0000912057-01-535981.txt : 20011026
0000912057-01-535981.hdr.sgml : 20011026
ACCESSION NUMBER: 0000912057-01-535981
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011019
EFFECTIVENESS DATE: 20011019
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MUTUAL FUND TRUST
CENTRAL INDEX KEY: 0000919034
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FISCAL YEAR END: 0831
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-75250
FILM NUMBER: 1762059
BUSINESS ADDRESS:
STREET 1: 1 CHASE MANHATTAN PLAZA
STREET 2: 3RD FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10081
MAIL ADDRESS:
STREET 1: ONE CHASE SQUARE 7TH FLOOR
CITY: ROCHESTER
STATE: NY
ZIP: 14643
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MUTUAL FUND TRUST
CENTRAL INDEX KEY: 0000919034
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FISCAL YEAR END: 0831
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-08358
FILM NUMBER: 1762060
BUSINESS ADDRESS:
STREET 1: 1 CHASE MANHATTAN PLAZA
STREET 2: 3RD FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10081
MAIL ADDRESS:
STREET 1: ONE CHASE SQUARE 7TH FLOOR
CITY: ROCHESTER
STATE: NY
ZIP: 14643
485BPOS
1
a2061049z485bpos.txt
485BPOS
As filed via EDGAR with the Securities and Exchange Commission
on October 19, 2001
File No. 811-8358
Registration No. 33-75250
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 24 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Post-Effective Amendment No. 24 /X/
------------------------------
MUTUAL FUND TRUST
(Exact Name of Registrant as Specified in Charter)
522 Fifth Avenue,
New York, New York 10036
--------------------------------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 1-800-348-4782
Copies to:
Sharon Weinberg Sarah E. Cogan, Esq. John Baumgardner, Jr., Esq.
J.P. Morgan Fund Distributors, Inc. Simpson Thacher & Bartlett Sullivan & Cromwell
1211 Avenue of the Americas 425 Lexington Avenue 125 Broad Street
New York, New York 10036 New York, New York 10017 New York, New York 10004
-------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) /x/ on October 21, 2001 pursuant paragraph (b)
/ / on ( date ) pursuant to paragraph (a)(1)
/ / 60 days after filing pursuant to / / on ( date ) pursuant to paragraph (a)(2) rule 485.
paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
------------------
EXPLANATORY NOTE
The prospectuses and statement of additional information for Mutual Fund
Trust filed on September 14, 2001 pursuant to Rule 497 are hereby
incorporated by reference.
PROSPECTUS OCTOBER 21, 2001
JPMORGAN LIQUID ASSETS MONEY
MARKET FUND
This Prospectus Offers: Institutional Shares
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
[LOGO] JPMORGAN Fleming
ASSET MANAGEMENT
JPMorgan Morgan Liquid Assets Money Market Fund 1
The Fund's Management and Administration 4
How Your Account Works 5
Buying Fund Shares 5
Selling Fund Shares 6
Other Information Concerning the Fund 6
Distributions and Taxes 7
What the Terms Mean 8
How To Reach Us Back cover
JPMORGAN LIQUID ASSETS MONEY MARKET FUND
THE FUND'S OBJECTIVE
The Fund's aim is to maximize current income consistent with the preservation of
capital and same-day liquidity.
THE FUND'S MAIN INVESTMENT STRATEGY
The Fund invests across a broad spectrum of U.S. dollar-denominated money market
securities, typically emphasizing different types of securities at different
times in order to take advantage of changing yield differentials. The Fund's
investments may include commercial paper and variable rate demand notes of U.S.
and foreign corporations, obligations issued by the U.S. Treasury, U.S.
government agencies, domestic and foreign banks and corporations, and foreign
governments, repurchase agreements, reverse repurchase agreements, as well as
asset-backed securities and taxable municipal obligations. Some of these
investments may be illiquid or purchased on a when-issued or delayed delivery
basis.
The dollar weighted averaged maturity of the Fund will be 90 days or less and
the Fund will buy only those instruments which have remaining maturities of 397
days or less.
All securities purchased by the Fund must meet the requirements of Rule 2a-7
under the Investment Company Act of 1940, which are designed to mitigate the
risk of loss.
In addition, the Fund may invest a portion of its assets in securities rated
Prime-2 by Moody's Investor Service ("Moody's") or A-2 by Standard & Poor's
Corporation ("S&P"), or, if not rated by Moody's or S&P, if J.P. Morgan Fleming
Asset Management (USA) Inc., the adviser, determines that the security is of
comparable quality. By comparison, the JPMorgan Prime Money Market Fund
generally invests only in securities that are rated Prime-1 by Moody's or A-1 by
S&P and the dollar-weighted average maturity of that fund's portfolio is
generally about 60 days or less.
The Fund seeks to develop an appropriate portfolio by considering the
differences in yields among securities of different maturities, market sectors
and issuers. The Fund's yield will vary in response to changes in interest
rates.
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund may change any of its investment policies (including its investment
objective) without shareholder approval.
THE FUND'S MAIN INVESTMENT RISKS
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Fund. Here are some specific risks of investing in the Fund.
The Fund may not achieve its objective if the adviser's expectations regarding
particular securities or markets are not met.
The Fund attempts to keep its net asset value constant, but there's no guarantee
it will be able to do so.
[SIDENOTE]
BEFORE YOU INVEST
INVESTORS CONSIDERING THE FUND SHOULD UNDERSTAND THAT:
- THERE IS NO ASSURANCE THAT THE FUND WILL MEET ITS INVESTMENT OBJECTIVE.
- THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM.
1
The value of money market investments tends to fall when prevailing interest
rates rise, although they're generally less sensitive to interest rate changes
than longer-term securities.
Investments in foreign banks and other foreign issuers may be riskier than
investments in the United States. That could be, in part, because of difficulty
converting investments into cash, political and economic instability, the
imposition of government controls, or regulations that don't match U.S.
standards.
Securities in the Fund's portfolio may not earn as high a current income as
longer-term or lower-quality securities.
The Fund may have difficulty valuing its illiquid holdings and may be unable to
sell them at the time or price it desires.
The Fund's ability to concentrate its investments in the banking industry could
increase risks. The profitability of banks depends largely on the availability
and cost of funds, which can change depending upon economic conditions. Banks
are also exposed to losses if borrowers get into financial trouble and can't
repay their loans.
As a result of recent world events, the U.S. securities markets have
experienced increased short-term market volatility. As a result, there may be
long-term effects on the U.S. and world economies. In addition, Fund service
providers may be adversely affected.
Although the Fund seeks to be fully invested, it may at times hold some of its
assets in cash. This would hurt the Fund's performance.
Repurchase agreements involve some risk to the Fund if the other party does not
live up to its obligations under the agreement.
If the Fund departs from its investment policies during temporary defensive
periods, it may not achieve its investment objective.
[SIDENOTE]
WHO MAY WANT TO INVEST
THE FUND IS DESIGNED FOR INVESTORS WHO:
- WANT AN INVESTMENT THAT STRIVES TO PRESERVE CAPITAL
- WANT REGULAR INCOME FROM A HIGH QUALITY PORTFOLIO
- WANT A HIGHLY LIQUID INVESTMENT
- ARE LOOKING FOR AN INTERIM INVESTMENT
- ARE PURSUING A SHORT-TERM GOAL
THE FUND IS NOT DESIGNED FOR INVESTORS WHO:
- ARE INVESTING FOR LONG-TERM GROWTH
- ARE INVESTING FOR HIGH INCOME
- REQUIRE THE ADDED SECURITY OF THE FDIC INSURANCE
[SIDENOTE]
INVESTMENTS IN THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
2
THE FUND'S PAST PERFORMANCE(1)
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a bar chart and
performance table will be included in the prospectus. Although past performance
of a fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the fund.
ESTIMATED INVESTOR EXPENSES
The estimated expenses of the Institutional Shares before and after
reimbursement are shown below. The table below does not reflect charges or
credits which you might incur if you invest you invest through a financial
institution.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (%) (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
INSTITUTIONAL
--------------------------------------------------------------------------------
MANAGEMENT FEES 0.10
--------------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES NONE
--------------------------------------------------------------------------------
SHAREHOLDER SERVICE FEES 0.10
--------------------------------------------------------------------------------
OTHER EXPENSES(2) 0.18
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.38
--------------------------------------------------------------------------------
FEE WAIVER AND EXPENSE REIMBURSEMENT(3) (0.18)
--------------------------------------------------------------------------------
NET EXPENSES(3) 0.20
--------------------------------------------------------------------------------
EXPENSE EXAMPLE(3)
The example below is intended to help you compare the cost of
investing in Institutional Shares of the Fund with the cost of investing in
other mutual funds. The example assumes:
- $10,000 initial investment,
- 5% return each year, and
- net expenses for the period 10/21/01 through 12/31/02 and total operating
expenses thereafter.
The example is for comparison only; the actual return and your actual costs may
be higher or lower.
YOUR COST($) 1 YR. 3 YRS.
--------------------------------------------------------------------------------
INSTITUTIONAL $20 $100
--------------------------------------------------------------------------------
(1)The Fund's fiscal year end is 8/31.
(2)"Other Expenses" are based on estimated amounts for the current fiscal year.
(3)Reflects a written agreement pursuant to which The Chase Manhattan Bank
agrees that it will reimburse the Fund to the extent total operating
expenses (excluding interest, taxes, extraordinary expenses and expenses
related to the deferred compensation plan) exceed 0.20% of the Fund's
average daily net assets through 12/31/02.
3
THE FUND'S MANAGEMENT AND ADMINISTRATION
The Fund is a series of Mutual Fund Trust, a Massachusetts business trust. The
Trust is governed by trustees who are responsible for overseeing all business
activities.
THE FUND'S INVESTMENT ADVISER
J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM (USA)) is the investment
adviser to the Fund and makes the day-to-day investment decisions for the Fund.
JPMFAM (USA) is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPMorgan
Chase), a bank holding company. JPMFAM (USA) provides the Fund with investment
advice and supervision. JPMFAM (USA) is located at 522 5th Avenue, New York, NY
10036.
The Fund will pay JPMFAM (USA) a management fee of 0.10% of average daily net
assets for its services as adviser.
THE FUND'S ADMINISTRATOR
The Chase Manhattan Bank (the Administrator) provides administrative services
and oversees the Fund's other service providers. The Administrator receives a
pro rata portion of the following annual fee on behalf of the Fund for
administrative services:
0.10% of the first $100 billion of average net assets of all money market funds
in the JPMorgan Funds Complex plus 0.05% of average net assets over $100
billion.
The Fund has agreements with certain shareholder servicing agents (including The
Chase Manhattan Bank) under which the shareholder servicing agents have agreed
to provide certain support services to their customers. For performing these
services, each shareholder servicing agent receives an annual fee of up to 0.10%
of the average daily net assets of the Institutional Shares of the Fund held by
investors serviced by the shareholder servicing agent.
JPMFAM (USA) and/or J.P. Morgan Fund Distributors, Inc. (JPMFD) may, at their
own expense, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers.
THE FUND'S DISTRIBUTOR
JPMFD is the distributor for the Fund. It is a subsidiary of The BISYS Group,
Inc. and is not affiliated with JPMorgan Chase.
4
HOW YOUR ACCOUNT WORKS
BUYING FUND SHARES
You don't pay any sales charge (sometimes called a load) when you buy
Institutional Shares of the Fund. The price you pay for your shares is the
net asset value per share (NAV). NAV is the value of everything the Fund
owns, minus everything it owes, divided by the number of shares held by
investors. The Fund seeks to maintain a stable NAV of $1.00. The Fund uses
the amortized cost method to value its portfolio of securities. This method
provides more stability in valuations. However, it may also result in periods
during which the stated value of a security is different than the price the
Fund would receive if it sold the investment.
The NAV of each class of shares is generally calculated by the cut-off time each
day the Fund is accepting orders. You'll pay the next NAV calculated after the
JPMorgan Institutional Funds Service Center receives your order in proper form.
An order is in proper form only after funds are converted into federal funds.
You can buy Institutional Shares through financial service firms, such as
broker-dealers and banks that have an agreement with the Fund, or directly
from the JPMorgan Institutional Funds Service Center. Shares are available on
any business day the Federal Reserve Bank of New York and the New York Stock
Exchange are open. The Fund also may be open for business on days the New
York Stock Exchange is closed, if banking institutions are open. If we
receive your order by the Fund's cut-off-time, we'll process your order at
that day's price and you'll be entitled to all dividends declared that day.
If we receive your order after the cut-off time, we'll generally process it
at the next day's price. Normally, the cut-off (in Eastern time) is 5:00 P.M.
If you buy through an agent and not directly from the JPMorgan Institutional
Funds Service Center, the agent could set earlier cut-off times. The Fund may
close earlier a few days each year if the Public Securities Association
recommends that the U.S. Government securities market close trading early.
If the JPMorgan Institutional Funds Service Center does not receive federal
funds by the later of the Fund's cut-off time or 4:00 p.m. Eastern time on the
day of the order, the order will be canceled. Any funds received in connection
with late orders will be invested on the following business day.
You must provide a Taxpayer Identification Number when you open an account.
The Fund has the right to reject any purchase order or cease offering shares
at any time.
TO OPEN AN ACCOUNT, BUY OR SELL SHARES OR GET FUND INFORMATION, CALL:
THE JPMORGAN INSTITUTIONAL FUNDS SERVICE CENTER
1-800-766-7722
MINIMUM INVESTMENTS
Investors must buy a minimum of $10,000,000 worth of Institutional Shares to
open an account. The minimum for subsequent purchases is $25,000, but the
minimum investment may be less for certain investors.
Your financial service firm may charge you a fee and may offer additional
services, such as special purchase redemption programs, "sweep" programs, cash
advances and redemption
5
checks. Your firm may set different minimum investments and earlier cut-off
times.
SELLING FUND SHARES
When you sell your shares you'll receive the next NAV calculated after the
JPMorgan Institutional Funds Service Center accepts your order in proper form.
We ask that you tell us early in the day if you plan to sell your shares so we
can effectively manage the Fund.
We will need the names of the registered shareholders and your account number
before we can sell your shares. We will send the proceeds from the sale to
you on the same day if we receive your request before the Fund's cut-off
time. The money will be sent the next day for requests we receive after this
deadline. We will not accept an order to sell shares if the Fund has not
collected your payment for the shares. Federal law allows the Fund to suspend
a sale or postpone payment for more than seven business days under unusual
circumstances.
You will need to have your signature guaranteed if you want your payment sent
to an address other than the one we have in our records.
SELLING SHARES
You may sell your shares in two ways:
THROUGH YOUR FINANCIAL SERVICE FIRMS
Tell your firm that you want to sell. They'll send all necessary documents to
the JPMorgan Institutional Funds Service Center. Your firm might charge you
for this service.
THROUGH THE JPMORGAN INSTITUTIONAL FUNDS SERVICE CENTER
Call 1-800-766-7722. We will send the proceeds by wire only to the bank
account on our records.
REDEMPTIONS-IN-KIND
The Funds reserve the right to make redemptions of over $250,000 in securities
rather than in cash.
OTHER INFORMATION CONCERNING THE FUND
We may close your account if the balance falls below the minimum investment
noted as a result of selling shares. We'll give you 60 day's notice before
closing your account.
Unless you indicate otherwise on your account application, we are authorized to
act on redemption and transfer instructions received by phone. If someone trades
on your account by phone, we'll ask that person to confirm your account
registration and address to make sure they match those you provided us. If they
give us the correct information, we are generally authorized to follow that
person's instructions. We'll take all reasonable precautions to confirm that the
instructions are genuine. Investors agree that they will not hold the Fund
liable for any loss or expenses from any sales request, if the Fund takes
reasonable precautions. The Fund will be liable for any losses to you from an
unauthorized sale or fraud against you if we do not follow reasonable
procedures.
You may not always reach the JPMorgan Institutional Funds Service
6
Center by telephone. This may be true at times of unusual market changes and
shareholder activity. You can mail us your instructions or contact your
investment representative or agent. We may modify or cancel the sale of
shares by phone without notice.
Please write to:
JPMorgan Institutional Funds Service
Center
500 Stanton Christiana Road
Newark, Delaware 19713
The Fund may issue multiple classes of shares. This prospectus relates only to
Institutional Shares of the Fund. Each class may have different requirements for
who may invest, and may have different sales charges and expense levels. A
person who gets compensated for selling Fund shares may receive a different
amount for each class.
DISTRIBUTIONS AND TAXES
The Fund can earn income and can realize capital gain. The Fund deducts any
expenses then pays these earnings to shareholders as distributions.
The Fund declares dividends daily, so your shares can start earning dividends
on the day you buy them. We distribute the dividends monthly in the form of
additional shares, unless you tell us that you want payment in cash or
deposited in a pre-assigned bank account. The taxation of dividends will not
be affected by the form in which you receive them. We distribute any
short-term capital gain at least annually. The Fund does not expect to
realize long-term capital gain.
Dividends of net investment income are usually taxable as ordinary income
paid at the federal, state and local levels. The state or municipality where
you live may not charge you state and local taxes on dividends of tax-exempt
interest earned on certain bonds. Dividends of interest earned on bonds
issued by the U.S. government and its agencies may also be exempt from some
types of state and local taxes.
Early in each calendar year, the Fund will send you a notice showing the amount
of distributions you received in the preceding year and the tax status of those
distributions.
Any investor for whom the Fund does not have a valid taxpayer identification
number will be subject to backup withholding.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
The above is only a general summary of tax implications of investing in this
Fund. Because each investor's tax consequences are unique, please consult
your tax adviser to see how investing in the Fund will affect your own tax
situation.
7
WHAT THE TERMS MEAN
ASSET-BACKED SECURITIES: Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
COMMERCIAL PAPER: Short-term securities with maturities of 1 to 270 days which
are issued by banks, corporations and others.
DEMAND NOTES: A debt security with no set maturity date. The investor can
generally demand payment of the principal at any time.
DOLLAR WEIGHTED AVERAGE MATURITY: The average maturity of the Fund is the
average amount of time until the organizations that issued the debt securities
in the Fund's portfolio must pay off the principal amount of the debt. "Dollar
weighted" means the larger the dollar value of debt security in the Fund, the
more weight it gets in calculating this average.
FLOATING RATE SECURITIES: Securities whose interest rates adjust automatically
whenever a particular interest rate changes.
LIQUIDITY: Liquidity is the ability to easily convert investments into cash
without losing a significant amount of money in the process.
MANAGEMENT FEE: A fee paid to the investment adviser to manage the Fund and make
decisions about buying and selling the Fund's investments.
MUNICIPAL LEASE OBLIGATIONS: These provide participation in municipal lease
agreements and installment purchase contracts, but are not part of the general
obligations of the municipality.
MUNICIPAL OBLIGATIONS: Debt securities issued by or on behalf of states,
territories and possessions or by their agencies or other groups with authority
to act for them. For securities to qualify as municipal obligations, the
municipality's lawyers must give an opinion that the interest on them is not
considered gross income for federal income tax purposes.
OTHER EXPENSES: Miscellaneous items, including transfer agency, administration,
custody and registration fees.
REPURCHASE AGREEMENTS: A special type of short-term investment. A dealer sells
securities to a fund and agrees to buy them back later for a set price. In
effect, the dealer is borrowing the fund's money for a short time, using the
securities as collateral.
SHAREHOLDER SERVICE FEE: A fee to cover the cost of paying shareholder servicing
agents to provide certain support services for your account.
VARIABLE RATE SECURITIES: Securities whose interest rates are periodically
adjusted.
8
This page intentionally left blank.
HOW TO REACH US
MORE INFORMATION For investors who want more information on the Fund the
following documents are available free upon request:
ANNUAL AND SEMI-ANNUAL REPORTS
Our annual and semi-annual reports contain more information about the Fund's
investments and performance. The annual report also includes details about the
market conditions and investment strategies that had a significant effect on the
Fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed information about the Fund and its policies.
It is incorporated by reference into this prospectus. That means, by law,
it's considered to be part of this prospectus.
You can get a free copy of these documents and other information, or ask us any
questions, by calling us at 1-800-766-7722 or writing to:
JPMORGAN INSTITUTIONAL FUNDS
SERVICE CENTER
500 STANTON CHRISTIANA ROAD
NEWARK, DE 19713
If you buy your shares through an institution, you should contact that
institution directly for more information. You can also find information online
at www.jpmorganfunds.com on the internet.
You can write or e-mail the SEC's Public Reference Room and ask them to mail you
information about the Fund, including the SAI. They will charge you a copying
fee for this service. You can also visit the Public Reference Section, and copy
the documents while you're there.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-0102.
1-202-942-8090
E-MAIL: publicinfo@sec.gov
Reports, a copy of the SAI and other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
JPMorgan Funds Fulfillment
Center 393 Manley Street
West Bridgewater, MA 02379-1039
The Fund's Investment Company Act file number is 811-8358.
(C)2001 JPMorgan Chase & Co. All Rights Reserved. October 2001
PR-MMI-901 X
PROSPECTUS OCTOBER 21, 2001
JPMORGAN LIQUID ASSETS MONEY
MARKET FUND
THIS PROSPECTUS OFFERS: CAPITAL SHARES
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] JPMORGAN Fleming
Asset Management
JPMorgan Liquid Assets Money Market Fund 1
The Fund's Management and Administration 4
How Your Account Works 5
Buying Fund Shares 5
Selling Fund Shares 6
Other Information Concerning the Fund 6
Distributions and Taxes 7
What the Terms Mean 8
How To Reach Us Back cover
JPMORGAN LIQUID ASSETS MONEY MARKET FUND
THE FUND'S OBJECTIVE
The Fund's aim is to maximize current income consistent with the preservation of
capital and same-day liquidity.
THE FUND'S MAIN INVESTMENT STRATEGY
The Fund invests across a broad spectrum of U.S. dollar-denominated money market
securities, typically emphasizing different types of securities at different
times in order to take advantage of changing yield differentials. The Fund's
investments may include commercial paper and variable rate demand notes of U.S.
and foreign corporations, obligations issued by the U.S. Treasury, U.S.
government agencies, domestic and foreign banks and corporations, and foreign
governments, repurchase agreements, reverse repurchase agreements, as well as
asset-backed securities and taxable municipal obligations. Some of these
investments may be illiquid or purchased on a when-issued or delayed delivery
basis.
The dollar weighted averaged maturity of the Fund will be 90 days or less and
the Fund will buy only those instruments which have remaining maturities of 397
days or less.
All securities purchased by the Fund must meet the requirements of Rule 2a-7
under the Investment Company Act of 1940, which are designed to mitigate the
risk of loss.
In addition, the Fund may invest a portion of its assets in securities rated
Prime-2 by Moody's Investor Service ("Moody's") or A-2 by Standard & Poor's
Corporation ("S&P"), or, if not rated by Moody's or S&P, if J.P. Morgan Fleming
Asset Management (USA) Inc., the adviser, determines that the security is of
comparable quality. By comparison, the JPMorgan Prime Money Market Fund
generally invests only in securities that are rated Prime-1 by Moody's or A-1 by
S&P and the dollar-weighted average maturity of that fund's portfolio is
generally about 60 days or less.
The Fund seeks to develop an appropriate portfolio by considering the
differences in yields among securities of different maturities, market sectors
and issuers. The Fund's yield will vary in response to changes in interest
rates.
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund may change any of its investment policies (including its investment
objective) without shareholder approval.
THE FUND'S MAIN INVESTMENT RISKS
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Fund. Here are some specific risks of investing in the Fund.
The Fund may not achieve its objective if the adviser's expectations regarding
particular securities or markets are not met.
[SIDENOTE]
BEFORE YOU INVEST
INVESTORS CONSIDERING THE FUND SHOULD UNDERSTAND THAT:
- THERE IS NO ASSURANCE THAT THE FUND WILL MEET ITS INVESTMENT OBJECTIVE.
- THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM.
1
The Fund attempts to keep its net asset value constant, but there's no guarantee
it will be able to do so.
The value of money market investments tends to fall when prevailing interest
rates rise, although they're generally less sensitive to interest rate
changes than longer-term securities.
Investments in foreign banks and other foreign issuers may be riskier than
investments in the United States. That could be, in part, because of difficulty
converting investments into cash, political and economic instability, the
imposition of government controls, or regulations that don't match U.S.
standards.
Securities in the Fund's portfolio may not earn as high a current income as
longer-term or lower-quality securities.
The Fund may have difficulty valuing its illiquid holdings and may be unable to
sell them at the time or price it desires.
The Fund's ability to concentrate its investments in the banking industry could
increase risks. The profitability of banks depends largely on the availability
and cost of funds, which can change depending upon economic conditions. Banks
are also exposed to losses if borrowers get into financial trouble and can't
repay their loans.
