borrower under an obligation. The borrower has the right to pay without penalty
all or any part of the principal amount then outstanding on an obligation
together with interest to the date of payment. Since these obligations
typically provide that the interest rate is tied to the Federal Reserve
commercial paper composite rate, the rate on master demand obligations is
subject to change. Repayment of a master demand obligation to participating
accounts depends on the ability of the borrower to pay the accrued interest and
principal of the obligation on demand which is continuously monitored by the
Advisor. Since
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master demand obligations typically are not rated by credit rating
agencies, a Portfolio may invest in such unrated obligations only if at the time
of an investment the obligation is determined by the Advisor to have a credit
quality which satisfies the Portfolio's quality restrictions. See "Quality and
Diversification Requirements." Although there is no secondary market for master
demand obligations, such obligations are considered by the Portfolios to be
liquid because they are payable upon demand. The Portfolios do not have any
specific percentage limitation on investments in master demand obligations.
REPURCHASE AGREEMENTS. Each of the Portfolios may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Portfolio's Trustees. In a repurchase agreement, a Portfolio
buys a security from a seller that has agreed to repurchase the same security at
a mutually agreed upon date and price. The resale price normally is in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Portfolio is invested in the
agreement and is not related to the coupon rate on the underlying security. A
repurchase agreement may also be viewed as a fully collateralized loan of money
by a Portfolio to the seller. The period of these repurchase agreements will
usually be short, from overnight to one week, and at no time will the Portfolios
invest in repurchase agreements for more than thirteen months. The securities
which are subject to repurchase agreements, however, may have maturity dates in
excess of thirteen months from the effective date of the repurchase agreement.
Each Portfolio always will receive securities as collateral whose market value
is, and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Portfolio in each agreement plus accrued
interest, and the Portfolio will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer to the account of the
Portfolio's custodian (the "Custodian").
Each of the Portfolios may make investments in other debt securities with
remaining effective maturities of not more than thirteen months, including
without limitation corporate and foreign bonds, asset-backed securities and
other obligations described in the Prospectus or this Statement of Additional
Information.
CORPORATE BONDS AND OTHER DEBT SECURITIES
As discussed in the Prospectus, the U.S. Fixed Income, Non-U.S. Fixed
Income, Diversified and European Equity Portfolios may invest in bonds and other
debt securities of domestic and foreign issuers to the extent consistent with
their investment objectives and policies. A description of these investments
appears in the Prospectus and below. See "Quality and Diversification
Requirements." For information on short-term investments in these securities,
see "Money Market Instruments."
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Payments of principal and interest may be guaranteed
up to certain amounts and for a certain time period by a letter of credit issued
by a financial institution unaffiliated with the entities issuing the
securities. The asset-backed securities in which a Portfolio may invest are
subject to the Portfolio's overall credit requirements. However, asset-backed
securities, in general, are subject to certain risks. Most of these risks are
related to limited interests in applicable collateral. For example, credit card
debt receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts on credit card debt
thereby reducing the balance due. Additionally, if the letter of credit is
exhausted, holders of asset-backed securities may also experience delays in
payments or losses if the full amounts due on underlying sales contracts are not
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realized. Because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of the market cycle has not been tested.
TAX EXEMPT OBLIGATIONS
As discussed in the Prospectus, in certain circumstances, the U.S. Fixed
Income Portfolio, may invest in tax exempt obligations to the extent consistent
with the Portfolio's investment objective and policies. A description of the
various types of tax exempt obligations which may be purchased by the Portfolio
appears in the Prospectus and below. See "Quality and Diversification
Requirements."
MUNICIPAL BONDS. Municipal bonds are debt obligations issued by the
states, territories and possessions of the United States and the District of
Columbia, by their political subdivisions and by duly constituted authorities
and corporations. For example, states, territories, possessions and
municipalities may issue municipal bonds to raise funds for various public
purposes such as airports, housing, hospitals, mass transportation, schools,
water and sewer works. They may also issue municipal bonds to refund
outstanding obligations and to meet general operating expenses. Public
authorities issue municipal bonds to obtain funding for privately operated
facilities, such as housing and pollution control facilities, for industrial
facilities or for water supply, gas, electricity or waste disposal facilities.
Municipal bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from revenues derived from particular facilities, from the proceeds of a
special excise tax or from other specific revenue sources. They are not
generally payable from the general taxing power of a municipality.
MUNICIPAL NOTES. Municipal notes are subdivided into three categories of
short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.
Municipal notes are short-term obligations with a maturity at the time of
issuance ranging from six months to five years. The principal types of
municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.
Municipal commercial paper typically consists of very short-term unsecured
negotiable promissory notes that are sold to meet seasonal working capital or
interim construction financing needs of a municipality or agency. While these
obligations are intended to be paid from general revenues or refinanced with
long-term debt, they frequently are backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or institutions.
Municipal demand obligations are subdivided into two types: variable rate
demand notes and master demand obligations.
Variable rate demand notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to demand payment of the notes
or to demand purchase of the notes at a purchase price equal to the unpaid
principal balance, plus accrued interest either directly by the issuer or by
drawing on a bank letter of credit or guaranty issued with respect to such note.
The issuer of the municipal obligation may have a corresponding right to prepay
at its discretion the outstanding principal of the note plus accrued interest
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upon notice comparable to that required for the holder to demand payment. The
variable rate demand notes in which the U.S. Fixed Income Portfolio may invest
are payable, or are subject to purchase, on demand usually on notice of seven
calendar days or less. The terms of the notes provide that interest rates are
adjustable at intervals ranging from daily to six months, and the adjustments
are based upon the prime rate of a bank or other appropriate interest rate index
specified in the respective notes. Variable rate demand notes are valued at
amortized cost; no value is assigned to the right of the Portfolio to receive
the par value of the obligation upon demand or notice.
Master demand obligations are tax exempt municipal obligations that provide
for a periodic adjustment in the interest rate paid and permit daily changes in
the amount borrowed. The interest on such obligations is, in the opinion of
counsel for the borrower, exempt from federal income tax. For a description of
the attributes of master demand obligations, see "Money Market Instruments"
above. Although there is no secondary market for master demand obligations,
such obligations are considered by the U.S. Fixed Income Portfolio to be liquid
because they are payable upon demand. The U.S. Fixed Income Portfolio has no
specific percentage limitations on investments in master demand obligations.
EQUITY INVESTMENTS
As discussed in the Prospectus, the Selected U.S. Equity, U.S. Small
Company, Non-U.S. Equity, European Equity, Emerging Markets Equity, Asia Growth
and Japan Equity Portfolios and the equity portion of the Diversified Portfolio
(collectively, the "Equity Portfolios") invest primarily in Equity Securities.
The Equity Securities in which the Equity Portfolios invest include those listed
on any domestic or foreign securities exchange or traded in the over-the-counter
market as well as certain restricted or unlisted securities. A discussion of
the various types of equity investments which may be purchased by these
Portfolios appears in the Prospectus and below. See "Quality and
Diversification Requirements."
EQUITY SECURITIES. The Equity Securities in which the Equity Portfolios
may invest may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
The convertible securities in which the Equity Portfolios 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.
The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders.
In the case of convertible preferred stock, the holders' claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.
COMMON STOCK WARRANTS
The Portfolios for The JPM Advisor U.S. Equity, U.S. Small Cap,
International Equity, Diversified, Emerging Markets Equity, European Equity,
Japan Equity and Asia Growth Funds may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price
fluctuations.
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As a result, warrants may be more volatile investments than the underlying
common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or prior to the expiration date.
FOREIGN INVESTMENTS
The Non-U.S. Fixed Income, Non-U.S. Equity, Emerging Markets Equity, Asia
Growth, European Equity and Japan Equity Portfolios make substantial investments
in foreign countries. The U.S. Fixed Income, Selected U.S. Equity, U.S. Small
Company and Diversified Portfolios may invest in certain foreign securities.
The U.S. Fixed Income Portfolio may invest in dollar-denominated fixed income
securities of foreign issuers. The Selected U.S. Equity Portfolio may invest in
equity securities of foreign corporations included in the S&P 500 Index or
listed on a national securities exchange. The U.S. Small Company Portfolio may
invest in equity securities of foreign issuers that are listed on a national
securities exchange or denominated or principally traded in the U.S. dollar.
The U.S. Fixed Income Portfolio may invest in dollar-denominated fixed income
securities of foreign issuers. The U.S. Fixed Income, Selected U.S. Equity,
U.S. Small Company and Diversified Portfolios do not expect to invest more than
25%, 5%, 5% and 30%, respectively, of their total assets at the time of purchase
in securities of foreign issuers. In the case of the U.S. Fixed Income
Portfolio, any foreign commercial paper must not be subject to foreign
withholding tax at the time of purchase. Foreign investments may be made
directly in securities of foreign issuers or in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Generally, ADRs
and EDRs are receipts issued by a bank or trust company that evidence ownership
of underlying securities issued by a foreign corporation and that are designed
for use in the domestic, in the case of ADRs, or European, in the case of EDRs,
securities markets.
Since investments in foreign securities may involve foreign currencies, the
value of a Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. Each of the Portfolios except for the
U.S. Fixed Income Portfolio may enter into forward commitments for the purchase
or sale of foreign currencies in connection with the settlement of foreign
securities transactions or to manage the Portfolio's currency exposure related
to foreign investments as described in the relevant Prospectus. The Portfolios
will not enter into such commitments for speculative purposes.
For a description of the risks associated with investing in foreign
securities, see "Risk Factors and Additional Investment Information" in the
Prospectus.
INVESTING IN JAPAN. Investing in Japanese securities may involve the risks
associated with investing in foreign securities generally. In addition, because
the Japan Equity Portfolio and the International Equity Portfolio invest in
Japan, they will be subject to the general economic and political conditions in
Japan. It is not expected that the Asia Growth Portfolio will invest in Japan
(see "Investment Objective and Policies" in the Prospectus).
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. 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
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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 Japan Equity and the International Equity Portfolios invest in
securities denominated in yen, changes in exchange rates between the U.S. dollar
and the yen affect the U.S. dollar value of their respective assets. Although
the Japanese economy has grown substantially over the past four decades,
recently the rate of growth had slowed substantially. See Foreign Currency
Exchange Transactions.
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 Japan Equity and
International Equity Portfolios.
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 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, there have been several changes in
leadership in Japan. What, if any, effect the current political situation will
have on prospective regulatory reforms of 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 these
Portfolios.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each of the Portfolios may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and for money market instruments and other
fixed income investments no interest accrues to a Portfolio until settlement
takes place. At the time a Portfolio makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction, reflect the value each day of such securities in determining its
net asset value and, if applicable, calculate the maturity for the purposes of
average maturity from that date. At the time of settlement, a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, each Portfolio will maintain with the Custodian a segregated
account with liquid assets, consisting of cash, U.S. Government securities or
other appropriate securities, in an amount at least equal to such commitments.
On delivery dates for such transactions, each Portfolio will meet its
obligations from maturities or sales of the securities held in the segregated
account and/or from cash flow. If a Portfolio chooses to dispose of the right
to acquire a when-issued security prior to its acquisition, it could, as with
the disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. It is the current policy of each Portfolio not to enter
into when-issued commitments exceeding in the aggregate
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15% of the market value of the Portfolio's total assets, less liabilities other
than the obligations created by when-issued commitments.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies
may be acquired by each of the Portfolios to the extent permitted under the
1940 Act. These limits require that, as determined immediately after a purchase
is made, (i) not more than 5% of the value of the Portfolio's total assets will
be invested in the securities of any one investment company, (ii) not more than
10% of the value of its total assets will be invested in the aggregate in
securities of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio. As a shareholder of another investment company, a Portfolio would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Portfolio bears directly
in connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. Each of the Portfolios may enter into
reverse repurchase agreements. In a reverse repurchase agreement, a Portfolio
sells a security and agrees to repurchase the same security at a mutually agreed
upon date and price. For purposes of the 1940 Act, it is also considered as the
borrowing of money by the Portfolio and, therefore, a form of leverage. The
Portfolios will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, a Portfolio will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. A Portfolio
will not invest the proceeds of a reverse repurchase agreement for a period
which exceeds the duration of the reverse repurchase agreement. A Portfolio may
not enter into reverse repurchase agreements exceeding in the aggregate
one-third of the market value of its total assets, less liabilities other than
the obligations created by reverse repurchase agreements. Each Portfolio will
establish and maintain with the Custodian a separate account with a segregated
portfolio of securities in an amount at least equal to its purchase obligations
under its reverse repurchase agreements.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The U.S. Fixed Income Portfolio may
engage in mortgage dollar roll transactions with respect to mortgage securities
issued by the Government National Mortgage Association, the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation. In a
mortgage dollar roll transaction, the Portfolio sells a mortgage backed security
and simultaneously agrees to repurchase a similar security on a specified future
date at an agreed upon price. During the roll period, the Portfolio will not be
entitled to receive any interest or principal paid on the securities sold. The
Portfolio is compensated for the lost interest on the securities sold by the
difference between the sales price and the lower price for the future repurchase
as well as by the interest earned on the reinvestment of the sales proceeds.
The Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in an
amount sufficient to pay for the future repurchase are segregated with the
Custodian. Mortgage dollar roll transactions are considered reverse repurchase
agreements for purposes of the Portfolio's investment restrictions.
LOANS OF PORTFOLIO SECURITIES. Each of the Portfolios 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 Portfolios in the normal settlement time, generally three business days
after notice, or by the borrower on one day's notice. Borrowed securities must
be returned when the loan is terminated. Any gain or loss in the market price
of the borrowed securities which occurs during the term of the loan inures to a
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Portfolio and its respective investors. The Portfolios may pay reasonable
finders' and custodial fees in connection with a loan. In addition, a Portfolio
will consider all facts and circumstances including the creditworthiness of the
borrowing financial institution, and no Portfolio will make any loans in excess
of one year. The Portfolios will not lend their securities to any officer,
Trustee, Director, employee or other affiliate of the Portfolios, the Advisor or
the Distributor, unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. Each of the
Portfolios may invest in privately placed, restricted, Rule 144A or other
unregistered securities as described in the Prospectus.
As to illiquid investments, a Portfolio is subject to a risk that should
the Portfolio decide to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfolio's
net assets could be adversely affected. Where an illiquid security must be
registered under the Securities Act of 1933, as amended (the "1933 Act"), before
it may be sold, a Portfolio may be obligated to pay all or part of the
registration expenses, and a considerable period may elapse between the time of
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Each of the Portfolios, except the Non-U.S. Fixed Income and Japan Equity
Portfolios, intends to meet the diversification requirements of the 1940 Act.
To meet these requirements, 75% of the assets of each of these Portfolios is
subject to the following fundamental limitations: (1) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government, its agencies and instrumentalities,
and (2) the Portfolio may not own more than 10% of the outstanding voting
securities of any one issuer. As for the other 25% of the Portfolio's assets
not subject to the limitation described above, there is no limitation on
investment of these assets under the 1940 Act, so that all of such assets may be
invested in securities of any one issuer, subject to the limitation of any
applicable state securities laws. Investments not subject to the limitations
described above could involve an increased risk to a Portfolio should an issuer,
or a state or its related entities, be unable to make interest or principal
payments or should the market value of such securities decline.
Although the Non-U.S. Fixed Income and Japan Equity Portfolios are not
limited by the diversification requirements of the 1940 Act, these Portfolios
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. To meet these requirements, each Portfolio must diversify
its holdings so that, with respect to 50% of the Portfolio's assets, no more
than 5% of its assets are invested in the securities of any one issuer other
than the U.S. Government at the close of each quarter of the Portfolio's taxable
year. The Portfolio may, with respect to the remaining 50% of its assets,
invest up to 25% of its assets in the securities of any one issuer (except this
limitation does not apply to U.S. Government securities).
U.S. FIXED INCOME, NON-U.S. FIXED INCOME AND DIVERSIFIED PORTFOLIOS. The
U.S. Fixed Income and Non-U.S. Fixed Income Portfolios and the fixed income
portion of the Diversified Portfolio invest principally in a diversified
portfolio of "high grade" and "investment grade" securities. Investment grade
debt is rated, on the date of investment, within the four highest ratings of
Moody's, currently Aaa, Aa, A and Baa, or of Standard & Poor's, currently AAA,
AA, A and BBB. High grade debt is rated, on the date of the investment, within
the two highest of such ratings. The U.S. Fixed Income Portfolio may also
invest
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up to 5% of its total assets in securities which are "below investment grade."
Such securities must be rated, on the date of investment, Ba by Moody's or BB by
Standard & Poor's. The Portfolios may invest in debt securities which are not
rated or other debt securities to which these ratings are not applicable, if in
the opinion of the Advisor, such securities are of comparable quality to the
rated securities discussed above. In addition, at the time the Portfolios
invest in any commercial paper, bank obligation or repurchase agreement, the
issuer must have outstanding debt rated A or higher by Moody's or Standard &
Poor's, the issuer's parent corporation, if any, must have outstanding
commercial paper rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no
such ratings are available, the investment must be of comparable quality in the
Advisor's opinion.
EQUITY PORTFOLIOS. The Equity Portfolios may invest in convertible debt
securities for which there are no specific quality requirements. In addition,
at the time the Portfolio invests in any commercial paper, bank obligation or
repurchase agreement, the issuer must have outstanding debt rated A or higher by
Moody's or Standard & Poor's, the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Advisor's opinion. At the time the Portfolio invests
in any other short-term debt securities, they must be rated A or higher by
Moody's or Standard & Poor's, or if unrated, the investment must be of
comparable quality in the Advisor's opinion.
In determining suitability of investment in a particular unrated security,
the Advisor takes into consideration asset and debt service coverage, the
purpose of the financing, history of the issuer, existence of other rated
securities of the issuer and other relevant conditions, such as comparability to
other issuers.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OVER-THE-COUNTER OPTIONS. All options purchased or
sold by the Portfolios will be traded on a securities exchange or will be
purchased or sold by securities dealers (over-the-counter or OTC options) that
meet creditworthiness standards approved by the Portfolio's Board of Trustees.
While exchange-traded options are obligations of the Options Clearing
Corporation, in the case of OTC options, a Portfolio relies on the dealer from
which it purchased the option to perform if the option is exercised. Thus, when
a Portfolio purchases an OTC option, it relies on the dealer from which it
purchased the option to make or take delivery of the underlying securities.
Failure by the dealer to do so would result in the loss of the premium paid by
the Portfolio as well as loss of the expected benefit of the transaction.
The staff of the Securities and Exchange Commission (the "SEC") has taken
the position that, in general, purchased OTC options and the underlying
securities used to cover written OTC options are illiquid securities. However,
a Portfolio may treat as liquid the underlying securities used to cover written
OTC options, provided it has arrangements with certain qualified dealers who
agree that the Portfolio may repurchase any option it writes for a maximum price
to be calculated by a predetermined formula. In these cases, the OTC option
itself would only be considered illiquid to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolios
permitted to enter into futures and options transactions may purchase or sell
(write) futures contracts and purchase put and call options, including put and
call options on futures contracts. In addition, the Non-U.S. Fixed Income,
Emerging Markets Equity, Asia Growth, European Equity and Japan Equity
Portfolios may sell (write) uncovered put and call options on futures. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index. Currently, futures contracts are
available on
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various types of fixed income securities, including but not limited to U.S.
Treasury bonds, notes and bills, Eurodollar certificates of deposit and on
indexes of fixed income securities and indexes of equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for
the option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid by
the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by a Portfolio are paid by the Portfolio into a segregated
account, in the name of the Futures Commission Merchant, as required by the
1940 Act and the SEC's interpretations thereunder.
COMBINED POSITIONS. The Portfolios permitted to purchase and write options
may do so in combination with each other, or in combination with futures or
forward contracts, to adjust the risk and return characteristics of the overall
position. For example, a Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call
option at one strike price and buying a call option at a lower price, in order
to reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open and
close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match a
Portfolio's current or anticipated investments exactly. A Portfolio may invest
in options and futures contracts based on securities with different issuers,
maturities or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options
or futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
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LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions and
could potentially require a Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and Over-the-Counter
Options" above for a discussion of the liquidity of options not traded on an
exchange.)
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, a Portfolio or the Advisor may be
required to reduce the size of its futures and options positions or may not be
able to trade a certain futures or options contract in order to avoid exceeding
such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Portfolios
intend to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which a Portfolio can commit assets to
initial margin deposits and option premiums. In addition, the Portfolios will
comply with guidelines established by the SEC with respect to coverage of
options and futures contracts by mutual funds, and if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be sold
while the futures contract or option is outstanding, unless they are replaced
with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of a Portfolio's assets could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
RISK MANAGEMENT
The Non-U.S. Fixed Income, Diversified, Emerging Markets Equity, Asia
Growth, European Equity and Japan Equity Portfolios may employ non-hedging risk
management techniques. Examples of such strategies include synthetically
altering the duration of a portfolio or the mix of securities in a portfolio.
For example, if the Advisor wishes to extend maturities in a fixed income
portfolio in order to take advantage of an anticipated decline in interest
rates, but does not wish to purchase the underlying long-term securities, it
might cause the Portfolio to purchase futures contracts on long-term debt
securities. Similarly, if the Advisor wishes to decrease fixed income
securities or purchase equities, it could cause the Portfolio to sell futures
contracts on debt securities and purchase futures contracts on a stock index.
Such non-hedging risk management techniques are not speculative, but because
they involve leverage include, as do all leveraged transactions, the possibility
of losses as well as gains that are greater than if these techniques involved
the purchase and sale of the securities themselves rather than their synthetic
derivatives.
PORTFOLIO TURNOVER
Set forth below are the portfolio turnover rates for the Portfolios
corresponding to the Funds. A rate of 100% indicates that the equivalent of all
of the Portfolio's assets have been sold and reinvested in a year. High
portfolio turnover may result in the realization of substantial net capital
gains or losses. To the extent net short term capital gains are realized, any
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distributions resulting from such gains are considered ordinary income for
federal income tax purposes. See "Taxes" below.
THE U.S. FIXED INCOME PORTFOLIO (U.S. Fixed Income Fund)--For the fiscal year
ended October 31, 1994: 234%; for the fiscal year ended October 31, 1995:
293%.
THE NON-U.S. FIXED INCOME PORTFOLIO (International Fixed Income Fund)--For the
period October 11, 1994 (commencement of operations) through September 30, 1995:
288%.
THE SELECTED U.S. EQUITY PORTFOLIO (U.S. Equity Fund)--For the fiscal year ended
May 31, 1995: 71%; for the fiscal year ended May 31, 1996: 84.55%.
THE U.S. SMALL COMPANY PORTFOLIO (U.S. Small Cap Equity Fund)--For the fiscal
year ended May 31, 1995: 75%; for the fiscal year ended May 31, 1996: 92.58%.
THE NON-U.S. EQUITY PORTFOLIO (International Equity Fund)--For the fiscal year
ended October 31, 1994: 56%; for the fiscal year ended October 31, 1995: 59%.
THE DIVERSIFIED PORTFOLIO (Diversified Fund)--For the period July 8, 1993
(commencement of operations) through June 30, 1994: 115%; for the fiscal year
ended June 30, 1995: 136%
THE EMERGING MARKETS EQUITY PORTFOLIO (Emerging Markets Equity Fund)--For the
period November 15, 1993 (commencement of operations) through October 31, 1994:
27.48%; for the fiscal year ended October 31, 1995: 41.31%.
THE EUROPEAN EQUITY PORTFOLIO (European Equity Fund)--For the period March 28,
1995 (commencement of operations) through December 31, 1995: 36%.
THE JAPAN EQUITY PORTFOLIO (Japan Equity Fund)--For the period March 28, 1995
(commencement of operations) through December 31, 1995: 60%.
THE ASIA GROWTH PORTFOLIO (Asia Growth Fund)--For the period April 5, 1995
(commencement of operations) through December 31, 1995: 70%.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Trust with
respect to each Fund and by each corresponding Portfolio. Except where
otherwise noted, these investment restrictions are "fundamental" policies which,
under the 1940 Act, may not be changed without the vote of a majority of the
outstanding voting securities of the Fund or Portfolio, as the case may be. A
"majority of the outstanding voting securities" is defined in the 1940 Act as
the lesser of (a) 67% or more of the voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities are present or
represented by proxy, or (b) more than 50% of the outstanding voting securities.
The percentage limitations contained in the restrictions below apply at the time
of the purchase of securities. Whenever a Fund is requested to vote on a change
in the fundamental investment restrictions of its corresponding Portfolio, the
Trust will hold a meeting of Fund shareholders and will cast its votes as
instructed by the shareholders.
The investment restrictions of each Fund and its corresponding Portfolio
are identical, unless otherwise specified and except that each Fund may invest
all of its investable assets in another open-end management investment company
with the same investment objective, policies and restrictions (such as the
Fund's corresponding Portfolio). Accordingly, references below to a Portfolio
also include the Portfolio's corresponding Fund unless the context requires
otherwise.
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The U.S. Fixed Income Portfolio may not:
1. 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 such borrowing and except in connection with
reverse repurchase agreements permitted by Investment Restriction No. 8.,
mortgage, pledge or 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 such borrowing. The Portfolio will not purchase securities while
borrowings (including reverse repurchase agreements) exceed 5% of the
Portfolio's total assets. This borrowing provision facilitates the orderly sale
of portfolio securities, for example, in the event of abnormally heavy
redemption requests. This provision is not for investment purposes. Collateral
arrangements for premium and margin payments in connection with the Portfolio's
hedging activities are not deemed to be a pledge of assets;
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Portfolio's
total assets would be invested in securities or other obligations of any one
such issuer. This limitation shall not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Portfolio's total assets;
3. Purchase the securities of an issuer if, immediately after such
purchase, the Portfolio owns more than 10% of the outstanding voting securities
of such issuer. This limitation shall not apply to permitted investments of up
to 25% of the Portfolio's total assets;
4. Purchase securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after such
purchase the value of its investments in such industry would exceed 25% of the
value of the Portfolio's total assets. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S. Government
securities;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of repurchase
agreements, or loans of portfolio securities in accordance with the Portfolio's
investment objective and policies;
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, commodity contracts, except for the
Portfolio's interest in hedging activities as described under "Investment
Objectives and Policies"; or interests in oil, gas, or mineral exploration or
development programs. However, the Portfolio may purchase debt obligations
secured by interests in real estate or issued by companies which invest in real
estate or interests therein including real estate investment trusts;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except in the course of the Portfolio's
hedging activities, unless at all times when a short position is open the
Portfolio owns an equal amount of such securities, provided that this
restriction shall not be deemed to be applicable to the purchase or sale of
when-issued securities or delayed delivery securities;
8. Issue any senior security, except as appropriate to evidence
indebtedness which constitutes a senior security and which the Portfolio is
permitted to incur pursuant to Investment Restriction No. 1 and except that the
Portfolio may enter into reverse repurchase agreements, provided that the
aggregate of senior securities, including reverse repurchase agreements, shall
not exceed one-third of the market value of the Portfolio's total assets, less
liabilities other than obligations created by reverse repurchase agreements.
The
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Portfolio's arrangements in connection with its hedging activities as described
in "Investment Objectives and Policies" shall not be considered senior
securities for purposes hereof;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act; or
10. Act as an underwriter of securities.
Each of the Selected U.S. Equity and U.S. Small Company Portfolios may not:
1. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after such
purchase the value of its investments in such industry would exceed 25% of the
value of the Portfolio's total assets. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S. Government
securities;
2. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts not to exceed 10% of the value of the Portfolio's total
assets, taken at cost, at the time of such borrowing. Mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not to exceed 10% of the value of the Portfolio's net assets at the time
of such borrowing. The Portfolio will not purchase securities while borrowings
exceed 5% of the Portfolio's total assets. This borrowing provision is included
to facilitate the orderly sale of portfolio securities, for example, in the
event of abnormally heavy redemption requests, and is not for investment
purposes. Collateral arrangements for premium and margin payments in connection
with the Portfolio's hedging activities are not deemed to be a pledge of assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Portfolio's
total assets would be invested in securities or other obligations of any one
such issuer. This limitation shall not apply to issues of the U.S. Government,
its agencies or instrumentalities or to permitted investments of up to 25% of
the Portfolio's total assets;
4. Purchase the securities of an issuer if, immediately after such
purchase, the Portfolio owns more than 10% of the outstanding voting securities
of such issuer. This limitation shall not apply to permitted investments of up
to 25% of the Portfolio's total assets;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities), or the entering into of repurchase
agreements, or loans of portfolio securities in accordance with the Portfolio's
investment objective and policies (see "Investment Objectives and Policies");
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, or commodity contracts, except for the
Portfolio's interests in hedging activities as described under "Investment
Objectives and Policies"; or interests in oil, gas, or mineral exploration or
development programs. However, the Portfolio may purchase securities or
commercial paper issued by companies which invest in real estate or interests
therein, including real estate investment trusts;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position, except in the course of the Portfolio's hedging
activities, provided that this restriction shall not be deemed to be applicable
to the purchase or sale of when-issued securities or delayed delivery
securities;
8. Acquire securities of other investment companies, except as permitted by
the 1940 Act;
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<PAGE>
9. Act as an underwriter of securities;
10. Issue any senior security, except as appropriate to evidence
indebtedness which the Portfolio is permitted to incur pursuant to Investment
Restriction No. 2. The Portfolio's arrangements in connection with its hedging
activities as described in "Investment Objectives and Policies" shall not be
considered senior securities for purposes hereof; or
11. Purchase any equity security if, as a result, the Portfolio would then
have more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years.
The Non-U.S. Equity Portfolio may not:
1. 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 net assets at
the time of borrowing, and except in connection with reverse repurchase
agreements and then only in amounts up to 33 1/3% of the value of the
Portfolio's net assets; or purchase securities while borrowings, including
reverse repurchase agreements, exceed 5% of the Portfolio's total assets. The
Portfolio will not mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not to exceed 30% of the value
of the Portfolio's net assets at the time of such borrowing;
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Portfolio's
total assets would be invested in securities or other obligations of any one
such issuer. This limitation shall not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Portfolio's total assets;
3. Purchase the securities of an issuer if, immediately after such
purchase, the Portfolio owns more than 10% of the outstanding voting securities
of such issuer. This limitation shall not apply to permitted investments of up
to 25% of the Portfolio's total assets;
4. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after such
purchase, the value of its investments in such industry would exceed 25% of the
value of the Portfolio's total assets. For purposes of industry concentration,
there is no percentage limitation with respect to investments in U.S. Government
securities;
5. Make loans, except through the purchase or holding of debt obligations
(including restricted securities), or the entering into of repurchase
agreements, or loans of portfolio securities in accordance with the Portfolio's
investment objective and policies, see "Risk Factors and Additional Investment
Information" in the Prospectus and "Investment Objectives and Policies" in this
Statement of Additional Information;
6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real property, including limited partnership interests, commodities, or
commodity contracts, except for the Portfolio's interests in hedging and foreign
exchange activities as described under "Risk Factors and Additional Investment
Information" in the Prospectus; or interests in oil, gas, mineral or other
exploration or development programs or leases. However, the Portfolio may
purchase securities or commercial paper issued by companies that invest in real
estate or interests therein including real estate investment trusts;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except to obtain such short-term credit
24
<PAGE>
as necessary for the clearance of purchases and sales of securities, provided
that this restriction shall not be deemed to apply to the purchase or sale of
when-issued securities or delayed delivery securities;
8. Acquire securities of other investment companies, except as permitted by
the 1940 Act;
9. Act as an underwriter of securities, except insofar as the Portfolio may
be deemed to be an underwriter under the 1933 Act by virtue of disposing of
portfolio securities; or
10. Issue any senior security, except as appropriate to evidence
indebtedness which the Portfolio is permitted to incur pursuant to Investment
Restriction No. 1. The Portfolio's arrangements in connection with its hedging
activities as described in "Risk Factors and Additional Investment Information"
in the Prospectus shall not be considered senior securities for purposes hereof.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC staff
interpretations thereof are amended or modified, each of the Emerging Markets
Equity, Asia Growth and European Equity Portfolios may not:
1. Purchase any security if, as a result, more than 25% of the value of the
Portfolio's total assets would be invested in securities of issuers having their
principal business activities in the same industry. This limitation shall not
apply to obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities;
2. Borrow money, except that the Portfolio may (i) borrow money from banks
for temporary or emergency purposes (not for leveraging purposes) and (ii) enter
into reverse repurchase agreements for any purpose; provided that (i) and (ii)
in total do not exceed 33 1/3% of the value of the Portfolio's total assets
(including the amount borrowed) less liabilities (other than borrowings). If at
any time any borrowings come to exceed 33 1/3% of the value of the Portfolio's
total assets, the Portfolio will reduce its borrowings within three business
days to the extent necessary to comply with the 33 1/3% limitation;
3. With respect to 75% of its total assets, purchase any security if, as a
result, (a) more than 5% of the value of the Portfolio's total assets would be
invested in securities or other obligations of any one issuer; or (b) the
Portfolio would hold more than 10% of the outstanding voting securities of that
issuer. This limitation shall not apply to Government securities (as defined in
the 1940 Act);
4. Make loans to other persons, except through the purchase of debt
obligations, loans of portfolio securities and participation in repurchase
agreements;
5. Purchase or sell physical commodities or contracts thereon, unless
acquired as a result of the ownership of securities or instruments, but the
Portfolio may purchase or sell futures contracts or options (including options
on futures contracts, but excluding options or futures contracts on physical
commodities) and may enter into foreign currency forward contracts;
6. Purchase or sell real estate, but the Portfolio may purchase or sell
securities that are secured by real estate or issued by companies (including
real estate investment trusts) that invest or deal in real estate;
7. Underwrite securities of other issuers, except to the extent the
Portfolio, in disposing of portfolio securities, may be deemed an underwriter
within the meaning of the 1933 Act; or
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<PAGE>
8. Issue senior securities, except as permitted under the 1940 Act or any
rule, order or interpretation thereunder.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC staff
interpretations thereof are amended or modified, each of the Non-U.S. Fixed
Income and Japan Equity Portfolios may not:
1. Purchase any security if, as a result, more than 25% of the value of the
Portfolio's total assets would be invested in securities of issuers having their
principal business activities in the same industry. This limitation shall not
apply to obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities;
2. Borrow money, except that the Portfolio may (i) borrow money from banks
for temporary or emergency purposes (not for leveraging purposes) and (ii) enter
into reverse repurchase agreements for any purpose; provided that (i) and (ii)
in total do not exceed 33 1/3% of the value of the Portfolio's total assets
(including the amount borrowed) less liabilities (other than borrowings). If at
any time any borrowings come to exceed 33 1/3% of the value of the Portfolio's
total assets, the Portfolio will reduce its borrowings within three business
days to the extent necessary to comply with the 33 1/3% limitation;
3. Make loans to other persons, except through the purchase of debt
obligations, loans of portfolio securities and participation in repurchase
agreements;
4. Purchase or sell physical commodities or contracts thereon, unless
acquired as a result of the ownership of securities or instruments, but the
Portfolio may purchase or sell futures contracts or options (including options
on futures contracts, but excluding options or futures contracts on physical
commodities) and may enter into foreign currency forward contracts;
5. Purchase or sell real estate, but the Portfolio may purchase or sell
securities that are secured by real estate or issued by companies (including
real estate investment trusts) that invest or deal in real estate;
6. Underwrite securities of other issuers, except to the extent the
Portfolio, in disposing of portfolio securities, may be deemed an underwriter
within the meaning of the 1933 Act; or
7. Issue senior securities, except as permitted under the 1940 Act or any
rule, order or interpretation thereunder.
The Diversified Portfolio may not:
1. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after such
purchase the value of its investments in such industry would exceed 25% of the
value of the Fund's total assets; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management investment
company with the same investment objective and restrictions as the Fund's. For
purposes of industry concentration, there is no percentage limitation with
respect to investments in U.S. Government securities;
2. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in securities or other obligations of any one such
issuer; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with the same
investment objective and restrictions as the Fund's. This limitation shall not
apply to securities issued or guaranteed by the U.S. Government, its agencies or
26
<PAGE>
instrumentalities or to permitted investments of up to 25% of the Fund's total
assets;
3. Purchase the securities of an issuer if, immediately after such
purchase, the Fund owns more than 10% of the outstanding voting securities of
such issuer; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with the same
investment objective and restrictions as the Fund's. This limitation shall not
apply to permitted investments of up to 25% of the Fund's total assets;
4. Borrow money (not including reverse repurchase agreements), except from
banks for temporary or extraordinary or emergency purposes and then only in
amounts up to 30% of the value of the Fund's or the Portfolio's total assets,
taken at cost at the time of such borrowing (and provided that such borrowings
and reverse repurchase agreements do not exceed in the aggregate one-third of
the market value of the Fund's and the Portfolio's total assets less liabilities
other than the obligations represented by the bank borrowings and reverse
repurchase agreements). The Fund will not mortgage, pledge, or hypothecate any
assets except in connection with any such borrowing and in amounts not to exceed
30% of the value of the Fund's or the Portfolio's net assets at the time of such
borrowing. The Fund or the Portfolio will not purchase securities while
borrowings exceed 5% of the Fund's total assets; provided, however, that the
Fund may increase its interest in an open-end management investment company with
the same investment objective and restrictions as the Fund's while such
borrowings are outstanding. This borrowing provision is included to facilitate
the orderly sale of portfolio securities, for example, in the event of
abnormally heavy redemption requests, and is not for investment purposes.
Collateral arrangements for premium and margin payments in connection with the
Fund's use of futures contracts and options are not deemed to be a pledge of
assets;
5. Issue any senior security, except as appropriate to evidence
indebtedness which constitutes a senior security and which the Fund is permitted
to incur pursuant to Investment Restriction No. 4 and except that the Fund may
enter into reverse repurchase agreements, provided that the aggregate of senior
securities, including reverse repurchase agreements, shall not exceed one-third
of the market value of the Fund's total assets, less liabilities other than
obligations created by reverse repurchase agreements. The Fund's arrangements
in connection with its use of futures contracts and options shall not be
considered senior securities for purposes hereof;
6. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities), or the entering into of repurchase
agreements, or loans of portfolio securities in accordance with the Fund's
investment objective and policies (see "Investment Objectives and Policies");
7. Purchase or sell commodities or commodity contracts, but this
restriction shall not prohibit the Fund from purchasing or selling futures
contracts or options (including options on futures contracts, but excluding
options or futures contracts on physical commodities) or entering into foreign
currency forward contracts; or purchase or sell real estate or interests in oil,
gas, or mineral exploration or development programs. However, the Fund may
purchase securities or commercial paper issued by companies which invest in real
estate or interests therein, including real estate investment trusts, and
purchase instruments secured by real estate or interests therein;
8. Purchase securities on margin, make short sales of securities, or
maintain a short position in securities, except to obtain such short term credit
as necessary for the clearance of purchases and sales of securities, provided
that this restriction shall not be deemed to be applicable to the purchase or
sale of when-issued securities or delayed delivery securities or to restrict the
Fund's use of futures contracts or options;
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<PAGE>
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act or in connection with a merger, consolidation, reorganization,
acquisition of assets or an offer of exchange; provided, however, that nothing
in this investment restriction shall prevent the Trust from investing all or
part of the Fund's assets in an open-end management investment company with the
same investment objective and restrictions as the Fund; or
10. Act as an underwriter of securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - ALL PORTFOLIOS. The investment
restriction described below is not a fundamental policy of each Portfolio and
may be changed by the Portfolio's Trustees. This non-fundamental investment
policy requires that each Portfolio may not:
(i) acquire any illiquid securities, such as repurchase agreements with
more than seven days to maturity or fixed time deposits with a duration of over
seven calendar days, if as a result thereof, more than 15% of the market value
of the Portfolio's total assets would be in investments that are illiquid.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - NON-U.S. EQUITY PORTFOLIO AND
DIVERSIFIED PORTFOLIO. The investment restrictions described below are not
fundamental policies of these Portfolios and may be changed by their respective
Trustees. These non-fundamental investment policies require that each such
Portfolio may not:
(i) purchase any equity security if, as a result, the Portfolio would then
have more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years;
(ii) invest in warrants (other than warrants acquired by the Portfolio as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 5%
of the value of the Portfolio's net assets or if, as a result, more than 2% of
the Portfolio's net assets would be invested in warrants not listed on a
recognized U.S. or foreign stock exchange, to the extent permitted by applicable
state securities laws; or
(iii) invest in any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Portfolio, or is an officer of the Advisor, if after the Portfolio's purchase of
the securities of such issuer, one or more of such persons owns beneficially
more than 1/2 of 1% of the shares or securities, or both, all taken at market
value, of such issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such shares or
securities, or both, all taken at market value.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - SELECTED U.S. EQUITY AND U.S.
SMALL COMPANY PORTFOLIOS. The investment restrictions described below are not
fundamental policies of these Portfolios and may be changed by the Portfolios'
Trustees. These non-fundamental investment policies require that each of these
Portfolios may not:
(i) invest in warrants (other than warrants acquired by the Portfolio as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 5%
of the value of the Portfolio's net assets or if, as a result, more than 2% of
the Portfolio's net assets would be invested in warrants not listed on a
recognized U.S. or foreign stock exchange, to the extent permitted by applicable
state securities laws;
28
<PAGE>
(ii) invest in any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Portfolio, or is an officer of the Advisor, if after the Portfolio's purchase of
the securities of such issuer, one or more of such persons owns beneficially
more than 1/2 of 1% of the shares or securities, or both, all taken at market
value, of such issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such shares or
securities, or both, all taken at market value;
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - SELECTED U.S. EQUITY, U.S. SMALL
COMPANY AND DIVERSIFIED PORTFOLIOS. The investment restrictions described below
are not fundamental policies of these Portfolios and may be changed by the
Portfolios' Trustees. These non-fundamental investment policies require that
each of these Portfolios may not:
(i) invest in real estate limited partnership interests; or
(ii) invest in oil, gas or other mineral leases.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - EMERGING MARKETS EQUITY, ASIA
GROWTH AND EUROPEAN EQUITY PORTFOLIOS. The investment restrictions described
below are not fundamental policies of these Portfolios and may be changed by the
Portfolios' Trustees. These non-fundamental investment policies require that
each of these Portfolios may not:
(i) Acquire securities of other investment companies, except as permitted
by the 1940 Act or any rule, order or interpretation thereunder, or in
connection with a merger, consolidation, reorganization, acquisition of assets
or an offer of exchange;
(ii) Purchase any security if, as a result, the Portfolio would then have
more than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years;
(iii) Invest in warrants (other than warrants acquired by the Portfolio as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 5%
of the value of the Portfolio's net assets or if, as a result, more than 2% of
the Portfolio's net assets would be invested in warrants not listed on a
recognized U.S. or foreign stock exchange, to the extent permitted by applicable
state securities laws;
(iv) Sell any security short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold or unless it
covers such short sales as required by the current rules or positions of the SEC
or its staff. Transactions in futures contracts and options shall not
constitute selling securities short;
(v) Purchase securities on margin, but the Portfolio may obtain such short
term credits as may be necessary for the clearance of transactions;
(vi) Purchase or retain securities of any issuer if, to the knowledge of
the Portfolio, any of the Portfolio's officers or Trustees or any officer of the
Advisor individually owns more than 1/2 of 1% of the issuer's outstanding
securities and such persons owning more than 1/2 of 1% of such securities
together beneficially own more than 5% of such securities, all taken at market;
or
(vii) Invest in real estate limited partnerships or purchase interests in
oil, gas or mineral exploration or development programs or leases.
29
<PAGE>
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - JAPAN EQUITY PORTFOLIO. The
investment restrictions described below are not fundamental policies of the
Japan Equity Portfolio and may be changed by the Portfolio's Trustees. These
non-fundamental investment policies require that the Portfolio may not:
(i) Acquire securities of other investment companies, except as permitted
by the 1940 Act or any rule, order or interpretation thereunder, or in
connection with a merger, consolidation, reorganization, acquisition of assets
or an offer of exchange;
(ii) Purchase any security if, as a result, the Portfolio would then have
more than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years;
(iii) Sell any security short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold or unless it
covers such short sales as required by the current rules or positions of the SEC
or its staff. Transactions in futures contracts and options shall not
constitute selling securities short;
(iv) Purchase securities on margin, but the Portfolio may obtain such short
term credits as may be necessary for the clearance of transactions;
(v) Purchase or retain securities of any issuer if, to the knowledge of the
Portfolio, any of the Portfolio's officers or Trustees or any officer of the
Advisor individually owns more than 1/2 of 1% of the issuer's outstanding
securities and such persons owning more than 1/2 of 1% of such securities
together beneficially own more than 5% of such securities, all taken at market;
or
(vi) Invest in real estate limited partnerships or purchase interests in
oil, gas or mineral exploration or development programs or leases.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - NON-U.S. FIXED INCOME PORTFOLIO.
The investment restrictions described below are not fundamental policies of the
Non-U.S. Fixed Income Portfolio and may be changed by the Portfolio's Trustees.
These non-fundamental investment policies require that the Portfolio may not:
(i) Acquire securities of other investment companies, except as permitted
by the 1940 Act or any rule, order or interpretation thereunder, or in
connection with a merger, consolidation, reorganization, acquisition of assets
or an offer of exchange;
(ii) Purchase any security if, as a result, the Portfolio would then have
more than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years;
(iii) Sell any security short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold or unless it
covers such short sales as required by the current rules or positions of the SEC
or its staff. Transactions in futures contracts and options shall not
constitute selling securities short;
(iv) Purchase or retain securities of any issuer if, to the knowledge of
the Portfolio, any of the Portfolio's officers or Trustees or any officer of the
Advisor individually owns more than 1/2 of 1% of the issuer's outstanding
securities and such persons owning more than 1/2 of 1% of such securities
together beneficially own more than 5% of such securities, all taken at market;
(v) Purchase securities on margin, but the Portfolio may obtain such short
term credits as may be necessary for the clearance of transactions; or
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<PAGE>
(vi) Invest in real estate limited partnerships or purchase interests in
oil, gas or mineral exploration or development programs or leases.