As a result of recent world events, the U.S. securities markets have
experienced increased short-term market volatility. As a result, there may be
long-term effects on the U.S. and world economies. In addition, Fund service
providers may be adversely affected.
Although the Fund seeks to be fully invested, it may at times hold some of its
assets in cash. This would hurt the Fund's performance.
Repurchase agreements involve some risk to the Fund if the other party does not
live up to its obligations under the agreement.
If the Fund departs from its investment policies during temporary defensive
periods, it may not achieve its investment objective.
[SIDENOTE]
WHO MAY WANT TO INVEST
THE FUND IS DESIGNED FOR INVESTORS WHO:
- WANT AN INVESTMENT THAT STRIVES TO PRESERVE CAPITAL
- WANT REGULAR INCOME FROM A HIGH QUALITY PORTFOLIO
- WANT A HIGHLY LIQUID INVESTMENT
- ARE LOOKING FOR AN INTERIM INVESTMENT
- ARE PURSUING A SHORT-TERM GOAL
THE FUND IS NOT DESIGNED FOR INVESTORS WHO:
- ARE INVESTING FOR LONG-TERM GROWTH
- ARE INVESTING FOR HIGH INCOME
- REQUIRE THE ADDED SECURITY OF THE FDIC INSURANCE
[SIDENOTE]
INVESTMENTS IN THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
2
THE FUND'S PAST PERFORMANCE(1)
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a bar chart and
performance table will be included in the prospectus. Although past
performance of a fund is no guarantee of how it will perform in the future,
historical performance may give you some indication of the risks of investing
in the fund.
ESTIMATED INVESTOR EXPENSES
The estimated expenses of the Capital Shares before and after reimbursement
are shown below. The table below does not reflect changes or credits which
you might incur if you invest through a financial institution.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (%) (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
CAPITAL
--------------------------------------------------------------------------------
MANAGEMENT FEES 0.10
--------------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES NONE
--------------------------------------------------------------------------------
SHAREHOLDER SERVICE FEES 0.05
--------------------------------------------------------------------------------
OTHER EXPENSES(2) 0.18
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.33
--------------------------------------------------------------------------------
FEE WAIVER AND EXPENSE REIMBURSEMENT(3) (0.18)
--------------------------------------------------------------------------------
NET EXPENSES(3) 0.15
--------------------------------------------------------------------------------
EXPENSE EXAMPLE(3)
The example below is intended to help you compare the cost of investing in
Capital Shares of the Fund with the cost of investing in other mutual funds. The
example assumes:
- $10,000 initial investment,
- 5% return each year, and
- net expenses for the period 10/21/01 through 12/31/02 and total operating
expenses thereafter.
The example is for comparison only; the actual return and your actual costs may
be higher or lower.
YOUR COST($) 1 YR. 3 YRS.
--------------------------------------------------------------------------------
CAPITAL $15 $81
--------------------------------------------------------------------------------
(1) THE FUND'S FISCAL YEAR END IS 8/31.
(2)"OTHER EXPENSES" ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
(3)REFLECTS A WRITTEN AGREEMENT PURSUANT TO WHICH THE CHASE MANHATTAN BANK
AGREES THAT IT WILL REIMBURSE THE FUND TO THE EXTENT TOTAL OPERATING
EXPENSES (EXCLUDING INTEREST, TAXES, EXTRAORDINARY EXPENSES AND EXPENSES
RELATED TO THE DEFERRED COMPENSATION PLAN) EXCEED 0.15% OF THE FUND'S
AVERAGE DAILY NET ASSETS THROUGH 12/31/02.
3
THE FUND'S MANAGEMENT AND ADMINISTRATION
The Fund is a series of Mutual Fund Trust, a Massachusetts business trust.
The Trust is governed by trustees who are responsible for overseeing all
business activities.
THE FUND'S INVESTMENT ADVISER
J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM (USA)) is the investment
adviser to the Fund and makes the day-to-day investment decisions for the Fund.
JPMFAM (USA) is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPMorgan
Chase), a bank holding company. JPMFAM (USA) provides the Fund with investment
advice and supervision. JPMFAM (USA) is located at 522 5th Avenue, New York, NY
10036.
The Fund will pay JPMFAM (USA) a management fee of 0.10% of average daily net
assets for its services as adviser.
THE FUND'S ADMINISTRATOR
The Chase Manhattan Bank (the Administrator) provides administrative services
and oversees the Fund's other service providers. The Administrator receives a
pro rata portion of the following annual fee on behalf of each Fund for
administrative services:
0.10% of the first $100 billion of average net assets of all money market funds
in the JPMorgan Funds complex plus 0.05% of average net assets over $100
billion.
The Fund has agreements with certain shareholder servicing agents (including
The Chase Manhattan Bank) under which the shareholder servicing agents have
agreed to provide certain support services to their customers. For performing
these services, each shareholder servicing agent receives an annual fee of up
to 0.05% of the average daily net assets of the Capital Shares of the Fund
held by investors serviced by the shareholder servicing agent.
JPMFAM (USA) and/or J.P. Morgan Fund Distributors, Inc. (JPMFD) may, at their
own expense, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers.
THE FUND'S DISTRIBUTOR
JPMFD is the distributor for the Fund. It is a subsidiary of The BISYS Group,
Inc. and is not affiliated with JPMorgan Chase.
4
HOW YOUR ACCOUNT WORKS
BUYING FUND SHARES
You don't pay any sales charge (sometimes called a load) when you buy Capital
Shares of the Fund. The price you pay for your shares is the net asset value per
share (NAV). NAV is the value of everything the Fund owns, minus everything it
owes, divided by the number of shares held by investors. The Fund seeks to
maintain a stable NAV of $1.00. The Fund uses the amortized cost method to value
its portfolio of securities. This method provides more stability in valuations.
However, it may also result in periods during which the stated value of a
security is different than the price the Fund would receive if it sold the
investment.
The NAV of each class of shares is generally calculated by the cut-off time each
day the Fund is accepting orders. You'll pay the next NAV calculated after the
JPMorgan Institutional Funds Service Center receives your order in proper form.
An order is in proper form only after funds are converted into federal funds.
You can buy Capital Shares through financial service firms, such as
broker-dealers and banks that have an agreement with the Fund, or directly from
the JPMorgan Institutional Funds Service Center. Shares are available on any
business day the Federal Reserve Bank of New York and the New York Stock
Exchange are open. The Fund also may be open for business on days the New York
Stock Exchange is closed, if banking institutions are open. If we receive your
order by the Fund's cut-off time we'll process your order at that day's price
and you'll be entitled to all dividends declared that day. If we receive your
order after the cut-off time, we'll generally process it at the next day's
price. Normally, the cut-off (in Eastern time) is 5:00 P.M.
If you buy through an agent and not directly from the JPMorgan Institutional
Funds Service Center, the agent could set earlier cut-off times. The Fund may
close earlier a few days each year if the Public Securities Association
recommends that the U.S. Government securities market close trading early.
If the JPMorgan Institutional Funds Service Center does not receive federal
funds by the later of the Fund's cut-off time or 4:00 p.m. Eastern time on the
day of the order, the order will be canceled. Any funds received in connection
with late orders will be invested on the following business day.
You must provide a Taxpayer Identification Number when you open an account.
The Fund has the right to reject any purchase order or cease offering shares
at any time.
TO OPEN AN ACCOUNT, BUY OR SELL SHARES OR GET FUND INFORMATION, CALL:
THE JPMORGAN INSTITUTIONAL FUNDS
SERVICE CENTER
1-800-766-7722
MINIMUM INVESTMENTS
Investors must buy a minimum of $75,000,000 worth of Capital Shares in the Fund
to open an account. The minimum for subsequent purchases is $25,000, but the
minimum investment may be less for certain investors.
Your financial service firm may charge you a fee and may offer additional
services, such as special purchase redemption programs, "sweep" programs, cash
advances and redemption checks. Your firm may set different minimum investments
and earlier cut-off times.
5
SELLING FUND SHARES
When you sell your shares you'll receive the next NAV calculated after the
JPMorgan Institutional Funds Service Center accepts your order in proper form.
We ask that you tell us early in the day if you plan to sell your shares so we
can effectively manage the Fund.
We will need the names of the registered shareholders and your account number
before we can sell your shares. We will send the proceeds from the sale to you
on the same day if we receive your request before the Fund's cut-off time. The
money will be sent the next day for requests we receive after this deadline. We
will not accept an order to sell shares if the Fund has not collected your
payment for the shares. Federal law allows the Fund to suspend a sale or
postpone payment for more than seven business days under unusual circumstances.
You will need to have your signature guaranteed if you want your payment sent to
an address other than the one we have in our records.
SELLING SHARES
You may sell your shares in two ways:
THROUGH YOUR FINANCIAL SERVICE FIRMS
Tell your firm that you want to sell. They'll send all necessary documents to
the JPMorgan Institutional Funds Service Center. Your firm might charge you for
this service.
THROUGH THE JPMORGAN INSTITUTIONAL FUNDS SERVICE CENTER
Call 1-800-766-7722. We will send the proceeds by wire only to the bank account
on our records.
REDEMPTIONS-IN-KIND
The Funds reserve the right to make redemptions of over $250,000 in securities
rather than in cash.
OTHER INFORMATION CONCERNING THE FUND
We may close your account if the balance falls below the minimum investment
noted above as a result of selling shares. We'll give you 60 days' notice before
closing your account.
Unless you indicate otherwise on your account application, we are authorized to
act on redemption and transfer instructions received by phone. If someone trades
on your account by phone, we'll ask that person to confirm your account
registration and address to make sure they match those you provided us. If they
give us the correct information, we are generally authorized to follow that
person's instructions. We'll take all reasonable precautions to confirm that the
instructions are genuine. Investors agree that they will not hold the Fund
liable for any loss or expenses from any sales request, if the Fund takes
reasonable precautions. The Fund will be liable for any losses to you from an
unauthorized sale or fraud against you if we do not follow reasonable
procedures.
You may not always reach the JPMorgan Institutional Funds Service Center by
telephone. This may be true at times of unusual market changes and shareholder
activity. You can mail us your instructions or contact your investment
representative or agent. We may modify or cancel the sale of shares by phone
without notice.
6
Please write to:
JPMorgan Institutional Funds Service Center
500 Stanton Christiana Road
Newark, DE 19713
The Fund may issue multiple classes of shares. This prospectus relates only to
Capital Shares of the Fund. Each class may have different requirements for who
may invest, and may have different sales charges and expense levels. A person
who gets compensated for selling Fund shares may receive a different amount for
each class.
DISTRIBUTIONS AND TAXES
The Fund can earn income and can realize capital gain. The Fund deducts any
expenses then pays these earnings to shareholders as distributions.
The Fund declares dividends daily, so your shares can start earning dividends on
the day you buy them. We distribute the dividends monthly in the form of
additional shares, unless you tell us that you want payment in cash or deposited
in a pre-assigned bank account. The taxation of dividends will not be affected
by the form in which you receive them. We distribute any short-term capital gain
at least annually. The Fund does not expect to realize long-term capital gain.
Dividends of net investment income are usually taxable as ordinary income paid
at the federal, state and local levels. The state or municipality where you live
may not charge you state and local taxes on dividends of tax-exempt interest
earned on certain bonds. Dividends of interest earned on bonds issued by the
U.S. government and its agencies may also be exempt from some types of state and
local taxes.
Early in each calendar year, the Fund will send you a notice showing the amount
of distributions you received in the preceding year and the tax status of those
distributions.
Any investor for whom the Fund does not have a valid taxpayer identification
number will be subject to backup withholding.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
The above is only a general summary of tax implications of investing in this
Fund. Because each investor's tax consequences are unique, please consult your
tax adviser to see how investing in the Fund will affect your own tax situation.
7
WHAT THE TERMS MEAN
ASSET-BACKED SECURITIES: Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
COMMERCIAL PAPER: Short-term securities with maturities of 1 to 270 days which
are issued by banks, corporations and others.
DEMAND NOTES: A debt security with no set maturity date. The investor can
generally demand payment of the principal at any time.
DOLLAR WEIGHTED AVERAGE MATURITY: The average maturity of the Fund is the
average amount of time until the organizations that issued the debt securities
in the Fund's portfolio must pay off the principal amount of the debt. "Dollar
weighted" means the larger the dollar value of debt security in the Fund, the
more weight it gets in calculating this average.
FLOATING RATE SECURITIES: Securities whose interest rates adjust automatically
whenever a particular interest rate changes.
LIQUIDITY: Liquidity is the ability to easily convert investments into cash
without losing a significant amount of money in the process.
MANAGEMENT FEE: A fee paid to the investment adviser to manage the Fund and make
decisions about buying and selling the Fund's investments.
MUNICIPAL LEASE OBLIGATIONS: These provide participation in municipal lease
agreements and installment purchase contracts, but are not part of the general
obligations of the municipality.
MUNICIPAL OBLIGATIONS: Debt securities issued by or on behalf of states,
territories and possessions or by their agencies or other groups with authority
to act for them. For securities to qualify as municipal obligations, the
municipality's lawyers must give an opinion that the interest on them is not
considered gross income for federal income tax purposes.
OTHER EXPENSES: Miscellaneous items, including transfer agency, administration,
custody and registration fees.
REPURCHASE AGREEMENTS: A special type of short-term investment. A dealer sells
securities to a fund and agrees to buy them back later for a set price. In
effect, the dealer is borrowing the fund's money for a short time, using the
securities as collateral.
SHAREHOLDER SERVICE FEE: A fee to cover the cost of paying shareholder servicing
agents to provide certain support services for your account.
VARIABLE RATE SECURITIES: Securities whose interest rates are periodically
adjusted.
8
HOW TO REACH US
MORE INFORMATION
For investors who want more information on the Fund the following documents are
available free upon request:
ANNUAL AND SEMI-ANNUAL REPORTS
Our annual and semi-annual reports contain more information about the Fund's
investments and performance. The annual report also includes details about the
market conditions and investment strategies that had a significant effect on the
Fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the Fund and its policies. It
is incorporated by reference into this prospectus. That means, by law, it's
considered to be part of this prospectus.
You can get a free copy of these documents and other information, or ask us any
questions, by calling us at 1-800-766-7722 or writing to:
JPMORGAN INSTITUTIONAL FUNDS
SERVICE CENTER
500 STANTON CHRISTIANA ROAD
NEWARK, DE 19713
If you buy your shares through an institution, you should contact that
institution directly for more information. You can also find information online
at www.jpmorganfunds.com on the internet.
You can write or e-mail the SEC's Public Reference Room and ask them to mail you
information about the Fund, including the SAI. They will charge you a copying
fee for this service. You can also visit the Public Reference Section, and copy
the documents while you're there.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-0102.
1-202-942-8090
E-MAIL: publicinfo@sec.gov
Reports, a copy of the SAI and other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
JPMorgan Funds Fulfillment Center
393 Manley Street
West Bridgewater, MA 02379-1039
The Fund's Investment Company Act File No. is 811-8358
(C)2001 JPMorgan Chase & Co. All Rights Reserved. October 2001
PR-MMI-901
PROSPECTUS OCTOBER 21, 2001
JPMORGAN LIQUID ASSETS MONEY
MARKET FUND
THIS PROSPECTUS OFFERS: AGENCY SHARES
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] JPMORGAN FLEMING
Asset Management
JPMORGAN LIQUID ASSETS MONEY MARKET FUND 1
THE FUND'S MANAGEMENT AND ADMINISTRATION 4
HOW YOUR ACCOUNT WORKS 5
BUYING FUND SHARES 5
SELLING FUND SHARES 6
OTHER INFORMATION CONCERNING THE FUND 6
DISTRIBUTIONS AND TAXES 7
WHAT THE TERMS MEAN 8
HOW TO REACH US BACK COVER
JPMORGAN LIQUID ASSETS MONEY MARKET FUND
THE FUND'S OBJECTIVE
The Fund's aim is to maximize current income consistent with the preservation of
capital and same-day liquidity.
THE FUND'S MAIN INVESTMENT STRATEGY
The Fund invests across a broad spectrum of U.S. dollar-denominated money market
securities, typically emphasizing different types of securities at different
times in order to take advantage of changing yield differentials. The Fund's
investments may include commercial paper and variable rate demand notes of U.S.
and foreign corporations, obligations issued by the U.S. Treasury, U.S.
government agencies, domestic and foreign banks and corporations, and foreign
governments, repurchase agreements, reverse repurchase agreements, as well as
asset-backed securities and taxable municipal obligations. Some of these
investments may be illiquid or purchased on a when-issued or delayed delivery
basis.
The dollar weighted averaged maturity of the Fund will be 90 days or less and
the Fund will buy only those instruments which have remaining maturities of 397
days or less.
All securities purchased by the Fund must meet the requirements of Rule 2a-7
under the Investment Company Act of 1940, which are designed to mitigate the
risk of loss.
In addition, the Fund may invest a portion of its assets in securities rated
Prime-2 by Moody's Investor Service ("Moody's") or A-2 by Standard & Poor's
Corporation ("S&P"), or, if not rated by Moody's or S&P, if J.P. Morgan Fleming
Asset Management (USA) Inc., the adviser, determines that the security is of
comparable quality. By comparison, the JPMorgan Prime Money Market Fund
generally invests only in securities that are rated Prime-1 by Moody's or A-1 by
S&P and the dollar-weighted average maturity of that fund's portfolio is
generally about 60 days or less.
The Fund seeks to develop an appropriate portfolio by considering the
differences in yields among securities of different maturities, market sectors
and issuers. The Fund's yield will vary in response to changes in interest
rates.
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund may change any of its investment policies (including its investment
objective) without shareholder approval.
THE FUND'S MAIN INVESTMENT RISKS
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Fund. Here are some specific risks of investing in the Fund.
The Fund may not achieve its objective if the adviser's expectations regarding
particular securities or markets are not met.
The Fund attempts to keep its net asset value constant, but there's no guarantee
it will be able to do so.
[SIDENOTE]
BEFORE YOU INVEST
INVESTORS CONSIDERING THE FUND SHOULD UNDERSTAND THAT:
- THERE IS NO ASSURANCE THAT THE FUND WILL MEET ITS INVESTMENT OBJECTIVE.
- THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM.
1
The value of money market investments tends to fall when prevailing interest
rates rise, although they're generally less sensitive to interest rate changes
than longer-term securities.
Investments in foreign banks and other foreign issuers may be riskier than
investments in the United States. That could be, in part, because of difficulty
converting investments into cash, political and economic instability, the
imposition of government controls, or regulations that don't match U.S.
standards.
Securities in the Fund's portfolio may not earn as high a current income as
longer-term or lower-quality securities.
The Fund may have difficulty valuing its illiquid holdings and may be unable to
sell them at the time or price it desires.
The Fund's ability to concentrate its investments in the banking industry could
increase risks. The profitability of banks depends largely on the availability
and cost of funds, which can change depending upon economic conditions. Banks
are also exposed to losses if borrowers get into financial trouble and can't
repay their loans.
As a result of recent world events, the U.S. securities markets have
experienced increased short-term market volatility. As a result, there may be
long-term effects on the U.S. and world economies. In addition, Fund service
providers may be adversely affected.
Although the Fund seeks to be fully invested, it may at times hold some of its
assets in cash. This would hurt the Fund's performance.
Repurchase agreements involve some risk to the Fund if the other party does not
live up to its obligations under the agreement.
If the Fund departs from its investment policies during temporary defensive
periods, it may not achieve its investment objective.
[SIDENOTE]
WHO MAY WANT TO INVEST
THE FUND IS DESIGNED FOR INVESTORS WHO:
- WANT AN INVESTMENT THAT STRIVES TO PRESERVE CAPITAL
- WANT REGULAR INCOME FROM A HIGH QUALITY PORTFOLIO
- WANT A HIGHLY LIQUID INVESTMENT
- ARE LOOKING FOR AN INTERIM INVESTMENT
- ARE PURSUING A SHORT-TERM GOAL
THE FUND IS NOT DESIGNED FOR INVESTORS WHO:
- ARE INVESTING FOR LONG-TERM GROWTH
- ARE INVESTING FOR HIGH INCOME
- REQUIRE THE ADDED SECURITY OF THE FDIC INSURANCE
[SIDENOTE]
INVESTMENTS IN THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
2
THE FUND'S PAST PERFORMANCE(1)
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a bar chart and
performance table will be included in the prospectus. Although past performance
of a fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the fund.
ESTIMATED INVESTOR EXPENSES
The estimated expenses of the Agency Shares before and after reimbursement
are shown below. The table below does not reflect charges or credits which
you might incur if you invest through a financial institution.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (%) (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
AGENCY
--------------------------------------------------------------------------------
MANAGEMENT FEES 0.10
--------------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES NONE
--------------------------------------------------------------------------------
SHAREHOLDER SERVICE FEES 0.10
--------------------------------------------------------------------------------
OTHER EXPENSES(2) 0.19
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 0.39
--------------------------------------------------------------------------------
FEE WAIVER AND EXPENSE REIMBURSEMENT(3) (0.13)
--------------------------------------------------------------------------------
NET EXPENSES(3) 0.26
--------------------------------------------------------------------------------
EXPENSE EXAMPLE(3)
The example below is intended to help you compare the cost of investing in
Agency Shares of the Fund with the cost of investing in other mutual funds.
The example assumes:
- $10,000 initial investment,
- 5% return each year, and
- net expenses for the period 10/21/01 through 12/31/02 and total operating
expenses thereafter.
The example is for comparison only; the actual return and your actual costs may
be higher or lower.
YOUR COST($) 1 YR. 3 YRS.
--------------------------------------------------------------------------------
AGENCY $27 $108
--------------------------------------------------------------------------------
(1)The Fund's fiscal year end is 8/31.
(2)"Other Expenses" are based on estimated amounts for the current fiscal year.
(3)Reflects a written agreement pursuant to which The Chase Manhattan Bank
agrees that it will reimburse the Fund to the extent total operating
expenses (excluding interest, taxes, extraordinary expenses and expenses
related to the deferred compensation plan) exceed 0.20% of the Fund's
average daily net assets through 12/31/02.
3
THE FUND'S MANAGEMENT AND ADMINISTRATION
The Fund is a series of Mutual Fund Trust, a Massachusetts business trust. The
Trust is governed by trustees who are responsible for overseeing all business
activities.
THE FUND'S INVESTMENT ADVISER
J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM (USA)) is the investment
adviser to the Fund and makes the day-to-day investment decisions for the Fund.
JPMFAM (USA) is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPMorgan
Chase), a bank holding company. JPMFAM (USA) provides the Fund with investment
advice and supervision. JPMFAM (USA) is located at 522 5th Avenue, New York, NY
10036.
The Fund will pay JPMFAM (USA) a management fee of 0.10% of average daily net
assets for its services as adviser.
THE FUND'S ADMINISTRATOR
The Chase Manhattan Bank (the Administrator) provides administrative services
and oversees the Fund's other service providers. The Administrator receives a
pro rata portion of the following annual fee on behalf of each Fund for
administrative services:
0.10% of the first $100 billion of average net assets of all money market funds
in the JPMorgan Funds Complex plus 0.05% of average net assets over $100
billion.
The Fund has agreements with certain shareholder servicing agents (including The
Chase Manhattan Bank) under which the shareholder servicing agents have agreed
to provide certain support services to their customers. For performing these
services, each shareholder servicing agent receives an annual fee of up to 0.10%
of the average daily net assets of the Agency Shares of the Fund held by
investors serviced by the shareholder servicing agent.
JPMFAM (USA) and/or J.P. Morgan Fund Distributors, Inc. (JPMFD) may, at their
own expense, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers.
THE FUND'S DISTRIBUTOR
JPMFD is the distributor for the Fund. It is a subsidiary of The BISYS Group,
Inc. and is not affiliated with JPMorgan Chase.
4
HOW YOUR ACCOUNT WORKS
BUYING FUND SHARES
You don't pay any sales charge (sometimes called a load) when you buy Agency
Shares of the Fund. The price you pay for your shares is the net asset value
per share (NAV). NAV is the value of everything the Fund owns, minus
everything it owes, divided by the number of shares held by investors. This
Fund seeks to maintain a stable NAV of $1.00. The Fund uses the amortized
cost method to value its portfolio of securities. This method provides more
stability in valuations. However, it may also result in periods during which
the stated value of a security is different than the price the Fund would
receive if it sold the investment.
The NAV of each class of shares is generally calculated by the cut-off time each
day the Fund is accepting orders. You'll pay the next NAV calculated after the
JPMorgan Institutional Funds Service Center receives your order in proper form.
An order is in proper form only after funds are converted into federal funds.
INVESTING THROUGH A SERVICE ORGANIZATION
Prospective investors may only purchase shares of the Fund with the
assistance of a service organization. Your service organization is paid by
the Fund to assist you in establishing your account, executing transactions,
and monitoring your investment. The minimum amount for initial investments in
the Fund by a service organization is $1,000,000 and $25,000 for additional
investments, although the minimum investments may be less for some investors.
Service organizations may provide the following services in connection with
their customers' investments in the Fund:
- Acting, directly or through an agent, as the sole shareholder of record
- Maintaining account records for customers
- Processing orders to purchase, redeem or exchange shares for customers
- Responding to inquiries from shareholders
- Assisting customers with investment procedures.
Shares are available on any business day the Federal Reserve Bank of New York
and the New York Stock Exchange are open. The Fund also may be open for
business on days the New York Stock Exchange is closed, if banking
institutions are open. If we receive your order by the Fund's cut-off time,
we'll process your order at that day's price and you'll be entitled to all
dividends declared that day. If we receive your order after the cut-off time,
we'll generally process it at the next day's price. Service organizations
will be responsible for transmitting accepted orders and payments to the Fund
by the cut-off time.
Normally, the cut-off (in Eastern time) is 5:00pm.
The Fund may close earlier a few days each year if the Public Securities
Association recommends that the U.S. Government securities market close
trading early.
You must provide a Taxpayer Identification Number when you open an account.
The Fund has the right to
5
reject any purchase order or to cease offering shares.
Your service organization may charge you a fee and may offer additional
services, such as special purchase redemption programs, "sweep" programs, cash
advances and redemption checks. Your service organization may set different
minimum investments and earlier cut-off times.
SELLING FUND SHARES
When you sell your shares you'll receive the next NAV calculated after the
JPMorgan Funds Service Center accepts your order in proper form.
We ask that you tell us early in the day if you plan to sell your shares so we
can effectively manage the Fund.
We will need the names of the registered shareholders and your account number
before we can sell your shares. We will send the proceeds from the sale to
you on the same day if we receive your request before the Fund's cut-off
time. The money will be sent the next day for requests we receive after this
deadline. We will not accept an order to sell shares if the Fund has not
collected your payment for the shares. Federal law allows the Fund to suspend
a sale or postpone payment for more than seven business days under unusual
circumstances.
You will need to have your signature guaranteed if you want your payment sent
to an address other than the one we have in our records. We may also need
additional documents or a letter from a surviving joint owner before selling
the shares.
SELLING SHARES THROUGH YOUR SERVICE ORGANIZATION
Tell your service organization that you want to sell shares. They'll send
all necessary documents to the JPMorgan Funds Service Center.
REDEMPTIONS-IN-KIND
The Funds reserve the right to make redemptions of over $250,000 in securities
rather than in cash.
OTHER INFORMATION CONCERNING THE FUND
We may close your account if the balance falls below the minimum because
you've sold shares. We may also close the account if you fail to meet the
investment minimum over a 12-month period. We'll give you 60 day's notice
before closing your account.
Unless you indicate otherwise on your account application, we are authorized to
act on redemption and transfer instructions received by phone. If someone trades
on your account by phone, we'll ask that person to confirm your account
registration and address to make sure they match those you provided us. If they
give us the correct information, we are generally authorized to follow that
person's instructions. We'll take all reasonable precautions to confirm that the
instructions are genuine. Investors agree that they will not hold the Fund
liable for any loss or expenses from any sales request, if the Fund takes
reasonable precautions. The Fund will be liable for any losses to you from an
unauthorized sale or fraud against you if we do not follow reasonable
procedures.
6
You may not always reach the JPMorgan Funds Service Center by telephone. This
may be true at times of unusual market changes and shareholder activity. You
can mail us your instructions or contact your investment representative or
agent. We may modify or cancel the sale of shares by phone without notice.
Please write to:
JPMorgan Funds Service
Center
P.O. Box 219392
Kansas City, MO 64121-9392
The Fund may issue multiple classes of shares. This prospectus relates only to
Agency Shares of the Fund. Each class may have different requirements for who
may invest, and may have different sales charges and expense levels. A person
who gets compensated for selling Fund shares may receive a different amount for
each class.
DISTRIBUTIONS AND TAXES
The Fund can earn income and can realize capital gain. The Fund deducts any
expenses and then pays out these earnings to shareholders as distributions.
The Fund declares dividends daily, so your shares can start earning dividends
on the day you buy them. We distribute the dividends monthly in the form of
additional shares, unless you tell us that you want payment in cash or
deposited in a pre-assigned bank account. The taxation of dividends will not
be affected by the form in which you receive them. We distribute any
short-term capital gain at least annually. The Fund does not expect to
realize long-term capital gain.
Dividends of net investment income are usually taxable as ordinary income at
the federal, state and local levels. The state or municipality where you live
may not charge you state and local taxes on dividends of tax-exempt interest
earned on certain bonds. Dividends of interest earned on bonds issued by the
U.S. government and its agencies may also be exempt from some types of state
and local taxes.
Early in each calendar year, the Fund will send you a notice showing the amount
of distributions you received in the preceding year and the tax status of those
distributions.
Any investor for whom the Fund does not have a valid taxpayer identification
number will be subject to backup withholding for taxes.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
The above is only a general summary of tax implications of investing in the
Fund. Because each investor's tax consequences are unique, please consult your
tax adviser to see how investing in the Fund will affect your own tax
situation.
7
WHAT THE TERMS MEAN
ASSET-BACKED SECURITIES: Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
COMMERCIAL PAPER: Short-term securities with maturities of 1 to 270 days which
are issued by banks, corporations and others.
DEMAND NOTES: A debt security with no set maturity date. The investor can
generally demand payment of the principal at any time.
DOLLAR WEIGHTED AVERAGE MATURITY: The average maturity of the Fund is the
average amount of time until the organizations that issued the debt
securities in the Fund's portfolio must pay off the principal amount of the
debt. "Dollar weighted" means the larger the dollar value of debt security in
the Fund, the more weight it gets in calculating this average.
FLOATING RATE SECURITIES: Securities whose interest rates adjust automatically
whenever a particular interest rate changes.
LIQUIDITY: Liquidity is the ability to easily convert investments into cash
without losing a significant amount of money in the process.
MANAGEMENT FEE: A fee paid to the investment adviser to manage the Fund and make
decisions about buying and selling the Fund's investments.
MUNICIPAL LEASE OBLIGATIONS: These provide participation in municipal lease
agreements and installment purchase contracts, but are not part of the general
obligations of the municipality.
MUNICIPAL OBLIGATIONS: Debt securities issued by or on behalf of states,
territories and possessions or by their agencies or other groups with authority
to act for them. For securities to qualify as municipal obligations, the
municipality's lawyers must give an opinion that the interest on them is not
considered gross income for federal income tax purposes.
OTHER EXPENSES: Miscellaneous items, including transfer agency, administration,
custody and registration fees.
REPURCHASE AGREEMENTS: A special type of short-term investment. A dealer sells
securities to a fund and agrees to buy them back later for a set price. In
effect, the dealer is borrowing the fund's money for a short time, using the
securities as collateral.
SHAREHOLDER SERVICE FEE: A fee to cover the cost of paying shareholder servicing
agents to provide certain support services for your account.
VARIABLE RATE SECURITIES: Securities whose interest rates are periodically
adjusted.
8
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HOW TO REACH US
MORE INFORMATION
For investors who want more information on the Fund the following documents
are available free upon request:
ANNUAL AND SEMI-ANNUAL REPORTS
Our annual and semi-annual reports contain more information about the Fund's
investments and performance. The annual report also includes details about the
market conditions and investment strategies that had a significant effect on the
Fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed information about the Fund and its policies. It's
incorporated by reference into this prospectus. That means, by law, it is
considered to be part of this prospectus.
You can get a free copy of these documents and other information, or ask us any
questions, by calling us at 1-800-766-7722 or writing to:
JPMORGAN FUNDS
SERVICE CENTER
PO Box 219392
Kansas City, MO 64121-9392
If you buy your shares through an institution, you should contact that
institution directly for more information. You can also find information online
at www.jpmorganfunds.com on the internet.
You can write or e-mail the SEC's Public Reference Room and ask them to mail you
information about the Fund, including the SAI. They will charge you a copying
fee for this service. You can also visit the Public Reference Section and copy
the documents while you're there.
Public Reference Section of the SEC
Washington, DC 20549-0102.
1-202-942-8090
E-mail: publicinfo@sec.gov
Reports, a copy of the SAI and other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
JPMorgan Funds Fulfillment Center
393 Manley Street
West Bridgewater, MA 02379-1039
The Fund's Investment Company Act File No. is 811-8358.
(C)2001 JPMorgan Chase & Co. All Rights Reserved. October 2001
PR-MMAGENCY-901 X
PROSPECTUS OCTOBER 21, 2001
--------------------------------------------------------------------------------
JPMORGAN LIQUID ASSETS MONEY
MARKET FUND
THIS PROSPECTUS OFFERS: PREMIER SHARES
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[GRAPHIC] JPMORGAN FLEMING
ASSET MANAGEMENT
JPMORGAN LIQUID ASSETS MONEY MARKET FUND 1
THE FUND'S MANAGEMENT AND ADMINISTRATION 4
HOW YOUR ACCOUNT WORKS 5
BUYING FUND SHARES 5
SELLING FUND SHARES 6
OTHER INFORMATION CONCERNING THE FUND 7
DISTRIBUTIONS AND TAXES 7
WHAT THE TERMS MEAN 9
HOW TO REACH US BACK COVER
JPMORGAN LIQUID ASSETS MONEY MARKET FUND
THE FUND'S OBJECTIVE
The Fund's aim is to maximize current income consistent with the preservation of
capital and same-day liquidity.
THE FUND'S MAIN INVESTMENT STRATEGY
The Fund invests across a broad spectrum of U.S. dollar-denominated money market
securities, typically emphasizing different types of securities at different
times in order to take advantage of changing yield differentials. The Fund's
investments may include commercial paper and variable rate demand notes of U.S.
and foreign corporations, obligations issued by the U.S. Treasury, U.S.
government agencies, domestic and foreign banks and corporations, and foreign
governments, repurchase agreements, reverse repurchase agreements, as well as
asset-backed securities and taxable municipal obligations. Some of these
investments may be illiquid or purchased on a when-issued or delayed delivery
basis.
The dollar weighted averaged maturity of the Fund will be 90 days or less and
the Fund will buy only those instruments which have remaining maturities of 397
days or less.
All securities purchased by the Fund must meet the requirements of Rule 2a-7
under the Investment Company Act of 1940, which are designed to mitigate the
risk of loss.
In addition, the Fund may invest a portion of its assets in securities rated
Prime-2 by Moody's Investor Service ("Moody's") or A-2 by Standard & Poor's
Corporation ("S&P"), or, if not rated by Moody's or S&P, if J.P. Morgan Fleming
Asset Management (USA) Inc., the adviser, determines that the security is of
comparable quality. By comparison, the JPMorgan Prime Money Market Fund
generally invests only in securities that are rated Prime-1 by Moody's or A-1 by
S&P and the dollar-weighted average maturity of that fund's portfolio is
generally about 60 days or less.
The Fund seeks to develop an appropriate portfolio by considering the
differences in yields among securities of different maturities, market sectors
and issuers. The Fund's yield will vary in response to changes in interest
rates.
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund may change any of its investment policies (including its investment
objective) without shareholder approval.
THE FUND'S MAIN INVESTMENT RISKS
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Fund. Here are some specific risks of investing in the Fund.
The Fund may not achieve its objective if the adviser's expectations regarding
particular securities or markets are not met.
The Fund attempts to keep its net asset value constant, but there's no guarantee
it will be able to do so.
[SIDENOTE]
BEFORE YOU INVEST
INVESTORS CONSIDERING THE FUND SHOULD UNDERSTAND THAT:
- THERE IS NO ASSURANCE THAT THE FUND WILL MEET ITS INVESTMENT OBJECTIVE.
- THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM.
1
The value of money market investments tends to fall when prevailing interest
rates rise, although they're generally less sensitive to interest rate changes
than longer-term securities.
Investments in foreign banks and other foreign issuers may be riskier than
investments in the United States. That could be, in part, because of difficulty
converting investments into cash, political and economic instability, the
imposition of government controls, or regulations that don't match U.S.
standards.
Securities in the Fund's portfolio may not earn as high a current income as
longer-term or lower-quality securities.
The Fund may have difficulty valuing its illiquid holdings and may be unable to
sell them at the time or price it desires.
The Fund's ability to concentrate its investments in the banking industry could
increase risks. The profitability of banks depends largely on the availability
and cost of funds, which can change depending upon economic conditions. Banks
are also exposed to losses if borrowers get into financial trouble and can't
repay their loans.
As a result of recent world events, the U.S. securities markets have
experienced increased short-term market volatility. As a result, there may be
long-term effects on the U.S. and world economies. In addition, Fund service
providers may be adversely affected.
Although the Fund seeks to be fully invested, it may at times hold some of its
assets in cash. This would hurt the Fund's performance.
Repurchase agreements involve some risk to the Fund if the other party does not
live up to its obligations under the agreement.
If the Fund departs from its investment policies during temporary defensive
periods, it may not achieve its investment objective.
[SIDENOTE]
WHO MAY WANT TO INVEST
THE FUND IS DESIGNED FOR INVESTORS WHO:
- WANT AN INVESTMENT THAT STRIVES TO PRESERVE CAPITAL
- WANT REGULAR INCOME FROM A HIGH QUALITY PORTFOLIO
- WANT A HIGHLY LIQUID INVESTMENT
- ARE LOOKING FOR AN INTERIM INVESTMENT
- ARE PURSUING A SHORT-TERM GOAL
THE FUND IS NOT DESIGNED FOR INVESTORS WHO:
- ARE INVESTING FOR LONG-TERM GROWTH
- ARE INVESTING FOR HIGH INCOME
- REQUIRE THE ADDED SECURITY OF THE FDIC INSURANCE
[SIDENOTE]
INVESTMENTS IN THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
2
THE FUND'S PAST PERFORMANCE(1)
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a bar chart and
performance table will be included in the prospectus. Although past performance
of a fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the fund.
ESTIMATED INVESTOR EXPENSES
The estimated expenses of the Premier Shares before and after reimbursement
are shown below. The table below does not reflect charges or credits which
you might incur if you invest through a financial institution.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (%) (EXPENSES
THAT ARE DEDUCTED FROM FUND ASSETS)
PREMIER
MANAGEMENT FEES 0.10
DISTRIBUTION (12B-1) FEES NONE
SHAREHOLDER SERVICE FEES 0.25
OTHER EXPENSES(2) 0.19
TOTAL OPERATING EXPENSES 0.54
FEE WAIVER AND EXPENSE REIMBURSEMENT(3) (0.09)
NET EXPENSES(3) 0.45
EXPENSE EXAMPLE(3)
The example below is intended to help you compare the cost of investing in
Premier Shares of the Fund with the cost of investing in other mutual funds. The
example assumes:
- $10,000 initial investment,
- 5% return each year, and
- net expenses for the period 10/21/01 through 12/31/02 and total operating
expenses thereafter.
The example is for comparison only; the actual return and your actual costs may
be higher or lower.
YOUR COST($) 1 YR. 3 YRS.
PREMIER $46 $161
(1) THE FUND'S FISCAL YEAR END IS 8/31.
(2) "OTHER EXPENSES" ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL
YEAR.
(3) REFLECTS A WRITTEN AGREEMENT PURSUANT TO WHICH THE CHASE MANHATTAN BANK
AGREES THAT IT WILL REIMBURSE THE FUND TO THE EXTENT TOTAL OPERATING
EXPENSES (EXCLUDING INTEREST, TAXES, EXTRAORDINARY EXPENSES AND EXPENSES
RELATED TO THE DEFERRED COMPENSATION PLAN) EXCEED 0.45% OF THE FUND'S
AVERAGE DAILY NET ASSETS THROUGH 12/31/02.
3
THE FUND'S MANAGEMENT AND ADMINISTRATION
The Fund is a series of Mutual Fund Trust, a Massachusetts business trust.
The Trust is governed by trustees who are responsible for overseeing all
business activities.
THE FUND'S INVESTMENT ADVISER
J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM (USA)) is the investment
adviser to the Fund and makes the day-to-day investment decisions for the Fund.
JPMFAM (USA) is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPMorgan
Chase), a bank holding company. JPMFAM (USA) provides the Fund with investment
advice and supervision. JPMFAM (USA) is located at 522 5th Avenue, New York, NY
10036.
The Fund will pay JPMFAM (USA) a management fee of 0.10% of average daily net
assets for its services as adviser.
THE FUND'S ADMINISTRATOR
The Chase Manhattan Bank (the Administrator) provides administrative services
and oversees the Fund's other service providers. The Administrator receives a
pro rata portion of the following annual fee on behalf of the Fund for
administrative services:
0.10% of the first $100 billion of average net assets of all money market funds
in the JPMorgan Funds Complex plus 0.05% of average net assets over $100
billion.
The Fund has agreements with certain shareholder servicing agents (including The
Chase Manhattan Bank) under which the shareholder servicing agents have agreed
to provide certain support services to their customers. For performing these
services, each shareholder servicing agent receives an annual fee of up to 0.25%
of the average daily net assets of the Premier Shares of the Fund held by
investors serviced by the shareholder servicing agent.
JPMFAM (USA) and/or J.P. Morgan Fund Distributors, Inc. (JPMFD) may, at their
own expense, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers.
JPMFD is the distributor for the Fund. It is a subsidiary of The BISYS Group,
Inc. and is not affiliated with JPMorgan Chase.
4
HOW YOUR ACCOUNT WORKS
BUYING FUND SHARES
You don't pay any sales charge (sometimes called a load) when you buy Premier
Shares of the Fund. The price you pay for your shares is the net asset value
per share (NAV). NAV is the value of everything the Fund owns, minus
everything it owes, divided by the number of shares held by investors. The
Fund seeks to maintain a stable NAV of $1.00. The Fund uses the amortized
cost method to value its portfolio of securities. This method provides more
stability in valuations. However, it may also result in periods during which
the stated value of a security is different than the price the Fund would
receive if it sold the investment.
The NAV of each class of shares is generally calculated as of 5:00 p.m.
Eastern time each day the Fund is accepting purchase orders. You'll pay the
next NAV calculated after the JPMorgan Funds Service Center receives your
order in proper form. An order is in proper form only after funds are
converted into federal funds.
The JPMorgan Funds Service Center accepts purchase orders on any business day
that the Federal Reserve Bank of New York and the New York Stock Exchange are
open. If you send us an order in proper form by the Fund's cut-off time, we will
process your order at that day's price and you will be entitled to all dividends
declared on that day. If we receive your order after the cut-off time, we will
generally process it at the next day's price. If you pay by check before the
cut-off time, we will generally process your order the next day the Fund is open
for business. Normally, the cut-off (in Eastern time) is 5:00 P.M.
If you buy through an agent and not directly from the JPMorgan Funds Service
Center, the agent could set earlier cut-off times. The Fund can set an
earlier cut-off time if the Public Securities Association recommends that the
U.S. Government securities market close trading early.
You must provide a Taxpayer Identification Number when you open an account.
The Fund has the right to reject any purchase order or to cease offering
shares at anytime.
To open an account, buy or sell shares or get fund information, call the
JPMorgan Funds Service Center at 1-800-348-4782
or
complete an application form and mail it along with a check for the amount you
want to invest to
JPMorgan Funds Service Center
P.O. Box 219392
Kansas City, MO 64121-9392
MINIMUM INVESTMENTS
First time investors must buy a minimum of $100,000 worth of Premier Shares
in the Fund to open an account. There are no minimum levels for subsequent
purchases, but you must always have at least $100,000 in your account. The
minimum investment may be less for certain investors.
Make your check out to JPMorgan Funds in U.S. dollars. We do not accept credit
cards, cash, or checks from a third party. If you purchase your shares by
uncertified check, you cannot sell those shares until your check clears, which
could take more than 15 calendar days after such shares were purchased.
5
Your purchase will be canceled if your check doesn't clear and you will be
responsible for any expenses and losses to the Fund. Orders by wire will be
canceled if the JPMorgan Funds Service Center doesn't receive payment by 4:00
p.m. Eastern time on the day you buy.
If you are planning to sell or transfer shares to another person shortly
after buying the shares, you should pay by certified check to avoid delays.
OPENING YOUR ACCOUNT AND BUYING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE
Your representative may charge you a fee and may offer additional services, such
as special purchase and redemption programs, "sweep" programs, cash advances and
redemption checks. Your representative may set different minimum investments and
earlier cut-off times.
SELLING FUND SHARES
You can sell your shares on any day the JPMorgan Funds Service Center is open
for trading, either directly to the Fund or through your investment
representative. You'll receive the next NAV calculated after the JPMorgan Funds
Service Center accepts your order.
We will need the names of the registered shareholders and your account number
before we can sell your shares. Under normal circumstances, if your request is
received before the Fund's cut-off time, the Fund will send you the proceeds the
same business day. We won't accept an order to sell shares if the Fund hasn't
collected your payment for the shares.
The Fund may stop accepting orders to sell and may postpone payments for more
than seven days, as federal securities laws permit.
You will need to have signatures guaranteed for all registered owners or their
legal representative if:
- you want to sell shares with a net asset value of $100,000 or more, or
- you want your payment sent to an address other than the one we have in our
records.
We may also need additional documents or a letter from a surviving joint owner
before selling the shares.
You may sell your shares in two ways:
THROUGH YOUR INVESTMENT REPRESENTATIVE
Tell your representative that you want to sell. He or she will send the
necessary documents to the Fund. Your representative might charge you for this
service.
THROUGH THE JPMORGAN FUNDS SERVICE CENTER
Call 1-800-348-4782. We will mail you a check or send the proceeds via
electronic transfer or wire. If you have changed your address of record within
the previous 30 days or if you sell $25,000 or more worth of Fund shares by
phone, we'll send the proceeds by electronic transfer or by wire only to the
bank account on our records.
6
Or
Send a signed letter with your instructions to:
JPMORGAN FUNDS SERVICE CENTER
P.O. BOX 219392 KANSAS CITY, MO 64121-9392
REDEMPTIONS-IN-KIND
The Fund reserves the right to make redemptions of over $250,000 in securities
rather than in cash.
OTHER INFORMATION CONCERNING THE FUND
We may close your account if the balance falls below $100,000 because you've
sold shares. We may also close the account if you fail to meet the investment
minimum over a 12-month period. We'll give you 60 days' notice before closing
your account.
Unless you indicate otherwise on your account application, we are authorized to
act on redemption and transfer instructions received by phone. If someone trades
on your account by phone, we'll ask that person to confirm your account
registration and address to make sure they match those you provided us. If they
give us the correct information, we are generally authorized to follow that
person's instructions. We'll take all reasonable precautions to confirm that the
instructions are genuine. Investors agree that they will not hold the Fund
liable for any loss or expenses from any sales request, if the Fund takes
reasonable precautions. The Fund will be liable for any losses to you from an
unauthorized sale or fraud against you if we do not follow reasonable
procedures.
You may not always reach the JPMorgan Funds Service Center by telephone. This
may be true at times of unusual market changes and shareholder activity. You can
mail us your instructions or contact your investment representative or agent. We
may modify or cancel the sale of shares by phone without notice.
Please write to:
JPMORGAN FUNDS SERVICE CENTER
P.O. BOX 219392
KANSAS CITY, MO 64121-9392
The Fund may issue multiple classes of shares. This prospectus relates only to
Premier Shares of the Fund. Each class may have different requirements for who
may invest, and may have different sales charges and expense levels. A person
who gets compensated for selling Fund shares may receive a different amount for
each class.
DISTRIBUTIONS AND TAXES
The Fund can earn income and it can realize capital gain. The Fund deducts any
expenses and then pays out these earnings to shareholders as distributions.
The Fund declares dividends daily, so your shares can start earning dividends on
the day you buy them. The Fund distributes the dividends monthly in the form of
additional shares, unless you tell us that you want payment in cash or deposited
in a pre-assigned bank account. The taxation of dividends will not be affected
by the form in which you receive them. The Fund distributes any short-term
capital gain at least annually. The Fund does not expect to realize long-term
capital gain.
7
Dividends of net investment income are usually taxable as ordinary income at the
federal, state and local levels. The state or municipality where you live may
not charge you state and local taxes on dividends of tax-exempt interest earned
on certain bonds. Dividends of interest earned on bonds issued by the U.S.
Government and its agencies may be exempt from some types of state and local
taxes.
Early in each calendar year, the Fund will send you a notice showing the amount
of distributions you received in the preceding year and the tax status of those
distributions.