ALL PORTFOLIOS. There will be no violation of any investment restriction
if that restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment or any other later change.
TRUSTEES AND OFFICERS
The Trustees of the Trust and the Trustees of the Portfolios, their
business addresses and their principal occupations during the past five years
are set forth below. An asterisk indicates that a Trustee is an "interested
person" (as defined in the 1940 Act) of the Trust or the Portfolios, as the case
may be.
TRUSTEES OF THE TRUST
JOHN C. COX*--Trustee; Nomura Professor of Finance, Massachusetts Institute
of Technology (since 1983); Director, Asset Specialization Corporation (since
May, 1992); Director, Nomura Asset Securities Corporation (since May, 1992);
Fellow, Econometric Society (since December, 1990); Director, Nomura Mortgage
Capital Corporation (since 1989); Director, American Finance Association (prior
to 1993); Consultant J.P. Morgan Investment Management Inc.* (since 1985). His
address is 15 Stony Brook Road, Weston, Massachusetts 02193.
JOHN R. RETTBERG--Trustee; retired; Consultant, Northrop Grumman
Corporation ("Northrop") (since January, 1995); Corporate Vice President and
Treasurer, Northrop (prior to January, 1995); Director, Independent Colleges of
Southern California (prior to 1994); Director, Junior Achievement (prior to
1993). His address is 79-165 Montego Bay Drive, Bermuda Dunes, California
92201.
JOHN F. RUFFLE*--Trustee; retired; Consultant, J.P. Morgan & Co.
Incorporated (since June, 1993); Director and Vice Chairman of J.P. Morgan & Co.
Incorporated (prior to June, 1993); Director, Trident Corporation (since April,
1994); Director, Bethlehem Steel Corporation (since September, 1990); Trustee,
Johns Hopkins University (since April, 1990); Trustee, Overlook Hospital
Foundation (since April, 1990); Director, Student Loan Marketing Association
(since April, 1990). His address is 103 Spruce Knob Road, Middletown Springs,
VT 05757.
KENNETH WHIPPLE, JR.--Trustee; Executive Vice President, Ford Motor
Company, President, Ford Financial Services Group, and Director, Ford Motor
Credit Company (since 1988); Director and President, Ford Holdings, Inc. (since
1989); Director, CMS Energy Corporation and Consumers Power Company (since
January, 1993); Director, Detroit Country Day School (since January, 1993);
Director Granite Management Corporation (formerly First Nationwide Financial
Corporation) and Granite Savings Bank (formerly First Nationwide Bank) (since
1988); Director, United Way of Southeastern Michigan (since 1988); Director, USL
Capital Corporation (since 1988); Chairman, Director and First Vice President,
WTVS-TV (since 1988). His address is 1115 Country Club Drive, Bloomfield Hills,
Michigan 48304.
JOHN BAUMGARDNER*--Trustee; Partner, Sullivan & Cromwell (law firm) (since
1983); Supervisory Director, The Turkish Private Equity Investment Company, N.V.
(1991-1993). His address is Sullivan & Cromwell, 125 Broad Street, New York, NY
10004.
Each Trustee of the Trust is paid a $16,000 annual fee for serving as
Trustee of the Trust and is reimbursed for expenses incurred in connection with
service as a Trustee. Under the Services Agreement, Morgan is responsible for
paying the Trustees' fees. The compensation paid to the Trust's Trustees in
calendar 1995 is set forth below. The Trustees may hold various other
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<PAGE>
directorships unrelated to the Trust. The Trustees of the Trust, in addition to
reviewing actions of the Trust's various service providers, decide upon matters
of general policy.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PENSION OR RETIREMENT ESTIMATED ANNUAL
AGGREGATE COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON
NAME OF TRUSTEE FROM THE TRUST DURING 1995 PART OF FUND EXPENSES RETIREMENT
John E. Baumgardner, Jr.* $0 None None
John C. Cox $13,067 None None
Joyce M. Nelson** $13,067 None None
John R. Rettberg $13,067 None None
John F. Ruffle $13,067 None None
Kenneth Whipple, Jr. $13,067 None None
</TABLE>
__________________________
*Trustee elected February [6], 1996.
**Trustee resigned January 2, 1996.
The dollar figure reported in the second column above was the total
compensation paid to the Trustee in 1995 for service on the Trust's board. None
of the Trust's Trustees serve on the board of another investment company in the
fund complex. As of the date of this Statement of Additional Information there
were 17 investment companies (including the Trust) in the fund complex.
TRUSTEES OF THE PORTFOLIOS
FREDERICK S. ADDY--Trustee; Retired; Executive Vice President and Chief
Financial Officer from January 1990 to April 1994, Amoco Corporation. His
address is 5300 Arbutus Cove, Austin, TX 78746.
WILLIAM G. BURNS--Trustee; Retired; Former Vice Chairman, NYNEX. His
address is 2200 Alaqua Drive, Longwood, FL 32779.
ARTHUR C. ESCHENLAUER--Trustee; Retired; Senior Vice President, Morgan
Guaranty Trust Company of New York until 1987. His address is 14 Alta Vista
Drive, RD #2, Princeton, NJ 08540.
MATTHEW HEALEY*--Trustee, Chairman and Chief Executive Officer; Chairman,
Pierpont Group, Inc., since 1989. His address is Pine Tree Club Estates, 10286
Saint Andrews Road, Boynton Beach, FL 33436.
MICHAEL P. MALLARDI--Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group prior to April 1996. His
address is 10 Charnwood Drive, Suffern, NY 10910.
Each Trustee of the Portfolios is paid an annual fee as follows for serving
as Trustee of The Pierpont Funds, The JPM Institutional Funds, the Portfolios
and the other portfolios in which these funds invest, and is reimbursed for any
expenses incurred in connection with service as a Trustee. The Trustees may
hold various other directorships unrelated to the Portfolios.
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<PAGE>
<TABLE>
<CAPTION>
TOTAL COMPENSA-
PENSION OR TION FROM THE
AGGREGATE RETIREMENT ESTIMATED PORTFOLIOS**, JPM
COMPENSATION BENEFITS ANNUAL INSTITUTIONAL AND
FROM THE ACCRUED AS BENEFITS PIERPONT FUNDS PAID
TRUST PART OF FUND UPON TO TRUSTEES DURING
<S> <C> <C> <C> <C>
NAME, POSITION DURING 1995 EXPENSES RETIREMENT 1995
Frederick S. Addy, Trustee N/A None None $62,500
William G. Burns, Trustee N/A None None $62,500
Arthur C. Eschenlauer, Trustee N/A None None $62,500
Matthew Healey, Trustee, Chairman
and Chief Executive Officer* N/A None None $62,500
Michael P. Mallardi, Trustee N/A None None $62,500
__________________
</TABLE>
*During 1995, Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
of Pierpont Group, Inc., compensation in the amount of $140,000, contributed
$21,000 to a defined contribution plan on his behalf, and paid $20,000 in
insurance premiums for his benefit.
**Includes the Portfolios and The Treasury Money Market Portfolio, The
Money Market Portfolio, The Tax Exempt Money Market Portfolio, The Short Term
Bond Portfolio, The Tax Exempt Bond Portfolio and The New York Total Return Bond
Portfolio.
As of April 1, 1995 the annual fee paid to each Trustee for serving as a
Trustee of each of the Portfolios and the six other registered investment
companies referenced directly above (collectively the "Master Portfolios"), The
JPM Institutional Funds and The Pierpont Funds was adjusted to $65,000.
The Portfolios' Trustees, in addition to reviewing actions of the
Portfolios' various service providers, decide upon matters of general policy.
Each of the Portfolios has entered into a Fund Services Agreement with Pierpont
Group, Inc. to assist the Trustees in exercising their overall supervisory
responsibilities over the affairs of the Portfolios. Pierpont Group, Inc. was
organized in July 1989 to provide services for The Pierpont Family of Funds, and
the Trustees of the Portfolios are the shareholders of Pierpont Group, Inc. The
Portfolios have agreed to pay Pierpont Group, Inc. a fee in an amount
representing its reasonable costs in performing these services. These costs are
periodically reviewed by the Portfolios' Trustees. The aggregate fees paid by
each Portfolio during the indicated fiscal years are set forth below:
U.S. FIXED INCOME PORTFOLIO--For the fiscal year ended October 31, 1994:
$23,028; for the fiscal year ended October 31, 1995: $40,729.
NON-U.S. FIXED INCOME PORTFOLIO--For the period October 11, 1994 (commencement
of operations) through September 30, 1995: $20,446.
SELECTED U.S. EQUITY PORTFOLIO--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $20,385; for the fiscal year ended May 31,
1995: $52,948; for the fiscal year ended May 31, 1996: $46,626.
U.S. SMALL COMPANY PORTFOLIO--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $33,435; for the fiscal year ended May 31,
1995: $62,256; for the fiscal year ended May 31, 1996: $48,688.
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<PAGE>
NON-U.S. EQUITY PORTFOLIO--For the fiscal year ended October 31, 1994: $32,512;
for the fiscal year ended October 31, 1995: $48,442.
DIVERSIFIED PORTFOLIO--For the period July 8, 1993 (commencement of operations)
through June 30, 1994: $3,434. For the fiscal year ended June 30, 1995:
$11,702.
EMERGING MARKETS EQUITY PORTFOLIO--For the period November 13, 1993
(commencement of operations) through October 31, 1994: $42,764; for the fiscal
year ended October 31, 1995: $53,162.
ASIA GROWTH PORTFOLIO--For the period April 5, 1995 (commencement of operations)
through December 31, 1995: $4,788.
EUROPEAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $19,953.
JAPAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $21,727.
OFFICERS
The Trust's and Portfolios' executive officers (listed below), other than
the Chief Executive Officer of the Portfolios, are provided and compensated by
Funds Distributor, Inc. ("FDI"), a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The officers conduct and supervise the business
operations of the Trust and the Portfolios. The Trust and the Portfolios have
no employees.
The officers of the Trust and the Portfolios and their principal
occupations during the past five years are set forth below. Unless otherwise
specified, each officer holds the same position with the Trust and each
Portfolio. The business address of each of the officers unless otherwise noted
is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109.
MATTHEW HEALEY; Chief Executive Officer of the Portfolios; Chairman,
Pierpont Group, Inc., since 1989. His address is Pine Tree Club Estates, 10286
Saint Andrews Road, Boynton Beach, FL 33436.
ELIZABETH A. BACHMAN; Vice President and Assistant Secretary. Counsel, FDI
and Premier Mutual Fund Services, Inc. ("Premier Mutual") and an officer of RCM
Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by the Dreyfus Corporation ("Dreyfus"). Prior to September 1995, Ms. Bachman
was enrolled at Fordham University School of Law and received her JD in May
1995. Prior to September 1992, Ms. Bachman was an assistant at the National
Association for Public Interest Law. Address: FDI, 200 Park Avenue, New York,
New York 10166.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President and
Chief Executive Officer and Director of FDI, Premier Mutual and an officer of
RCM Capital Funds, Inc., RCM Equity Funds, Inc. and certain investment companies
advised or administered by Dreyfus. From December 1991 to July 1994, she was
President and Chief Compliance Officer of FDI. Prior to December 1991, she
served as Vice President and Controller, and later as Senior Vice President of
The Boston Company Advisors, Inc. ("TBCA").
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Supervisor of
Treasury Services and Administration of FDI and an officer of certain investment
companies advised or administered by Dreyfus. From April 1993 to January 1995,
Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust Company.
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<PAGE>
Prior to March 1993, Mr. Conroy was employed as a fund accountant at The
Boston Company.
JACQUELINE HENNING; Assistant Secretary and Assistant Treasurer of the
Portfolios. Managing Director, State Street Cayman Trust Company, Ltd. since
October 1994. Prior to October 1994, Mrs. Henning was head of mutual funds at
Morgan Grenfell in Cayman and for five years was Managing director of Bank of
Nova Scotia Trust Company (Cayman) Limited from September 1988 to September
1993. Address: P.O. Box 2508 GT, Elizabethan Square, 2nd Floor, Shedden Road,
George Town, Grand Cayman, Cayman Islands.
RICHARD W. INGRAM; President and Treasurer. Senior Vice President and
Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. From March 1994 to
November 1995, Mr. Ingram was Vice President and Division Manager of First Data
Investor Services Group, Inc. From 1989 to 1994, Mr. Ingram was Vice President,
Assistant Treasurer and Tax Director - Mutual Funds of The Boston Company.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant Vice
President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity Funds,
Inc. From June 1994 to January 1996, Ms. Jacoppo was a Manager, SEC
Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994, Ms. Jacoppo
was a senior paralegal at TBCA.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI. From April 1994 to July 1996,
Mr. Kelley was Assistant Counsel at Forum Financial Group. From 1992 to 1994,
Mr. Kelley was employed by Putnam Investments in legal and compliance
capacities. Prior to September 1992, Mr. Kelley was enrolled at Boston College
Law School and received his JD in May 1992.
LENORE J. MCCABE; Assistant Secretary and Assistant Treasurer of the
Portfolios. Assistant Vice President, State Street Bank and Trust Company since
November 1994. Assigned as Operations Manager, State Street Cayman Trust
Company, Ltd. since February 1995. Prior to November, 1994, employed by Boston
Financial Data Services, Inc. as Control Group Manager. Address: P.O. Box 2508
GT, Elizabethan Square, 2nd Floor, Shedden Road, George Town, Grand Cayman,
Cayman Islands.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI, an officer of RCM
Capital Funds, Inc., RCM Equity Funds, Inc. and certain investment companies
advised or administered by Dreyfus. From 1989 to 1994, Ms. Nelson as an
Assistant Vice President and client manager for The Boston Company.
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President and
General Counsel of FDI and Premier Mutual and an officer of RCM Capital Funds,
Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc.
and certain investment companies advised or administered by Dreyfus. From
February 1992 to April 1994, Mr. Pelletier served as Counsel for TBCA. From
August 1990 to February 1992, Mr. Pelletier was employed as an Associate at
Ropes & Gray.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of FDI and Premier Mutual and
an officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. From July 1988 to
November 1993, Mr. Tower was Financial Manager of The Boston Company.
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<PAGE>
INVESTMENT ADVISOR
The investment advisor to the Portfolios is Morgan Guaranty Trust Company
of New York, a wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P.
Morgan"), a bank holding company organized under the laws of the State of
Delaware. Morgan, whose principal offices are at 60 Wall Street, New York, New
York 10260, is a New York trust company which conducts a general banking and
trust business. Morgan is subject to regulation by the New York State Banking
Department and is a member bank of the Federal Reserve System. Through offices
in New York City and abroad, Morgan offers a wide range of services, primarily
to governmental, institutional, corporate and high net worth individual
customers in the United States and throughout the world.
J.P. Morgan, through the Advisor and other subsidiaries, acts as investment
advisor to individuals, governments, corporations, employee benefit plans,
mutual funds and other institutional investors with combined assets under
management of approximately $179 billion (of which the Advisor advises over $28
billion).
J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as a financial advisor to
national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
The basis of Morgan's investment process is fundamental investment research
as the firm believes that fundamentals should determine an asset's value over
the long term. J.P. Morgan currently employs over 100 full time research
analysts, among the largest research staffs in the money management industry, in
its investment management divisions located in New York, London, Tokyo,
Frankfurt, Melbourne and Singapore to cover companies, industries and countries
on site. In addition, the investment management divisions employ approximately
300 capital market researchers, portfolio managers and traders. The conclusions
of the equity analysts' fundamental research is quantified into a set of
projected returns for individual companies through the use of a dividend
discount model. These returns are projected for 2 to 5 years to enable analysts
to take a longer term view. These returns, or normalized earnings, are used to
establish relative values among stocks in each industrial sector. These values
may not be the same as the markets' current valuations of these companies. This
provides the basis for ranking the attractiveness of the companies in an
industry according to five distinct quintiles or rankings. This ranking is one
of the factors considered in determining the stocks purchased and sold in each
sector. The Advisor's fixed income investment process is based on analysis of
real rates, sector diversification and quantitative and credit analysis.
The investment advisory services the Advisor provides to the Portfolios are
not exclusive under the terms of the Advisory Agreements. The Advisor is free
to and does render similar investment advisory services to others. The Advisor
serves as investment advisor to personal investors and other investment
companies and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which the Advisor serves as trustee. The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolios. Such accounts are supervised by officers and employees of
the Advisor who may also be acting in similar capacities for the Portfolios.
See "Portfolio Transactions."
Sector weightings are generally similar to a fund's benchmark with the
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmarks for the Portfolios in which the Funds
invest are currently: The U.S. Fixed Income Portfolio--Salomon Brothers Broad
Investment Grade Bond Index; The Non-U.S. Fixed Income Portfolio--Salomon
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<PAGE>
Brothers Non-U.S. World Government Bond Index (currency hedged); The Selected
U.S. Equity Portfolio--S&P 500 Index; The U.S. Small Company Portfolio--Russell
2500 Index; The Non-U.S. Equity Portfolio--EAFE Index; The Diversified
Portfolio--diversified benchmark (52% S&P 500, 35% Salomon Brothers Broad
Investment Grade Bond, 3% Russell 2000 and 10% EAFE indexes); The Emerging
Markets Equity Portfolio--MSCI Emerging Markets Free Index; The European Equity
Portfolio--the MSCI Europe Index; The Japan Equity Portfolio--the TOPIX; and The
Asia Growth Portfolio--the MSCI indexes for Hong Kong and Singapore and the
International Finance Corporation Investable indexes for China, Indonesia,
Malaysia, Philippines, South Korea, Taiwan and Thailand.
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary of
J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, which manages employee benefit funds of corporations,
labor unions and state and local governments and the accounts of other
institutional investors, including investment companies. Certain of the assets
of employee benefit accounts under its management are invested in commingled
pension trust funds for which the Advisor serves as trustee. J.P. Morgan
Investment Management Inc. advises the Advisor on investment of the commingled
pension trust funds.
The Portfolios are managed by officers of the Advisor who, in acting for
their customers, including the Portfolios, do not discuss their investment
decisions with any personnel of J.P. Morgan or any personnel of other divisions
of the Advisor or with any of its affiliated persons, with the exception of J.P.
Morgan Investment Management Inc.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Advisory
Agreements, the Portfolio corresponding to each Fund has agreed to pay the
Advisor a fee, which is computed daily and may be paid monthly, equal to the
annual rates of each Portfolio's average daily net assets shown below.
PORTFOLIO FEE RATE
- --------- --------
U.S. FIXED INCOME 0.30%
NON-U.S. FIXED INCOME 0.35%
SELECTED U.S. EQUITY 0.40%
U.S. SMALL COMPANY 0.60%
NON-U.S. EQUITY 0.60%
DIVERSIFIED 0.55%
EMERGING MARKETS EQUITY 1.00%
ASIA GROWTH 0.80%
EUROPEAN EQUITY 0.65%
JAPAN EQUITY 0.65%
The table below sets forth for each Fund listed the advisory fees paid by
its corresponding Portfolio to the Advisor for the fiscal periods indicated.
See "Expenses" in the Prospectus and below for applicable expense limitations.
U.S. FIXED INCOME PORTFOLIO (U.S. FIXED INCOME FUND)--For the period July 12,
1993 (commencement of operations) through October 31, 1993: $119,488. For the
fiscal year ended October 31, 1994: $699,081. For the fiscal year ended
October 31, 1995: $1,339,147.
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<PAGE>
NON-U.S. FIXED INCOME PORTFOLIO (INTERNATIONAL FIXED INCOME FUND)--For the
period October 11, 1994 (commencement of operations) through September 30, 1995:
$782,748.
SELECTED U.S. EQUITY PORTFOLIO (U.S. EQUITY FUND)--For the period July 19, 1993
(commencement of operations) through May 31, 1994: $1,263,048. For the fiscal
year ended May 31, 1995: $2,025,936. For the fiscal year ended May 31, 1996:
$2,744,054.
U.S. SMALL COMPANY PORTFOLIO (U.S. SMALL CAP EQUITY FUND)--For the period July
19, 1993 (commencement of operations) through May 31, 1994: $2,912,670. For
the fiscal year ended May 31, 1995: $3,514,331. For the fiscal year ended May
31, 1996: $4,286,311.
NON-U.S. EQUITY PORTFOLIO (INTERNATIONAL EQUITY FUND)--For the period October 4,
1993 (commencement of operations) through October 31, 1993: $78,550. For the
fiscal year ended October 31, 1994: $1,911,202. For the fiscal year ended
October 31, 1995: $3,174,965.
THE DIVERSIFIED PORTFOLIO (Diversified Fund)--For the period July 8, 1993
(commencement of operations) through June 30, 1994: $197,026. For the fiscal
year ended June 30, 1995: $663,000.
EMERGING MARKETS EQUITY PORTFOLIO (EMERGING MARKETS EQUITY FUND)--For the period
November 15, 1993 (commencement of operations) through October 31, 1994:
$4,122,465. For the fiscal year ended October 31, 1995: $5,713,506.
ASIA GROWTH PORTFOLIO--For the period April 5, 1995 (commencement of operations)
through December 31, 1995: $528,956.
EUROPEAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $1,675,355.
JAPAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $1,777,126.
The Investment Advisory Agreements provide that they will continue in
effect for a period of two years after execution only if specifically approved
thereafter annually in the same manner as the Distribution Agreement. See "Co-
Administrator and Distributor" below. Each of the Investment Advisory
Agreements will terminate automatically if assigned and is terminable at any
time without penalty by a vote of a majority of the Portfolio's Trustees, or by
a vote of the holders of a majority of the Portfolio's outstanding voting
securities, on 60 days' written notice to the Advisor and by the Advisor on 90
days' written notice to the Portfolio. See "Additional Information."
The Glass-Steagall Act and other applicable laws generally prohibit banks
such as Morgan from engaging in the business of underwriting or distributing
securities, and the Board of Governors of the Federal Reserve System has issued
an interpretation to the effect that under these laws a bank holding company
registered under the federal Bank Holding Company Act or certain subsidiaries
thereof may not sponsor, organize or control a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Trust.
The interpretation does not prohibit a holding company or a subsidiary thereof
from acting as investment advisor and custodian to such an investment company.
Morgan believes that it may perform the services for the Portfolios
contemplated by the Advisory Agreements without violation of the Glass-Steagall
Act or other applicable banking laws or regulations. State laws on this issue
may differ from the interpretation of relevant federal law, and banks and
financial institutions may be required to register as dealers pursuant to state
securities laws. However, it is possible that future changes in either federal
or state statutes and regulations concerning the permissible activities of banks
or trust
38
<PAGE>
companies, as well as further judicial or administrative decisions and
interpretations of present and future statutes and regulations, might prevent
Morgan from continuing to perform such services for the Portfolios.
If Morgan were prohibited from acting as investment advisor to any
Portfolio, it is expected that the Trustees of the Portfolio would recommend to
investors that they approve the Portfolio's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Under separate agreements, Morgan also provides certain financial, fund
accounting and administrative services to the Trust and the Portfolios and
shareholder services for the Trust (see "Services Agent").
CO-ADMINISTRATOR AND DISTRIBUTOR
FDI serves as the Trust's exclusive Distributor and holds itself available
to receive purchase orders for each of the Fund's shares. In that capacity, FDI
has been granted the right, as agent of the Trust, to solicit and accept orders
for the purchase of each of the Fund's shares in accordance with the terms of
the Distribution Agreement between the Trust and FDI. The Distribution
Agreement shall continue in effect with respect to each of the Funds for a
period of two years after execution only if it is approved at least annually
thereafter (i) by a vote of the holders of a majority of the Fund's outstanding
shares or by its Trustees and (ii) by a vote of a majority of the Trustees of
the Trust who are not "interested persons" (as defined by the 1940 Act) of the
parties to the Distribution Agreement, cast in person at a meeting called for
the purpose of voting on such approval (see "Trustees and Officers"). The
Distribution Agreement will terminate automatically if assigned by either party
thereto and is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested persons" of the Trust, or by a vote of the holders of a majority of
the Fund's outstanding shares as defined under "Additional Information," in any
case without payment of any penalty on not more than 60 days' written notice to
the other party. The principal offices of FDI are located at 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
FDI also serves as the Trust's and the Portfolios' Co-Administrator. The
Co-Administration Agreements may be renewed or amended by the respective
Trustees without a shareholder vote. The Co-Administration Agreements are
terminable at any time without penalty by a vote of a majority of the Trustees
of the Trust or the Portfolios, as applicable, on not more than 60 days' written
notice nor less than 30 days' written notice to the other party. The Co-
Administrator may subcontract for the performance of its obligations, provided,
however, that unless the Trust or the Portfolios, as applicable, expressly
agrees in writing, the Co-Administrator shall be fully responsible for the acts
and omissions of any subcontractor as it would for its own acts or omissions.
See "Services Agent" below.
Below are set forth for each Fund listed and its corresponding Portfolio
the administrative fees paid to Signature Broker-Dealer Services, Inc. (which
provided distribution and administrative services to the Trust and placement
agent and administrative services to the Portfolios prior to August 1, 1996) for
the fiscal periods indicated. See "Expenses" in the Prospectus and below for
applicable expense limitations.
U.S. FIXED INCOME PORTFOLIO--For the period July 12, 1993 (commencement of
operations) through October 31, 1993: $950. For the fiscal year ended
October 31, 1994: $16,107. For the fiscal year ended October 31, 1995:
$27,436.
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NON-U.S. FIXED INCOME PORTFOLIO--For the period October 11, 1994 (commencement
of operations) through September 30, 1995: $13,862.
SELECTED U.S. EQUITY PORTFOLIO--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $19,348. For the fiscal year ended May 31,
1995: $32,670. For the fiscal year ended May 31, 1996: $62,404.
U.S. EQUITY FUND--For the period February 5, 1996 (commencement of operations)
through May 31, 1996: $2.
U.S. SMALL COMPANY PORTFOLIO--For the period July 19, 1993 (commencement of
operations) through May 31, 1994: $30,420. For the fiscal year ended May 31,
1995: $38,215. For the fiscal year ended May 31, 1996: $65,079.
U.S. SMALL CAP EQUITY FUND--For the period January 19, 1996 (commencement of
operations) through May 31, 1996: $3.
NON-U.S. EQUITY PORTFOLIO--For the period October 4, 1993 (commencement of
operations) through October 31, 1993: $1,005. For the fiscal year ended
October 31, 1994: $22,024. For the fiscal year ended October 31, 1995:
$31,500.
THE DIVERSIFIED PORTFOLIO--For the period July 8, 1993 (commencement of
operations) through June 30, 1994: $2,423. For the fiscal year ended June 30,
1995: $7,770.
EMERGING MARKETS EQUITY PORTFOLIO--For the period November 15, 1993
(commencement of operations) through October 31, 1994: $30,828. For the fiscal
year ended October 31, 1995: $35,189.
ASIA GROWTH PORTFOLIO--For the period April 5, 1995 (commencement of operations)
through December 31, 1995: $4,037. For the six months ended June 30, 1996:
$6,530 (unaudited).
ASIA GROWTH FUND--For the period January 5, 1996 (commencement of operations)
through June 30, 1996: $16 (unaudited).
EUROPEAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $15,623. For the six months ended
June 30, 1996: $32,409 (unaudited).
EUROPEAN EQUITY FUND--For the period January 23, 1996 (commencement of
operations) through June 30, 1996: $34 (unaudited).
JAPAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $17,418. For the six months ended
June 30, 1996: $30,693 (unaudited).
JAPAN EQUITY FUND--For the period January 24, 1996 (commencement of operations)
through June 30, 1996: $26 (unaudited).
SERVICES AGENT
The Trust and the Portfolios have entered into a Services Agreement and an
Administrative Services Agreements (the "Services Agreements"), respectively,
with Morgan effective December 29, 1995, as amended effective August 1, 1996,
pursuant to which Morgan is responsible for certain financial, fund accounting
and administrative services provided to the Funds and Portfolios. The Services
Agreements may be terminated at any time, without penalty, by the respective
Trustees or Morgan, in each case on not more than 60 days' nor less than 30
days' written notice to the other party.
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Under the Services Agreement with the Trust, Morgan is also responsible for
performing shareholder account administrative and servicing functions for each
Fund, which includes, but is not limited to, answering inquiries regarding
account status and history, the manner in which purchases and redemptions of
Fund shares may be effected, and certain other matters pertaining to the Funds;
assisting customers in designating and changing dividend options, account
designations and addresses; providing necessary personnel and facilities to
coordinate the establishment and maintenance of shareholder accounts and records
with the Funds' transfer agent; transmitting purchase and redemption orders to
the Funds' transfer agent and arranging for the wiring or other transfer of
funds to and from customer accounts in connection with orders to purchase or
redeem Fund shares; verifying purchase and redemption orders, transfers among
and changes in accounts; informing the Distributor of the gross amount of
purchase orders for Fund shares; and providing other related services.
In addition, Morgan is responsible for the annual costs to the Funds of
certain usual and customary expenses incurred by the Funds (the "expense
undertaking"). The expenses covered by the expense undertaking include, but are
not limited to, transfer, registrar, and dividend disbursing costs, legal and
accounting expenses, the fees of the Co-Administrator for services to the Trust,
the cost of any liability insurance or fidelity bonds, the compensation and
expenses of the Trust's Trustees, the expenses of printing and mailing reports,
notices and proxies to Fund shareholders, interest charges, membership dues in
the Investment Company Institute allocable to the Funds, shareholder meeting
fees and registration fees under federal or state securities laws. When the
Funds pay these expenses directly, such amounts will be deducted from the fees
to be paid to Morgan under the Trust's Services Agreement. If such amounts are
more than the amount of Morgan's fees under the agreement, Morgan will reimburse
the applicable Fund for such excess amounts.
Under the Trust's Services Agreement, the administration and operation
expenses of each Fund not covered by the expense undertakings, and for which
each Fund is responsible, include the Trust's services agent fee, organization
expenses and extraordinary expenses as defined in the Services Agreement, which
includes litigation and indemnification expenses and material increases in
expenses due to occurrences such as significant increases in the fee schedules
of service providers or significant decreases in a Fund's asset level due to
changes in tax or other laws or other extraordinary occurrences outside of the
ordinary course of a Fund's business.
The Trust's Services Agreement provides for each Fund to pay Morgan a fee
for these services which is computed daily and may be paid monthly at the
following annual rates of average daily net assets: U.S. Fixed Income Fund,
0.60%; International Fixed Income Fund, 0.68%; U.S. Equity, U.S. Small Cap
Equity and Diversified Funds, 0.69%; International Equity Fund, 0.76%; Emerging
Markets Equity Fund, 0.77%; and Asia Growth, European Equity and Japan Equity
Funds, 0.75%. As noted immediately above, these fee levels reflect payments
made directly to third parties by each of the Funds for expenses covered by the
expense undertaking, as well as payments to Morgan for services rendered under
the agreement. The Trust's Trustees regularly review amounts paid to and
accounted for by Morgan pursuant to this agreement. See "Expenses" in the
Prospectus and below for applicable expense limitations.
Under the Portfolios' amended Services Agreements and the Co-Administration
Agreements, each of the Portfolios has agreed to pay Morgan and FDI fees equal
to its allocable share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Master Portfolios (in
which series of the Trust, The Pierpont Funds or The JPM Institutional Funds
invest) in accordance with the following annual schedule: 0.09% on the first
$7 billion of the Master Portfolios' aggregate average daily net assets and
0.04% of the Master Portfolios' average daily net assets in excess of $7
billion.
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Under Administrative Services Agreements in effect from December 29, 1995
through July 31, 1996, with Morgan, each Portfolio paid Morgan a fee equal to
its proportionate share of an annual complex-wide charge. This charge was
calculated daily based on the aggregate net assets of the Master Portfolios in
accordance with the following schedule: 0.06% of the first $7 billion of the
Master Portfolios' aggregate average daily net assets, and 0.03% of the Master
Portfolios' aggregate average daily net assets in excess of $7 billion.
Prior to December 29, 1995, each Portfolio had entered into a Financial and
Fund Accounting Services Agreement with Morgan, the provisions of which included
certain of the activities described above and, prior to September 1, 1995, also
included reimbursement of the Portfolio's usual and customary expenses. Below
are set forth for each Fund listed and its corresponding Portfolio the fees paid
to Morgan, net of fee waivers and reimbursements, as Services Agent. See
"Expenses" in the Prospectus and below for applicable expense limitations.
THE U.S. FIXED INCOME PORTFOLIO--For the fiscal year ended October 31, 1995:
$167,081.
THE NON-U.S. FIXED INCOME PORTFOLIO--For the period October 11, 1994
(commencement of operations) through September 30, 1995: $156,367.
THE SELECTED U.S. EQUITY PORTFOLIO--For the fiscal year ended May 31, 1996:
$138,134.
U.S. EQUITY FUND--For the period February 5, 1996 (commencement of operations)
through May 31, 1996: $(46,245)*.
THE U.S. SMALL COMPANY PORTFOLIO--For the fiscal year ended May 31, 1996:
$144,277.
U.S. SMALL CAP EQUITY FUND--For the period January 19, 1996 (commencement of
operations) through May 31, 1996: $(37,481)*.
THE NON-U.S. EQUITY PORTFOLIO--For the fiscal year ended October 31, 1995:
$349,443.
THE DIVERSIFIED PORTFOLIO--For the fiscal year ended June 30, 1995: $63,153.
THE EMERGING MARKETS EQUITY PORTFOLIO--For the fiscal year ended October 31,
1995: $337,050.
ASIA GROWTH PORTFOLIO--For the period April 5, 1995 (commencement of operations)
through December 31, 1995: $21,823; for the six months ended June 30, 1996:
$12,972 (unaudited).
ASIA GROWTH FUND--For the period January 5, 1996 (commencement of operations)
through June 30, 1996: $(27,641)* (unaudited).
EUROPEAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $128,335; for the six months ended
June 30, 1996: $64,388 (unaudited).
EUROPEAN EQUITY FUND--For the period January 23, 1996 (commencement of
operations) through June 30, 1996: $(27,180)* (unaudited).
JAPAN EQUITY PORTFOLIO--For the period March 28, 1995 (commencement of
operations) through December 31, 1995: $147,974; for the six months ended
June 30, 1996: $60,965 (unaudited).
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JAPAN EQUITY FUND--For the period January 24, 1996 (commencement of operations)
through June 30, 1996: $(24,930)* (unaudited).
__________________
*Indicates a reimbursement by Morgan for expenses in excess of its fees
under the Trust's Services Agreement. No fees were paid by the Fund for the
fiscal period.
As discussed under "Investment Advisor", the Glass-Steagall Act and other
applicable laws and regulations limit the activities of bank holding companies
and certain of their subsidiaries in connection with registered open-end
investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders and providing administrative services to
the Funds and the Portfolios under the Services Agreements and in acting as
Advisor to the Portfolios under the Investment Advisory Agreements, may raise
issues under these laws. However, Morgan believes that it may properly perform
these services and the other activities described in the Prospectuses without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations.
If Morgan were prohibited from providing any of the services under the
Services Agreements, the Trustees would seek an alternative provider of such
services. In such event, changes in the operation of the Funds or the
Portfolios might occur and a shareholder might no longer be able to avail
himself or herself of any services then being provided to shareholders by
Morgan.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02101, serves as the Trust's and each of the Portfolio's
Custodian and Transfer and Dividend Disbursing Agent. Pursuant to the Custodian
Contracts, State Street is responsible for maintaining the books of account and
records of portfolio transactions and holding portfolio securities and cash. In
the case of foreign assets held outside the United States, the Custodian employs
various subcustodians who were approved by the Trustees of the Portfolios in
accordance with the regulations of the SEC. The Custodian maintains portfolio
transaction records. As Transfer Agent and Dividend Disbursing Agent, State
Street is responsible for maintaining account records detailing the ownership of
Fund shares and for crediting income, capital gains and other changes in share
ownership to shareholder accounts. Under the terms of the Services Agreement
between the Trust and Morgan, Morgan is responsible for the usual and customary
fees of the Custodian for each Fund (see "Services Agent"); the corresponding
Portfolio is responsible for the fees of the Custodian for the Portfolio (see
"Services Agent").
INDEPENDENT ACCOUNTANTS
The independent accountants of the Trust and the Portfolios are Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. Price
Waterhouse LLP conducts an annual audit of the financial statements of each of
the Funds and the Portfolios, assists in the preparation and/or review of each
of the Fund's and the Portfolio's federal and state income tax returns and
consults with the Funds and the Portfolios as to matters of accounting and
federal and state income taxation.
EXPENSES
Each Fund is responsible for Morgan's fee under the Trust's Services
Agreement and any fees or expenses not covered by the Services Agreement with
the Trust (see "Services Agent" above and "Expenses" in the Prospectuses). In
addition, each Portfolio is responsible for all fees and other usual and
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customary expenses associated with its operations (see "Expenses" in the
Prospectuses).
Morgan has agreed to waive fees as necessary if in any fiscal year the sum
of any Fund's expenses exceeds the limits set by applicable regulations of state
securities commissions. Currently, Morgan believes that the most restrictive
expense limitation of state securities commissions limits expenses to 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. For additional information regarding waivers or expense subsidies, see
"Management of the Trust and the Portfolio" in the Prospectuses.
PURCHASE OF SHARES
Investors may open Fund accounts and purchase shares as described in the
relevant Prospectus under "Purchase of Shares." References in the Prospectus
and this Statement of Additional Information to customers of Morgan or an
Eligible Institution include customers of their affiliates and references to
transactions by customers with Morgan or an Eligible Institution include
transactions with their affiliates. Only Fund investors who are using the
services of Morgan or a financial institution acting pursuant to an agreement
with Morgan or the Trust on behalf of a Fund may make transactions in shares of
a Fund.
Each Fund may, at its own option, accept securities in payment for shares.
The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities may
be accepted in payment for shares only if they are, in the judgment of Morgan,
appropriate investments for the Fund's corresponding Portfolio. In addition,
securities accepted in payment for shares must: (i) meet the investment
objective and policies of the acquiring Fund's corresponding Portfolio; (ii) be
acquired by the applicable Fund for investment and not for resale (other than
for resale to the Fund's corresponding Portfolio); (iii) be liquid securities
which are not restricted as to transfer either by law or liquidity of market;
and (iv) if stock, have a value which is readily ascertainable as evidenced by a
listing on a stock exchange, over-the-counter market or by readily available
market quotations from a dealer in such securities. Each Fund reserves the
right to accept or reject at its own option any and all securities offered in
payment for its shares.
Prospective investors may purchase shares with the assistance of an
Eligible Institution, and the Eligible Institution may charge the investor a fee
for this service and other services it provides to its customers.
REDEMPTION OF SHARES
Investors may redeem shares as described in the relevant Prospectus under
"Redemption of Shares."
If the Trust on behalf of a Fund and its corresponding Portfolio determine
that it would be detrimental to the best interest of the remaining shareholders
of a Fund to make payment wholly or partly in cash, payment of the redemption
price may be made in whole or in part by a distribution in kind of securities
from the Portfolio, in lieu of cash, in conformity with the applicable rule of
the SEC. If shares are redeemed in kind, the redeeming shareholder might incur
transaction costs in converting the assets into cash. The method of valuing
portfolio securities is described under "Net Asset Value," and such valuation
will be made as of the same time the redemption price is determined. The Trust
on behalf of all of the Funds and their corresponding Portfolios (except the
Non-U.S. Fixed Income, Asia Growth, European Equity and Japan Equity Portfolios)
have elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which
the Funds and the corresponding Portfolios are obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund
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during any 90-day period for any one shareholder. The Trust will redeem Fund
shares in kind only if it has received a redemption in kind from the
corresponding Portfolio and therefore shareholders of the Fund that receive
redemptions in kind will receive securities of the Portfolio. The Portfolios
have advised the Trust that the Portfolios will not redeem in kind except in
circumstances in which a Fund is permitted to redeem in kind.
FURTHER REDEMPTION INFORMATION. The Trust on behalf of a Fund and the
Portfolios reserve the right to suspend the right of redemption and to postpone
the date of payment upon redemption as follows: (i) for up to seven days,
(ii) during periods when the New York Stock Exchange is closed for other than
weekends and holidays or when trading on such Exchange is restricted as
determined by the SEC by rule or regulation, (iii) during periods in which an
emergency, as determined by the SEC, exists that causes disposal by the
Portfolio of, or evaluation of the net asset value of, its portfolio securities
to be unreasonable or impracticable, or (iv) for such other periods as the SEC
may permit.
EXCHANGE OF SHARES
An investor may exchange shares from any JPM Advisor Fund into any other
JPM Advisor Fund, as described under "Exchange of Shares" in the Prospectus.
For complete information, the Prospectus as it relates to the Fund into which a
transfer is being made should be read prior to the transfer. Requests for
exchange are made in the same manner as requests for redemptions. See
"Redemption of Shares." Shares of the Fund to be acquired are purchased for
settlement when the proceeds from redemption become available. In the case of
investors in certain states, state securities laws may restrict the availability
of the exchange privilege. The Trust reserves the right to discontinue, alter
or limit the exchange privilege at any time.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays dividends and distributions as described under
"Dividends and Distributions" in the Prospectus.
NET ASSET VALUE
Each of the Funds computes its net asset value once daily on Monday through
Friday as described under "Net Asset Value" in the Prospectus. The net asset
value will not be computed on the day the following legal holidays are observed:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. On days when U.S. trading
markets close early in observance of these holidays, the Funds and the
Portfolios would expect to close for purchases and redemptions at the same time.
The days on which net asset value is determined are the Funds' business days.
The net asset value of each Fund is equal to the net asset value of the
Fund's investment in its corresponding Portfolio (which is equal to the Fund's
pro rata share of the total investment of the Fund and of any other investors in
the Portfolio less the Fund's pro rata share of the Portfolio's liabilities)
less the Fund's liabilities. The following is a discussion of the procedures
used by the Portfolios corresponding to each Fund in valuing their assets.
U.S. FIXED INCOME, DIVERSIFIED AND INTERNATIONAL FIXED INCOME FUNDS. In
the case of the Portfolios for the U.S. Fixed Income, Diversified and
International Fixed Income Funds, securities with a maturity of 60 days or more,
including securities that are listed on an exchange or traded over-the-counter,
are valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national securities
exchange or, in the absence of recorded sales, at the readily available closing
bid price on such exchange or at the quoted bid price in the over-the-counter
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market, if such exchange or market constitutes the broadest and most
representative market for the security and (ii) in other cases, take into
account various factors affecting market value, including yields and prices of
comparable securities, indication as to value from dealers and general market
conditions. If such prices are not supplied by the Portfolio's independent
pricing service, such securities are priced in accordance with procedures
adopted by the Portfolio's Trustees. All portfolio securities with a remaining
maturity of less than 60 days are valued by the amortized cost method.
Securities listed on a foreign exchange are valued at the last quoted sale price
available before the time when net assets are valued. Because of the large
number of municipal bond issues outstanding and the varying maturity dates,
coupons and risk factors applicable to each issuer's books, no readily available
market quotations exist for most municipal securities. The Portfolio values
municipal securities on the basis of prices from a pricing service which uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining values.
Trading in securities in most foreign markets is normally completed before
the close of trading in U.S. markets and may also take place on days on which
the U.S. markets are closed. If events materially affecting the value of
securities occur between the time when the market in which they are traded
closes and the time when a Portfolio's net asset value is calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Portfolio's Trustees.
U.S. EQUITY, U.S. SMALL CAP EQUITY, INTERNATIONAL EQUITY, EMERGING MARKETS
EQUITY, DIVERSIFIED, ASIA GROWTH, EUROPEAN EQUITY AND JAPAN EQUITY FUNDS. In
the case of each of the Equity Portfolios, the value of investments listed on a
domestic securities exchange, other than options on stock indexes, is based on
the last sale prices on the New York Stock Exchange at 4:00 P.M. or, in the
absence of recorded sales, at the average of readily available closing bid and
asked prices on such exchange. Securities listed on a foreign exchange are
valued at the last quoted sale price available before the time when net assets
are valued. Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security. For purposes of
calculating net asset value, all assets and liabilities initially expressed in
foreign currencies will be converted into U.S. dollars at the prevailing market
rates available at the time of valuation.
Options on stock indexes traded on national securities exchanges are valued
at the close of options trading on such exchanges which is currently 4:10 P.M.,
New York time. Stock index futures and related options, which are traded on
commodities exchanges, are valued at their last sales price as of the close of
such commodities exchanges which is currently 4:15 P.M., New York time.
Securities or other assets for which market quotations are not readily available
(including certain restricted and illiquid securities) are valued at fair value
in accordance with procedures established by and under the general supervision
and responsibility of the Portfolio's Trustees. Such procedures include the use
of independent pricing services which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments
which mature in 60 days or less are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original maturity when acquired by the Portfolio was more
than 60 days, unless this is determined not to represent fair value by the
Trustees.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days on which the New York Stock Exchange is closed.
If
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events materially affecting the value of securities occur between the time when
the exchange on which they are traded closes and the time when a Portfolio's net
asset value is calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general supervision of
the Portfolio's Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of yield,
actual distributions, total return or capital appreciation in reports, sales
literature and advertisements published by the Trust. Current performance
information for the Funds may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.
YIELD QUOTATIONS. As required by regulations of the SEC, the annualized
yield for the U.S. Fixed Income and International Fixed Income Funds is computed
by dividing each Fund's net investment income per share earned during a 30-day
period by the net asset value on the last day of the period. The average daily
number of shares outstanding during the period that are eligible to receive
dividends is used in determining the net investment income per share. Income is
computed by totaling the interest earned on all debt obligations during the
period and subtracting from that amount the total of all recurring expenses
incurred during the period. The 30-day yield is then annualized on a
bond-equivalent basis assuming semi-annual reinvestment and compounding of net
investment income, as described under "Additional Information" in the
Prospectus.
TOTAL RETURN QUOTATIONS. As required by regulations of the SEC, the
annualized total return of each of the Funds for a period is computed by
assuming a hypothetical initial payment of $1,000. It is then assumed that all
of the dividends and distributions by the Fund over the period are reinvested.
It is then assumed that at the end of the period, the entire amount is redeemed.
The annualized total return is then calculated by determining the annual rate
required for the initial payment to grow to the amount which would have been
received upon redemption.
Aggregate total returns, reflecting the cumulative percentage change over a
measuring period, may also be calculated.
Historical performance information for any period or portion thereof prior
to the commencement of operations of each Fund will be that of its corresponding
Pierpont Fund (or, in the case of the International Fixed Income Fund, its
corresponding JPM Institutional Fund) which also invests all of its investable
assets in the Fund's corresponding Portfolio, as permitted by applicable SEC
staff interpretations, if the Pierpont or JPM Institutional Fund commenced
operations before its corresponding JPM Advisor Fund. The applicable financial
information in the registration statement for The Pierpont Funds (Registration
Nos. 33-54632 and 811-7340) and The JPM Institutional Funds (Registration Nos.
33-54642 and 811-7342) is incorporated herein by reference.
Below is set forth historical information for the Funds for the periods
indicated:
INTERNATIONAL FIXED INCOME FUND (3/31/96): Average annual total return, 1 year:
12.24%; average annual total return, 5 years: N/A; average annual total return,
commencement of operations(*) to period end: 13.70%; aggregate total return, 1
year: 12.24%; aggregate total return, 5 years: N/A; aggregate total return,
commencement of operations(*) to period end: 18.64%.
U.S. EQUITY FUND (5/30/96): Average annual total return, 1 year: 24.98%;
average annual total return, 5 years: 14.51%; average annual total return, 10
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years: 13.61%; aggregate total return, 1 year: 24.98%; aggregate total return,
5 years: 96.89%; aggregate total return, 10 years: 258.26%.
U.S. SMALL CAP FUND (5/30/96): Average annual total return, 1 year: 34.77%;
average annual total return, 5 years: 16.42%; average annual total return, 10
years: 11.18%; aggregate total return, 1 year: 34.77%; aggregate total return,
5 years: 113.83%; aggregate total return, 10 years: 188.46%.
INTERNATIONAL EQUITY FUND (4/30/96): Average annual total return, 1 year:
11.64%; average annual total return, 5 years: 7.05%; average annual total
return, commencement of operations(*) to period end: 5.13%; aggregate total
return, 1 year: 11.64%; aggregate total return, 5 years: 40.58%; aggregate
total return, commencement of operations(*) to period end: 34.44%.
EMERGING MARKETS EQUITY FUND (4/30/96): Average annual total return, 1 year:
11.58%; average annual total return, 5 years: N/A; average annual total return,
commencement of operations(*) to period end: 3.80%; aggregate total return, 1
year: 11.58%; aggregate total return, 5 years: N/A; aggregate total return,
commencement of operations(*) to period end: 9.59%.
EUROPEAN EQUITY FUND (6/30/96): Average annual total return, 1 year: N/A;
average annual total return, 5 years: N/A; average annual total return,
commencement of operations(*) to period end: 6.78%; aggregate total return, 1
year: N/A; aggregate total return, 5 years: N/A; aggregate total return,
commencement of operations(*) to period end: 6.78%.
JAPAN EQUITY FUND (6/30/96): Average annual total return, 1 year: N/A; average
annual total return, 5 years: N/A; average annual total return, commencement of
operations(*) to period end: 5.55%; aggregate total return, 1 year: N/A;
aggregate total return, 5 years: N/A; aggregate total return, commencement of
operations(*) to period end: 5.55%.
ASIA GROWTH FUND (6/30/96): Average annual total return, 1 year: N/A; average
annual total return, 5 years: N/A; average annual total return, commencement of
operations(*) to period end: 4.30%; aggregate total return, 1 year: N/A;
aggregate total return, 5 years: N/A; aggregate total return, commencement of
operations(*) to period end: 4.30%.
__________________
*The International Fixed Income, U.S. Equity, U.S. Small Cap Equity,
International Equity, Emerging Markets Equity, European Equity, Japan Equity and
Asia Growth Funds commenced operations on March 6, 1996, February 5, 1996,
January 19, 1996, November 22, 1996, November 22, 1996, January 23, 1996,
January 24, 1996 and January 5, 1996, respectively. The Pierpont Funds
corresponding to the U.S. Fixed Income, U.S. Equity, U.S. Small Cap Equity and
International Equity Funds commenced operations on July 12, 1993, July 19, 1993,
July 19, 1993 and October 4, 1993, and their predecessors commenced operations
on March 11, 1988, June 27, 1985 and June 1, 1990, respectively. The JPM
Institutional Funds corresponding to the International Fixed Income Fund and the
Diversified Fund commenced operations on December 1, 1994 and September 10,
1993, respectively. The Pierpont Fund corresponding to the Emerging Markets
Equity Fund commenced operations on November 15, 1993. These corresponding
Pierpont and JPM Institutional Funds had lower expenses than the Funds.
GENERAL. A Fund's performance will vary from time to time depending upon
market conditions, the composition of its corresponding Portfolio and its
operating expenses. Consequently, any given performance quotation should not be
considered representative of a Fund's performance for any specified period in
the future. In addition, because performance will fluctuate, it may not provide
a basis for comparing an investment in a Fund with certain bank deposits or
other investments that pay a fixed yield or return for a stated period of time.
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Comparative performance information may be used from time to time in
advertising the Fund's shares, including appropriate market indices including
the benchmarks indicated under "Investment Advisor" above or data from Lipper
Analytical Services, Inc., Micropal, Inc., Ibbotson Associates, Morningstar
Inc., and other industry publications.
In order to illustrate the benefits of balanced investing across asset
classes over longer periods of time, the Diversified Fund may use performance
data that will be based on the return of, as appropriate, the S&P 500 Index, the
Salomon Brothers Broad Investment Grade Bond Index, the Frank Russell 2000 and
2500 Indexes, and the EAFE Index. The quoted performance will illustrate what
results could have been achieved had the Fund invested specified percentages of
the Fund's assets in classes of securities that would have produced a return
equal to the relevant index over the time period at issue.
From time to time, the Funds may quote performance in terms of yield,
actual distributions, total return, or capital appreciation in reports, sales
literature, and advertisements published by the Funds. Current performance
information for the Funds may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.
PORTFOLIO TRANSACTIONS
The Advisor places orders for all Portfolios for all purchases and sales of
portfolio securities. See "Investment Objectives and Policies."
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually
includes profit to the dealers. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
On occasion, certain securities may be purchased directly from an issuer, in
which case no commissions or discounts are paid.
U.S. FIXED INCOME AND INTERNATIONAL FIXED INCOME FUNDS. Portfolio
transactions for the Portfolios corresponding to the U.S. Fixed Income and
International Fixed Income Funds will be undertaken principally to accomplish a
Portfolio's objective in relation to expected movements in the general level of
interest rates. The Fixed Income and Non-U.S. Fixed Income Portfolios may
engage in short-term trading consistent with their objectives. See "Investment
Objectives and Policies--Portfolio Turnover".
In connection with portfolio transactions for the Portfolios, the Advisor
intends to seek best price and execution on a competitive basis for both
purchases and sales of securities.
U.S. EQUITY, U.S. SMALL CAP EQUITY, INTERNATIONAL EQUITY, EMERGING MARKETS
EQUITY, DIVERSIFIED, ASIA GROWTH, EUROPEAN EQUITY AND JAPAN EQUITY FUNDS. In
connection with portfolio transactions for the Equity Portfolios, the overriding
objective is to obtain the best possible execution of purchase and sale orders.
In selecting a broker, the Advisor considers a number of factors including:
the price per unit of the security; the broker's reliability for prompt,
accurate confirmations and on-time delivery of securities; the firm's financial
condition; as well as the commissions charged. A broker may be paid a brokerage
commission in excess of that which another broker might have charged for
effecting the same transaction if, after considering the foregoing factors, the
Advisor decides that the broker chosen will provide the best possible execution.
The Advisor monitors the reasonableness of the brokerage commissions paid in
light of the execution received. The Trustees of each Portfolio review
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regularly the reasonableness of commissions and other transaction costs incurred
by the Portfolios in light of facts and circumstances deemed relevant from time
to time, and, in that connection, will receive reports from the Advisor and
published data concerning transaction costs incurred by institutional investors
generally. Research services provided by brokers to which the Advisor has
allocated brokerage business in the past include economic statistics and
forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Advisor's clients and not solely or necessarily for the
benefit of an individual Portfolio. The Advisor believes that the value of
research services received is not determinable and does not significantly reduce
its expenses. The Portfolios do not reduce their fee to the Advisor by any
amount that might be attributable to the value of such services.
The Portfolios or their predecessors corresponding to the U.S. Equity, U.S.
Small Cap Equity, International Equity, Emerging Markets Equity, Diversified,
European Equity, Japan Equity and Asia Growth Funds paid the following
approximate brokerage commissions for the indicated fiscal periods:
SELECTED U.S. EQUITY FUND (May): 1996: $1,376,000; 1995: $1,179,132; 1994:
$744,676.
U.S. SMALL COMPANY FUND (May): 1996: $1,554,000; 1995: $1,217,016; 1994:
$1,760,320.
INTERNATIONAL EQUITY FUND (October): 1995: $1,691,642; 1994: $1,413,238;
1994: $1,413,238.
DIVERSIFIED FUND (June): 1995: $145,589; 1994: $78,737; 1993: N/A.
EMERGING MARKETS EQUITY FUND (October): 1995: $1,475,147; 1994: $1,262,905;
1993: N/A.
ASIA GROWTH FUND (December): 1995: $27,322; 1994: N/A; 1993: N/A.
EUROPEAN EQUITY FUND (December): 1995: $143,416; 1994: N/A; 1993: N/A.
JAPAN EQUITY FUND (December): 1995: $0; 1994: N/A; 1993: N/A.
Any increases in brokerage commissions reflected above were due to
increased portfolio activity and an increase in net investments in the
Portfolio.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisor may allocate a portion of a Portfolio's
brokerage transactions to affiliates of the Advisor. In order for affiliates of
the Advisor to effect any portfolio transactions for a Portfolio, the
commissions, fees or other remuneration received by such affiliates must be
reasonable and fair compared to the commissions, fees, or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. Furthermore, the Trustees of each Portfolio,
including a majority of the Trustees who are not "interested persons," have
adopted procedures which are reasonably designed to provide that any
commissions, fees, or other remuneration paid to such affiliates are consistent
with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to or
through the Co-Administrator, the Distributor or the Advisor or any other
"affiliated person" (as defined in the 1940 Act) of the Co-Administrator,
Distributor or Advisor when such entities are acting as principals, except to
the
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extent permitted by law. In addition, the Portfolios will not purchase
securities during the existence of any underwriting group relating thereto of
which the Advisor or an affiliate of the Advisor is a member, except to the
extent permitted by law.
On those occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other customers
including other Portfolios, the Advisor to the extent permitted by applicable
laws and regulations may, but is not obligated to, aggregate the securities to
be sold or purchased for a Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction will be
made by the Advisor in the manner it considers to be most equitable and
consistent with its fiduciary obligations to a Portfolio. In some instances,
this procedure might adversely affect a Portfolio.
If a Portfolio that writes options effects a closing purchase transaction
with respect to an option written by it, normally such transaction will be
executed by the same broker-dealer who executed the sale of the option. The
writing of options by a Portfolio will be subject to limitations established by
each of the exchanges governing the maximum number of options in each class
which may be written by a single investor or group of investors acting in
concert, regardless of whether the options are written on the same or different
exchanges or are held or written in one or more accounts or through one or more
brokers. The number of options which a Portfolio may write may be affected by
options written by the Advisor for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
MASSACHUSETTS TRUST
The Trust is a trust fund of the type commonly known as a "Massachusetts
business trust" of which each Fund is a separate and distinct series. A copy of
the Declaration of Trust for the Trust is on file in the office of the Secretary
of The Commonwealth of Massachusetts. The Declaration of Trust and the By-Laws
of the Trust are designed to make the Trust similar in most respects to a
Massachusetts business corporation. The principal distinction between the two
forms concerns shareholder liability described below.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust which is not the case for a corporation. However, the Trust's Declaration
of Trust provides that the shareholders shall not be subject to any personal
liability for the acts or obligations of any Fund and that every written
agreement, obligation, instrument or undertaking made on behalf of any Fund
shall contain a provision to the effect that the shareholders are not personally
liable thereunder.
No personal liability will attach to the shareholders under any undertaking
containing such provision when adequate notice of such provision is given,
except possibly in a few jurisdictions. With respect to all types of claims in
the latter jurisdictions, (i) tort claims, (ii) contract claims where the
provision referred to is omitted from the undertaking, (iii) claims for taxes,
and (iv) certain statutory liabilities in other jurisdictions, a shareholder may
be held personally liable to the extent that claims are not satisfied by the
Fund. However, upon payment of such liability, the shareholder will be entitled
to reimbursement from the general assets of the Fund. The Trustees intend to
conduct the operations of the Trust in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Funds.
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The Trust's Declaration of Trust further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as individuals or
personally, that no Trustee, officer, employee or agent of a Fund is liable to a
Fund or to a shareholder, and that no Trustee, officer, employee or agent is
liable to any third persons in connection with the affairs of a Fund, except as
such liability may arise from his or its own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or its duties to such third
persons. It also provides that all third persons shall look solely to Fund
property for satisfaction of claims arising in connection with the affairs of a
Fund. With the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee or agent is entitled to be indemnified against
all liability in connection with the affairs of a Fund.
The Trust shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.
DESCRIPTION OF SHARES
The Trust is an open-end management investment company organized as a
Massachusetts business trust in which each Fund represents a separate series of
shares of beneficial interest. See "Massachusetts Trust."
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares ($0.001 par value) of one or more series and
classes within any series and to divide or combine the shares (of any series, if
applicable) without changing the proportionate beneficial interest of each
shareholder in a Fund (or in the assets of other series, if applicable). To
date shares of the ten series described in this Statement of Additional
Information have been authorized and nine are available for sale to the public.
Each share represents an equal proportional interest in a Fund with each other
share. Upon liquidation of a Fund, holders are entitled to share pro rata in
the net assets of a Fund available for distribution to such shareholders. See
"Massachusetts Trust." Shares of a Fund have no preemptive or conversion rights
and are fully paid and nonassessable. The rights of redemption and exchange are
described in the Prospectus and elsewhere in this Statement of Additional
Information.
The shareholders of the Trust are entitled to a full vote for each full
share held and to a fractional vote for each fractional share. Subject to the
1940 Act, the Trustees themselves have the power to alter the number and the
terms of office of the Trustees, to lengthen their own terms, or to make their
terms of unlimited duration subject to certain removal procedures, and to
appoint their own successors, PROVIDED, HOWEVER, that immediately after such
appointment the requisite majority of the Trustees have been elected by the
shareholders of the Trust. The voting rights of shareholders are not cumulative
so that holders of more than 50% of the shares voting can, if they choose, elect
all Trustees being selected while the shareholders of the remaining shares would
be unable to elect any Trustees. It is the intention of the Trust not to hold
meetings of shareholders annually. The Trustees may call meetings of
shareholders for action by shareholder vote as may be required by either the
1940 Act or the Trust's Declaration of Trust.
Shareholders of the Trust have the right, upon the declaration in writing
or vote of more than two-thirds of its outstanding shares, to remove a Trustee.
The Trustees will call a meeting of shareholders to vote on removal of a Trustee
upon the written request of the record holders of 10% of the Trust's shares. In
addition, whenever ten or more shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least $25,000 or at least
1% of the Trust's outstanding shares, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting for the
purpose of voting upon
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the question of removal of any Trustee or Trustees and accompanied by a form of
communication and request which they wish to transmit, the Trustees shall within
five business days after receipt of such application either: (1) afford to such
applicants access to a list of the names and addresses of all shareholders as
recorded on the books of the Trust; or (2) inform such applicants as to the
approximate number of shareholders of record, and the approximate cost of
mailing to them the proposed communication and form of request. If the Trustees
elect to follow the latter course, the Trustees, upon the written request of
such applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as recorded on the
books, unless within five business days after such tender the Trustees shall
mail to such applicants and file with the SEC, together with a copy of the
material to be mailed, a written statement signed by at least a majority of the
Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion. After opportunity for
hearing upon the objections specified in the written statements filed, the SEC
may, and if demanded by the Trustees or by such applicants shall, enter an order
either sustaining one or more of such objections or refusing to sustain any of
them. If the SEC shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of such
objections, the SEC shall find, after notice and opportunity for hearing, that
all objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all shareholders
with reasonable promptness after the entry of such order and the renewal of such
tender.
The Trustees have no current intention to create any classes within the
initial series or any subsequent series. The Trustees may, however, authorize
the issuance of shares of additional series and the creation of classes of
shares within any series with such preferences, privileges, limitations and
voting and dividend rights as the Trustees may determine. The proceeds from the
issuance of any additional series would be invested in separate, independently
managed portfolios with distinct investment objectives, policies and
restrictions, and share purchase, redemption and net asset valuation procedures.
Any additional classes would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances. All consideration received by the Trust for
shares of any additional series or class, and all assets in which such
consideration is invested, would belong to that series or class, subject only to
the rights of creditors of the Trust and would be subject to the liabilities
related thereto. Shareholders of any additional series or class will approve
the adoption of any management contract or distribution plan relating to such
series or class and of any changes in the investment policies related thereto,
to the extent required by the 1940 Act.
For information relating to mandatory redemption of Fund shares or their
redemption at the option of the Trust under certain circumstances, see
"Redemption of Shares" in the Prospectus.
As of July 26, 1996, SFG Investors II Limited Partnership, c/o H.C.
Wainwright & Co., Inc., One Boston Place, Boston, MA 02108-4400, owned of record
and beneficially 95.3% of the outstanding shares of beneficial interest of the
U.S. Fixed Income Fund. As of July 26, 1996, Charles Schwab & Co., Inc.
("Charles Schwab"), 101 Montgomery Street, San Francisco, CA 94104-4122, held of
record the following outstanding shares of the Funds: the International Fixed
Income Fund (99.8%); the U.S. Equity Fund (16.4%); the U.S. Small Cap Equity
Fund (47%); the International Equity Fund (81%); the Japan Equity Fund (14.4%)
and the Emerging Markets Equity Fund (14.1%). Charles Schwab disclaims
beneficial ownership of such shares, and the Trust has no knowledge as to the
beneficial ownership of such shares. As of July 26, 1996, Morgan as agent for
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the American Hospital of Paris held of record the following outstanding shares
of the Funds: the European Equity Fund (100%) and the Japan Equity Fund
(85.4%). As of July 26, 1996, State Street Bank and Trust Company as Custodian
for the IRA accounts of George D. Watson, 3508 Duke St., College Park, MD 20740-
4016, held of record the following outstanding shares: the U.S. Equity Fund
(9.1%). As of July 26, 1996, Donaldson Lufkin & Jenrette Securities
Corporation, P.O. Box 2052, Jersey City, NJ 07303-2052, held of record the
following outstanding shares of the Funds: the Asia Growth Fund (99%) and the
Emerging Markets Equity Fund (85.2%). As of July 26, 1996, Steve J. Serder as
Guardian for the Estate of Ashley Serder, 1140 Tewes, Zion, IL 60099-4513, owned
of record and beneficially the following outstanding shares of the Funds: the
U.S. Equity Fund (42%); the U.S. Small Cap Equity Fund (15%) and the
International Equity Fund (15.5%). As of July 26, 1996, Laura D. Gross, 310
Cypress St., Phoenix, AZ 85003-1105, owned of record and beneficially the
following outstanding shares of the Funds: the U.S. Equity Fund (24.5%) and the
U.S. Small Cap Equity Fund (12.5%). As of July 26, 1996, John Thayer Sidel c/o
Nancy Sidel, 200 East 66th Street, Apt. D 906, New York, NY 10021-6728, owned of
record and beneficially 25.2% of the outstanding shares of the U.S. Small Cap
Fund. As of the same date, the officers and Trustees as a group owned less than
1% of the shares of each Fund.
TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As
a regulated investment company, a Fund must, among other things, (a) derive at
least 90% of its gross income from dividends, interest, payments with respect to
loans of stock and securities, gains from the sale or other disposition of
stock, securities or foreign currency and other income (including but not
limited to gains from options, futures, and forward contracts) derived with
respect to its business of investing in such stock, securities or foreign
currency; (b) derive less than 30% of its gross income from the sale or other
disposition of stock, securities, options, futures, or forward contracts (other
than options, futures or forward contracts on foreign currencies) held less than
three months, or foreign currencies (or options, futures or forward contracts on
foreign currencies), but only if such currencies (or options, futures or forward
contracts on foreign currencies) are not directly related to a Fund's principal
business of investing in stocks or securities (or options and futures with
respect to stocks or securities); and (c) diversify its holdings so that, at the
end of each fiscal quarter, (i) at least 50% of the value of the Fund's total
assets is represented by cash, U.S. Government securities, investments in other
regulated investment companies and other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the Fund's total assets, and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities). As a regulated investment company, a
Fund (as opposed to its shareholders) will not be subject to federal income
taxes on the net investment income and capital gains that it distributes to its
shareholders, provided that at least 90% of its net investment income and
realized net short-term capital gains in excess of net long-term capital losses
for the taxable year is distributed.
Under the Code, a Fund will be subject to a 4% excise tax on a portion of
its undistributed income if it fails to meet certain distribution requirements
by the end of the calendar year. Each Fund intends to make distributions in a
timely manner and accordingly does not expect to be subject to the excise tax.
For federal income tax purposes, dividends that are declared by a Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
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Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses (other than exempt interest
dividends) are generally taxable to shareholders of the Funds as ordinary income
whether such distributions are taken in cash or reinvested in additional shares.
The U.S. Equity, U.S. Small Cap Equity and Diversified Funds expect that a
portion of these distributions to corporate shareholders will be eligible for
the dividends-received deduction. Distributions to corporate shareholders of
the U.S. Fixed Income, International Fixed Income, International Equity,
Emerging Markets Equity, Asia Growth, European Equity and Japan Equity Funds are
not eligible for the dividends-received deduction. Distributions of net
long-term capital gains (i.e., net long-term capital gains in excess of net
short-term capital losses) are taxable to shareholders of a Fund as long-term
capital gains, regardless of whether such distributions are taken in cash or
reinvested in additional shares and regardless of how long a shareholder has
held shares in the Fund. See "Taxes" in the Prospectus for a discussion of the
federal income tax treatment of any gain or loss realized on the redemption or
exchange of a Fund's shares. Additionally, any loss realized on a redemption or
exchange of shares of a Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before
such disposition, such as pursuant to reinvestment of a dividend in shares of
the Fund.
Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where, if applicable, a put is acquired or a
call option is written thereon. Other gains or losses on the sale of securities
will be short-term capital gains or losses. Gains and losses on the sale, lapse
or other termination of options on securities will be treated as gains and
losses from the sale of securities. If an option written by a Portfolio lapses
or is terminated through a closing transaction, such as a repurchase by the
Portfolio of the option from its holder, the Portfolio will realize a short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount paid by the Portfolio in the closing transaction. If securities
are purchased by a Portfolio pursuant to the exercise of a put option written by
it, the Portfolio will subtract the premium received from its cost basis in the
securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to certain foreign currency contracts, or to fluctuations in
exchange rates between the time a Portfolio accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time a
Portfolio actually collects such income or pays such liabilities, are treated as
ordinary income or ordinary loss. Similarly, gains or losses on the disposition
of debt securities held by a Portfolio, if any, denominated in foreign currency,
to the extent attributable to fluctuations in exchange rates between the
acquisition and disposition dates are also treated as ordinary income or loss.
Forward currency contracts, options and futures contracts entered into by a
Portfolio may create "straddles" for U.S. federal income tax purposes and this
may affect the character and timing of gains or losses realized by the Portfolio
on forward currency contracts, options and futures contracts or on the
underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, the Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Certain options, futures and foreign currency contracts held by a Portfolio
at the end of each fiscal year will be required to be "marked to market" for
federal income tax purposes -- i.e., treated as having been sold at market
value. For options and futures contracts, 60% of any gain or loss recognized on
these deemed sales and on actual dispositions will be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss regardless of how long the Portfolio has held such options or
futures.
However,
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gain or loss recognized on certain foreign currency contracts will be
treated as ordinary income or loss.
The Equity Portfolios may invest in Equity Securities of foreign issuers.
If a Portfolio purchases shares in certain foreign corporations (referred to as
passive foreign investment companies ("PFICs") under the Code), the Portfolio
may be subject to federal income tax on a portion of an "excess distribution"
from such foreign corporation or gain from the disposition of such shares, even
though such income may have to be distributed as a taxable dividend by the Fund
to its shareholders. In addition, certain interest charges may be imposed on a
Fund or its shareholders in respect of unpaid taxes arising from such
distributions or gains. Alternatively, a Fund may each year include in its
income and distribute to shareholders a pro rata portion of the foreign
investment fund's income, whether or not distributed to the Fund.
Pursuant to proposed regulations, open-end regulated investment companies
such as the Funds would be entitled to elect to mark to market their stock in
certain PFICs. Marking to market in this context means recognizing as gain for
each taxable year the excess, as of the end of that year, of the fair market
value of each PFIC's stock over the owner's adjusted basis in that stock
(including mark to market gains of a prior year for which an election was in
effect).
FOREIGN SHAREHOLDERS. Dividends of net investment income and distributions
of realized net short-term gains in excess of net long-term losses to a
shareholder who, as to the United States, is a nonresident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Distributions of net
long term capital gains to foreign shareholders will not be subject to U.S. tax
unless the distributions are effectively connected with the shareholder's trade
or business in the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder was present in the United States
for more than 182 days during the taxable year and certain other conditions are
met.
In the case of a foreign shareholder who is a nonresident alien individual
and who is not otherwise subject to withholding as described above, a Fund may
be required to withhold U.S. federal income tax at the rate of 31% unless IRS
Form W-8 is provided. Transfers by gift of shares of a Fund by a foreign
shareholder who is a nonresident alien individual will not be subject to U.S.
federal gift tax, but the value of shares of the Fund held by such a shareholder
at his or her death will be includible in his or her gross estate for U.S.
federal estate tax purposes.
FOREIGN TAXES. It is expected that the corresponding Portfolios of the
International Fixed Income, U.S. Equity, U.S. Small Cap Equity, International
Equity, Emerging Markets Equity, Diversified, Asia Growth, European Equity and
Japan Equity Funds may be subject to foreign withholding taxes with respect to
income received from sources within foreign countries. In the case of each of
these Funds, so long as more than 50% in value of the total assets of the Fund's
corresponding Portfolio at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may elect to treat any foreign
income taxes paid by it as paid directly by its shareholders. These Funds will
make such an election only if they deem it to be in the best interest of their
shareholders. The Funds will notify their respective shareholders in writing
each year if they make the election and of the amount of foreign income taxes,
if any, to be treated as paid by the shareholders. If a Fund makes the
election, each shareholder will be required to include in his or her income his
or her
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proportionate share of the amount of foreign income taxes paid by the Fund and
will be entitled to claim either a credit (subject to the limitations discussed
below) or, if he or she itemizes deductions, a deduction for his or her share of
the foreign income taxes in computing federal income tax liability. (No
deduction will be permitted in computing an individual's alternative minimum tax
liability.) A shareholder who is a nonresident alien individual or a foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the election described in this paragraph, but may not be able to claim a credit
or deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. A tax-exempt shareholder will not ordinarily benefit
from this election. Shareholders who choose to utilize a credit (rather than a
deduction) for foreign taxes will be subject to the limitation that the credit
may not exceed the shareholder's U.S. tax (determined without regard to the
availability of the credit) attributable to his or her total foreign source
taxable income. For this purpose, the portion of dividends and distributions
paid by each of the International Fixed Income, International Equity, Emerging
Markets Equity, Asia Growth, European Equity and Japan Equity Funds from its
foreign source net investment income will be treated as foreign source income.
Each of these Funds' gains and losses from the sale of securities will generally
be treated as derived from U.S. sources, however, and certain foreign currency
gains and losses likewise will be treated as derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
"passive income," such as the portion of dividends received from the Fund which
qualifies as foreign source income. In addition, the foreign tax credit is
allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, shareholders may be
unable to claim a credit for the full amount of their proportionate shares of
the foreign income taxes paid by the International Fixed Income, International
Equity, Emerging Markets Equity, Asia Growth, European Equity and Japan Equity
Funds.
STATE AND LOCAL TAXES. Each Fund may be subject to state or local taxes in
jurisdictions in which the Fund is deemed to be doing business. In addition,
the treatment of a Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.
OTHER TAXATION. The Trust is organized as a Massachusetts business trust
and, under current law, neither the Trust nor any Fund is liable for any income
or franchise tax in The Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code. The Portfolios are organized as New York trusts. The Portfolios are not
subject to any federal income taxation or income or franchise tax in the State
of New York or The Commonwealth of Massachusetts. The investment by a Fund in
its corresponding Portfolio does not cause the Fund to be liable for any income
or franchise tax in the State of New York.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus, the
term "majority of the outstanding voting securities" means the vote of (i) 67%
or more of the Fund's shares or the Portfolio's outstanding voting securities
present at a meeting if the holders of more than 50% of the Fund's outstanding
shares or the Portfolio's outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding shares or
the Portfolio's outstanding voting securities, whichever is less.
Telephone calls to the Funds, Morgan or Eligible Institutions may be tape
recorded. With respect to the securities offered hereby, this Statement of
Additional Information and the Prospectuses do not contain all the information
included in the Trust's Registration Statement filed with the SEC under the
1933 Act and the Trust's and the Portfolios' Registration Statements filed under
57
<PAGE>
the 1940 Act. Pursuant to the rules and regulations of the SEC, certain
portions have been omitted. The Registration Statements including the exhibits
filed therewith may be examined at the office of the SEC in Washington D.C.
Statements contained in this Statement of Additional Information and the
Prospectuses concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectuses and this Statement of Additional Information, in connection with
the offer contained therein and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Trust,
the Funds or the Distributor. The Prospectus and this Statement of Additional
Information do not constitute an offer by any Fund or by the Distributor to sell
or solicit any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Fund or the
Distributor to make such offer in such jurisdictions.
FINANCIAL STATEMENTS
Attached are audited statements of assets and liabilities and the reports
thereon of Price Waterhouse LLP for each of the Funds (excluding the U.S. Fixed
Income, Diversified, U.S. Equity and U.S. Small Cap Equity Funds). The current
financial statements for each Portfolio and the U.S. Fixed Income, International
Fixed Income, International Equity, Emerging Markets Equity, U.S. Equity and
U.S. Small Cap Equity Funds are incorporated herein by reference from their
respective annual and, if applicable, semi-annual reports as filed with the SEC
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder. A copy of
each such report will be provided, without charge, to each person receiving this
Statement of Additional Information.
58
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
ASSETS
Cash $ 100
Deferred Organization Expenses 32,251
-------
Total Assets 32,351
-------
LIABILITIES
Organization Expenses Payable 32,251
-------
Total Liabilities 32,251
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor International Fixed Income Fund (the "Fund") is a series of The
JPM Advisor Funds, a Massachusetts business trust (the "Trust") organized on
September 16, 1994, and has been inactive since that date except for matters
relating to its organization and registration as an investment company under the
Investment Company Act of 1940, as amended, and the sale of 10 shares (the
"initial shares") of the Fund to Signature Financial Group, Inc. ("Signature"),
the parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the
Trust's administrator and distributor.
The Fund will invest all of its investable assets in The Non-U.S. Fixed Income
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company and has the same investment objective and policies as the Fund.
The Fund has incurred $32,251 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund which the number of initial shares redeemed bears to the total number of
initial shares outstanding immediately prior to such redemption.
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-1A. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
<PAGE>
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of September 30, 1995 the Fund had not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor International Fixed Income Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
International Fixed Income Fund (one of nine funds comprising The JPM Advisor
Funds, hereafter referred to as the "Fund") at September 30, 1995, in conformity
with generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 30, 1996
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- -------------------------------------------------------------------------------
ASSETS
Investment in The Non-U.S. Equity Portfolio $ 100
Deferred Organization Expenses 33,596
-------
Total Assets 33,696
-------
LIABILITIES
Organization Expenses Payable 33,596
-------
Total Liabilities 33,596
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor International Equity Fund (the "Fund") is a series of The JPM
Advisor Funds, a Massachusetts business trust (the "Trust") organized on
September 16, 1994, and has been inactive since that date except for matters
relating to its organization and registration as an investment company under the
Investment Company Act of 1940, as amended, and the sale of 10 shares (the
"initial shares") of the Fund to Signature Financial Group, Inc. ("Signature"),
the parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the
Trust's administrator and distributor.
The Fund will invest all of its investable assets in The Non-U.S. Equity
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company and has the same investment objective and policies as the Fund.
The Fund has incurred $33,596 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund which the number of initial shares redeemed bears to the total number of
initial shares outstanding immediately prior to such redemption.
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
<PAGE>
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of October 31, 1995 the Fund had not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor International Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
International Equity Fund (one of nine funds comprising The JPM Advisor Funds,
hereafter referred to as the "Fund") at October 31, 1995, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 30, 1996
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Investment in The Emerging Markets
Equity Portfolio $ 100
Deferred Organization Expenses 33,628
-------
Total Assets 33,728
-------
LIABILITIES
Organization Expenses Payable 33,628
-------
Total Liabilities 33,628
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor Emerging Markets Equity Fund (the "Fund") is a series of The JPM
Advisor Funds, a Massachusetts business trust (the "Trust") organized on
September 16, 1994, and has been inactive since that date except for matters
relating to its organization and registration as an investment company under the
Investment Company Act of 1940, as amended, and the sale of 10 shares (the
"initial shares") of the Fund to Signature Financial Group, Inc. ("Signature"),
the parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the
Trust's administrator and distributor.
The Fund will invest all of its investable assets in The Emerging Markets Equity
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company and has the same investment objective and policies as the Fund.
The Fund has incurred $33,628 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund which the number of initial shares redeemed bears to the total number of
initial shares outstanding immediately prior to such redemption.
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
<PAGE>
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of October 31, 1995 the Fund had not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor Emerging Markets Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
Emerging Markets Equity Fund (one of nine funds comprising The JPM Advisor
Funds, hereafter referred to as the "Fund") at October 31, 1995, in conformity
with generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 30, 1996
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR ASIA GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
ASSETS
Investment in The Asia Growth Portfolio $ 100
Deferred Organization Expenses 32,208
-------
Total Assets 32,308
-------
LIABILITIES
Organization Expenses Payable 32,208
-------
Total Liabilities 32,208
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor Asia Growth Fund (the "Fund") is a series of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust") organized on September 16,
1994, and has been inactive since that date except for matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 10 shares (the "initial
shares") of the Fund to Signature Financial Group, Inc. ("Signature"), the
parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the Trust's
administrator and distributor.
The Fund will invest all of its investable assets in The Asia Growth Portfolio
(the "Portfolio"), a series of The Series Portfolio, a trust organized under the
laws of the State of New York. The Portfolio is an open-end management
investment company and has the same investment objective and policies as the
Fund.
The Fund has incurred $32,208 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund and the Portfolio which the number of initial shares redeemed bears to the
total number of initial shares outstanding immediately prior to such redemption,
and the amount of such reduction in excess of the unamortized organization
expenses of the Fund shall be contributed by the Fund to the Portfolio.
<PAGE>
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of December 31, 1995, the Fund has not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor Asia Growth Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor Asia
Growth Fund (one of nine funds comprising The JPM Advisor Funds, hereafter
referred to as the "Fund") at December 31, 1995, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Fund's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 27, 1996
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Investment in The European Equity Portfolio $ 100
Deferred Organization Expenses 31,966
-------
Total Assets 32,066
-------
LIABILITIES
Organization Expenses Payable 31,966
-------
Total Liabilities 31,966
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor European Equity Fund (the "Fund") is a series of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust") organized on September 16,
1994, and has been inactive since that date except for matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 10 shares (the "initial
shares") of the Fund to Signature Financial Group, Inc. ("Signature"), the
parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the Trust's
administrator and distributor.
The Fund will invest all of its investable assets in The European Equity
Portfolio (the "Portfolio"), a series of The Series Portfolio, a trust organized
under the laws of the State of New York. The Portfolio is an open-end
management investment company and has the same investment objective and policies
as the Fund.
The Fund has incurred $31,966 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund and the Portfolio which the number of initial shares redeemed bears to the
total number of initial shares outstanding immediately prior to such redemption,
and the amount of such reduction in excess of the unamortized organization
expenses of the Fund shall be contributed by the Fund to the Portfolio.
<PAGE>
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of December 31, 1995, the Fund has not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor European Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
European Equity Fund (one of nine funds comprising The JPM Advisor Funds,
hereafter referred to as the "Fund") at December 31, 1995, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 27, 1996
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Investment in The Japan Equity Portfolio $ 100
Deferred Organization Expenses 32,684
-------
Total Assets 32,784
-------
LIABILITIES
Organization Expenses Payable 32,684
-------
Total Liabilities 32,684
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor Japan Equity Fund (the "Fund") is a series of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust") organized on September 16,
1994, and has been inactive since that date except for matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 10 shares (the "initial
shares") of the Fund to Signature Financial Group, Inc. ("Signature"), the
parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the Trust's
administrator and distributor.
The Fund will invest all of its investable assets in The Japan Equity Portfolio
(the "Portfolio"), a series of The Series Portfolio, a trust organized under the
laws of the State of New York. The Portfolio is an open-end management
investment company and has the same investment objective and policies as the
Fund.
The Fund has incurred $32,684 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund and the Portfolio which the number of initial shares redeemed bears to the
total number of initial shares outstanding immediately prior to such redemption,
and the amount of such reduction in excess of the unamortized organization
expenses of the Fund shall be contributed by the Fund to the Portfolio.
<PAGE>
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of December 31, 1995, the Fund has not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor Japan Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
Japan Equity Fund (one of nine funds comprising The JPM Advisor Funds, hereafter
referred to as the "Fund") at December 31, 1995, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Fund's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 27, 1996
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Asia Growth Portfolio ("Portfolio"), at value $ 116,397
Deferred Organization Expenses 29,086
---------
Total Assets 145,483
---------
LIABILITIES
Administration Fee Payable 2
Organization Expenses Payable 29,352
---------
Total Liabilities 29,354
---------
NET ASSETS
Applicable to 10,395 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 116,129
---------
---------
Net Asset Value, Offering and Redemption Price Per Share $11.17
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 106,634
Undistributed Net Investment Income 1,089
Accumulated Net Realized Gain on Investment and Foreign Currency Transactions 6,056
Net Unrealized Appreciation of Investment and Foreign Currency Translations 2,350
---------
Net Assets $ 116,129
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD JANUARY 5, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of $204 Foreign Withholding Taxes) $ 3,064
Allocated Interest Income 340
Allocated Portfolio Expenses (Net of $8 Reimbursement) (1,520)
---------
Net Investment Income Allocated from Portfolio 1,884
FUND EXPENSES
Transfer Agent Fees $ 7,550
Printing Expenses 6,635
Registration Fees 6,516
Professional Fees 3,990
Amortization of Organization Expenses 3,122
Trustees' Fees and Expenses 2,259
Administration Fee 16
Miscellaneous 1,659
---------
Total Expenses 31,747
Less: Reimbursement of Expenses (30,952)
---------
NET FUND EXPENSES (795)
---------
NET INVESTMENT INCOME 1,089
NET REALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM PORTFOLIO 6,056
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT AND FOREIGN
CURRENCY TRANSLATIONS ALLOCATED FROM PORTFOLIO 2,350
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,495
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 5, 1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,089
Net Realized Gain on Investment and Foreign Currency Transactions Allocated
from Portfolio 6,056
Net Change in Unrealized Appreciation of Investment and Foreign Currency
Translations Allocated from Portfolio 2,350
---------------
Net Increase in Net Assets Resulting from Operations 9,495
---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 1,724,669
Cost of Shares of Beneficial Interest Redeemed (1,618,142)
---------------
Net Increase from Transactions in Shares of Beneficial Interest 106,527
---------------
Total Increase in Net Assets 116,022
NET ASSETS
Beginning of Period 107
---------------
End of Period (including undistributed net investment income of $1,089) $ 116,129
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected Data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 5, 1996
(COMMENCEMENT OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.71
-----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10
Net Realized and Unrealized Gain on Investment and Foreign Currency 0.36
-----------------
Total from Investment Operations 0.46
-----------------
NET ASSET VALUE, END OF PERIOD $ 11.17
-----------------
-----------------
Total Return 4.30%(a)
-----------------
-----------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets at End of Period (in thousands) $ 116
Ratios to Average Net Assets
Expenses 1.85%(b)
Net Investment Income 0.87%(b)
Decrease Reflected in Expense Ratio due to Expense Reimbursement 0.65%(b)(c)
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Advisor Asia Growth Fund (the "Fund") is a separate series of The JPM
Advisor Funds, a Massachusetts business trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund commenced operations on January 5, 1996.
The Fund invests all of its investable assets in The Asia Growth Portfolio (the
"Portfolio"), a no load, diversified open-end management investment company
having the same investment objective as the Fund. The value of such investment
included in the Statement of Assets and Liabilities reflects the Fund's
proportionate interest in the net assets of the Portfolio (less than 1% at June
30, 1996). The performance of the Fund is directly affected by the performance
of the Portfolio. The financial statements of the Portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Distributions to shareholders of net investment income and net realized
capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $32,208. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e)The Fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gain, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Signature
provides administrative services necessary for the operations of the Fund,
furnishes office space and facilities required for conducting the business
of the Fund and pays the compensation of the Fund's officers affiliated
with Signature. The Administration Agreement provides for a fee to be paid
to Signature equal to the Fund's proportionate share of a complex-wide fee
based on the following annual schedule: 0.03% on the first $7 billion of
the aggregate average daily net assets of the Portfolio and the other
portfolios (the "Master Portfolios") in which series of the Trust, The JPM
Institutional Funds, or The Pierpont Funds invest and 0.01% on the
aggregate average daily net assets of the Master Portfolios in excess of
$7 billion. The portion of this charge payable by the Fund is determined
by the proportionate share its net assets bear to the total net assets of
the Trust, The JPM Institutional Funds, The Pierpont Funds and the Master
Portfolios. For the period January 5, 1996 (commencement of operations)
through June 30, 1996, such fees amounted to $16. The fees payable by the
Fund under the Administration Agreement between Signature and the Trust
are subject to the expense limit provided by the Services Agreement (see
Note 2b.)
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan Guaranty Trust Company of New York
("Morgan"). FDI will also become the Fund's distributor. The fees payable
by the Fund under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund are based on the Fund's allocable share of a
complex-wide fee and will also be subject to the expense limit provided by
the Services Agreement (see Note 2b).
b)The Trust, on behalf of the Fund, has a Services Agreement with Morgan
under which Morgan would receive a fee, based on the percentage described
below, for overseeing certain aspects of the administration and operation
of the Fund and for providing shareholder servicing to Fund shareholders.
The Services Agreement is also designed to provide an expense limit for
certain expenses of the Fund. If total expenses of the Fund, excluding
amortization of organization expenses, exceed the expense limit of 0.77%
of the Fund's average daily net assets, Morgan will reimburse the Fund for
the excess expense amount and receive no fee. Should such expenses be less
than the expense limit, Morgan's fee would be limited to the difference
between such expenses and the fee calculated under the Services Agreement.
For the period January 5, 1996 (commencement of operations) through June
30, 1996, Morgan has agreed to reimburse the Fund $27,641 under the
Services Agreement.
In addition to the expenses that Morgan assumes under the Services
Agreement, Morgan has agreed to reimburse the Fund to the extent necessary
to maintain the total operating expenses of the Fund, including the
expenses allocated to the Fund from the Portfolio, at no more than 1.85%
of the average daily net assets of the Fund through December 31, 1996. For
the period from January 5, 1996 (commencement of operations) through June
30, 1996, Morgan has agreed to reimburse the Fund $3,342 for expenses
which exceeded this limit. Morgan, Charles Schwab & Co. ("Schwab") and the
Trust are parties to separate services and operating agreements (the
"Schwab Agreements") whereby Schwab makes Fund shares available to
customers of investment
<PAGE>
THE JPM ADVISOR ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
advisors and other financial intermediaries who are Schwab's clients. The
Fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the Services Agreement with the Trust is
terminated, the Fund would be responsible for the ongoing payments to
Schwab.
c)An aggregate annual fee of $16,000 is paid to each Trustee for serving as
a Trustee of The Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the Fund's allocated portion of the total
fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 5, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1996
-------------------------------------
<S> <C>
Shares of beneficial interest sold 153,895
Shares of beneficial interest redeemed (143,510)
--------
Net increase 10,385
--------
--------
</TABLE>
<PAGE>
The Asia Growth Portfolio
Semi-Annual Report June 30, 1996
(unaudited)
(The following pages should be read in conjunction
with The JPM Advisor Asia Growth Fund
Semi-Annual Financial Statements)
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
COMMON STOCK (92.8%)
CHINA (2.6%)
Huaneng Power International
Inc. (ADR)
(Telecommunication
Services)+ ................ 64,000 $ 1,144,000
Shanghai Dajiang Co. Ltd.