Any investor for whom the Fund does not have a valid Taxpayer Identification
Number may be subject to backup withholding.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
The above is only a general summary of tax implications of investing in the
Fund. Because each investor's tax consequences are unique, please consult your
tax adviser to see how investing in the Fund will affect your own tax situation.
ASSET-BACKED SECURITIES: Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
COMMERCIAL PAPER: Short-term securities with maturities of 1 to 270 days which
are issued by banks, corporations and others.
DEMAND NOTES: A debt security with no set maturity date. The investor can
generally demand payment of the principal at any time.
DOLLAR WEIGHTED AVERAGE MATURITY: The average maturity of the Fund is the
average amount of time until the organizations that issued the debt securities
in the Fund's portfolio must pay off the principal amount of the debt. "Dollar
weighted" means the larger the dollar value of debt security in the Fund, the
more weight it gets in calculating this average.
FLOATING RATE SECURITIES: Securities whose interest rates adjust automatically
whenever a particular interest rate changes.
LIQUIDITY: Liquidity is the ability to easily convert investments into cash
without losing a significant amount of money in the process.
MANAGEMENT FEE: A fee paid to the investment adviser to manage the Fund and make
decisions about buying and selling the Fund's investments.
MUNICIPAL LEASE OBLIGATIONS: These provide participation in municipal lease
agreements and installment purchase contracts, but are not part of the general
obligations of the municipality.
8
WHAT THE TERMS MEAN
MUNICIPAL OBLIGATIONS: Debt securities issued by or on behalf of states,
territories and possessions or by their agencies or other groups with authority
to act for them. For securities to qualify as municipal obligations, the
municipality's lawyers must give an opinion that the interest on them is not
considered gross income for federal income tax purposes.
OTHER EXPENSES: Miscellaneous items, including transfer agency, administration,
custody and registration fees.
REPURCHASE AGREEMENTS: A special type of short-term investment. A dealer sells
securities to a fund and agrees to buy them back later for a set price. In
effect, the dealer is borrowing the fund's money for a short time, using the
securities as collateral.
SHAREHOLDER SERVICE FEE: A fee to cover the cost of paying shareholder servicing
agents to provide certain support services for your account.
VARIABLE RATE SECURITIES: Securities whose interest rates are periodically
adjusted.
9
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HOW TO REACH US
MORE INFORMATION
For investors who want more information on the Fund the following documents are
available free upon request:
ANNUAL AND SEMI-ANNUAL REPORTS
Our annual and semi-annual reports contain more information about the Fund's
investments and performance. The annual report also includes details about the
market conditions and investment strategies that had a significant effect on the
Fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed information about the Fund and its policies. It's
incorporated by reference into this prospectus. That means, by law, it is
considered to be part of this prospectus.
You can get a free copy of these documents and other information, or ask us any
questions, by calling us at 1-800-348-4782 or writing to:
JPMORGAN FUNDS SERVICE CENTER
P.O. BOX 219392
KANSAS CITY, MO 64121-9392
If you buy your shares through an institution, you should contact that
institution directly for more information. You can also find information online
at www.jpmorganfunds.com on the internet.
You can write or e-mail the SEC's Public Reference Room and ask them to mail you
information about the Fund, including the SAI. They will charge you a copying
fee for this service. You can also visit the Public Reference Section and copy
the documents while you're there.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-0102.
1-202-942-8090
E-MAIL: publicinfo@sec.gov
Reports, a copy of the SAI and other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
JPMorgan Funds Fulfillment
Center 393 Manley Street
West Bridgewater, MA 02379-1039
The Fund's Investment Company Act File No. is 811-8358.
(C) 2001 JPMorgan Chase & Co. All Rights Reserved. October 2001
PR-MMP-901 X
PROSPECTUS OCTOBER 21, 2001
JPMORGAN LIQUID ASSETS MONEY
MARKET FUND
THIS PROSPECTUS OFFERS: MORGAN SHARES
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
[LOGO] JPMorgan Fleming
Asset Management
JPMORGAN LIQUID ASSETS MONEY MARKET FUND 1
THE FUND'S MANAGEMENT AND ADMINISTRATION 4
HOW YOUR ACCOUNT WORKS 5
BUYING FUND SHARES 5
SELLING FUND SHARES 6
EXCHANGING FUND SHARES 7
OTHER INFORMATION CONCERNING THE FUND 8
DISTRIBUTIONS AND TAXES 8
SHAREHOLDER SERVICES 10
WHAT THE TERMS MEAN 11
HOW TO REACH US BACK COVER
JPMorgan LIQUID ASSETS MONEY MARKET FUND
THE FUND'S OBJECTIVE
THE FUND'S AIM IS TO MAXIMIZE CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF
CAPITAL AND SAME-DAY LIQUIDITY.
THE FUND'S MAIN INVESTMENT STRATEGY
The Fund invests across a broad spectrum of U.S. dollar-denominated money market
securities, typically emphasizing different types of securities at different
times in order to take advantage of changing yield differentials. The Fund's
investments may include commercial paper and variable rate demand notes of U.S.
and foreign corporations, obligations issued by the U.S. Treasury, U.S.
government agencies, domestic and foreign banks and corporations, and foreign
governments, repurchase agreements, reverse repurchase agreements, as well as
asset-backed securities and taxable municipal obligations. Some of these
investments may be illiquid or purchased on a when-issued or delayed delivery
basis.
The dollar weighted averaged maturity of the Fund will be 90 days or less and
the Fund will buy only those instruments which have remaining maturities of 397
days or less.
All securities purchased by the Fund must meet the requirements of Rule 2a-7
under the Investment Company Act of 1940, which are designed to mitigate the
risk of loss.
In addition, the Fund may invest a portion of its assets in securities rated
Prime-2 by Moody's Investor Service ("Moody's") or A-2 by Standard & Poor's
Corporation ("S&P"), or, if not rated by Moody's or S&P, if J.P. Morgan Fleming
Asset Management (USA) Inc., the adviser, determines that the security is of
comparable quality. By comparison, the JPMorgan Prime Money Market Fund
generally invests only in securities that are rated Prime-1 by Moody's or A-1 by
S&P and the dollar-weighted average maturity of that fund's portfolio is
generally about 60 days or less.
The Fund seeks to develop an appropriate portfolio by considering the
differences in yields among securities of different maturities, market sectors
and issuers. The Fund's yield will vary in response to changes in interest
rates.
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund may change any of its investment policies (including its investment
objective) without shareholder approval.
THE FUND'S MAIN INVESTMENT RISKS
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Fund. Here are some specific risks of investing in the Fund.
The Fund may not achieve its objective if the adviser's expectations regarding
particular securities or markets are not met.
The Fund attempts to keep its net asset value constant, but there's no
guarantee it will be able to do so.
The value of money market investments tends to fall when prevailing interest
rates rise, although they're
[SIDENOTE]
BEFORE YOU INVEST
INVESTORS CONSIDERING THE FUND SHOULD UNDERSTAND THAT:
- THERE IS NO ASSURANCE THAT THE FUND WILL MEET ITS INVESTMENT OBJECTIVE.
- THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM.
1
generally less sensitive to interest rate changes than longer-term securities.
Investments in foreign banks and other foreign issuers may be riskier than
investments in the United States. That could be, in part, because of difficulty
converting investments into cash, political and economic instability, the
imposition of government controls, or regulations that don't match U.S.
standards.
Securities in the Fund's portfolio may not earn as high a current income as
longer-term or lower-quality securities.
The Fund may have difficulty valuing its illiquid holdings and may be unable to
sell them at the time or price it desires.
The Fund's ability to concentrate its investments in the banking industry could
increase risks. The profitability of banks depends largely on the availability
and cost of funds, which can change depending upon economic conditions. Banks
are also exposed to losses if borrowers get into financial trouble and can't
repay their loans.
As a result of recent world events, the U.S. securities markets have
experienced increased short-term market volatility. As a result, there may be
long-term effects on the U.S. and world economies. In addition, Fund service
providers may be adversely affected.
Although the Fund seeks to be fully invested, it may at times hold some of its
assets in cash. This would hurt the Fund's performance.
Repurchase agreements involve some risk to the Fund if the other party does not
live up to its obligations under the agreement.
If the Fund departs from its investment policies during temporary defensive
periods, it may not achieve its investment objective.
[SIDENOTE]
WHO MAY WANT TO INVEST
THE FUND IS DESIGNED FOR INVESTORS WHO:
- WANT AN INVESTMENT THAT STRIVES TO PRESERVE CAPITAL
- WANT REGULAR INCOME FROM A HIGH QUALITY PORTFOLIO
- WANT A HIGHLY LIQUID INVESTMENT
- ARE LOOKING FOR AN INTERIM INVESTMENT
- ARE PURSUING A SHORT-TERM GOAL
THE FUND IS NOT DESIGNED FOR INVESTORS WHO:
- ARE INVESTING FOR LONG-TERM GROWTH
- ARE INVESTING FOR HIGH INCOME
- REQUIRE THE ADDED SECURITY OF THE FDIC INSURANCE
[SIDENOTE]
INVESTMENTS IN THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
2
THE FUND'S PAST PERFORMANCE(1)
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a bar chart and
performance table will be included in the prospectus. Although past performance
of a fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the fund.
ESTIMATED INVESTOR EXPENSES
The estimated expenses of the Morgan Shares before and after reimbursement
are shown below. The table below does not reflect charges or credits which
you might incur if you invest through a financial institution.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (%) (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
MORGAN
------------------------------------------------------------------------------
MANAGEMENT FEES 0.10
DISTRIBUTION (12B-1) FEES 0.10
SHAREHOLDER SERVICE FEES 0.35
OTHER EXPENSES(2) 0.21
TOTAL OPERATING EXPENSES 0.76
FEE WAIVER AND EXPENSE REIMBURSEMENT(2) (0.17)
NET EXPENSES(2) 0.59
EXPENSE EXAMPLE(3)
The example below is intended to help you compare the cost of investing in
Morgan Shares of the Fund with the cost of investing in other mutual funds. The
example assumes:
- $10,000 initial investment,
- 5% return each year, and
- net expenses for the period 10/21/01 through 12/31/02 and total operating
expenses thereafter.
The example is for comparison only; the actual return and your actual costs may
be higher or lower.
YOUR COST($) 1 YR. 3 YRS.
----------------------------------------------------------------------------
MORGAN $60 $220
(1) THE FUND'S FISCAL YEAR END IS 8/31.
(2) "OTHER EXPENSES" ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
(3) REFLECTS A WRITTEN AGREEMENT PURSUANT TO WHICH THE CHASE MANHATTAN BANK
AGREES THAT IT WILL REIMBURSE THE FUND TO THE EXTENT TOTAL OPERATING
EXPENSES (EXCLUDING INTEREST, TAXES, EXTRAORDINARY EXPENSES AND EXPENSES
RELATED TO THE DEFERRED COMPENSATION PLAN) EXCEED 0.59% OF THE FUND'S
AVERAGE DAILY NET ASSETS THROUGH 12/31/02.
3
THE FUND'S MANAGEMENT AND ADMINISTRATION
The Fund is a series of Mutual Fund Trust, a Massachusetts business trust.
The Trust is governed by trustees who are responsible for overseeing all
business activities.
THE FUND'S INVESTMENT ADVISER
J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM (USA)) is the investment
adviser to the Fund and makes the day-to-day investment decisions for the Fund.
JPMFAM (USA) is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPMorgan
Chase), a bank holding company. JPMFAM (USA) provides the Fund with investment
advice and supervision. JPMFAM (USA) is located at 522 5th Avenue, New York, NY
10036.
The Fund will pay JPMFAM (USA) a management fee of 0.10% of average daily net
assets for its services as adviser.
THE FUND'S ADMINISTRATOR
The Chase Manhattan Bank (the Administrator) provides administrative services
and oversees the Fund's other service providers. The Administrator receives a
pro rata portion of the following annual fee on behalf of each Fund for
administrative services:
0.10% of the first $100 billion of average net assets of all money market funds
in the JPMorgan Funds Complex plus 0.05% of average net assets over $100
billion.
The Fund has agreements with certain shareholder servicing agents (including The
Chase Manhattan Bank) under which the shareholder servicing agents have agreed
to provide certain support services to their customers. For performing these
services, each shareholder servicing agent receives an annual fee of up to 0.35%
of the average daily net assets of the Morgan Shares of the Fund held by
investors serviced by the shareholder servicing agent. The Board of Trustees has
determined that the amount payable for "service fees" (as defined by the NASD)
does not exceed 0.25% of the average annual net assets attributable to the
Morgan Shares of the Fund.
JPMFAM (USA) and/or J.P. Morgan Fund Distributors, Inc. (JPMFD) may, at their
own expense, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers.
THE FUNDS' DISTRIBUTOR
JPMFD is the distributor for the Fund. It is a subsidiary of The BISYS Group,
Inc. and is not affiliated with JPMorgan Chase.
4
HOW YOUR ACCOUNT WORKS
BUYING FUND SHARES
You don't pay any sales charge (sometimes called a load) when you buy Morgan
Shares in the Fund. The price you pay for your shares is the net asset value
per share (NAV). NAV is the value of everything the Fund owns, minus everything
it owes, divided by the number of shares held by investors. The Fund seeks to
maintain a stable NAV of $1.00. The Fund uses the amortized cost method to value
its portfolio of securities. This method provides more stability in valuations.
However, it may also result in periods during which the stated value of a
security is different than the price the Fund would receive if it sold the
investment.
The NAV of each class of shares is generally calculated by the cut-off time
each day the Fund is accepting orders. You'll pay the next NAV calculated
after the JPMorgan Funds Service Center receives your order in proper form.
An order is in proper form only after funds are converted into federal funds.
You can buy shares through financial service firms, such as broker-dealers
and banks that have an agreement with the Fund, or directly from the JPMorgan
Funds Service Center. Shares are available on any business day that the
Federal Reserve Bank of New York and the New York Stock Exchange are open.
The Fund also may be open for business on days the New York Stock Exchange is
closed, if banking institutions are open. If we receive your order by the
Fund's cut-off time, we'll process your order at that day's price and you'll
be entitled to all dividends declared on that day. If we receive your order
after the cut-off time, we'll generally process it at the next day's price.
If you pay by check before the cut-off time, we'll generally process your
order the next day the Fund is open for business. Normally, the cut-off (in
Eastern time) is 5:00 P.M.
If you buy through an agent and not directly from the JPMorgan Funds Service
Center, the agent could set earlier cut-off times. The Fund may close earlier
a few days each year if the Public Securities Association recommends that the
U.S. Government securities market close trading early.
You must provide a Taxpayer Identification Number when you open an account. The
Fund has the right to reject any purchase order or to cease offering shares
at any time.
TO OPEN AN ACCOUNT, BUY OR SELL SHARES OR GET FUND INFORMATION, CALL:
--------------------------------------------------------------------------------
THE JPMORGAN FUNDS SERVICE CENTER
--------------------------------------------------------------------------------
1-800-348-4782
--------------------------------------------------------------------------------
MINIMUM INVESTMENTS
TYPE OF INITIAL ADDITIONAL
ACCOUNT INVESTMENT INVESTMENTS
---------------------------------------------------------
REGULAR ACCOUNT $2,500 $100
---------------------------------------------------------
SYSTEMATIC
INVESTMENT PLAN(1) $1,000 $100
---------------------------------------------------------
IRAs $1,000 $100
---------------------------------------------------------
SEP-IRAs $1,000 $100
---------------------------------------------------------
EDUCATION IRAs $500 $100
---------------------------------------------------------
(1) For alternative minimum investments for systematic investment plan
accounts, please see Shareholder Services.
Make your check out to JPMorgan Funds in U.S. dollars. We do not accept
credit cards, cash, or checks from a third party. If you purchase your shares
by uncertified check, you cannot sell these shares until your check clears,
5
which could take more than 15 calendar days after such shares were purchased.
If you buy through an Automated Clearing House, you can not sell your shares
until the payment clears. This could take more than seven business days.
Your purchase will be canceled if your check does not clear and you will be
responsible for any expenses and losses to the Fund. Orders by wire will be
canceled if the JPMorgan Funds Service Center does not receive payment by
4:00 p.m. Eastern time on the day you buy.
If you are planning to exchange, sell or transfer shares to another person
shortly after buying the shares, you should pay by certified check to avoid
delays.
You can buy shares in three ways:
THROUGH YOUR INVESTMENT REPRESENTATIVE
Your representative may charge you a fee and may offer additional services,
such as special purchase and redemption programs, "sweep" programs, cash
advances and redemption checks. Some representives charge a single fee that
covers all services. Your representative may impose different minimum
investments and earlier deadlines to buy and sell shares.
THROUGH THE JPMORGAN FUNDS SERVICE CENTER
Call 1-800-348-4782
Complete the application form and mail it along with a check for the amount
you want to invest to:
JPMorgan Funds Service Center
P.O. Box 219392
Kansas City, MO 64121-9392
THROUGH A SYSTEMATIC INVESTMENT PLAN
This is an easy way to make regular investments. See Shareholder Services for
details.
SELLING FUND SHARES
When you sell your shares, either directly or through your investment
representative, you will receive the next NAV calculated after the JPMorgan
Institutional Funds Service Center accepts your order in proper form. We ask
that you tell us early in the day if you plan to sell your shares so we can
effectively manage the Fund.
We will need the names of the registered shareholders and your account number
before we can sell your shares. Under normal circumstances, if your request
is received before the Fund's cut-off time, the Fund will send you the
proceeds the same business day. We will not accept an order to sell shares if
the Fund has not collected your payment for the shares. The Fund may stop
accepting orders to sell and may postpone payments for more than seven days,
as federal securities laws permit.
6
You will need to have signatures guaranteed for all registered owners or
their legal representative if:
- you want to sell shares with a net asset value of $100,000 or more, or
- you want your payment sent to an address other than the one we have in our
records.
We may also need additional documents or a letter from a surviving joint
owner before selling the shares.
You can sell shares in three ways:
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE
Tell your representative that you want to sell. He or she will send all
necessary documents to the JPMorgan Funds Service Center. Your representative
might charge you for this service.
THROUGH THE JPMORGAN FUNDS SERVICE CENTER
Call 1-800-348-4782. We will mail you a check or send the proceeds via
electronic transfer or wire.
Or
Send a signed letter with your instructions to:
JPMORGAN FUNDS SERVICE CENTER
P.O. BOX 219392
KANSAS CITY, MO 64121-9392
If you have changed your address of record within the previous 30 days or if
you sell $25,000 or more worth of Fund shares by phone, we'll send the
proceeds by electronic transfer or wire only to the bank account on our
records.
THROUGH A SYSTEMATIC WITHDRAWAL PLAN
You can automatically sell shares. See Shareholder Services for details.
REDEMPTIONS-IN-KIND
The Fund reserves the right to make redemptions of over $250,000 in
securities rather than in cash.
EXCHANGING FUND SHARES
You can exchange your Morgan Shares for shares in certain other JPMorgan
Funds. For tax purposes, an exchange is treated as a sale of Fund shares.
Carefully read the prospectus of the fund you want to buy before making an
exchange. You'll need to meet any minimum investment requirements and may
have to pay a sales charge. Call 1-800-348-4782 for details.
You should not exchange shares as a means of short-term trading as this could
increase management costs and affect all shareholders. We reserve the right
to limit the number of exchanges or to refuse an exchange. We may also
terminate this privilege. We may charge an administration fee of $5 for each
exchange if you make more than 10 exchanges in a year or three in a quarter.
See the Statement of Additional Information to find out more about the
exchange privilege.
THROUGH A SYSTEMATIC EXCHANGE PLAN
You can also set up a systematic exchange program to automatically exchange
shares on a regular basis. It's a free service. See Shareholder Services for
details.
7
EXCHANGE BY PHONE
You may also use our Telephone Exchange Privilege. You can get information by
contacting the JPMorgan Funds Service Center or your investment
representative.
DISTRIBUTION ARRANGEMENTS
The Fund has adopted a Rule 12b-1 distribution plan under which it pays up to
0.10% of its Morgan Class assets in distribution fees.
These payments cover such things as payments for services provided by
broker-dealers and expenses connected to sale of shares. Payments are not
tied to the amount of actual expenses incurred. Because 12b-1 expenses are
paid out of the Fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than other types
of sales charges.
OTHER INFORMATION CONCERNING THE FUND
We may close your account if the balance falls below the minimum because
you've sold shares. We may also close the account if you are in the
Systematic Investment Plan and fail to meet the investment minimum over a
12-month period. We will give you 60 days' notice before closing your account.
Unless you indicate otherwise on your account application, we are authorized to
act on redemption and transfer instructions received by phone. If someone trades
on your account by phone, we'll ask that person to confirm your account
registration and address to make sure they match those you provided us. If they
give us the correct information, we are generally authorized to follow that
person's instructions. We'll take all reasonable precautions to confirm that the
instructions are genuine. Investors agree that they will not hold the Fund
liable for any loss or expenses from any sales request, if the Fund takes
reasonable precautions. The Fund will be liable for any losses to you from an
unauthorized sale or fraud against you if we do not follow reasonable
procedures.
You may not always reach the JPMorgan Funds Service Center by telephone. This
may be true at times of unusual market changes and shareholder activity. You
can mail us your instructions or contact your investment representative or
agent. We may modify or cancel the sale of shares by phone without notice.
PLEASE WRITE TO:
JPMORGAN FUNDS SERVICE CENTER
P.O. BOX 219392
KANSAS CITY, MO 64121-9392
The Fund may issue multiple classes of shares. This prospectus relates only to
Morgan Shares of the Fund. Each class may have different requirements for who
may invest, and may have different sales charges and expense levels. A person
who gets compensated for selling Fund shares may receive a different amount for
each class.
DISTRIBUTIONS AND TAXES
The Fund can earn income and it can realize capital gain. The Fund deducts
any expenses then pays these earnings to shareholders as distributions.
8
The Fund declares dividends daily, so your shares can start earning dividends on
the day you buy them. We distribute the dividends monthly in the form of
additional shares, unless you tell us that you want payment in cash or deposited
in a pre-assigned bank account. The taxation of dividends will not be affected
by the form in which you receive them. We distribute any short-term capital
gain at least annually. The Fund does not expect to realize long-term capital
gain.
Dividends of net investment income are usually taxable as ordinary income at
the federal, state and local levels. The state or municipality where you live
may not charge you state and local taxes on dividends of tax-exempt interest
earned on certain bonds. Dividends earned on bonds issued by the U.S.
government and its agencies may also be exempt from some types of state and
local taxes.
Early in each calendar year, the Fund will send you a notice showing the amount
of distributions you received in the preceding year and the tax status of those
distributions.
Any investor for whom the Fund does not have a valid Taxpayer Identification
Number may be subject to backup withholding.
The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.
The above is only a general summary of tax implications of investing in this
Fund. Because each investor's tax consequences are unique, please consult
your tax adviser to see how investing in the Fund will affect your own tax
situation.
9
SHAREHOLDER SERVICES
SYSTEMATIC INVESTMENT PLAN
If you make an initial investment of at least $1000, you can regularly invest
$100 or more on a monthly, quarterly or semiannual basis. You may also choose
to make a lower initial investment of $250, which requires additional monthly
systematic investments of $200. The money is automatically deducted from your
checking or savings account. For further information please refer to the How
Your Account Works section of this prospectus.
You can set up a plan when you open an account by completing the appropriate
section of the application. Current shareholders can join by sending a signed
letter and a deposit slip or void check from their bank account to JPMorgan
Service Center. Call 1-800-348-4782 for complete instructions.
SYSTEMATIC WITHDRAWAL PLAN
You can automatically sell shares. You can make regular withdrawals of $50 or
more. You can have automatic withdrawals made monthly, quarterly or
semiannually. Your account must contain at least $5,000 to start the plan.
Call 1-800-348-4782 for complete instructions.
SYSTEMATIC EXCHANGE PLAN
You can set up a systematic exchange program to automatically exchange shares
on a regular basis. It's a free service. However, you cannot have
simultaneous plans for the systematic investment or exchange and the
systematic withdrawal or exchange for the same fund. Call 1-800-348-4782 for
complete instructions.
FREE EXCHANGE PRIVILEGE
You can exchange shares between JPMorgan Funds in the same class without
charge. This allows you to adjust your investments as your objectives change.
10
WHAT THE TERMS MEAN
ASSET-BACKED SECURITIES: Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
COMMERCIAL PAPER: Short-term securities with maturities of 1 to 270 days which
are issued by banks, corporations and others.
DEMAND NOTES: A debt security with no set maturity date. The investor can
generally demand payment of the principal at any time.
DOLLAR WEIGHTED AVERAGE MATURITY: The average maturity of the Fund is the
average amount of time until the organizations that issued the debt
securities in the Fund's portfolio must pay off the principal amount of the
debt. "Dollar weighted" means the larger the dollar value of debt security in
the Fund, the more weight it gets in calculating this average.
FLOATING RATE SECURITIES: Securities whose interest rates adjust automatically
whenever a particular interest rate changes.
LIQUIDITY: Liquidity is the ability to easily convert investments into cash
without losing a significant amount of money in the process.
MANAGEMENT FEE: A fee paid to the investment adviser to manage the Fund and make
decisions about buying and selling the Fund's investments.
MUNICIPAL LEASE OBLIGATIONS: These provide participation in municipal lease
agreements and installment purchase contracts, but are not part of the general
obligations of the municipality.
MUNICIPAL OBLIGATIONS: Debt securities issued by or on behalf of states,
territories and possessions or by their agencies or other groups with authority
to act for them. For securities to qualify as municipal obligations, the
municipality's lawyers must give an opinion that the interest on them is not
considered gross income for federal income tax purposes.
OTHER EXPENSES: Miscellaneous items, including transfer agency, administration,
custody and registration fees.
REPURCHASE AGREEMENTS: A special type of short-term investment. A dealer sells
securities to a fund and agrees to buy them back later for a set price. In
effect, the dealer is borrowing the fund's money for a short time, using the
securities as collateral.
SHAREHOLDER SERVICE FEE: A fee to cover the cost of paying shareholder servicing
agents to provide certain support services for your account.
VARIABLE RATE SECURITIES: Securities whose interest rates are periodically
adjusted.
11
HOW TO REACH US
MORE INFORMATION
For investors who want more information on the Fund, the following documents are
available free upon request:
ANNUAL AND SEMI-ANNUAL REPORTS
Our annual and semi-annual reports contain more information about the Fund's
investments and performance. The annual report also includes details about the
market conditions and investment strategies that had a significant effect on the
Fund`s performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the Fund and its policies. It's
incorporated by reference into this prospectus. That means, by law, it is
considered to be part of this prospectus.
You can get a free copy of these documents and other information, or ask us any
questions, by calling us at 1-800-348-4782 or writing to:
JPMORGAN FUNDS SERVICE CENTER
P.O. BOX 219392
KANSAS CITY, MO 64121-9392
If you buy your shares through an institution, you should contact that
institution directly for more information. You can also find information online
at www.jpmorganfunds.com on the internet.
You can write or e-mail the SEC's Public Reference Room and ask them to mail you
information about the Fund, including the SAI. They will charge you a copying
fee for this service. You can also visit the Public Reference Section and copy
the documents while you're there.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-0102.
1-202-942-8090
E-MAIL: publicinfo@sec.gov
Reports, a copy of the SAI and other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
JPMorgan Funds Fulfillment Center
393 Manley Street
West Bridgewater, MA 02379-1039
The Fund's Investment Company Act File No. is 811-8358.
(C) 2001 JPMorgan Chase & Co. All Rights Reserved. October 2001
PR-MM-901
PR-MMB-901 X
PR-MMM-901 X
JPMORGAN FUNDS
MUTUAL FUND TRUST
STATEMENT OF ADDITIONAL
INFORMATION
OCTOBER 21, 2001
JPMORGAN LIQUID ASSETS MONEY MARKET FUND
522 FIFTH AVENUE, NEW YORK, NEW YORK 10036
This Statement of Additional Information sets forth information which may be
of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Fund. This Statement of Additional
Information should be read in conjunction with the Prospectuses dated
October 21, 2001 offering shares of the Fund. Any references to a "Prospectus"
in this Statement of Additional Information is a reference to the foregoing
Prospectuses, as the context requires. Copies of each Prospectus may be obtained
by an investor without charge by contacting J.P. Morgan Fund Distributors, Inc.
(the "Distributor"), at 1211 Avenue of the Americas, 41st Floor, New York, NY
10036.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
For more information about your account, simply call or write the JPMorgan
Funds Service Center at:
Morgan, Agency and Premier Shares: Institutional and Capital Shares:
JPMorgan Funds Service Center JPMorgan Institutional Funds Service Center
P.O. Box 219392 500 Stanton Christiana Road
Kansas City, MO 64121-9392 Newark, Delaware 19713
1-800-348-4782 1-800-766-7722
TABLE OF CONTENTS PAGE
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The Fund.......................................... 3
Investment Policies and Restrictions.............. 3
Performance Information........................... 14
Purchases, Redemptions and Exchanges.............. 17
Distributions; Tax Matters........................ 18
Fund Distributions................................ 20
Trustees.......................................... 22
Officers.......................................... 25
Codes of Ethics................................... 26
Adviser........................................... 27
Administrator..................................... 27
Distribution Plan................................. 28
Distributor....................................... 29
Shareholder Servicing Agents, Transfer Agent and
Custodian....................................... 29
Independent Accountants........................... 30
Certain Regulatory Matters........................ 30
Expenses.......................................... 31
Description of Shares, Voting Rights and
Liabilities..................................... 31
Appendix A--Description of Certain Obligations
Issued or Guaranteed by U.S. Government Agencies
or Instrumentalities............................ A-1
Appendix B--Description of Ratings................ B-1
2
THE FUND
Liquid Assets Money Market Fund (the "Fund") is a series of Mutual Fund
Trust (the "Trust"), an open-end management investment company which was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on February 4, 1994. The Fund is diversified, as such term is
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). To
date, the Trustees of the Trust have authorized the issuance of the following
classes of shares: Morgan, Premier, Agency, Institutional and Capital. The
shares of the Fund are collectively referred to in this Statement of Additional
Information as the "Shares." The fiscal year-end of the Fund is August 31.
The Trustees provide broad supervision over the affairs of the Trust
including the Fund. J.P. Morgan Fleming Asset Management (USA) Inc. ("JPMFAM
(USA)" or the "Adviser") is the investment adviser for the Fund.
The Chase Manhattan Bank ("Chase") serves as the Trust's administrator (the
"Administrator") and supervises the overall administration of the Trust,
including the Fund. A majority of the Trustees of the Trust are not affiliated
with the JPMFAM (USA) or the Administrator.
Investments in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, Chase, an affiliate of the Adviser, or any other bank. Shares of
the Fund are not federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other governmental agency. An investment in the
Fund is subject to risk that may cause the value of the investment to fluctuate,
and when the investment is redeemed, the value may be higher or lower than the
amount originally invested by the investor.
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES
The Prospectuses set forth the various investment policies applicable to the
Fund. The following information supplements and should be read in conjunction
with the related sections of each Prospectus. As used in this Statement of
Additional Information, "municipal obligations" has the meaning given to it in
the Fund's relevant Prospectus. For descriptions of the securities ratings of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P") and Fitch Investor Services, Inc. ("Fitch"), see Appendix B.
The Fund invests only in U.S. dollar-denominated high-quality obligations
which are determined to present minimal credit risks. This credit determination
must be made in accordance with procedures established by the Board of Trustees.
The management style used for the Fund emphasizes several key factors.
Portfolio managers consider security quality, which is the ability of the debt
issuer to make timely payments of principal and interest. Also important in the
analysis is the relationship of a bond's yield and its maturity, in which the
managers evaluate the risks of investing in long-term higher-yielding
securities. Another step in the analysis is comparing yields on different types
of securities to determine relative risk/reward profiles.
MONEY MARKET INSTRUMENTS
A description of the various types of money market instruments that may be
purchased by the Fund appears below. Also see "Quality and Diversification
Requirements."
U.S. TREASURY SECURITIES. The Fund 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.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Fund 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. 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. In the
case of securities not backed by the full faith
3
and credit of the United States, the Fund 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 the
Fund may invest that are not backed by the full faith and credit of the United
States include, but are not limited to: (i) obligations of the Tennessee Valley
Authority, the Federal Home Loan Mortgage Corporation, the Federal Home Loan
Banks and the U.S. Postal Service, each of which has the right to borrow from
the U.S. Treasury to meet its obligations; (ii) securities issued by the Federal
National Mortgage Association, which are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and
(iii) obligations of the Federal Farm Credit System and the Student Loan
Marketing Association, each of whose obligations may be satisfied only by the
individual credits of the issuing agency.
FOREIGN GOVERNMENT OBLIGATIONS. The Fund, 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. See "Foreign Investments." These securities must be
denominated in the U.S. dollar.
BANK OBLIGATIONS. The Fund, unless otherwise noted in the Prospectuses 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 $1 billion in total assets and are organized under
the laws of the United States or any state thereof, (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). See "Foreign
Investments." The Fund will not invest in obligations for which the Adviser, or
any of its affiliated persons, is the ultimate obligor or accepting bank. The
Fund 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. The Fund 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 Chase, acting as agent, for no additional fee. The monies loaned
to the borrower come from accounts managed by Chase or its affiliates, pursuant
to arrangements with such accounts. Interest and principal payments are credited
to such accounts. Chase, an affiliate of the Adviser, 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 Chase. Since master demand obligations typically are not rated by
credit rating agencies, the Fund may invest in such unrated obligations only if
at the time of an investment the obligation is determined by the Adviser to have
a credit quality which satisfies the Fund's quality restrictions. See "Quality
and Diversification Requirements." Although there is no secondary market for
master demand obligations, such obligations are considered by the Fund to be
liquid because they are payable upon demand. The Fund does not have any specific
percentage limitation on investments in master demand obligations. It is
possible that the issuer of a master demand obligation could be a client of
Chase to whom Chase, in its capacity as a commercial bank, has made a loan.
ASSET-BACKED SECURITIES. The Fund may also invest in securities generally
referred to as asset-backed securities, which 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 or other asset-backed securities collateralized by such assets.
Asset-backed securities provide periodic payments that generally consist of both
interest and principal payments. Consequently, the life of an asset-backed
security varies with the prepayment experience of the underlying obligations.
4
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 the Fund may invest are subject to the Fund'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 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.
STRUCTURED PRODUCTS. The Fund may invest in interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of certain debt obligations. This type of restructuring involves
the deposit with or purchase by an entity, such as a corporation or trust, or
specified instruments (such as commercial bank loans) and the issuance by that
entity of one or more classes of securities ("structured products") backed by,
or representing interests in, the underlying instruments. The cash flow on the
underlying instruments may be apportioned among the newly issued structured
products to create securities with different investment characteristics such as
varying maturities, payment priorities and interest rate provisions, and the
extent of the payments made with respect to structured products is dependent on
the extent of the cash flow on the underlying instruments. The Fund may invest
in structured products which represent derived investment positions based on
relationships among different markets or asset classes.
The Fund is permitted to invest in a class of structured products that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured products typically have higher yields and present
greater risks than unsubordinated structured products. The Fund's purchase of
subordinated structured products will not be deemed to be leverage for purposes
of the Fund's fundamental investment limitation related to borrowing and
leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investments in
these structured products may be limited by the restrictions contained in the
1940 Act. Structured products are typically sold in private placement
transactions, and there currently is no active trading market for structured
products. As a result, certain structured products in which the Fund invests may
be deemed illiquid and subject to its limitation on illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security. In
addition, because structured products are typically sold in private placement
transactions, there may be no active trading market for structured products.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
brokers, dealers or banks that meet the Adviser's approved credit guidelines. In
a repurchase agreement, the Fund 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
Fund 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 the Fund to the seller. Repurchase agreements
maturing in more than seven days are treated as illiquid for purposes of the
Fund's restrictions on purchases of illiquid securities. The Fund will always
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 Funds in each agreement plus accrued interest, and the Fund will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the Fund's custodian. The Fund will be
fully collateralized within the meaning of paragraph (a)(4) of Rule 2a-7 under
the 1940 Act. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In
5
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, realization upon disposal of the collateral by the Fund may be
delayed or limited.
OTHER DEBT SECURITIES. The Fund 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 Prospectuses or this Statement
of Additional Information.
FOREIGN INVESTMENTS
The Fund may invest in certain foreign securities. All investments must be
U.S. dollar-denominated. Investment in securities of foreign issuers and in
obligations of foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of U.S. domestic issuers. There
may be limited publicly available information with respect to foreign issuers,
and foreign issuers are not generally subject to uniform accounting, auditing
and financial standards and requirements comparable to those applicable to
domestic companies.
Investors should realize that the value of the Fund'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 Fund'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 Fund must be made in compliance with
U.S. and foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.
MUNICIPAL OBLIGATIONS
The Fund may invest in municipal obligations. The Fund may invest in
high-quality, short-term municipal obligations that carry yields that are
competitive with those of other types of money market instruments in which it
may invest. Dividends paid by the Fund that are derived from interest on
municipal obligations will be taxable to shareholders for federal income tax
purposes.
Interest on certain municipal obligations (including certain industrial
development bonds), while exempt from federal income tax, is a preference item
for the purpose of the alternative minimum tax ("AMT"). Where a mutual fund
receives such interest, a proportionate share of any exempt-interest dividend
paid by the mutual fund may be treated as such a preference item to
shareholders.
MUNICIPAL BONDS. The Fund may invest in municipal bonds issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies, authorities and
instrumentalities. 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 and
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. The Fund may invest in
municipal notes of various types, including notes issued in anticipation of
receipt of taxes, the proceeds of the sale of bonds, other revenues or grant
proceeds, as well as municipal commercial paper and municipal demand obligations
such as variable rate demand notes and master demand obligations. These
municipal bonds and notes will be taxable securities; income generated from
these investments will be subject to federal, state and local taxes.
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
6
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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund 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 securities,
no interest accrues to the Fund until settlement takes place. At the time the
Fund 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, the Fund will maintain with the Fund's
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, the Fund
will meet its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If the Fund 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. Also, the Fund may be disadvantaged if the other party to
the transaction defaults.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by the Fund to the extent permitted under the 1940 Act or any order
pursuant thereto. These limits currently require that, as determined immediately
after a purchase is made, (i) not more than 5% of the value of the Fund'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 Fund, provided however, that the Fund may invest all of its
investable assets in an open-end investment company that has the same investment
objective as the Fund. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of such
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement, the Fund sells a security and
agrees to repurchase the same security at a mutually agreed upon date and price
reflecting the interest rate effective for the term of the agreement. For
purposes of the 1940 Act, a reverse repurchase agreement is also considered as
the borrowing of money by the Fund and, therefore, a form of leverage. Leverage
may cause any gains or losses for the Fund to be magnified. The Fund will invest
the proceeds of borrowings under reverse repurchase agreements. In addition,
except for liquidity purposes, the Fund will enter into a reverse repurchase
agreement only when the expected return from the investment of the proceeds is
greater than the expense of the transaction. The Fund will not invest the
proceeds of a reverse repurchase
7
agreement for a period which exceeds the duration of the reverse repurchase
agreement. The Fund will establish and maintain with its 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. All forms of
borrowing (including reverse repurchase agreement and securities lending) are
limited in the aggregate and may not exceed 30% of the Fund's total assets.
LOANS OF PORTFOLIO SECURITIES. The Fund 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 Fund 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 Fund any income accruing thereon. Loans will
be subject to termination by the Fund 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 Fund and its respective investors. The Fund may pay
reasonable finders' and custodial fees in connection with a loan. In addition,
the Fund will consider all facts and circumstances including the
creditworthiness of the borrowing financial institution, and the Fund will not
make any loans in excess of one year. Loans of portfolio securities may be
considered extensions of credit by the Fund. The risks to the Fund with respect
to borrowers of its portfolio securities are similar to the risks to the Fund
with respect to sellers in repurchase agreement transactions. See "Repurchase
Agreements." The Fund will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Fund, the Adviser or the
Distributor, unless otherwise permitted by applicable law. All forms of
borrowing (including reverse repurchase agreement and securities lending) are
limited in the aggregate and may not exceed 30% of the Fund's total assets.
FORWARD COMMITMENTS. The Fund may purchase securities for delivery at a
future date, which may increase its overall investment exposure and involves a
risk of loss if the value of the securities declines prior to the settlement
date. In order to invest the Fund's assets immediately, while awaiting delivery
of securities purchased on a forward commitment basis, short-term obligations
that offer same-day settlement and earnings will normally be purchased. When a
commitment to purchase a security on a forward commitment basis is made,
procedures are established consistent with the General Statement of Policy of
the Securities and Exchange Commission concerning such purchases. Since that
policy currently recommends that an amount of the Fund's assets equal to the
amount of the purchase be held aside or segregated to be used to pay for the
commitment, a separate account of the Fund consisting of cash, cash equivalents
or high-quality debt securities equal to the amount of the Fund's commitments
will be established at the Fund's custodian bank. For the purpose of determining
the adequacy of the securities in the account, the deposited securities will be
valued at market value. If the market value of such securities declines,
additional cash, cash equivalents or highly liquid securities will be placed in
the account daily so that the value of the account will equal the amount of such
commitments by the Fund.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis may
involve more risk than other types of purchases. Securities purchased on a
forward commitment basis and the securities held in the Fund's portfolio are
subject to changes in value based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Purchasing securities on a forward commitment basis can involve
the risk that the yields available in the market when the delivery takes place
may actually be higher or lower than those obtained in the transaction itself.
On the settlement date of the forward commitment transaction, the Fund will meet
its obligations from then available cash flow, sale of securities held in the
separate account, sale of other securities or, although it would not normally
expect to do so, from sale of the forward commitment securities themselves
(which may have a value greater or lesser than the Fund's payment obligations).
Forward commitments involve some risk to the Fund if the other party should
default on its obligation and the Fund is delayed or prevented from recovering
the collateral in completing the transaction.
8
To the extent the Fund engages in forward commitment transactions, it will
do so for the purpose of acquiring securities consistent with its investment
objective and policies and not for the purpose of investment leverage, and
settlement of such transactions will be within 90 days from the trade date.
STAND-BY COMMITMENTS. When the Fund purchases securities it may also enter
into put transactions, including those referred to as stand-by commitments, with
respect to such securities. Under a stand-by commitment, a bank, broker-dealer
or other financial institution agrees to purchase at the Fund's option a
specified security at a specified price within a specified period prior to its
maturity date. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield.
The amount payable to the Fund upon its exercise of a stand-by commitment
with respect to a municipal obligation normally would be (i) the acquisition
cost of the municipal obligation (excluding any accrued interest paid by the
Fund on the acquisition), less any amortized market premium or plus any
amortized market or original issue discount during the period the Fund owned the
security, plus (ii) all interest accrued on the security since the last interest
payment date during the period the security was owned by the Fund. Absent
unusual circumstances relating to a change in market value, the Fund would value
the underlying municipal obligation at amortized cost. Accordingly, the amount
payable by a bank or dealer during the time a stand-by commitment is exercisable
would be substantially the same as the market value of the underlying municipal
obligation. The Fund values stand-by commitments at zero for purposes of
computing its net asset value per share.
The stand-by commitments that may be entered into by the Fund are subject to
certain risks, which include the ability of the issuer of the commitment to pay
for the securities at the time the commitment is exercised, the fact that the
commitment is not marketable by the Fund, and that the maturity of the
underlying security will generally be different from that of the commitment. Not
more than 10% of the total assets of the Fund will be invested in municipal
obligations that are subject to stand-by commitments from the same bank or
broker-dealer.
FLOATING AND VARIABLE RATE SECURITIES AND PARTICIPATION CERTIFICATES. The
Fund may invest in floating and variable rate securities. Floating and variable
rate demand instruments permit the holder to demand payment upon a specified
number of days' notice of the unpaid principal balance plus accrued interest
either from the issuer or by drawing on a bank letter of credit, a guarantee or
insurance issued with respect to such instrument. The floating or variable rate
demand instruments in which the Fund may invest are payable on demand on not
more than seven calendar days' notice.
The terms of these types of securities provide that interest rates are
adjustable at intervals ranging from daily to up to six months and the
adjustments are based upon the prime rate of a bank or other short-term rates,
such as Treasury Bills or LIBOR (London Interbank Offered Rate), as provided in
the respective instruments. The Fund will decide which floating or variable rate
securities to purchase in accordance with procedures prescribed by the Board of
Trustees of the Trust in order to minimize credit risks.
The Board of Trustees may determine that an unrated floating or variable
rate security meets the Fund's high quality criteria if it is backed by a letter
of credit or guarantee or is insured by an insurer that meets such quality
criteria, or on the basis of a credit evaluation of the underlying obligor. If
the credit of the obligor is of "high quality," no credit support from a bank or
other financial institution will be necessary. The Board of Trustees will
re-evaluate each unrated floating or variable rate security on a quarterly basis
to determine that it continues to meet the Fund's high quality criteria. If an
instrument is ever deemed to fall below the Fund's high quality standards,
either it will be sold in the market or the demand feature will be exercised.
The securities in which the Fund may invest include participation
certificates, issued by a bank, insurance company or other financial
institution, in securities owned by such institutions or affiliated
organizations ("Participation Certificates"), and certificates of indebtedness
or safekeeping. Participation Certificates are pro rata interests in securities
held by others; certificates of indebtedness or safekeeping are documentary
receipts for such original securities held in custody by others. A Participation
Certificate gives the Fund an undivided interest in the security in the
proportion that the Fund's participation interest bears to the total principal
amount of the security and generally provides the
9
demand feature described below. Each Participation Certificate is backed by an
irrevocable letter of credit or guarantee of a bank (which may be the bank
issuing the Participation Certificate, a bank issuing a confirming letter of
credit to that of the issuing bank, or a bank serving as agent of the issuing
bank with respect to the possible repurchase of the certificate of
participation) or insurance policy of an insurance company that the Board of
Trustees of the Trust has determined meets the prescribed quality standards for
the Fund.
The Fund may have the right to sell the Participation Certificate back to
the institution and draw on the letter of credit or insurance on demand after
the prescribed notice period, for all or any part of the full principal amount
of the Fund's participation interest in the security, plus accrued interest. The
institutions issuing the Participation Certificates would retain a service and
letter of credit fee and a fee for providing the demand feature, in an amount
equal to the excess of the interest paid on the instruments over the negotiated
yield at which the Participation Certificates were purchased by the Fund. The
total fees would generally range from 5% to 15% of the applicable prime rate or
other short-term rate index. With respect to insurance, the Fund will attempt to
have the issuer of the Participation Certificate bear the cost of any such
insurance, although the Fund retains the option to purchase insurance if deemed
appropriate. Obligations that have a demand feature permitting the Fund to
tender the obligation to a foreign bank may involve certain risks associated
with foreign investment. The Fund's ability to receive payment in such
circumstances under the demand feature from such foreign banks may involve
certain risks such as future political and economic developments, the possible
establishments of laws or restrictions that might adversely affect the payment
of the bank's obligations under the demand feature and the difficulty of
obtaining or enforcing a judgment against the bank.
The Adviser has been instructed by the Board of Trustees to monitor on an
ongoing basis the pricing, quality and liquidity of the floating and variable
rate securities held by the Fund, including Participation Certificates, on the
basis of published financial information and reports of the rating agencies and
other bank analytical services to which the Fund may subscribe. Although these
instruments may be sold by the Fund, it is intended that they be held until
maturity. The Internal Revenue Service has not ruled on whether interest on
participations in floating or variable rate municipal obligations is tax exempt.
Past periods of high inflation, together with the fiscal measures adopted to
attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the underlying
floating or variable rate securities may change with changes in interest rates
generally, the floating or variable rate nature of the underlying floating or
variable rate securities should minimize changes in value of the instruments.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation and the risk of potential capital depreciation is less than would
be the case with a portfolio of fixed rate securities. The Fund's portfolio may
contain floating or variable rate securities on which stated minimum or maximum
rates, or maximum rates set by state law, limit the degree to which interest on
such floating or variable rate securities may fluctuate; to the extent it does,
increases or decreases in value may be somewhat greater than would be the case
without such limits. Because the adjustment of interest rates on the floating or
variable rate securities is made in relation to movements of the applicable
banks' "prime rates" or other short-term rate adjustment indices, the floating
or variable rate securities are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the floating or variable rate
securities may be higher or lower than current market rates for fixed rate
obligations of comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of
(i) the notice period required before the Fund is entitled to receive payment of
the principal amount of the security upon demand or (ii) the period remaining
until the security's next interest rate adjustment. The maturity of a variable
rate demand instrument will be determined in the same manner for purposes of
computing the Fund's dollar-weighted average portfolio maturity.
TENDER OPTION FLOATING OR VARIABLE RATE CERTIFICATES. The Fund may invest
in tender option bonds. A tender option bond is a synthetic floating or variable
rate security issued when long term bonds are purchased in the secondary market
and are then deposited into a trust. Custodial receipts are then issued to
investors, such as the Fund, evidencing ownership interests in the trust. The
trust sets a floating or variable rate on a daily or weekly basis which is
established through a remarketing agent.