(Multi-Industry) .......... 1,487,100 780,727
Shanghai Haixin Shipping Co.
(Transport & Services) .... 3,500,000 230,605
Shanghai Tyre and Rubber Co.
Ltd. (Metals & Mining)+ ... 1,435,800 358,950
Shanghai Yaohua Pilkington
Glass Co. Ltd. (Building
Materials) . 602,750 361,650
------------
2,875,932
------------
HONG KONG (35.6%)
C.P. Pokphand Co.
(Agriculture) ............. 500,000 198,630
Cathay Pacific Airways
(Airlines) ................ 635,000 1,164,911
CDL Hotels International Ltd.
(Restaurants & Hotels) .... 400,000 219,624
Cheung Kong Holdings Ltd.
(Real Estate) ............. 560,000 4,033,328
China Light and Power Co.
Ltd.
(Telecommunications) ...... 370,000 1,677,797
Citic Pacific Ltd.
(Multi-Industry) .......... 266,000 1,075,614
Dao Heng Bank Group Ltd.
(Banking) ................. 55,000 212,454
Dickson Concepts
International Ltd.
(Retail) .................. 300,000 383,696
Dong Fang Electrical
Machinery Co. (Electrical
Equipment) ................ 1,884,000 472,186
Guangdon Electric Power
(Electric) ................ 1,000,000 639,493
Hang Seng Bank (Banking) .... 217,500 2,191,717
Henderson Land Development
Company Ltd. (Real
Estate) ................... 266,000 1,993,151
Hong Kong Electric Holdings
Ltd. (Electric) ........... 525,000 1,600,670
Hong Kong Telecommunications
Ltd.
(Telecommunications) ...... 1,922,000 3,451,428
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
HONG KONG (CONTINUED)
<TABLE>
<S> <C> <C>
HSBC Holdings PLC
(Banking) ................. 149,303 $ 2,256,758
Hutchison Whampoa Ltd.
(Multi-Industry) .......... 549,000 3,454,076
JCG Holdings Limited
(Financial Services) ...... 554,000 450,901
Johnson Electric Holdings
Ltd. (Electronics) ........ 451,000 1,013,810
Joyce Boutique Holdings
(Retail) .................. 622,000 208,927
Luoyang Glass Co. Ltd.
(Building Materials) ...... 1,576,000 374,632
National Mutual Asia Ltd.
(Insurance) ............... 220,000 193,269
New World Development Co.
Ltd. (Real Estate) ........ 300,000 1,391,382
Shangri-La Asia Ltd.
(Restaurants & Hotels) .... 170,000 238,292
Sing Tao Holdings
(Broadcasting &
Publishing) ............... 672,000 397,183
Sun Hung Kai Properties Ltd.
(Real Estate) ............. 327,000 3,305,694
Swire Pacific Ltd., Class A
(Multi-Industry) .......... 402,500 3,444,946
Television Broadcast Ltd.
(Entertainment, Leisure &
Media) .................... 186,000 698,055
Tingyi (Cayman Islands)
Holding Co. (Food,
Beverages & Tobacco)+ ..... 648,000 177,895
Wai Kee Holdings Ltd.
(Construction &
Housing) .................. 820,000 235,708
Wharf (Holdings) Ltd. (Real
Estate) ................... 90,000 322,072
Yizheng Chemical Fibre Co.
Ltd. (Chemicals) .......... 1,340,000 296,027
Yue Yuen Industrial Holdings
(Metals & Mining) ......... 1,416,000 402,454
Zhenhai Refining & Chemical
Co. (Chemicals) ........... 3,946,000 1,121,529
------------
39,298,309
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
INDONESIA (3.9%)
P.T. Gudang Garam (Food,
Beverages & Tobacco) ...... 178,500 $ 765,025
P.T. Hanjaya Mandala
Sampoerna (Food, Beverages
& Tobacco) ................ 23,000 261,877
P.T. Indosat (ADR)
(Telecommunications) ...... 6,000 201,000
P.T. International Nickel
Indonesia (Metals &
Mining) . 210,000 478,211
P.T. Japfa Comfeed Indonesia
(Food, Beverages &
Tobacco) .................. 351,500 203,884
P.T. Kabelmetal Indonesia
(Telecommunications-
Equipment) ................ 200,000 90,228
P.T. Matahari Putra Prima
(Retail) .................. 157,000 286,690
P.T. Pabris Kertas Tjiwi
Kimia (Metals & Mining) ... 543,693 554,807
P.T. Pan Indonesia Bank
(Banking) ................. 518,125 478,627
P.T. Semen Cibinong (Building
Materials) ................ 146,000 329,334
P.T. Telekomunikasi Indonesia
(Telecommunications) ...... 427,500 647,470
P.T. Tigaraksa Satria
(Multi-Industry) .......... 75,800 195,409
------------
4,492,562
------------
MALAYSIA (15.0%)
Arab Malaysian Finance Berhad
(Financial Services) ...... 75,000 327,624
Commerce Asset-Holding Berhad
(Banking) ................. 104,000 633,527
Edaran Otomobil Nasional
Berhad (Automotive) ....... 57,000 545,960
Guinness Anchor Berhad (Food,
Beverages & Tobacco) ...... 240,000 495,344
Hicom Holdings Berhad
(Diversified
Manufacturing) ............ 133,000 378,441
IJM Corp. Berhad (Building
Materials) ................ 188,000 325,484
Industrial Oxygen Inc. Berhad
(Agriculture) ............. 358,000 496,418
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
MALAYSIA (CONTINUED)
<TABLE>
<S> <C> <C>
Intiplus Berhad (Financial
Services) ................. 456,000 $ 447,733
Konsortium Perkapalan Berhad
(Transport & Services)+ ... 95,000 571,088
Leader Universal Holdings
Berhad (Electronics) ...... 125,000 353,173
Lingui Developments Berhad
(Forest Products &
Paper) .................... 318,000 751,913
Malayan Banking Berhad
(Banking) ................. 79,000 759,848
Malayan Cement Berhad
(Building Materials) ...... 233,000 560,267
Malaysian Assurance Alliance
Berhad (Insurance) ........ 750 3,968
Malaysian Oxygen Berhad
(Chemicals) ............... 186,500 1,009,022
Malaywata Steel Berhad
(Metals & Mining) ......... 305,000 523,157
Maruichi Malaysian Steel Tube
Berhad (Metals &
Mining) ................... 118,000 439,798
Matsushita Electric Co.
Malaysia Berhad
(Electronics) ............. 27,000 275,926
Metroplex Berhad (Real
Estate) . 149,000 160,033
New Straits Times Press
Berhad (Entertainment,
Leisure & Media) .......... 242,000 1,260,802
Pacific & Orient Berhad
(Insurance) ............... 104,000 291,756
Petronas Dagangan Berhad
(Oil-Services) ............ 83,000 224,528
Reliance Pacific Berhad
(Entertainment, Leisure &
Media) .................... 152,000 371,588
Resorts World Berhad
(Entertainment, Leisure &
Media) .................... 249,000 1,426,999
Sime Darby Berhad
(Multi-Industry) .......... 270,000 746,622
Sime U.E.P. Properties Berhad
(Real Estate) ............. 431,000 876,600
TA Enterprise Berhad
(Financial Services) ...... 362,000 565,798
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
MALAYSIA (CONTINUED)
<TABLE>
<S> <C> <C>
Technological Resources
Industries Berhad
(Multi-Industry) .......... 124,000 $ 432,344
Tenaga Nasional Berhad
(Telecommunications) ...... 253,000 1,064,628
------------
16,320,389
------------
PHILIPPINES (3.7%)
Aboitiz Equity Ventures Inca
(GDS) (Banking)+ .......... 1,930,800 361,115
Alaska Milk Corp. (Food,
Beverages & Tobacco)+ ..... 3,183,000 388,775
Alsons Cement Corp. (Building
Materials)+ ............... 436,000 199,701
Bankard Inc. (Banking)+ ..... 790,000 331,690
Fil-Estate Land Inc. (Real
Estate) ................... 296,100 378,613
JG Summit Holdings Inc.
(Multi-Industry) .......... 852,000 318,697
Manila Electric Co.
(Electric) ................ 60,000 629,790
Petron Corp.
(Oil-Services) ............ 612,812 280,686
Philippine Long Distance
Telephone Co. (ADR)
(Utilities) ............... 5,700 331,313
Philippine National Bank
(Banking)+ ................ 16,628 277,671
Pryce Properties Corp. (Real
Estate) ................... 5,405,400 342,490
Steniel Manufacturing Corp.
(Metals & Mining) ......... 2,300,000 267,756
------------
4,108,297
------------
SINGAPORE (8.4%)
Acma Ltd. (Computer
Peripherals) .............. 117,600 343,274
Cycle & Carriage Ltd.
(Automotive) .............. 27,000 288,853
DBS Land Ltd. (Real
Estate) ................... 105,000 360,057
Development Bank Singapore
(Banking) ................. 74,000 922,744
Fraser & Neave Ltd. (Food,
Beverages & Tobacco) ...... 98,000 1,013,714
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
SINGAPORE (CONTINUED)
<TABLE>
<S> <C> <C>
Hotel Properties Ltd.
(Restaurants & Hotels) .... 215,000 $ 380,816
Jurong Engineering Ltd.
(Capital Goods) ........... 99,000 347,899
Jurong Shipyard Ltd.
(Transport & Services) .... 32,000 162,104
NatSteel Ltd. (Metals &
Mining) ................... 147,500 292,608
Osprey Maritime Ltd.
(Transport & Services) .... 139,500 246,218
Overseas Chinese Bank
(Banking) ................. 76,000 888,452
Singapore Airlines Ltd.
(Airlines) ................ 159,000 1,678,495
Singapore Telecommunications
Ltd.
(Telecommunications) ...... 336,000 895,084
United Overseas Bank Ltd.
(Banking) ................. 155,310 1,485,490
------------
9,305,808
------------
SOUTH KOREA (5.9%)
Cho Hung Bank (Banking) ..... 61,000 758,689
Chung Ho Computer Co.
(Computer Peripherals) .... 8,000 580,393
Dong Ah Construction
Industrial Co.
(Construction &
Housing) .................. 7,300 277,700
Dongbu Insurance
(Insurance)+ .............. 8,030 434,477
Hana Bank (Banking) ......... 17,596 323,298
Hansol Paper Co. Ltd. (GDS)
(Forest Products &
Paper) .................... 14,937 287,537
Hansol Paper Co. Ltd. (GDS)
144A (Forest Products &
Paper)+ ................... 2,195 42,254
Hyundai Engineering &
Construction Co.
(Construction &
Housing)+ ................. 4,000 186,120
Korea Electric Power Corp.
(Electric) ................ 18,000 726,946
Korea First Bank
(Banking)+ ................ 83,000 719,827
Korea Housing Bank
(Banking)+ ................ 540 12,582
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
SOUTH KOREA (CONTINUED)
<TABLE>
<S> <C> <C>
Korea Mobile
Telecommunications
(Telecommunications) ...... 430 $ 519,070
Korea Zinc Co. (Metals &
Mining) ................... 14,100 323,309
Oriental Fire & Marine
Insurance (Insurance) ..... 4,200 147,564
Pohang Iron & Steel Co.
(Metals & Mining) ......... 5,100 416,023
Samsung Electronics (GDR
represents 1/2 non-voting
common share) 144A
(Electronics) ............. 11,374 275,820
Samsung Electronics (GDR
represents 1/2 non-voting
preferred share) 144A
(Electronics)+ ............ 5,236 104,720
Samsung Electronics (GDR
represents 1/2 voting
common share) 144A
(Electronics)+ ............ 266 10,906
Samsung Electronics (GDR
represents 1/2 voting
common share) 144A
(Electronics)+ ............ 884 45,305
Seoul City Gas Co. Ltd.
(Natural Gas) ............. 4,500 352,267
------------
6,544,807
------------
TAIWAN (5.3%)
Acer Incorporation (GDR)
(Computer Peripherals)+ ... 44,240 336,224
Asia Cement Corp. (GDS)
(Building Materials) ...... 83,865 1,698,275
China Steel Corp. (GDS)
(Metals & Mining) ......... 60,000 1,530,000
Hocheng Group Corp. (GDR)
144A (Building
Materials)+ ............... 13,114 162,286
President Enterprises Corp.
(GDR) (Food, Beverages &
Tobacco)+ ................. 72,051 1,459,033
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
TAIWAN (CONTINUED)
<TABLE>
<S> <C> <C>
Siliconware Precision
Industries (GDR)
(Semiconductors)+ ......... 24,000 $ 189,000
Yageo Corp. (GDR)
(Electronics)+ ............ 68,600 514,500
------------
5,889,318
------------
THAILAND (12.4%)
Advanced Info Service Public
Co. Ltd.
(Telecommunications) ...... 95,900 1,419,666
Bangkok Bank Public Co. Ltd.
(Banking) ................. 159,000 2,153,452
Bangkok Expressway Public Co.
Ltd. (Transport &
Services)+ ................ 100,000 164,375
Banpu Public Co. Ltd. (Metals
& Mining) ................. 10,700 308,372
Central Pattana Public Co.
Ltd. (Real Estate) ........ 144,500 671,320
Dhana Siam Finance and
Securities Public Co. Ltd.
(Financial Services) ...... 126,500 702,246
Finance One Public Co. Ltd.
(Financial Services) ...... 83,000 535,922
Krung Thai Bank Public Co.
Ltd. (Banking) ............ 85,000 398,241
Land & House Public Co. Ltd.
(Real Estate) ............. 44,000 554,348
Modern Form Group Public Co.
Ltd. (Manufacturing) ...... 174,700 135,844
Phatra Thanakit Co. Ltd.
(Financial Services) ...... 45,000 313,592
Regional Container Line
Public Co. Ltd. (Packaging
& Containers) ............. 37,500 549,230
Saha-Union Public Co. Ltd.
(Textiles) ................ 200,000 313,002
Sahavirya Steel Industries
Public Co. Ltd. (Metals &
Mining)+ . 470,000 305,324
Siam Cement Public Co. Ltd.
(Building Materials) ...... 22,000 1,079,246
Siam Commercial Bank Co. Ltd.
(Banking) ................. 18,000 260,795
TelecomAsia Corp. Public Co.
Ltd.
(Telecommunications)+ ..... 674,000 1,479,396
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
THAILAND (CONTINUED)
<TABLE>
<S> <C> <C>
Thai Farmers Bank Public Co.
Ltd. (Banking) ............ 114,600 1,254,322
Thai Petrochemical Industry
Public Co. Ltd.
(Chemicals) ............... 252,000 384,461
United Communication Industry
(Telecommunications-
Equipment) ................ 51,000 682,698
------------
13,665,852
------------
TOTAL COMMON STOCK
(COST $95,359,277) ....... 102,501,274
------------
CONVERTIBLE PREFERRED STOCKS (0.5%)
PHILIPPINES (0.5%)
Philippine Long Distance
Telephone Co. (GDS
represents 1 Series 2
Convertible Preferred)
(Utilities) (cost
$532,650) ................. 15,900 532,650
PREFERRED STOCK (0.4%)
SOUTH KOREA (0.4%)
Mando Machinery Corp.
(Automotive Supplies) ..... 11,000 211,545
Shin Won Corp. (Apparels &
Textiles) ................. 13,530 193,733
------------
TOTAL PREFERRED STOCK (COST
$591,526) ................ 405,278
------------
RIGHTS (0.1%)+
SINGAPORE (0.1%)
Overseas Chinese Bank (expire
07/09/96) (Banking) ....... 7,600 61,061
SOUTH KOREA (0.0%)(A)
Hana Bank (Expire 07/26/96)
(Banking) ................. 3,045 14,640
------------
TOTAL RIGHTS
(COST $55,410) ........... 75,701
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
WARRANTS (0.9%)+
MALAYSIA (0.5%)
Petronas Dagangan Berhad
(Expire 02/23/99) (Oil-
Services) ................. $ 340,000 $ 501,435
SINGAPORE (0.4%)
United Overseas Land Ltd.
(Expire 06/09/97) (Real
Estate) ................... 697,536 513,968
------------
TOTAL WARRANTS
(COST $1,028,686) ........ 1,015,403
------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
CONVERTIBLE BONDS (3.4%)
HONG KONG (0.3%)
Regal Hotels International,
5.25% due 12/13/08
(Restaurants & Hotels) .... 350,000 346,062
MALAYSIA (1.3%)
Commerce Asset Holding
Berhad, 1.75% due 09/26/04
(Banking) ................. 720,000 860,400
Telekom Malaysia Berhad,
4.00% due 10/03/04
(Telecommunications) ...... 560,000 590,100
------------
1,450,500
------------
SOUTH KOREA (0.3%)
Ssangyong Oil Refining Co.
Ltd., 3.75% due 12/31/08
(Oil-Production) .......... 305,000 315,675
TAIWAN (1.5%)
Far Eastern Department Stores
Ltd., 3.00% due 07/06/01
(Retail) .................. 600,000 569,250
Nan Ya Plastics Corp., 1.75%
due 07/19/01
(Chemicals) ............... 470,000 507,013
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
TAIWAN (CONTINUED)
<TABLE>
<S> <C> <C>
U-Ming Marine Transport
Corp., 1.50% due 02/07/01
(Transport & Services) .... 390,000 349,050
Yang Ming Marine Transport,
2.00% due 10/06/01
(Transport & Services) .... 200,000 251,500
------------
1,676,813
------------
TOTAL CONVERTIBLE BONDS
(COST $3,714,252) ........ 3,789,050
SHORT-TERM INVESTMENTS (1.5%)
EURO DOLLAR TIME DEPOSITS (1.5%)
State Street Cayman Islands,
4.88% due 07/01/96
(cost $1,651,000) ......... 1,651,000 1,651,000
------------
TOTAL INVESTMENTS
(COST $102,932,801) (99.6%) ............ 109,970,356
OTHER ASSETS IN EXCESS OF LIABILITIES
(0.4%) ................................. 471,826
------------
NET ASSETS (100.0%) ...................... $110,442,182
------------
------------
</TABLE>
- ------------------------
Note: For Federal Income Tax purposes, the cost of securities owned at June 30,
1996 was substantially the same as the cost of securities for financial
statement purposes.
+ -- Non-income producing security.
(a) -- Less than 0.1%
ADR -- American Depositary Receipt.
GDS -- Global Depositary Shares.
GDR -- Global Depositary Receipt.
144A -- Security restricted for resale to Qualified
Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
June 30, 1996
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-------------
<S> <C>
Banking............................................................................................. 16.26%
Real Estate......................................................................................... 13.75%
Telecommunications.................................................................................. 11.03%
Multi - Industry.................................................................................... 9.64%
Metals & Mining..................................................................................... 5.72%
Building Materials.................................................................................. 4.70%
Food, Beverages & Tobacco........................................................................... 4.40%
Entertainment, Leisure & Media...................................................................... 3.47%
Electric............................................................................................ 3.32%
Financial Services.................................................................................. 3.09%
Chemicals........................................................................................... 3.06%
Airlines............................................................................................ 2.63%
Electronics......................................................................................... 2.39%
Transport & Services................................................................................ 1.82%
Retail.............................................................................................. 1.80%
Computer Peripherals................................................................................ 1.16%
Restaurants & Hotels................................................................................ 1.09%
Telecommunication Services.......................................................................... 1.06%
Forest Products & Paper............................................................................. 1.00%
Insurance........................................................................................... 0.99%
Utilities........................................................................................... 0.80%
Automotive.......................................................................................... 0.77%
Telecommunications-Equipment........................................................................ 0.71%
Construction & Housing.............................................................................. 0.65%
Agriculture......................................................................................... 0.64%
Packaging & Containers.............................................................................. 0.51%
Oil-Services........................................................................................ 0.47%
Electrical Equipment................................................................................ 0.44%
Broadcasting & Publising............................................................................ 0.37%
Diversified Manufacturing........................................................................... 0.35%
Natural Gas......................................................................................... 0.33%
Capital Goods....................................................................................... 0.32%
Oil-Production...................................................................................... 0.29%
Textiles............................................................................................ 0.29%
Automotive Supplies................................................................................. 0.20%
Apparels & Textiles................................................................................. 0.18%
Semiconductors...................................................................................... 0.17%
Manufacturing....................................................................................... 0.13%
-------------
100.00%
-------------
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $102,932,801) $109,970,356
Foreign Currency at Value (Cost $312,407) 312,108
Cash 38,223
Unrealized Appreciation on Open Spot Foreign Currency Contracts 584
Receivable for Investments Sold 977,321
Dividends Receivable 319,684
Interest Receivable 52,318
Deferred Organization Expenses 25,469
------------
Total Assets 111,696,063
------------
LIABILITIES
Payable for Investments Purchased 991,727
Custody Fee Payable 112,771
Advisory Fee Payable 72,481
Organization Expenses Payable 5,750
Administrative Services Fee Payable 4,530
Administration Fee Payable 1,161
Fund Services Fee Payable 320
Accrued Expenses & Other Liabilities 65,141
------------
Total Liabilities 1,253,881
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $110,442,182
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax of $108,976 ) $1,157,622
Interest Income 134,734
----------
Investment Income 1,292,356
EXPENSES
Advisory Fee $ 414,049
Custodian Fees and Expenses 183,844
Professional Fees 29,654
Administrative Services Fee 12,972
Administration Fee 6,530
Fund Services Fee 2,840
Amortization of Organization Expenses 2,633
Printing Expenses 1,716
Trustees' Fees and Expenses 1,135
Insurance Expense 361
Registration Fees 349
Miscellaneous 1,164
----------
Total Expenses 657,247
Less: Reimbursement of Expenses (7,302)
----------
NET EXPENSES (649,945)
----------
NET INVESTMENT INCOME 642,411
NET REALIZED GAIN (LOSS) ON
Investment Transactions 3,216,295
Foreign Currency Transactions (198,727)
----------
Net Realized Gain 3,017,568
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF
Investments 4,622,842
Foreign Currency Contracts and Translations (61)
----------
Net Change in Unrealized Appreciation 4,622,781
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,282,760
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
APRIL 5, 1995
(COMMENCEMENT
FOR THE SIX OF
MONTHS ENDED OPERATIONS)
JUNE 30, THROUGH
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ ---------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 642,411 $ 783,140
Net Realized Gain on Investments and Foreign Currency
Transactions 3,017,568 2,768,176
Net Change in Unrealized Appreciation of Investments and
Foreign Currency Translations 4,622,781 2,414,409
------------ ---------------
Net Increase in Net Assets Resulting from Operations 8,282,760 5,965,725
------------ ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 38,835,059 104,554,882
Withdrawals (23,657,025) (23,539,419)
------------ ---------------
Net Increase from Investors' Transactions 15,178,034 81,015,463
------------ ---------------
Total Increase in Net Assets 23,460,794 86,981,188
NET ASSETS
Beginning of Period 86,981,388 200
------------ ---------------
End of Period $110,442,182 $ 86,981,388
------------ ---------------
------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
APRIL 5, 1995
FOR THE SIX (COMMENCEMENT
MONTHS OF
ENDED OPERATIONS)
JUNE 30, THROUGH
1996 DECEMBER 31,
(UNAUDITED) 1995
----------- ---------------
RATIOS TO AVERAGE NET ASSETS
Expenses $ 1.26%(a) $ 1.40%(a)
Net Investment Income 1.24%(a) 1.18%(a)
Decrease reflected in Expense Ratio due to Expense
Reimbursement 0.01%(a) --
Portfolio Turnover 42%(b) 70%(b)
</TABLE>
- ------------------------
(a)Annualized.
(b)Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Asia Growth Portfolio (the "Portfolio") one of three Portfolios comprising
The Series Portfolio (the "Series Portfolio"), is registered under the
Investment Company Act of 1940, as amended, (the "Act") as a no-load,
diversified, open-end management investment company which was organized under
the laws of the State of New York on June 24, 1994. The Portfolio commenced
operations on April 5, 1995. The Portfolio's investment objective is to achieve
a high total return from a portfolio of equity securities of companies in Asian
growth markets. The Declaration of Trust permits the Trustees to issue an
unlimited number of beneficial interests in the Portfolio.
Investments in Asian growth markets may involve certain considerations and risks
not typically associated with investments in the United States. Future economic
and political developments in Asian growth market countries could adversely
affect the liquidity or value, or both of such securities in which the Portfolio
is invested. The ability of the issuers of debt securities held by the Portfolio
to meet their obligations may be affected by economic and political developments
in a specific industry or region.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the readily available closing bid price on
such exchanges. Securities listed on a foreign exchange are valued at the
last quoted sale price available before the time when net assets are
valued. Unlisted securities are valued at the average of the quoted bid
and asked prices in the over-the-counter market. Securities or other
assets for which market quotations are not readily available are valued at
fair value in accordance with procedures established by the Portfolio's
Trustees. Such procedures may include the use of independent pricing
services, which use prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values
from dealers; operating data and general market conditions. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market values of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expense are
translated at the exchange rate prevailing on the respective dates of such
transactions. Translation
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
gains and losses resulting from changes in exchange rates during the
reporting period and gains and losses realized upon settlement of foreign
currency transactions are reported in the Statement of Operations.
Since the net assets of the Portfolio are presented at the exchange rates
and market values prevailing at the end of the period, the Portfolio does
not isolate the portion of the results of operations arising as a result
of changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period.
c)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d)The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables against fluctuations in
future foreign currency rates. A forward contract is an agreement to buy
or sell currencies of different countries on a specified future date at a
specified rate. Risks associated with such contracts include the movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of foreign forward and spot currency contract
translations.
At June 30, 1996 the Portfolio had open spot foreign currency contracts as
follows:
SUMMARY OF OPEN CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION
FOREIGN CURRENCY SALE CONTRACTS PROCEEDS 6/30/96 (DEPRECIATION)
- ------------------------------------------------------------------------ ---------- ----------- -----------------
<S> <C> <C> <C>
Hong Kong Dollar, 123,668, expiring 7/1/96 $ 15,976 $ 15,977 $ (1)
Indonesian Rupiah, 35,697,600, expiring 7/1/96 15,325 15,337 (12)
Indonesian Rupiah, 67,034,724, expiring 7/2/96 28,808 28,815 (7)
Malaysian Ringgit, 107,306, expiring 7/1/96 42,948 43,004 (56)
Malaysian Ringgit, 303,974, expiring 7/2/96 121,737 121,821 (84)
Malaysian Ringgit, 176,114, expiring 7/3/96 70,610 70,580 30
Malaysian Ringgit, 168,944, expiring 7/3/96 67,699 67,706 (7)
---
(137)
---
</TABLE>
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS COST 6/30/96 (DEPRECIATION)
- ------------------------------------------------------------------------ ---------- ----------- -----------------
<S> <C> <C> <C>
Indonesian Rupiah, 122,504,623, expiring 7/3/96 $ 52,635 $ 52,645 $ 10
Malaysian Ringgit, 61,314, expiring 7/1/96 24,582 24,572 (10)
Malaysian Ringgit, 18,016, expiring 7/2/96 7,217 7,220 3
Malaysian Ringgit, 231,115, expiring 7/3/96 112,455 112,661 206
Malaysian Ringgit, 105,585, expiring 7/3/96 42,238 42,315 77
Malaysian Ringgit, 58,619, expiring 7/3/96 23,462 23,492 30
Malaysian Ringgit, 709,045, expiring 7/3/96 283,777 284,159 382
Malaysian Ringgit, 166,798, expiring 7/5/96 66,795 66,846 51
Malaysian Ringgit, 96,380, expiring 7/8/96 38,638 38,626 (12)
Malaysian Ringgit, 96,380, expiring 7/8/96 38,638 38,626 (12)
Malaysian Ringgit, 92,598, expiring 7/9/96 37,110 37,106 (4)
---
721
---
Net Unrealized Appreciation on Foreign Currency Contracts $ 584
---
---
</TABLE>
e)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code.
f)The Portfolio incurred organization expenses in the amount of $33,000.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from the commencement of operations.
g)The Portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the Portfolio. It is the
policy of the Portfolio to value the underlying collateral daily on a
market-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the Portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.80% of the Portfolio's
average daily net assets. For the six months ended June 30, 1996 such fees
amounted to $414,049.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature provides administrative services necessary
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
for the operations of the Portfolio, furnishes office space and facilities
required for conducting the business of the Portfolio and pays the
compensation of the Portfolio's officers affiliated with Signature. The
Administration Agreement provided for a fee to be paid to Signature equal
to the Portfolio's proportionate share of a complex-wide fee based on the
following annual schedule: 0.03% on the first $7 billion of the aggregate
average daily net assets of the Portfolio and the other portfolios subject
to this agreement (the "Master Portfolios") and 0.01% on the aggregate
average daily net assets of the Master Portfolios in excess of $7 billion.
The portion of this charge payable by the Portfolio is determined by the
proportionate share its net assets bear to the total net assets of The
Pierpont Funds, The JPM Institutional Funds, The JPM Advisor Funds and the
Master Portfolios. For the six months ended June 30, 1996, such fees
amounted to $6,530.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio. (see Note
2c).
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the Portfolio. Under the
Services Agreement, the Portfolio has agreed to pay Morgan a fee equal to
its proportionate share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Master
Portfolios' in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios aggregate average daily net
assets and 0.03% of the aggregate average daily net assets in excess of $7
billion. The portion of this charge payable by the Portfolio is determined
by the proportionate share that the Portfolio's net assets bear to the net
assets of the Master Portfolios and other investors in the Master
Portfolios for which Morgan provides similar services. For the six months
ended June 30, 1996, such fees amounted to $12,972.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate average daily net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios aggregate
average daily net assets and 0.04% of the aggregate average daily net
assets in excess of $7 billion.
In addition, Morgan has agreed to reimburse the Portfolio to the extent
necessary to maintain the total operating expenses of the Portfolio at no
more than 1.25% of the average daily net assets of the Portfolio. For the
six months ended June 30, 1996, Morgan has agreed to reimburse the
Portfolio $7,302 for expenses under this agreement.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $2,840 for the six months ended June 30, 1996.
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represent the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive also serves as
Chairman of Group and received compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $400.
3. INVESTMENT TRANSACTIONS:
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1996 were as follows:
<TABLE>
<S> <C>
COST OF PROCEEDS FROM
PURCHASES SALES
- ------------- -------------
$ 59,105,481 $41,831,889
</TABLE>
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR ASIA GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
ASSETS
Investment in The Asia Growth Portfolio $ 100
Deferred Organization Expenses 32,208
-------
Total Assets 32,308
-------
LIABILITIES
Organization Expenses Payable 32,208
-------
Total Liabilities 32,208
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor Asia Growth Fund (the "Fund") is a series of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust") organized on September 16,
1994, and has been inactive since that date except for matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 10 shares (the "initial
shares") of the Fund to Signature Financial Group, Inc. ("Signature"), the
parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the Trust's
administrator and distributor.
The Fund will invest all of its investable assets in The Asia Growth Portfolio
(the "Portfolio"), a series of The Series Portfolio, a trust organized under the
laws of the State of New York. The Portfolio is an open-end management
investment company and has the same investment objective and policies as the
Fund.
The Fund has incurred $32,208 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund and the Portfolio which the number of initial shares redeemed bears to the
total number of initial shares outstanding immediately prior to such redemption,
and the amount of such reduction in excess of the unamortized organization
expenses of the Fund shall be contributed by the Fund to the Portfolio.
<PAGE>
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of December 31, 1995, the Fund has not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor Asia Growth Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor Asia
Growth Fund (one of nine funds comprising The JPM Advisor Funds, hereafter
referred to as the "Fund") at December 31, 1995, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Fund's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 27, 1996
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The European Equity Portfolio ("Portfolio"), at value $ 592,281
Deferred Organization Expenses 29,129
---------
Total Assets 621,410
---------
LIABILITIES
Transfer Agent Fee Payable 7,547
Printing Expense Payable 6,634
Registration Fees Payable 4,428
Organization Expenses Payable 4,360
Professional Fees Payable 3,958
Accrued Trustees' Fees and Expenses 2,558
Administration Fee Payable 13
Accrued Expenses 1,782
---------
Total Liabilities 31,280
---------
NET ASSETS
Applicable to 48,689 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 590,130
---------
---------
Net Asset Value, Offering and Redemption Price Per Share $12.12
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 549,196
Undistributed Net Investment Income 4,036
Accumulated Net Realized Gain on Investment and Foreign Currency Transactions 5,987
Net Unrealized Appreciation of Investment and Foreign Currency Translations 30,911
---------
Net Assets $ 590,130
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD JANUARY 23, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of $2,666 Foreign Withholding Taxes) $ 7,711
Allocated Interest Income (Net of $5 Foreign Withholding Taxes) 740
Allocated Portfolio Expenses (2,238)
---------
Net Investment Income Allocated from Portfolio 6,213
FUND EXPENSES
Transfer Agent Fees $ 7,547
Printing Expenses 6,634
Registration Fees 6,517
Professional Fees 3,990
Amortization of Organization Expenses 2,837
Trustees' Fees and Expenses 2,558
Administration Fee 34
Miscellaneous 1,784
---------
Total Fund Expenses 31,901
Less: Reimbursement of Expenses (29,724)
---------
NET FUND EXPENSES (2,177)
---------
NET INVESTMENT INCOME 4,036
NET REALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM PORTFOLIO 5,987
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT AND FOREIGN CURRENCY
TRANSLATIONS ALLOCATED FROM PORTFOLIO 30,911
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,934
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 23,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 4,036
Net Realized Gain on Investments and Foreign Currency Transactions
Allocated from Portfolio 5,987
Net Change in Unrealized Appreciation of Investments and Foreign Currency
Translations Allocated from Portfolio 30,911
---------------
Net Increase in Net Assets Resulting from Operations 40,934
---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 590,000
Cost of Shares of Beneficial Interest Redeemed (40,948)
---------------
Net Increase from Transactions in Shares of Beneficial Interest 549,052
---------------
Total Increase in Net Assets 589,986
NET ASSETS
Beginning of Period 144
---------------
End of Period (including undistributed net investment income of $4,036) $ 590,130
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 23, 1996
(COMMENCEMENT OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.35
-----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08
Net Realized and Unrealized Gain on Investment and Foreign Currency 0.69
-----------------
Total from Investment Operations 0.77
-----------------
NET ASSET VALUE, END OF PERIOD $ 12.12
-----------------
-----------------
Total Return 6.78%(a)
-----------------
-----------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in Thousands) $ 590
Ratios to Average Net Assets
Expenses 1.70%(b)
Net Investment Income 1.55%(b)
Decrease Reflected in Expense Ratio due to Expense Reimbursement 0.80%(b)(c)
</TABLE>
- ------------------------
(a)Not Annualized.
(b)Annualized.
(c)After consideration of certain state limitations.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Advisor European Equity Fund (the "Fund") is a separate series of The
JPM Advisor Funds, a Massachusetts business trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940, as amended, as a no-load,
open-end management investment company. The Fund commenced investment operations
on January 23, 1996.
The Fund invests all of its investable assets in The European Equity Portfolio
(the "Portfolio"), a diversified open-end management investment company having
the same investment objective as the Fund. The value of such investment included
in the Statement of Assets and Liabilities reflects the Fund's proportionate
interest in the net assets of the Portfolio (less than 1% at June 30, 1996.) The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the schedule of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $31,966. These
costs were deferred and are being amortized on a straight-line basis over
a five-year period from the commencement of operations.
e)The Fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Signature
provides administrative services necessary for the
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
operations of the Fund, furnishes office space and facilities required for
conducting the business of the Fund and pays the compensation of the
Fund's officers affiliated with Signature. The Administration Agreement
provided for a fee to be paid to Signature equal to the Fund's
proportionate share of a complex-wide fee based on the following annual
schedule: 0.03% on the first $7 billion of the aggregate average daily net
assets of the Portfolio and the other portfolios (the "Master Portfolios")
in which the Trust, The JPM Institutional Funds, or The Pierpont Funds
invest and 0.01% on the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge payable by
the Fund is determined by the proportionate share its net assets bear to
the total net assets of the Trust, The JPM Institutional Funds, The
Pierpont Funds and the Master Portfolios. For the period January 23, 1996
(commencement of operations) through June 30, 1996, Signature's fee for
these services amounted to $34. The fees payable by the Fund under the
Administration Agreement between Signature and the Trust are subject to
the expense limit provided by the Services Agreement (see Note 2b).
Deferred organization expenses included a $15,000 development fee payable
to Signature for the use of their portfolio and fund allocation system.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan Guaranty Trust Company of New York
("Morgan"). FDI will also become the Fund's distributor. The fees payable
by the Fund under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund are based on the Fund's allocable share of a
complex-wide fee and will also be subject to the expense limit provided by
the Services Agreement (see Note 2b).
b)The Trust, on behalf of the Fund, has a Services Agreement with Morgan
under which Morgan receives a fee, based on the percentage described
below, for overseeing certain aspects of the administration and operation
of the Fund and for providing shareholder servicing to Fund shareholders.
The Services Agreement is also designed to provide an expense limit for
certain expenses of the Fund. If total expenses of the Fund, excluding
amortization of organization expenses, exceed the expense limit of 0.75%
of the Fund's average daily net assets, Morgan will reimburse the Fund for
the excess expense amount and receive no fee. Should such expense be less
than the expense limit, Morgan's fee would be limited to the difference
between such expenses and the fee calculated under the Services Agreement.
For the period January 23, 1996 (commencement of operations) through June
30, 1996, Morgan has agreed to reimburse the Fund $27,116 for excess
expenses.
In addition to the expenses that Morgan assumes under the Services
Agreement, Morgan has agreed to reimburse the Fund to the extent necessary
to maintain the total operating expenses of the Fund including the
expenses allocated to the Fund from the Portfolio, at no more than 1.70%
of the average daily net assets of the Fund through December 31, 1996. For
the period from January 23, 1996 (commencement of operations) through June
30, 1996, Morgan has agreed to reimburse the Fund $2,608 for expenses
which exceeded this limit. Morgan, Charles Schwab & Co. ("Schwab") and the
Trust are parties to separate services and operating agreements (the
"Schwab Agreements") whereby Schwab makes Fund shares available to
customers of investment advisors and other financial intermediaries who
are Schwab's clients. The Fund is not responsible
<PAGE>
THE JPM ADVISOR EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
for payments to Schwab under the Schwab Agreements; however, in the event
the Services Agreement with the Trust is terminated, the Fund would be
responsible for the ongoing payments to Schwab.
c)An aggregate annual fee of $16,000 is paid to each Trustee for serving as
a Trustee of the Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the Fund's allocated portion of the total
fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 23, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1996
-------------------------------
<S> <C>
Shares of beneficial interest sold........................... 52,102
Shares of beneficial interest redeemed....................... (3,426)
------
Net increase................................................. 48,676
------
------
</TABLE>
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
COMMON STOCK (92.2%)
AUSTRIA (0.1%)
Bohler Uddeholm (Metals &
Mining) .................. 4,100 $ 317,672
------------
BELGIUM (3.0%)
Arbed SA (Metals &
Mining)+ . 9,190 1,051,618
Banque Bruxelles Lambert SA
(Banking) ................ 14,660 2,732,752
Delhaize Le Lion
(Retail) ................. 17,000 854,639
Electrabel SA (Electric) ... 11,000 2,362,986
Fortis AG (Insurance) ...... 14,464 1,909,050
Generale De Banque SA
(Banking) ................ 2,590 911,448
PetroFina SA (Oil-
Production) .............. 8,390 2,653,928
Powerfin SA (Electric) ..... 3,820 523,087
Solvay SA (Chemicals) ...... 4,890 3,024,156
Tractebel (Electric) ....... 4,560 1,892,177
------------
17,915,841
------------
FINLAND (1.5%)
Metra OY (Industrial) ...... 24,000 1,074,496
Nokia AB
(Telecommunications-
Equipment) ............... 90,700 3,338,363
Rautaruukki OY (Metals &
Mining) .................. 150,300 1,090,232
Sampo Insurance Company Ltd.
(Insurance) .............. 22,000 1,273,811
UPM-Kymmene Corporation
(Forest Products &
Paper)+ .................. 85,100 1,760,285
------------
8,537,187
------------
FRANCE (18.0%)
Alcatel Alsthom
(Telecommunications-
Equipment) ............... 25,267 2,203,708
AXA (Multi - Industry) ..... 52,448 2,868,901
AXA - Non Negotiable
Certificates (Multi -
Industry)+ ............... 1,267 69,305
Banque Nationale de Paris
(Financial Services) ..... 29,852 1,047,817
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
FRANCE (CONTINUED)
<TABLE>
<S> <C> <C>
BIC (Manufacturing) ........ 8,000 $ 1,135,955
Bouygues (Construction &
Housing) ................. 17,718 1,975,516
Canal Plus (Broadcasting &
Publishing) .............. 7,000 1,711,897
Carrefour Supermarche
(Retail) ................. 5,285 2,960,699
Castorama Dubois
(Retail) ................. 8,700 1,713,607
CEP Communications
(Broadcasting &
Publishing) . 13,400 1,132,265
Cetelem (Financial
Services) ................ 6,500 1,460,833
Chargeurs International SA
(Multi - Industry)+ ...... 6,060 270,859
Christian Dior SA
(Retail) ................. 37,225 4,844,662
Compagnie de Saint Gobain
(Building Materials) ..... 20,110 2,691,443
Compagnie Financiere de Cic
et de l'Union Europeenne
(Banking) ................ 13,070 926,664
Compagnie Generale des Eaux
(Water) .................. 44,365 4,955,212
Credit Commercial de France
(Banking) ................ 37,400 1,733,389
Credit Local de France
(Financial Services) ..... 35,600 2,897,464
Essilor International
(Health Services) ........ 5,305 1,502,439
Genset ADR
(Biotechnology)+ ......... 12,000 225,750
Groupe Danone (Food,
Beverages & Tobacco) ..... 43,236 6,542,397
Groupe Danone - Non
Negotiable Certificates
(Food, Beverages &
Tobacco)+ ................ 702 106,225
Havas Advertising SA
(Business & Public
Services) ................ 10,100 1,137,898
Imetal (Building
Materials) ............... 4,874 691,134
L'Air Liquide
(Chemicals) .............. 22,680 4,004,616
L'Oreal (Health & Personal
Care) .................... 7,300 2,423,365
Lafarge SA (Building
Materials) ............... 17,743 1,073,591
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
FRANCE (CONTINUED)
<TABLE>
<S> <C> <C>
Lagardere Groupe
(Entertainment, Leisure &
Media) ................... 75,150 $ 1,937,108
Pathe SA (Entertainment,
Leisure & Media)+ ........ 6,060 1,421,980
Peugeot SA (Automotive) .... 21,705 2,904,912
Pinault-Printemps-Redoute SA
(Retail) ................. 6,850 2,396,394
Promodes (Retail) .......... 13,730 3,957,841
Rexel SA (Electrical
Equipment) ............... 4,690 1,295,467
Rhone-Poulenc
(Chemicals) .............. 73,020 1,919,082
Roussel Uclaf
(Pharmaceuticals) ........ 7,785 1,867,581
Sanofi (Pharmaceuticals) ... 30,800 2,308,165
Schneider SA
(Electronics) ............ 49,750 2,609,221
SEITA (Food, Beverages &
Tobacco) ................. 49,700 2,278,360
SGS - Thomson
Microelectronics NV
(Electronics)+ ........... 16,900 594,182
Sidel, SA (Machinery) ...... 9,900 2,517,264
Societe Generale
(Banking) ................ 35,320 3,883,212
Societe Industrielle de
Transports Automobiles SA
(Sita) (Pollution
Control) ................. 6,500 1,604,770
Sommer Allibert (Diversified
Manufacturing) ........... 3,305 839,717
Synthelabo
(Pharmaceuticals) ........ 24,710 2,087,930
Television Francaise 1
(Broadcasting &
Publishing) . 15,430 1,762,370
Total SA (Oil-Services) .... 119,515 8,863,644
Union des Assurances
Federales (Insurance) .... 17,960 2,215,307
Usinor Sacilor (Metals &
Mining) .................. 116,200 1,675,933
Valeo SA (Automotive) ...... 29,400 1,573,341
------------
106,821,392
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
GERMANY (13.3%)
Allgemeine
Handelsgesellschaft der
Verbraucher AG
(Retail) ................. 4,306 $ 1,329,589
Allianz AG Holding
(Insurance) .............. 2,131 3,689,009
Bankgesellschaft Berlin AG
(Banking) ................ 7,170 1,523,839
BASF AG (Chemicals) ........ 27,300 7,801,850
Bayer AG (Chemicals) ....... 121,240 4,281,245
Beiersdorf AG (Health &
Personal Care) ........... 2,590 2,552,329
Bilfinger & Berger Bau AG
(Construction &
Housing) ................. 7,460 3,146,441
Colonia Konzern AG
(Insurance) .............. 2,425 1,959,578
Continental AG
(Automotive) . 133,990 2,174,278
Daimler-Benz AG
(Automotive) ............. 5,250 2,809,287
Deutsche Bank AG
(Banking) ................ 99,935 4,727,111
Deutsche Lufthansa AG
(Transportation) ......... 11,700 1,652,609
Deutsche Pfandbrief &
Hypothekenbank AG
(Banking) ................ 55,900 2,210,823
Douglas Holding AG
(Retail) ................. 29,900 1,192,355
Dresdner Bank AG
(Banking) ................ 160,500 4,033,222
Fried, Krupp AG Hoesch Krupp
(Machinery) .............. 17,785 2,734,106
Karstadt AG (Retail) ....... 1,000 404,365
MAN AG (Automotive) ........ 5,800 1,443,390
Mannesmann AG
(Machinery) .............. 5,180 1,790,034
Munchener
Rueckversicherungs-
Gesellschaft
(Insurance) .............. 3,407 7,028,254
RWE AG (Oil-Services) ...... 23,000 896,042
SAP AG (Computer Software) . 22,850 3,385,154
Siemens AG (Electrical
Equipment)+ .............. 140,800 7,520,364
VEBA AG (Oil-Services) ..... 96,450 5,124,310
Volkswagen AG
(Automotive) ............. 9,576 3,557,644
------------
78,967,228
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
IRELAND (1.5%)
Allied Irish Banks PLC
(Banking) ................ 227,300 $ 1,191,062
Bank of Ireland PLC
(Banking) ................ 246,000 1,677,141
CRH PLC (Building
Materials) ............... 151,000 1,519,772
Greencore Group PLC (Food,
Beverages & Tobacco) ..... 326,000 1,713,462
Irish Life PLC
(Insurance) .............. 319,000 1,268,969
Jefferson Smurfit Group PLC
(Forest Products &
Paper) ................... 645,000 1,741,436
------------
9,111,842
------------
ITALY (4.4%)
Arnoldo Mondadori Editore
SPA (Entertainment,
Leisure & Media) ......... 199,000 1,505,854
Assicurazioni Generali
(Insurance) .............. 166,000 3,827,977
Banca Fideuram SPA
(Financial Services) ..... 503,000 1,089,376
Banca Populare di Bergamo
(Banking) ................ 81,000 1,233,797
ENI SPA (Oil-Services) ..... 644,000 3,211,701
Fiat SPA (Automotive) ...... 756,000 2,532,410
Instituto Mobiliare Italiano
SPA (Financial
Services) ................ 108,000 901,790
Instituto Nazionale Delle
Assicurazioni
(Insurance) .............. 1,031,000 1,536,797
Mediolanum SPA
(Insurance)+ ............. 53,000 527,251
Montedison SPA
(Chemicals)+ ............. 2,525,000 1,467,611
Olivetti & C SPA (Computer
Software)+ ............... 2,375,000 1,281,271
Parmalat Finanziaria SPA
(Agriculture) ............ 968,000 1,300,811
Telecom Italia
(Telecommunications) ..... 933,000 1,609,827
Telecom Italia Mobile SPA
(Telecommunications) ..... 647,000 1,445,562
Telecom Italia SPA
(Telecommunications) ..... 1,186,000 2,549,247
------------
26,021,282
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
NETHERLANDS (6.3%)
ABN Amro Holdings NV
(Banking) ................ 51,800 $ 2,779,699
Aegon NV (Insurance) ....... 33,902 1,561,063
Dutch State Mines NV
(Chemicals) .............. 19,000 1,886,670
European Vinyls Corporation
Vinyls International NV
(Packaging &
Containers) .............. 30,000 931,472
ING Groep NV (Financial
Services)+ ............... 55,250 1,647,489
Konin Bijenkorf Beheer
(Retail) ................. 19,000 1,605,061
Koninklijke Hoogovens NV
(Metals & Mining) ........ 37,000 1,369,908
Koninklijke PTT Nederland NV
(Commercial Services) .... 76,200 2,883,766
Moeara Enim Petroleum MIJ -
New Shares
(Oil-Services) ........... 144 2,480,175
Moeara Enim Petrol MIJ (Oil-
Services) ................ 1,000 1,341,554
Philips Electronics NV
(Electronics) ............ 75,270 2,447,302
Royal Dutch Petroleum Co.