10
These types of instruments, to be money market eligible under Rule 2a-7, must
have a liquidity facility in place which provides additional comfort to the
investors in case the remarketing fails. The sponsor of the trust keeps the
difference between the rate on the long term bond and the rate on the short term
floating or variable rate security.
ZERO COUPON AND STRIPPED OBLIGATIONS. The Fund may invest up to 20% of its
total assets in such stripped obligations. The principal and interest components
of United States Treasury bonds with remaining maturities of longer than ten
years are eligible to be traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are separately issued by
the United States Treasury at the request of depository financial institutions,
which then trade the component parts separately. The interest component of
STRIPS may be more volatile than that of United States Treasury bills with
comparable maturities. The Fund may also invest in zero coupon obligations. Zero
coupon obligations are sold at a substantial discount from their value at
maturity and, when held to maturity, their entire return, which consists of the
amortization of discount, comes from the difference between their purchase price
and maturity value. Because interest on a zero coupon obligation is not
distributed on a current basis, the obligation tends to be subject to greater
price fluctuations in response to changes in interest rates than are ordinary
interest-paying securities with similar maturities. As with STRIPS, the risk is
greater when the period to maturity is longer. The value of zero coupon
obligations appreciates more than such ordinary interest-paying securities
during periods of declining interest rates and depreciates more than such
ordinary interest-paying securities during periods of rising interest rates.
Under the stripped bond rules of the Internal Revenue Code of 1986, as amended,
investments in zero coupon obligations will result in the accrual of interest
income on such investments in advance of the receipt of the cash corresponding
to such income.
Zero coupon securities may be created when a dealer deposits a U.S. Treasury
or federal agency security with a custodian and then sells the coupon payments
and principal payment that will be generated by this security separately.
Proprietary receipts, such as Certificates of Accrual on Treasury Securities,
Treasury Investment Growth Receipts and generic Treasury Receipts, are examples
of stripped U.S. Treasury securities separated into their component parts
through such custodial arrangements.
CUSTODIAL RECEIPTS. The Fund may acquire securities in the form of
custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms. These are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.
FUNDING AGREEMENTS. The Fund may invest in short-term funding agreements. A
funding agreement is a contract between an issuer and a purchaser that obligates
the issuer to pay a guaranteed rate of interest on a principal sum deposited by
a purchaser. Funding agreements generally will also guarantee the return of
principal and may guarantee a stream of payments over time. A funding agreement
has a fixed maturity date and may have either a fixed or variable interest rate
that is based on an index and guaranteed for a set time period. Because there
generally is no active secondary market for these investments, a funding
agreement may be deemed to be illiquid.
ILLIQUID INVESTMENTS, PRIVATELY PLACED AND CERTAIN UNREGISTERED
SECURITIES. The Fund may invest in privately placed, restricted, Rule 144A or
other unregistered securities. The Fund may not acquire any illiquid holdings
if, as a result thereof, more than 10% of the Fund's net assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
Fund may acquire investments that are illiquid or have limited liquidity, such
as the Fund's investments in 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 Fund. The price the Fund
pays for illiquid securities or receives upon resale may be lower than the price
paid or received for similar securities with a more liquid market. Accordingly
the valuation of these securities will reflect any limitations on their
liquidity.
11
The Fund may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Trustees. The Trustees will monitor the Adviser's
implementation of these guidelines on a periodic basis.
As to illiquid investments, the Fund is subject to a risk that should the
Fund decide to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net assets could be
adversely affected. Where an illiquid security must be registered under the 1933
Act before it may be sold, the Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
QUALITY AND DIVERSIFICATION REQUIREMENTS
The Fund intends to meet the diversification requirements of the 1940 Act.
Current 1940 Act diversification requirements require that with respect to 75%
of the assets of the Fund: (1) the Fund 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 Fund may not own
more than 10% of the outstanding voting securities of any one issuer. As for the
other 25% of the Fund'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. Investments
not subject to the limitations described above could involve an increased risk
to the Fund 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.
At the time the Fund invests in any taxable commercial paper, master demand
obligation, bank obligation or repurchase agreement, the issuer must have
outstanding debt rated A or higher by Moody's or S&P, the issuer's parent
corporation, if any, must have outstanding commercial paper rated Prime-1 by
Moody's or A-1 by S&P, or if no such ratings are available, the investment must
be of comparable quality in the Adviser's opinion.
In order to achieve its investment objective and maintain a stable net asset
value, the Fund will (i) limit its investment in the securities (other than U.S.
Government securities) of any one issuer to no more than 5% of its assets,
measured at the time of purchase, except for investments held for not more than
three business days and (ii) limit investments to securities that present
minimal credit risks and securities (other than U.S. Government securities) that
are rated within the highest short-term rating category by at least two
nationally recognized statistical rating organizations ("NRSROs") or by the only
NRSRO that has rated the security. Securities which originally had a maturity of
over one year are subject to more complicated, but generally similar, rating
requirements. A description of illustrative credit ratings is set forth in
"Appendix A." The Fund may also purchase unrated securities that are of
comparable quality to the rated securities described above. Additionally, if the
issuer of a particular security has issued other securities of comparable
priority and security and which have been rated in accordance with (ii) above,
that security will be deemed to have the same rating as such other rated
securities.
In addition, the Board of Trustees has adopted procedures which (i) require
the Board of Trustees to approve or ratify purchases by the Fund of securities
(other than U.S. Government securities) that are unrated; (ii) require the Fund
to maintain a dollar-weighted average portfolio maturity of not more than 60
days and to invest only in securities with a remaining maturity of not more than
397 days; and (iii) require the Fund, in the event of certain downgradings of or
defaults on portfolio holdings, to dispose of the holding, subject in certain
circumstances to a finding by the Trustees that disposing of the holding would
not be in the Fund's best interest.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which may not be
changed without approval by the Trustees and a "majority of the outstanding
shares" of the Fund which, as used in this Statement of Additional Information,
means the vote of the lesser of (i) 67% or more of the shares of the
12
Fund present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the Fund.
The Fund:
(1) May not borrow money, except that the Fund may borrow money for
temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33% of the value of its total
assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings.
Any borrowings representing more than 5% of the Fund's total assets must be
repaid before the Fund may make additional investments;
(2) May make loans to other persons, in accordance with the Fund's
investment objective and policies and to the extent permitted by applicable
law;
(3) May not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities, or repurchase agreements secured thereby) if,
as a result, more than 25% of the Fund's total assets would be invested in
the securities of companies whose principal business activities are in the
same industry. Notwithstanding the foregoing, the Fund may invest more than
25% of its total assets in obligations issued by banks, including U.S.
banks;
(4) May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments but this shall not
prevent the Fund from (i) purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities or (ii) engaging in forward purchases or sales of
foreign currencies or securities;
(5) May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate
or securities of companies engaged in the real estate business). Investments
by the Fund in securities backed by mortgages on real estate or in
marketable securities of companies engaged in such activities are not hereby
precluded;
(6) May not issue any senior security (as defined in the 1940 Act),
except that (a) the Fund may engage in transactions that may result in the
issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order;
(b) the Fund may acquire other securities, the acquisition of which may
result in the issuance of a senior security, to the extent permitted under
applicable regulations or interpretations of the 1940 Act; and (c) subject
to the restrictions set forth above, the Fund may borrow money as authorized
by the 1940 Act. For purposes of this restriction, collateral arrangements
with respect to the Fund's permissible options and futures transactions,
including deposits of initial and variation margin, are not considered to be
the issuance of a senior security; and
(7) May underwrite securities issued by other persons except insofar as
the Fund may technically be deemed to be an underwriter under the 1933 Act
in selling a portfolio security.
In addition, as a matter of fundamental policy, notwithstanding any other
investment policy or restriction, the Fund may seek to achieve its investment
objective by investing all of its investable assets in another investment
company having substantially the same investment objective and policies as the
Fund. For purposes of investment restriction (5) above, real estate includes
real estate limited partnerships. For purposes of investment restriction (3)
above, industrial development bonds, where the payment of principal and interest
is the ultimate responsibility of companies within the same industry, are
grouped together as an "industry." Investment restriction (3) above, however, is
not applicable to investments by the Fund in municipal obligations where the
issuer is regarded as a state, city, municipality or other public authority
since such entities are not members of any "industry." Supranational
organizations are collectively considered to be members of a single "industry"
for purposes of restriction (3) above.
13
In addition, the Fund is subject to the following nonfundamental investment
restrictions which may be changed without shareholder approval:
(1) The Fund may not, with respect to 75% of its assets, hold more
than 10% of the outstanding voting securities of any issuer or invest more
than 5% of its assets in the securities of any one issuer (other than
obligations of the U.S. Government, its agencies and instrumentalities).
(2) The Fund may not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment program of
the Fund. The Fund has no current intention of making short sales against
the box.
(3) The Fund may not purchase or sell interests in oil, gas or mineral
leases.
(4) The Fund may not invest more than 10% of its net assets in
illiquid securities.
(5) The Fund may not write, purchase or sell any put or call option or
any combination thereof, provided that this shall not prevent (i) the
writing, purchasing or selling of puts, calls or combinations thereof with
respect to portfolio securities or (ii) with respect to the Fund's
permissible futures and options transactions, the writing, purchasing,
owning, holding or selling of futures and options positions or of puts,
calls or combinations thereof with respect to futures.
(6) The Fund may invest up to 5% of its total assets in the securities
of any one investment company, but may not own more than 3% of the
securities of any one investment company or invest more than 10% of its
total assets in the securities of other investment companies.
For purposes of investment restriction (4) above, illiquid securities
includes securities restricted as to resale unless they are determined to be
readily marketable in accordance with procedures established by the Board of
Trustees.
The investment objective of the Fund is non-fundamental.
For purposes of the Fund's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time of purchase, later
changes in percentage or ratings resulting from any cause other than actions by
the Fund will not be considered a violation. If the value of the Fund's holdings
of illiquid securities at any time exceeds the percentage limitation applicable
at the time of acquisition due to subsequent fluctuations in value or other
reasons, the Board of Trustees will consider what actions, if any, are
appropriate to maintain adequate liquidity.
PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Performance is calculated separately for each
class of Shares. Because such performance information is based on past
investment results, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of the Fund or its
14
classes. The Fund's performance may be compared with indices such as the Lehman
Brothers Government/Credit Bond Index, the Lehman Brothers Government Bond
Index, the Lehman Government Bond 1-3 Year Index and the Lehman Aggregate Bond
Index; the S&P 500 Index, the Dow Jones Industrial Average or any other commonly
quoted index of common stock prices; and the Russell 2000 Index and the NASDAQ
Composite Index. Additionally, the Fund may, with proper authorization, reprint
articles written about the Fund and provide them to prospective shareholders.
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in the
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. One-,
five- and ten-year periods will be shown, unless the class has been in existence
for a shorter period.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yields of the classes of Shares of the Fund will vary
based on market conditions, the current market value of the securities held by
the Fund and changes in the Fund's expenses. The Adviser, Shareholder Servicing
Agents (hereinafter defined), the Administrator, J.P. Morgan Fund
Distributors, Inc. (the "Distributor") and other service providers may
voluntarily waive a portion of their fees on a month-to-month basis. In
addition, the Distributor may assume a portion of the Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of the classes of
Shares of the Fund during the period such waivers are in effect. These factors
and possible differences in the methods used to calculate the yields and total
rates of return should be considered when comparing the yields or total rates of
return of the classes of shares of the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Trust is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received, which will have the effect of increasing the net
return on the investment of customers of those Shareholder Servicing Agents.
Such customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return.
The Fund presents performance information for each class thereof since the
commencement of operations of the Fund, rather than the date such class was
introduced. Performance information for each class introduced after the
commencement of operations of the Fund is therefore based on the performance
history of a predecessor class or classes. Historical expenses reflected in
performance information are based upon the distribution, shareholder servicing
fees and other expenses actually incurred during the period presented and have
not been restated, for periods during which the performance information for a
particular class is based upon the performance history of a predecessor class,
to reflect the ongoing expenses currently borne by the particular class.
Advertising or communications to shareholders may contain the views of the
advisers as to current market, economic, trade and interest rate trends, as well
as legislative, regulatory and monetary developments, and may include investment
strategies and related matters believed to be of relevance to the Fund.
Advertisements for JPMorgan Funds may include references to the asset size
of other financial products made available by JPMFAM (USA), such as the offshore
assets of other funds.
TOTAL RATE OF RETURN
The Fund's or a class's total rate of return for any period will be
calculated by (a) dividing (i) the sum of the net asset value per share on the
last day of the period and the net asset value per share on the last day of the
period of shares purchasable with dividends and capital gains declared during
such period with respect to a share held at the beginning of such period and
with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day of
such period, and (b) subtracting 1 from the result. The average annual rate of
return quotation will be calculated by (x) adding 1 to the period total rate of
return quotation as calculated above, (y) raising such
15
sum to a power which is equal to 365 divided by the number of days in such
period, and (z) subtracting 1 from the result.
YIELD QUOTATIONS
Any current "yield" for a class of shares of the Fund which is used in such
a manner as to be subject to the provisions of Rule 482(d) under the 1933 Act
shall consist of an annualized historical yield, carried at least to the nearest
hundredth of one percent, based on a specific seven calendar day period and
shall be calculated by dividing the net change in the value of an account having
a balance of one Share at the beginning of the period by the value of the
account at the beginning of the period and multiplying the quotient by 365/7.
For this purpose, the net change in account value would reflect the value of
additional Shares purchased with dividends declared on the original Share and
dividends declared on both the original Share and any such additional Shares,
but would not reflect any realized gains or losses from the sale of securities
or any unrealized appreciation or depreciation on portfolio securities. In
addition, any effective yield quotation for a class of shares of the Fund so
used shall be calculated by compounding the current yield quotation for such
period by multiplying such quotation by 7/365, adding 1 to the product, raising
the sum to a power equal to 365/7, and subtracting 1 from the result.
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition to
the days listed above (other than Good Friday), the Fund is closed for business
on the following holidays: Martin Luther King Day, Columbus Day and Veteran's
Day.
The Fund calculates its NAV once each day at the close of regular trading on
the New York Stock Exchange. The Fund's portfolio securities are valued at its
amortized cost. Amortized cost valuation involves valuing an instrument at its
cost and thereafter accrediting discounts and amortizing premiums at a constant
rate to maturity. This method increases stability in valuation, but may result
in periods during which the stated value of a portfolio security is higher or
lower than the price the Fund would receive if the instrument were sold.
Pursuant to the rules of the Securities and Exchange Commission, the Board of
Trustees has established procedures to stabilize the net asset value of the Fund
at $1.00 per share. However, no assurance can be given that the Fund will be
able to do so on a continuous basis. These procedures include a review of the
extent of any deviation of net asset value per share, based on available market
rates (and appropriate substitutes which reflect current market conditions),
from the $1.00 amortized cost price per share. If fluctuating interest rates
cause the market value of the Fund's portfolio to approach a deviation of more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Trustees will consider what action, if any, should be initiated. Such
action may include redemption of shares in kind (as described in greater detail
below), selling portfolio securities prior to maturity, reducing or withholding
dividends, and utilizing a net asset value per share as determined by using
available market quotations.
The Fund has established procedures designed to ensure that its portfolio
securities meet their high quality criteria.
Bonds and other fixed income securities (other than short-term obligations)
in the Fund's portfolio are valued on the basis of valuations furnished by a
pricing service, the use of which has been approved by the Board of Trustees. In
making such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques that take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures and option contracts that are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Portfolio securities (other than short-term obligations) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
16
Interest income on long-term obligations in the Fund's portfolio is
determined on the basis of coupon interest accrued plus amortization of discount
(the difference between acquisition price and stated redemption price at
maturity) and premiums (the excess of purchase price over stated redemption
price at maturity). Interest income on short-term obligations is determined on
the basis of interest and discount accrued less amortization of premium.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. DST Systems, Inc. ("DST"), the Fund's
transfer agent (the "Transfer Agent"), may defer acting on a shareholder's
instructions until it has received them in proper form. In addition, the
privileges described in the Prospectuses are not available until a completed and
signed account application has been received by the transfer agent. Telephone
transaction privileges are made available to shareholders automatically upon
opening an account unless the privilege is declined in Section 6 of the account
application. The telephone exchange privilege is not available if an investor
was issued certificates for Shares that remain outstanding.
An investor can buy shares in the Fund three ways: (i) through an investment
representative; (ii) through the Fund's distributor by calling the Funds Service
Center; or (iii) through the Systematic Investment Plan. Upon receipt of any
instructions or inquiries by telephone from a shareholder or, if held in a joint
account, from either party, or from any person claiming to be the shareholder
and confirmation that the account registration and address given by such person
match those on record, the Fund or its agent is authorized, without notifying
the shareholder or joint account parties, to carry out the instructions or to
respond to the inquiries, consistent with the service options chosen by the
shareholder or joint shareholders in his or their latest account application or
other written request for services, including purchasing, exchanging or
redeeming shares of the Fund and depositing and withdrawing monies from the bank
account specified in the Bank Account Registration section of the shareholder's
latest account application or as otherwise properly specified to the Fund in
writing.
Subject to compliance with applicable regulations, the Fund has reserved the
right to pay the redemption price of its Shares, either totally or partially, by
a distribution in kind of readily marketable portfolio securities (instead of
cash). The securities so distributed would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. The Trust has
filed an election under Rule 18f-1 committing to pay in cash all redemptions by
a shareholder of record up to amounts specified by the rule (approximately
$250,000).
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing shares. A qualified group must
have more than 10 members, must be available to arrange for group meetings
between representatives of the Fund and the members, must agree to include sales
and other materials related to the Fund in its publications and mailings to
members at reduced or no cost to the Distributor, and must seek to arrange for
payroll deduction or other bulk transmission of investments in the Fund.
In accordance with section 22(e) of the 1940 Act, the Trust, on behalf of
the Fund, and the portfolio reserves the right to postpone the date of payment
upon redemption for more than one day or suspend the right of redemption as
follows: (i) 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, (ii) 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 (iii) for such other periods as the SEC
may by order permit for the protection of the Fund shareholders.
17
Shareholders of other JPMorgan Funds may be entitled to exchange their
shares for, or reinvest distributions from their funds in, Shares of the Fund at
net asset value.
EXCHANGE PRIVILEGE. Shareholders may exchange their shares in the Fund for
shares of the same class in any other JPMorgan Fund that offers such share
class. The shareholder will not pay a sales charge for such exchange.
J.P. Morgan Chase & Co. ("JPMorgan Chase") may discontinue this exchange
privilege at any time. The Fund reserves the right to limit the number of
exchanges or to refuse an exchange. The Fund may charge an administration fee of
$5 for each exchange if an investor makes more than 10 exchanges in a year or
three in a quarter. Under the Exchange Privilege, shares may be exchanged for
shares of another fund only if shares of the fund exchanged into are registered
in the state where the exchange is to be made. Shares of the Fund may only be
exchanged into another fund if the account registrations are identical.
Shareholders must have acquired their shares in the fund by exchange from one of
the other JPMorgan Funds or the exchange will be done at relative net asset
value plus the appropriate sales charge. Any such exchange may create a gain or
loss to be recognized for federal income tax purposes. Normally, shares of the
fund to be acquired are purchased on the redemption date, but such purchase may
be delayed by either fund for up to five business days if a fund determines that
it would be disadvantaged by an immediate transfer of the proceeds.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written requests for
additional account services made after a shareholder has submitted an initial
account application to the Fund, and in certain other circumstances described in
the Prospectuses. The Fund may also refuse to accept or carry out any
transaction that does not satisfy any restrictions then in effect. A signature
guarantee may be obtained from a bank, trust company, broker-dealer or other
member of a national securities exchange. Please note that a notary public
cannot provide a signature guarantee.
The Fund reserves the right to change any of these policies at any time and
may reject any request to purchase shares at a reduced sales charge.
Investors may incur a fee if they effect transactions through a broker or
agent.
DISTRIBUTIONS; TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Fund's Prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its shareholders, and the discussions here and in
each Prospectus are not intended as substitutes for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
to meet all other requirements that are necessary for it to be relieved of
federal taxes on income and gains it distributes to shareholders. The Fund
intends to remain qualified as a regulated investment company under subchapter M
of the Code. As a regulated investment company, the Fund is not subject to
federal income tax on the portion of its net investment income (i.e., its
investment company taxable income, as that term is defined in the Code, without
regard to the deduction for dividends paid) and net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to shareholders, provided that it distributes at least 90% of the
sum of its net investment income and tax-exempt income (net of expenses
allocable thereto) for the taxable year (the "Distribution Requirement"), and
satisfies certain other requirements of the Code that are described below.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to stock or securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies such
currency gains are directly related to the regulated investment company's
principal business of and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "Income Requirement").
18
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, (1) at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and (2) no more than 25% of the
value of its total assets may be invested in the securities of any one issuer
(other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
If the Fund engages in hedging or derivatives transactions involving foreign
currencies, forward contracts, options and/or futures contracts (including
options, futures and forward contracts on foreign currencies) and short sales,
such transactions will be subject to special provisions of the Code that, among
other things, may affect the character of gains and losses realized by the Fund
(that is, may affect whether gains or losses are ordinary or capital),
accelerate recognition of income of the Fund and defer recognition of certain of
the Fund's losses. These rules could therefore affect the character, amount and
timing of distributions to shareholders. In addition, these provisions (1) will
require the Fund to "mark-to-market" certain types of positions in its portfolio
(that is, treat them as if they were closed out) and (2) may cause the Fund to
recognize income without receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the Distribution Requirement and
avoid the 4% excise tax (described below). The Fund intends to monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it acquires any option,
futures contract, forward contract or hedged investment in order to mitigage the
effect of these rules.
The Fund may make investments that produce income that is not matched by a
corresponding cash distribution to the Fund, such as investments in obligations
such as zero coupon securities having original issue discount (i.e., an amount
equal to the excess of the stated redemption price of the security at maturity
over its issue price) or securities having market discount (i.e., an amount
equal to the excess of the stated redemption price of the security over the
basis of such security immediately after it was acquired), if the Fund elects to
accrue market discount on a current basis. In addition, income may continue to
accrue for federal income tax purposes with respect to a non-performing
investment. Any such income would be treated as income earned by the Fund and
therefore would be subject to the distribution requirements of the Code. Because
such income may not be matched by a corresponding cash distribution to the Fund,
the Fund may be required to borrow money or dispose of other securities to be
able to make distributions to its investors. In addition, if an election is not
made to currently accrue market discount with respect to a market discount
security, all or a portion of any deduction for any interest expense incurred to
purchase or hold such a security may be deferred until such security is sold or
otherwise disposed.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANY
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ending on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). Tax-exempt
interest on municipal obligations is not subject to the excise tax. The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
19
The Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its net investment
income for each taxable year. Such distributions will be taxable to shareholders
as ordinary income and treated as dividends for federal income tax purposes, but
they will not qualify for the 70% dividends received deduction for corporations.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a "capital gain
dividend," it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
The maximum rate of tax on long-term capital gains of individuals is
generally 20% with respect to capital assets held for more than 12 months and
18% with respect to capital assets with a holding period of more than 5 years
beginning after December 31, 2000.
Conversely, if the Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If the Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders of
record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. Exempt-interest dividends derived from certain "private activity"
municipal obligations issued after August 7, 1986 will generally constitute an
item of tax preference includable in AMTI for both corporate and noncorporate
taxpayers. In addition, exempt-interest dividends derived from all municipal
obligations, regardless of the date of issue, must be included in adjusted
current earnings, which are used in computing an additional corporate preference
item (i.e., 75% of the excess of a corporate taxpayer's adjusted current
earnings over its AMTI (determined without regard to this item and the AMT net
operating loss deduction)) includable in AMTI.
Net investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known.
Distributions by the Fund that do not constitute ordinary income dividends,
exempt-interest dividends or capital gain dividends will be treated as a return
of capital to the extent of (and in reduction of) the shareholder's tax basis in
his shares; any excess will be treated as gain from the sale of his shares, as
discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in
20
the manner described above, although such distributions economically constitute
a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to backup withhold and remit to
the U.S. Treasury a portion of ordinary income dividends and capital gain
dividends, and the proceeds of redemption of shares, paid to any shareholder
(1) who has provided either an incorrect tax identification number or no number
at all, (2) who is subject to backup withholding by the IRS for failure to
report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that it is not subject to backup withholding or
that it is a corporation or other "exempt recipient." Backup withholding is not
an additional tax and any amount withheld may be credited against a
shareholder's federal income tax liability, provided the appropriate information
is furnished to the IRS.