(Oil-Services) ........... 60,340 9,318,013
Unilever NV (Food, Beverages
& Tobacco) ............... 34,100 4,934,281
Wolters Kluwer NV
(Broadcasting &
Publishing) . 19,600 2,226,417
------------
37,412,870
------------
NORWAY (1.8%)
Aker AS, Series B
(Industrial) .............. 15,000 267,843
Hafslund AS, Series B
(Medical Supplies) ....... 50,000 315,563
Kvaerner AS, Series B
(Construction &
Housing) ................. 57,000 2,202,320
Norsk Hydro AS (Oil-
Services) ................ 121,000 5,923,035
Nycomed AS, Series B
(Medical Supplies) ....... 50,000 692,699
Uni Storebrand ASA
(Insurance)+ ............. 301,000 1,352,948
------------
10,754,408
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
PORTUGAL (0.0%)*
Banco Espirito Santo
(Banking) ................ 7,260 $ 116,479
Cimpor Cimentos de Portugal
SA (Building
Materials) ............... 5,820 120,861
------------
237,340
------------
SPAIN (5.3%)
Acerinox SA (Metals &
Mining) .................. 5,000 520,627
Banco Intercontinental
Espanol (Financial
Services) ................ 23,900 2,671,278
Banco Pastor (Banking) ..... 22,000 1,372,738
Banco Popular Espanol SA
(Banking) ................ 23,700 4,222,012
Cubiertas y Mzov SA
(Construction &
Housing) ................. 6,600 429,839
Ebro Agricolas Compania de
Alimentacion SA
(Miscellaneous) .......... 75,800 874,996
Empresa Nacional de
Electricidad
(Electric) ............... 45,300 2,823,059
Fomento de Construcciones y
Contras SA (Construction &
Housing) ................. 4,520 373,697
Fuerzas Electric de Cataluna
SA (Electric) ............ 193,700 1,578,778
Hidroelectrica del
Cantabrico SA
(Electric) ............... 28,000 974,020
Iberdrola SA (Electric) .... 365,200 3,745,688
Repsol SA (Gas
Exploration) ............. 137,900 4,791,671
Telefonica de Espana
(Telecommunications) ..... 297,500 5,476,133
Telefonica de Espana SA ADR
(Telecommunications) ..... 17,200 948,150
Vallehermoso SA (Real
Estate) .................. 24,300 479,515
------------
31,282,201
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
SWEDEN (1.3%)
Astra AB, Series B
(Pharmaceuticals) ........ 43,000 $ 1,872,813
Ericsson (LM), Series B
(Telecommunications-
Equipment) ............... 65,000 1,400,804
Nordbanken AB (Banking) .... 20,000 385,805
SKF AB, Series A (Capital
Goods) ................... 50,000 1,160,430
Stadshypotek AB
(Banking) ................ 32,500 724,892
Svenska Cellulosa AB, Series
B (Forest Products &
Paper) ................... 50,000 1,028,563
Volvo AB, Series B
(Automotive) ............. 40,000 910,259
------------
7,483,566
------------
SWITZERLAND (7.6%)
ABB AG (Machinery) ......... 830 1,026,524
Ciba Geigy AG
(Pharmaceuticals) ........ 5,982 7,288,472
Compagnie Financiere
Richemont AG (Food,
Beverages & Tobacco) ..... 960 1,518,646
CS Holding AG (Banking) .... 32,275 3,068,552
Georg Fischer AG (Automotive
Supplies) ................ 1,110 1,281,478
Holderbank Financiere Glaris
AG (Building
Materials) ............... 1,227 980,313
Julius Baer Holdings AG
(Banking) ................ 930 1,003,083
Liechtenstein Global Trust
AG (Banking) ............. 1,800 877,248
Nestle SA (Food, Beverages &
Tobacco) ................. 4,740 5,411,664
Roche Holding AG
(Pharmaceuticals) ........ 967 7,374,331
Sandoz AG
(Pharmaceuticals) ........ 4,690 5,362,073
Schweizerische
Rueckversicherungs-
Gesellschaft
(Insurance) .............. 890 913,720
Schweizerischer Bankverein
(Banking) ................ 19,360 3,820,520
SGS-Thomson Microelectronics
NV (Electronics) ......... 370 885,358
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
SWITZERLAND (CONTINUED)
<TABLE>
<S> <C> <C>
Societe Generale de
Surveillance Holding SA
(Commercial Services) .... 2,800 $ 1,230,385
Swissair AG (Airlines)+ .... 750 725,647
Zurich
Versicherungsgesellschaft
(Insurance) .............. 7,000 1,907,096
------------
44,675,110
------------
UNITED KINGDOM (28.1%)
Abbey National PLC
(Banking) ................ 267,900 2,251,985
Allied Colloids Group PLC
(Chemicals) .............. 1,102,000 2,225,976
Allied Domecq PLC (Food,
Beverages & Tobacco) ..... 356,000 2,505,784
Amersham International PLC
(Biotechnology) .......... 101,700 1,659,227
Barclays PLC (Banking) ..... 278,000 3,336,866
Bass PLC (Food, Beverages &
Tobacco) ................. 188,000 2,361,747
BAT Industries PLC (Food,
Beverages & Tobacco) ..... 570,800 4,443,418
BICC PLC (Electrical
Equipment) ............... 223,000 1,072,410
BOC Group PLC
(Chemicals) .............. 122,000 1,750,621
Britannic Assurance PLC
(Insurance) .............. 175,800 1,964,008
British Aerospace PLC
(Aerospace) .............. 154,100 2,338,139
British Airways PLC
(Airlines) . 192,000 1,649,764
British Gas PLC (Natural
Gas) ..................... 616,120 1,713,617
British Petroleum Company
PLC (Oil-Services) ....... 661,718 5,809,207
British Telecommunications
PLC (Telecommunications) . 783,500 4,212,215
BTR PLC (Multi -
Industry) ................ 991,000 3,895,737
Cable & Wireless PLC
(Telecommunications) ..... 374,000 2,472,673
Caradon PLC (Multi -
Industry) ................ 454,000 1,520,192
Courtaulds Textile PLC
(Textiles) ............... 240,000 1,338,755
Dalgety PLC (Food, Beverages
& Tobacco) ............... 165,000 903,730
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
General Cable PLC
(Broadcasting &
Publishing)+ ............. 581,600 $ 1,762,197
General Electric Company PLC
(Electrical Equipment) ... 485,000 2,611,202
Glaxo Wellcome PLC
(Pharmaceuticals) ........ 764,800 10,302,969
Glynwed International PLC
(Metals & Mining) ........ 304,700 1,496,081
Guardian Royal Exchange PLC
(Insurance) .............. 727,000 2,801,441
Guinness PLC (Food,
Beverages & Tobacco) ..... 447,000 3,250,490
Hanson PLC (Multi -
Industry) ................ 601,000 1,680,902
Hillsdown Holdings PLC
(Food, Beverages &
Tobacco) ................. 975,000 2,627,502
HSBC Holdings PLC
(Banking) ................ 296,000 4,636,045
Hyder PLC (Water) .......... 197,116 2,185,301
Inchcape PLC (Commercial
Services) ................ 123,704 563,179
Kingfisher PLC (Retail) .... 254,700 2,558,544
Ladbroke Group PLC
(Entertainment, Leisure &
Media) ................... 607,000 1,683,536
Lloyds TSB Group PLC
(Banking) ................ 1,209,260 5,918,691
Lucas Industries PLC
(Automotive) ............. 377,000 1,326,799
Marks & Spencer PLC
(Retail) ................. 536,800 3,924,349
MEPC PLC (Real Estate) ..... 443,100 2,795,266
National Grid Group PLC
(Electric) ............... 394,000 1,043,797
National Power PLC
(Electric) ............... 285,000 2,302,733
National Westminster Bank
PLC (Banking) ............ 234,000 2,232,439
Pace Micro Technology PLC
(Electronics)+ ........... 137,000 400,197
Pearson PLC (Broadcasting &
Publishing) .............. 208,000 2,145,986
Peninsular & Orient Steam
Navigation Co.
(Transportation) ......... 113,600 854,317
Prudential Corporation PLC
(Insurance) .............. 340,000 2,144,867
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Racal Electronic PLC
(Telecommunications-
Equipment) ............... 469,000 $ 2,222,635
Rank Organisation PLC
(Entertainment, Leisure &
Media) ................... 410,000 3,169,366
Reuters Holdings
(Broadcasting &
Publishing) .............. 359,000 4,345,376
Rolls-Royce PLC
(Aerospace) .............. 624,000 2,171,841
RTZ Corp. PLC (Metals &
Mining) .................. 276,465 4,093,818
Sainsbury (J.) PLC
(Retail) ................. 608,841 3,585,408
Sears PLC (Retail) ......... 1,235,000 1,899,755
Shell Transport & Trading
Co. (Oil-Services) ....... 315,000 4,620,383
SmithKline Beecham PLC
(Pharmaceuticals) ........ 394,350 4,218,725
South West Water PLC
(Water) .................. 129,000 1,310,880
Standard Chartered PLC
(Banking) ................ 231,000 2,300,729
Tarmac PLC (Construction &
Housing) ................. 1,245,100 2,128,102
Tesco PLC (Retail) ......... 773,000 3,531,200
THORN EMI PLC
(Entertainment, Leisure &
Media) ................... 123,900 3,453,736
Tomkins PLC (Multi -
Industry) ................ 269,000 1,011,493
Unilever PLC (Food,
Beverages & Tobacco) ..... 185,000 3,679,401
Vodafone Group PLC
(Telecommunications) ..... 1,026,500 3,819,970
Zeneca Group PLC
(Pharmaceuticals) ........ 86,000 1,902,847
------------
166,140,566
------------
TOTAL COMMON STOCK (COST
$489,889,111) ........... 545,678,505
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
PREFERRED STOCK (1.7%)
GERMANY (1.7%)
GEA AG (Machinery) ......... 4,300 $ 1,429,436
Henkel KGAA (Chemicals) .... 6,850 2,956,662
Jungheinrich AG
(Machinery) . 8,850 1,569,830
RWE AG (Oil-Services) ...... 130,370 4,008,383
------------
9,964,311
------------
TOTAL PREFERRED STOCK
(COST $9,326,636)........ 9,964,311
------------
RIGHTS (0.2%)
FRANCE (0.2%)
Carrefour Supermarkets
(Retail)+ ................ 5,285 1,459,817
------------
TOTAL RIGHTS
(COST $910,055)........ . 1,459,817
------------
WARRANTS (0.8%)
GERMANY (0.8%)
Allianz AG Holding, Expiring
2/23/98 (Insurance)+ ..... 15,740 801,405
Krupp Hoesch Stahl AG,
Expiring 8/1/96 (Multi -
Industry)+ ............... 3,643 344,641
Veba International Finance,
Expiring 4/6/98 (Oil-
Services)+ ............... 8,120 2,315,216
Volkswagen AG, Expiring
10/27/98 (Automotive)+ ... 10,320 1,206,828
------------
4,668,090
------------
SWITZERLAND (0.0%)*
Schweizerischer Bankverein,
Expiring 6/30/00
(Banking)+ ............... 2,300 7,534
------------
TOTAL WARRANTS (COST
$3,687,775) ............. 4,675,624
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
CONVERTIBLE BONDS (1.1%)
(IN DEM)
GERMANY (0.0%)*
Commerzbank AG, 8.00% due
06/01/07 (Banking) ....... 3,000 $ 2,198
------------
(IN ITL)
ITALY (0.1%)
Istituto Nazionale delle
Assicurazioni, 6.50% due
06/ 28/01 (Insurance) .... 810,000,000 536,924
------------
(IN CHF)
SWITZERLAND (0.7%)
Sandoz Capital BVI. Ltd.,
1.25% due 10/23/02
(Financial Services) ..... 2,725,000 3,042,556
Swiss Re Finance Bermuda,
2.00% due 07/06/00
(Financial Services) ..... 1,370,000 1,455,625
------------
4,498,181
------------
(IN GBP)
UNITED KINGDOM (0.3%)
BPB Industries, 7.25% due
08/ 25/08 (Industrial) .... 869,000 1,689,504
------------
TOTAL CONVERTIBLE BONDS
(COST $6,170,924) ....... 6,726,807
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.2%)
(IN USD)
U.S. TREASURY OBLIGATIONS (0.0%)*
United States Treasury
Bills, 5.03% due
10/10/96++ ............... 110,000 $ 108,366
TIME DEPOSITS--FOREIGN (3.2%)
State Street Bank Cayman
Islands (Banking), 4.88%
due 07/01/96 ............. 18,880,000 18,880,000
------------
TOTAL SHORT-TERM
INVESTMENTS (COST
$18,988,419) ............ 18,988,366
------------
TOTAL INVESTMENTS (COST $528,972,920)
(99.2%) ................................ 587,493,430
OTHER ASSETS IN EXCESS OF LIABILITIES
(0.8%) ................................. 4,611,858
------------
NET ASSETS (100.0%) ...................... $592,105,288
------------
------------
</TABLE>
- ------------------------
* Less than 0.1%.
+ Non-Income-Producing Security.
++ These securities are segregated as collateral for
initial margin on futures contracts.
ADR -- ADR after the name of a foreign holdings
stands for American Depository Receipt, representing ownership of foreign
securities on deposit with a domestic custodian bank.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
---------------
<S> <C>
Banking............................................................................................. 14.4%
Oil-Services........................................................................................ 9.2%
Pharmaceuticals..................................................................................... 7.6%
Food, Beverages & Tobacco........................................................................... 7.2%
Insurance........................................................................................... 6.7%
Retail.............................................................................................. 6.5%
Chemicals........................................................................................... 5.3%
Telecommunications.................................................................................. 3.8%
Automotive.......................................................................................... 3.5%
Electric............................................................................................ 2.9%
Financial Services.................................................................................. 2.7%
Broadcasting & Publishing........................................................................... 2.6%
Entertainment, Leisure & Media...................................................................... 2.2%
Electrical Equipment................................................................................ 2.1%
Metals & Mining..................................................................................... 2.0%
Multi-Industry...................................................................................... 2.0%
Machinery........................................................................................... 1.9%
Construction & Housing.............................................................................. 1.7%
Telecommunication-Equipment......................................................................... 1.6%
Water............................................................................................... 1.4%
Building Materials.................................................................................. 1.2%
Electronics......................................................................................... 1.2%
Health & Personal Care.............................................................................. 0.9%
Aerospace........................................................................................... 0.8%
Commercial Services................................................................................. 0.8%
Computer Software................................................................................... 0.8%
Forest Products & Paper............................................................................. 0.8%
Gas Exploration..................................................................................... 0.8%
Real Estate......................................................................................... 0.6%
Industrial.......................................................................................... 0.5%
Oil-Production...................................................................................... 0.5%
Miscellaneous....................................................................................... 3.8%
---------------
100.0%
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $528,972,920) $587,493,430
Cash 2,387,842
Foreign Currency at Value (Cost $9,469,457) 9,550,577
Receivable for Investments Sold 11,795,793
Dividends and Interest Receivable 2,119,986
Deferred Organization Expenses 25,663
Unrealized Appreciation on Open Spot Foreign Currency Contracts 1,735
Variation Margin Receivable 433
------------
Total Assets 613,375,459
------------
LIABILITIES
Payable for Investments Purchased 20,741,211
Advisory Fee Payable 307,521
Custody Fee Payable 142,339
Administrative Services Fee Payable 23,060
Administration Fee Payable 5,977
Fund Services Fee Payable 1,637
Unrealized Depreciation on Open Spot Foreign Currency Contracts 638
Accrued Trustees' Fees and Expenses 438
Accrued Expenses 47,350
------------
Total Liabilities 21,270,171
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $592,105,288
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (Net of $2,536,808 Foreign Withholding Taxes) $ 8,129,554
Interest (Net of $4,909 Foreign Withholding Taxes) 555,153
-----------
Investment Income 8,684,707
EXPENSES
Advisory Fee $ 1,670,174
Custodian Fees and Expenses 380,317
Administrative Services Fee 64,388
Administration Fee 32,409
Professional Fees 30,570
Fund Services Fee 14,050
Trustees' Fees and Expenses 4,816
Amortization of Organization Expenses 2,655
Miscellaneous 4,490
-----------
Total Expenses (2,203,869)
-----------
NET INVESTMENT INCOME 6,480,838
NET REALIZED GAIN (LOSS) ON
Investment Transactions 9,489,058
Foreign Currency Transactions (40,859)
-----------
Net Realized Gain 9,448,199
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments (including $636 net unrealized gains from future
contracts) 21,623,570
Foreign Currency Contracts and Translations 48,454
-----------
Net Change in Unrealized Appreciation 21,672,024
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $37,601,061
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
MARCH 28, 1995
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF OPERATIONS)
JUNE 30, THROUGH
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ --------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,480,838 $ 4,300,747
Net Realized Gain on Investments and Foreign Currency
Transactions 9,448,199 6,759,498
Net Change in Unrealized Appreciation of Investments and
Foreign Currency Translations 21,672,024 36,897,712
------------ --------------
Net Increase in Net Assets Resulting from Operations 37,601,061 47,957,957
------------ --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 173,887,337 432,918,641
Withdrawals (51,276,075) (48,983,833)
------------ --------------
Net Increase from Investors' Transactions 122,611,262 383,934,808
------------ --------------
Total Increase in Net Assets 160,212,323 431,892,765
NET ASSETS
Beginning of Period 431,892,965 200
------------ --------------
End of Period $592,105,288 $431,892,965
------------ --------------
------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
MARCH 28, 1995
FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED OPERATIONS)
JUNE 30, 1996 THROUGH DECEMBER
(UNAUDITED) 31, 1995
--------------- -----------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.86%(a) 0.90%(a)
Net Investment Income 2.52%(a) 1.67%(a)
Portfolio Turnover 27%(b) 36%(b)
</TABLE>
- ------------------------
(a)Annualized.
(b)Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The European Equity Portfolio (the "Portfolio"), one of three Portfolios
comprising The Series Portfolio (the "Series Portfolio"), is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on June 24, 1994. The Portfolio's
investment objective is to provide a high total return from a portfolio of
equity securities of European companies. The Portfolio commenced operations on
March 28, 1995. The Declaration of Trust permits the Trustees to issue an
unlimited number of beneficial interests in the Portfolio.
Investments in European markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in European countries could adversely affect the
liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of the debt securities held by the
Portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the readily available closing bid price on
such exchange, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers;
operating data and general market conditions. All portfolio securities
with a remaining maturity of less than 60 days are valued by the amortized
cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net asset value is calculated, such securities will
be valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expense are translated at the exchange rates prevailing on the
respective dates of such
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d)The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency contract
translations. At June 30, 1996, the Portfolio had open foreign currency
contracts as follows:
SUMMARY OF OPEN SPOT FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION
PURCHASE CONTRACTS COST 06/30/96 (DEPRECIATION)
- ------------------------------------------------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
German Mark 140,000, for GBP 59,587, expiring 07/01/96 $ 91,976 $ 92,587 $ (611)
Spanish Peseta 580,000,000, expiring 07/01/96 4,522,064 4,523,796 1,732
SALES CONTRACTS
- -------------------------------------------------------------
German Mark 2,400, expiring 07/01/96 $ 1,570 $ 1,577 $ (7)
German Mark 18,400, expiring 07/02/96 12,091 12,088 3
British Pounds 2,600, expiring 07/02/96 4,020 4,040 (20)
------
NET UNREALIZED APPRECIATION ON OPEN SPOT FOREIGN CURRENCY
CONTRACTS $ 1,097
------
------
</TABLE>
e)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/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
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
Portfolio enters in the contract. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains
or losses. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time when it was closed. The
Portfolio invests in futures contracts solely for the purpose of hedging
its existing portfolio securities, or securities the Portfolio intends to
purchase, against fluctuations in value caused by changed in prevailing
market interest rates. The use of futures transactions involves the risk
of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible
inability of counterparties to meet the terms of their contracts. Futures
transactions during the six months ended June 30, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
NUMBER PRINCIPAL AMOUNT
OF CONTRACTS OF CONTRACTS
------------- -----------------
<S> <C> <C>
Contracts opened 16 $ 2,509,639
Contracts closed 0 0
------ -----------------
Open at end of period 16 $ 2,509,639
------ -----------------
------ -----------------
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACTS APPRECIATION
SUMMARY OF OPEN CONTRACTS AT JUNE 30, 1996 LONG (DEPRECIATION)
- -------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Financial Times-Stock Exchange 100-Share Index,
expiring 09/01/96 8 $ (3,441 )
German Stock Exchange Index,
expiring 09/01/96 8 4,077
------ -----------------
Totals 16 $ 636
------ -----------------
------ -----------------
</TABLE>
Of the $2,387,842 held as cash at June 30, 1996, $2,386,989 is segregated
as collateral for initial margin on futures contracts.
f)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The Portfolio earns foreign
income which may be subject to foreign withholding taxes at various rates.
g)The Portfolio incurred organization expenses in the amount of $33,000.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from the commencement of operations.
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.65% of the Portfolio's
average daily net assets. For the six months ended June 30, 1996 such fees
amounted to $1,670,174.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with Signature. The Administration
Agreement provides for a fee to be paid to Signature equal to the
Portfolio's proportionate share of a complex-wide fee based on the
following annual schedule: 0.03% on the first $7 billion of the aggregate
average daily net assets of the Portfolio and the other portfolios (the
"Master Portfolios") in which The Pierpont Funds, The JPM Institutional
Funds or The JPM Adviser Funds invest and 0.01% on the aggregate average
daily net assets of the Master Portfolios in excess of $7 billion. The
portion of this charge payable by the Portfolio is determined by the
proportionate share its net assets bear to the total net assets of The
Pierpont Funds, The JPM Institutional Funds, The JPM Advisor Funds and the
Master Portfolios. For the six months ended June 30, 1996 such fees
amounted to $32,409.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio (see Note
2c).
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the Portfolio. Under the
Services Agreement, the Portfolio has agreed to pay Morgan a fee equal to
its proportionate share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.03% of the aggregate average daily net assets in excess of $7
billion. The portion of this charge payable by the Portfolio is determined
by the proportionate share that the Portfolio's net assets bear to the net
assets of the Master Portfolios and investors in the Master Portfolios for
which Morgan provides similar services. For the six months ended June 30,
1996 such fees amounted to $64,388.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate average daily net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.04% of the Master Portfolios'
aggregate average daily net assets in excess of $7 billion.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
Trustees of the Portfolio represent all the existing shareholders of
Group. The Portfolio's allocated portion of Group's costs in performing
its services amounted to $14,050 for the six months ended June 30, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represents the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive also serves as
Chairman of Group and received compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $1,800.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1996 were as follows:
<TABLE>
<S> <C>
COST OF PROCEEDS FROM
PURCHASES SALES
- -------------- --------------
$ 257,572,512 $ 133,033,451
</TABLE>
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Investment in The European Equity Portfolio $ 100
Deferred Organization Expenses 31,966
-------
Total Assets 32,066
-------
LIABILITIES
Organization Expenses Payable 31,966
-------
Total Liabilities 31,966
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor European Equity Fund (the "Fund") is a series of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust") organized on September 16,
1994, and has been inactive since that date except for matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 10 shares (the "initial
shares") of the Fund to Signature Financial Group, Inc. ("Signature"), the
parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the Trust's
administrator and distributor.
The Fund will invest all of its investable assets in The European Equity
Portfolio (the "Portfolio"), a series of The Series Portfolio, a trust organized
under the laws of the State of New York. The Portfolio is an open-end
management investment company and has the same investment objective and policies
as the Fund.
The Fund has incurred $31,966 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund and the Portfolio which the number of initial shares redeemed bears to the
total number of initial shares outstanding immediately prior to such redemption,
and the amount of such reduction in excess of the unamortized organization
expenses of the Fund shall be contributed by the Fund to the Portfolio.
<PAGE>
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of December 31, 1995, the Fund has not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor European Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
European Equity Fund (one of nine funds comprising The JPM Advisor Funds,
hereafter referred to as the "Fund") at December 31, 1995, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 27, 1996
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Japan Equity Portfolio ("Portfolio"), at value $ 124,244
Deferred Organization Expenses 29,837
---------
Total Assets 154,081
---------
LIABILITIES
Organization Expenses Payable 29,697
Administration Fee Payable 3
---------
Total Liabilities 29,700
---------
NET ASSETS
Applicable to 11,887 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 124,381
---------
---------
Net Asset Value, Offering and Redemption Price Per Share $10.46
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 28,921
Accumulated Net Investment Loss (395)
Accumulated Net Realized Gain on Investment and Foreign Currency Transactions 28,340
Net Unrealized Appreciation of Investment and Foreign Currency Translations 67,515
---------
Net Assets $ 124,381
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD JANUARY 24, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of $698 Foreign Withholding Taxes) $ 2,574
Allocated Interest Income 428
Allocated Portfolio Expenses (1,595)
---------
Net Investment Income Allocated from Portfolio 1,407
FUND EXPENSES
Transfer Agent Fees $ 7,545
Printing Expenses 6,635
Registration Fees 5,960
Professional Fees 3,974
Amortization of Organization Expenses 2,882
Trustees' Fees and Expenses 1,021
Administration Fee 26
Miscellaneous 1,244
---------
Total Fund Expenses 29,287
Less: Reimbursement of Expenses (27,485)
---------
NET FUND EXPENSES (1,802)
---------
NET INVESTMENT LOSS (395)
NET REALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM PORTFOLIO 28,340
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT AND FOREIGN
CURRENCY TRANSLATIONS ALLOCATED FROM PORTFOLIO 67,515
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 95,460
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 24,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (395)
Net Realized Gain on Investments and Foreign Currency
Transactions Allocated from Portfolio 28,340
Net Change in Unrealized Appreciation of Investments and Foreign
Currency Translations Allocated from Portfolio 67,515
---------------
Net Increase in Net Assets Resulting from Operations 95,460
---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTERESTS
Proceeds from Shares of Beneficial Interest Sold 1,871,853
Cost of Shares of Beneficial Interest Redeemed (1,843,031)
---------------
Net Increase from Transactions in Shares of Beneficial Interest 28,822
---------------
Total Increase in Net Assets 124,282
NET ASSETS
Beginning of Period 99
---------------
End of Period (including accumulated net investment loss of $395) $ 124,381
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 24,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.91
---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (.03)
Net Realized and Unrealized Gain on Investment and Foreign Currency .58
---------------
Total from Investment Operations .55
---------------
NET ASSET VALUE, END OF PERIOD $ 10.46
---------------
---------------
Total Return 5.55%(a)
---------------
---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $ 124
Ratios to Average Net Assets (b)
Expenses 1.70%
Net Investment Income (0.20)%
Decrease Reflected in Expense Ratio due to Expense Reimbursement .80%(c)
</TABLE>
- ------------------------
(a)Not Annualized.
(b)Annualized.
(c)After consideration of certain state limitations.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Advisor Japan Equity Fund (the "Fund") is a separate series of The JPM
Advisor Funds, a Massachusetts business trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund commenced investment operations on
January 24, 1996.
The Fund invests all of its investable assets in The Japan Equity Portfolio (the
"Portfolio"), a no load, diversified, open-end management investment company
having the same investment objective as the Fund. The value of such investment
included in the Statement of Assets and Liabilities reflects the Fund's
proportionate interest in the net assets of the Portfolio (less than 1% at June
30, 1996). The performance of the Fund is directly affected by the performance
of the Portfolio. The financial statements of the Portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Distributions to shareholders of net investment income and net realized
capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $32,684. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to comply with the provisions of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gain, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Signature
provides administrative services necessary for the operations of the Fund,
furnishes office space and facilities required for conducting the business
of the Fund and pays the compensation of the Fund's officers affiliated
with Signature. The Administration Agreement provides for a fee to be paid
to Signature equal to the Fund's proportionate share of a complex-wide fee
based on the following annual schedule: 0.03% on the first $7 billion of
the aggregate average daily net assets of the Portfolio and the other
portfolios (the "Master Portfolios") in which series of the Trust, The JPM
Institutional Funds, or The Pierpont Funds invest and 0.01% on the
aggregate average daily net assets of the Master Portfolios in excess of
$7 billion. The portion of this charge payable by the Fund is determined
by the proportionate share its net assets bear to the total net assets of
the Trust, The JPM Institutional Funds, The Pierpont Funds and the Master
Portfolios. For the period January 24, 1996 (commencement of operations)
through June 30, 1996, such fees amounted to $26. The fees payable by the
Fund under the Administration Agreement between Signature and the Trust
are subject to the expense limit provided by the Services Agreement (see
Note 2b).
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan Guaranty Trust Company of New York
("Morgan"). FDI will also become the Fund's distributor. The fees payable
by the Fund under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund, are based on the Fund's allocable share of a
complex-wide fee and will also be subject to the expense limit provided by
the Services Agreement (see Note 2b).
b)The Trust, on behalf of the Fund, has a Services Agreement with Morgan
under which Morgan would receive a fee, based on the percentage described
below, for overseeing certain aspects of the administration and operation
of the Fund and for providing shareholder servicing to Fund shareholders.
The Services Agreement is also designed to provide an expense limit for
certain expenses of the Fund. If total expenses of the Fund, excluding
amortization of organization expenses, exceed the expense limit of 0.77%
of the Fund's average daily net assets, Morgan will reimburse the Fund for
the excess expense amount and receive no fee. Should such expenses be less
than the expense limit, Morgan's fee would be limited to the difference
between such expenses and the fee calculated under the Services Agreement.
For the period January 24, 1996 (commencement of operations) through June
30, 1996, Morgan has agreed to reimburse the Fund $24,880 under the
Services Agreement.
In addition to the expenses that Morgan assumes under the Trust's Services
Agreement, Morgan has agreed to reimburse the Fund to the extent necessary
to maintain the total operating expenses of the Fund, including the
expenses allocated to the Fund from the Portfolio, at no more than 1.70%
of the average daily net assets of the Fund through December 31, 1996. For
the period from January 24, 1996 (commencement of operations) through June
30, 1996. Morgan has agreed to reimburse the Fund $2,605 for expenses
under this agreement. Morgan, Charles Schwab & Co. ("Schwab") and the
Trust are parties to separate services and operating agreements (the
"Schwab Agreements") whereby Schwab makes Fund shares available to
customers of investment advisors
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
and other financial intermediaries who are Schwab's clients. The Fund is
not responsible for payments to Schwab under the Schwab Agreements;
however, in the event the Services Agreement with the Trust is terminated,
the Fund would be responsible for the ongoing payments to Schwab.
c)An aggregate annual fee of $16,000 is paid to each Trustee for serving as
a Trustee of The Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the Fund's allocated portion of the total
fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 24, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1996
-------------------------------------
<S> <C>
Shares of beneficial interest sold..................... 181,310
Shares of beneficial interest redeemed................. (169,433)
--------
Net increase........................................... 11,877
--------
--------
</TABLE>
<PAGE>
The Japan Equity Portfolio
Semi-Annual Report June 30, 1996
(unaudited)
(The following pages should be read in conjunction
with The JPM Advisor Japan Equity Fund
Semi-Annual Financial Statements)
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
COMMON STOCK (85.1%)
BASIC INDUSTRIES (8.8%)
CHEMICALS (3.2%)
Daido Hoxan Inc. ........... 90,000 $ 579,314
Hitachi Chemical Co.
Ltd. ..................... 100,000 984,669
Japan Synthetic Rubber ..... 150,000 1,079,034
Kyowa Hakko Kogyo Co. Ltd. . 200,000 1,914,635
Matsumoto Yushi-Seiyaku
Co. ...................... 37,000 944,553
Mitsui Petrochemical
Industries ............... 150,000 1,203,485
Mitsui Toatsu Chemicals .... 1,248,000 4,926,848
Nippon Zeon Company,
Ltd.+ .................... 403,000 2,498,507
Tosoh Corp.+ ............... 400,000 1,776,052
------------
15,907,097
------------
DIVERSIFIED MANUFACTURING (1.3%)
Itoki Crebio Corp. ......... 62,000 560,186
Organo Corp. ............... 20,000 215,169
Sun Wave Corp. ............. 100,000 1,431,417
Ube Industries Ltd.+ ....... 1,219,000 4,634,538
------------
6,841,310
------------
FOREST PRODUCTS & PAPER (1.3%)
Chuetsu Pulp & Paper Co.
Ltd.+ .................... 9,000 55,634
Daiken Corp. ............... 25,000 211,977
Honshu Paper Co. Ltd. ...... 432,000 3,060,352
Mitsubishi Pencil Co.
Ltd. ..................... 10,000 97,555
Sumitomo Forestry Co. ...... 200,000 2,972,243
------------
6,397,761
------------
METALS & MINING (2.9%)
Daido Steel Co. Ltd. ....... 416,000 2,055,698
Komai Tekko Inc. ........... 32,000 288,836
Mitsui Mining & Smelting Co.
Ltd.+ .................... 580,000 2,369,041
Nippon Steel Corp. ......... 2,824,000 9,680,977
Sumitomo Light Metal
Industries Ltd.+ ......... 100,000 405,720
------------
14,800,272
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
PACKAGING & CONTAINERS (0.1%)
Hokkai Can Co. Ltd. ........ 94,000 $ 741,328
------------
TOTAL BASIC INDUSTRIES ... 44,687,768
------------
CAPITAL GOODS (13.2%)
BUILDING MATERIALS (0.7%)
Asahi Glass Co. Ltd. ....... 100,000 1,194,367
Sankyo Aluminium Industries
Co. Ltd. ................. 380,000 2,224,259
Yokogawa Bridge Corp. ...... 25,000 341,899
------------
3,760,525
------------
COMPUTER SYSTEMS (0.3%)
Fujitsu Ltd. ............... 165,000 1,504,356
------------
CONSTRUCTION & HOUSING (2.9%)
Hitachi Plant Engineering
and Construction Co.
Ltd. ..................... 130,000 1,037,094
Kawasaki Heavy
Industries ............... 200,000 1,012,021
Matsui Construction Co.
Ltd. ..................... 200,000 1,597,352
Nippon Hodo ................ 115,000 1,950,192
Nishimatsu Construction Co.
Ltd. ..................... 257,000 2,811,778
Sekisui House Ltd. ......... 100,000 1,139,664
SXL Corp. .................. 50,000 492,335
Toenec Corp. ............... 125,000 1,162,457
Tokyo Denki Komusho Co.
Ltd. ..................... 103,100 1,080,994
Toyo Construction Co.
Ltd. ..................... 520,000 2,650,219
------------
14,934,106
------------
ELECTRICAL EQUIPMENT (3.5%)
Alps Electric Co. Ltd. ..... 200,000 2,425,204
Fuji Electric Co., Ltd. .... 1,142,000 6,174,296
Hitachi .................... 798,000 7,421,125
Matsushita Refrigeration
Co. ...................... 10,000 78,227
Murata Manufacturing Co.,
Ltd. ..................... 26,000 983,758
Ricoh Corp. Ltd. ........... 71,000 750,902
------------
17,833,512
------------
INDUSTRIAL (0.5%)
Okamura Corp. .............. 300,000 2,508,172
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
MACHINERY (4.6%)
Aichi Corp. ................ 184,000 $ 1,979,550
Daikin Industries Ltd. ..... 300,000 3,282,231
Ebara Corp. ................ 309,000 4,930,185
Kitz Corp. ................. 370,000 1,922,840
Mitsubishi Heavy Industries
Ltd. ..................... 734,000 6,377,576
NSK Corp. .................. 73,000 551,752
Sanden Corp. ............... 280,000 2,139,285
Shin Nippon Machinery ...... 48,000 328,223
Yaskawa Electric Corp.+ .... 370,000 1,808,145
------------
23,319,787
------------
MANUFACTURING (0.7%)
Topy Industries Co. Ltd. ... 230,000 1,121,885
Tsubakimoto Chain .......... 350,000 2,383,720
------------
3,505,605
------------
TOTAL CAPITAL GOODS ...... 67,366,063
------------
CONSUMER GOODS & SERVICES (15.4%)
APPARELS & TEXTILES (0.4%)
Tomiya Apparel Co. Ltd. .... 229,000 1,983,471
Toyobo Co. Ltd. ............ 25,000 93,680
------------
2,077,151
------------
AUTOMOTIVE (4.8%)
Honda Motor Co. ............ 165,000 4,272,371
Nissan Diesel Motor Co.+ ... 450,000 2,662,710
Nissan Motor Co. Ltd. ...... 600,000 5,322,685
Toyota Auto Body Co.
Ltd. ..................... 61,000 661,825
Toyota Motor Corp. ......... 324,000 8,093,982
Yokohama Rubber Company
Ltd. ..................... 400,000 2,505,436
------------
23,519,009
------------
AUTOMOTIVE SUPPLIES (0.4%)
Achilles Corp. ............. 209,000 851,766
Nissan Shatai Co. .......... 21,000 132,301
Sumitomo Rubber Industries
Ltd. ..................... 150,000 1,297,849
------------
2,281,916
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (0.9%)
Gakken Co. Ltd. ............ 273,000 $ 2,021,089
Toppan Printing Co. Ltd. ... 172,000 2,509,083
------------
4,530,172
------------
COMMERCIAL SERVICES (0.4%)
Japan Airport Terminal ..... 133,000 1,879,533
------------
CONSTRUCTION & HOUSING (0.3%)
Mitsui Home Co. ............ 30,000 486,864
Sanyo Industries ........... 198,000 1,265,464
------------
1,752,328
------------
ENTERTAINMENT, LEISURE & MEDIA (0.5%)
Daiwa Kosho Lease Co.
Ltd. ...................... 15,000 160,009
Kinki Nippon Tourist Co.
Ltd.+ .................... 192,000 1,540,460
Kyodo Printing Co. ......... 90,000 1,058,520
------------
2,758,989
------------
FOOD, BEVERAGES & TOBACCO (2.9%)
Itoham Foods Inc. .......... 444,000 3,380,151
Japan Tobacco, Inc. ........ 434 3,323,806
Nippon Suisan Kaisha
Ltd.+ .................... 400,000 1,703,113
Pokka Corporation .......... 30,000 361,045
Q.P. Corporation ........... 125,000 1,208,043
Snow Brand Milk Products Co.
Ltd. ..................... 509,000 3,457,329
Yamazaki Baking Co. Ltd. ... 73,000 1,351,094
------------
14,784,581
------------
HOUSEHOLD PRODUCTS (0.7%)
Nippon Sheet Glass ......... 336,000 1,645,054
Uni-Charm Corp. ............ 80,000 2,056,865
------------
3,701,919
------------
MISCELLANEOUS (0.3%)
Canon Sales Co. Inc. ....... 57,000 1,585,044
------------
MULTI - INDUSTRY (0.3%)
Fuji Denki Reiki ........... 135,450 1,728,915
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
RETAIL (3.5%)
Familymart Co. ............. 54,500 $ 2,424,839
Izumi Co. .................. 97,000 1,936,790
Izumiya Co. Ltd. ........... 201,000 4,031,674
Kansai Super Market
Ltd.+ .................... 70,000 778,618
Keiyo Co. Ltd. ............. 75,000 943,641
Mizuno Corp. ............... 59,000 554,059
Nichii Co. Ltd. ............ 150,000 2,489,025
Seiyu Ltd. ................. 130,000 1,647,498
Takashimaya Co. Ltd. ....... 200,000 3,099,885
Tokyu Store Chain .......... 17,000 151,739
------------
18,057,768
------------
TOTAL CONSUMER GOODS &
SERVICES ................ 78,657,325
------------
ENERGY (0.9%)
OIL-PRODUCTION (0.9%)
Cosmo Oil Company Ltd. ..... 650,000 4,017,998
Showa Shell Sekiyu K. K. ... 31,000 322,206
------------
4,340,204
------------
TOTAL ENERGY ............. 4,340,204
------------
FINANCE (27.1%)
BANKING (20.4%)
Asahi Bank Ltd. ............ 831,000 9,622,134
Bank of Iwate Limited ...... 4,300 248,556
Bank of Ryukyus ............ 45,000 1,608,293
Bank of Tokyo-Mitsubishi ... 400 9,300
Chuo Trust & Banking Co.
Ltd. ..................... 331,000 3,259,256
Dai-Ichi Kangyo Bank
Ltd. ..................... 1,305,000 24,272,099
Daiwa Bank Ltd. ............ 1,333,000 9,212,256
Fukui Bank ................. 688,000 3,958,079
Fukushima Bank Ltd. ........ 45,000 180,523
Hokkaido Takushoku Bank .... 1,675,000 5,070,135
Hyakugo Bank ............... 400,000 2,673,195
Juroku Bank ................ 291,000 1,591,882
Kagawa Bank ................ 122,000 1,179,050
Keiyo Bank ................. 150,000 882,100
Kita-Nippon Bank ........... 19,000 1,108,665
Kyushu Bank ................ 69,000 290,012
Mitsui Trust & Banking ..... 200,000 2,334,031
Miyazaki Bank .............. 146,000 1,031,623
Nanto Bank Ltd. ............ 252,000 1,812,776
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
BANKING (CONTINUED)
<TABLE>
<S> <C> <C>
North Pacific Bank ......... 71,000 $ 388,397
Sakura Bank Ltd. ........... 976,000 10,856,162
San-In Godo Bank ........... 31,000 253,808
Sanwa Bank Ltd. ............ 423,000 7,828,942
Shinwa Bank ................ 89,000 547,722
Sumitomo Bank Ltd. ......... 257,000 4,967,474
Sumitomo Trust & Bank ...... 74,000 1,012,021
Suruga Bank Ltd. ........... 103,000 684,591
Toyo Trust & Banking Co.
Ltd. ..................... 220,000 2,266,563
Yasuda Trust & Banking Co.
Ltd. ..................... 759,000 4,795,586
------------
103,945,231
------------
COMMERCIAL SERVICES (0.3%)
Asatsu Inc. ................ 30,000 1,299,216
------------
FINANCIAL SERVICES (3.6%)
Daiwa Securities Co.
Ltd. ...................... 150,000 1,928,311
Diamond Lease Co. Ltd. ..... 100,000 1,358,479
Nomura Securities Co.
Ltd. ..................... 760,000 14,828,391
------------
18,115,181
------------
INSURANCE (1.7%)
Chiyoda Fire & Marine
Insurance Co. Ltd. ....... 271,000 1,593,660
Fuji Fire & Marine ......... 335,000 1,863,122
Koa Fire & Marine Insurance
Co. Ltd. ................. 150,000 972,361
Tokio Marine & Fire
Insurance Co. Ltd. ....... 328,000 4,366,097
------------
8,795,240
------------
REAL ESTATE (1.1%)
Daikyo Inc. ................ 65,000 482,989
Daiwa Danchi Co. Ltd.+ ..... 208,000 1,335,066
Heiwa Real Estate .......... 182,500 1,497,518
Mitsui Fudosan Co. Ltd. .... 180,000 2,428,851
------------
5,744,424
------------
TOTAL FINANCE ............ 137,899,292
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
HEALTHCARE (2.2%)
PHARMACEUTICALS (2.2%)
Chugai Pharmaceutical Co.
Ltd. ..................... 568,000 $ 5,541,135
Dai Ichi Pharmaceutical Co.
Ltd. ..................... 100,000 1,540,825
Eisai Co. Ltd. ............. 5,000 94,364
Kissei Pharmaceutical
Co. ...................... 2,500 69,975
Ono Pharmaceutical ......... 115,000 3,952,809
------------
11,199,108
------------
TOTAL HEALTHCARE ......... 11,199,108
------------
TECHNOLOGY (8.5%)
ELECTRONICS (6.3%)
Canon Inc. ................. 88,000 1,829,297
Kyocera Corp. .............. 47,000 3,320,980
Matsushita Electric
Industries Co. Ltd. ...... 478,000 8,890,470
Ryoyo Electro Corp. ........ 50,000 1,075,842
Sony Corp. ................. 130,000 8,545,653
TDK Corp. .................. 90,000 5,366,448
Tokai Rika Denki Co. ....... 147,000 1,581,488
Victor Company of Japan,
Ltd.+ .................... 100,000 1,431,417
------------
32,041,595
------------
SEMICONDUCTORS (0.3%)
Rohm Company ............... 26,000 1,716,242
------------
TELECOMMUNICATIONS (1.9%)
Nippon Telegraph & Telephone
Corp. .................... 1,277 9,453,956
------------
TOTAL TECHNOLOGY ......... 43,211,793
------------
TRANSPORTATION (5.5%)
RAILROADS (2.5%)
East Japan Railway Co. ..... 1,552 8,136,286
Nishi-Nippon Railroad ...... 418,000 1,734,021
Tobu Railway Co. ........... 425,000 2,786,022
------------
12,656,329
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
TRANSPORT & SERVICES (2.4%)
Hitachi Transport System ... 150,000 $ 1,641,116
Itochu Warehouse Co.
Ltd. ..................... 47,000 269,964
Kawasaki Kisen Kaisha
Ltd.+ .................... 873,000 2,944,982
Marubeni Corp. ............. 700,000 3,829,270
Nippon Express Co. Ltd. .... 150,000 1,463,328
Sankyu Inc. ................ 300,000 1,367,596
Senko Co. Ltd. ............. 136,000 841,929
------------
12,358,185
------------
WHOLESALE & INTERNATIONAL TRADE (0.6%)
Kamei Corp. ................ 10,000 121,260
Kawasho Corp.+ ............. 152,000 737,262
Tomen Corp. ................ 402,000 1,543,032
Toyota Tsusho
Corporation .............. 73,000 499,173
------------
2,900,727
------------
TOTAL TRANSPORTATION ..... 27,915,241
------------
UTILITIES (3.5%)
ELECTRIC (2.6%)
Shikoku Electric Power
Inc. ...................... 139,780 3,096,834
Tohoku Electric Power Co.
Inc. ..................... 178,300 3,982,760
Tokyo Electric Power ....... 200,000 5,069,224
Yurtec Corp. ............... 75,000 1,319,730
------------
13,468,548
------------
NATURAL GAS (.9%)
Hokuriku Gas ............... 204,000 799,770
Osaka Gas Co. .............. 1,075,000 3,930,244
------------
4,730,014
------------
TOTAL UTILITIES .......... 18,198,562
------------
TOTAL COMMON STOCK (COST
$420,502,552) ........... 433,475,356
------------
WARRANTS (2.2%)
CONSUMER GOODS & SERVICES (1.0%)
APPARELS & TEXTILES (0.1%)
Kuraray Co. Ltd.
(Expire 1/26/99) ......... 800 710,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
CONSTRUCTION & HOUSING (0.5%)
Maeda Corp. (Expire
2/5/97) ................... 515 $ 778,937
Misawa Homes (Expire
10/29/99) ................ 3,000 814,930
------------
1,593,867
------------
MERCHANDISING (0.1%)
Canon Sales Co. Inc. (Expire
11/11/97) ................ 4,500 737,032
------------
MISCELLANEOUS (0.1%)
Yuasa Trading Co. Ltd.
(Expire 1/12/97) .......... 4,550 748,857
------------
RETAIL (0.2%)
Parco (Expire 7/21/99) ..... 500 843,750
Marutomi Group Co. Ltd.
(Expire 11/24/99) ........ 340 97,792
------------
941,542
------------
TOTAL CONSUMER GOODS &
SERVICES ................ 4,731,298
------------
BASIC INDUSTRIES (0.8%)
FOREST PRODUCTS & PAPER (0.0%)
New Oji Paper Co., Ltd.
(Expire 7/30/98) .......... 100 161,376
------------
INDUSTRIAL (0.3%)
Lion Corp. (Expire
6/18/99) .................. 6,020 1,322,664
------------
METALS & MINING (0.5%)
Dowa Mining Co., Ltd.
(Expire 12/9/97) .......... 1,043 1,212,488
Yodogawa Steel Works (Expire
12/10/97) ................ 1,000 1,487,500
------------
2,699,988
------------
TOTAL BASIC INDUSTRIES ... 4,184,028
------------
TRANSPORTATION (0.2%)
RAILROADS (0.2%)
Nagoya Railroad Co. Ltd.
(Expire 1/22/97) ......... 662 976,450
------------
TOTAL TRANSPORTATION ..... 976,450
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
TECHNOLOGY (0.2%)
SEMICONDUCTORS (0.2%)
Rohm Company (Expire
11/20/97) ................ 1,100 $ 1,043,630
Sanken Electric Co. (Expire
4/2/99) .................. 930 204,332
------------
1,247,962
------------
TOTAL TECHNOLOGY ......... 1,247,962
------------
TOTAL WARRANTS (COST
$11,300,028) ............ 11,139,738
------------
<CAPTION>
FIXED INCOME PRINCIPAL
SECURITIES (0.1%) AMOUNT
------------
<S> <C> <C>
CAPITAL GOODS (0.1%)
CONSTRUCTION & HOUSING (0.1%)
Nishimatsu Construction Co.
Ltd., 0.5% due
09/30/09 ................. 75,000,000 683,798
------------
TOTAL FIXED INCOME
SECURITIES (COST
$694,627) ............... 683,798
------------
CONVERTIBLE BONDS (7.0%)
BASIC INDUSTRIES (0.4%)
DIVERSIFIED MANUFACTURING (0.1%)
Ryobi Ltd., 2.8% due
03/29/02 ................. 48,000,000 512,903
------------
COMMERCIAL SERVICES (0.3%)
Yamanouchi Pharmacuetical,
1.25% due 03/31/14 ....... 140,000,000 1,534,899
------------
TOTAL BASIC INDUSTRIES ................... 2,047,802
------------
CAPITAL GOODS (2.5%)
COMPUTER SYSTEMS (1.5%)
NEC Corp., 1.9% due
03/30/01 ................. 696,000,000 7,722,652
------------
CONSTRUCTION & HOUSING (0.3%)
SXL Corp., 2.7% due
03/29/02 ................. 150,000,000 1,586,412
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (0.7%)
Hitachi Ltd., 2.7% due
03/31/97 ................. $289,000,000 $ 3,351,596
------------
TOTAL CAPITAL GOODS ...... 12,660,660
------------
CONSUMER GOODS & SERVICES (1.8%)
AUTOMOTIVE (1.3%)
Toyota Motor Corp., 1.2% due
01/28/98 ................. 500,000,000 6,550,786
------------
RETAIL (0.5%)
Izumiya Co. Ltd., 0.8% due
08/31/99 ................. 173,000,000 2,429,033
------------
TOTAL CONSUMER GOODS &
SERVICES ................ 8,979,819
------------
FINANCE (2.3%)
FINANCIAL SERVICES (2.1%)
BOT Cayman Finance Ltd.,
4.25% due 03/24/03 ....... 780,000,000 10,685,030
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
REAL ESTATE (0.2%)
Sekisui House Ltd., 2.5% due
01/31/02 ................. $ 75,000,000 $ 925,179
------------
TOTAL FINANCE ............ 11,610,209
------------
TOTAL CONVERTIBLE BONDS
(COST $34,163,749) ...... 35,298,490
------------
TOTAL INVESTMENTS (COST $466,660,957)
(94.4%) ................................ 480,597,382
OTHER ASSETS IN EXCESS OF LIABILITIES
(5.6%) ................................. 28,743,528
------------
NET ASSETS (100.0%) ...................... $509,340,910
------------
------------
</TABLE>
- ------------------------------
+Non-Income Producing Security.
Note: For Federal Income Tax purposes, the cost of securities owned at June 30,
1996 was substantially the same as the cost of securities for financial
statement purposes.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $466,660,957) $480,597,382
Cash 1,317,104
Foreign Currency at Value (Cost $13,528,027) 13,396,202
Receivable for Investments Sold 16,879,005
Dividends Receivable 1,990,435
Interest Receivable 199,757
Deferred Organization Expenses 25,316
------------
Total Assets 514,405,201
------------
LIABILITIES
Payable for Investments Purchased 4,147,222
Advisory Fee Payable 282,102
Custody Fee Payable 127,179
Administrative Services Fee Payable 22,845
Unrealized Depreciation on Open Spot Foreign Currency Contract 18,099
Administration Fee Payable 5,571
Organization Expenses Payable 3,488
Fund Services Fee Payable 1,552
Accrued Expenses & Other Liabilities 456,233
------------
Total Liabilities 5,064,291
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $509,340,910
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of $436,764 Foreign Withholding Taxes) $ 1,747,055
Interest Income (Net of $50,082 Foreign Withholding Taxes) 458,046
-----------
Investment Income 2,205,101
EXPENSES
Advisory Fee $ 1,581,190
Custodian Fees and Expenses 221,591
Administrative Services Fee 60,965
Professional Fees 30,781
Administration Fee 30,693
Fund Services Fee 13,641
Trustees' Fees and Expenses 4,631
Amortization of Organization Expense 2,638
Printing Expenses 1,691
Insurance Expense 1,316
Registration Fees 344
Miscellaneous 1,128
-----------
Total Expenses (1,950,609)
-----------
NET INVESTMENT INCOME 254,492
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Investment Transactions 10,439,727
Foreign Currency Transactions (160,282)
-----------
Net Realized Gain 10,279,445
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS
Investment 6,839,111
Foreign Currency Contracts and Translations (225,135)
-----------
Net Change in Unrealized Appreciation 6,613,976
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $17,147,913
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
MARCH 28, 1995
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF
JUNE 30, OPERATIONS) TO
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ --------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 254,492 $ 314,783
Net Realized Gain on Investment and Foreign Currency
Transactions 10,279,445 5,011,111
Net Change in Unrealized Appreciation of Investment and
Foreign Currency Translations 6,613,976 7,075,578
------------ --------------
Net Increase in Net Assets Resulting from Operations 17,147,913 12,401,472
------------ --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 244,370,378 465,133,508
Withdrawals (164,668,585) (65,143,876)
------------ --------------
Net Increase from Investors' Transactions 79,701,793 399,989,632
------------ --------------
Total Increase in Net Assets 96,849,706 412,391,104
NET ASSETS
Beginning of Period 412,491,204 100,100
------------ --------------
End of Period $509,340,910 $412,491,204
------------ --------------
------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
FOR THE SIX MARCH 28, 1995
MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1996 OPERATIONS)
(UNAUDITED) THROUGH DECEMBER 31, 1995
------------- ---------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%(a) 0.87%(a)
Net Investment Income 0.10%(a) 0.12%(a)
Portfolio Turnover 44.07%(b) 60%(b)
</TABLE>
- ------------------------
(a)Annualized
(b)Not Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Japan Equity Portfolio (the "Portfolio"), one of three portfolios comprising
The Series Portfolio (the "Series Portfolio"), is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on June 24, 1994. The Portfolio
commenced operations on March 28, 1995. The Portfolio's investment objective is
to provide a high total return from a portfolio of equity securities of issuers
that have their principal activities in Japan or are organized under Japanese
law. The Declaration of Trust permits the Trustees to issue an unlimited number
of beneficial interests in the Portfolio.
Investments in Japanese markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in Japan could adversely affect the liquidity or value,
or both, of such securities in which the Portfolio is invested. The ability of
the issuers of the debt securities held by the Portfolio to meet their
obligations may be affected by economic and political developments in a specific
industry or region.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Portfolio:
a)The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in
accordance with procedures established by the Portfolio's Trustees. Such
procedures may include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers;
operating data and general market conditions. All portfolio securities
with a remaining maturity of less than 60 days are valued by the amortized
cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net asset value is calculated, such securities will
be valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
prevailing exchange rates at the end of the period. Purchases, sales,
income and expense are translated at the exchange rate prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in exchange rates during the reporting period and
gains and losses realized upon settlement of foreign currency transactions
are reported in the Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d)The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. Dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency contract
translations. At June 30, 1996 the Portfolio had open spot foreign
currency contract as follows:
SUMMARY OF OPEN CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE APPRECIATION
FOREIGN CURRENCY SALE CONTRACTS PROCEEDS AT 6/30/96 (DEPRECIATION)
- ------------------------------------------------------------------- ------------- ------------- --------------
<S> <C> <C> <C>
Japanese Yen, 1,098,800,000, expiring 7/2/96 $ 10,000,000 $ 10,018,099 ($18,099)
</TABLE>
e)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code.
f)The Portfolio incurred organization expenses in the amount of $33,000.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from the commencement of operations.
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.65% of the Portfolio's
average daily net assets. For the six months ended June 30, 1996, such
fees amounted to $1,581,190.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with Signature. The Administration
Agreement provides for a fee to be paid to Signature equal to the
Portfolio's proportionate share of a complex-wide fee based on the
following annual schedule: 0.03% on the first $7 billion of the aggregate
average daily net assets of the Portfolio and the other portfolios (the
"Master Portfolios") in which The JPM Institutional Funds, The Pierpont
Funds or The JPM Advisor Funds invest and 0.01% on the aggregate average
daily net assets of the Master Portfolios in excess of $7 billion. The
portion of this charge payable by the Portfolio is determined by the
proportionate share its net assets bear to the total net assets of The JPM
Institutional Funds, The Pierpont Funds, The JPM Advisor Funds and the
Master Portfolios. For the six months ended June 30, 1996, such fees
amounted to $30,693.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio. (see Note
2c).
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the Portfolio. Under the
Services Agreement, the Portfolio has agreed to pay Morgan a fee equal to
its proportionate share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios aggregate average daily net
assets and 0.03% of the aggregate average daily net assets in excess of $7
billion. The portion of this charge payable by the Portfolio is determined
by the proportionate share that the Portfolio's net assets bear to the net
assets of the Master Portfolios and other investors in the Master
Portfolios for which Morgan provides similar services. For the six months
ended June 30, 1996, such fees amounted to $60,965.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate average daily net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.04% of the aggregate average
daily net assets in excess of $7 billion.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
Trustees of the Portfolio represent all the existing shareholders of
Group. The Portfolio's allocated portion of Group's costs in performing
its services amounted to $13,641 for the six months ended June 30, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represent the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive Officer also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $1,750.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
- ----------------- -------------------
<S> <C>
$ 288,823,423 $ 215,905,276
</TABLE>
<PAGE>
THE JPM ADVISOR FUNDS - THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Investment in The Japan Equity Portfolio $ 100
Deferred Organization Expenses 32,684
-------
Total Assets 32,784
-------
LIABILITIES
Organization Expenses Payable 32,684
-------
Total Liabilities 32,684
-------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) -
Net Assets $ 100
-------
-------
Net Asset Value Per Share (10 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $0.001 par value), Offering and
Redemption Price $ 10.00
-------
-------
NOTES TO FINANCIAL STATEMENT
NOTE 1 - ORGANIZATION
The JPM Advisor Japan Equity Fund (the "Fund") is a series of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust") organized on September 16,
1994, and has been inactive since that date except for matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940, as amended, and the sale of 10 shares (the "initial
shares") of the Fund to Signature Financial Group, Inc. ("Signature"), the
parent company of Signature Broker-Dealer Services, Inc. ("SBDS"), the Trust's
administrator and distributor.
The Fund will invest all of its investable assets in The Japan Equity Portfolio
(the "Portfolio"), a series of The Series Portfolio, a trust organized under the
laws of the State of New York. The Portfolio is an open-end management
investment company and has the same investment objective and policies as the
Fund.
The Fund has incurred $32,684 in organization expenses based on its allocable
pro rata share of total organization expenses for the nine funds in the Trust.
These costs are being deferred and will be amortized on a straight line basis
over a period not to exceed five years beginning with the commencement of
operations of the Fund. The amount paid by the Fund on any redemption by
Signature or any other current holder of the Fund's initial shares will be
reduced by the pro rata portion of any unamortized organization expenses of the
Fund and the Portfolio which the number of initial shares redeemed bears to the
total number of initial shares outstanding immediately prior to such redemption,
and the amount of such reduction in excess of the unamortized organization
expenses of the Fund shall be contributed by the Fund to the Portfolio.
<PAGE>
NOTE 2 - SERVICE AGREEMENTS WITH AFFILIATES
The Trust has entered into a Services Agreement with Morgan Guaranty Trust
Company of New York ("Morgan") to provide financial and fund accounting services
and shareholder servicing for the Fund, as described in the accompanying Trust's
registration statement on Form N-lA. The Trust has also entered into separate
administration and distribution agreements with SBDS to provide for
administrative and distribution services for the Fund, as described in such
registration statement. Morgan, Charles Schwab & Co. ("Schwab") and the Trust
are parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes Fund shares available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
The financial responsibilities and other obligations of the Fund under the
Schwab Agreements are contingent upon termination of Morgan's Services Agreement
with the Trust. The officers of the Trust are employees of SBDS.
NOTE 3 - COMMENCEMENT OF OPERATIONS
As of December 31, 1995, the Fund has not commenced operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The JPM Advisor Japan Equity Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The JPM Advisor
Japan Equity Fund (one of nine funds comprising The JPM Advisor Funds, hereafter
referred to as the "Fund") at December 31, 1995, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Fund's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 27, 1996
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with the designations 1, 2, and 3 to indicate the relative degree of
safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest rating
assigned by Standard & Poor's and has a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory
capacity to pay principal and interest.
MOODY'S
CORPORATE AND MUNICIPAL BONDS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection
A-1
<PAGE>
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - Well established access to a range of financial markets and assured sources
of alternate liquidity.
SHORT-TERM TAX EXEMPT NOTES
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes with this
rating enjoy strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.
A-2
<PAGE>
APPENDIX B
INVESTING IN JAPAN AND ASIAN GROWTH MARKETS
JAPAN AND ITS SECURITIES MARKETS
The Japan Equity Portfolio will be subject to general economic and
political conditions in Japan. These include future political and economic
developments, the possible imposition of, or changes in, exchange controls or
other Japanese governmental laws or restrictions applicable to such investments,
diplomatic developments, political or social unrest and natural disasters.
Japan is largely dependent upon foreign economies for raw materials. For
instance, almost all of its oil is imported, the majority from the Middle East.
Oil prices therefore have a major impact on the domestic economy, as is
evidenced by the current account deficits triggered by the two oil crises of the
1970s. While Japan is working to reduce its dependence on foreign materials,
its lack of natural resources poses a significant obstacle to this effort.
GEOLOGICAL FACTORS. The islands of Japan lie in the western Pacific Ocean,
off the eastern coast of the continent of Asia. Japan has in the past
experienced earthquakes and tidal waves of varying degrees of severity, and the
risks of such phenomena, and damage resulting therefrom, continue to exist.
ASIAN GROWTH MARKETS
The Asia Growth Portfolio will be subject to certain risks and special
considerations, including those set forth below, which are not typically
associated with investing in securities of U.S. companies. In particular,
securities markets in Asian growth markets have been subject to substantial
price volatility, often without warning. This potential for sudden market
declines should be weighed and balanced against the potential for rapid growth
in Asian growth markets. Further, certain securities that the Portfolio may
purchase, and investment techniques in which the Portfolio may engage, involve
risks, including those set forth below.
INVESTMENT AND REPATRIATION RESTRICTIONS
Foreign investment in the securities markets of several Asian growth
markets is restricted or controlled to varying degrees. These restrictions may
limit investment in certain of the Asian growth markets and may increase
expenses of the Portfolio. For example, certain countries may require
governmental approval prior to investments by foreign persons in a particular
company or industry sector or limit investment by foreign persons to only a
specific class of securities of a company which may have less advantageous terms
(including price) than securities of the company available for purchase by
nationals. Certain countries may restrict or prohibit investment opportunities
in issuers or industries deemed important to national interests. In addition,
the repatriation of both investment income and capital from several of the Asian
growth markets is subject to restrictions such as the need for certain
government consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of the operation of the Portfolio. For example, Taiwan imposes a
waiting period on the repatriation of investment capital for certain foreign
investors. Although these restrictions may in the future make it undesirable to
invest in the countries to which they apply, the Advisor does not believe that
any current repatriation restrictions would preclude the Portfolio from
effectively managing its assets.
If, because of restrictions on repatriation or conversion, the Portfolio
were unable to distribute substantially all of its net investment income and
long-term capital gains within applicable time periods, the Portfolio could be
subject to U.S. federal income and excise taxes which would not otherwise be
incurred and may cease to qualify for the favorable tax treatment afforded to
B-1
<PAGE>
regulated investment companies under the Code, in which case it would become
subject to U.S. federal income tax on all of its income and gains.
Generally, there are restrictions on foreign investment in certain Asian
growth markets, although these restrictions vary in form and content. In India,
Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand, the
Portfolio may be limited by government regulation or a company's charter to a
maximum percentage of equity ownership in any one company.
The Advisor has applied for approval from Indian governmental authorities
to invest in India on behalf of the Portfolio as a foreign institutional
investor (an "FII"). Under the guidelines that apply currently for FIIs, no FII
(or members of an affiliated group investing through one or more FIIs) may hold
more than 5% of the total issued capital of any Indian company. In addition,
all non-resident portfolio investments, including those of all FIIs and their
clients, may not exceed 24% of the issued share capital of any Indian company;
however, the 24% limit does not apply to investments by FIIs through authorized
offshore funds and offshore equity issues. Further, at least 70% of the total
investments made by an FII pursuant to its FII authorization must be in equity
and equity related instruments such as convertible debentures and tradeable
warrants. Under a recently adopted policy, FIIs may purchase new issues of
equity securities directly from an Indian company, subject to certain
conditions. The procedures for such direct subscription by FIIs of such equity
securities are unclear and it is likely that a further limit, in addition to the
24% limit referred to above, may be imposed. The guidelines that apply for FIIs
are relatively recent and thus experience as to their application has been
limited. At present, FII authorizations are granted for five years and may be
renewed with the approval of India governmental authorities.
Korea generally prohibits foreign investment in Won-denominated debt
securities and Sri Lanka prohibits foreign investment in government debt
securities. In the Philippines, the Portfolio may generally invest in "B"
shares of Philippine issuers engaged in partly nationalized business activities,
which shares are made available to foreigners, and the market prices, liquidity
and rights of which may vary from shares owned by nationals. Similarly, in the
People's Republic of China (the "PRC"), the Portfolio may only invest in "B"
shares of securities traded on The Shanghai Securities Exchange and The Shenzhen
Stock Exchange, currently the two officially recognized securities exchanges in
the PRC. "B" shares traded on The Shanghai Securities Exchange are settled in
U.S. dollars and those traded on The Shenzhen Stock Exchange are generally
settled in Hong Kong dollars.
In Hong Kong, Korea, the Philippines, Taiwan and Thailand, there are
restrictions on the percentage of permitted foreign investment in shares of
certain companies, mainly those in highly regulated industries, although in
Taiwan there are limitations on foreign ownership of shares of any listed
company. In addition, Korea also prohibits foreign investment in specified
telecommunications companies and the Philippines prohibits foreign investment in
mass media companies and companies providing certain professional services.
MARKET CHARACTERISTICS
DIFFERENCES BETWEEN THE U.S. AND ASIAN SECURITIES MARKETS. The securities
markets of Asian growth markets have substantially less volume than the New York
Stock Exchange, and equity and debt securities of most companies in Asian growth
markets are less liquid and more volatile than equity and debt securities of
U.S. companies of comparable size. Some of the stock exchanges in Asian growth
markets, such as those in the PRC, are in the earliest stages of their
development. Many companies traded on securities markets in Asian growth
markets are smaller, newer and less seasoned than companies whose securities are
traded on securities markets in the United States. Investments in smaller
companies involve greater risk than is customarily associated with investing in
larger
B-2
<PAGE>
companies. Smaller companies may have limited product lines, markets or
financial or managerial resources and may be more susceptible to losses and
risks of bankruptcy. Additionally, market making and arbitrage activities are
generally less extensive in such markets, which may contribute to increased
volatility and reduced liquidity of such markets. Accordingly, each of these
markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. To the extent that any Asian
growth market experiences rapid increases in its money supply and investment in
equity securities for speculative purposes, the equity securities traded in any
such country may trade at price-earnings multiples higher than those of
comparable companies trading on securities markets in the United States, which
may not be sustainable. Securities markets in Asian growth markets may also be
subject to substantial governmental control, which may cause sudden or prolonged
disruptions in market prices unrelated to supply and demand considerations.
This may also be true of currency markets.
Brokerage commissions and other transaction costs on securities exchanges
in Asian growth markets are generally higher than in the United States. In
addition, security settlements may in some instance be subject to delays and
related administrative uncertainties, including risk of loss associated with the
credit of local brokers.
GOVERNMENT SUPERVISION OF ASIAN SECURITIES MARKETS; LEGAL SYSTEMS. There
is less government supervision and regulation of foreign securities exchanges,
listed companies and brokers in Asian growth markets than exists in the United
States. Less information, therefore, may be available to the Fund than in
respect of investments in the United States. Further, in certain Asian growth
markets, less information may be available to the Fund than to local market
participants. Brokers in Asian growth markets may not be as well capitalized as
those in the United States, so that they are more susceptible to financial
failure in times of market, political, or economic stress. In addition,
existing laws and regulations are often inconsistently applied. As legal
systems in some of the Asian growth markets develop, foreign investors may be
adversely affected by new laws and regulations, changes to existing laws and
regulations and preemption of local laws and regulations by national laws. In
circumstances where adequate laws exist, it may not be possible to obtain swift
and equitable enforcement of the law. Currently a mixture of legal and
structural restrictions affect the securities markets of certain Asian growth
markets.
Korea, in an attempt to avoid market manipulation, requires institutional
investors to deposit in their broker's account a percentage of the amount to be
invested prior to execution of a purchase order. That deposit requirement will
expose the Fund to the broker's credit risk. These examples demonstrate that
legal and structural developments can be expected to affect the Portfolio,
potentially affecting liquidity of positions held by the Portfolio, in
unexpected and significant ways from time to time.
FINANCIAL INFORMATION AND STANDARDS. Issuers in Asian growth markets
generally are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. issuers. In particular, the assets and profits appearing on the financial
statements of an Asian growth market issuer may not reflect its financial
position or results of operations in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps accounting records
in local currency, inflation accounting rules may require, for both tax and
accounting purposes, that certain assets and liabilities be restated on the
issuer's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits. Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the real condition of
those issuers and securities markets. Moreover, substantially less information
may be publicly
B-3
<PAGE>
available about issuers in Asian growth markets than is available about U.S.
issuers.
SOCIAL, POLITICAL AND ECONOMIC FACTORS
Asian growth markets may be subject to a greater degree of social,
political and economic instability than is the case in the United States and
Western European countries. Such instability may result from, among other
things, the following: (i) authoritarian governments or military involvement in
political and economic decision-making, and changes in government through extra-
constitutional means; (ii) popular unrest associated with demand for improved
political, economic and social conditions; (iii) internal insurgencies, (iv) war
or hostile relations with neighboring countries; and (v) ethnic, religious and
racial disaffection. Such social, political and economic instability could
significantly disrupt the principal financial markets in which the Portfolio
invests and adversely affect the value of the Portfolio's assets. In addition,
there may be the possibility of asset expropriations or future confiscatory
levels of taxation affecting the Portfolio.
Few Asian growth markets have western-style or fully democratic
governments. Some governments in the region are authoritarian and influenced by
security forces. During the course of the last 25 years, governments in the
region have been installed or removed as a result of military coups, while
others have periodically demonstrated repressive police state characteristics.
Disparities of wealth, among other factors, have also led to social unrest in
some Asian growth markets, accompanied, in certain cases, by violence and labor
unrest. Ethnic, religious and racial disaffection, as evidenced in India,
Pakistan and Sri Lanka, have created social, economic and political problems.
Several Asian growth markets have or in the past have had hostile
relationships with neighboring nations or have experienced internal insurgency.
Thailand has experienced border conflicts with Laos and Cambodia, and India is
engaged in border disputes with several of its neighbors, including the PRC and
Pakistan. Tension between the Tamil and Sinhalese communities in Sri Lanka has
resulted in periodic outbreaks of violence. An uneasy truce exists between
North Korea and South Korea, and the recurrence of hostilities remains possible.
Reunification of North Korea and South Korea could have a detrimental effect on
the economy of South Korea. Also, the PRC continues to claim sovereignty over
Taiwan. The PRC is acknowledged to possess nuclear weapons capability; North
Korea is alleged to possess or be in the process of developing such a
capability.
The economies of most Asian growth markets are heavily dependent upon
international trade and are accordingly affected by protective barriers and the
economic conditions of their trading partners, principally, the United States,
Japan, the PRC and the European Community. The enactment by the United States
or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian growth markets. In addition, the
economies of some Asian growth markets, Indonesia and Malaysia, for example, are
vulnerable to weakness in world prices for their commodity exports, including
crude oil.
Governments in certain Asian growth markets participate to a significant
degree, through ownership interest or regulation, in their respective economies.
Action by these governments could have a significant adverse effect on market
prices of securities and payment of dividends.
The PRC has only recently permitted private economic activities and the PRC
government has exercised and continues to exercise substantial control over
virtually every sector of the PRC economy through regulation and state
ownership. Continued economic growth and development in the PRC, as well as
opportunities for foreign investment, and prospects of private sector
enterprises, in the PRC,
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<PAGE>
will depend in many respects on the implementation of the PRC's current program
of economic reform, which cannot be assured.
In Hong Kong, British proposals to extend limited democracy have caused a
political rift with the PRC, which is scheduled to assume sovereignty over the
colony in 1997. Although the PRC has committed by treaty to preserve the
economic and social freedoms enjoyed in Hong Kong for 50 years after regaining
control of Hong Kong, the continuation of the current form of the economic
system in Hong Kong after the reversion will depend on the actions of the
government of the PRC. In addition, such reversion has increased sensitivity in
Hong Kong to political developments and statements by public figures in the PRC.
Business confidence in Hong Kong, therefore, can be significantly affected by
such developments and statements, which in turn can affect markets and business
performance.
With respect to investments in Taiwan, it should be noted that Taiwan lacks
formal diplomatic relations with many nations, although it conducts trade and
financial relations with most major economic powers. Both the government of the
PRC and the government of the Republic of China in Taiwan claim sovereignty over
all of China. Although relations between Taiwan and the PRC are currently
peaceful, renewed frictions or hostility could interrupt operations of Taiwanese
companies in which the Portfolio invests and create uncertainty that could
adversely affect the value and marketability of its Taiwan investments.
With regard to India, agriculture occupies a more prominent position in the
Indian economy than in the United States, and the Indian economy therefore is
more susceptible to adverse changes in weather. The government of India has
exercised and continues to exercise significant influence over many aspects of
the economy, and the number of public sector enterprises in India is
substantial. Accordingly government actions in the future could have a
significant effect on the Indian economy which could affect private sector
companies, market conditions and prices and yields of securities held by the
Portfolio. Religious and ethnic unrest persists in India. The long standing
grievances between the Hindu and Muslim populations resulted in communal
violence during 1993 in the aftermath of the destruction of a mosque in Ayodhya
by radical elements of the Hindu population. The Indian government is also
confronted by separatist movements in several states and the long standing
border dispute with Pakistan over the State of Jammu and Kashmir, a majority of
whose population is Muslim, remains unsolved. In addition, Indian stock
exchanges have in the past been subject to repeated closure including for ten
days in December 1993 due to a broker's strike, and there can be no assurance
that this will not recur.
THINLY TRADED MARKETS
Compared to securities traded in the United States, all securities of Asian
growth market issuers may generally be considered to be thinly traded. Even
relatively widely held securities in such countries may not be able to absorb
trades of a size customarily transacted by institutional investors, without
price disruptions. Accordingly, the Portfolio's ability to reposition itself
will be more constrained than would be the case for a typical equity mutual
fund.
SETTLEMENT PROCEDURES AND DELAYS
Settlement procedures in Asian growth markets are less developed and
reliable than those in the United States and in other developed markets, and the
Portfolio may experience settlement delays or other material difficulties. This
problem is particularly severe in India where settlement is through physical
delivery and, where currently, a severe shortage of vault capacity exists among
custodial banks, although efforts are being undertaken to alleviate the
shortage. In addition, significant delays are common in registering transfers
of securities, and the Portfolio may be unable to sell such securities until the
registration process is completed and may experience delays in receipt of
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<PAGE>
dividends and other entitlement. The recent and anticipated inflow of funds
into the Indian securities market has placed added strains on the settlement
system and transfer process. In addition, the Portfolio may be subject to
significant limitations in the future on the volume of trading during any
particular period, imposed by its sub-custodian in India or otherwise as a
result of such physical or other operational constraints.
JPM597B
<PAGE>
JPM510
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are included in Part A:
Financial Highlights: The JPM Advisor U.S. Fixed Income Fund, The JPM Advisor
International Equity Fund, The JPM Advisor Emerging Markets Equity Fund, The JPM
Advisor U.S. Equity Fund, The JPM Advisor U.S. Small Cap Equity Fund, The JPM
Advisor European Equity Fund and The JPM Advisor Asia Growth Fund.
The following financial statements are included in Part B:
The JPM Advisor U.S. Fixed Income Fund
Statement of Assets and Liabilities at October 31, 1995
Statement of Operations for the period March 24, 1995 (Inception Date) to
October 31, 1995
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements, October 31, 1995
Statement of Assets and Liabilities at April 30, 1996 (unaudited)
Statement of Operations for the six months ended April 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, April 30, 1996 (unaudited)
The U.S. Fixed Income Portfolio
Schedule of Investments at October 31, 1995
Statement of Assets and Liabilities at October 31, 1995
Statement of Operations for the fiscal year ended October 31, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, October 31, 1995
Schedule of Investments at April 30, 1996 (unaudited)
Statement of Assets and Liabilities at April 30, 1996 (unaudited)
Statement of Operations for the six months ended April 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, April 30, 1996 (unaudited)
The JPM Advisor International Fixed Income Fund
Statement of Assets and Liabilities at September 30, 1995
Notes to Financial Statement, September 30, 1995
Statement of Assets and Liabilities at March 31, 1996 (unaudited)
Statement of Operations for the six months ended March 31, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, March 31, 1996 (unaudited)
The Non-U.S. Fixed Income Portfolio
Schedule of Investments at September 30, 1995
Statement of Assets and Liabilities at September 30, 1995
Statement of Operations for the fiscal year ended September 30, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statement, September 30, 1995
Schedule of Investments at March 31, 1996 (unaudited)
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Statement of Assets and Liabilities at March 31, 1996 (unaudited)
Statement of Operations for the six months ended March 31, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, March 31, 1996 (unaudited)
The JPM Advisor U.S. Equity Fund
Statement of Assets and Liabilities at May 31, 1996
Statement of Operations for the period February 5, 1996 (commencement of
operations) to
May 31, 1996
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements, May 31, 1996
The Selected U.S. Equity Portfolio
Schedule of Investments at May 31, 1996
Statement of Assets and Liabilities at May 31, 1996
Statement of Operations For the fiscal year ended May 31, 1996
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, May 31, 1996
The JPM Advisor U.S. Small Cap Equity Fund
Statement of Assets and Liabilities at May 31, 1996
Statement of Operations for the period January 19, 1996 (commencement of
operations) to
May 31, 1996
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements, May 31, 1996
The U.S. Small Company Portfolio
Schedule of Investments at May 31, 1996
Statement of Assets and Liabilities at May 31, 1996
Statement of Operations for the fiscal year ended May 31, 1996
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, May 31, 1996
The JPM Advisor International Equity Fund
Statement of Assets and Liabilities at October 31, 1995
Notes to Financial Statement, October 31, 1995
Statement of Assets and Liabilities at April 30, 1996 (unaudited)
Statement of Operations for the six months ended April 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, April 30, 1996 (unaudited)
The Non-U.S. Equity Portfolio
Schedule of Investments at October 31, 1995
Statement of Assets and Liabilities at October 31, 1995
Statement of Operations for the fiscal year ended October 31, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, October 31, 1995
Schedule of Investments at April 30, 1996 (unaudited)
Statement of Assets and Liabilities at April 30, 1996 (unaudited)
Statement of Operations for the six months ended April 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, April 30, 1996 (unaudited)
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<PAGE>
The JPM Advisor Diversified Portfolio
Schedule of Investments at June 30, 1995
Statement of Assets and Liabilities at June 30, 1995
Statement of Operations for the six months ended June 30, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, June 30, 1995
Schedule of Investments at December 31, 1995 (unaudited)
Statement of Assets and Liabilities at December 31, 1995 (unaudited)
Statement of Operations for the fiscal year ended December 31, 1995 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, December 31, 1995 (unaudited)
The JPM Advisor Emerging Markets Equity Fund
Statement of Assets and Liabilities at October 31, 1995
Notes to Financial Statement, October 31, 1995
Statement of Assets and Liabilities at April 30, 1996 (unaudited)
Statement of Operations for the six months ended April 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, April 30, 1996 (unaudited)
The Emerging Markets Equity Portfolio
Schedule of Investments at October 31, 1995
Statement of Assets and Liabilities at October 31, 1995
Statement of Operations for the fiscal year ended October 31, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, October 31, 1995
Schedule of Investments at April 30, 1996 (unaudited)
Statement of Assets and Liabilities at April 30, 1996 (unaudited)
Statement of Operations for the six months ended April 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, April 30, 1996 (unaudited)
The JPM Advisor Asia Growth Fund
Statement of Assets and Liabilities at December 31, 1995
Notes to Financial Statement, December 31, 1995
Statement of Assets and Liabilities at June 30, 1996 (unaudited)
Statement of Operations for the period January 5, 1996 (commencement of
operations) through June 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, June 30, 1996 (unaudited)
The Asia Growth Portfolio
Schedule of Investments at December 31, 1995
Statement of Assets and Liabilities at December 31, 1995
Statement of Operations for the period April 4, 1995 (commencement of
operations) through December 31, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, December 31, 1995
Schedule of Investments at June 30, 1996 (unaudited)
Statement of Assets and Liabilities at June 30, 1996 (unaudited)
Statement of Operations for the six months ended June 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, June 30, 1996
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<PAGE>
The JPM Advisor European Equity Fund
Statement of Assets and Liabilities at December 31, 1995
Notes to Financial Statement, December 31, 1995
Statement of Assets and Liabilities at June 30, 1996 (unaudited)
Statement of Operations for the period January 23, 1996 (commencement of
operations) through June 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, June 30, 1996 (unaudited)
The European Equity Portfolio
Schedule of Investments at December 31, 1995
Statement of Assets and Liabilities at December 31, 1995
Statement of Operations for the period March 28, 1995 (commencement of
operations) through December 31, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements December 31, 1995
Schedule of Investments at June 30, 1996 (unaudited)
Statement of Assets and Liabilities at June 30, 1996 (unaudited)
Statement of Operations for the six months ended June 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, June 30, 1996
The JPM Advisor Japan Equity Fund
Statement of Assets and Liabilities at December 31, 1995
Notes to Financial Statement, December 31, 1995
Statement of Assets and Liabilities at June 30, 1996 (unaudited)
Statement of Operations for the period January 24, 1996 (commencement of
operations) through June 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements, June 30, 1996 (unaudited)
The Japan Equity Portfolio
Schedule of Investments at December 31, 1995
Statement of Assets and Liabilities at December 31, 1995
Statement of Operations for the period March 28, 1995 (commencement of
operations) through December 31, 1995
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements, December 31, 1995
Schedule of Investments at June 30, 1996 (unaudited)
Statement of Assets and Liabilities at June 30, 1996 (unaudited)
Statement of Operations for the six months ended June 30, 1996 (unaudited)
Statement of Changes in Net Assets (unaudited)
Supplementary Data (unaudited)
Notes to Financial Statements, June 30, 1996
(b) Exhibits
1 Declaration of Trust, as amended.1
1(a) Amendment No. 2 to the Amended Declaration of Trust.1
1(b) Amendment No. 3 to the Amended Declaration of Trust.2
2 By-Laws, as amended.1
6 Distribution Agreement between Registrant and Funds Distributor, Inc.
("FDI").3
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8 Custodian Contract between Registrant and State Street Bank and Trust
Company ("State Street").3
9(a) Co-Administration Agreement between Registrant and FDI.3
9(b) Services Agreement, as amended and restated, between Registrant and Morgan
Guaranty Trust Company of New York.3
9(c) Transfer Agency and Service Agreement between Registrant and State Street.3
10 Opinion and consent of Sullivan & Cromwell.3
11 Consents of independent accountants.3
13 Purchase agreements with respect to the Registrant's initial shares.3
16 Schedule for computation of performance quotations.3
17 Financial data schedules.3
18 Powers of attorney.3
1 Incorporated herein by reference from post-effective amendment no. 1 to the
Registrant's registration statement on Form N-1A (the "Registration
Statement") as filed with the Securities and Exchange Commission (the
"SEC") on September 29, 1995.
2 Incorporated herein by reference from post-effective amendment no. 4 to the
Registration Statement as filed with the SEC on April 17, 1996.
3 Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class: Shares of Beneficial Interest (par value $0.001)
As of July 31, 1996:
The JPM Advisor U.S. Fixed Income Fund: 1
The JPM Advisor International Fixed Income Fund: 2
The JPM Advisor U.S. Equity Fund: 7
The JPM Advisor U.S. Small Cap Equity Fund: 5
The JPM Advisor International Equity Fund: 4
The JPM Advisor Emerging Markets Equity Fund: 6
The JPM Advisor Asia Growth Fund: 7
The JPM Advisor European Equity Fund: 2
The JPM Advisor Japan Equity Fund: 5
The JPM Advisor Diversified Fund: 0
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust and
Section 5 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain expenses in
connection with the defense of claims, demands, actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.
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<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, trustee,
officer, or controlling person of the Registrant and the principal underwriter
in connection with the successful defense of any action, suite or proceeding) is
asserted against the Registrant by such director, trustee, officer or
controlling person or principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FDI, located at 60 State Street, Suite 1300, Boston, Massachusetts 02109, is
the principal underwriter of the Registrant's shares. FDI is an indirectly
wholly owned subsidiary of Boston Institutional Group, Inc., a holding company,
all of whose outstanding shares are owned by key employees. FDI is a broker-
dealer registered under the Securities Exchange Act of 1934, as amended.
FDI acts as principal underwriter of the following investment companies other
than the Registrant:
BJB Investment Funds
Foreign Fund, Inc.
Fremont Mutual Funds
H.T. Insight Funds, Inc.
The Harris Insight Funds Trust
LKCM Fund
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Capital Funds,Inc.
RCM Equity Funds, Inc.
Skyline Funds
St. Clair Funds, Inc.
Waterhouse Investors Cash Management Fund, Inc.
FDI does not act as depositor or investment adviser of any investment companies.
(b) The following is a list of officers, directors and partners of FDI. The
principal address of all officers and directors is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Name; Positions and Offices with Underwriter; Position and Offices with
Registrant:
Marie E. Connolly; Director, President and Chief Executive Officer; Vice
President and Assistant Treasurer
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<PAGE>
Richard W. Ingram; Senior Vice President; President and Treasurer
John E. Pelletier; Senior Vice President and General Counsel; Vice President and
Secretary
Donald R. Roberson; Senior Vice President; None
John F. Tower III; Senior Vice President, Chief Financial Officer and Treasurer;
Vice President and Assistant Treasurer
Rui M. Moura; First Vice President; None
Bernard A. Whalen; First Vice President; None
John W. Gomez; Chairman and Director; None
William J. Nutt; Director; None
The information required by this Item 29 with respect to each director and
officer of FDI is incorporated herein by reference to Schedule A of Form BD
filed by FDI pursuant to the Securities Exchange Act of 1934 (SEC File
No. 20518).