SALE OR REDEMPTION OF SHARES
The Fund seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that the Fund will do this. In such a case, a
shareholder will recognize gain or loss on the sale or redemption of shares of
the Fund in an amount equal to the difference between the proceeds of the sale
or redemption and the shareholder's adjusted tax basis in the shares. All or a
portion of any loss so recognized may be disallowed if the shareholder purchases
other shares of the Fund within 30 days before or after the sale or redemption.
In general, any gain or loss arising from (or treated as arising from) the sale
or redemption of shares of the Fund will be considered capital gain or loss and
will be long-term capital gain or loss if the shares were held for longer than
one year. However, any capital loss arising from the sale or redemption of
shares held for six months or less will be disallowed to the extent of the
amount of exempt-interest dividends received on such shares and (to the extent
not disallowed) will be treated as a long-term capital loss to the extent of the
amount of capital gain dividends received on (or undistributed capital gains
credited with respect to) such shares.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, dividends paid to such foreign
shareholder from net investment income will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such a foreign shareholder would generally be exempt from U.S. federal income
tax on gains realized on the sale of shares of the Fund, exempt-interest
dividends, capital gain dividends and amounts retained by the Fund that are
designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, undistributed capital gains credited to such
shareholder, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. federal income tax at the graduated rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign non-corporate shareholders, the Fund may be required
to backup withhold U.S. federal income tax on distributions that are otherwise
exempt from withholding tax (or taxable at a reduced treaty rate) unless such
shareholders furnish the Fund with proper notification of their foreign status.
21
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in the Fund, including
the procedure for claiming the benefit of a lower treaty rate and the
applicability of foreign taxes. Transfers by gift of shares of a Fund by an
individual foreign shareholder 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 death will
generally be includible in his gross estate for U.S. federal estate tax
purposes, subject to any applicable estate tax treaty.
STATE AND LOCAL TAX MATTERS
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes or withholding taxes.
Most states provide that a regulated investment company may pass through
(without restriction) to its shareholders state and local income tax exemptions
available to direct owners of certain types of U.S. Government securities (such
as U.S. Treasury obligations). Thus, for residents of these states,
distributions derived from the Fund's investment in certain types of U.S.
Government securities should be free from state and local income taxes to the
extent that the interest income from such investments would have been exempt
from state and local income taxes if such securities had been held directly by
the respective shareholders themselves. Certain states, however, do not allow a
regulated investment company to pass through to its shareholders the state and
local income tax exemptions available to direct owners of certain types of U.S.
Government securities unless the regulated investment company holds at least a
required amount of U.S. Government securities. Accordingly, for residents of
these states, distributions derived from the Fund's investment in certain types
of U.S. Government securities may not be entitled to the exemptions from state
and local income taxes that would be available if the shareholders had purchased
U.S. Government securities directly. Shareholders' dividends attributable to the
Fund's income from repurchase agreements generally are subject to state and
local income taxes, although statutes and regulations vary in their treatment of
such income. The exemption from state and local income taxes does not preclude
states from asserting other taxes on the ownership of U.S. Government
securities. To the extent that the Fund invests to a substantial degree in U.S.
Government securities which are subject to favorable state and local tax
treatment, shareholders of the Fund will be notified as to the extent to which
distributions from the Fund are attributable to interest on such securities.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies may differ from the rules for U.S.
federal income taxation in other respects. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Fund.
EFFECT OF FUTURE LEGISLATION
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
TRUSTEES
The Trustees of the Trust are also the Trustees of the Fund, as defined
below. Their names, principal occupations during the past five years, addresses
and dates of birth are set forth below:
WILLIAM J. ARMSTRONG--Trustee; Retired; formerly Vice President and
Treasurer, Ingersoll-Rand Company. Address: 287 Hampshire Ridge, Park Ridge, NJ
07656. His date of birth is December 4, 1941.
ROLAND R. EPPLEY, JR.--Trustee; Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association, Inc. (1971 - 1988);
Director, Janel Hydraulics, Inc.; formerly Director of The Hanover Funds, Inc.
(open-end mutual funds). Address: 105 Coventry Place, Palm Beach Gardens, FL
33418. His date of birth is April 1, 1932.
22
ANN MAYNARD GRAY--Trustee; Former President, Diversified Publishing Group
and Vice President, Capital Cities/ABC, Inc. Ms. Gray is also a director of Duke
Energy Corporation and Elan Corporation, plc. (pharmaceuticals). Address: 1262
Rockrimmon Road, Stamford, CT 06903. Her date of birth is August 22, 1945.
MATTHEW HEALEY--Trustee and President of the Board of Trustees; Former Chief
Executive Officer of certain trusts in the JPMorgan Fund Complex through
April 2001. Address: Pine Tree Country Club Estates, 10286 Saint Andrews Road,
Boynton Beach, FL 33436. His date of birth is August 23, 1937.
FERGUS REID, III--Trustee and Chairman of the Board of Trustees; Chairman
and Chief Executive Officer, Lumelite Corporation (plastics manufacturing),
since September 1985; Trustee, Morgan Stanley Funds. Address: 202 June Road,
Stamford, CT 06903. His date of birth is August 12, 1932.
JAMES J. SCHONBACHLER--Trustee; Retired; Prior to September, 1998, Managing
Director, Bankers Trust Company and Group Head and Director, Bankers Trust A.G.,
Zurich and BT Brokerage Corp. (financial services). Address: 3711 Northwind
Court, Jupiter, FL 33477. His date of birth is January 26, 1943.
LEONARD M. SPALDING*--Trustee; Retired; formerly Chief Executive Officer of
Chase Mutual Funds Corp.; formerly President and Chief Executive Officer of
Vista Capital Management (investment management); and formerly Chief Investment
Executive of The Chase Manhattan Private Bank (investment management). Address:
2025 Lincoln Park Road, Springfield, KY 40069. His date of birth is July 20,
1935.
H. RICHARD VARTABEDIAN--Trustee; Investment Management Consultant; formerly,
Senior Investment Officer, Division Executive of the Investment Management
Division of The Chase Manhattan Bank, N.A., 1980-1991. Address: P.O. Box 296,
Beach Road, Hendrick's Head, Southport, ME 04576. His date of birth is
January 26, 1936.
The Trustees decide upon general policies and are responsible for overseeing
the Trust's business affairs. The Board of Trustees of the Trust presently has
Audit, Valuation, Investment, and Governance Committees. The members of the
Audit Committee are Messrs. Armstrong (Chairman), Eppley and Reid and Ms. Gray.
The function of the Audit Committee is to recommend independent auditors and
monitor accounting and financial matters. The Audit Committee met two times
during the fiscal year ended October 31, 2000. The members of the Valuation
Committee are Messrs. Healey (Chairman), Spalding, Schonbachler and Armstrong.
The function of the Valuation Committee is to determine the fair value of the
Fund's portfolio securities as necessary. The members of the Investment
Committee are Messrs. Spalding (Chairman), Vartabedian and Healey and Ms. Gray.
The function of the Investment Committee is to oversee the Adviser's investment
program. The members of the Governance Committee are Messrs. Vartabedian
(Chairman), Schonbachler, Eppley and Reid. The function of the Governance
Committee is to nominate trustees for the Board to consider and to address
Trustee compensation issues.
Each Trustee is currently paid an annual fee of $120,000 for serving as
Trustee of the Fund and the JPMorgan Fund Complex. Each Trustee is reimbursed
for expenses incurred in connection with service as a Trustee. For his services
as Chairman of the Board of Trustees of the JPMorgan Fund Complex, Mr. Reid is
paid an additional $130,800. For his services as President of the Board of
Trustees of the JPMorgan Fund Complex, Mr. Healey is paid an additional $40,000.
For his services as the Chairman of the Governance Committee of the JPMorgan
Fund Complex, Mr. Vartabedian is paid an additional $40,000. The Trustees may
hold various other directorships unrelated to the JPMorgan Fund Complex.
-------------------
*Mr. Spalding is deemed to be an "interested person" due to his ownership of
equity securities of affiliates of J.P Morgan Chase & Co. ("J.P Morgan Chase").
23
Trustee compensation expenses paid by the Trust and the JPMorgan Fund
Complex for the calendar year ended December 31, 2000 are set forth below:
AGGREGATE TRUSTEE PENSION OR TOTAL
COMPENSATION PAID RETIREMENT COMPENSATION PAID
BY THE TRUST BENEFITS ACCRUED FROM "FUND
DURING 2000 BY THE "FUND COMPLEX"** COMPLEX"(1)
----------------- ------------------------- -----------------
William J. Armstrong, Trustee $ 69,666 $ 41,781 $ 90,000
Roland R. Eppley, Jr., Trustee 70,327 58,206 91,000
Ann Maynard Gray, Trustee NA NA 75,000
Matthew Healey, Trustee and
President of the Board of
Trustees(2) NA NA 75,000
Fergus Reid, III, Trustee and
Chairman of the Board of Trustees 159,630 110,091 205,750
James J. Schonbachler, Trustee NA NA 75,000
Leonard M. Spalding, Jr., Trustee* 68,825 35,335 89,000
H. Richard Vartabedian, Trustee 104,351 86,791 134,350
* Mr. Spalding is deemed to be an "interested person" due to his ownership of
equity securities of affiliates of J.P. Morgan Chase.
** On February 22, 2001, the Board of Trustees voted to terminate the
Retirement Plan.
(1) A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investment services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies. The JPMorgan Fund Complex for
which the Trustees serve includes 10 investment companies.
(2) Pierpont Group, Inc., which provided services to the former J.P Morgan
Family of Funds, paid Mr. Healey, in his role as Chairman of Pierpont
Group, Inc., compensation in the amount of $200,000, contributed $25,500 to
a defined contribution plan on his behalf and paid $18,400 in insurance
premiums for his benefit.
The Trustees of the former Chase Vista Funds instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not an
employee of the former Chase Vista Funds' adviser, administrator or distributor
or any of their affiliates) may be entitled to certain benefits upon retirement
from the board of trustees. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the adviser of certain former Chase Vista Funds and its
affiliates (collectively, the "Covered Funds"). Each Eligible Trustee is
entitled to receive from the Covered Funds an annual benefit commencing on the
first day of the calendar quarter coincident with or following his date of
retirement equal to the sum of (1) 8% of the highest annual compensation
received from the Covered Funds multiplied by the number of such Trustee's years
of service (not in excess of 10 years) completed with respect to any Covered
Funds and (2) 4% of the highest annual compensation received from the Covered
Funds for each year of service in excess of 10 years, provided that no Trustee's
annual benefit will exceed the highest annual compensation received by that
Trustee from the Covered Funds. Such benefit is payable to each eligible Trustee
in monthly installments for the life of the Trustee. On February 22, 2001, the
Board of Trustees voted to terminate the Plan and in furtherance of this
determination agreed to pay Trustees an amount equal, in the aggregate, to
$10.95 million, of which $5.3 million had been previously accrued by the Covered
Funds. The remaining $5.65 million was reimbursed by Chase. Messrs. Armstrong,
Eppley, Reid, Spalding and Vartabedian received $1,027,673, $800,600,
$2,249,437, $463,798 and $1,076,927, respectively, in connection with the
termination. Each nominee has elected to defer receipt of such amount pursuant
to the Deferred Compensation Plan for Eligible Trustees.
The Trustees instituted a Deferred Compensation Plan for Eligible Trustees
(the "Deferred Compensation Plan") pursuant to which each Trustee (who is not an
employee of any of the Funds, the Adviser, the Administrator or Distributor or
any of their affiliates) may enter into an agreement with the Fund whereby
payment of the Trustees' fees are deferred until the payment date elected by the
Trustee (or the
24
Trustee's termination of service). The deferred amounts are deemed invested in
shares of funds as elected by the Trustee at the time of deferral. If a
deferring Trustee dies prior to the distribution of amounts held in the deferral
account, the balance of the deferral account will be distributed to the
Trustee's designated beneficiary in a single lump sum payment as soon as
practicable after such deferring Trustee's death. Messrs. Armstrong, Eppley,
Reid, Spalding and Vartabedian are the only Trustees who have elected to defer
compensation under such plan.
The Declaration of Trust provides that the Trust will indemnify its Trustees
and officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices or with
respect to any matter unless it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best interest
of the Trust. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
OFFICERS
The Trust's executive officers (listed below), other than the officers who
are employees of the Adviser or one of its affiliates, are provided and
compensated by J.P. Morgan Fund Distributors, Inc., a subsidiary of The BISYS
Group, Inc. The officers conduct and supervise the business operations of the
Trust. The Trust has no employees.
The officers of the Trust, their principal occupations during the past five
years and dates of birth are set forth below. The business address of each of
the officers unless otherwise noted is 522 Fifth Avenue, New York, New York
10036.
GEORGE GATCH; President, Managing Director, J.P. Morgan Investment
Management Inc. Mr. Gatch is head of J.P.Morgan Fleming's U.S. Mutual Funds and
Financial Intermediaries Business. He has held numerous positions throughout the
firm in business management, marketing and sales. His date of birth is
December 21, 1962.
DAVID WEZDENKO; Treasurer. Vice President, J.P. Morgan Investment Management
Inc. Mr. Wezdenko is the Chief Operating Officer for J.P.Morgan Fleming's U.S.
Mutual Funds and Financial Intermediaries Business. Since joining J.P. Morgan
Chase (or its predecessors) in 1996, he has held numerous financial and
operations related positions supporting the J.P. Morgan pooled funds business.
His date of birth is October 2, 1963.
SHARON WEINBERG; Secretary. Vice President, J.P. Morgan Investment
Management Inc. Ms. Weinberg is head of Business and Product Strategy for
J.P.Morgan Fleming's U.S. Mutual Funds and Financial Intermediaries Business.
Since joining J.P. Morgan Chase (or its predecessors) in 1996 in New York, she
has held numerous positions throughout the asset management business in mutual
funds marketing, legal, and product development. Her date of birth is June 15,
1959.
MICHAEL MORAN; Vice President and Assistant Treasurer. Vice President, J.P.
Morgan Investment Management Inc. Mr. Moran is the Chief Financial Officer of
J.P.Morgan Fleming's U.S. Mutual Funds and Financial Intermediaries Business. He
has held various financial reporting roles in the Investment Management and
Middle Market businesses at J.P. Morgan Chase (or its predecessors). His date of
birth is July 14, 1969.
STEPHEN UNGERMAN; Vice President and Assistant Treasurer. Vice President,
J.P. Morgan Investment Management Inc. Mr. Ungerman is head of the Fund Service
Group within Fund Administration. Prior to joining J.P. Morgan Chase (or its
predecessors) in 2000, he held a number of senior management positions in
Prudential Insurance Co. of America's asset management business, including
Assistant General Counsel, Tax Director, and Co-head of Fund Administration
Department. Mr. Ungerman was also the Assistant Treasurer of all mutual funds
managed by Prudential. His date of birth is June 2, 1953.
25
JUDY R. BARTLETT; Vice President and Assistant Secretary. Vice President and
Assistant General Counsel, J.P. Morgan Investment Management Inc. since
September 2000. From August 1998 through August 2000, Ms. Bartlett was an
attorney at New York Life Insurance Company where she served as Assistant
Secretary for the Mainstay Funds. From October 1995 through July 1998, Ms.
Bartlett was an associate at the law firm of Willkie, Farr & Gallagher. Her date
of birth is May 29, 1965.
JOSEPH J. BERTINI; Vice President and Assistant Secretary. Vice President
and Assistant General Counsel, J.P. Morgan Investment Management Inc. Prior to
October of 1997, he was an attorney in the Mutual Fund Group at SunAmerica Asset
Management Inc. His date of birth is November 4, 1965.
PAUL M. DERUSSO; Assistant Treasurer. Vice President, J.P. Morgan Investment
Management Inc. Mr. DeRusso has served in Funds Administration as Manager of the
Budgeting and Expense Group for certain trusts in the JPMorgan Fund Complex
since prior to 1996. His date of birth is December 3, 1954.
LAI MING FUNG; Assistant Treasurer. Associate, J.P. Morgan Investment
Management Inc. Ms. Fung serves in the Funds Administration Group as a Budgeting
Analyst for the Budgeting and Expense Group. Prior to April 1999, she worked
with Morgan Stanley Dean Witter as a Section Head in the Fund Accounting Group.
Her date of birth is September 8, 1974.
MARY SQUIRES; Assistant Treasurer. Vice President, J.P. Morgan Investment
Management Inc. Ms. Squires has held numerous financial and operations positions
supporting the J.P. Morgan Chase organization complex (or its predecessors). Her
date of birth is January 8, 1955.
NIMISH S. BHATT; Assistant Treasurer. Senior Vice President, Fund
Administration and Financial Services, BISYS Investment Services, since November
2000; various positions held within BISYS prior thereto since 1996, including
Vice President and Director of International Operations, Vice President of
Financial Administration and Vice President of Tax. His address is 3435 Stelzer
Road, Columbus, Ohio 43219. His date of birth is June 6, 1963.
ARTHUR A. JENSEN; Assistant Treasurer. Vice President, Financial Services,
BISYS Investment Services, since June 2001; formerly Section Manager at Northern
Trust Company and Accounting Supervisor at Allstate Insurance Company. His
address is 3435 Stelzer Road, Columbus, Ohio 43219. His date of birth is
September 28, 1966.
MARTIN R. DEAN; Assistant Treasurer. Vice President, Administration Service,
BISYS Fund Services, Inc.; formerly Senior Manager, KPMG Peat Marwick
(1987-1994). His address is 3435 Stelzer Road, Columbus, Ohio 43219. His date of
birth is September 27, 1963.
ALAINA METZ; Assistant Secretary. Chief Administrative Officer, BISYS Fund
Services; formerly Supervisor, Blue Sky Department, Alliance Capital Management
L.P. Her address is 3435 Stelzer Road, Columbus, Ohio 43219. Her date of birth
is April 7, 1967.
LISA HURLEY; Assistant Secretary. Executive Vice President and General
Counsel, BISYS Fund Services, Inc.; formerly Counsel to Moore Capital Management
and General Counsel to Global Asset Management and Northstar Investments
Management. Her address is 90 Park Avenue, New York, NY 10016. Her date of birth
is May 29, 1955.
As of October 21, 2001, the officers and Trustees as a group owned less than
1% of the shares of the Fund.
CODES OF ETHICS
The Trust, the Adviser and the Distributor have adopted codes of ethics
pursuant to Rule 17j-1 under the 1940 Act. Each of these codes permits personnel
subject to such code to invest in securities, including securities that may be
purchased or held by the Fund. Such purchases, however, are subject to
procedures reasonably necessary to prevent Access Persons from engaging in any
unlawful conduct set forth in Rule 17j-1.
26
ADVISER
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement"),
JPMFAM (USA) acts as investment adviser of the Fund providing investment advice
and supervision. The Adviser continuously provides investment programs and
determines from time to time what securities shall be purchased, sold or
exchanged and what portion of the Fund's assets shall be held uninvested. The
Adviser to the Fund furnishes, at its own expense, all services, facilities and
personnel necessary in connection with managing the investments and effecting
portfolio transactions for the Fund. The Advisory Agreement for the Fund will
continue in effect from year to year only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority of
the Fund's outstanding voting securities and by a majority of the Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on such Advisory Agreement.
Under the Advisory Agreement, the Adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Fund with
greater opportunities and flexibility in accessing investment expertise.
Pursuant to the terms of the Advisory Agreement, the Adviser is permitted to
render services to others. Each Advisory Agreement is terminable without penalty
by the Trust on behalf of the Fund on not more than 60 days', nor less than 30
days', written notice when authorized either by a majority vote of the Fund's
shareholders or by a vote of a majority of the Board of Trustees of the Trust,
or by the Adviser on not more than 60 days', nor less than 30 days', written
notice, and will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The Advisory Agreement provides that the Adviser under
such agreement shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in the
execution of portfolio transactions for the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties thereunder.
In the event the operating expenses of the Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to the Fund imposed by the securities law or regulations thereunder
of any state in which the shares of the Fund are qualified for sale as such
limitations may be raised or lowered from time to time, the Adviser shall reduce
its advisory fee (which fee is described below) to the extent of its share of
such excess expenses. The amount of any such reduction to be borne by the
Adviser shall be deducted from the monthly advisory fee otherwise payable with
respect to the Fund during such fiscal year; and if such amounts should exceed
the monthly fee, the Adviser shall pay to the Fund its share of such excess
expenses no later than the last day of the first month of the next succeeding
fiscal year.
JPMFAM (USA), a wholly-owned subsidiary of J.P. Morgan Chase & Co., is
registered with the Securities and Exchange Commission as an investment adviser.
Also included among JPMFAM (USA) accounts are commingled trust funds and a broad
spectrum of individual trust and investment management portfolios. These
accounts have varying investment objectives. JPMFAM (USA) is located at 522
Fifth Avenue, New York, New York, 10036.
In consideration of the services provided by the Adviser pursuant to the
Advisory Agreement, the Adviser is entitled to receive from the Fund an
investment advisory fee computed daily and paid monthly based on an annual rate
equal to 0.10% of the Fund's average daily net assets specified in the relevant
Prospectuses. However, the Adviser may voluntarily agree to waive a portion of
the fees payable to it on a month-to-month basis.
ADMINISTRATOR
Pursuant to an Administration Agreement (the "Administration Agreement"),
Chase serves as administrator of the Fund. Chase provides certain administrative
services to the Fund, including, among other responsibilities, coordinating the
negotiation of contracts and fees with, and the monitoring of performance and
billing of, the Fund's independent contractors and agents; preparation for
signature by an officer of the Trust of all documents required to be filed for
compliance by the Trust with applicable
27
laws and regulations excluding those of the securities laws of various states;
arranging for the computation of performance data, including net asset value and
yield; responding to shareholder inquiries; and arranging for the maintenance of
books and records of the Fund and providing, at its own expense, office
facilities, equipment and personnel necessary to carry out its duties. Chase in
its capacity as administrator does not have any responsibility or authority for
the management of the Fund, the determination of investment policy, or for any
matter pertaining to the distribution of Fund shares.
Under the Administration Agreement, Chase is permitted to render
administrative services to others. The Administration Agreement will continue in
effect from year to year with respect to the Fund only if such continuance is
specifically approved at least annually by the Board of Trustees including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act), or by vote of a majority of the Fund's outstanding voting securities.
The Administration Agreement is terminable without penalty by the Trust on
behalf of the Fund on 60 days' written notice when authorized either by a
majority vote of the Fund's shareholders or by vote of a majority of the Board
of Trustees, including a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, or by Chase on 60 days'
written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The Administration Agreement also
provides that neither Chase nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration of
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its or
their obligations and duties under the Administration Agreement.
In consideration of the services provided by Chase pursuant to the
Administration Agreement, Chase receives from the Fund a fee computed daily and
paid monthly at an annual rate equal to 0.10% of the JPMorgan Funds Complex's
aggregate average daily net money market assets up to $100 billion on an
annualized basis for the Fund's then-current fiscal year plus 0.05% of such
average net assets over $100 billion. Chase may voluntarily waive a portion of
the fees payable to it with respect to each Fund on a month-to-month basis.
Chase may pay a portion of the fees it receives to BISYS Fund Services, L.P.
for its services as the Fund's sub-administrator.
DISTRIBUTION PLAN
The Trust has adopted a plan of distribution pursuant to Rule 12b-1 under
the 1940 Act (the "Distribution Plan") on behalf of the Morgan Shares of the
Fund, which provides that such class shall pay for distribution services a
distribution fee (the "Distribution Fee"), including payments to the
Distributor, at annual rates not to exceed the amounts set forth in the relevant
Prospectus. The Distributor may use all or any portion of such Distribution Fee
to pay for Fund expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature and other
such distribution-related expenses. Promotional activities for the sale of each
class of shares of the Fund will be conducted generally by the JPMorgan Funds,
and activities intended to promote one class of shares of the Fund may also
benefit the Fund's other shares and other JPMorgan Funds.
Some payments under the Distribution Plan may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to exceed
0.10% annualized of the average net asset value of Morgan Shares maintained in
the Fund by such broker-dealers' customers. Trail or maintenance commissions
will be paid to broker-dealers beginning the 13th month following the purchase
of the Morgan Shares. Since the distribution fees are not directly tied to
expenses, the amount of distribution fees paid by the Morgan Shares during any
year may be more or less than actual expenses incurred pursuant to the
Distribution Plan. The Distributor will use its own funds (which may be borrowed
or otherwise financed) to pay such amounts. Because the Distributor will receive
a maximum 0.10% of average daily net assets, the fee will take the Distributor
several years to recoup the sales commissions paid to dealers and other sales
expenses. For this reason, this type of distribution fee arrangement is
characterized by the staff of the Securities and Exchange Commission as being of
the "compensation variety" (in contrast to "reimbursement" arrangements by which
a distributor's payments are directly linked to its expenses). However, no class
of shares of the Fund will make payments or be liable for any distribution
expenses incurred by other classes of Shares of the Fund.