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), and the Rules thereunder will be maintained at the offices of:
Morgan Guaranty Trust Company of New York: 60 Wall Street, New York, New York
10260-0060, 9 West 57th Street, New York, New York 10019 or 522 Fifth Avenue,
New York, New York 10036 (records relating to its functions as shareholder
servicing agent and services agent).
State Street Bank and Trust Company: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 (records relating to its functions as custodian, transfer
agent and dividend disbursing agent).
Funds Distributor, Inc.: 60 State Street, Suite 1300, Boston, Massachusetts
02109 (records relating to its functions as distributor and co-administrator).
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained in the
latest annual report to shareholders, the Registrant shall furnish each
person to whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders upon request and without charge.
(b) The Registrant undertakes to file a post-effective amendment, using
financials which need not be certified, within four to six months following
the commencement of public investment operations of the Registrant's U.S.
Fixed Income, International Fixed Income and Diversified Funds. The
financial statements included in such amendment will be as of and for the
time period ended on a date reasonably close or as soon as practicable to
the date of the filing of the amendment.
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(c) The Registrant undertakes to comply with Section 16(c) of the 1940 Act as
though such provisions of the 1940 Act were applicable to the Registrant,
except that the request referred to in the third full paragraph thereof may
only be made by shareholders who hold in the aggregate at least 10% of the
outstanding shares of the Registrant, regardless of the net asset value of
shares held by such requesting shareholders.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933, and has duly caused this
post-effective amendment to its registration statement on Form N-1A to be signed
on its behalf by the undersigned, thereto duly authorized in the City of Boston
and Commonwealth of Massachusetts on the 22nd day of August, 1996.
THE JPM ADVISOR FUNDS
By /s/ Richard W. Ingram
-------------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on August 22, 1996.
/s/ Richard W. Ingram
- ------------------------
Richard W. Ingram
President and Treasurer
/s/ John E. Baumgardner, Jr.*
- ------------------------
John E. Baumgardner, Jr.
Trustee
/s/ John C. Cox*
- ------------------------
John C. Cox
Trustee
/s/ John R. Rettberg*
- ------------------------
John R. Rettberg
Trustee
/s/ John F. Ruffle*
- ------------------------
John F. Ruffle
Trustee
/s/ Kenneth Whipple, Jr.*
- ------------------------
Kenneth Whipple, Jr.
Trustee
*By /s/ Richard W. Ingram
------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney filed herewith.
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SIGNATURES
Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of The JPM Advisor Funds (the "Trust") (File
No. 33-84798) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of George Town, Grand Cayman, Cayman Islands, B.W.I., on
the 22nd day of August, 1996.
THE U.S. FIXED INCOME PORTFOLIO, THE SELECTED U.S. EQUITY PORTFOLIO, THE U.S.
SMALL COMPANY PORTFOLIO, THE NON-U.S. EQUITY PORTFOLIO, THE DIVERSIFIED
PORTFOLIO, THE EMERGING MARKETS EQUITY PORTFOLIO, THE NON-U.S. FIXED INCOME
PORTFOLIO AND THE SERIES PORTFOLIO
/s/ Lenore McCabe
By -------------------------
Lenore McCabe
Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on August 22, 1996.
/s/ Richard W. Ingram*
- ------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios
/s/ Matthew Healey*
- ------------------------
Matthew Healey
Chairman and Chief Executive Officer (Principal Executive Officer) of the
Portfolios
/s/ Frederick S. Addy*
- ------------------------
Frederick S. Addy
Trustee of the Portfolios
/s/ William G. Burns*
- ------------------------
William G. Burns
Trustee of the Portfolios
/s/ Arthur C. Eschenlauer*
- ------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios
/s/ Michael P. Mallardi*
- ------------------------
Michael P. Mallardi
Trustee of the Portfolios
/s/ Lenore McCabe
*By ------------------------
Lenore McCabe
as attorney-in-fact pursuant to a power of attorney filed herewith.
C-10
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ----------- ----------------------
6 Distribution Agreement between Registrant and Funds Distributor,
Inc.
8 Custodian Contract between Registrant and State Street Bank and
Trust Company.
9(a) Co-Administration Agreement between Registrant and Funds
Distributor, Inc.
9(b) Services Agreement, as amended and restated, between Registrant
and Morgan Guaranty Trust Company of New York.
9(c) Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company.
10 Opinion and consent of Sullivan & Cromwell.
11 Consents of independent accountants.
13 Purchase agreements with respect to the Registrant's initial
shares.
16 Schedule for computation of performance quotations.
17 Financial data schedules.
18 Powers of attorney.
<PAGE>
Exhibit 6
THE JPM ADVISOR FUNDS
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made as of this 1st day of August, 1996, between
THE JPM ADVISOR FUNDS, an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts (the "Trust"), and FUNDS DISTRIBUTOR, INC.,
a Massachusetts corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Shares of Beneficial Interest (par value $0.001 per share) of
the Trust (the "Shares") are divided into multiple series (such series together
with any other series which may in the future be established, the "Funds");
WHEREAS, it is in the interest of the Trust to be able to offer Shares of
each Fund for sale continuously and to appoint a broker registered under the
Securities Exchange Act of 1934 and various state broker registration statutes
for the purpose of facilitating such offers and sales;
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of Shares of the Funds;
NOW, THEREFORE, the parties agree as follows:
Section 1. APPOINTMENT OF THE DISTRIBUTOR. The Trust hereby appoints the
Distributor its exclusive agent in connection with the offering and sale of the
Shares on the terms set forth in this Agreement and the Distributor hereby
accepts such appointment and agrees to act hereunder.
Section 2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
(a) The Distributor agrees to offer and sell, as agent for the Trust, from
time to time during the term of this Agreement, Shares upon the terms described
in the Prospectus relating to such Shares. As used in this Agreement, the term
"Prospectus" shall mean the prospectus, including any information incorporated
by reference therein, relating to such Shares included as part of the Trust's
Registration Statement, as such prospectus may be amended or supplemented from
time to time, and the term "Registration Statement" shall mean the Registration
Statement most recently filed from time to time by the Trust with the Securities
and Exchange Commission and effective under the Securities Act of 1933, as
amended (the "1933 Act") and the 1940 Act, as such Registration Statement may be
amended by any amendments thereto at the time in effect.
(b) The Distributor will hold itself available to receive orders,
satisfactory to the Distributor, for the purchase of Shares and will establish
procedures for the acceptance and transmission of orders on behalf of the Trust,
which procedures shall be reasonably acceptable to the Trust. The Distributor
shall promptly forward to the Trust's custodian funds received in respect of
purchases of Shares. Purchase orders shall be deemed effective at the time and
in the manner set forth in the Prospectus relating to such Shares.
1
<PAGE>
(c) The offering price of the Shares shall be the net asset value per
Share (as defined in or pursuant to the Declaration of Trust of the Trust and
determined as set forth in the Prospectus relating to such Shares) next
determined following receipt of an order. The Trust shall furnish the
Distributor, with all possible promptness, an advice of each computation of net
asset value of Shares of each Fund.
(d) The Distributor shall not be obligated to sell any certain number of
Shares and nothing herein contained shall prevent the Distributor from entering
into like distribution arrangements with other investment companies.
Section 3. DUTIES OF THE TRUST.
(a) The Trust agrees to sell Shares of each Fund so long as it has Shares
available for sale and to cause the Trust's transfer agent to record on its
books the ownership of (or deliver certificates, if any, for) such Shares
registered in such names and amounts as the Distributor has requested in writing
or other means of data transmission, as promptly as practicable after receipt by
the Trust of the net asset value thereof and written request of the Distributor
therefor.
(b) The Trust shall keep the Distributor fully informed with regard to the
Trust's affairs and shall furnish to the Distributor copies of all information,
financial statements and other papers which may be necessary for use in
connection with the sale of Shares of the Funds, and this shall include one
certified copy, upon request by the Distributor, of all financial statements
prepared for the Trust by independent accountants and such number of copies of
its most current Prospectuses as may be necessary to accompany confirmation of
sales and annual and interim reports and Prospectuses for delivery to existing
shareholders.
(c) The Trust shall take, from time to time, such steps, including payment
of the related filing fee, as may be necessary to register its Shares under the
1933 Act to the end that there will be available for sale such number of Shares
as the Distributor may be expected to sell. The Trust agrees to file from time
to time such amendments, reports and other documents as may be necessary in
order that there may be no untrue statement of a material fact in a Registration
Statement or Prospectuses, or necessary in order that there may be no omission
to state a material fact in the Registration Statement or Prospectuses which
omission would make the statements therein misleading.
(d) The Trust, through Funds Distributor, Inc. as Co-Administrator, shall
use its best efforts to qualify and maintain the qualification of any
appropriate number of the Shares of each Fund for sale under the securities laws
of such states as the Distributor and the Trust may approve, and, if necessary
or appropriate in connection therewith, to qualify and maintain the
qualification of the Trust as a broker or dealer in such states; provided that
the Trust shall not be required to amend its Declaration of Trust or By-laws to
comply with the laws of any state, to maintain an office in any state, to change
the terms of the offering of the Shares in any state from the terms set forth in
its Registration Statement and Prospectuses, to qualify as a foreign corporation
in any state or to consent to service of process in any state other than with
respect to claims arising out of the offering of the Shares. The Distributor
shall furnish such information and other material relating to its affairs and
activities as may be required by such Co-Administrator in connection with such
qualifications.
Section 4. EXPENSES. The Trust shall bear all costs and expenses
necessary for the continuous sale of the Shares such as: (i) fees and
disbursements of its counsel and independent accountants; (ii) the preparation,
filing and printing of any registration statements and/or prospectuses required
to be filed by and under the Federal and state
2
<PAGE>
securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses and proxy materials to shareholders; and (iv) the
qualifications of Shares for sale and of the Trust as a broker or dealer under
the securities laws of such states or other jurisdictions as shall be selected
by the Trust and the Distributor pursuant to Section 3(d) hereof and the cost
and expenses payable to each such state for continuing qualification therein in
connection with such sale. Since the Trust has not adopted a plan under Rule
12b-1 of the 1940 Act, the Distributor is directed and agrees that it will not
incur any expenses which would require the Trust to adopt a plan under Rule 12b-
1.
Section 5. INDEMNIFICATION. The Trust agrees to indemnify, defend and
hold the Distributor, its officers and directors and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Trust for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement, to the extent that it might
require indemnity of any person who is also an officer or Trustee of the Trust
or who controls the Trust within the meaning of Section 15 of the 1933 Act,
shall not inure to the benefit of such officer, Trustee or controlling person
unless a court of competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would not be against
public policy as expressed in the 1933 Act; and further provided that in no
event shall anything contained herein be so construed as to protect the
Distributor against any liability to the Trust or to its securities holders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations under this Agreement.
The Trust's agreement to indemnify the Distributor, its officers and directors
and any such controlling person, as aforesaid is expressly conditioned upon the
Trust's being promptly notified of any action brought against the Distributor,
its officers or directors, or any such controlling person, such notification to
be given to the Trust in accordance with Section 9, with a copy to Stephen K.
West, Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. The
Trust agrees promptly to notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or Trustees in
connection with the issue and sale of any Shares.
The Distributor agrees to indemnify, defend and hold the Trust, its
Trustees and officers and any person who controls the Trust, if any, within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its Trustees or
officers of any such controlling person may incur under the 1933 Act or under
common law or otherwise, but only the extent that such liability or expense
incurred by the Trust, its Trustees or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Trust for use in the
3
<PAGE>
preparation of the Registration Statement or Prospectus or shall arise out of or
be based upon any alleged omission to state a material fact in such information
or a fact necessary to make such information not misleading, it being understood
that the Trust will rely upon the information provided by the Distributor for
use in the preparation of the Registration Statement and Prospectus. The
Distributor's agreement to indemnify the Trust, its Trustees and officers, and
any such controlling person as aforesaid is expressly conditioned upon the
Distributor's being promptly notified of any action brought against the Trust,
its Trustees or officers or any such controlling person, such notification to be
given to the Distributor in accordance with Section 9.
Section 6. LIMITATION OF LIABILITY. The Distributor shall not be liable
for any error of judgment or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or for reckless disregard by it of its obligations and
duties under this Agreement.
Section 7. COMPLIANCE WITH SECURITIES LAWS. The Trust represents that it
is registered as an open-end management investment company under the 1940 Act,
and agrees that it will comply with the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with the applicable terms and provisions of the 1940 Act, the 1933 Act
and, subject to the provisions of Section 3(d), applicable state securities
laws. The Distributor agrees to comply with the applicable terms and provisions
of the Securities Exchange Act of 1934.
Section 8. TERM OF AGREEMENT; TERMINATION. This Agreement shall
commence on the date first set forth above. This Agreement shall continue in
effect for a period more than two years from the date hereof only so long as
such continuance is specifically approved at least annually in conformity with
the requirements of the 1940 Act.
This Agreement shall terminate automatically in the event of its assignment
(as defined the 1940 Act). In addition, this Agreement may be terminated by
either party at any time, without penalty, on not less than sixty (60) days'
written notice to the other party.
Section 9. NOTICES. Any notice required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid: (1) to the Distributor at Funds Distributor, Inc., 60 State
Street, 13th Floor, Boston, Massachusetts 02109, Attention: President with a
copy to General Counsel; or (2) to the Trust at The JPM Advisor Funds, at its
address as set forth in its Prospectuses, Attention: Treasurer, with a copy to
Morgan Guaranty Trust Company, 522 Fifth Avenue, New York, New York 10036,
Attention: Funds Management or at such other address as either party may from
time to time specify to the other party pursuant to this Section 9.
Section 10. CONFIDENTIALITY. The Distributor agrees on behalf of itself
and its employees to treat confidentially and as proprietary information of the
Trust all records and other information not otherwise publicly available
relative to the Trust and its prior, present or potential shareholders and not
to use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Distributor may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.
4
<PAGE>
Section 11. NO LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. The Trustees
have authorized the execution of this Agreement in their capacity as Trustees
and not individually and the Distributor agrees that neither the shareholders
nor the Trustees nor any officer, employee, representative or agent of the Trust
shall be personally liable upon, nor shall resort be had to their private
property for the satisfaction of, obligations given, executed or delivered on
behalf of or by the Trust, that the shareholders, Trustees, officers, employees,
representatives and agents of the Trust shall not be personally liable
hereunder, and that it shall look solely to the property of the Trust for the
satisfaction of any claim hereunder.
Section 12. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE JPM ADVISOR FUNDS
By /s/ John E. Pelletier
John E. Pelletier, Vice President
and Secretary
FUNDS DISTRIBUTOR, INC.
By /s/ Marie E. Connolly
Marie E. Connolly, President and
Chief Executive Officer
JPM272.DOC
<PAGE>
Exhibit 8
CUSTODIAN CONTRACT
Between
THE JPM ADVISOR FUNDS
and
STATE STREET BANK AND TRUST COMPANY
[W:\..\solomon\agm\JPMAdvu.cus
21E593] [JPM514]
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be
Held By It................................................................2
2. Duties of the Custodian with Respect to Property
of the Portfolios Held by the Custodian
in the United States......................................................3
2.1 Holding Securities...................................................3
2.2 Delivery of Securities...............................................4
2.3 Registration of Securities..........................................10
2.4 Bank Accounts.......................................................11
2.5 Availability of Federal Funds.......................................12
2.6 Collection of Income................................................13
2.7 Payment of Fund Monies..............................................14
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased................................................18
2.9 Appointment of Agents...............................................19
2.10 Deposit of Portfolios' Assets in Securities System..................19
2.10A Portfolio Assets Held in the Custodian's
Direct Paper System............................................23
2.11 Segregated Account..................................................25
2.12 Ownership Certificates for Tax Purposes.............................27
2.13 Proxies.............................................................27
2.14 Communications Relating to Portfolio Securities.....................28
3. Duties of the Custodian with Respect to Property of
the Portfolios Held Outside of the United States.........................29
3.1 Appointment of Foreign Sub-Custodians...............................29
3.2 Assets to be Held...................................................30
3.3 Foreign Securities Depositories.....................................30
3.4 Agreements with Foreign Banking Institutions........................31
3.5 Access of Independent Accountants of the Fund.......................32
3.6 Reports by Custodian................................................32
3.7 Transactions in Foreign Custody Account.............................33
3.8 Liability of Foreign Sub-Custodians.................................34
3.9 Liability of Custodian..............................................34
3.10 Reimbursement for Advances..........................................36
3.11 Monitoring Responsibilities.........................................37
3.13 Branches of U.S. Banks..............................................37
3.13 Tax Law.............................................................38
4. Payments for Sales or Repurchase or Redemptions of Shares of
the Portfolio............................................................39
<PAGE>
5. Proper Instructions......................................................40
6. Actions Permitted Without Express Authority..............................41
7. Evidence of Authority....................................................41
8. Duties of Custodian with Respect to the Books of
Account and Calculation of Net Asset Value and Net Income................42
9. Records..................................................................42
10. Reports to Fund by Independent Public Accountants........................43
11. Compensation of Custodian................................................44
12. Responsibility of Custodian..............................................44
13. Effective Period, Termination and Amendment..............................46
14. Successor Custodian......................................................48
15. Interpretive and Additional Provisions...................................50
16. Additional Series........................................................50
17. Massachusetts Law to Apply...............................................51
18. Prior Contracts..........................................................51
19. Shareholder Communications Election......................................51
20. Limitation of Liability..................................................53
<PAGE>
CUSTODIAN CONTRACT
This Contract between The JPM Advisor Funds, a business trust organized and
existing under the laws of the Commonwealth of Massachusetts, having its
principal place of business at 6 St. James Avenue, Boston, Massachusetts 02116
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund offers shares in nine series, 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 Emerging Markets Equity Fund, The JPM
Advisor Asia Growth Fund, The JPM Advisor European Equity Fund, and The JPM
Advisor Japan Equity Fund, such series together with all other series
subsequently established
<PAGE>
by the Fund and made subject to this Contract in accordance with paragraph 17,
being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio, desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund's
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolio(s), and all payments
of income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolio(s) ("Shares") as
may be issued by the Fund or sold from time to time. The Custodian shall not be
responsible for any property
2
<PAGE>
of a Portfolio held or received by the Portfolio and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories, if any,
designated in Schedule A hereto but only in accordance with the provisions of
Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio,
3
<PAGE>
other than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a securities depository or in
a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which the Custodian acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of
the Portfolio(s), which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
4
<PAGE>
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a
5
<PAGE>
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any
6
<PAGE>
deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
equivalent collateral or by a letter of credit equal at all times
to 100% of the market value of the securities loaned plus accrued
income, except that in connection with any loans for which
collateral is to be credited to
7
<PAGE>
the Custodian's account in the book-entry system authorized by
the U.S. Department of the Treasury, the Custodian will not be
held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or
8
<PAGE>
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
Futures Commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio;
14) Upon receipt of instructions from the Fund's transfer agent (the
"Transfer Agent"), for delivery to the Transfer Agent or to the
holders of shares in connection with distributions in kind, as
may be described from time to time in the currently effective
prospectus and statement of additional information of the
Portfolio (the "Prospectus") in satisfaction of requests by
holders of
9
<PAGE>
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Fund's Board
of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate
purpose and naming the person or persons to whom delivery of such
securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, or in the name or nominee name
of
10
<PAGE>
any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of a Portfolio under
the terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize its
best efforts only to collect timely income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each
Portfolio, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account
11
<PAGE>
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
PROVIDED, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of the
Portfolio be approved by vote of a majority of the Board of Trustees
of the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund on behalf of a Portfolio (i) invest in such
instruments as may be set forth in such instructions on the same day
as received all federal funds
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received after a time agreed upon by the Custodian and the Fund and
(ii) make federal funds available to the Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of funds received in respect of sales of securities by the
Portfolio and of funds obtained through borrowings, in each case which
are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law, or pursuant
to custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment
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all coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which a Portfolio is
properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of a Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out
monies of the Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures
14
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contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions
set forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form
15
<PAGE>
or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of
the Portfolio in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) From an account of the Portfolio located outside of the United
States (except as
16
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otherwise specified by the Fund for the Portfolio), for the
payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the
account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Portfolio whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) From an account of the Portfolio located outside of the United
States (except as otherwise specified by the Fund for the
Portfolio), for the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents of the
Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of
17
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the Portfolio, a certified copy of a resolution of the Fund's
Board of Trustees or of the Executive Committee signed by two
officers of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose and naming the
person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
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2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; PROVIDED, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder. In addition, the Custodian may appoint an
affiliate of the Custodian located outside of the United States to
perform such of its duties hereunder as are required to be performed
outside of the United States.
2.10 DEPOSIT OF PORTFOLIOS' ASSETS IN SECURITIES SYSTEMS. The Custodian
may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the Securities System in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
19
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rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account ("Securities System Account") of the Custodian in
the Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the
20
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Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Securities System Account, and (ii) the making
of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio. Copies of
all advices from the Securities System of transfers of securities
for the account of the Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account
of the Portfolio on the next
21
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business day;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the certificates required by Article 13 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the
22
<PAGE>
rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage; provided, that the Custodian shall,
notwithstanding such subrogation, reimburse the Portfolio for its
reasonable expenses in connection with such claim.
2.10A PORTFOLIO ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to
the following provisions;
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account of the Custodian in the Direct
23
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Paper System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written
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<PAGE>
advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the Direct Paper System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each Portfolio establish and
maintain a segregated account or accounts for and on behalf of each
such Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with
the provisions of any agreement among the Fund on behalf of the
Portfolio, the Custodian and a broker-dealer registered under the
Exchange Act and a member
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<PAGE>
of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of the
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio, (ii) for purposes of segregating
cash or government securities in connection with options purchased,
sold or written by the Portfolio or commodity futures contracts or
options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required
by Investment Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, BUT ONLY, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions from
the Fund on behalf of the
26
<PAGE>
Portfolio, a certified copy of a resolution of the Fund's Board of
Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such
27
<PAGE>
proxies, all proxy soliciting materials and all notices relating to
such securities.
2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of domestic
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to
the Portfolio all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Fund shall
28
<PAGE>
notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the
Portfolio's securities and other assets, if any, maintained outside
the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined
in Section 5 of this Contract together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of a Portfolio's assets.
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3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(l) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect a Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging
to the Portfolio, the foreign securities of the Portfolio held by each
foreign sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of any Portfolio
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking
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institution shall provide that: (a) the assets of each Portfolio will
not be subject to any right, charge, security interest, lien or claim
of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolio held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will
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<PAGE>
use its best efforts to arrange for the independent accountants of the
Fund to be afforded access to the books and records of any foreign
banking institution employed as a foreign sub-custodian insofar as
such books and records relate to the performance of such foreign
banking institution under its agreement with the Custodian.
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of each Portfolio held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio's securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Portfolio indicating,
as to securities acquired for the Portfolio, the identity of the
entity having physical possession of such securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph
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(b) of this Section 3.7, the provision of Sections 2.2 and 2.7 of this
Contract shall apply, MUTATIS MUTANDIS to the foreign securities of
each Portfolio held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities received for the
account of each Portfolio and delivery of securities maintained for
the account of the Portfolio may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee
33
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harmless from any liability as a holder of record of such securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians
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generally in this Contract and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by
paragraph 3.12 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war
or terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the foregoing provisions
of this paragraph 3.9, in delegating custody duties to State Street
London Ltd., the Custodian shall not be relieved of any responsibility
to the Fund for any loss due to such delegation, except such loss as
may result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to acts of God, nuclear
incident or other losses under
35
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circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Portfolio shall
be security therefor and should the Portfolio fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of the Portfolio's assets to the extent
necessary to obtain reimbursement.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually, if
applicable to the Fund, during the month of June, information
36
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concerning the foreign sub-custodians employed by the Custodian. In
addition, the Custodian will, as appropriate, promptly inform the Fund
in the event that the Custodian learns of a material adverse change in
the financial condition of a foreign sub-custodian or any loss of the
assets of a Portfolio or in the case of any foreign sub-custodian not
the subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 BRANCHES OF U.S. BANKS.
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of a Portfolio's assets is
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment
37
<PAGE>
Company Act of 1940 meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract. (b)
Cash held for each Portfolio in the United Kingdom shall be maintained
in an interest bearing account established for the Portfolio with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 TAX LAW.
(a) UNITED STATES TAXES. The Custodian shall have no responsibility
or liability for any obligations now or hereafter imposed on any
Portfolio or the Custodian as the Fund's custodian by the tax law of
the United States of America or any state or political subdivision
thereof.
(b) CLAIMING FOR EXEMPTION OR REFUND UNDER THE TAX LAWS OF NON-UNITED
STATES JURISDICTIONS. The sole responsibility of the Custodian with
regard to the tax law of non-United States jurisdictions shall be to
use reasonable efforts to cooperate with the Fund to assist
38
<PAGE>
in the process of making any claim for exemption or refund of any
charges that is being made by or for the benefit of the Fund.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE PORTFOLIOS
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of each Portfolio such
payments as are received for Shares of that Portfolio issued or sold from time
to time by the Fund. The Custodian will provide notification to the Fund on
behalf of each Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of that Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable resolutions of the
Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available to an
account maintained outside of the United States (except as specified by the
Fund) for payment to holders of Shares who have delivered to the Transfer Agent
a request for redemption or repurchase of their Shares.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this
39
<PAGE>
Contract means a writing signed or initialled by one or more person or persons
as the Board of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electromechanical or electronic devices
provided that the Board of Trustees and the Custodian are satisfied that such
procedures afford adequate safeguards for the assets of the Portfolio(s). For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.11.
40
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6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of
41
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the Fund. The Custodian may receive and accept a certified copy of a resolution
of the Board of Trustees of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such resolution or (b) of any
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such resolution, and such resolution may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of the Portfolio(s) and/or compute the net asset value per
share of the outstanding shares of the Portfolio(s).
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereof. All such records shall be the property
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of the Fund and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
10. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each Portfolio at such
times as the Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such
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inadequacies, the reports shall so state.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be
44
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without liability for any action reasonably taken or omitted pursuant to such
advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of a Portfolio in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to a
Portfolio's securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund,as a
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prerequisite to requiring the Custodian to take such action, shall provide
indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) for
the benefit of a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
13. EFFECTIVE PERIOD TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at
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any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of a certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has approved the use of a
particular Securities System by such Portfolio as required by Rule 17f-4 under
the Investment Company Act of 1940, as amended, and that the Custodian shall not
with respect to a Portfolio act under Section 2.10A hereof in the absence of
receipt of certificate of the Secretary or an Assistant Secretary that the Board
of Trustees has approved the use of the Direct Paper System by such Portfolio;
PROVIDED FURTHER, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and further provided, that the Fund on
behalf of the Portfolio(s) may at any time by action of its Board of Trustees
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this
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Contract in the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of the Portfolio(s)
shall pay to the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
14. SUCCESSOR CUSTODIAN
If a successor custodian for the Portfolio(s) shall be appointed by the
Board of Trustees of the Fund, the Custodian shall, upon termination, deliver to
such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities of the Portfolio(s) then held by it
hereunder and shall transfer to an account of the successor custodian all of the
securities of the Portfolio(s) held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a resolution of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in
48
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accordance with such resolution.
In the event that no written order designating a successor custodian or
certified copy of a resolution of the Board of Trustees shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $50,000,000, all securities, funds and other
properties held by the Custodian on behalf of the Portfolio(s) and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of the Portfolio(s) and to transfer to an
account of such successor custodian all of the securities of the Portfolio(s)
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the resolution referred to
or of the Board of Trustees to appoint a
49
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successor custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
15. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of the Portfolio(s), may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
16. ADDITIONAL SERIES
In the event that the Fund establishes one or more series of Shares in
addition to The JPM Advisor U.S. Fixed Income Fund, The JPM Advisor
International Fixed
50
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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 Emerging
Markets Equity Fund, The JPM Advisor Asia Growth Fund, The JPM Advisor European
Equity Fund, and The JPM Advisor Japan Equity Fund, with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
17. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
18. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Portfolios' assets.
19. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of
51
<PAGE>
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide a Portfolio's name, address and share
position to requesting companies whose securities the Portfolio owns. If the
Fund tells the Custodian "no", the Custodian will not provide this information
to requesting companies. If the Fund tells the Custodian "yes" or does not
check either "yes" or "no" below, the Custodian is required by the rule to treat
the Fund as consenting to disclosure of this information for all securities
owned by the Portfolio or any funds or accounts established by the Fund for the
Portfolio. For the Fund's protection, the Rule prohibits the requesting company
from using the Fund's or a Portfolio's name and address for any purpose other
than corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release a Portfolio's name,
address, and share positions.
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<PAGE>
NO [X] The Custodian is not authorized to release a Portfolio's name,
address, and share positions.
20. LIMITATION OF LIABILITY
The references herein to the Trustees of the Fund are to the Trustees of
the Fund as trustees and not individually or personally. The obligations of the
Fund entered into on behalf of the Fund by any of the Trustees are not made
individually but in their capacity as trustees and are not binding on any of the
Trustees personally. All persons dealing with the Fund must look solely to the
assets of the Fund for the enforcement of any claims against the Fund.
53
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
8th day of March, 1995.
THE JPM ADVISOR FUNDS
By /s/ James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
54
<PAGE>
SCHEDULE A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of The JPM Advisor
Funds for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
NOT APPLICABLE
Certified:
/s/ James B. Craver
Fund's Authorized Officer
James B. Craver
Date: March 8, 1995
55
<PAGE>
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and The JPM Advisor Funds (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated March 8, 1995[, as amended] (the "Custodian Contract");
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions Custodian Contract pursuant to which the custodian provides services
to the Fund;
NOW, THEREFORE, in consideration of the promises and covenants contained
herein, the Custodian and the Fund hereby agree as follows:
1. The existing Section 3.13 of the Custodian Contract shall be amended and
restated in its entirety to read as follows:
3.13 TAX LAW.
(a) UNITED STATES TAXES. The Custodian shall have no responsibility
or liability for any obligations now or hereafter imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of the United
States of America or any state or political subdivision thereof. The
Custodian will be responsible for informing the Fund of the income
received by the Fund which is United States source income and which is
not United States source income.
(b) CLAIMING FOR EXEMPTION OR REFUND UNDER THE TAX LAWS OF NON-UNITED
STATES JURISDICTIONS. The sole responsibility of the Custodian with
regard to the tax laws of non-United States jurisdictions shall be to
identify the income of the Fund which has been subject to withholding
and other tax assessments or other governmental charges by such
jurisdictions and the amount thereof and to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund of
such charges that can be made on behalf of the Fund.
2. The existing Article 8 of the Custodian Contract shall be amended and
restated in its entirety to read as follows:
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET INCOME. The Custodian shall keep the books of
account of each Portfolio of the Fund. Until otherwise directed
by Proper Instructions, the Custodian shall compute the net asset
value per share of the outstanding shares of each Portfolio of
Fund. The Custodian shall also calculate daily the net income of
each Portfolio of the Fund as described in the Fund's currently
effective prospectus for such Portfolio and shall advise the Fund
and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to
do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculation of the net asset value per share and the daily income
of each Portfolio of the Fund shall be
<PAGE>
made at the time or times described from time to time in the
Fund's currently effective prospectus for such Portfolio.
3. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this amendment to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative as of this first day of July, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
Name: Ronald E. Logue
Title: Executive Vice President
THE JPM ADVISOR FUNDS
By: /s/ John E. Baumgardner, Jr.
John E. Baumgardner, Jr.
Trustee
JPM506
<PAGE>
[The JPM Advisor Funds
60 State Street, Suite 1300
Boston, Massachusetts 02109
(617) 557-0700
[_________, 199_]
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
RE: CUSTODIAN CONTRACT AND TRANSFER AGENCY AND SERVICE AGREEMENT
This is to advise you that the Board of Trustees of The JPM Advisor Funds (the
"Fund") has established and organized a new series of shares of beneficial
interest (The JPM Advisor Diversified Fund) (the "Portfolio"). In accordance
with the additional funds provisions in Article 16 of the Custodian Contract
dated March 8, 1995 and in Section 10.01 of the Transfer Agency and Service
Agreement dated March 8, 1995 between the Fund and State Street Bank and Trust
Company ("State Street"), the Fund hereby requests that State Street act as
Custodian and Transfer Agent for the Portfolio under the terms of the respective
contracts.
Please indicate your acceptance of the foregoing by executing the eight
originals of this letter agreement, returning four to the Fund and retaining
four agreements for your records.
Very truly yours,
By ___________________________
Name:
Title:
Agreed to as of the ___ day of ______, 199_
STATE STREET BANK AND TRUST COMPANY
By ___________________________
Title:
[JPM259D]]
<PAGE>
Exhibit 9(a)
THE JPM ADVISOR FUNDS
CO-ADMINISTRATION AGREEMENT
CO-ADMINISTRATION AGREEMENT, dated as of August 1, 1996, by and between The
JPM Advisor Funds, a Massachusetts business trust having a Declaration of Trust
on file with the office of Secretary of State of the Commonwealth of
Massachusetts (the "Trust"), and Funds Distributor, Inc., a Massachusetts
corporation (the "Co-Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940 (collectively with the rules
and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Shares of Beneficial Interest (par value $0.001 per share) of
the Trust (the "Shares") are divided into multiple series (together with any
series which may in the future be established, the "Series" or the "Fund"); and
WHEREAS, the Trust wishes to engage the Co-Administrator to provide certain
administrative and management services, and the Co-Administrator is willing to
provide such administrative and management services to the Trust and each
Series, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF THE CO-ADMINISTRATOR. Subject to the general direction and
control of the Board of Trustees of the Trust, the Co-Administrator shall
perform the following administrative and management services: (a) providing or
obtaining office space, equipment and clerical personnel necessary for
maintaining the organization of the Trust, including a principal office in
Massachusetts, and for performing the administrative and management functions
herein set forth; (b) arranging for Directors, officers and employees of the Co-
Administrator or its agents, reasonably acceptable to the Trustees, to serve as
Trustees, officers or agents of the Trust and perform the duties incident to
their office, if duly elected or appointed to such positions and subject to
their individual consent and to any limitations imposed by law; (c) preparing
such reports, applications and documents (including reports regarding the sale
and redemption of Shares as reported by the Trust's transfer agent as may be
required in order to comply with state securities laws) as may be necessary or
desirable to register Shares with state securities authorities, monitoring the
sale of Shares as reported by the Trust's transfer agent for compliance with
state securities laws, and filing with the appropriate state securities
authorities the registration statements and reports for the Trust and the Shares
and all amendments thereto, as may be necessary or convenient to register and
keep effective the Trust and the Shares with state securities authorities to
enable the Trust to make a continuous offering of Shares; (d) reviewing and
filing with the National Association of Securities Dealers all marketing and
sales literature provided to the Co-Administrator on behalf of the Trust; and
(e) maintaining books and records of the Trust related to the foregoing. In the
performance of its duties under this Agreement, the Co-Administrator will comply
with the provisions of the Declaration of Trust and By-Laws of the Trust and the
Trust's stated investment objectives, policies and restrictions and will use its
best efforts to safeguard and promote the welfare of the Trust and to comply
with other policies which the Board of Trustees may from time to time determine.
Notwithstanding the foregoing, the Co-Administrator shall not be
1
<PAGE>
deemed to have assumed any duties with respect to this Agreement, including,
without limitation, any responsibility for the management of the Trust's assets
or the rendering of investment advice and supervision with respect thereto, nor
shall the Co-Administrator be deemed to have assumed or have any responsibility
with respect to functions specifically assumed by any transfer agent, custodian
or other administrative service provider of the Trust. The Co-Administrator
undertakes to comply with all applicable requirements of the federal securities
laws and any other laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by it hereunder.
2. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Co-Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request.
3. ALLOCATION OF CHARGES AND EXPENSES. The Co-Administrator shall pay the
entire salaries and wages of all of the Trust's Trustees, officers and agents
who devote part or all of their time to the affairs of the Co-Administrator or
its affiliates, and the wages and salaries of such persons shall not be deemed
to be expenses incurred by the Trust for purposes of this Section 3. Except as
provided in the foregoing sentence, the Co-Administrator shall not pay other
expenses relating to the Trust including, without limitation, compensation of
Trustees not affiliated with the Co-Administrator; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Trust; fees and expenses of the Trust's independent auditors, of legal
counsel and of any transfer agent, distributor, shareholder servicing agent,
registrar or dividend disbursing agent of the Trust; expenses of distributing
and redeeming Shares and servicing shareholder accounts; expenses of preparing,
printing and mailing prospectuses and statements of additional information,
reports, notices, proxy statements and reports to shareholders and governmental
officers and commissions; expenses of preparing and mailing agendas and
supporting documents for meetings of Trustees and committees of Trustees;
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of the Trust's
custodian for all services to the Trust, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of the Shares; expenses of shareholder meetings; and
expenses relating to the issuance, registration and qualification of Shares.
4. COMPENSATION OF CO-ADMINISTRATOR. For the services to be rendered and
the facilities to be provided by the Co-Administrator hereunder, the Co-
Administrator shall receive a fee from each such Series of the Trust as agreed
by the Trust and the Co-Administrator from time to time as set forth on Schedule
A attached hereto. This fee will be payable as agreed by the Trust and the Co-
Administrator, but no more frequently than monthly.
5. LIMITATION OF LIABILITY OF THE CO-ADMINISTRATOR. The Co-Administrator
shall not be liable for any error of judgment or mistake of law or for any act
or omission in the administration or management of the Trust or the performance
of its duties hereunder, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of the reckless
disregard of its obligations and duties hereunder. As used in this Section 5,
the term "Co-Administrator" shall include Funds Distributor, Inc. and/or any of
its affiliates and the Directors, officers and employees of Funds Distributor,
Inc. and/or of its affiliates.
6. ACTIVITIES OF THE CO-ADMINISTRATOR. The services of the Co-
Administrator to the Trust are not to be deemed to be exclusive, the Co-
Administrator being free to render administrative and/or other services to other
parties. It is understood that Trustees, officers, and shareholders of the
Trust are or may become interested in the Co-Administrator and/or any of
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<PAGE>
its affiliates, as Directors, officers, employees, or otherwise, and that
Directors, officers and employees of the Co-Administrator and/or any of its
affiliates are or may become similarly interested in the Trust and that the Co-
Administrator and/or any of its affiliates may be or become interested in the
Trust as a shareholder or otherwise.
7. TERMINATION. This Agreement may be terminated as to any Series at any
time, without the payment of any penalty, by the Board of Trustees of the Trust
or by the Co-Administrator, in each case on not more than 60 days' nor less than
30 days' written notice to the other party.
8. SUBCONTRACTING BY THE CO-ADMINISTRATOR. The Co-Administrator may
subcontract for the performance of its obligations hereunder with any one or
more persons; PROVIDED, HOWEVER, that the Co-Administrator may subcontract
hereunder only with the prior consent of the Trustees of the Trust; and
PROVIDED, FURTHER, that, unless the Trust otherwise expressly agrees in writing,
the Co-Administrator shall be as fully responsible to the Trust for the acts and
omissions of any subcontractor as it would be for its own acts or omissions.
9. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
10. AMENDMENTS. This Agreement may be amended by only mutual written
consent.
11. CONFIDENTIALITY. The Co-Administrator agrees on behalf of itself and
its employees to treat confidentially and as proprietary information of the
Trust all records and other information not otherwise publicly available
relative to the Trust and its prior, present or potential shareholders and not
to use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Co-Administrator may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.
12. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. Should any part of this Agreement be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law.
13. NOTICE. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Co-Administrator at 60 State
Street, 13th Floor, Boston, Massachusetts 02109, Attention: President with a
copy to General Counsel; or (2) to the Trust at 60 State Street, 13th Floor,
Boston, Massachusetts 02109, Attention: Treasurer, or at such other address as
either party may from time to time specify to the other party pursuant to this
section, with a copy to Morgan Guaranty Trust Company of New York, 522 Fifth
Avenue, New York, New York 10036, Attention: Funds Management.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Trust has executed this Agreement not individually,
but as an officer of the Trust under the Trust's Declaration of Trust, dated
September 16, 1994 as amended, and the obligations of this Agreement are not
binding upon any of the Trustees or shareholders of the Trust individually, but
bind only the Trust estate.
THE JPM ADVISOR FUNDS
By /s/ John E. Pelletier
John E. Pelletier, Vice President
and Secretary
FUNDS DISTRIBUTOR, INC.
By /s/ Marie E. Connolly
Marie E. Connolly, President and
Chief Executive Officer
4
JPM350B.DOC
<PAGE>
SCHEDULE A
The Co-Administrator's annual fee charged to and payable by each Covered
Entity as defined below is its share of an annual complex-wide charge. The
annual complex-wide charge is:
(a) $425,000 for all Covered Entities, PROVIDED that such charge shall be
increased by $5,000 for each Covered Entity in excess of 100, plus
(b) out-of-pocket charges for any services subcontracted pursuant to co-
administration agreements with Covered Entities.
The portion of this charge payable by each Covered Entity is (i) in the case of
any charges described in paragraph (b) directly attributable to a particular
Covered Entity, the amount attributable to such Covered Entity, plus (ii) in the
case of all other amounts, the amount determined by the proportionate share that
such Covered Entity's net assets bear to the total net assets of the Covered
Entities.
A Covered Entity is any series of The Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds, the Portfolios in which they invest, and each
other current or future mutual fund (or series thereof) for which both (1) a tax
return is filed with the Internal Revenue Service under United States tax law
and (2) Morgan Guaranty Trust Company of New York provides investment advice
and/or administrative services and the Co-Administrator provides administration
services.
Approved: July 18, 1996
Effective August 1, 1996
JPM350B.DOC
<PAGE>
Exhibit 9(b)
THE JPM ADVISOR FUNDS
SERVICES AGREEMENT
SERVICES AGREEMENT, dated as of March 8, 1995, as amended and restated
August 1, 1996, by and between The JPM Advisor Funds, a Massachusetts business
trust having a Declaration of Trust on file with the office of Secretary of
State of the Commonwealth of Massachusetts (the "Trust"), and Morgan Guaranty
Trust Company of New York, a New York trust company ("Morgan").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940 (collectively with the rules
and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Shares of Beneficial Interest (par value $0.001 per share) of
the Trust (the "Shares") are divided into multiple series (together with any
other series which may in the future be established, the "Funds"); and
WHEREAS, transactions in Shares may be made by investors who are using the
services of a financial institution which is acting as services agent pursuant
to an agreement with the Trust; and
WHEREAS, Morgan wishes to act as the services agent for its customers and
for other investors in the Trust who are customers of an Eligible Institution as
contemplated by and defined in the currently effective prospectus of the
respective Fund of the Trust (the "Customers") in performing certain
administrative functions in connection with purchases and redemptions of Shares
from time to time upon the order and for the account of Customers and to provide
related services to Customers in connection with their investments in the Trust;
and
WHEREAS, it is in the interest of the Trust to make the shareholder
services of Morgan available to Customers who are or may become shareholders of
the Trust; and
WHEREAS, the Trust wishes to engage Morgan to provide certain
administrative and related services, and Morgan is willing to provide such
services to the Trust and each Fund, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the Trust and Morgan hereby agree as follows:
1. APPOINTMENT. Morgan hereby agrees to perform certain shareholder
services as agent for Customers and certain administrative and related services
for the Trust as hereinafter set forth.
2. SERVICES.
2.1 Morgan shall be responsible for performing the following services:
a) answering Customer inquiries regarding account status and history, the manner
in which purchases and redemptions of Shares may be effected, and certain other
matters pertaining to the Trust; b) assisting Customers in designating and
changing dividend options, account designations and addresses; c) providing
necessary personnel and facilities to coordinate the establishment and
maintenance of shareholder accounts and records with the Trust's transfer agent
(the "Transfer Agent"); d) receiving Customers' purchase and redemption orders
on behalf of, and transmitting such orders to,
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the Transfer Agent; e) arranging for the wiring or other transfer of funds to
and from Customer accounts in connection with Customer orders to purchase or
redeem Shares; f) verifying purchase and redemption orders, transfers among and
changes in Customer-designated accounts; g) informing the distributor of the
Trust of the gross amount of purchase and redemption orders for Shares;
h) monitoring the activities of the Transfer Agent related to Customer accounts
and to statements, confirmations or other reports furnished to Customers by the
Transfer Agent; i) arranging for the preparation and filing of the Trust's tax
returns and preparing financial statements and other financial reports for
review by the Trust's independent auditors; j) coordinating the annual audit of
each Fund; k) developing the budget and establishing the rate of expense accrual
for each Fund; l) overseeing the preparation by the Transfer Agent of tax
information for shareholders; m) overseeing the Trust's custodian (the
"Custodian") and the Transfer Agent and other service providers, including
expense disbursement, verifying the calculation of Fund performance data and the
reporting thereof to appropriate tracking services, computing the amount and
monitoring the frequency of distributing Fund dividends and capital gains
distributions and confirming that they have been properly distributed to the
shareholders of record; and monitoring calculation of net asset value of Shares
by the Custodian; n) taking responsibility for compliance with all applicable
federal securities and other regulatory requirements (other than state
securities registration and filing requirements); o) taking responsibility for
monitoring each Fund's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"); p) arranging for the
preparation of agendas and supporting documents for and minutes of meetings of
Trustees, committees of Trustees, and shareholders; q) maintaining books and
record relating to such services; and r) being responsible for the Trust's usual
and customary expenses as defined in Section 5.1 of this Agreement.
2.2 Morgan shall keep the books of account of each Fund. Until otherwise
directed by the Trust, Morgan shall compute the net asset value per share of the
outstanding shares of each Fund. Morgan shall also calculate daily the net
income of each Fund as described in the Trust's currently effective prospectus
related to such Fund and shall advise the Trust and the Transfer Agent daily of
the total amount of such net income and, if instructed in writing by an officer
of the Trust to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The calculations of
the net asset value per share and the daily income of each Fund shall be made at
the time or times described from time to time in the Trust's currently effective
prospectus related to such Fund.
2.3 Morgan, shall act as liaison with the Trust's independent public
accountants and shall provide, upon request, account analyses, fiscal year
summaries and other audit-related schedules. Morgan shall take all reasonable
action in the performance of its obligations under this Agreement to assure that
the necessary information is made available to such accountants for the
expression of their opinion, as such may be required by the Trust from time to
time.
2.4 Morgan shall provide such other related services as the Trust or a
Customer may reasonably request, to the extent permitted by applicable law.
Morgan shall provide all personnel and facilities necessary in order for it to
provide the services contemplated by this paragraph.
Morgan assumes no responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and conditions provided
herein. In the performance of its duties under this Agreement, Morgan will
comply with the provisions of the Declaration of Trust and By-Laws of the Trust
and the stated investment objective, policies and restrictions of each Fund, and
will use its best efforts to safeguard and promote the welfare of
2
<PAGE>
the Trust, and to comply with other policies which the Trust's Board of Trustees
may from time to time determine.
3. BOOKS AND RECORDS. Morgan shall with respect to each Fund create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Trust under the
1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Trust and shall
at all times during the regular business hours of Morgan be open for inspection
by duly authorized officers, employees or agents of the Securities and Exchange
Commission. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Morgan hereby agrees that all records which it maintains for the Fund are
the property of the Trust and further agrees to surrender promptly to the Trust
any such record upon the Trust's request.
4. OPINION OF TRUST'S INDEPENDENT ACCOUNTANTS. Morgan shall take all
reasonable action, as the Trust on behalf of each applicable Fund may from time
to time request, to obtain from year to year favorable opinions from the Trust's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Trust's Form N-1A, Form N-SAR or other periodic
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
5. ALLOCATION OF CHARGES AND EXPENSES.
5.1 Morgan shall bear all of the expenses incurred in connection with
carrying out its duties hereunder. In addition, Morgan is responsible for
certain usual and customary expenses incurred by the Trust. These expenses
include compensation of Trustees; federal and state governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Trust; fees and expenses of the Trust's administrator, any provider other
than Morgan of services to the Trust under a co-administration agreement (the
"Co-Administrator"), independent auditors, legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; expenses of
preparing, printing and mailing prospectuses and statements of additional
information, reports, notices, proxy statements and reports to shareholders and
governmental offices and commissions; expenses of preparing and mailing agendas
and supporting documents for meetings of Trustees and committees of Trustees;
insurance premiums; fees and expenses of the Custodian for all services to the
Trust, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of Shares;
expenses of shareholder meetings; and expenses relating to the issuance,
registration and qualification of Shares.
When such services are provided by third parties and the Trust pays for the
services directly, such amounts will be deducted from the fee to be paid Morgan
under this Agreement. If such amounts are more than the amount of Morgan's fee
under this Agreement, Morgan will reimburse the Trust for such excess amounts.
Morgan will report to the Trustees regularly on the payments it has made
pursuant to this Section 5.1.
5.2 The Trust will pay all extraordinary expenses not incurred in the
ordinary course of the Trust's business including but not limited to litigation
and indemnification expenses; material increases in Trust expenses due to
occurrences such as significant increases in the fee schedules of the Custodian
or the Transfer Agent or a significant decrease in the Trust's asset level due
to changes in tax or other laws or regulations; or other such extraordinary
occurrences outside of the ordinary course of the Trust's business.
3
<PAGE>
6. COMPENSATION OF MORGAN. For the services to be rendered and the fees
and expenses to be borne by Morgan hereunder, the Trust shall pay Morgan a fee
at an annual rate as set forth on Schedule A attached hereto from each Fund;
provided, however, that the portion of such fee attributable to Morgan's
shareholder services for the shareholders of any Fund shall not exceed the
amount payable at an annual rate of 0.25% of the daily net asset values of such
Fund's Shares owned by or for Customers and attributable to the Trust as set
forth on Schedule A attached hereto. This fee will be computed daily and will
be payable as agreed by the Trust and Morgan, but no more frequently than
monthly.
7. INFORMATION PERTAINING TO THE SHARES, ETC. Morgan and its officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares except to communicate to Customers accurately factual
information contained in the Trust's prospectuses and statement of additional
information and objective historical performance information. Morgan shall act
as agent for Customers only in furnishing information regarding the Trust or the
Shares and shall have no authority to act as agent for the Trust in its capacity
as shareholder servicing agent hereunder.
During the term of this Agreement, the Trust agrees to furnish Morgan all
prospectuses, statements of additional information, proxy statements, reports to
shareholders, sales literature, or other material the Trust will distribute to
shareholders of each Fund or the public, which refer in any way to Morgan, and
Morgan agrees to furnish the Trust all material prepared for Customers, in each
case prior to use thereof, and not to use such material if the other party
reasonably objects in writing within five business days (or such other time as
may be mutually agreed in writing) after receipt thereof. In the event of
termination of this Agreement, the Trust will continue to furnish to Morgan
copies of any of the above-mentioned materials which refer in any way to Morgan.
The Trust shall furnish or otherwise make available to Morgan such other
information relating to the business affairs of the Trust as Morgan at any time,
or from time to time, reasonably requests in order to discharge its obligations
hereunder.
Nothing in this Section 7 shall be construed to make the Trust liable for
the use of any information about the Trust which is disseminated by Morgan.
8. USE OF MORGAN'S NAME. The Trust shall not use the name of Morgan in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by Morgan prior thereto in writing; provided, however, that
the approval of Morgan shall not be required for any use of its name which
merely refers in accurate and factual terms to its appointment hereunder or as
investment advisor to the separately registered investment companies in which
the Trust invests or which is required by the Securities and Exchange Commission
or any state securities authority or any other appropriate regulatory,
governmental or judicial authority; provided, further, that in no event shall
such approval be unreasonably withheld or delayed.
9. USE OF THE TRUST'S NAME. Morgan shall not use the name of the Trust on
any checks, bank drafts, bank statements or forms for other than internal use in
a manner not approved by the Trust prior thereto in writing; provided, however,
that the approval of the Trust shall not be required for the use of the Trust's
name in connection with communications permitted by Sections 2.1 and 7 hereof or
for any use of the Trust's name which merely refers in accurate and factual
terms to Morgan's role hereunder or as investment advisor as set forth above or
which is required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory, governmental or
judicial authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
4
<PAGE>
10. SECURITY. Morgan represents and warrants that the various procedures
and systems which it has implemented with regard to safeguarding from loss or
damage attributable to fire, theft or any other cause any Trust records and
other data and Morgan's records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as in its judgment are required
for the secure performance of its obligations hereunder. The parties shall
review such systems and procedures on a periodic basis, and the Trust shall from
time to time specify the types of records and other data of the Trust to be
safeguarded in accordance with this Section 10.
11. FORCE MAJEURE. Morgan shall not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including, but not
limited to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure of communication or power supply.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION OF MORGAN. The Trust will indemnify and hold Morgan
harmless, from all losses, claims, damages, liabilities or expenses (including
reasonable fees and disbursements of counsel) from any claim, demand, action or
suit (collectively, "Claims") (a) arising in connection with misstatements or
omissions in the Trust's prospectuses, actions or inactions by the Trust or any
of its other agents or contractors, or the performance of Morgan's obligations
hereunder and (b) not resulting from the willful misfeasance, bad faith or gross
negligence of Morgan, its officers, employees or agents, in the performance of
Morgan's duties or from reckless disregard by Morgan, its officers, employees or
agents of Morgan's obligations and duties under this Agreement. Notwithstanding
anything herein to the contrary, the Trust will indemnify and hold Morgan
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any Claim as a
result of Morgan's acting in accordance with any written instructions reasonably
believed by Morgan to have been executed by any person duly authorized by the
Trust, or as a result of acting in reliance upon any instrument or stock
certificate reasonably believed by Morgan to have been genuine and signed,
countersigned or executed by a person duly authorized by the Trust, excepting
only the gross negligence or bad faith of Morgan.
In any case in which the Trust may be asked to indemnify or hold Morgan
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question, and Morgan shall use reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Trust. The Trust
shall have the option to defend Morgan against any Claim which may be the
subject of indemnification under this Section 12.1. In the event that the Trust
elects to defend against such Claim, the defense shall be conducted by counsel
chosen by the Trust and reasonably satisfactory to Morgan. Morgan may retain
additional counsel at its own expense. Except with the prior written consent of
the Trust, Morgan shall not confess any Claim or make any compromise in any case
in which the Trust will be asked to indemnify Morgan.
12.2 INDEMNIFICATION OF THE TRUST. Without limiting the rights of the
Trust under applicable law, Morgan will indemnify and hold the Trust harmless
from all losses, claims, damages, liabilities or expenses (including reasonable
fees and disbursements of counsel) from any Claim (a) resulting from the willful
misfeasance, bad faith or gross negligence of Morgan, its officers, employees or
agents, in the performance of Morgan's duties or from reckless disregard by
Morgan, its officers, employees or agents of Morgan's obligations and duties
under this Agreement, and (b) not resulting from Morgan's actions in accordance
with written instructions reasonably believed
5
<PAGE>
by Morgan to have been executed by any person duly authorized by the Trust, or
in reliance upon any instrument or stock certificate reasonably believed by
Morgan to have been genuine and signed, countersigned or executed by a person
authorized by the Trust.
In any case in which Morgan may be asked to indemnify or hold the Trust
harmless, Morgan shall be advised of all pertinent facts concerning the
situation in question and the Trust shall use reasonable care to identify and
notify Morgan promptly concerning any situation which presents or appears likely
to present a claim for indemnification against Morgan. Morgan shall have the
option to defend the Trust against any Claim which may be the subject of
indemnification under this Section 12.2. In the event that Morgan elects to
defend against such Claim, the defense shall be conducted by counsel chosen by
Morgan and reasonably satisfactory to the Trust. The Trust may retain
additional counsel at its own expense. Except with the prior written consent of
Morgan, the Trust shall not confess any Claim or make any compromise in any case
in which Morgan will be asked to indemnify the Trust.
12.3 SURVIVAL OF INDEMNITIES. The indemnities granted by the parties in
this Section 12 shall survive the termination of this Agreement.
13. ACTIVITIES OF MORGAN. The services of Morgan to the Trust are not to
be deemed to be exclusive, Morgan being free to engage in any other business or
to render services of any kind to any other corporation, firm, individual or
association.
14. SUBCONTRACTING BY MORGAN. Morgan may subcontract for the performance
of its obligations hereunder with any one or more persons, including but not
limited to any one or more persons which is an affiliate of Morgan; provided,
however, unless the Trust otherwise expressly agrees in writing, Morgan shall be
as fully responsible to the Trust for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
15. TERMINATION. This Agreement may be terminated as to any Fund at any
time, without the payment of any penalty, by the Board of Trustees of the Trust
or by Morgan, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party.
16. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
17. AMENDMENTS. This Agreement may be amended only by mutual written
consent.
18. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. Should any part of this Agreement be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law.
19. NOTICE. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid (1) to Morgan at Morgan Guaranty Trust Company
of New York, 522 Fifth Avenue, New York, New York 10036, Attention: Managing
Director, Funds Management or (2) to the Trust at The JPM Advisor
6
<PAGE>
Funds at its principal place of business as provided to Morgan, Attention:
Treasurer.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Trust has executed this Agreement not individually,
but as an officer of the Trust under the Trust's Declaration of Trust and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of the Trust individually, but bind only the Trust estate.
THE JPM ADVISOR FUNDS
By: /s/ Elizabeth A. Bachman
Elizabeth A. Bachman
Vice President and Assistant Secretary
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Stephen H. Hopkins
Stephen H. Hopkins
Vice President
7
JPMASA3.DOC
<PAGE>
SCHEDULE A
FEES UNDER SERVICES AGREEMENT
THE JPM ADVISOR U.S. FIXED INCOME FUND
0.60% of the average daily net assets of the Fund
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
0.68% of the average daily net assets of the Fund
THE JPM ADVISOR U.S. EQUITY FUND
THE JPM ADVISOR U.S. SMALL CAP EQUITY FUND
THE JPM ADVISOR DIVERSIFIED FUND
0.69% of the average daily net assets of the Fund
THE JPM ADVISOR ASIA GROWTH EQUITY FUND
THE JPM ADVISOR EUROPEAN EQUITY FUND
THE JPM ADVISOR JAPAN EQUITY FUND
0.75% of the average daily net assets of the Fund
THE JPM ADVISOR INTERNATIONAL EQUITY FUND
0.76% of the average daily net assets of the Fund
THE JPM ADVISOR EMERGING MARKETS EQUITY FUND
0.77% of the average daily net assets of the Fund
Approved: May 21, 1996
JPMASA3.DOC
<PAGE>
Exhibit 9(c)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE JPM ADVISOR FUNDS
and
STATE STREET BANK AND TRUST COMPANY
JPM259D
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 Terms of Appointment; Duties of the Bank........................ 2
Article 2 Fees and Expenses .............................................. 5
Article 3 Representations and Warranties of the Bank...................... 6
Article 4 Representations and Warranties of the Fund...................... 7
Article 5 Data Access and Proprietary Information ........................ 8
Article 6 Indemnification ................................................ 10
Article 7 Standard of Care................................................ 14
Article 8 Covenants of the Fund and the Bank.............................. 14
Article 9 Termination of Agreement ....................................... 16
Article 10 Additional Funds .............................................. 16
Article 11 Assignment .................................................... 17
Article 12 Amendment ..................................................... 17
Article 13 Massachusetts Law to Apply..................................... 18
Article 14 Merger of Agreement............................................ 18
Article 15 Limitations of Liability of the Trustees and the
Shareholders .................................................. 18
Article 16 Counterparts .................................................. 18
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 8th day of March, 1995, by and between THE JPM
ADVISOR FUNDS, a Massachusetts business trust, having its principal office and
place of business at 6 St. James Avenue, Boston, Massachusetts 02116 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund has established and will offer and continue to offer
shares in nine series initially, 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 Emerging Markets Equity Fund, The JPM Advisor Asia Growth
Fund, The JPM Advisor European Equity Fund and The JPM Advisor Japan Equity Fund
(such series, together with all other series subsequently established by the
Fund and made subject to this Agreement in accordance with Article 10, being
herein referred to as a "Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank
as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with
<PAGE>
certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund, on behalf of the Portfolios, hereby employs and appoints
the Bank to act as, and the Bank agrees to act as its transfer agent for the
authorized and issued shares of beneficial interest of the Fund representing
interests in each of the respective Portfolios ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of each
of the respective Portfolios of the Fund ("Shareholders") and set out in the
currently effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio, including
without limitation any periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation thereof to the
Custodian of the Fund
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<PAGE>
authorized pursuant to the Declaration of Trust of the Fund
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive redemption requests and redemption directions and
deliver the appropriate documentation thereof to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Report abandoned property to the various states as
authorized by the Fund per policies and principles agreed
upon by the Fund and the Bank;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares which are authorized,
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<PAGE>
based upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of Shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i) perform
the customary services of a transfer agent, dividend disbursing agent, custodian
of certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and
-4-
<PAGE>
other confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor the
total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to providing the system referred to
above, the initial establishment of transactions subject to blue sky compliance
by the Fund and the reporting of such transactions to the Fund as provided
above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the Fund
on behalf of each Portfolio and the Bank per the attached service responsibility
schedule. The Bank may at times perform only a portion of these services and
the Fund or its agent may perform these services on the Fund's behalf.
Article 2 FEES AND EXPENSES
2.01 For performance by the Bank pursuant to this Agreement, the
Fund agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees
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<PAGE>
and out-of-pocket expenses and advances identified under Section 2.02 below may
be changed from time to time subject to mutual written agreement between the
Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees on behalf of each of the Portfolios to reimburse the Bank for out-
of-pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies, records
storage or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the Bank
at the request or with the consent of the Fund, will be reimbursed by the Fund
on behalf of the applicable Portfolio.
2.03 The Fund agrees on behalf of each of the Portfolios to pay
all fees and reimbursable expenses promptly following the receipt of the
respective billing notice. Procedures applicable to advance payment by the Fund
to the Bank of postage for mailing dividends, proxies, Fund reports and other
mailings to Shareholder accounts may be established from time to time by
agreement between the Fund and the Bank.
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
-6-
<PAGE>
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and the Fund will use its best efforts to continue to make such filings with
respect to all Shares of the Fund being offered for sale.
-7-
<PAGE>
Article 5 DATA ACCESS AND PROPRIETARY INFORMATION
5.01 The Fund acknowledges that the data bases, computer
programs, screen format, report formats, interactive design techniques, and
documentation manuals (collectively, "Proprietary Information") furnished to the
Fund by the Bank as part of the Fund's ability to access certain Fund-related
data ("Customer Data") maintained by the Bank on data bases under the control
and ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to the Bank and further agrees that it
shall not divulge any Proprietary Information to any person or organization
except as may be provided hereunder. Without limiting the foregoing, the Fund
agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such
-8-
<PAGE>
information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data
required hereunder from being retransmitted to any other
computer facility or other location, except with the prior
written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal
copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall use its best efforts to
promptly correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND
-9-
<PAGE>
ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the
ability to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions are known as "Customer
Originated Electronic Financial Instructions" or "COEFI"), then in such event
the Bank shall be entitled to rely on the validity and authenticity of such
instruction without undertaking any further inquiry as long as such instruction
is undertaken in conformity with security procedures established by the Bank
from time to time.
Article 6 INDEMNIFICATION
6.01 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to any claim,
demand, action or suit in connection with:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
-10-
<PAGE>
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state unless any such violation results from failure of the system provided by
the Bank to Section 1.02 (b) to operate properly.
6.02 The Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to any action or
failure or omission to act by the Bank as a result of the Bank's lack of good
faith, negligence or willful misconduct.
-11-
<PAGE>
6.03 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund on behalf of the applicable Portfolio for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a co-
transfer agent or co-registrar.
6.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage
-12-
<PAGE>
reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes, provided
that the Bank shall use its best efforts to minimize the likelihood of all
damage, loss of data, delays and errors resulting from uncontrollable events,
and if such damage, loss of data, delays or errors occur, the Bank shall use its
best efforts to mitigate the effects of such occurrence.
6.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
6.06 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
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<PAGE>
Article 7 STANDARD OF CARE
7.01 The Bank shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees.
Article 8 COVENANTS OF THE FUND AND THE BANK
8.01 The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the
Fund authorizing the appointment of the Bank and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund
and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices. The forms and documents used for the Fund or its
Shareholders shall be acceptable to the Fund.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as may
be reasonably acceptable to the Fund. To the
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<PAGE>
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law. Notice shall be given to
the other party a reasonable time in advance of any such disclosure. In
addition, in the case of any request or demand for the inspection of the
Shareholder records of the Fund, the Bank will notify the Fund promptly of
receipt of such request or demand and request instructions from an authorized
officer of the Fund as to such inspection. The Fund will, within two business
days, furnish instructions to the Bank. Pending receipt of such instructions,
the Bank will not disclose such Shareholder records and upon receipt the Bank
will abide by such instructions. Notwithstanding any other provision of this
Agreement, in the event that (i) the Fund instructs the Bank not to disclose
such Shareholder records and the Bank has furnished the Fund with an opinion of
counsel that the Bank may be held liable for the failure to disclose such
-15-
<PAGE>
Shareholder records, the Fund will indemnify the Bank for any such liability, or
(ii) the Bank discloses such Shareholder records without proper instructions
from the Fund, the Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to such
disclosure. The provision of Section 6.06 shall govern such indemnification.
Article 9 TERMINATION OF AGREEMENT
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally, the
Bank reserves the right to charge for any other reasonable expenses associated
with such termination.
Article 10 ADDITIONAL FUNDS
10.01 In the event that the Fund establishes one or more series of
Shares in addition to 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 Emerging Markets Equity Fund, The JPM Advisor Asia Growth Fund,
The JPM Advisor European Equity Fund and The JPM Advisor Japan Equity Fund with
respect to which it desires to have the Bank render services as transfer agent
under the terms hereof, it shall so
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<PAGE>
notify the Bank in writing, and if the Bank agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
Article 11 ASSIGNMENT
11.01 Except as provided in Section 11.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
Article 12 AMENDMENT
12.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Trustees of the Fund.
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<PAGE>
Article 13 MASSACHUSETTS LAW TO APPLY
13.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 14 MERGER OF AGREEMENT
14.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 15 LIMITATIONS OF LIABILITY OF THE TRUSTEES AND THE
SHAREHOLDERS
15.01 A copy of the Declaration of Trust of the Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or Shareholders individually but are
binding only upon the assets and property of the Fund. Article 16 COUNTERPARTS
16.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
THE JPM ADVISOR FUNDS
BY: /s/ James B. Craver
James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
Executive Vice President
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<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
RESPONSIBILITY
SERVICE PERFORMED BANK FUND
- ----------------- ---- ----
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with broker-dealers. N/A
5. Pay over monies to redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control book
for each issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and non-resident alien
accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation statements for
Shareholders. X
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<PAGE>
RESPONSIBILITY
SERVICE PERFORMED BANK FUND
- ----------------- ---- ----
18. Provide Shareholder account information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a), (b) and (c) of
the Agreement.
THE JPM ADVISOR FUNDS
BY: /s/ James B. Craver
James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
Executive Vice President
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<PAGE>
[logo] State Street [registered trademark]
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105-1713
STATE STREET BANK & TRUST CO.
FEE INFORMATION FOR SERVICES AS
TRANSFER AND DIVIDEND DISBURSING AGENT
THE JPM ADVISOR FUNDS
GENERAL: Fees are based on annual per shareholder account charges for account
maintenance. Fees are billable on a monthly basis at the rate of 1/12
of the annual fee. A charge is made for an account in the month that
an account opens or closes.
ANNUAL MAINTENANCE CHARGE:
[bullet] Daily Dividend Funds - Per Account, Per Year $20.00
[bullet] Non-daily Dividend Funds - Per Account, Per Year $15.00
[bullet] There would be a minimum charge per Fund of $16,000 per annum.
OTHER FEES:
[bullet] Closed Accounts, Per Account, Per Month $0.10
[bullet] Disaster Recovery/Emergency Backup per Account
Serviced Per Year $0.25
[bullet] Investor Account, Per Year $1.80
The following features will each be assessed additional charges as an add-on to
the annual per account rate.
[bullet] Transmissions, Per Type, Per Month $300.00
[bullet] Super Selects $100.00
[bullet] Custom Tape Generations $150.00
[bullet] Spacs $25.00
OUT OF POCKET EXPENSES:
[bullet] Out-of-Pocket expenses include but are not limited to: confirmation
statements, stationery, forms, postage, microfilm, microfiche, and
expenses incurred at the specific direction of the fund.
THE JPM ADVISOR FUNDS STATE STREET BANK & TRUST CO.
By: /s/ Thomas M. Lenz By: /s/ [indistinguishable]
Title: Secretary Title: Vice President
Date 5/9/96 Date: 5/29/96
[JPM259D]
<PAGE>
[ The JPM Advisor Funds
60 State Street, Suite 1300
Boston, Massachusetts 02109
(617) 557-0700
[_________, 199_]
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
RE: CUSTODIAN CONTRACT AND TRANSFER AGENCY AND SERVICE AGREEMENT
This is to advise you that the Board of Trustees of The JPM Advisor Funds (the
"Fund") has established and organized a new series of shares of beneficial
interest (The JPM Advisor Diversified Fund) (the "Portfolio"). In accordance
with the additional funds provisions in Article 16 of the Custodian Contract
dated March 8, 1995 and in Section 10.01 of the Transfer Agency and Service
Agreement dated March 8, 1995 between the Fund and State Street Bank and Trust
Company ("State Street"), the Fund hereby requests that State Street act as
Custodian and Transfer Agent for the Portfolio under the terms of the respective
contracts.
Please indicate your acceptance of the foregoing by executing the eight
originals of this letter agreement, returning four to the Fund and retaining
four agreements for your records.
Very truly yours,
By ___________________________
Name:
Title:
Agreed to as of the ___ day of ______, 199_
STATE STREET BANK AND TRUST COMPANY
By ___________________________
Title:
[JPM259D]]
<PAGE>
Exhibit 10
SULLIVAN & CROMWELL
NEW YORK TELEPHONE: (212) 558-4000
TELEX: 62694 (INTERNATIONAL) 127816 (DOMESTIC)
CABLE ADDRESS: LADYCOURT, NEW YORK
FACSIMILE: (212) 558-3588 (125 BROAD STREET)
(212) 558-3792 (250 PARK AVENUE)
125 Broad Street, New York 10004-2498
250 PARK AVENUE, NEW YORK 10177-0021
1701 PENNSYLVANIA AVE., N.W., WASHINGTON, DC 20006-5805
444 SOUTH FLOWER STREET, LOS ANGELES 90071-2901
8, PLACE VENDOME, 75001 PARIS
ST. OLAVE'S HOUSE, 9a IRONMONGER LANE, LONDON EC2V 8EY
101 COLLINS STREET, MELBOURNE 3000
2-1, MARUNOUCHI 1-CHOME, CHIYODA-KU, TOKYO 100
NINE QUEEN'S ROAD, CENTRAL, HONG KONG
March 23, 1995
The JPM Advisor Funds,
6 St. James Avenue,
Suite 900,
Boston, Massachusetts 02116.
Dear Sirs:
In connection with the Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-84798) of The JPM Advisor Funds, an
unincorporated business trust organized in compliance with the laws of the
Commonwealth of Massachusetts (the "Trust"), with the Securities and Exchange
Commission for the purpose of registering under the Securities Act 1933, as
amended (the "Securities Act") an indefinite number of shares of beneficial
interest, par value $.001 per share (the "Shares"), we, as your counsel, have
examined such trust records, certificates and other documents, and such
questions of law, as we have considered necessary or appropriate for the
purposes of this opinion.
Upon the basis of such examination and review, we advise you that, in our
opinion, when the Registration
[469]
<PAGE>
The JPM Advisor Funds -2-
Statement referred to above has become effective under the Securities Act and
the Shares are issued and sold for the consideration authorized by the Trustees
of the Trust, which consideration shall in each event be at least equal to the
par value of such Shares, they will be validly issued, fully paid and
nonassessable by the Trust.
The foregoing opinion is limited to the Federal laws of the United States
and the laws of the Commonwealth of Massachusetts, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction. With respect to
all matters of Massachusetts law, we have relied upon the opinion, dated March
23, 1995, of James B. Craver (Massachusetts license no. M.B.O. 104500), and our
opinion is subject to the same assumptions, qualifications and limitations with
respect to such matters as are contained in such opinion of James B. Craver.
Also, we have relied as to certain matters on information obtained from
public officials, officers of the Trust and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Pre-Effective Amendment referred to above. In giving such consent, we do not
thereby admit that we are
[470]
<PAGE>
The JPM Advisor Funds -3-
in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ Sullivan & Cromwell
[JPM511]
[471]
<PAGE>
Exhibit 11
CONSENTS OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 8 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
June 27, 1996, relating to the statement of assets and liabilities of The JPM
Advisor Asia Growth Fund, The JPM Advisor European Equity Fund and The JPM
Advisor Japan Equity Fund at December 31, 1995 and our reports dated January 30,
1996, relating to the statements of assets and liabilities of The JPM Advisor
Emerging Markets Equity Fund and The JPM Advisor International Equity Fund at
October 31, 1995 and The JPM Advisor International Fixed Income Fund at
September 30, 1995, which appear in such Statement of Additional Information,
and to the incorporation by reference of our reports into the Prospectuses which
constitute parts of this Registration Statement.
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated July 25, 1996, relating to the financial
statements and the financial highlights of The JPM Advisor U.S. Equity Fund and
The JPM Advisor U.S. Small Cap Equity Fund and the financial statements and
supplementary data of The Selected U.S. Equity Portfolio and The U.S. Small
Company Portfolio appearing in the May 31, 1996 Annual Reports, which are also
incorporated by reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our report dated August 28, 1995, relating to the financial
statements and supplementary data of The Diversified Portfolio appearing in the
June 30, 1995 Annual Report, which is also incorporated by into the Registration
Statement.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement of our report dated November 20, 1995, relating to the financial
statements and supplementary data of The Non-U.S. Fixed Income Portfolio
appearing in the September 30, 1995 Annual Report, which is also incorporated by
reference into the Registration Statement.
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of the Registration
Statement of our report dated February 27, 1996, relating to the financial
statements and financial highlights of The JPM Advisor U.S. Fixed Income Fund at
October 31, 1995 and our reports dated December 22, 1995, relating to the
financial statements and supplementary data of The U.S. Fixed Income Portfolio,
The Emerging Markets Equity Portfolio, and The Non-U.S. Equity Portfolio
appearing in the October 31, 1995 Annual Reports, which are also incorporated by
reference into the Registration Statement.
<PAGE>
Consents of
Independent Accountants
Page 2
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of the Registration
Statement of our reports dated February 23, 1996, relating to the financial
statements and supplementary data of The Asia Growth Portfolio, The Japan Equity
Portfolio, and The European Equity Portfolio at December 31, 1995, which are
also incorporated by reference into the Registration Statement.
We also consent to the references to us under the headings "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, New York
August 22, 1996
JPM510
<PAGE>
Exhibit 13
H.C. WAINWRIGHT & CO., INC.
Investments Since 1868
One Boston Place (617) 227-3100
Boston, MA 02108 Fax: 973-0550
March 24, 1995
The JPM Advisor Funds
6 St. James Avenue, 9th Floor
Boston, MA 02116
Ladies and Gentlemen:
With respect to our purchase from you of 10,000 shares of beneficial
interest ("Initial Shares") of The JPM Advisor U.S. Fixed Income Fund (the
"Fund"), a series of The JPM Advisor Funds, a Massachusetts business trust, for
a purchase price of $100,000, we hereby advise you that we are purchasing such
Initial Shares with no intention to dispose of them either through resale to
others or redemption by the Fund.
The amount paid by the Fund on any redemption by us of any such Initial
Shares will be reduced by the PRO RATA portion of any unamortized organization
expenses which the number of Initial Shares redeemed bears to the total number
of Initial Shares outstanding immediately prior to such redemption.
Very truly yours,
SFG INVESTORS II LIMITED PARTNERSHIP
By: H.C. WAINWRIGHT & CO., INC.
as General Partner
By: /s/ Stephen D. Barrett
Stephen D. Barrett
President
JPM397[JPM513] [473]
Member: New York and Boston Stock Exchanges
<PAGE>
SIGNATURE FINANCIAL GROUP INC.
6 St. James Avenue
Boston, Massachusetts 02116
Tel. (617) 423-0800
Fax (617) 542-5815
March 22, 1995
The JPM Advisor Funds
6 St. James Avenue
Boston, Massachusetts 02116
Ladies and Gentlemen:
Re: 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 Emerging Markets Equity Fund,
The JPM Advisor Asia Growth Fund, The JPM Advisor European Equity Fund, and
The JPM Advisor Japan Equity Fund (each, a "Fund"; collectively, the
"Funds"; each Fund is a series of The JPM Advisor Funds, a Massachusetts
business trust)
-----------------------------------------------------------------------
With respect to our purchase from you of 10 shares of beneficial interest
("Initial Shares") of each of the Funds for $100 per Fund, we hereby advise you
that we are purchasing such Initial Shares with no intention to dispose of them
either through resale to others or redemption by the Funds.
The amount paid by the Funds on any redemption by us of any such Initial
Shares will be reduced by the PRO RATA portion of any unamortized organization
expenses which the number of Initial Shares redeemed bears to the total number
of Initial Shares outstanding immediately prior to such redemption.
Very truly yours,
SIGNATURE FINANCIAL GROUP, INC.
By /s/ Linwood C. Downs
Linwood C. Downs
Treasurer
JPM396[JPM513] [475A]
<PAGE>
CHANGE IN OWNERSHIP AGREEMENT
SFG Investors II Limited Partnership ("SFG") and FDI Distribution Services, Inc.
("FDI"), a Delaware corporation, hereby agree with each other as follows:
1. SFG and FDI hereby represent that this change in ownership agreement
(the "Agreement") shall be entered into for the benefit of The JPM Advisor
Funds, a Massachusetts business trust (the "Trust"), such benefit to be
evidenced by the Trust's acceptance of the terms of this Agreement by signature
inscribed at the end hereof,
2. SFG hereby offers FDI and FDI hereby purchases 10,203,146 shares (par
value $.001 per share) of the U.S. Fixed Income Fund of the Trust (the
"Fund")(the "Shares") by deposit of a sum of $103,744.53, determined as the net
asset value of the Shares as of the close of business on the last business day
immediately preceding this Agreement, plus any accrued but yet unpaid dividends
(the "Cash Deposit").
3. SFG represents and warrants to FDI and the Trust that, upon receipt of
the Cash Deposit from FDI as consideration for this transaction, SFG shall
immediately notify (via fax, with hard copy to follow) the Trust's transfer
agent or shareholder servicing agent to change the record of ownership, as of
the date of this Agreement, to reflect that FDI has assumed ownership of the
Shares. Such notification shall take the form of the letter attached hereto as
Exhibit A.
4. FDI represents and warrants to the Trust that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
5. FDI agrees that if it or any direct or indirect transferee of any of
the Shares redeems any of the Shares prior to the fifth anniversary of July 23,
1996, the date the Trust began its investment activities, FDI will pay to the
Trust an amount equal to the number resulting from multiplying the Trust's total
unamortized organizational expenses by a fraction, the numerator of which is
equal to the number of Shares redeemed by FDI or such transferee and the
denominator of which is equal to the number of Shares held by FDI outstanding as
of the date of such redemption, as long as the administrative position of the
staff of the Securities and Exchange Commission requires such reimbursement.
6. FDI is authorized and otherwise duly qualified to purchase and hold
Shares and to enter into this Agreement.
<PAGE>
SFG INVESTORS II LIMITED PARTNERSHIP
ATTEST:
By: H.C. Wainwright & Co., Inc.
as General Partner
/s/ Michael Flynn By: /s/ Stephen D. Barrett
Stephen D. Barrett, President
Date: 8/6/96
FDI DISTRIBUTION SERVICES, INC.
ATTEST:
/s/ Cheryl A. Vella By: /s/ Joseph F. Tower
Joseph F. Tower, Senior Vice
President & Treasurer
Date: 8/6/96
ACCEPTED BY:
THE JPM ADVISOR FUNDS
ATTEST:
___________________________________ By: _________________________________
Richard W. Ingram, President
Date: _________________
[JPM515]
<PAGE>
EXHIBIT A
August , 1996
Mr. Timothy Herrera
Morgan Guaranty Trust Co. of New York
522 Fifth Avenue
New York, NY 10036
Re: SFG Investors II, L.P. Seed Capital
Dear Mr. Herrera:
We have entered into a change in ownership agreement, effective immediately (the
"Agreement"), whereby SFG Investors II Limited Partnership ("SFG") shall
transfer ownership of certain shares of the U.S. Fixed Income Fund (the "Fund")
of The JPM Advisor Funds, a Massachusetts business trust (the "Trust"), to FDI
Distribution Services, Inc. ("FDI"), in exchange for such consideration as is
defined in the Agreement, which is attached hereto.
Please re-register all full and fractional shares in the following account
previously held by SFG and FDI:
JPM ADVISOR FUND FUND AND ACCOUNT NUMBER
U.S. Fixed Income Fund 600 - 101
The account should be registered to FDI in the following manner:
FDI Distribution Services, Inc.
Attn: Joseph F. Tower
60 State Street
Suite 1300
Boston, MA 02109
Tax ID#: 04-3229807
If you have any questions regarding these instructions, please contact
______________________ at _________________.
Sincerely,
[Authorized Signatory of SFG]
[JPM515]
<PAGE>
JPM512 Exhibit 16
THE JPM ADVISOR FUNDS
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
U.S. FIXED INCOME AND INTERNATIONAL FIXED INCOME FUNDS
30-DAY YIELD
Quotations of yield will be based on a Fund's investment income per share
earned during a particular 30-day period, less expenses accrued during the
period ("net investment income") and will be computed by dividing net investment
income by the maximum offering price per share on the last day of the period,
according to the following formula:
30-DAY YIELD - 2[(a-b + 1)6[superscript]-1]
---
cd
(where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends and
d = the maximum offering price per share on the last day of the period).
ALL FUNDS
ANNUAL TOTAL RETURN
Quotations of a Fund's average annual total return will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in such Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), calculated pursuant to the following formula:
P (1 + T)n [superscript] + ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed) on an annual basis and will assume that all dividends and
distributions are reinvested when paid.
AGGREGATE TOTAL RETURN
A Fund's aggregate total return, reflecting the cumulative percentage
change over a measuring period, is calculated according to the following
formula:
P (1 + T) = ERV
(where P = a hypothetical initial payment of $1,000 and T = total return).
<PAGE>
Exhibit 18
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy and Christopher J. Kelley, and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statements on Form N-1A, and any and all amendments thereto,
filed by The JPM Advisor Funds with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended, and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable each Trust to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of July, 1996.
/s/ Kenneth Whipple, Jr.
Kenneth Whipple, Jr.
JPM502A
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy and Christopher J. Kelley, and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statements on Form N-1A, and any and all amendments thereto,
filed by The JPM Advisor Funds with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended, and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable each Trust to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of July, 1996.
/s/ John R. Rettberg
John R. Rettberg
JPM502A
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy and Christopher J. Kelley, and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statements on Form N-1A, and any and all amendments thereto,
filed by The JPM Advisor Funds with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended, and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable each Trust to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of July, 1996.
/s/ John F. Ruffle
John F. Ruffle
JPM502A
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy and Christopher J. Kelley, and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statements on Form N-1A, and any and all amendments thereto,
filed by The JPM Advisor Funds with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended, and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable each Trust to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of July, 1996.
/s/ John C. Cox
John C. Cox
JPM502A
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Conroy and Christopher J. Kelley, and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statements on Form N-1A, and any and all amendments thereto,
filed by The JPM Advisor Funds with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended, and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable each Trust to comply with such
Acts, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction, and the undersigned hereby ratifies and confirms as his own act
and deed any and all acts that such attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof. Any one of such attorneys and agents
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of July, 1996.
/s/ John E. Baumgardner, Jr.
John E. Baumgardner, Jr.
JPM502A
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Con[t]roy, Christopher J. Kelley and
Jacqueline Henning/Lenore McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in his name
and on his behalf in any and all capacities the Registration Statements on Form
N-1A, and any and all amendments thereto, filed by The Pierpont Funds, The JPM
Institutional Funds or The JPM Advisor Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of July, 1996, in Paget, Bermuda.
/s/ Richard W. Ingram
Richard W. Ingram
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A.
Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Con[t]roy, Christopher
J. Kelley and Jacqueline Henning/Lenore McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds or The JPM Advisor Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of July, 1996, in Paget, Bermuda.
/s/ Frederick S. Addy
Frederick S. Addy
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A.
Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Con[t]roy, Christopher
J. Kelley and Jacqueline Henning/Lenore McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds or The JPM Advisor Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of July, 1996, in Paget, Bermuda.
/s/ William G. Burns
William G. Burns
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A.
Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Con[t]roy, Christopher
J. Kelley and Jacqueline Henning/Lenore McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds or The JPM Advisor Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of July, 1996, in Paget, Bermuda.
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard W. Ingram, Marie E.
Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A. Bachman, Karen
Jacoppo-Wood, Mary A. Nelson, Douglas C. Con[t]roy, Christopher J. Kelley and
Jacqueline Henning/Lenore McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in his name
and on his behalf in any and all capacities the Registration Statements on Form
N-1A, and any and all amendments thereto, filed by The Pierpont Funds, The JPM
Institutional Funds or The JPM Advisor Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of July, 1996, in Paget, Bermuda.
/s/ Matthew Healey
Matthew Healey
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier, Elizabeth A.
Bachman, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C. Con[t]roy, Christopher
J. Kelley and Jacqueline Henning/Lenore McCabe, and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, filed by The Pierpont Funds,
The JPM Institutional Funds or The JPM Advisor Funds (each a "Trust"), or the
Registration Statement(s), and any and all amendments thereto, filed by any
other investor in any registered investment company in which any of the Trusts
invest, with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended, and any and
all instruments which such attorneys and agents, or any of them, deem necessary
or advisable to enable each Trust to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction, and the
undersigned hereby ratifies and confirms as his own act and deed any and all
acts that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and may
exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of July, 1996, in Paget, Bermuda.
/s/ Michael P. Mallardi
Michael P. Mallardi
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEMI-ANNUAL REPORT DATED APRIL 30, 1996 FOR THE JPM ADVISOR U.S. FIXED INCOME
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SEMI-ANNUAL REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 04
<NAME> THE JPM ADVISOR U.S. FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 103655
<RECEIVABLES> 32
<ASSETS-OTHER> 34509
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 138196
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35251
<TOTAL-LIABILITIES> 35251
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102212
<SHARES-COMMON-STOCK> 10206
<SHARES-COMMON-PRIOR> 10002
<ACCUMULATED-NII-CURRENT> 126
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1706
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1099)
<NET-ASSETS> 102945
<DIVIDEND-INCOME> 12
<INTEREST-INCOME> 3479
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 3491
<REALIZED-GAINS-CURRENT> 1707
<APPREC-INCREASE-CURRENT> (4630)
<NET-CHANGE-FROM-OPS> 568
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3492
<DISTRIBUTIONS-OF-GAINS> 2131
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 204
<NET-CHANGE-IN-ASSETS> 204
<ACCUMULATED-NII-PRIOR> 127
<ACCUMULATED-GAINS-PRIOR> 2130
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23436
<AVERAGE-NET-ASSETS> 106065
<PER-SHARE-NAV-BEGIN> 10.58
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> (0.28)
<PER-SHARE-DIVIDEND> (0.34)
<PER-SHARE-DISTRIBUTIONS> (0.21)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEMI-ANNUAL REPORT DATED APRIL 30, 1996 FOR THE JPM ADVISOR EMERGING MARKETS
EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SEMI ANNUAL
REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 09
<NAME> THE JPM ADVISOR EMERGING MARKETS EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-22-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 1762419
<INVESTMENTS-AT-VALUE> 1849034
<RECEIVABLES> 36850
<ASSETS-OTHER> 30681
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1916565
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55783
<TOTAL-LIABILITIES> 55783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1770648
<SHARES-COMMON-STOCK> 154920
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 3251
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 268
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 86615
<NET-ASSETS> 1860782
<DIVIDEND-INCOME> 9522
<INTEREST-INCOME> 1323
<OTHER-INCOME> 0
<EXPENSES-NET> 7019
<NET-INVESTMENT-INCOME> 3826
<REALIZED-GAINS-CURRENT> 268
<APPREC-INCREASE-CURRENT> 86615
<NET-CHANGE-FROM-OPS> 90709
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 575
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239376
<NUMBER-OF-SHARES-REDEEMED> 84466
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 154910
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29963
<AVERAGE-NET-ASSETS> 724974
<PER-SHARE-NAV-BEGIN> 10.30
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEMI-ANNUAL REPORT DATED APRIL 30, 1996 FOR THE JPM ADVISOR INTERNATIONAL EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SEMI ANNUAL REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 8
<NAME> THE JPM ADVISOR INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
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<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 261045
<INVESTMENTS-AT-VALUE> 272212
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1996 FOR THE JPM ADVISOR EUROPEAN EQUITY FUND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 03
<NAME> THE JPM ADVISOR EUROPEAN EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-23-1996
<PERIOD-END> JUN-30-1996
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<NET-INVESTMENT-INCOME> 4
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1996 FOR THE JPM ADVISOR ASIA GROWTH FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUND
<SERIES>
<NUMBER> 01
<NAME> THE JPM ADVISOR ASIA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1996 FOR THE JPM ADVISOR JAPAN EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 02
<NAME> THE JPM ADVISOR JAPAN EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-04-1996
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<NET-INVESTMENT-INCOME> (1)
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<NET-CHANGE-FROM-OPS> (95)
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<NUMBER-OF-SHARES-SOLD> 181
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<GROSS-EXPENSE> 31
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<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 0.58
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<EXPENSE-RATIO> 1.70
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED MARCH 31, 1996 FOR THE JPM ADVISOR U.S. SMALL CAP EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 07
<NAME> THE JPM ADVISOR U.S. SMALL CAP EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
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<NUMBER-OF-SHARES-SOLD> 98
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<NET-CHANGE-IN-ASSETS> 73
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED MARCH 31, 1996 FOR THE JPM ADVISOR U.S. EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 06
<NAME> THE JPM ADVISOR U.S. EQUITY FUND
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEMI-ANNUAL REPORT DATED MARCH 31, 1996 FOR THE JPM ADVISOR INTERNATIONAL FIXED
INCOME FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SEMI ANNUAL
REPORT.
</LEGEND>
<CIK> 0000931068
<NAME> THE JPM ADVISOR FUNDS
<SERIES>
<NUMBER> 05
<NAME> THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
<S> <C>
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</TABLE>