There is no distribution plan for the other classes of the Fund.
28
The Morgan class of Shares is entitled to exclusive voting rights with
respect to matters concerning its Distribution Plan.
The Distribution Plan provides that it will continue in effect indefinitely
if such continuance is specifically approved at least annually by a vote of both
a majority of the Trustees and a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the Distribution Plan
or in any agreement related to such Plan ("Qualified Trustees").
The Distribution Plan requires that the Trust shall provide to the Board of
Trustees, and the Board of Trustees shall review, at least quarterly, a written
report of the amounts expended (and the purposes therefor) under the
Distribution Plan. The selection and nomination of Qualified Trustees shall be
committed to the discretion of the disinterested Trustees (as defined in the
1940 Act) then in office. The Distribution Plan may be terminated at any time by
a vote of a majority of the Qualified Trustees or by vote of a majority of the
outstanding voting shares of the class of the Fund to which it applies (as
defined in the 1940 Act). The Distribution Plan may not be amended to increase
materially the amount of permitted expenses thereunder without the approval of
shareholders and may not be materially amended in any case without a vote of the
majority of both the Trustees and the Qualified Trustees. The Fund will preserve
copies of any plan, agreement or report made pursuant to the Distribution Plan
for a period of not less than six years from the date of the Distribution Plan,
and for the first two years such copies will be preserved in an easily
accessible place.
DISTRIBUTOR
J.P. Morgan Fund Distributors, Inc. serves as the Trust's exclusive
distributor and holds itself available to receive purchase orders for the Fund's
Shares. In that capacity, the Distributor has been granted the right, as agent
of the Trust, to solicit and accept orders for the purchase of the Fund's Shares
in accordance with the terms of the Distribution Agreement between the Trust and
the Distributor. Under the terms of the Distribution Agreement between the
Distributor and the Trust, dated April 11, 2001, the Distributor receives no
compensation in its capacity as the Trust's distributor. The Distributor is a
wholly-owned indirect subsidiary of The BYSIS Group, Inc. The Distributor
currently provides administration and distribution services for a number of
other investment companies.
The Distribution Agreement will continue in effect with respect the Fund for
a period of two years after execution and thereafter only if it is approved at
least annually (i) by a vote of the holders of a majority of the Fund's
outstanding shares or (ii) by a vote of a majority of the Trustees of the Trust
and a vote of the Trustees 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, including 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 60 days'
written notice to the other party. The principal offices of the Distributor are
located at 1211 Avenue of the Americas, New York, New York 10036.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has entered into a shareholder servicing agreement (a "Shareholder
Servicing Agreement") with Chase (a "Shareholder Servicing Agent") to provide
certain services including but not limited to the following: answer customer
inquiries regarding account status and history, the manner in which purchases
and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by
29
a Shareholder Servicing Agent) quarterly and year-end statements and
confirmations of purchases and redemptions; transmit, on behalf of the Fund,
proxy statements, annual reports, updated prospectuses and other communications
to shareholders of the Fund; receive, tabulate and transmit to the Fund proxies
executed by shareholders with respect to meetings of shareholders of the Fund;
and provide such other related services as the Fund or a shareholder may
request. Shareholder Servicing Agents may be required to register pursuant to
state securities law. Shareholder Servicing Agent may subcontract with other
parties for the provision of shareholder support services.
In consideration of the service provided by the Shareholder Servicing Agent
pursuant to the Shareholder Servicing Agreement, the Shareholder Servicing Agent
receives from the Fund a fee of 0.25% for the Premier Shares, a fee of 0.35% for
the Morgan Shares, a fee of 0.10% for the Institutional Shares and Agency Shares
and a fee of 0.05% for the Capital Shares, expressed as a percentage of the
average daily net asset values of Fund shares. The Shareholder Servicing Agent
may voluntarily agree from time to time to waive a portion of the fees payable
to it under its Shareholder Servicing Agreement with respect to the Fund on a
month-to-month basis.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures and payment for the purchase and
redemption of Fund shares, such as pre-authorized or systematic purchase and
redemption programs, "sweep" programs, cash advances and redemption checks. Each
Shareholder Servicing Agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions with respect to
such services. Certain Shareholder Servicing Agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as Shareholder Servicing Agents.
For shareholders that bank with Chase, Chase may aggregate investments in
the JPMorgan Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on specified
minimum balance requirements, such as reduced or no fees for certain banking
services or preferred rates on loans and deposits. Chase and certain
broker-dealers and other Shareholder Servicing Agents may, at their own expense,
provide gifts, such as computer software packages, guides and books related to
investment or additional Fund shares valued up to $250 to their customers that
invest in the JPMorgan Funds.
The Trust has also entered into a Transfer Agency Agreement with DST
pursuant to which DST acts as transfer agent for the Trust. DST's address is 210
West 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, The Bank of New York ("BONY") acts as the
custodian of the assets of the Fund for which BONY receives such compensation as
is from time to time agreed upon by the Trust and BONY. As custodian, BONY
provides oversight and record keeping for the assets held in the portfolios of
the Fund. Chase also provides fund accounting services for the income, expenses
and shares outstanding for the Fund. BONY is located at One Wall Street, New
York, NY 10286. For additional information, see the Prospectuses.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, provides the Fund with audit services, tax return preparation and
assistance and consultation with respect to the preparation of filings with the
Securities and Exchange Commission.
CERTAIN REGULATORY MATTERS
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of the Fund,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of securities so purchased. Chase and its affiliates
deal, trade and invest for their own accounts in U.S. Government obligations,
municipal obligations and commercial paper and are among the leading dealers of
various types of U.S. Government obligations and municipal obligations. Chase
and its affiliates may sell U.S. Government obligations and municipal
obligations to, and purchase them from, other investment companies sponsored by
the Fund's distributor or affiliates of the distributor. Chase will not invest
any Fund assets in any U.S. Government obligations, municipal obligations or
commercial paper purchased from itself or any affiliate, although under
30
certain circumstances such securities may be purchased from other members of an
underwriting syndicate in which Chase or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased by the Fund.
Chase has informed the Fund that in making its investment decision, it does not
obtain or use material inside information in the possession of any other
division or department of Chase, including the division that performs services
for the Trust as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
EXPENSES
In addition to the fees payable to the Adviser, Chase and the Distributor
under various agreements discussed under "Investment Adviser," "Distributor,"
"Administrator," "Shareholder Servicing" and "Distribution Plan" above, the Fund
is responsible for usual and customary expenses associated with the Trust's
operations. Such expenses include legal fees, accounting and audit expenses,
insurance costs, the compensation and expenses of the Trustees, registration
fees under federal securities laws, extraordinary expenses applicable to the
Fund, transfer, registrar and dividend disbursing costs, the expenses of
printing and mailing reports, notices and proxy statements to Fund shareholders,
filing fees under state securities laws, applicable registration fees under
foreign securities laws, custodian fees and brokerage expenses.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust currently consists of 9 series of shares of beneficial interest,
par value $.001 per share. With respect to its money market funds, the Trust may
offer more than one class of shares. The Trust has reserved the right to create
and issue additional series or classes. Each share of a series or class
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Expenses of the Trust which are not attributable to a specific
series or class are allocated among all the series in a manner believed by
management of the Trust to be fair and equitable. Shares have no pre-emptive or
conversion rights. Shares, when issued, are fully paid and non-assessable,
except as set forth below. Shareholders are entitled to one vote for each whole
share held, and each fractional share shall be entitled to a proportionate
fractional vote, except that Trust shares held in the treasury of the Trust
shall not be voted. Shares of each series or class generally vote together,
except when required under federal securities laws to vote separately on matters
that may affect a particular class, such as the approval of distribution plans
for a particular class. With respect to shares purchased through a Shareholder
Servicing Agent and, in the event written proxy instructions are not received by
the Fund or its designated agent prior to a shareholder meeting at which a proxy
is to be voted and the shareholder does not attend the meeting in person, the
Shareholder Servicing Agent for such shareholder will be authorized pursuant to
an applicable agreement with the shareholder to vote the shareholder's
outstanding shares in the same proportion as the votes cast by other Fund
shareholders represented at the meeting in person or by proxy.
The categories of investors that are eligible to purchase shares and minimum
investment requirements may differ for each class of the Fund's Shares. In
addition, other classes of Fund shares may be subject to differences in sales
charge arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which will affect the relative performance of the
different classes. Investors may call 1-800-622-4273 to obtain additional
information about other classes of shares of the Fund that are offered. Any
person entitled to receive compensation for selling or servicing shares of the
Fund may receive different levels of compensation with respect to one class of
shares over another.
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the judgment
of the Trustees, it is necessary or desirable to submit matters for a
shareholder vote. Shareholders have, under certain circumstances, the right to
31
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have, in certain circumstances, the right to remove one or more Trustees without
a meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of a majority of the outstanding
shares of each portfolio affected by the amendment. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series or class, a Shareholder Servicing Agent may vote any shares as to which
such Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares of that portfolio otherwise
represented at the meeting in person or by proxy as to which such Shareholder
Servicing Agent is the agent of record. Any shares so voted by a Shareholder
Servicing Agent will be deemed represented at the meeting for purposes of quorum
requirements. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any series
or class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two-thirds of its outstanding
shares, except that if the Board of Trustees recommends such merger,
consolidation or sale or disposition of assets, the approval by vote of the
holders of a majority of the series' or class' outstanding shares will be
sufficient, or (ii) by the vote of the holders of a majority of its outstanding
shares, or (iii) by the Board of Trustees by written notice to the series' or
class' shareholders. Unless each series and class is so terminated, the Trust
will continue indefinitely.
No certificates are issued for shares of the Fund.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of the Trust property for any
shareholder held personally liable for the obligations of the Trust. The Trust's
Declaration of Trust also provides that the Trust shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the
Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
32
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
MARITIME ADMINISTRATION BONDS--are bonds issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FNMA BONDS--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA DEBENTURES--are debentures issued by the Federal Housing Administration
of the U.S. Government and are guaranteed by the U.S. Government.
FHA INSURED NOTES--are bonds issued by the Farmers Home Administration of
the U.S. Government and are guaranteed by the U.S. Government.
GNMA CERTIFICATES--are mortgage-backed securities which represent a partial
ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA and
the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or FHA-
insured mortgages underlying the Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures may result in the return of the greater part of
principal invested far in advance of the maturity of the mortgages in the pool.
Foreclosures impose no risk to principal investment because of the GNMA
guarantee. As the prepayment rate of individual mortgage pools will vary widely,
it is not possible to accurately predict the average life of a particular issue
of GNMA Certificates. The yield which will be earned on GNMA Certificates may
vary form their coupon rates for the following reasons: (i) Certificates may be
issued at a premium or discount, rather than at par; (ii) Certificates may trade
in the secondary market at a premium or discount after issuance; (iii) interest
is earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates. Principal which is so prepaid will be reinvested,
although possibly at a lower rate. In addition, prepayment of mortgages included
in the mortgage pool underlying a GNMA Certificate purchased at a premium could
result in a loss to a Fund. Due to the large amount of GNMA Certificates
outstanding and active participation in the secondary market by securities
dealers and investors, GNMA Certificates are highly liquid instruments. Prices
of GNMA Certificates are readily available from securities dealers and depend
on, among other things, the level of market rates, the Certificate's coupon rate
and the prepayment experience of the pool of mortgages backing each Certificate.
If agency securities are purchased at a premium above principal, the premium is
not guaranteed by the issuing agency and a decline in the market value to par
may result in a loss of the premium, which may be particularly likely in the
event of a prepayment. When and if available, U.S. Government obligations may be
purchased at a discount from face value.
FHLMC CERTIFICATES AND FNMA CERTIFICATES--are mortgage-backed bonds issued
by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association, respectively, and are guaranteed by the U.S. Government.
GSA PARTICIPATION CERTIFICATES--are participation certificates issued by the
General Services Administration of the U.S. Government and are guaranteed by the
U.S. Government.
NEW COMMUNITIES DEBENTURES--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the
A-1
Housing and Urban Development Act of 1970, the payment of which is guaranteed by
the U.S. Government.
PUBLIC HOUSING BONDS--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of Housing
and Urban Development of the U.S. Government, the payment of which is secured by
the U.S. Government.
PENN CENTRAL TRANSPORTATION CERTIFICATES--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA DEBENTURES--are debentures fully guaranteed as to principal and interest
by the Small Business Administration of the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS--are bonds issued by
the Washington Metropolitan Area Transit Authority. Some of the bonds issued
prior to 1993 are guaranteed by the U.S. Government.
FHLMC BONDS--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS--are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
STUDENT LOAN MARKETING ASSOCIATION ("SALLIE MAE") NOTES AND BONDS--are notes
and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. ARMORY BOARD BONDS--are bonds issued by the District of Columbia Armory
Board and are guaranteed by the U.S. Government.
EXPORT-IMPORT BANK CERTIFICATES--are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
APPENDIX B
DESCRIPTION OF RATINGS*
The ratings of Moody's and Standard & Poor's represent their opinions as to
the quality of various Municipal Obligations. It should be emphasized, however,
that ratings are not absolute standards of quality. Consequently, Municipal
Obligations with the same maturity, coupon and rating may have different yields
while Municipal Obligations of the same maturity and coupon with different
ratings may have the same yield.
DESCRIPTION OF MOODY'S FOUR HIGHEST MUNICIPAL BOND RATINGS
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 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 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.
DESCRIPTION OF MOODY'S THREE HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature-variable rate demand obligation or commercial paper programs; such
ratings will be designated as "VMIG." Short-term ratings on issues with demand
features are differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity dates
and payment relying on external liquidity. Symbols used are as follows:
MIG-1/VMIG-1--Notes bearing this designation are of the best quality,
enjoying 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/VMIG-2--Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
MIG-3/VMIG-3--Notes bearing this designation are of favorable quality, where
all security elements are accounted for but there is lacking the undeniable
strength of the preceding grade, liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
* As described by the rating agencies. Ratings are generally given to
securities at the time of issuance. While the rating agencies may from time
to time revise such ratings, they undertake no obligation to do so.
B-1
DESCRIPTION OF STANDARD & POOR'S FOUR HIGHEST MUNICIPAL BOND RATINGS
AAA--Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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 in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL NOTES AND TAX-EXEMPT
DEMAND BONDS
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in 3 years or less will likely receive a
note rating. Notes maturing beyond 3 years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment.
- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
SP-3--Speculative capacity to pay principal and interest.
Standard & Poor's assigns "dual" ratings to all long-term debt issues that
have as part of their provisions a demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/B-1+"). For the newer "demand notes," S&P's note
rating symbols, combined with the commercial paper symbols, are used (for
example, "SP-1+/A-1+").
DESCRIPTION OF STANDARD & POOR'S TWO HIGHEST COMMERCIAL PAPER RATINGS
A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
B-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
B-2
DESCRIPTION OF MOODY'S TWO HIGHEST COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2 and Prime-3.
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:
(1) leading market positions in well-established industries; (2) high rates of
return on funds employed; (3) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (4) broad margins in
earnings coverage of fixed financial charges and high internal cash generation;
and (5) well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF FITCH'S RATINGS OF MUNICIPAL NOTES AND TAX-EXEMPT DEMAND BONDS
MUNICIPAL BOND RATINGS
The ratings represent Fitch's assessment of the issuer's ability to meet the
obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issuer, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's financial strength and
credit quality.
AAA--Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1.
A--Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstance than bonds with higher ratings.
BBB--Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse consequences on
these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of
credit within a rating category. Plus and minus signs, however, are not used in
the AAA category.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis, the
short-term rating places greater emphasis than bond ratings on the existence of
liquidity necessary to meet the issuer's obligations in a timely manner.
B-3
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2--Good Credit Quality. Issues carrying this rating have satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
F-3--Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, although
near-term adverse changes could cause these securities to be rated below
investment grade.
B-4
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MUTUAL FUND TRUST
PART C. OTHER INFORMATION
ITEM 23. Exhibits
EXHIBIT
NUMBER
(a) Declaration of Trust. (1)
(b) By-laws. (1)
(d)(1) Form of Investment Advisory Agreement. (4)
(d)(2) Form of Investment Subadvisory Agreement between The Chase Manhattan
Bank and Chase Asset Management, Inc. (4)
(d)(3) Form of Investment Sub-Advisory Agreement between The Chase Manhattan
Bank and Texas Commerce Bank, National Association. (5)
(e) Form of Distribution Agreement. (8)
(f)(1) Retirement Plan for Eligible Trustees. (4)
(f)(2) Deferred Compensation Plan for Eligible Trustees. (4)
(g) Form of Custodian Agreement. (1)
(h)(1) Form of Transfer Agency Agreement. (8)
(h)(2) Form of Shareholder Servicing Agreement. (4)
(h)(3) Form of Administration Agreement. (4)
(i) Opinion of Reid & Priest re: Legality of Securities being
Registered. (2)
(j) Consent of PricewaterhouseCoopers LLP. (6)
(m)(1) Forms of Rule 12b-1 Distribution Plans (including forms of Selected
Dealer Agreements and Shareholder Service Agreements.) (1) and (3)
(m)(2) Form of Rule 12b-1 Distribution Plan (including forms of elected
Dealer Agreement and Shareholder Servicing Agreement). (4)
(m)(3) Form of Rule 12b-1 Plan - Class C Shares (including forms of
Shareholder Servicing Agreements). (2)
(m)(4) Form of Rule 12b-1 Distribution Plan - Reserve Share Class (including
forms of Shareholder Service Agreement and Bank Shareholder Service
Agreement). (8)
(m)(5) Form of Rule 12b-1 Distribution Plan - Cash Management Share Class
(including forms of Shareholder Service Agreement and Bank Shareholder
Service Agreement).(8)
(n) Form of Rule 18f-3 Multi-Class Plan. (8)
(99)(a) Powers of Attorney for: William J. Armstrong, Roland R. Eppley,
Jr., George Gatch, Ann Maynard Gray, Matthew Healey, Fergus Reid, III,
James J. Schonbachler, Leonard M. Spalding, H. Richard Vartabedian
and David Wezdenko. (8)
-------------------
(1) Filed as an Exhibit to the Registration Statement on Form N-1A of the
Registrant (File No. 33-75250) as filed with the Securities and
Exchange Commission on February 14, 1994.
C-1
(2) Filed as an Exhibit to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of the Registrant
(File No. 33-75250) as filed with the Securities and Exchange
Commission on April 18, 1994.
(3) Filed as an Exhibit to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of the Registrant
(File No. 33-75250) as filed with the Securities and Exchange
Commission on August 29, 1994.
(4) Filed as an Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A of the Registrant as filed with
the Securities and Exchange Commission on December 28, 1995.
(5) Filed as an Exhibit to Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A of the Registrant as filed with
the Securities and Exchange Commission on March 7, 1996.
(6) Filed as an Exhibit to Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A of the Registrant as filed with
the Securities and Exchange Commission on July 27, 2001.
(7) Filed as an Exhibit to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of the Registrant as filed with
the Securities and Exchange Commission on October 27, 1997.
(8) Filed as an Exhibit to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A of the Registrant as filed with
the Securities and Exchange Commission on September 7, 2001.
ITEM 24. Persons Controlled by or Under Common Control with Registrant
Not applicable
ITEM 25. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser, administrator and distributor are insured under
an errors and omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule 17g-1 under
the Investment Company Act of 1940.
Under the terms of the Registrant's Declaration of Trust, the
Registrant may indemnify any person who was or is a Trustee, officer or employee
of the Registrant to the maximum extent permitted by law; provided, however,
that any such indemnification (unless ordered by a court) shall be made by the
Registrant only as authorized in the specific case upon a determination that
indemnification of such persons is proper in the circumstances. Such
determination shall be made (i) by the Trustees, by a majority vote of a quorum
which consists of Trustees who are neither in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the proceeding, or (ii) if the required
quorum is not obtainable or, if a quorum of such Trustees so directs, by
independent legal counsel in a written opinion. No indemnification will be
provided by the Registrant to any Trustee or officer of the Registrant for any
liability to the Registrant or shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
Insofar as the conditional advancing of indemnification monies for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
that amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an equivalent form
of security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a
C-2
majority of a quorum of the Registrant's disinterested, non-party Trustees, or
an independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance ultimately
will be found entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities 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 Act and will be governed by the final adjudication of
such issue.
ITEM 26. Business and Other Connections of Investment Adviser
The business of the Adviser is summarized in the Prospectuses constituting Part
A of this Registration Statement, which are incorporated herein by reference.
The business or other connections of each director and officer of J. P. Morgan
is currently listed in the investment advisor registration on Form ADV for J.P.
Morgan (File No. 801-21011).
ITEM 27. Principal Underwriters
(a) J.P. Morgan Fund Distributors, Inc., a wholly-owned subsidiary of The
BISYS Group, Inc. is the underwriter for the Registrant.
J.P. Morgan Fund Distributors, Inc. acts as principal underwriter
for the following investment companies:
Fleming Mutual Fund Group, Inc.
J.P. Morgan Funds
J.P. Morgan Institutional Funds
J.P. Morgan Series Trust
J.P. Morgan Series Trust II
Mutual Fund Group
Mutual Fund Investment Trust
Mutual Fund Master Investment Trust
Mutual Fund Select Group
Mutual Fund Select Trust
Mutual Fund Trust
Mutual Fund Variable Annuity Trust
Growth and Income Portfolio
(b) The following are the Directors and officers of J.P. Morgan Fund
Distributors, Inc. The principal business address of each of these persons, is
listed below.
Position and Offices Position and Offices
Name and Address with Distributor with the Registrant
----------------- -------------------- --------------------
Lynn J. Mangum Chairman None
90 Park Ave
New York, NY 10016
Margaret Warner Chambers Vice President None
90 Park Ave
New York, NY 10016
Charles Linn Booth Vice President/Compliance None
3435 Stelzer Road Officer
Columbus, OH 43219
C-3
Dennis Sheehan Director None
90 Park Ave
New York, NY 10016
Kevin J. Dell Secretary None
90 Park Ave.
New York, NY 10016
Edward S. Forman Assistant Secretary None
90 Park Ave
New York, NY 10016
Olu T. Lawal Fin/Op None
90 Park Ave
New York, NY 10016
Patrick William McKeon Vice President/Chief Compliance None
90 Park Ave Officer
New York, NY 10016
William J. Tomko President None
3435 Stelzer Road
Columbus, OH 43219
(c) Not applicable
ITEM 28. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
NAME ADDRESS
J.P. Morgan Fund Distributors, Inc. 1211 Avenue of the Americas
New York, NY 10036
DST Systems, Inc 210 W. 10th Street,
Kansas City, MO 64105
The Chase Manhattan Bank 270 Park Avenue,
New York, NY 10017
The Chase Manhattan Bank One Chase Square,
Rochester, NY 14363
The Bank of New York 1 Wall Street
New York, NY 10086
JPMorgan Fleming Asset Management, Inc. 522 Fifth Avenue
New York, NY 10036
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ITEM 29. Management Services
Not applicable
ITEM 30. Undertakings
Registrant undertakes that its trustees shall promptly call a
meeting of shareholders of the Trust for the purpose of voting upon the question
of removal of any such trustee or trustees when requested in writing so to do by
the record holders of not less than 10 per centum of the outstanding shares of
the Trust. In addition, the Registrant shall, in certain circumstances, give
such shareholders assistance in communicating with other shareholders of a fund
as required by Section 16(c) of the Investment Company Act of 1940.
C-5
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 the registration statement under Rule
485(b) and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and the State of New York on the 19th day of October, 2001.
MUTUAL FUND TRUST
By /s/ George Gatch
--------------------------
George Gatch
President
/s/ David Wezdenko
--------------------------
David Wezdenko
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 October 19, 2001.
Fergus Reid, III* Chairman and Trustee
------------------------------------
Fergus Reid, III
William J. Armstrong* Trustee
------------------------------------
William J. Armstrong
Roland R. Eppley, Jr.* Trustee
------------------------------------
Roland R. Eppley, Jr.
Ann Maynard Gray* Trustee
------------------------------------
Ann Maynard Gray
Matthew Healey* Trustee
------------------------------------
Matthew Healey
James J. Schonbachler* Trustee
------------------------------------
James J. Schonbachler
Leonard M. Spalding* Trustee
------------------------------------
Leonard M. Spalding
H. Richard Vartabedian* Trustee
------------------------------------
H. Richard Vartabedian
*By: /s/ David Wezdenko Attorney-in-Fact
-------------------------------
David Wezdenko
C-6